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| EX-99 - EXHIBIT 99.5 - IMAGEWARE SYSTEMS INC | ex99-5.htm |
| EX-99 - EXHIBIT 99.4 - IMAGEWARE SYSTEMS INC | ex99-4.htm |
| EX-99 - EXHIBIT 99.3 - IMAGEWARE SYSTEMS INC | ex99-3.htm |
| EX-99 - EXHIBIT 99.2 - IMAGEWARE SYSTEMS INC | ex99-2.htm |
| 8-K - CURRENT REPORT - IMAGEWARE SYSTEMS INC | iwsy8k_june252020.htm |
6-25-20 Q1 2020 Financial Results and Update Call Script
OPERATOR:
Please standby, we are about to begin. Good afternoon everyone, and
thank you for participating in ImageWare Systems' first quarter
financial results and corporate update call to discuss the
Company’s business and operations.
Joining us today are ImageWare Systems' President and CEO, Ms.
Kristin Taylor, and the company's CFO, Mr. Jonathan Morris as well
as Mr. Mark Blackman, VP of Product Management. Following those
remarks, management will answer your questions.
Any statements made on this call 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 Incorporated are intended to identify
such forward-looking statements.
ImageWare may from time-to-time update these 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, please see Risk
Factors in ImageWare's Annual Report on Form 10-K for the fiscal
year ended December 31, 2019, 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
the date on which they are made.
I remind everyone that this call will be available for replay
through July 2, 2020 starting at 7:30 PM Eastern Time 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 Jonathan Morris, CFO of
ImageWare Systems. Please go-ahead sir.
JONATHAN:
Thank you, operator, and welcome to those of you joining our call
today.
Our financial results are available in the recently published news
release and Form 10-Q. For context on today's call, I'll provide a
brief summary of those results.
Revenue for the three months ended March 31, 2020, totaled $0.8
million, down from $0.9 million for 2019. The revenue for both
years primarily reflected our legacy business.
Gross profit for the three months ended March 31, 2020 and the
comparable period of 2019 each totaled approximately $0.7 million.
Gross margin increased to 85% in 2020 compared with 78% in 2019 due
to our continued efforts to reduce costs.
Loss from operations for the three months ended March 31, 2020 was
($3.1 million) compared with ($3.6 million) for the same quarter in
2019.
We ended the first quarter with $53,000 in cash.
While the effects of the coronavirus are difficult to estimate and
the situation remains dynamic, we have experienced preliminary
negative impact primarily through increased sales cycles. We
however view this as a relatively short-term disruption that does
not impact our long-term strategy and initiatives.
-1-
As previously reported, on May 4, 2020 we entered into a PPP loan
agreement for approximately $1,571,000 dollars of government
stimulus funds issued under the CARES Act administered by the SBA.
We intend to use proceeds from the PPP loan primarily for payroll
costs, rent and utilities. The PPP Loan has a 1.00% interest rate
per annum which matures on May 4, 2022. We continue to evaluate the
use of qualifying expenses under which the loan may be forgivable
in part or in full.
As noted last quarter, our balance sheet was enhanced and our
financial outlook was materially strengthened by several recent
capital infusions. We continue to have the right, not the
obligation, to call on a $10.3m
dollar commitment from Lincoln Park Capital. That commitment
does not restrict our ability to receive capital from
alternative sources.
We continue ongoing discussions with a number of potential sources
for significant long-term capital now that our balance sheet and
financial outlook have materially improved, and will share more
information as developments evolve.
This concludes my financial summary. I will now turn the call over
to Kris for the progress update of our business strategy.
Kris…
KRIS:
Thank you, Jonathan, and thank you to everyone for joining us
today. I hope you all are continuing to stay safe and take
precautions as less restrictive pandemic measures unfold. As of
today, ImageWare is continuing to efficiently operate through an
extremely productive and committed distributed workforce.
We’ve extended our remote workforce timeline to early Fall to
ensure the health and safety of our team -- and we will continue to
do so until the health crisis is over.
June marks my fourth month as your President and CEO, and I’m
pleased to share that I have been recently elected to serve you on
the ImageWare Board of Directors. We are in the midst of reshaping
the existing board which has been in place for more than a decade. My election was
the first of more changes forthcoming in this area over the next
several months.
I’m happy to have accomplished a number of items as part of
my 100-day strategy, despite the continued global crises and
economic setbacks. I’ve been leery to walk into this new
assignment ready to dismantle things before I truly understand what
needs to change - or before I can create the vision for what new
capabilities could be built that would give the Company strength to
further its impact. I am convinced now that what has been built
over the three decades at ImageWare is the basis of what will be a
thriving company.
ImageWare created a sizeable market serving law enforcement in
state and local government markets. We leveraged the Biometric
Engine (BE) - which we created from the ground up - in large
federal government end-to-end projects, and we decided to play in
the access control market by embedding our biometric authentication
software into physical and logical access cards. As I spoke about -
approximately a month ago - we are busy updating and upgrading
these platforms to be able to compete more aggressively. Mark
Blackman will talk more about this shortly.
Some of the areas we have started to knock down in the first 100
days are:
1.
Overall
reduction of 25% includes previously discussed personnel cost
reduction of 33%, third party contractor cost reduction of 70%, and
proposed occupancy cost reduction of 60%.
2.
Integrating
new staff and reigniting existing staff
3.
Updating
all of our major product platforms
4.
Creating
a Cloud platform and moving toward BaaS
(Biometrics-as-a-Service)
5.
Re-aligning
Marketing, Sales, Product Management and Engineering
6.
Creating
impactful external messaging that sets us apart from the
competition
7.
Re-building
the corporate website and creating a self-service
portal
8.
Building
Go-To-Market Strategies in each segment that result in
revenue
9.
Creating
Agile-based processes, increasing the cadence of releases, and
empowering individuals with ownership of work
10.
Shortening
the customer sales journey
11.
Creating
an IP licensing business unit, which includes generating, and
filing new patents - as well as monetizing old patents
It is important to define who we are and what space we operate in.
Knowing who we are helps us with who we are not.
We are part of the sea called “cyber security.” We
reside in a bay called identity management and we are on a beach
called Biometric identification -- along with a further subset,
called Biometric Multifactor Authentication or MFA.
-2-
The Identity Platform focuses on large projects where our
identification matching capabilities are critical to the solution.
In identification matching, the individual of a captured biometric
is unknown, and therefore queried against all identities within a
biometric database, in what is referred to as a 1-to-X query. All
matching entries within a configured threshold are displayed in a
gallery with a score representing the degree of confidence in the
match. We are pioneers in this segment, and our patented
capabilities such as the Biometric Engine (our optimized database
for biometrics and Biometric Fusion) the capabilities to query and
score on multiple biometrics, continue to make us a leading
provider in this space.
In GoVerifyID, our biometric MFA product, the identity of the
captured biometric is known and therefore a single query, one entry
within a biometric database is needed to confirm and authenticate
the user. Computationally, this is much easier to manage and scale,
so the optimization of the database is less critical than
customer-focused capabilities such as: an ease of deployment,
support across existing infrastructure and customer experience.
Because we only authenticate, and do not store and manage
identities, the total addressable market is much lower than the
Identity Providers (IDPs) such as OKTA and Microsoft Active
Directory. At present we are focusing on bringing biometric MFA
authentication to enterprises -- but over time, as opportunities
present themselves, we will add IDP capabilities to
GoVerifyID.
The process of re-invigorating a business takes time. As quickly as
I have been working on a daily basis to operationally renew the
Company with efficiency measures, I am also rushing to have the
team finish products and narrow-in on our competitive delineation.
As much as I am trying to raise capital, we are working to close
new business to deliver necessary immediate revenue.
On this note, I would like to introduce you to Mark Blackman, VP of
Product Management. Mark has been committed to revamping our
product development for the past couple of months. He has worked
tirelessly to create a formal function that is heavily tied to
Engineering, Marketing and Sales. He keeps us on track with
goal-execution and weekly revised product road maps (detailed
through December), with broader five-year plans and competitive
product positioning.
As noted in our press release, Mark has more than 25 years of broad
experience encompassing product management, engineering, IT,
business development and intellectual property strategy. His career
includes key leadership positions with Qualcomm, where he drove
results with Qualcomm Internet Services, and defined product
strategy for developers and carriers on BREW (a mobile app store
with over 1 billion devices supported around the world). He also
led a software team that deployed services across Latin America,
and drove the IP strategy for Security, Software, and Sensors
inside of Qualcomm Technology Licensing Division.
We’re excited to have him officially join us. Mark, will you
tell us more about Q1 product achievements and what you are
developing with the engineering team?
MARK:
Thank you, Kristin, it would be my pleasure. As Kristin
mentioned, the team has been actively
auditing products and processes to better understand what is
working well and what is in need of improvement. The top down
analysis has identified many areas to refine both in product
strategy and execution.
On the product side, while we have a number of compelling
offerings, many of our products are targeted for updates. We are
working to strategically update products with the latest in mobile
and Cloud technology, prioritized by market opportunity. This work
will not only improve customer experience and capabilities, but
will also stream-line development and lower the cost associated
with product operations and support.
Additionally, we have uncovered new opportunities to expand the
reach within our existing customer base through the integration of
product offerings, specifically within our Identity
Platform.
With regards to our internal operations, we have restructured many
processes and teams to enable greater agility and focus for the
organization. Examples such as customer-focused feature
prioritization, resource optimization and measuring-and-tracking
Key Performance Indicators (or KPIs), will ensure we are
efficiently building and deploying products that address the
specific needs of the markets we serve. And we are seeing immediate
results from these activities. For example, through an audit of
system expenses, we have reduced Cloud computing costs by 20% and
have targeted additional savings in the near future.
While we work to improve operations, in parallel, we are driving
products forward.
-3-
I’m pleased to report that in April, we received iBeta PAD
level one compliance for our BioIntellic anti-spoofing product.
This is our liveness detection technology leveraged across
ImageWare’s software products to prevent presentation
attacks, by ensuring the captured biometric image is that of a live
individual, and not a picture or 3D mask.
Our BioIntellic is also available as a standalone product, enabling
other companies to quickly integrate liveness detection into their
offerings. For example, Contactable (an identity-as-a-service
company) has completed BioIntellic integration into their proofing
product for large consumer, financial and banking opportunities in
the Africa region.
GoVerifyID is our enterprise-ready application enabling enterprises
to add Cloud-based, biometric MFA authentication to existing IAM
infrastructure. A key differentiator from many other MFA offerings
is the Cloud-based matching of biometrics. When biometrics are
securely stored to the Cloud, employees can biometrically
authenticate across a pool of shared computers or workstations.
This is extremely useful. For example, in authenticating bank
tellers as they move across terminals - or call centers with many
operators sharing a pool of workstations. Over the next quarter,
sales and marketing will leverage this capability in their
messaging to target opportunities in finance, healthcare, and
manufacturing.
Also on GoVerifyID, we are scheduled to relaunch the product in
July. The relaunch includes a new container and microservices-based
architecture, and refreshed mobile and desktop software clients.
Both enhancements will greatly reduce the cost of development and
system operations. The new architecture will enable a higher-level
of automation, providing interested parties the ability to test and
purchase GoVerifyID in a self-service manner. Additionally, user
experience greatly improves with regards to the look and
performance of the mobile applications -- bringing it in line with
competitor offerings.
Along with GoVerifyID product changes, we are launching an external
product website in Q3. Simplified messaging and pricing will also
be part of this product refresh.
Our
Identity Platform is a suite of products that address the biometric
requirements of large-scale government and corporate clients.
Examples where the Identity Platform can be deployed include
national ID programs, corporate onboarding and access control,
transportation-credential management, and financial accounts and
transactions. The Identity Platform includes our Law Enforcement
and EPI Suite products along with QuickApps and Proofing
products.
At
present, the Identity Platform consists of a series of standalone
products that were independently created for a specific application
or project. And while these applications continue to provide value
as designed, we also see real value in having a higher level of
integration between the products themselves, enabling them to be
used together to capture, proof, credential and authenticate
biometrics in a manner that is easy to administer and scale. This
workflow is foundational to the majority of the government and
corporate opportunities we compete for, and therefore, leverageable
across many customers and projects.
Previously,
we talked about a plan to continue to build, innovate, and expand
products within the Quick Suite product family. In Q1, updates to
QuickCapture and QuickID were released - and I’m pleased to
share that and we are completing the first deployment of
QuickCapture to Arizona law enforcement agencies. We are continuing
to support our legacy in law enforcement - and refresh product
offerings through Q3 and the remainder of the year - in order to
build revenue in this area into 2021 and beyond.
Also in
law enforcement, marketing just completed a survey in which
agencies provided valuable feedback about capture enrollment and
what they would like to see from the product going-forward. We are
gratified to see the majority of the user-experience and
performance is positive, with very minor improvements necessary to
increase loyalty and future purchases. We are incorporating agency
feedback from this survey and thank you to all that
participated.
Throughout
the rest of 2020 we will continue to enhance our Identity Platform
products, focusing more on EPI and law enforcement offerings,
leveraging Cloud and mobile technologies to improve functionality
and value to the customer, while reducing the cost and effort of
developing and deploying our products.
This
concludes my product summary. I now turn it back to you,
Kris.
-4-
KRIS:
Thank you, Mark. You have heard today from two of our recent
leadership additions (Jonathan, our CFO, and Mark, our VP of
Product Management). On our last call I said we’d be
announcing more hires to fuel the business. I would like announce
today, Sudheer Koganti as VP of Engineering.
Sudheer comes to ImageWare after a 19-year technical career in
software development leadership for Qualcomm. After Qualcomm, he
co-founded a SaaS-based IoT company.
Sudheer has made early and meaningful progress in redefining
ImageWare’s Engineering.
I would like to take this opportunity to discuss our most recent
patent and Intellectual Property strategy. This month we were
issued our 24th patent – titled Out of Band Enrollment and
Verification Using Interactive Messaging. The patent is related to our GoVerifyID product
and the process of enrolling biometrics from a mobile device for
Cloud-based biometrics services. Specifically, this patent
identifies and defines the process of enrolling an identity - using
open protocols combined with out-of-band messaging as part of the
authentication workflow. This patent is another example of our
leadership in Cloud-based biometrics and adds to the value of the
greater portfolio.
Over the past 33 years, ImageWare has built the most cited
multimodal biometric patent portfolio in the world. We are proud of
this work and, as part of a new IP monetization plan, we will begin
to request that companies take a license should they need our IP
for their own biometric authentication products and
platforms.
I plan to establish a small licensing group that will be solely
focused on IP. They will sit separate from the focus of our main
business and be responsible for driving a licensing program in the
tech sector, which should realize a discrete stream of revenue for
our Company.
I want to be clear. We are not becoming a licensing company. We are a software
business who is establishing a licensing business unit. We plan to
make several hires of folks that have strong backgrounds in
patents, licensing and monetization. Furthermore, we will grow the
generation of more patents on a monthly basis. We will continue to
build upon what we have. I have hired a company, IP Capital Group
based in Williston, Vermont, who has a 22-year history of creating
profitable licensing-businesses-and-models for companies. We are
deeply ingrained with them at the moment.
Historically, ImageWare has leveraged its IP for product
protection, ensuring the IP developed in R&D for ImageWare
products is not unlawfully leveraged by other competitors to their
advantage. On separate occasions, our patents have been
successfully asserted in court to block infringing products. We
believe many of our patents have great, foundational value with
regards to multimodal biometric systems.
Over the past 3 years, there has been a substantial increase in the
deployment of multimodal biometric implementations, and there is
reason to believe that we should continue to see the use of
biometrics to authenticate a person as being the most accurate and
secure method. For this reason, we believe it is time to move
quickly to leverage our patent portfolio for licensing. We are
working to better understand the valuation of the portfolio,
revenue associated with infringement, and potential revenue flows
from the overall program. At this time, it’s too early in the
process to discuss specifics, but I wanted to express that this
activity is taking place – and I look forward to providing
updates on our progress.
Furthering the monetization discussion, now I’d like to talk
about Q1 sales and business development.
During the first quarter we received $1,049,844 in orders. The
orders were derived from 4 new sales, 51 incremental sales to
existing customers, and 21 renewals. These orders came from notable
and significant retailers and government agencies.
I’ll highlight a few of these deals to give context, starting
with the new business in Q1.
On our last call we talked about refreshing our EPI Suite software
family (our biometric smart access cards). I’m pleased to
report that we have closed some modest EPI Builder sales. The first
is a new credentialing opportunity with a Fortune 100
transportation and logistics company.
-5-
Our second sale was made to an existing client, specializing in
transportation in support of one of the largest cities in the US.
This was an initial sale, and they have indicated interest in an
additional low six-figure-deal to add-on licensing in the last
quarter of 2020.
Earlier, Mark discussed our relaunching GoVerifyID with both a
mobile and desktop version. We closed two new small GoVerifyID
customers with our MFA authentication product for the
enterprise.
On the Identity Platform, we continue to see strong demand from our
existing local, state and federal customers. These sales vary
vastly in size and complexity, from simple sales of additional user
licenses or consumables, to large integrations, or platform
upgrades. COVID-19 continues to slow the projects either because
technical staff can’t evaluate the product effectively
without a lab to test in, or approvals for purchases are
sluggish.
However, despite this, in Q1, we delivered a significant milestone
for one of our international customers for $391,000. The customer,
a national transportation security agency, uses ImageWare’s
Identity Platform to provide biometric credentialing and access
management – ImageWare is essentially the backbone of their
solution and has been for more than a decade.
When it comes to renewal business, we continue to see strong
commitment in our solutions to our law enforcement platform
customers -- which speaks volumes to the value that our platform is
delivering. These renewals totaled $312,000 over six renewals. We
also saw a substantive number of renewals for our credentialing
solutions. One example being a Fortune 50 telecommunications
corporation, who renewed their use of EPI Suite licensing for
another year through our Partner (Plasco ID).
Many have asked what our sales strategy will be. It continues to
span government, state, local and federal, as well as serving the
enterprise market specifically in the areas of banking/financial,
retail, manufacturing and healthcare.
Government remains an important area of focus for our Identity
Platform. More specifically, we are seeing continued use-cases in
Immigration, and Law Enforcement, and new opportunities in
Healthcare, driving the increased and broader use of biometrics in
identification, authentication, and access management. We have
renewals from loyal customers - as well as the imminent new update
to the law enforcement platform that we plan to sell our existing
customers in every US state and overseas agencies.
We have new ideas for use cases of our software in government in
the public safety space. Given the current climate in the US with
law enforcement, we believe this is a real opportunity to help law
enforcement personnel to defend our country while supporting human
rights and fighting bias.
We have been actively exploring leading areas of cybersecurity that
will enhance product value in the future - such as AI, machine
learning, predictive and behavioral analytics. Rather than staff
and build these solutions in-house, we will be collaborating with
leading providers of advanced security technology, such as quantum
proof encryption and AI-powered continuous risk monitoring. When
these cutting-edge security products are integrated with biometric
authentication, confirmed knowledge of end users can be propagated
into the capabilities of these solutions, greatly increasing their
security capabilities. For example, traffic flows can be encrypted
using encryption schemes based on the risk profile of the
biometrically authenticated users.
Based on this effort, we have solidified a strategic partnership
with SPARQ Global, a privately held cybersecurity company, based in
Virginia Beach, VA. SPARQ is the commercial entity of a US defense
contractor, Global Technical Systems (GTS), who provides
classified-grade cybersecurity across all commercial sectors - with
a primary emphasis on mission-critical infrastructures, data,
content, assets and IP. As part of our contract, ImageWare is the
exclusive biometrics vendor to SPARQ and its clients. With this
partnership, we are poised to win a state and local project, with
SPARQ as the prime - we are not at liberty to discuss this at this
time, but this work will position us for recognized revenue in
2020.
On the EPI Suite software family, we will continue to serve
numerous existing clients from (Fortune 1000’s to government
to SMB’s) but the revved EPI platform will provide a mobile
integration and a Cloud offering that will excite clients and grow
revenue.
The Enterprise security space, with GoVerifyID, is where ImageWare
has been eager to head. Finishing the mobile and desktop version of
the product and providing clean integrations will allow us to keep
positioning GoVerifyID into Fortune 1000’s. We have had
numerous sales calls over the past four months that have gone well.
We are focusing on companies with large work forces in financial
services, retail, manufacturing and healthcare.
-6-
As part of rebuilding Sales and Marketing teams, we have spent
quite some time in the last few months on Competitive and Market
Intelligence. We have been studying markets and geographies –
seeking to better understand where and exactly how we can maximize
-- and most importantly accelerate -- the potential of our
portfolio. One thing that has become very apparent is that a
vertical approach (focused on a few industries and geographic
markets) is where we see our immediate sales focus and future
revenues. Furthermore, we have realized that we must better
understand the audiences and personas of the people we are selling
to and towards that end, we are launching new targeted marketing
and revenue growth campaigns in the coming weeks.
Banking & Finance as well as Retail, and Manufacturing, are
some of the largest, most demanding industries when it comes to the
adoption of Multifactor Authentication. Use-cases include online
banking access, trade finance confirmations, international payment
verifications, foreign exchange, and other banking and financial
services. More specifically, we are focusing our internal sales and
marketing teams, as well as partner sales organizations, on
targeting the many hundreds of regional banks, credit unions, and
niche financial services players across the US for
GoVerifyID.
As many of you are aware, ImageWare has developed partners through
the years to help us sell our software. We are expanding
revenue-driving partnerships as one of our key initiatives. We have
some exciting momentum building across multiple partner types -
including agents, resellers, and system integrators.
We will continue our recruitment of revenue-generating partners
through 2020. We will also continue to work with existing partners,
such as Fujitsu, on joint sales offerings and on-going education of
biometric authentication. We recently collaborated with Fujitsu
Caribbean-Latin America as well as Fujitsu Europe on developing
joint offerings. We have had similar calls with many of the
existing partners, such as IBM. You can expect to hear more about
this in the coming months as we expand our focus-and-critical-wins
through partners.
We also have a considerable focus on generating pipeline
opportunities, and in the past quarter have run a number of
marketing campaigns and sales – both directly and indirectly
– with partners looking to strengthen our customer security
as they move to remote-working environments due to the COVID-19
pandemic. Remote workers will continue to be a trend of the future.
How can organizations ensure that their data is protected in the
home environment? We believe biometric authentication combined with
our technologies can solve many of the threats that corporations
face with remote users. We are presently looking at solving
concerns in this area.
Our pipeline is building momentum - and as a result of our focus
and marketing campaigns - in the last several months we have added
more than 35 new opportunities over three product lines (GVID,
Identity Platform/Proofing, and EPI). We are involved in weekly
calls for opportunities in-and-outside of California, the US and
Europe.
We are busy working on past opportunities that were started at
small numbers and are ramping (such a So. African telecom carrier,
financial services providers and governments). Many of these
opportunities are still active and we are driving them
forward.
We are also going back over the fields that were cultivated in the
past several years by calling on companies who were too early for
our solution. While some of the contacts inside the companies have
changed, the imminent need for biometric authentication has not. We
are having moderate success in this regard.
What I would like to impart for the closing of our prepared remarks
for this call is, that although we have made significant and
necessary changes, many of which have not been easy...today we are
working together, and as a unified new team, which includes our
shareholders. I think it’s evident that we’ve begun to
see early benefits of engineering empowerment - using data to drive
the path forward, working closely with customers on requirements,
sales, product, engineering and marketing alignment, as well as new
marketing tactics that are driving leads and helping to define our
brand.
Thank you, Mark, for your valuable contribution to this call, and
Jonathan for the financial update.
This concludes our prepared remarks. Now we’ll begin our
Question and Answer session - and we appreciate the questions you
submitted via email this week.
A reminder that a many of your questions cover the same subject or
similar subjects. We will answer your questions as we can with the
best information available at this time. Some topics are best
addressed in future quarterly updates.
==================================
-7-
KRIS: We’ll begin by answering questions on the
subject of the Biometric Market
in general and the Biometric Payment Cards
recently in the
news.
Kris:
We’ve been asked to quantify the
Biometric
Market and its near-term
outlook. We believe the total addressable MFA market
opportunity will be approximately $4.5B by 2025.
Biometric
smart cards have been in the industry
for many years, and ImageWare has been a leading developer of
authentication and identification solutions - using and encoding
those cards for well over a decade. In fact, ImageWare has provided
solutions for the federal and international governments using
biometric smart cards that are used to authenticate individual
identities and authorize-and-provision physical and logical access
control. These solutions were built on our patented Biometric
Engine®
and have been in production as
mentioned prior for over a decade. Customers include government
agencies and government transportation
entities.
At
ImageWare, we always believed that biometric authentication would
come to the consumer market in a big way. We were proven right when
Apple introduced fingerprint into the iPhone. What followed was a
wave of biometric use to secure phones that continues to grow
today.
We
now see the market turning to biometrics to secure financial
transactions using payment cards. The reason for this is clear - to
reduce fraud - which is a growing and persistent problem. At
ImageWare, we see the inclusion of biometrics in payment cards as
further proof that the biometric authentication market as a whole
will continue to grow and that we are poised to provide the
scalable solutions to support it. As sensor technology advances,
the need for a scalable platform solution to support-and-enable the
mass use of biometrics will be a critical component to adoption.
ImageWare leads this endeavor with proven, patented products that
power some of the most demanding 24/7, mission-critical
applications to-date.
The
adoption of biometrics as part of financial transactions will
continue to grow. We expect to grow with it and continue to be an
integral part of it by providing the world's most powerful
biometric platform for identity authentication. As the use cases
for identity authentication continue to evolve, we're ready to
support them with scalable, turn-key solutions that have a strong
track record of success due to our work in the government and
consumer markets.
Many of us read recently that IBM announced they were pulling
their facial biometrics.
IBM's removal from the facial
biometric market combined with Amazon's and Google's actions to
prevent using their facial recognition technology by law
enforcement has been all over the news. Some have taken these
actions further by supporting a facial recognition ban. It's
important to understand what this means for the industry, and why
facial recognition is receiving such a
backlash.
There
are several issues that are of concern. The first is mass
surveillance. In many countries, citizens and politicians see what
happened when mass surveillance using facial recognition had been
implemented in countries like China, Russia, and even the United
Kingdom. Mass spying on innocent civilians has had unwanted and
unexpected outcomes such as social currency, misidentification, and
more. And that's the second issue, namely, the gender and race bias
that many facial recognition algorithms suffer from when used
against large databases for identification. The risk of
misidentifying someone based on their race or gender is too big of
a problem to ignore.
To
be clear, ImageWare is not in the mass surveillance business - we
do not develop solutions that support that type of application. For
example, we provide identification solutions to law enforcement and
to the government. These are based on controlled facial image
captures - such as mug shots - that are matched against known
identities such as alleged, charged, and convicted criminals - not
the general population. We provide authentication solutions that
are used to verify a single person's identity when they attempt to
log into their network, their email, their healthcare record, and
their financial institutions.
These
are specific solutions that are designed to enhance and protect
privacy, not to take it away -- as is the case with mass
surveillance or the use of products such as ClearView.ai, which use
any image of any person that can be taken with a cell phone or
scraped from social media and used to identify a complete
stranger.
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Also in the news recently, was a report
that Biometric Payment Cards
are now being manufactured in
China. While we're not
surprised to see fingerprint as the first modality tied to a
biometric financial card, fingerprints are only one biometric
modality (or type) and not the most inclusive one at that. An
estimated 30% of the global population does not have an easily read
or even readable fingerprint. Factors such as age, genetics, and
even what you do for a living, can have an impact on whether common
fingerprint capture technology will be effective for a given
person.
At
ImageWare, we pioneered the field of multi-modal biometrics - the
use of multiple biometric types to identify or authenticate an
individual. From experience, we know that ultimately these types of
biometric cards will have to include other types of biometric
authentication other than fingerprint to be inclusive and gain mass
adoption.
Our
patented technologies, products, and platforms enable multi-modal
biometric use cases like financial smart cards. They're patented,
scalable, and proven to provide the results needed for applications
such as this.
KRIS: Next, Jonathan will address the number of questions we
received regarding our S-1
Registration Statement, the $10.3 million dollar commitment by
Lincoln Park Capital to purchase shares, and the
status of financing and
other related matters.
Jonathan…
Jonathan:
We
continue to receive questions regarding the agreement with Lincoln
Park Capital. I want to reinforce that the company has right, not the obligation, to call on
this $10.3m dollar commitment. This commitment, along with other
capital infusions, have materially strengthened and enhanced our
balance sheet as well as our financial outlook. The most recent LPC
transaction on June 11th was part of the original agreement dated
April 28, 2020. That commitment does not restrict our ability to
receive capital from alternative sources.
We have
also been asked to discuss our capital raising efforts. As I
mentioned earlier, we are evaluating a number of financing
opportunities with several potential sources for significant
long-term capital. Given our ongoing discussions with capital
providers, it isn’t appropriate to talk about the structure
or negotiations at this time.
KRIS: Thank you, Jonathan. This leads us to questions
regarding our Revenue
Model
Kris:
Historically,
federal, state and local sales have made up the lion’s share
of ImageWare’s revenues. We charge per project, based upon
the client’s needs and professional services required for
their unique implementations. Government award contracts in
different yearly bundles, based on needs and budget, culminating
into a project RFP. In the future, we will increase sales revenue
through GoVerifyID, our enterprise offering, with monthly recurring
revenue through a SaaS model.
KRIS: As expected, we have a number of questions about the
Status of Historic Projects and
their Revenue.
Kris:
The
foreign government project we 8-K’d earlier this year is slow
due to both of our countries being paralyzed with the COVID-19. We
are waiting for this project to begin.
Our
projects with Contactable are present but represent small revenue
at this point. The African telecom market opportunity is slow given
that the implementation is on feature phones. We will see more of a
takeoff when users move to more sophisticated mobile phones with
built-in biometric hardware capabilities.
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KRIS: Next we’ll turn to questions regarding
Revenue and estimated Timing for New
Projects.
Kris:
Recognizing there
have been delays in revenues with past projects, the sales team is
making excellent progress with strong presentations that are
resonating. I am directly involved with most of these meetings,
pushing for deal wins. I want to assure you that we have productive
conversations with real customers ranging in size from Fortune
1,000 to SMBs to government.
Most
potential clients like our solutions but tell us that they have
what they need for the moment in terms of authentication. Some have
asked us to complete RFI’s. Some have asked us to integrate
into their existing MFA provider - and we are busy working on
implementation paths. We are waiting to hear on awards of business
from a number of entities.
As I
have said before, it’s simply too soon for us to provide
revenue estimates. I have studied the sales cycle at ImageWare. We
are heavy in Q3 and Q4. Commercial deals typically take 3-6 months
on average to close and government projects can take upwards of
three years. We are finishing products, revving platforms, driving
new marketing and messaging campaigns, building a new web site, and
simplifying the customer journey. We have great
fundamentals…we just need more time to bring success back to
the business.
KRIS:
I
believe that we covered the subject of our IP and plans for Monetization in our
prepared remarks…so I’ll end the call with a brief
closing comment.
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KRIS:
I thank everyone for joining our call. I look forward to our Q2
business update as we continue to build, innovate and expand
products, fine-tune the key features of our products, and make
substantive inroads towards our sales goals.
We have made important recent progress, and we still have
challenges ahead. With the support of our team and our investors,
we will face them with great optimism and the conviction that we
will be successful.
I would like to encourage anyone with ongoing questions or feedback
to reach out to our investor relations team or myself. Stay safe
and be well. Thank you again.
OPERATOR:
This concludes today’s conference. Thank you for your
participation.
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