Jim Miller - Chairman & CEO Wayne Wetherell - CFO

Jaeson Schmidt - Lake Street Capital Markets Mike Malouf - Craig-Hallum Harvey Kohn - HRK Strategic Advisory

Thanks, Kalian and good afternoon to everyone. As you saw at the close of the market today we reported financial results for the first quarter ended March 31, 2015.

I would like to begin today's call by speaking first about some specific financial results for the quarter and afterwards I will walk you through some recent developments. In the first quarter of 2015 total revenue decreased to 1 million versus 1.1 million in the first quarter of 2014 primarily due to lower hardware revenue and lower royalty revenue from our channel partners.

Gross margin in the first quarter decreased to 71.1% compared to 76.4% in the year ago quarter. The decrease was primarily due to lower software and royalty product revenues.

Net loss in the first quarter was 2.3 million or negative $0.03 per basic share compared to a net loss of 1.7 or negative $0.02 per basic share in the first quarter of 2014. At March 31, 2015 cash and cash equivalents totaled 8.4 million compared to $200,000 at December 31, 2014 reflecting our 12 million convertible preferred offering in February.

We used approximately 2 million of those proceeds to repay all outstanding debt and will use the remaining net proceeds of approximately 9.9 million for research and development and other general corporate purposes. Now let's be clear, these numbers aren't acceptable to us.

It has taken us longer than anticipated for us transition to a commercial base provider of biometrics as a service and it's taken longer than anticipated for our partners to commence the roll out of our products which is an obvious risk inherent in our partner go to market strategy. However, Imageware's strategy to target large IT service providers and deliver security for their cloud customers remains on-track.

Ultimately our model is dependent upon our partners and we have formed very significant relationships with Fujitsu, TransUnion, Computer Associates, IBM, Deutsche Telekom, and more recently with Agility and Extenua. All of these partners remain in the testing and implementation stage and they have reiterated their commitment to Imageware.

None of them have changed their mind or their plans with respect to the roll-out of our products. We’re also in the final stages of contract negotiations which we expect to conclude shortly with new well-known partners who will license one or more of the IWS Identity Management products and take them to market globally under their brands and names.

While we certainly expected some of these agreements to be producing revenues today, it is important to note that we’re dealing with large organizations that are thoughtful and methodical about the roll-out of our transformational software and in other cases they have a plan to incorporate our software into new products that they still need to develop. In some cases they are building and refining their sales and marketing strategy which will serve as the basis for product roll out.

One executive of the large integrator said recently that the tipping point is at hand and his company expects to see significant movement in the second half of this year. We couldn’t agree more.

These new partners will add to the seven commercial partners we’ve signed currently. The size of many of our partners and their ability to touch 100s of millions of users around the globe is what drives our strong outlook.

As such we remain undeterred by the pace of the roll-out and steadfast in our goal to transition Imageware to a commercial base provider of biometrics as a service, a transition we expect to drive very significant shareholder value. Now diving into our specific projects.

Many of you have asked us when we can expect to see actual revenues generated from our new generation of software as a service products and obviously it's been a priority for us and I'm pleased to report to you today that during the first quarter we successfully completed our first software as a service installation and began to generate revenues with the on premise production version of GoCloudID which was deployed for use in the Baja Driver's License Program. The installation of this private cloud system is now in production across the state of Baja California, Mexico.

The system provides finger print and facial recognition biometrics to over 80,000 current users and is supporting the production of additional users at the rate of 15,000 to 20,000 per month. The system is paid for on a per transaction basis and represents our first implementation of biometric based identity management on a software as a service basis in the cloud.

It's worth noting that somewhat to our surprise this first implementation was to a government customer which we think bodes very, very well for future SaaS business on the public sector side along with the private sector. Our major international retailer continues to exercise extreme precautions regarding security around the collection of employee data.

For those of you who aren't familiar Mexican privacy laws are significantly more stringent than those here in the U.S. The retailer has asked in internal committee to study Fujitsu's data center protocols making sure that they all have appropriately ISO certification and that they handle the sensitive data in question in the most diligent and secure fashion.

This is important as it's the retailers intention to roll this out beyond the specific region of Mexico. So all due care has been taken to satisfy any and all concerns of data security.

Once the retailer is satisfied we expect the agreement to move forward as planned and as such we will update our shareholders appropriately. Now moving on to our German projects, Deutsche Telekom is doing a final check and their Berlin TLab headquarters on the latest and greatest version of our GoVerifyID product, a version that now runs on Linux instead of Windows.

Given all the news regarding NSA security breaches and at the German's behest our new version removes Microsoft, a U.S. company and now uses the Linux operating system.

We estimate this process cost 180 days of our roll out plan, but now that this version is developed we’re waiting a final run-through TLabs this month and from there the software can move concurrently to Deutsche Bond and to the pilot sites of the German healthcare system. At the end of 2014 we entered into a partnership with Transunion to integrate their ID manager solution with our GoVerifyID product allowing Imageware to deliver advantage fraud prevention capabilities to organizations.

Through the relationship consumer identifies will be thoroughly analyzed using both biometric signatures and the Transunion ID Manager Platform. During this first quarter Transunion created a white label version of our GoVerifyID product and they are currently integrating that into their new global platform which will service the 33 countries and 100s of millions of customers around the world they serve -- Transunion advises us that this launch remains unscheduled for the second quarter.

With that said Transunion is involved in prelaunch sales activities and is previewing the GoVerifyID product to it's current customers. In January of this year we announced that CA Technologies invited us to be part of their Tech Partner Program with an advanced partner membership status.

CA is one of the world's leading providers of software as a service based IT management software and solutions. For their fiscal year beginning April 1st, CA has chosen six partner products to feature as worldwide prime movers and Imageware was selected in that group.

Through it's technology partner program CA enables the development of value added integration for it's products such as Imageware's GoVerifyID which is anchored by our patented biometric engine version 2.0. These two flagship products will be associated with CA Secure Cloud formerly known as the CloudMinder and CA's single sign-on formerly known as the SiteMinder product.

These products will be delivered by CA as a service. CA secure cloud provides corporations with identity management, advance authentication and federated single sign-on to cloud and on premise applications.

Single sign-on can provide organizations with enterprise class, secure single sign-on and flexible identity access management so they can authenticate users and control access to web applications and portals. The CA launch is pending the completion of the laborious task of certifying our product with CA technologies to ensure consistent use and computability for anyone that uses this product going forward.

we are targeting the completion of this in the second quarter. Our contract with Fujitsu to jointly market a cloud based multi-modal, biometric identity management as a service solution continues to progress.

In the first quarter we deployed GoCloudID on the Fujitsu cloud for proof of concept evaluation by several Fujitsu customers. Our relationship is stronger than ever and we are in the midst of executing a master global agreement which escalates our relationship and paves the way for our global roll-out.

Fujitsu remains equally excited about our prospects and for those of you who haven't seen it I recommend you view our website at iwsinc.com where you can see Fujitsu talk about the products we’re creating together in their own words. We’re also looking forward to presenting at the Fujitsu form in Tokyo later this week where we were invited by Fujitsu to show case our cloud based biometric user verification solution and discuss the future of Fujitsu's and Imageware's strategic partnership.

This is a fantastic opportunity to sell product directly to Fujitsu's prime customers in Asia and around the world and what is Fujitsu's premier annual customer event. In March we signed a binding agreement with Kuwait based Agility to create a joint venture company based in Kuwait City which will sell the IWS product suite throughout the Middle East and other countries such as India, where Agility has existing customers under contract.

Agility is a nearly $5 billion in annual revenue company, employees over 20,000 people globally and is a leader in supply chain management space. They have existing customers with a current need for our products.

Under our agreement we will receive a onetime technology fee upon the commencement of joint venture operations as well as ongoing revenues from the sale of software as a service in the region. In April we successfully installed the pilot software at Agility and we’re currently working on the final version of our joint venture agreement.

We expect the joint venture to be operational in the second quarter. Also in March, Extenua announced a partnership with Imageware to create the first end to end enterprise secure cloud storage data encryption and multi-modal biometric identity management platform for office and mobile devices.

Extenua is a pioneering developer of enterprise security software that simplifies the use and access of cloud storage. Our GoVerifyID solution will be integrated with their Cloud2Drive products to help enterprises both large and small face security challenges posed with cloud storage.

Biometric authentications including voice, eye, signature, finger print and facial recognition provide additional enterprise grade security layers and fraud defense for cloud storage users. Extenua is in the process of working on their integration with IBM now and estimates finishing quite soon.

Once complete the product will be available on IBM's Blue Mix cloud platform. As a reminder IBM's Blue Mix is similar to an enterprise app store allowing IBM cloud customers to choose among a collection of either IBM software and services or those from a variety of vendors such as Imageware.

Extenua is also in discussions with a number of other cloud service companies. Over the past several quarters we have entered into seven major partnerships, some with major global firms for the integration and resale or direct use of our products.

Biometrics as an industry is just now moving into the consumer realm like many technologies before it will take time to route and then explode and flourish as initial deployments turn to full scale adoption. As you look around and do your own research you will see these verifiable signs everywhere.

As we have cautioned in the past on several occasions we’re not quite yet a quarter-to-quarter company. It's a priority for us to get there and as biometrics grows into the consumer market we believe this will happen rapidly and successfully.

As we move forward and our growth plans becomes a reality we’re also going to reposition Imageware in the public market. To that end we filed our application for listing on NASDAQ and are working closely with the NASDAQ officials to bring that listing to reality.

I would like to remind our listeners once again that all the commercial deals we have discussed today are SaaS based and we’re paid on a per person per month basis or as in the case of our first cloud ID deployment at Baja California on a per transaction basis. Our goal is to completely change the financial model of this company.

The roll out of any of the agreements we have discussed even at a fraction of where our partners model the rollout would accomplish this goal. Based on the expectations of our partners we continue to expect to be cash flow positive on a quarterly basis during 2015 and see substantial growth and profitability moving into 2016.

And now we would like to open up the call to any questions you might have.

Jim, just wondering if you can talk a little bit about your confidence that some of these loads will get over the go line as we move through 2015?

Yes, absolutely. Extremely high, look, we share the frustration obviously; we have worked hard on these deals.

There are seven major ones out there as I said in the call we have got several more of that -- we will hit very, very shortly. The goal is not to sign partnerships the goal is to enter into the partnerships with only one purpose and that’s moving to product to revenue for both companies.

The good news is we’re on the same page there with our partners, that’s their goal too. The only reason to do this would be for them to see the revenue potential come to reality as well.

So we see all of these agreements moving forward, we’re extremely confident that they will some in the really short term. It's a big heavy lift for some of these folks.

And I know people are investor some of them don’t understand and in certain cases don’t like to hear it but it's just so. When you look at Transunion for example, redeveloping two different global platforms and combining them into one that serves 33 countries on one integrated platform is really easy for me to say and one big heavy lift to accomplish.

So it takes time for them to do that. The good news is our piece on that is done and the good news is they are planning to move ahead and move this to market in their full profitability and I don’t mean to suggest anything other than the other ones are absolutely in the same place.

So yes again very high confidence these are moving ahead.

And then if you could just update us on the mobile wallet opportunities and any new update there that would be helpful.

Yes actually what happened with the mobile wallet opportunity is really that the product the GoVerifyID which was biometric authentication built specifically for mobile devices not just phones of course but any mobile device has really being the product that we are leading with and so what we’re out speaking to a number of folks I think that you will see the GoVerifyID product hit the market not so much first at least not in the embodiment of a wallet Jaeson, but just as the last piece of security and authentication for access to cloud based data product storage information. So I think that the mobile wallet industry seems to still be trying to get it's own act together.

We were not content to wait for that and so we have moved in a parallel direction, not an alternative but a parallel and we’re still in those conversations with specific mobile wallet folks but we’re finding a lot of folks like the GoVerify idea without having to put it in a mobile wallet framework., it works either way of course, so good for us either way. But we have not seen the movement in mobile wallet as fast as we would have liked but that’s okay, because GoVerifyID plays with or without a mobile wallet attached to it.

Okay, and the last one from me before I jump back in the queue. I know you’re going to invest more in R&D here but how should we look at the slope of the OpEx ramp for this year?

With R&D basically we’re going to add more people. Right now we have got about 6 to 7 additional positions that we’re out actively trying to fill, that’s on a base of about 30 some odd people right now.

So it's not a huge increase but we will see an increase there.

And that’s really the expense Jaeson, is of course is the headcount itself, I mean obviously people are always at company's number one expense. But as we have said and we remain consistent with it as we said a couple of months ago we need to add to support the growth and the opportunities, you know half a dozen to 10 folks not 20 to 30.

So we’re in the process of looking for folks to fill those positions and that’s it.

Jim, I'm wondering if you can talk a little bit more about the Transunion relationship, specifically what are they actually selling? Can you just give us a sense of what they are selling and what they are charging for and just so that we can get a sense of what the end market looks like.

I mean what they are doing is they have created with our help a white label version of GoVerifyID so their idea is to put that product on to laptops, smartphones, lots of folks around the world use mobile devices as the only way they transact business. And to add an additional and final layer of security in their authentication process.

And they will be doing this for a different group's of people, some of these are folks who avail themselves of a monthly service like credit reporting or credit monitoring, and then those cases those folks will use the GoVerifyID product to ensure their identity is consistent with the identity on file and then access is granted accordingly. In other cases there is more transactional approach that is certain transactions like loans, large financial loans, commercial transactions, access to credit reports on maybe a onetime basis, you’re buying a car, you’re buying a house, you’re getting an education loan, you’re doing a loan for medical services.

Those are all run through an analysis that Transunion does and again to ensure the authentication that you’re really the person you say you’re, they will use our product. Those are priced in different ways.

And so we’re pricing our product to Transunion in several different ways accordingly. Monthly service is really easy, you can do per person per month transaction or a per person per month fee.

On a per transaction basis obviously transactions you might have a person that does five transactions a month, you might have a person that does one and Transunion's view is those kind of things should not be on per person per month and we understand that. The good news is our model accommodates per transaction so you will have what I call a hybrid pricing model depending on the different groups of transactions that Transunion uses the product for.

The final pricing's we haven't announced yet, we’re still doing a little refinement on that, but that’s the way they will break down so there will not be one model it will be truly a hybrid again and you will see this I think in other financial institutions, customers as we add them because that’s just the way their business works. They have regular monthly and then they have a lot of transactions that verify -- again some individuals a lot per month, some have one or none.

And with regards to Agility, is your expectation -- I know you said that things were going to start ramping this quarter, will you have any SaaS revenue you think from Agility this quarter or is that more of the back half of this year?

No I actually do think we will, Mike. We installed the pilot software out there few weeks back and everybody is pretty excited about moving forward with that, so we’re trying to go through as quickly as we possibly can, finish up the paperwork here and I really do thing we’re on the short and final approach to wrap all that up here pretty quick.

And then final question, with regards to cash flow you had mentioned that you are going to be cash flow positive in 2016 is that -- if I narrow that down is that basically kind of a target to have the fourth quarter be positive cash flow or is it like an actual quarter or are you talking about certain period of time? Can you just give a little bit more color on that?

Thanks.

What we see is the ability to on a quarterly basis go cash flow positive at some quarter in '15 and then carrying that through consistently the whole year '16.

Okay so we were conservative we would say, the fourth quarter of 2016 will be capital positive.

Yes if you were conservative that’s the way to look at it.

Two of my questions were answered already but I wonder -- congratulations on Baja, as my numbers arrive as a population of about 3 million people I was just curious you indicate that Imageware will receive revenue per transaction, could you give me a little color as to what a transaction is regarding to Baja Driving license [ph] and are we talking about a $0.10 or $2 or some little color on that?

Per transaction in driver's licenses is just simply the production and issuance of driver's license. So the numbers when we say 15,000 to 20,000 those were the numbers of people who come in and renew and/or get a new driver's license credential authorized and issued by the State of Baja California in Mexico.

You’re right, there are about 3 million folks in the Baja population for driver's population or for Baja population this deal is anticipated to generate a 1.5 million to 2 million credentials upto the time it renews in 2017. And those will run somewhere between 15,000 to 20,000 a month maybe as high as 30.

This is a whole brand new system for the state as well and they are doing some different things on their end with the issuance of the credential. It is the first of it's kind as I noted in my remarks and we’re pretty excited by about because it's government and originally we did not think government would be inclined to do a cloud based software as a service on any model.

So this is very encouraging, but that’s the way it shakes out. The royalty after some of the upfront money was paid, runs about a $1 a license.

Okay. Thanks, Kalian.

The first quarter saw our first cloud ID SaaS deployment go into production and begin its generation of revenues on a monthly per transaction basis. We look forward to updating shareholders on our upcoming deployments and our company's progress when we speak to you on the quarter to update call in August.

Until then we appreciate your time, your attention, your support and we wish you all a pleasant afternoon and evening.