James Miller - Chairman and Chief Executive Officer Wayne Wetherell - Senior Vice President, Administration and Chief Financial Officer

Harvey Kohn - HRK Strategic Advisory Bob Clutterbuck - Clutterbuck Capital Management

Thank you, Melissa. As you saw at the close of the market today, we reported financial results for the third quarter ended September 30, 2016.

Like to begin today's call by speaking first about some specific financial results and milestones for the quarter, afterwards walk you through some recent developments including the exciting introduction of our new enterprise product offering. In the third quarter of 2016, total revenue was $800,000, compared to $1.2 million in the third quarter of 2015.

The difference is primarily due to non-recurring revenue in 2015’s period for certain identity management projects. Gross margin in the third quarter of 2016 was 72.6% compared to 72.8% in the same quarter a year ago.

Net loss in the third quarter of 2016 was $2.4 million or a negative $0.03 per basic share compared to $1.9 million or a negative $0.02 per basic share last year. At September 30, 2016, cash and cash equivalents totaled $1.7 million compared to $3.4 million at December 31, 2015 and total debt was $2.1 billion compared to no debt at December 31, 2015.

You may have seen from our filings with the SEC that we recently filed three shelf registration statement to provide us with $15 million in registered common stock which will give us greater flexibility to raise additional capital as needed on more favorable terms than through unregistered offerings, $2 million of the $15 million applies to the $2 million raised in September leaving $13 million for future requirements. Additionally, we have $3 million remaining on our line of credit if needed.

As we mentioned on our last update call, our network of commercial partners over the last couple of years has grown significantly. So in the interest of time, we do believe it makes sense to run down that entire list and provide updates on a one-by-one basis.

Instead we will focus on providing updates on new partner agreements signed over the last few months and comment on our established partner agreements depending upon the materiality of new information. With that said, during the third quarter, we forged several new key partnerships while also building upon existing relationships.

First, we entered into an agreement with SAP leveraging their resources to create an integrated solution between the GoVerifyID product and their SAP HANA Cloud platform. This solution enables SAP customers to streamline their user login experience while increasing their user identity assurance for access to their applications running on the SAP HANA Cloud.

GoVerifyID will allow these organizations to easily add Biometric Authentication to their existing security systems. We believe this is just the first step to a larger relationship with SAP, which we are now discussing.

Next, we entered into a strategic partnership with Fortscale Security. Fortscale deals with analyzing user behavior.

So, if it’s detected that you are engaged in abnormal behavior, for example, if during logging into your network, your usual routine varies. The user will be required to authenticate themselves biometrically using the IWS GoVerifyID product.

This solution utilizes either cloud-based or on-premise deployment and ensures seamless integration with existing security and access providers and we are currently under consideration by one of the world’s largest network access providers with this product. Last month, we expanded our partnership with Fujitsu to integrate GoVerifyID into their Fujitsu smart origination product offering.

This product which Fujitsu will officially launch tomorrow, serves to streamline online applications and increased fraud protection by utilizing the camera on applicant smart device GoVerifyID biometric collects and verifies the user’s identity, automatically fills application fields and undertakes device identification and geo location. This partnership in which we are working will provide an unparalleled levels of security for clients as well as remove the tedious effort of filling up forms and recalling information while guiding a user through loan application and documentation process.

It’s also worth noting that Fujitsu is the first to market and deliver this as a scalable solution either on-premise or on Fujitsu’s K5 cloud. More recently, we entered into a three year agreement with Aurion Pro to integrate GoVerifyID with their digital branch DX multi-service kiosk.

The solution is designed to enhance the customer experience by automating traditional banking branch kiosks to perform at higher levels of efficiency, personalization and speed without the need for paper or plastic credentials. This integration serves to increase customer engagement and enables Aurion Pro to deliver the highest caliber customer experience with convenient state-of-the-art security control.

Aurion Pro will market and resell the combined solution to their existing and prospective customers while we will host the GoVerifyID software as a service on Amazon web services cloud. Aurion Pro began sales efforts on this exciting new product during the first week of November.

It’s important to note the differentiation of this Aurion Pro partnership compared to others in the past, Aurion Pro isn’t just partnering with us. Aurion Pro is putting their brand name on a product they built with ImageWare at the center of it.

They are taking their time, their brand and their money to go to market. This is their only biometric product offering and because Aurion Pro’s client base includes some of the world’s largest financial institutions, we couldn’t be more excited to be at the center of it.

We are equally excited about our newest OEM agreement with Avatier, a long time leader in the mobile identity management and access government space with customers such as Nordstrom, COX Communications, DHL and Marriott among others. They are using our software development tools to incorporate GoVerifyID into their product suite, creating a new biometric-based product under their brand.

Avatier plans to commence sales efforts by the end of this month. Finally, we continue to receive small but consistent revenues from users of our products who pay us for use and hosting of the GoVerifyID solution.

Moving on, I’d like to take some time to detail our exciting new product offering which is truly a significant advancement in the world of biometrics. As you may have seen in our press release from earlier today, we have officially introduced GoVerifyID Enterprise Suite, a revolutionary new product that is the first ever end-to-end biometric platform that seamlessly integrates with an enterprise as Microsoft Infrastructure in just one hour.

The digital workforce which comprises not only employees, but vendors, consultants and sometimes customers has continued to expand and data is now extended across numerous devices and systems intensifying the need for next level enterprise-wide protection. This cloud-based solution safeguards data against potentially devastating security breaches that could tarnish a corporation’s reputation and brand.

Working across the entire Microsoft ecosystem, GoVerifyID Enterprise Suite offers a consistent user experience and centralized administration with the highest level of security, flexibility and usability. Further, given the overall magnitude of existing Microsoft Enterprise users, we see tremendous opportunity as this solution is also backwardly compatible with Windows 7, 8 and S.

We are completing agreements with several initial users of the product and are looking forward to announcing them soon. We are very excited about the future of this offering as we believe it’s a true game changer in biometrics and if you haven’t not already done so, I encourage you to read this morning’s press release for further details about this product.

The soft launch has already occurred and we will be formally launching and showcasing the product at the CA World Trade Show in Las Vegas, which started today. We continue to believe we have the right products in the right place at the right time and we continue to see adoption growth day-by-day.

Now, where are the revenues, investors ask and I ask our team that every single day. In fact, as you might imagine I am asking our team that multiple time today.

Savvy marketing analysts such as Gartner, IDC and Forrester are predicting that biometrics market will be upwards of $30 billion in a few short years by 2020. And even if this forecast is radically off the mark, which we do not believe it will be given the track records of the respective firms involved.

Biometrics will still experience tremendous growth. The market is very real.

However, there have been impediments to adoption of the technology and this has resulted in a slowness of revenue which we’ve experienced. Allow me to explain further.

As biometric providers have been seeking adoption in sales in the consumer market, target companies have come to realize that the four [ph] before consumer rollout, they need to protect the enterprise market as it is the principal target of hackers. Because of this, we have seen Sony, JPMorgan, Experion, Target, Anthem, and many, many others become the target of successful hacks resulting in the compromise of millions of people’s personal information.

This in turn has caused these companies to place greater emphasis on protecting their own internal systems prior to rolling out biometric systems to their customers. However, existing solutions including our own GoVerifyID, built for the consumer market did not respond to the enterprise requirement to install quickly and with little or no integration or to authenticate an extended workforce such as consultants and vendors many of whom do not work in a dedicated facility and who access network stored information on a mobile device a considerable security on mobility.

And this is why we built and we are so excited about the new GoVerifyID for enterprise. We had to find a way to both respond to the market needs and generate revenues by offering a product that address these specific needs.

This new product has been built initially for the Windows operating system as it is still by far and away the most used product by enterprise users. We have been doing installs and testing in under 15 minutes and it requires no coding.

The new product allows for biometric authentication of your entire workforce including contractors and vendors and allows you to authenticate identity from any device they might use. Additionally, it has our award winning and patented biometric engine at its back-end enabling it to use any biometric input and scale into the millions of users.

The product is sold as a service. So there is no upfront cost allowing our customers to pay as they go and giving them the ability to scale as necessary.

And finally, as mentioned, it’s backwardly compatible to older Windows systems such as 7, 8 and 10. This is the product the market has been looking for and according to several large market analyst firms, it’s a product no one else has.

This version works within the Microsoft ecosystem as that is the dominant system used in the enterprise. But we will have Linux and MAC versions released very soon.

We believe that once embedded in the enterprise, we will be a pole position for the rollout to consumers. We also believe that this product will haze in revenue generation which is a vital importance to all of us.

We announced the product today and it will begin shipping November 21. It’s been the challenging and exciting year and as we have shared with you in the past, biometrics as an industry is still in its early stages.

There are and will be a number of starts stops, ups, downs along the way as is customary with the introduction of any new technology. ImageWare is involved in a number of proof-of-concept tests with high profile global customers and several of those are making their way to complete a deal.

Believe me, I wish we could move them faster, but understand that they are moving in the right direction. Our technology partnerships are in excellent condition.

None of our partners have gone away or decided to forego working with ImageWare in place of other technologies and despite some delay in determining how each of them will enter the market, all of them continue to work toward that goal. As we close out the year, and look ahead to 2017, we plan to continue executing our go to market strategy and capitalize on the growing adoption of biometrics both at the commercial and enterprise level armed with new products and an increasing confidence that we are in the right place at the right time and the success will happen.

Now before delivering some closing remarks, I’d like to open the call up for any questions you might have.

Hey, Jim. How are you?

Hi, Harvey.

Good, Harvey. Thanks.

I have two questions, one, I missed something or is this the first time I am hearing the name Avatier.

Yes.

Are we seeing a release or anything on that?

No. We have not.

Avatier wanted to wait. So they were ready to go to market with the product and now with that happening we felt it was appropriate to share with everyone.

Okay and second, the other data with most of you with Steve Visconti from present CEO of Extenua.

Yes.

And who comment about the – about GoVerifyID, he talked about the size and the magnitude of the opportunities and how compelling you were and they are beginning to spend more resources on security and we are engaged, I am quoting now, we are engaged in multiple opportunities which run into the tens of thousands of users, would you be able to give us a little bit more color on that?

Well, of course, those are Extenua customers, so, Steve, and his team controls the customers and the pace of those deals. I do know what he has advised us as his partner that he is in the process of closing out a couple of opportunities significant ones.

I believe they involve the government space and because of the uniqueness of the combined products, Steve’s CLOUD2DRIVE and his new even more advanced product which allows for the protection of data stored and attachments on emails coupled with biometric verification. There has been increased interest and procurement is - process is underway.

So, he is excited and as his partner, we are excited and we believe that based again on his advice to us that those deals are progressing well and that are fairly eminent to getting completed.

Okay, thanks.

You bet.

Hi, Jim, how are you?

Good, Bob. Thanks.

How are you?

Well, real good. Jim, just more of an observation than a question, but I wouldn’t certainly like to comment and from a shareholder perspective and then we certainly don’t represent other shareholders, but some others at the backwards saying comments that we remain potentially very optimistic for three primary reasons.

You mentioned one of them early, I mean there is not a month, there is not a week, there is not a day that goes by where some major firm has had and number two, from everything we read, everybody is predicting that biometrics will play more and more of a meaningful role in cyber solution and to be blunt, I think with the partnerships we have, the technology, the plug and play that – as VIP potentially, it is the keyword, we are going to capture a very decent part of the market. However, the one flashing red light that you talked about is revenues, revenues, revenues and so at least from our perspective that if we don’t get revenues from any big name revenue deals, say during the next quarter, from a stockholders’ perspective, we think the stock will continue to languish.

To be honest if we think our options will be somewhat limited, but we do think that we can close significant revenue deals over the next quarter that are [Indiscernible] and we think ImageWare can do whatever you wanted because this was obviously a bigger discussion, you can reach pole vaults of money if want to greatly expand that we think there are multiple alternatives which ratifies those outcomes. So, in essence, when we’re taking a look at the next quarter, and if we are on the same page on this, tell me again why this time – do you really see over the next quarter some significant deals being closed?

And there are no more reassurances.

Okay, well, thank you for the question and the observation is right on. I don’t disagree with any of it.

Revenues are a job one. In terms of shareholder expectations and job one for this management and this company, we – so the message received loud and clear.

Part of the thinking behind the new products was really to drive those revenue along the way we went out and introduced GoVerifyID which is a fabulously great product and it has gotten a lot of interest. But along the way, we discovered that the companies that we were seeking to put GoVerifyID into play with mostly with their customers had themselves now stopped to look at the market and had decided that really what they needed to protect was themselves.

So it’s simple, before a Target or a JPMorgan or any of those companies rollout to the tens and millions of customers that they have, they are going to lock down their own internal networks because that’s how, for example, in the Target case, went in – and hacked my Mastercard, they went in and hacked into Target’s vulnerable network system and they burrowed into the place where that Mastercard data was pout. So that caused the Target folks to take a step back and say, whoa, whoa, on this road to massive rollout, we’ve had a pause and reconsider what needs to be protected first.

We also, as we are protecting it, don’t want to have to go reengineer a lot of legacy systems that are operating in big companies, some of which could be years old and by years, we’ve run into some, we are working with a very major bank, global bank and we’ve had a proof-of-concept running from us. And we have seen the utilization of half-a-dozen progress that are legacy, but yet are key to their operation that are ten years old, twelve years old and may not seem like a long time to some of our shareholders and listeners today, but those are dinosaurs in software terms.

And they cannot accommodate the ability to use new products as advanced as ours and have the biometrics work. So two choices there for us, forego the opportunity unacceptable, right.

Or get into the integration business ourselves because, these large global companies have a boatload of things to do every single day. They go – they got so many resources even the big ones, they’ve got resources and they are spoken for.

So in comes ImageWare with a fabulous new product and it looks great, everybody loves it, but there is certain products that it is not going to hook into not, because us, because just the way those old products are structured. So, we are not going to get into the integration business.

That’s what we are trying to get away from. Now, we are not building custom one-off products here one-by-one.

That doesn’t work. So, for us, what we did is, we went back to the drawing board and we challenged our R&D group and said, come up with something that protects the enterprise and that requires no integration work and I mean no integration work.

It’s a snap in and that’s what it’s called in Microsoft’s ecosystem. It is a snap in, it is installing in – we say an hour, we’ve installed it in the test results, as I said in under 15 minutes.

It doesn’t require anybody to code and you know of course, since we sell this as a service, you don’t have to – we are not asking you to write us a big seven-figure check upfront. So we have tried to remove every single obstacle that we have run into to delivering the product and generating the revenue and closing the sale and we believe that’s what this product does.

It does it spectacularly. So, it’s one of the – I will tell you that, right up there with the biometric engine, I will tell you I think this is one of the greatest things ImageWare has ever produced and I couldn’t be prouder of the efforts that’s gone into this and just the reaction, Bob, to the folks who have seen it.

It is a big eye opener because there is nothing like this product out there. So, yes, I mean, that’s why we did it.

It was to respond to markets, it was also because, we recognize that what we need to do, as I said, job one is revenues, revenues, revenues. Yes, now the second part of your question.

Yes, we believe we will do really well in this industry. Every sign every day we see points to and validate the vision that we have in Avatier and the products that we are building.

We, as I said, are very active with a number of POCs that have been running with big global Fortune-500 type companies. And a number of them are now coming off of the test phase to the, okay, let’s get license them phase.

And so, those deals will close. As I said in my remarks, I wish I could find a way to move them quicker.

But they are going in the right way and they will close. So I believe we will satisfy the second thing of what you asked and that is, yes, you will see deals close.

They will be revenue drivers. They will be significant and they will close in the short run.

They said, I wish we could move them faster, but there is just, these are big companies and the timeframe is the timeframe. But we couldn’t be more optimistic about and confident about closing these deals and obviously, getting the revenue from them and I think, of course, the references from them which will also be equally spectacular because, if a large company is a user of your products that speaks well for the next folks who were looking at the product as well.

Okay, I am going to put now this back down because written out in the transcripts in public record and so we’ll review it probably in the next call, and next call probably won’t be until March because the…

Yes.

Because the year-end call. You see anyway, by that call, or when we are on that call, we will not have had major revenue announcements where we haven’t discussed the…

Sitting here today, Bob, no, I don’t. No, too many things going on.

There is – we have such a book of people who are using the product moving down the road to doing deals. There is – sitting here today, I cannot imagine that, we won’t have a number of those on the close side of the ledger by that time, no.

Well, great. We look forward to it.

Thanks for taking my call.

We too, thank you.

Thanks again. Up to now the private sector biometric business has been in its infancy in terms of consumer and enterprise adoption.

In order to be ready to participate in this market expansion, IWS and the partners have needed to build ability and capacity, sometimes as you’ve seen, brick-by-brick and step-by-step. We’ve also had to retool our strategy to fit the changing market needs for securing the enterprise before moving to the consumer market space.

While the realization of our large partnership initiatives have taken time, it has not discouraged us quite to the contrary, biometrics remains a very real, very large and very exciting opportunity. It’s popping up literally everywhere nowadays and those of you who follow the market see it as well and for very good reason, the consistent security breaches are a constant reminder of the need for biometric and we remain confident that our unique multi-modal technology combined with our back-end platforms that will handle all types of biometric modalities in very large scale will enable us to be a leader in the biometric space.

Steve Jobs said it and I am going to repeat it. Revolutionary change is harder more emotionally stressful, takes longer and usually involves a period of time where people believe that the effort to achieve it is failing until it’s successful.

At IWS, we’ve been leading the revolution towards biometric adoption and we remain absolutely confident and despite a challenging journey, we will be very, very successful. As always, we’d like to thank everyone for joining and appreciate your time and ongoing support.

We are very much looking forward to speaking to you along the way and when we report our fourth quarter and year end results in March. Thank you and a good afternoon and good evening to everybody.