TWST: Would you give us a brief historical sketch of the company and a picture of the things you are doing at the present time?

Mr. Wetherell: ImageWare was founded in 1987. It originally started in the digital imaging industry with a consumer-based product, which was a photo kiosk that would take your picture, put it on a background, say, in front of the Eiffel Tower, and print it as a postcard. In 1995, the company changed hands and management decided to move this technology toward providing law enforcement with better investigative products that utilize digital imaging.

In 1995, we launched our first law enforcement products, which included a complete digital booking system along with several investigative products including vehicle identification and composite drawing software. The latter was used to develop photo-realistic digital composites, from witness descriptions. We provided the law enforcement community with new technologies to help them get away from hard copy photographs, generally Polaroids, in large mug books. The use of these mug books required witnesses to go downtown to manually flip through thousands of photos to identify a criminal suspect. We also provided systems that enabled officers to conduct investigations electronically, replacing the traditional manual process of going downtown to central records, pulling hard copy files, and faxing black and white facsimiles to others involved in the investigation.

Along the way we became very interested in the science of biometrics. ImageWare was the first to incorporate facial recognition technology in an investigative solution, which was deployed at the Los Angeles County Sheriff’s Department to enable officers to find suspects more quickly by using facial recognition technology to search mug shots. We went public in March 2000 and declared as our strategic plan to expand our law enforcement digital imaging technology into the growing digital identification markets, including secure credentials.

Today, ImageWare is a global leader in identity management solutions, providing biometric, secure credential, law enforcement and digital imaging technologies to government, systems integrators, the transportation industry, and more.

Our latest development is the IWS™ Biometric Engine®, a biometric identity management platform for enrolling, managing and identifying people by the physical characteristics of the human body. It’s a core component of an organization’s security infrastructure and can be utilized within our secure credential and law enforcement systems or on its own. The IWS™ Biometric Engine® enables the user to capture virtually any biometric type (finger, face, iris, DNA, etc), any biometric algorithm, using hardware from any biometric vendor and conduct biometric searches to provide identity confirmation. Searches can be 1:1 for verification, 1:n for identification or x:n for investigative purposes. And it can manage populations in the tens of millions. It’s ideal for large government projects like secure passport or driver license systems, national ID programs, trusted traveler programs and other secure applications.

Our products are state of the art, and we believe that the market demand for biometrics, for better ID systems, and law enforcement systems with the ability to share information from agency to agency has begun to move, and we will see some significant growth over the next several years.

TWST: Did 9/11 pump things up for you somewhat?

Mr. Wetherell: 9/11 got the industry’s attention, but did not create immediate demand for the technologies available. Prior to 9/11 our society had historically been very trusting within our country and abroad; our systems were and continue to be somewhat antiquated in terms of the ID technology. They can easily be circumvented; fraud is very easy with respect to everything from driver licenses to other breeder documents that can ultimately get a criminal a passport or other credentials. What 9/11 didn't do is result in immediate infrastructure upgrades.

Everyone realized we had to do something, but everybody waited for government, waited for standards to be set, evaluated alternative technologies, looked what other countries were doing. We're now starting to see movement in the industry on a worldwide basis. A lot of the current movement is due to the Visa Waiver Program that the U.S. put into place requiring machine-readable, biometrically-enabled travel documents worldwide for participating countries that want to have a visa waiver coming into the United States. The Department of Homeland Security identified a number of things that needed to be done and have put a number of plans in place, but they are just now starting to get moving on implementation. We are going to see a lot of the growth in our markets over the next couple of years.

TWST: Can you tell us something about the competitive landscape? What might make you different from a superior in some respects to your competitors?

Mr. Wetherell: Let's take the biometric side of our business. Over the last few years there have been numerous companies offering single biometric technology and trying to get decision makers to adopt their technology. You've got iris, facial recognition, fingerprint, voice recognition, DNA and a number of different biometric technologies out there, and they're all saying, “Ours will work,” and in many cases, they are correct. In other words, a good, well-performing biometric system only needs one biometric to make a good identification.

However, if you are trying to search against extremely large databases, multiple biometrics will significantly increase your odds of accurate identification.. So there is a lot of competition between companies that develop the different algorithms for the various biometric out there. We take a different route.

Historically, we sold facial recognition because it fit our law enforcement market for investigative purposes. The law enforcement market already had fingerprint even before we got into the business. AFIS, Automated Fingerprint Identification Systems, have been accepted by the law enforcement community for decades. We decided that as we move forward both on the ID side and law enforcement sides, we needed to become agnostic as to what biometrics are included in our applications and what algorithms are included in any one biometric. Therefore, we built our system to accept any biometric type, algorithm and even hardware, based on our customers’ requirements. We provide the application to make the system easy to use and efficient for the customer. If they want an iris plus a face plus a fingerprint, we supply that. If they want fingerprint only, we supply that. If they want fingerprint today, but want iris or face or DNA in the future, we supply them with a system that is flexible enough to accommodate those changes quite easily.

TWST: Is any other company doing it that way?

Mr. Wetherell: There are several other companies that offer multiple biometric systems. Right now we are the most interoperable, enabling organizations to fuse multiple biometrics together to improve the accuracy of the identity of an individual.

TWST: Could you to mention a few of your typical customers in different areas?

Mr. Wetherell: In identification, we have the state of New Mexico using our technology for their driver licenses. We supply ID systems for airports such as Washington Dulles and Reagan National. We supply everything from low-end simple-to-use ID card systems (One of our customers is the YMCA; they utilize our software to generate membership cards.) to very high-end smart card biometric systems used in high security government environments.

Our law enforcement customers include the entire State of Arizona, where every county in the state is connected to a central database so they all may share data and access our digital booking, facial recognition and investigative solution called IWS™ Law Enforcement. Arizona is really the model of the future. Of course, we have a number of large law enforcement agencies across the country including Los Angeles, Las Vegas, Houston, Milwaukee, Portland, and Seattle.

In regards to biometrics, our IWS™ Biometric Engine® goes beyond government and law enforcement organizations and into other markets such as entertainment. Carnival Cruise Lines, for example, uses the biometric engine to enhance their photo purchasing experience for guests and to speed the photo procurement process. The project, which encompasses a photo-retrieval kiosk that utilizes facial-recognition , is part of Carnival’s ongoing effort to leverage technology to maximize guest satisfaction.

TWST: Will you be looking overseas for additional customers?

Mr. Wetherell: We are a global company with offices in San Diego, Canada, Germany and Singapore. We have recently restructured our international offices to sell our secure credential and biometric systems into large projects worldwide. We have doubled our effort to develop relationships and build partnerships with systems integrators overseas to enable us to access those projects. We also continue to sell into international projects from our office in San Diego. We recently announced a very large contract with the government of Mexico, where they are using our IWS™ Biometric Engine® on an undisclosed project. We continue to work on other opportunities throughout Latin America as well.

TWST: Have you been able to refine your products based upon response from customers?

Mr. Wetherell: In the software business, we continually look for customer input to refine our products. As an example, we have a group of our law enforcement customers throughout the country and internationally who come together once a year to provide feedback and future product requirements.

In addition, we have a solid team to provide 24-hour support to our customers who have agreements and might need assistance any time of the day from anywhere in the world. Because of our technical support team has so much regular, direct contact with our customers, they are able to provide our product development and engineering teams with valuable customer feedback on product requirements.

TWST: What are the key elements and your strategy for the next couple of years?

Mr. Wetherell: Our goal is to get our technology adopted as the foundation of a number of infrastructure-type rebuilds. Again, our systems are built to support whatever type of hardware, ID credential, biometric or biometric algorithm our customers want. For example, ImageWare, along with IBM and three other security companies, partnered to provide an integrated secure identity management solution that combines physical and logical access in a single card that uses biometrics to improve security and cut costs. Our EPI Builder SDK (Software Development Kit) was used in that product, which places ImageWare in the middle of an infrastructure-type IBM product. We've developed other relationships with companies like Hewlett-Packard and Unisys — companies that rely upon us to provide them with core biometric, secure credential or law enforcement technologies as part of their solution when bidding on systems upgrades or infrastructure rebuilds.

TWST: The relationships you have with HP and IBM — is this the best way to be for you, or will the company possibly be a target for acquisition sometime?

Mr. Wetherell: We are in an industry that is being looked at in terms of acquisition. A rollup has already started within our industry. But the big guys are starting to recognize the value of ImageWare’s niche within the industry. This is evident from the IBM announcement. They decided it was time to have a product to address the identity management market. When large integrators start coming in, quite often they will have a buy versus build approach. As the market gets further validated, there will be more rollup within the industry.

ImageWare can be a prime on certain projects depending on the type of technology involved. We are quite comfortable priming larger projects such as the Mexico deal that we just announced. But in many cases, a very large infrastructure rebuild is required, in which case, we would leverage our relationships with the Unisys, the IBMs, the Hewlett-Packards of the world, where they would prime; we supply our technology; they supply the feet on the street and manage the project and overall implementation.

TWST: What would you reasonably expect the company to look like three years from now, and what might be some milestones along the way for investors to look for?

Mr. Wetherell: Three years from now, I believe we will see worldwide adoption of biometrics — greater security within identification documents, better protection from identity theft, as well as confirmed identity when individuals are crossing borders. All of those things will play into our product mix. We think that over this next year we will start to see an increase in our revenue. We will begin to develop more predictability in our run rates on a quarterly basis because a number of contracts and relationships will have rollouts over multiple year time frames.

TWST: What challenges or possible problems might arise for you in the next few years, if any?

Mr. Wetherell: We are excited about the next few years. In our particular industry, the main challenge will be around the technology adoption rate. We are cultivating relationships with large systems integrators to augment the work of our sales force by also including us in their proposals. We are embedded in the technology that these integrators are putting forth. We have increased our sales staff significantly and engaged lobbyists to keep us aware of and involved in the opportunities coming forth.

TWST: Can you tell us something about the backgrounds and the expertise of several of the key people in the company?

Mr. Wetherell: Jim Miller, our CEO, has a number of years experience with Fortune 500 companies. He is the visionary behind the company's corporate structure and responsible for the strategic and operational performance of the company.

Bill Willis is our Chief Technical Officer. Naturally we are a technology company so this is a key position. Bill comes from the biometrics industry. Before coming to ImageWare, he was the Chief Technical Officer of Iridian an iris biometric company. He has helped us meld our expertise within the company and expand our products into key areas that will make us a core technology for infrastructure rebuilds.

Our key strength is that we have remained agnostic to the hardware, the types of biometrics and the algorithms that work with our products.

TWST: How long have you been with the company?

Mr. Wetherell: I have been with the company since 1996. Prior to ImageWare, I was the CFO of Bilstein Corporation of America, a subsidiary of Krupp, a large multinational conglomerate based in Germany. Prior to that, I worked at Oak Industries. I was with the Oak’s communications division for five years and in the Oak Industries corporate group for another five.

TWST: How many employees does the company have overall?

Mr. Wetherell: Right now, we have approximately 77 employees worldwide. We've brought that number down significantly from about 140 several years ago. We had a number of facilities that we consolidated to reduce headcount and costs as a result of acquisitions. We significantly reduced our overall fixed costs to slim ourselves down to a point where we can be responsive and efficient.

TWST: Do you see any need at this time to improve the company's capital structure?

Mr. Wetherell: We continue to monitor our capital needs. One thing we did not do, which a number of companies did within our industry, was raise hoards of cash far in excess of our near term needs by putting vast numbers of shares out into the market. Periodically we raise what cash we needed to implement our plan. We did not go out and raise $100 million, diluting our existing shareholders, so that we would have a war chest to keep us alive for 10 years. We wanted to get the cash we needed to get to the next step, get our values up. If we need additional cash, we can go back to the market. But we want to do that at a time when the business and the opportunity is recognized and the stock price displays that value.

TWST: What would be the two or three best reasons for a long-term investor to take a good look at the company, either now or in the near future?

Mr. Wetherell: The best reason is what’s happening now in our industry and how we’re positioned with our products. We feel that providing the applications, not necessarily the individual technology, but providing the basic core applications is the place to be. That's where we are going to get value for our products.

I think anyone following our industry recognizes there is going to be a significant amount of effort and money thrown at infrastructure to change the way identification is managed, both in government, as well as on the commercial side with large multi-national corporations. As they do that, we are well positioned to take advantage of that effort.

Another reason to consider ImageWare is that because of the number of shares we have outstanding in our capital restructure, as we grow revenue, we will quickly reach a point where we generate profit. As those profits materialize, they will translate to earnings per share with our company faster than they would with companies in our sector that have issued significantly more shares.

TWST: The things you said raise one very broad question about the ways in which ID is managed. It seems people aren't talking about national ID very much. People don't like it, at least within the US. Would you care a comment on that theme?

Mr. Wetherell: US Politicians don't like to talk too much about national ID cards. It was brought up right after 9/11, and immediately there was a lot of negative response as to privacy concerns. It's interesting because through my valued customer membership at my local grocery store, they likely have more information on me than my state does from my driver license. My ATM card provides my bank with information on where I am, how much I am spending, especially if I bank online and use online payments. We're a country that wants to protect privacy, yet we are willing to give up privacy if it makes life easier. I think ultimately we will move toward, maybe not a national ID card, but identification systems that people voluntarily go into to not only keep their identity from being stolen, but to make life easier for them when they cross a border or conduct a financial or other transaction that requires positive identification. What may drive this are institutions and state governments that may require more than a driver license or social security card to positively identify you.

TWST: Is there anything that you would like to add, particularly with regard to the company's long-term objectives?

Mr. Wetherell: Our objective is to solidly place ourselves within the identification biometric infrastructure that is going to be rolled out worldwide to governments and through private enterprise such that we will be a part of the core technologies that they are implementing. We will continue to play a part as they change from current biometric technology to future biometric technology; we provide the applications to enable identification and to help users utilize the system to the greatest extent.

TWST: Thank you.

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