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ImageWare Systems Inc.

Mr. Jim Miller
Chairman and CEO
ImageWare Systems Inc.

SSW: Jim, you have served as President, CEO, and Director since 1990, please give us a brief company history.

ImageWare was founded in 1987 with the initial focus around digital imaging and the automated processing of digital photographs. In 1995, the company was sold and changed its focus by entering into the Law Enforcement market, where we provided software programs for digital booking, composite sketching and image editing solutions to state and local police. We’ve since incorporated biometric and secure credential solutions into our product offering that enable our customers to produce anything from simple identification cards to very complex and secure documents such as driver licenses, passports, biometrically-enabled smart cards and other secure documents for government, airports and corporate businesses. We also provide digital imaging and workflow applications for the professional photography sector that facilitate the transition from film-based photography to digital imaging.

Looking at the market and listening to our customers, we have made significant technological strides, which have changed the direction and scope of the company. Today, ImageWare is a leading global developer of digital imaging, identification and biometric software solutions for a host of markets including government, enterprise, law enforcement, professional photography, transportation, education, and more. We offer the most comprehensive portfolio of software available within these core markets.

ImageWare's secure credential and biometric product lines are used to produce ID cards, driver licenses, passports, national medical health cards, national IDs and other secure documents. The Company's law enforcement and biometric product lines provide the public safety market with booking, investigative and identification solutions that can be accessed and shared via PC, Web and wireless platforms. ImageWare's professional digital imaging product line provides professional photographers with automated, in-studio and mobile solutions to facilitate the transition from film-based photography to digital imaging. We are headquartered in San Diego, with offices in Canada, Germany and Singapore.

SSW: How has your business been affected by the ongoing war on terrorism?

ImageWare, like all public companies in the Security Technology sector, saw its stock price increase as a result of the tragic events surrounding September 11,2001. However, while investors felt that companies in the sector would be immediate beneficiaries of sales given our products, we were more cautious as we noted the dampening effect of those world events as our government customers wrestled with new budget requests and new procurement requirements were thrust on the world. As it turned out, our caution was warranted, as sales into the newly created Homeland Defense sector have been slow to materialize which is only natural as the government undergoes its largest reorganization in over 50 years while at the same time playing a major role in significant world events. One should also remember that most large-scale security initiatives are built into budgets several quarters before they can be implemented. Over the mid-and-long term, however, we believe that world events will cause increased awareness and need for products such as ImageWare’s.

SSW: Please elaborate on the solution IW has provided to United Parcel Service?

UPS is using a custom ID system developed by ImageWare, for badging employees, vendors and UPS drivers.

After the tragic events of 9/11, military and government buildings set forth heighten security measures for all building entries. UPS drivers were getting turned away because they were unable to provide proper identification, which resulted in back-logged deliveries. UPS needed a secure, authenticated identification card for all drivers and turned to ImageWare to develop a custom ID solution that could be deployed by UPS worldwide to verify employee identity. This solution enabled the UPS Security Technology Group to develop custom card designs, populate cards with data and images and track and manage ID badge production and issuance – all from a Web browser. UPS has been able to centralize its service quickly and efficiently, and streamlined the corporate identification production process by using our solution.

SSW: Are there other enterprise and government accounts in addition to UPS you would like to talk about?

We have a number of significant accounts that are high profile and use our solutions in very demanding environments. The FAA, NORAD, and Nellis Air Force Base use our software to create secure credentials. Our ID solutions are also used to produce gaming employee work cards in Las Vegas; national ID cards in Abu Dhabi and Dubai; and driver licenses in Singapore, Indonesia, and the State of New Mexico. A number of international airports across the nation such as Ronald Reagan, Washington Dulles, Seattle-Tacoma and the Atlanta-Hartsfield, are also using our ID technologies to authenticate the identity of individuals before they are allowed access to restricted areas.

We also have more than 900 law enforcement agencies worldwide that use our digital booking, identification and investigative solutions – Los Angeles, New South Wales and the entire State of Arizona are just a few. On the professional photography side, we provide digital imaging and workflow applications to a number of digital photography hardware companies, principally Eastman Kodak and Mitsubishi. The Picture People, a wholly owned subsidiary of Hallmark Cards Inc., is also using our digital workflow solution to streamline operations and increase productivity. And most recently, we announced a biometric face finding pilot project with Carnival Cruise Lines that will revolutionize photo purchasing on cruise ships.

SSW: IW has an impressive track record in the law enforcement sector with 900 agencies nationwide. That is an impressive achievement in anyone’s book. Some of your larger competitors don’t have anywhere near 900 “wins” in this space. Without divulging any trade or competitive secrets – how did you do that? Do you sell direct? Work with strategic partners?

Both. We are pioneers in the space and have been in it since the start of the industry’s shift to digital systems. We have a great sales team and very sophisticated partners who sell our law enforcement solutions around the globe. But most importantly, our present clients are great references for our prospective clients.

SSW: Do you expect the US Government to be a larger customer in 2004 than in 2003?

We do. The Government, on the federal, state and local levels, is already the largest purchaser of ImageWare technologies. We expect this to increase as the US Government takes a larger role in facilitating the required use of secure credentials and biometrics abroad. The US VISIT program as well as programs and regulations put forth by the Department of Homeland Defense are just a few examples of how the government is energizing this sector. Additionally, there are funds set aside by our government to enable a variety of countries overseas to produce secure credentials including national IDs, national medical health cards and the like.

SSW: Congratulations on the recent $13.6 million in total financing in November 2003 and January 2004. Does IW have the capital it needs now and cash flow from operations to execute its plans for the foreseeable future?

Absolutely. During 2003, our goal was to lower our operating expenses by $2 million as well as put ImageWare on a debt free basis with sufficient cash to enable us to undertake the sales and marketing initiatives that will lead us to sustained profitability. We have since achieved both of those goals despite general economic conditions which made the short term sales environment challenging. We continue to see increasingly strong prospects for sales as the US government releases funds dedicated to Homeland Defense and Security, state and local agencies, and both the public and private sectors realize the need for rapid identity verification and authentication in domestic and international markets.

SSW: IW, with all its impressive achievements, still has a market cap which is fairly modest. What is IW doing to help get its story out.

That’s a great point. We are one of as the best-kept secret in the industry. This is primarily because many of our solutions to date have been sold or deployed through distribution, system integrators or OEM partnerships with companies like Fargo Electronics, JCI, Polaroid, Digimarc and others. What many people don’t realize is that ImageWare technologies are behind a multitude of their end-user applications ranging from passports and visas to driver licenses and access control systems.

We’re getting our story out by continually talking with the investment community and a long list of media outlets. We’ve updated our Web site to promote our technologies more clearly and are working on a variety of other promotional materials.

SSW: Thank you very much for your time, Jim. Is there anything else you would like to add?

Yes. ImageWare has the right products and people at the right time in our industry and we are bullish on our prospects for the future.

This interview may contain forward-looking statements made pursuant to the “safe harbor'' provisions of the Private Securities Litigation Reform Act of 1995. While these statements are meant to convey to the public the company's progress, business opportunities and growth prospects, readers are cautioned that such forward-looking statements represent management's opinion. While management believes such representation to be true and accurate based on the information available to the company, actual results may differ materially from those described. The company's operations and business prospects are always subject to risks and uncertainties. Important facts that may cause actual results to differ are set forth in the company’s periodic filings with the U.S. Securities and Exchange Commission.