Earnings Notes And News

ImageWare Systems [IW]

Sales increased 59% largely due to multi-biometric enrollment and management and identity proofing the company is doing for the Department of Veterans Affairs in support of HSPD-12. ImageWare announced a $1.7M contract with the VA in August. Success on this contract allows the company to command better pricing in the market, Jim Miller, ImageWare’s chairman and CEO, says. Losses narrowed on decreases in sales and marketing staff, less use of contract programmers and consultants, and lower stock based compensation expense. The company is relying less on direct sales as its continues to pursue its strategy of working with large systems integrators such as General Electric [GE], Honeywell [HON], IBM [IBM] and others who incorporate ImageWare’s biometric engine into their various identity management solutions. The company’s relationships with these integrators are expanding and that ImageWare will soon announce partnerships with two more large firms that have a global presence and want to incorporate the company’s biometric technology into their solutions, Miller says. He also points to pending opportunities with Boeing [BA], Computer Sciences Corp. [CSC], Raytheon [RTN] and Science Applications International Corp. [SAI]. Miller says that with recent organizational changes within the Pentagon’s defense biometrics regime the “stage is set” for vendors to participate. He says handheld and mobile devices, which in the past have been hindered by a lack of power and oversized hardware, are advancing and the company is testing its biometric software in these devices. Miller also says the company is expanding its focus beyond its traditional government end customer to the private and commercial sectors, particularly for financial institutions. Miller disclosed that ImageWare has been working to integrate voice recognition and translation technology into its software for use on mobile and desktop devices. This is a new area for the company and one that it is “keen” on, he says. Voice recognition offers ease of use in the field as well as security to unlock a device in order to begin using it, he says. The real-time language translation technology would be great for situations where the various responders to a situation might speak different languages, he adds. ImageWare’s current customers in the law enforcement community are “excited” about this technology, Miller says. Backlog at the end of the quarter stood at $1.8M.

Implant Sciences [IMX]

Revenues from the Security business nearly tripled to $1.3 million although overall sales fell slightly due to a significant drop off in revenues from the Medical business. The company’s Semiconductor business eked out a slight sales gain to $1.7 million. Implant says the shift to more reliance on security revenues will become sustainable as it rounds out its new sales and marketing team and strengthens its distributor network. Philip Thomas, Implant’s president and CEO, says that early next year he’ll be visiting the company’s two distributors in China to push them to be more aggressive in generating orders. The company has begun a review of its distributors and plans to shed those that are underperforming. Security sales also increased from the $1.1 million in the fourth quarter and Thomas believes sequential growth in this segment is also reaching sustainable levels. Security sales in the first quarter were driven mainly by product sales, including recent deliveries of handheld and benchtop explosive trace detectors to Japan and China. Thomas says the company hasn’t been announcing small one-off orders. Implant continues to position itself for business with the Department of Homeland Security but of late is finding employee turnover there and in its component agencies contributing to already slow business cycles there. To overcome its own limited resources, Thomas says, Implant is looking for partners to help with product development, particularly in the area of cargo and parcel screening. Despite the wider loss, due in part to increased spending in the Security segment on product development and sales and marketing, Implant recorded 39 percent gross margins in the segment versus negative margins a year ago due to improve efficiency in engineering and product improvements, Thomas says.