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By Boyan Angelov
Sep 03, 2014

ImageWare Systems, Inc. (IWSY) Gains Momentum As Conference Approaches

ImageWare Systems, Inc. (IWSY) gained $0.64 in share price in the past week. The gradual increase escalated with higher improvements in the last two sessions. Yesterday, IWSY stock reached the price of $2,91 on a volume of nearly 900 thousand shares trading hands.

The ticker's ascend can be accredited to a 3-year agreement announced on August 28. In a press release, IWSY informed investors that it had reached a deal with a company called SaaS Deployment which was described as “a major international retailer”. Strangely enough, the name of IWSY's new partner was only mentioned once in the title of the press release and no further input was given on the company. Under the agreement, Saas Deployment will use IWSY's Cloud ID products on the Fujitsu Trusted S5 Cloud platform.IWSY_chart.png

Another item of news around IWSY is the company's participation at the upcoming Gateway Conference which will take place tomorrow in San Francisco. The venture's CEO Jim Miller is scheduled to present and have one-on-one meetings at the event.

The recent exposure that IWSY has received seems to be helping the company climb up the charts at this stage. Before jumping on board with the penny stock, however, further evaluation should be done. IWSY's latest 10-Q for the period ended June 30, 2014 can provide more details:

  • Cash: $1,4 million
  • Total current assets: $2,9 million
  • Total current liabilities: $2,6 million
  • Revenues: $937 thousand
  • Net loss: $2 million

Most indicators of IWSY's financial state are good. The company has a good amount of cash on hand and assets which outweigh the liabilities, albeit only slightly. The company is doing well in its sales. Still, IWSY has been ending its last few periods at a high net loss.

Looking further into the report, we can find some rather questionable decisions on IWSY's means of financing. The company currently has a line of credit in the amount of $3,5 million to handle. Pursuant to the terms of the agreement, $2,5 million from the outstanding balance can be converted into common stock shares at a price of $0.95 per share. With the current market price of IWSY's shares standing at $2,91, this poses the risk of serious dilution.

After a couple of amendments on the agreement, warrants for 177,7 thousand shares of common stock were issued and subsequently split equally between two undisclosed members of the company's board of directors. Additionally, IWSY entered into an unsecured line of credit for borrowings of $500 thousand which are convertible into common stock shares at a price of $2,25 per share.

IWSY_logo.pngA further red flag is the amount of shares IWSY has issued in the past six months. According to the report, a total of 4,642,632 warrants were exercised for the issuance of the same amount of common stock shares for proceeds of $2,7 million. An amendment was made on July 1, approving the increase of shares authorized for the company's 1999 Stock Option Plan from 4 million to 7 million.

With all the risks stemming from the recent decisions of IWSY, investors need to do their due diligence on the company, if they are considering an investment in its stock.

Average Reader Price Target For IWSY:

No Change.
2.91

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