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Share Name | Share Symbol | Market | Type |
---|---|---|---|
ImageWare Systems Incorporated (CE) | USOTC:IWSY | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.0001 | 0.00 | 01:00:00 |
[X]
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
[ ]
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
|
Delaware
|
|
33-0224167
|
(State or Other Jurisdiction of Incorporation or
|
|
(IRS Employer Identification No.)
|
Organization)
|
|
|
Large accelerated filer
|
[ ]
|
Accelerated filer
|
[X]
|
Non-accelerated filer
|
[ ]
|
Smaller reporting company
|
[ ]
|
|
|
|
|
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Page
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1
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2
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3
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4
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5
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23
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38
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38
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39
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39
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39
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39
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39
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39
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40
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41
|
|
|
September 30,
2016
|
December 31,
2015
|
ASSETS
|
(Unaudited)
|
|
Current
Assets:
|
|
|
Cash
and cash equivalents
|
$
1,685
|
$
3,352
|
Accounts
receivable, net of allowance for doubtful accounts of $3 at
September 30, 2016 and December 31, 2015
|
199
|
349
|
Inventory,
net
|
81
|
46
|
Other
current assets
|
237
|
69
|
Total
Current Assets
|
2,202
|
3,816
|
|
|
|
Property
and equipment, net
|
115
|
162
|
Other
assets
|
30
|
98
|
Intangible
assets, net of accumulated amortization
|
109
|
117
|
Goodwill
|
3,416
|
3,416
|
Total Assets
|
$
5,872
|
$
7,609
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
Current
Liabilities:
|
|
|
Accounts
payable
|
$
216
|
$
198
|
Deferred
revenue
|
1,383
|
1,059
|
Accrued
expense
|
818
|
1,149
|
Lines
of credit payable to related parties, net of discount
|
2,026
|
—
|
Total
Current Liabilities
|
4,443
|
2,406
|
|
|
|
Pension
obligation
|
1,615
|
1,511
|
Total
Liabilities
|
6,058
|
3,917
|
|
|
|
Shareholders’
Equity (Deficit):
|
|
|
Preferred
stock, authorized 4,000,000 shares:
|
|
|
Series
B Convertible Redeemable Preferred Stock, $0.01 par value;
designated 750,000 shares, 389,400 shares issued, and 239,400
outstanding at September 30, 2016 and December 31, 2015;
liquidation preference $620 and $607 at September 30, 2016 and
December 31, 2015, respectively.
|
2
|
2
|
Series
E Convertible Redeemable Preferred Stock, $0.01 par value;
designated 12,000 shares, 12,000 shares issued and outstanding at
September 30, 2016 and December 31, 2015; liquidation preference
$12,000 and $12,240 at September 30, 2016 and December 31, 2015,
respectively.
|
—
|
—
|
Series
F Convertible Redeemable Preferred Stock, $0.01 par value;
designated 2,000 shares, 2,000 and 0 shares issued and outstanding
at September 30, 2016 and December 31, 2015; liquidation preference
$2,000 and $0 at September 30, 2016 and December 31, 2015,
respectively.
|
—
|
—
|
Common Stock, $0.01 par value, 150,000,000 shares authorized;
94,814,007 and 94,077,599 shares issued at September 30, 2016 and
December 31, 2015, respectively, and 94,807,303 and 94,070,895
shares outstanding at September 30, 2016 and December 31, 2015,
respectively.
|
947
|
940
|
Additional
paid-in capital
|
153,844
|
149,902
|
Treasury
stock, at cost 6,704 shares
|
(64
)
|
(64
)
|
Accumulated
other comprehensive loss
|
(1,242
)
|
(1,195
)
|
Accumulated
deficit
|
(153,673
)
|
(145,893
)
|
Total
Shareholders’ Equity (Deficit)
|
(186
)
|
3,692
|
|
|
|
Total Liabilities and Shareholders’ Equity
(Deficit)
|
$
5,872
|
$
7,609
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
||
|
2016
|
2015
|
2016
|
2015
|
Net
loss
|
$
(2,431
)
|
$
(1,858
)
|
$
(6,822
)
|
$
(5,952
)
|
Other
comprehensive income (loss):
|
|
|
|
|
Foreign
currency translation adjustment
|
(16
)
|
—
|
(46
)
|
46
|
Comprehensive
loss
|
$
(2,447
)
|
$
(1,858
)
|
$
(6,868
)
|
$
(5,906
)
|
|
Nine Months Ended
September 30,
|
|
|
2016
|
2015
|
Cash flows from operating activities
|
|
|
Net
loss
|
$
(6,822
)
|
$
(5,952
)
|
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
|
|
Depreciation
and amortization
|
103
|
123
|
Amortization
of debt issuance costs and beneficial conversion
feature
|
85
|
426
|
Reduction
in accrued expense from the expiration of statute of
limitations
|
(200
)
|
—
|
Warrants
issued in lieu of cash paid for services
|
—
|
80
|
Stock-based
compensation
|
859
|
665
|
Change
in assets and liabilities
|
|
|
Accounts
receivable
|
150
|
(777
)
|
Inventory
|
(35
)
|
539
|
Other
assets
|
(134
)
|
(53
)
|
Accounts
payable
|
18
|
(128
)
|
Deferred
revenue
|
324
|
(502
)
|
Accrued
expense
|
(131
)
|
(76
)
|
Pension
obligation
|
104
|
33
|
Total
adjustments
|
1,143
|
330
|
Net
cash used in operating activities
|
(5,679
)
|
(5,622
)
|
|
|
|
Cash flows from investing activities
|
|
|
Purchase
of property and equipment
|
(47
)
|
(73
)
|
Net
cash used in investing activities
|
(47
)
|
(73
)
|
|
|
|
Cash flows from financing activities
|
|
|
Proceeds
from exercised stock options
|
1
|
34
|
Proceeds
from issuance of preferred stock, net of issuance
costs
|
1,979
|
9,955
|
Proceeds
from lines of credit, net of repayments
|
2,150
|
400
|
Dividends
paid
|
(25
)
|
(25
)
|
Net
cash provided by financing activities
|
4,105
|
10,364
|
|
|
|
Effect
of exchange rate changes on cash
|
(46
)
|
46
|
Net
increase (decrease) in cash and cash equivalents
|
(1,667
)
|
4,715
|
|
|
|
Cash
and cash equivalents at beginning of period
|
3,352
|
218
|
|
|
|
Cash
and cash equivalents at end of period
|
$
1,685
|
$
4,933
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
Cash
paid for interest
|
$
1
|
$
1
|
Cash
paid for income taxes
|
$
—
|
$
—
|
Summary
of non-cash investing and financing activities:
|
|
|
Beneficial
conversion feature of convertible debt
|
$
176
|
$
146
|
Conversion
of related party notes into Series E Preferred
|
$
—
|
$
1,978
|
Stock
dividend on Series E Preferred
|
$
923
|
$
774
|
Stock
dividend on Series F Preferred
|
$
12
|
$
—
|
(Amounts in thousands except share and per share
amounts)
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
||
|
2016
|
2015
|
2015
|
2016
|
Numerator
for basic and diluted loss per share:
|
|
|
|
|
Net
loss
|
$
(2,431
)
|
$
(1,858
)
|
$
(6,822
)
|
$
(5,952
)
|
Preferred
dividends
|
(317
)
|
(306
)
|
(986
)
|
(812
)
|
|
|
|
|
|
Net
loss available to common shareholders
|
$
(2,748
)
|
$
(2,164
)
|
$
(7,808
)
|
$
(6,764
)
|
|
|
|
|
|
Denominator
for basic and dilutive loss per share – weighted-average
shares outstanding
|
94,550,721
|
93,867,339
|
94,309,309
|
93,690,097
|
|
|
|
|
|
Net
loss
|
$
(0.03
)
|
$
(0.02
)
|
$
(0.07
)
|
$
(0.06
)
|
Preferred
dividends
|
(0.00
)
|
(0.00
)
|
(0.01
)
|
(0.01
)
|
|
|
|
|
|
Basic
and diluted loss per share available to common
shareholders
|
$
(0.03
)
|
$
(0.02
)
|
$
(0.08
)
|
$
(0.07
)
|
Potential Dilutive Securities
|
|
For the Three and Nine Months Ended
September 30,
|
|
|||||
|
|
2016
|
|
|
2015
|
|
||
Convertible notes payable
|
|
1,759,888
|
|
|
—
|
|
||
Convertible
preferred stock
|
|
|
7,696,123
|
|
|
|
6,362,790
|
|
Stock
options
|
|
|
6,529,510
|
|
|
|
5,361,969
|
|
Warrants
|
|
|
425,000
|
|
|
|
466,666
|
|
Total potential dilutive securities
|
|
|
16,410,521
|
|
|
|
12,191,425
|
|
Fiscal Year Ended December 31,
|
Estimated Amortization
Expense
($ in thousands)
|
2016
(3 months)
|
$
3
|
2017
|
12
|
2018
|
12
|
2019
|
12
|
2020
|
12
|
Thereafter
|
58
|
Totals
|
$
109
|
($ in thousands)
|
September 30,
2016
|
December 31,
2015
|
Lines
of Credit
|
|
|
8%
convertible lines of credit. Face value of advances under lines of
credit $2,150 at September 30, 2016 and $0 at December 31, 2015.
Discount on advances under lines of credit is $124 at September 30,
2016 and $0 at December 31, 2015. Maturity date is June 30,
2017.
|
$
2,026
|
$
—
|
|
|
|
Total
lines of credit to related parties
|
2,026
|
—
|
Less
current portion
|
(2,026
)
|
—
|
Long-term
lines of credit to related parties
|
$
—
|
$
—
|
|
Common Stock
|
Shares
outstanding at December 31, 2015
|
94,070,895
|
Shares
issued as payment of stock dividend on Series E
Preferred
|
721,243
|
Shares
issued as payment of stock dividend on Series F
Preferred
|
10,136
|
Shares
issued pursuant to cashless warrant exercises
|
2,403
|
Share
issued pursuant to option exercises for cash
|
2,626
|
Shares
outstanding at September 30, 2016
|
94,807,303
|
|
Warrants
|
Weighted- Average
Exercise Price
|
Balance
at December 31, 2015
|
450,000
|
$
0.67
|
Granted
|
—
|
—
|
Expired
/ Canceled
|
—
|
—
|
Exercised
|
(25,000
)
|
1.10
|
Balance
at September 30, 2016
|
425,000
|
$
0.67
|
|
Options
|
Weighted-Average
Exercise Price
|
Balance
at December 31, 2015
|
5,376,969
|
$
1.17
|
Granted
|
1,264,000
|
$
1.34
|
Expired/Cancelled
|
(121,500
)
|
$
1.29
|
Exercised
|
(2,626
)
|
$
0.38
|
Balance
at September 30, 2016
|
6,516,843
|
$
1.20
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
||
|
2016
|
2015
|
2016
|
2015
|
Cost
of revenue
|
$
5
|
$
5
|
$
14
|
$
10
|
General
and administrative
|
180
|
180
|
529
|
433
|
Sales
and marketing
|
56
|
54
|
165
|
116
|
Research
and development
|
51
|
49
|
151
|
106
|
|
|
|
|
|
Total
|
$
292
|
$
288
|
$
859
|
$
665
|
Level 1
|
Unadjusted quoted prices in active markets that are accessible at
the measurement date for identical, unrestricted assets or
liabilities.
|
Level 2
|
Applies to assets or liabilities for which there are inputs other
than quoted prices included within Level 1 that are observable for
the asset or liability such as quoted prices for similar assets or
liabilities in active markets; quoted prices for identical assets
or liabilities in markets with insufficient volume or infrequent
transactions (less active markets); or model-derived valuations in
which significant inputs are observable or can be derived
principally from, or corroborated by, observable market
data.
|
Level 3
|
Prices or valuation techniques that require inputs that are both
significant to the fair value measurement and unobservable
(supported by little or no market activity).
|
|
Fair Value at September 30, 2016
|
|||
($ in thousands)
|
Total
|
Level 1
|
Level 2
|
Level 3
|
|
|
|
|
|
Assets:
|
|
|
|
|
Pension
assets
|
$
1,623
|
$
1,623
|
$
—
|
$
—
|
Totals
|
$
1,623
|
$
1,623
|
$
—
|
$
—
|
|
Fair Value at December 31, 2015
|
|||
($ in thousands)
|
Total
|
Level 1
|
Level 2
|
Level 3
|
|
|
|
|
|
Assets:
|
|
|
|
|
Pension
assets
|
$
1,557
|
$
1,557
|
$
—
|
$
—
|
Totals
|
$
1,557
|
$
1,557
|
$
—
|
$
—
|
($ in thousands)
|
|
2016
(3 months)
|
$
119
|
2017
|
$
421
|
2018
|
$
202
|
2019
|
$
35
|
2020
and thereafter
|
$
42
|
|
$
819
|
|
Three Months Ended
September 30,
|
|
|
|
Net Product Revenue
|
2016
|
2015
|
$ Change
|
% Change
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
Software
and royalties
|
$
173
|
$
436
|
$
(263
)
|
(60
)%
|
Percentage
of total net product revenue
|
83
%
|
79
%
|
|
|
Hardware
and consumables
|
$
—
|
$
5
|
$
(5
)
|
(100
)%
|
Percentage
of total net product revenue
|
—
%
|
1
%
|
|
|
Services
|
$
36
|
$
111
|
$
(75
)
|
(68
)%
|
Percentage
of total net product revenue
|
17
%
|
20
%
|
|
|
Total
net product revenue
|
$
209
|
$
552
|
$
(343
)
|
(62
)%
|
|
Three Months Ended
September 30,
|
|
|
|
Maintenance Revenue
|
2016
|
2015
|
$ Change
|
% Change
|
(dollars in thousands)
|
|
|
|
|
Total
maintenance revenue
|
$
639
|
$
629
|
$
10
|
2
%
|
|
Three Months Ended
September 30,
|
|
|
|
Cost of Product Revenue:
|
2016
|
2015
|
$ Change
|
% Change
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
Software
and royalties
|
$
13
|
$
18
|
$
(5
)
|
(28
%)
|
Percentage
of software and royalty product revenue
|
8
%
|
4
%
|
|
|
Hardware
and consumables
|
$
—
|
$
4
|
$
(4
)
|
(100
%)
|
Percentage
of hardware and consumables product revenue
|
—
%
|
80
%
|
|
|
Services
|
$
19
|
$
102
|
$
(83
)
|
(81
%)
|
Percentage
of services product revenue
|
53
%
|
92
%
|
|
|
Total
product cost of revenue
|
$
32
|
$
124
|
$
(92
)
|
(74
%)
|
Percentage
of total product revenue
|
15
%
|
22
%
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
Maintenance cost of revenue
|
2016
|
2015
|
$ Change
|
% Change
|
(dollars in thousands)
|
|
|
|
|
Total
maintenance cost of revenue
|
$
200
|
$
197
|
$
3
|
2
%
|
Percentage
of total maintenance revenue
|
31
%
|
31
%
|
|
|
|
Three Months Ended
September 30,
|
|
|
|
Maintenance gross profit
|
2016
|
2015
|
$ Change
|
% Change
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
Total
maintenance gross profit
|
$
439
|
$
432
|
$
7
|
2
%
|
Percentage
of total maintenance revenue
|
69
%
|
69
%
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
Net Product Revenue
|
2016
|
2015
|
$ Change
|
% Change
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
Software
and royalties
|
$
675
|
$
1,409
|
$
(734
)
|
(52
)%
|
Percentage
of total net product revenue
|
70
%
|
72
%
|
|
|
Hardware
and consumables
|
$
54
|
$
28
|
$
26
|
93
%
|
Percentage
of total net product revenue
|
5
%
|
1
%
|
|
|
Services
|
$
239
|
$
515
|
$
(276
)
|
(54
)%
|
Percentage
of total net product revenue
|
25
%
|
26
%
|
|
|
Total
net product revenue
|
$
968
|
$
1,952
|
$
(984
)
|
(50
)%
|
|
Nine Months Ended
September 30,
|
|
|
|
Maintenance Revenue
|
2016
|
2015
|
$ Change
|
% Change
|
(dollars in thousands)
|
|
|
|
|
Total
maintenance revenue
|
$
1,919
|
$
1,916
|
$
3
|
0
%
|
|
Nine Months Ended
September 30,
|
|
|
|
Cost of Product Revenue:
|
2016
|
2015
|
$ Change
|
% Change
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
Software
and royalties
|
$
62
|
$
65
|
$
(3
)
|
(5
%)
|
Percentage
of software and royalty product revenue
|
9
%
|
5
%
|
|
|
Hardware
and consumables
|
$
31
|
$
19
|
$
12
|
63
%
|
Percentage
of hardware and consumables product revenue
|
57
%
|
68
%
|
|
|
Services
|
$
69
|
$
702
|
$
(633
)
|
(90
%)
|
Percentage
of services product revenue
|
29
%
|
136
%
|
|
|
Total
product cost of revenue
|
$
162
|
$
786
|
$
(624
)
|
(79
%)
|
Percentage
of total product revenue
|
17
%
|
40
%
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
Maintenance cost of revenue
|
2016
|
2015
|
$ Change
|
% Change
|
(dollars in thousands)
|
|
|
|
|
Total
maintenance cost of revenue
|
$
624
|
$
618
|
$
6
|
1
%
|
Percentage
of total maintenance revenue
|
32
%
|
32
%
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
Maintenance gross profit
|
2016
|
2015
|
$ Change
|
% Change
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
Total
maintenance gross profit
|
$
1,295
|
$
1,298 $
|
(3
)
|
(0
%)
|
Percentage
of total maintenance revenue
|
68
%
|
68
%
|
|
|
●
|
Increase
in
personnel
related expense of approximately $242,000 due to increased salaries
from headcount increases of approximately $194,000, higher 401(k)
plan employer contributions of approximately $28,000 and higher
pension expense of our foreign sales office of approximately
$20,000.
|
●
|
Increase
in stock-based compensation expense of approximately
$116,000.
|
●
|
Decreases
in professional services of approximately $146,000 which includes
decreases in Board of Director fees of approximately $22,000, lower
contractor fees of approximately $42,000, lower corporate-related
expense of approximately $4,000, lower legal and patent-related
expense of approximately $112,000 offset by higher auditing fees of
approximately $10,000 and higher investor relations fees of
approximately $24,000.
|
●
|
Decrease
in travel, insurances, licenses, dues, rent, and office related
costs of approximately $13,000.
|
●
|
Increase
in personnel related expense of approximately $40,000 due to
headcount increases.
|
●
|
Increase
in professional services of approximately $54,000 resulting from
higher utilization of certain consultants.
|
●
|
Decrease
in contract services, travel and trade show expense and office
related expense of approximately $41,000.
|
●
|
Increase
in stock-based compensation expense of approximately
$50,000.
|
●
|
Increase
in personnel related expense of approximately $636,000 due to
headcount increases needed for the accelerated development of the
Company’s mobile identity management solutions.
|
|
|
●
|
Decrease
in contractor fees and contract services of approximately
$41,000.
|
|
|
●
|
Increase
in stock-based compensation of approximately $45,000.
|
●
|
Decrease
in office related expense and travel of approximately
$58,000.
|
|
Payment Due by Year
|
||||
|
Total
|
Less than
1 Year
|
1-3 Years
|
3-5 Years
|
More than
5 Years
|
Operating
lease obligations
|
819
|
119
|
658
|
42
|
|
Notes
payable to related parties
|
2,150
|
2,150
|
—
|
—
|
—
|
Total
|
$
2,969
|
2,269
|
658
|
42
|
—
|
($ in thousands)
|
|
2016
(3 months)
|
$
119
|
2017
|
$
421
|
2018
|
$
202
|
2019
|
$
35
|
2020
and thereafter
|
$
42
|
|
$
819
|
(a)
|
|
EXHIBITS
|
|
|
|
3.1
|
|
Certificate of Designations, Preferences, and Rights of the Series
F Convertible Preferred Stock, dated September 2, 2016
|
10.1
|
|
Form of Series F Financing Securities Purchase
Agreement
|
31.1
|
|
Certification of the Principal Executive Officer pursuant to Rule
13a-14(a) and 15d-14(a)
|
31.2
|
|
Certification of the Principal Financial and Accounting Officer
pursuant to Rule 13a-14(a) and 15d-14(a)
|
32.1
|
|
Certification by the Principal Executive Officer and Principal
Financial and Accounting Officer pursuant to 18 U.S.C. 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
101.INS
|
|
XBRL Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
Date: November 14, 2016
|
|
IMAGEWARE SYTEMS, INC
|
|
|
|
|
|
By:
/s/ S. James
Miller
|
|
|
S. James Miller
Chief Executive Officer, Chairman
and Director
(Principal Executive
Officer)
|
|
|
|
Date: November 14, 2016
|
|
By:
/s/ Wayne
Wetherell
|
|
|
Wayne Wetherell
Chief Financial Officer
(Principal Financial and Accounting
Officer)
|
1 Year ImageWare Systems (CE) Chart |
1 Month ImageWare Systems (CE) Chart |
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