ORGANIZATION AND DESCRIPTION OF BUSINESS	9 Months Ended
Sep. 30, 2012
Notes to Financial Statements
Note 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS	Overview ImageWare Systems, Inc. (the “Company”), a Delaware corporation, is a pioneer and leader in the emerging market for biometrically enabled software-based identity management solutions. Using those human characteristics that are unique to us all, the Company creates software that provides a highly reliable indication of a person’s identity, including the Company’s “flagship” product, the patented IWS Biometric Engine®. The Company’s products are used to manage and issue secure credentials, including national IDs, passports, driver’s licenses and access control credentials. The Company’s products also provide law enforcement with integrated mug shot, LiveScan fingerprint and investigative capabilities. The Company also provides comprehensive authentication security software using biometrics to secure physical and logistical access to facilities, computer networks and Internet sites. Biometric technology is now an integral part of all markets the Company addresses and all of the Company’s products are integrated into the IWS Biometric Engine. Recent Developments On August 20, 2012, the Company and Fujitsu Frontech North America Inc. (“Fujitsu”) executed an original equipment manufacturer, or OEM, licensing agreement. Subsequently, on September 6, 2012, the Company received certification to run its patented Biometric Engine® across Fujitsu’s NuVola Private Cloud Platform. Utilization of the NuVola Cloud Platform will allow the Biometric Engine to rapidly and securely deploy biometric security information to users. Liquidity At September 30, 2012, our principal sources of liquidity consisted of cash and cash equivalents of $5,316,000 and accounts receivable, net of $1,038,000. As of September 30, 2012, we had positive working capital of $2,815,000, which included $1,880,000 of deferred revenue. Historically, our principal sources of cash have included customer payments from the sale of our products, proceeds from the issuance of common and preferred stock and proceeds from the issuance of debt. Our principal uses of cash include cash used in operations, payments relating to purchases of property and equipment and repayments of borrowings. We expect that our principal uses of cash in the future will be for operations, working capital and capital expenditures. We expect that, as our revenue grows, our sales, marketing and research and development expenses will continue to grow and, as a result, we will need to generate significant net revenue to achieve profitability. Management believes the Company's current cash and cash equivalents will be sufficient to meet working capital and capital expenditure requirements for the 12 months following the date of the filing of this quarterly report. However, in the event results from operations are materially less than forecasted, the Company's current cash and cash equivalents may be insufficient to meet its working capital and capital expenditure requirements. We may, therefore, be required to sell equity or debt securities, secure a bank line of credit or consider strategic alliances to fully execute our business plan. The sale of equity or equity-related securities could result in additional dilution to our shareholders. There can be no assurance that additional financing, in any form, will be available at all or, if available, will be on terms acceptable to us.

ORGANIZATION AND DESCRIPTION OF BUSINESS

9 Months Ended

Sep. 30, 2012

Note 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Overview

ImageWare Systems, Inc. (the “Company”), a Delaware corporation, is a pioneer and leader in the emerging market for biometrically enabled software-based identity management solutions. Using those human characteristics that are unique to us all, the Company creates software that provides a highly reliable indication of a person’s identity, including the Company’s “flagship” product, the patented IWS Biometric Engine®. The Company’s products are used to manage and issue secure credentials, including national IDs, passports, driver’s licenses and access control credentials. The Company’s products also provide law enforcement with integrated mug shot, LiveScan fingerprint and investigative capabilities. The Company also provides comprehensive authentication security software using biometrics to secure physical and logistical access to facilities, computer networks and Internet sites. Biometric technology is now an integral part of all markets the Company addresses and all of the Company’s products are integrated into the IWS Biometric Engine.

Recent Developments

On August 20, 2012, the Company and Fujitsu Frontech North America Inc. (“Fujitsu”) executed an original equipment manufacturer, or OEM, licensing agreement. Subsequently, on September 6, 2012, the Company received certification to run its patented Biometric Engine® across Fujitsu’s NuVola Private Cloud Platform. Utilization of the NuVola Cloud Platform will allow the Biometric Engine to rapidly and securely deploy biometric security information to users.

Liquidity

At September 30, 2012, our principal sources of liquidity consisted of cash and cash equivalents of $5,316,000 and accounts receivable, net of $1,038,000. As of September 30, 2012, we had positive working capital of $2,815,000, which included $1,880,000 of deferred revenue. Historically, our principal sources of cash have included customer payments from the sale of our products, proceeds from the issuance of common and preferred stock and proceeds from the issuance of debt. Our principal uses of cash include cash used in operations, payments relating to purchases of property and equipment and repayments of borrowings. We expect that our principal uses of cash in the future will be for operations, working capital and capital expenditures. We expect that, as our revenue grows, our sales, marketing and research and development expenses will continue to grow and, as a result, we will need to generate significant net revenue to achieve profitability.

Management believes the Company's current cash and cash equivalents will be sufficient to meet working capital and capital expenditure requirements for the 12 months following the date of the filing of this quarterly report. However, in the event results from operations are materially less than forecasted, the Company's current cash and cash equivalents may be insufficient to meet its working capital and capital expenditure requirements. We may, therefore, be required to sell equity or debt securities, secure a bank line of credit or consider strategic alliances to fully execute our business plan. The sale of equity or equity-related securities could result in additional dilution to our shareholders. There can be no assurance that additional financing, in any form, will be available at all or, if available, will be on terms acceptable to us.