ORGANIZATION AND DESCRIPTION OF BUSINESS	6 Months Ended
Jun. 30, 2016
Notes to Financial Statements
ORGANIZATION AND DESCRIPTION OF BUSINESS	Overview ImageWare Systems, Inc. (the “Company”) is incorporated in the state of Delaware. The Company is a pioneer and leader in the market for biometrically enabled software-based identity management solutions. The Company develops mobile and cloud-based identity management solutions providing biometric, secure credential and law enforcement technologies. Our patented biometric product line includes our flagship product, the Biometric Engine®, a hardware and algorithm independent multi-biometric engine that enables the enrollment and management of unlimited population sizes. Our identification products are used to create, issue and manage secure credentials, including national IDs, passports, driver's licenses, smart cards and access control credentials. Our digital booking products provide law enforcement with integrated mug shots, fingerprint live scans, and investigative capabilities. The Company is headquartered in San Diego, CA, with offices in Portland, OR, Washington, D.C., Mexico, and Ottawa, Ontario. Recent Developments On March 9, 2016, the Company and Neal I. Goldman, a director of the Company ("Goldman"), entered into the fourth amendment (the "Fourth Amendment") to the convertible promissory note and line of credit previously issued by the Company to Goldman on March 27, 2013 (the "Goldman LOC"). The Fourth Amendment (i) provides the Company with the ability to borrow up to $5.0 million under the terms of the Goldman LOC; (ii) permits Goldman to convert the outstanding principal, plus any accrued but unpaid interest due under the Goldman LOC (the "Outstanding Balance"), into shares of the Company's common stock, par value $0.001 per share ("Common Stock"), for $1.25 per share; and (iii) extends the maturity date of the Goldman LOC to June 30, 2017. In addition, on March 9, 2016, the Company and Charles Crocker, also a director of the Company ("Crocker"), entered into a new line of credit and promissory note (the "New Crocker LOC"), in the principal amount of $500,000. The New Crocker LOC shall accrue interest at a rate of 8% per annum, and matures on the earlier to occur of June 30, 2017 or such date that the Company consummates a debt and/or equity financing resulting in net proceeds to the Company of at least $3.5 million. All outstanding amounts due under the terms of the New Crocker LOC shall be convertible into the Company's Common Stock at $1.25 per share. As of June 30, 2016, $1,250,000 was outstanding under the terms of the Goldman LOC and $250,000 was outstanding under the terms of the New Crocker LOC (together, the “Lines of Credit”). Subsequent to June 30, 2016, we borrowed an additional $500,000 under the Lines of Credit. As a result, approximately $3,500,000 remains available under the Lines of Credit for additional borrowings. Liquidity, Capital Resources 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, including our Lines of Credit. Our principal uses of cash have included 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 product development including customization of identity management products for enterprise and consumer applications, further development of intellectual property, development of Software-as-a-Service (“SaaS”) capabilities for existing products as well as general working capital and capital expenditure requirements. We expect that, as our revenue grows, our sales and marketing and research and development expense will continue to grow, albeit at a slower rate and, as a result, we will need to generate significant net revenue to achieve and sustain income from operations. Reliance on Lines of Credit During the three months ended June 30, 2016, we incurred borrowings under our existing Lines of Credit of approximately $1,500,000, due and payable on June 30, 2017, and an additional $500,000 subsequent to June 30, 2016. We anticipate needing to increase our borrowings under the Lines of Credit to continue to fund our working capital needs, thereby increasing the aggregate indebtedness due and payable on or before June 30, 2017. We currently do not anticipate generating sufficient revenue and profit to repay these borrowings in full when due. Therefore, unless the holders of the notes issued under the Lines of Credit convert any outstanding balance into shares of common stock, we will need to seek an extension of the maturity date of the Lines of Credit on or before June 30, 2017. If remaining available borrowings under our Lines of Credit are insufficient or we are unable to extend the maturity date of the Lines of Credit, we will be required to raise additional capital through debt and/or equity financing to continue operations. No assurances can be given that any such financing will be available to us on favorable terms, if at all. At this time, we do not have any commitments for alternative financing or for an extension of the maturity date of the Lines of Credit. Going Concern As reflected in the accompanying consolidated financial statements, the Company has continuing losses, negative working capital and negative cash flows from operations. Available borrowings under our existing Lines of Credit may be insufficient to provide for our working capital needs for the next twelve months. As a result, we may need to raise additional capital through debt and/or equity financing to execute our business plan. In addition, in the event we are unable to raise additional capital, we may be required to sell certain of the Company’s assets or license the Company’s technologies to others. These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern. In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon continued operations of the Company, which, in turn, is dependent upon the Company’s ability to continue to raise capital and generate positive cash flows from operations. However, the Company operates in markets that are emerging and highly competitive. There is no assurance that the Company will operate at a profit or generate positive cash flows in the future. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

ORGANIZATION AND DESCRIPTION OF BUSINESS

6 Months Ended

Jun. 30, 2016

ORGANIZATION AND DESCRIPTION OF BUSINESS

Overview

ImageWare Systems, Inc. (the “Company”) is incorporated in the state of Delaware. The Company is a pioneer and leader in the market for biometrically enabled software-based identity management solutions. The Company develops mobile and cloud-based identity management solutions providing biometric, secure credential and law enforcement technologies. Our patented biometric product line includes our flagship product, the Biometric Engine®, a hardware and algorithm independent multi-biometric engine that enables the enrollment and management of unlimited population sizes. Our identification products are used to create, issue and manage secure credentials, including national IDs, passports, driver's licenses, smart cards and access control credentials. Our digital booking products provide law enforcement with integrated mug shots, fingerprint live scans, and investigative capabilities. The Company is headquartered in San Diego, CA, with offices in Portland, OR, Washington, D.C., Mexico, and Ottawa, Ontario.

Recent Developments

On March 9, 2016, the Company and Neal I. Goldman, a director of the Company ("Goldman"), entered into the fourth amendment (the "Fourth Amendment") to the convertible promissory note and line of credit previously issued by the Company to Goldman on March 27, 2013 (the "Goldman LOC"). The Fourth Amendment (i) provides the Company with the ability to borrow up to $5.0 million under the terms of the Goldman LOC; (ii) permits Goldman to convert the outstanding principal, plus any accrued but unpaid interest due under the Goldman LOC (the "Outstanding Balance"), into shares of the Company's common stock, par value $0.001 per share ("Common Stock"), for $1.25 per share; and (iii) extends the maturity date of the Goldman LOC to June 30, 2017.

In addition, on March 9, 2016, the Company and Charles Crocker, also a director of the Company ("Crocker"), entered into a new line of credit and promissory note (the "New Crocker LOC"), in the principal amount of $500,000. The New Crocker LOC shall accrue interest at a rate of 8% per annum, and matures on the earlier to occur of June 30, 2017 or such date that the Company consummates a debt and/or equity financing resulting in net proceeds to the Company of at least $3.5 million. All outstanding amounts due under the terms of the New Crocker LOC shall be convertible into the Company's Common Stock at $1.25 per share.

As of June 30, 2016, $1,250,000 was outstanding under the terms of the Goldman LOC and $250,000 was outstanding under the terms of the New Crocker LOC (together, the “Lines of Credit”). Subsequent to June 30, 2016, we borrowed an additional $500,000 under the Lines of Credit. As a result, approximately $3,500,000 remains available under the Lines of Credit for additional borrowings.

Liquidity, Capital Resources

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, including our Lines of Credit. Our principal uses of cash have included 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 product development including customization of identity management products for enterprise and consumer applications, further development of intellectual property, development of Software-as-a-Service (“SaaS”) capabilities for existing products as well as general working capital and capital expenditure requirements. We expect that, as our revenue grows, our sales and marketing and research and development expense will continue to grow, albeit at a slower rate and, as a result, we will need to generate significant net revenue to achieve and sustain income from operations.

Reliance on Lines of Credit

During the three months ended June 30, 2016, we incurred borrowings under our existing Lines of Credit of approximately $1,500,000, due and payable on June 30, 2017, and an additional $500,000 subsequent to June 30, 2016. We anticipate needing to increase our borrowings under the Lines of Credit to continue to fund our working capital needs, thereby increasing the aggregate indebtedness due and payable on or before June 30, 2017.

We currently do not anticipate generating sufficient revenue and profit to repay these borrowings in full when due. Therefore, unless the holders of the notes issued under the Lines of Credit convert any outstanding balance into shares of common stock, we will need to seek an extension of the maturity date of the Lines of Credit on or before June 30, 2017. If remaining available borrowings under our Lines of Credit are insufficient or we are unable to extend the maturity date of the Lines of Credit, we will be required to raise additional capital through debt and/or equity financing to continue operations. No assurances can be given that any such financing will be available to us on favorable terms, if at all. At this time, we do not have any commitments for alternative financing or for an extension of the maturity date of the Lines of Credit.

Going Concern

As reflected in the accompanying consolidated financial statements, the Company has continuing losses, negative working capital and negative cash flows from operations. Available borrowings under our existing Lines of Credit may be insufficient to provide for our working capital needs for the next twelve months. As a result, we may need to raise additional capital through debt and/or equity financing to execute our business plan. In addition, in the event we are unable to raise additional capital, we may be required to sell certain of the Company’s assets or license the Company’s technologies to others. These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern.

In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon continued operations of the Company, which, in turn, is dependent upon the Company’s ability to continue to raise capital and generate positive cash flows from operations. However, the Company operates in markets that are emerging and highly competitive. There is no assurance that the Company will operate at a profit or generate positive cash flows in the future.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.