Note 1 - Description of Business and Operations	3 Months Ended
Mar. 31, 2022
Notes to Financial Statements
Business Description and Basis of Presentation [Text Block]	NOTE 1. DESCRIPTION OF BUSINESS AND OPERATIONS Overview As used in this Report, “we”, “us”, “our”, “Imageware”, “Imageware Systems” or the “Company” refers to Imageware Systems, Inc. and all of its subsidiaries. Imageware Systems, Inc. is incorporated in the state of Delaware. The Company 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. The Company’s “flagship” product is our patented Biometric Engine®. The Company’s products are used to manage and issue secure credentials, including national IDs, passports, driver licenses and access control credentials. The Company’s products also provide law enforcement with integrated mug shot, fingerprint LiveScan and investigative capabilities. The Company also provides comprehensive authentication security software using biometrics to secure physical and logical access to facilities or computer networks or internet sites. Biometric technology is now an integral part of all markets the Company addresses, and all the products are integrated into our Biometric Engine. The Company's common stock, par value $0.01 per share (the “Common Stock”), trades under the symbol “IWSY" on the OTCQB Marketplace. Liquidity, Going Concern and Management’s Plans At March 31, 2022 and December 31, 2021, we had negative working capital of $10,289,000 and $8,046,000, respectively. Included in our negative working capital as of March 31, 2022 are $6,024,000 of derivative liabilities which are not required to be settled in cash except in the event of the consummation of a change of control or at any time after the fourth anniversary of the private placement of our Series D Convertible Preferred Stock, par value $0.01 ("Series D Preferred"), consummated in November and December, 2020 (the “Series D Financing”), at which anniversary the holders of the Series D Preferred may require the Company to redeem in cash any or all of the holder’s outstanding Series D Preferred at an amount equal to the liquidation preference of the Series D Preferred. At March 31, 2022 the liquidation preference totaled $23,469,000. Historically, our principal sources of cash have included proceeds from the issuance of common and preferred stock and proceeds from the issuance of debt, and, to a lesser extent, customer payments from the sale of our products. Our principal uses of cash have included cash used in operations, product development, and payments relating to purchases of property and equipment. 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 requirements. Management expects 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 positive cash flows from operations. Historically, the Company has not been able to generate sufficient net revenue to achieve and sustain positive cash flows from operations. As a result, the Company has been dependent on equity and debt financings to satisfy its working capital requirements and continue as a going concern. To address our working capital requirements, management is actively seeking additional financing, of which no assurances can be given that we will be successful. In addition, the Company has instituted several cost cutting measures and has utilized cash proceeds available under the Credit Facility (defined below) with certain funds and separate accounts managed by Nantahala Capital Management, LLC and other lenders (collectively, the “Lenders”), and under the purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”) to satisfy its working capital requirements (“LPC Purchase Agreement”). During 2021, the Company retained an investment bank to initiate a review of available alternatives to maximize shareholder value, which may include, among other alternatives, (i) a merger, consolidation, or other business combination or a purchase involving all or a substantial amount of the business, securities or assets of the Company, and/or (ii) the private placement of securities to meet its working capital requirements or otherwise as necessary in connection with the consummation of any of the above transactions. In the event the Company is unable to consummate one or more of the above transactions, the Company will not be able to continue as a going concern. The Company continues to evaluate indications of interest as well as options to address its projected working capital requirements, and those discussions are ongoing, including discussions with the Company’s largest shareholder with whom the Company has entered a Term Loan and Security Agreement to provide up to $2,500,000 (the “Credit Facility”). As of May 20, 2022 approximately $342,000 remains available under the Credit Facility in such Lender’s discretion, and no assurances can be given that the Lenders will consent to the release of the additional $342,000 under the Credit Facility. The Company is currently negotiating to obtain the remaining funds available under the Credit Facility, including obtaining a waiver of the minimum cash requirement covenant under the Credit Facility. In this regard, the Company is required to maintain a minimum amount of unrestricted cash and cash equivalents and may fall below the minimum cash requirement given its existing cash balances. Although we believe we will obtain a waiver of the minimum cash requirement, in the event the Company is unable to obtain a waiver of the minimum cash requirement, the Lenders fail to provide the remaining funds under the Credit Facility, and/or we fail to obtain alternative sources of capital, of which no assurances can be given, such inability may result in an event of default under the terms of the Credit Facility, thereby providing the Lenders with certain rights and remedies under the terms of the Credit Facility, including declaring all advances under the terms of the Credit Facility immediately due and payable. To date, the Board of Directors (“Board”) has not entered into any financing or other arrangements, other than the Credit Facility and the LPC Purchase Agreement, and no assurances can be given that we will be successful in raising additional capital through the issuance of debt and/or equity securities or entering into any other transaction that addresses our ability to continue as a going concern. The consummation of a transaction will likely involve substantial dilution to the Company’s stockholders and may result in the loss of your entire investment. In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying condensed 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 be able to obtain additional capital, operate at a profit or generate positive cash flows in the future. Therefore, management’s plans do not alleviate the substantial doubt of the Company’s ability to continue as a going concern. The condensed 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.

Note 1 - Description of Business and Operations

3 Months Ended

Mar. 31, 2022

Business Description and Basis of Presentation [Text Block]

NOTE 1. DESCRIPTION OF BUSINESS AND OPERATIONS

Overview

As used in this Report, “we”, “us”, “our”, “Imageware”, “Imageware Systems” or the “Company” refers to Imageware Systems, Inc. and all of its subsidiaries. Imageware Systems, Inc. is incorporated in the state of Delaware. The Company 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. The Company’s “flagship” product is our patented Biometric Engine®. The Company’s products are used to manage and issue secure credentials, including national IDs, passports, driver licenses and access control credentials. The Company’s products also provide law enforcement with integrated mug shot, fingerprint LiveScan and investigative capabilities. The Company also provides comprehensive authentication security software using biometrics to secure physical and logical access to facilities or computer networks or internet sites. Biometric technology is now an integral part of all markets the Company addresses, and all the products are integrated into our Biometric Engine.

The Company's common stock, par value $0.01 per share (the “Common Stock”), trades under the symbol “IWSY" on the OTCQB Marketplace.

Liquidity, Going Concern and Management’s Plans

At March 31, 2022 and December 31, 2021, we had negative working capital of $10,289,000 and $8,046,000, respectively. Included in our negative working capital as of March 31, 2022 are $6,024,000 of derivative liabilities which are not required to be settled in cash except in the event of the consummation of a change of control or at any time after the fourth anniversary of the private placement of our Series D Convertible Preferred Stock, par value $0.01 ("Series D Preferred"), consummated in November and December, 2020 (the “Series D Financing”), at which anniversary the holders of the Series D Preferred may require the Company to redeem in cash any or all of the holder’s outstanding Series D Preferred at an amount equal to the liquidation preference of the Series D Preferred. At March 31, 2022 the liquidation preference totaled $23,469,000.

Historically, our principal sources of cash have included proceeds from the issuance of common and preferred stock and proceeds from the issuance of debt, and, to a lesser extent, customer payments from the sale of our products. Our principal uses of cash have included cash used in operations, product development, and payments relating to purchases of property and equipment. 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 requirements. Management expects 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 positive cash flows from operations. Historically, the Company has not been able to generate sufficient net revenue to achieve and sustain positive cash flows from operations. As a result, the Company has been dependent on equity and debt financings to satisfy its working capital requirements and continue as a going concern.

To address our working capital requirements, management is actively seeking additional financing, of which no assurances can be given that we will be successful. In addition, the Company has instituted several cost cutting measures and has utilized cash proceeds available under the Credit Facility (defined below) with certain funds and separate accounts managed by Nantahala Capital Management, LLC and other lenders (collectively, the “Lenders”), and under the purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”) to satisfy its working capital requirements (“LPC Purchase Agreement”).

During 2021, the Company retained an investment bank to initiate a review of available alternatives to maximize shareholder value, which may include, among other alternatives, (i) a merger, consolidation, or other business combination or a purchase involving all or a substantial amount of the business, securities or assets of the Company, and/or (ii) the private placement of securities to meet its working capital requirements or otherwise as necessary in connection with the consummation of any of the above transactions. In the event the Company is unable to consummate one or more of the above transactions, the Company will not be able to continue as a going concern. The Company continues to evaluate indications of interest as well as options to address its projected working capital requirements, and those discussions are ongoing, including discussions with the Company’s largest shareholder with whom the Company has entered a Term Loan and Security Agreement to provide up to $2,500,000 (the “Credit Facility”). As of May 20, 2022 approximately $342,000 remains available under the Credit Facility in such Lender’s discretion, and no assurances can be given that the Lenders will consent to the release of the additional $342,000 under the Credit Facility. The Company is currently negotiating to obtain the remaining funds available under the Credit Facility, including obtaining a waiver of the minimum cash requirement covenant under the Credit Facility. In this regard, the Company is required to maintain a minimum amount of unrestricted cash and cash equivalents and may fall below the minimum cash requirement given its existing cash balances. Although we believe we will obtain a waiver of the minimum cash requirement, in the event the Company is unable to obtain a waiver of the minimum cash requirement, the Lenders fail to provide the remaining funds under the Credit Facility, and/or we fail to obtain alternative sources of capital, of which no assurances can be given, such inability may result in an event of default under the terms of the Credit Facility, thereby providing the Lenders with certain rights and remedies under the terms of the Credit Facility, including declaring all advances under the terms of the Credit Facility immediately due and payable.

To date, the Board of Directors (“Board”) has not entered into any financing or other arrangements, other than the Credit Facility and the LPC Purchase Agreement, and no assurances can be given that we will be successful in raising additional capital through the issuance of debt and/or equity securities or entering into any other transaction that addresses our ability to continue as a going concern. The consummation of a transaction will likely involve substantial dilution to the Company’s stockholders and may result in the loss of your entire investment.

In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying condensed 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 be able to obtain additional capital, operate at a profit or generate positive cash flows in the future. Therefore, management’s plans do not alleviate the substantial doubt of the Company’s ability to continue as a going concern.

The condensed 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.