IMAGEWARE SYSTEMS INC: Entry of Material Definitive Agreement, Financial Statements and Supporting Documents (Form 8-K)

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Item 1.01. Conclusion of a significant definitive agreement.

On July 13, 2022 (the “Effective Date”), ImageWare Systems, Inc. (the “Company”) has entered into the Second Amendment to the Term Loan and Guarantee Agreement (as amended and supplemented, the “Amended Loan Agreement”), by and between the Company and certain segregated funds and accounts managed by Nantahala Capital Management, LLC (collectively, “Nantahala”). Pursuant to the Amended Loan Agreement, Nantahala (i) has increased the Maximum Drawdown Amount (as defined in the Amended Loan Agreement) by $150,000so that the Company may, and on the Effective Date has done so, request an additional drawdown in the amount of $150,000 (the “Additional Drawdown”) under the Credit Facility (the “Credit Facility”), and (ii) has provided a continuing waiver of Minimum Liquidity Threshold (as defined in the Amended Loan Agreement) until the effective date.

The amended loan agreements provide, among other things: (i) the payment to Nantahala of fees in the amount of $50,000 (the “PIK Fee”), to be paid in kind by increasing the aggregate principal amount outstanding under the Credit Facility (collectively, the “Loans”); (ii) regularization, following July 5, 2022, interest on all loans under the Credit Facility at the Default Rate (as defined in the Amended Loan Agreement); and (iii) the exchange of certain shares of the Company’s Series D Convertible Preferred Shares, par value $0.01 per share (“Series D Preferred”), held by Nantahala, with a declared value equal to $150,000
(plus all accrued and unpaid dividends on such Series D Preferred Shares), for additional loans under and in accordance with the terms of the Amended Loan Agreement. Accordingly, the aggregate principal amount due and payable to Nantahala under the Amended Loan Agreement on the Effective Date is approximately $5,995,465payable no later than December 29, 2022.

In consideration for the Additional Drawdown, the Company has agreed to: (i) appoint a new officer with exclusive power and authority to, among other things, manage mergers and acquisitions, the sale of any material assets and financings on behalf of of the Company (the “Designated Officer”); (ii) provide certain cash forecasts to Nantahala; and (iii) raise certain additional capital, in each case more fully set forth in the Amended Loan Agreement. James Demitrieus has been appointed by the Board to serve as Designated Officer.

The foregoing description of the Amended Loan Agreement does not purport to be complete and is qualified in its entirety by the full text of the Amended Loan Agreement, a copy of which is filed as Schedule 10.1 hereto and is incorporated by reference herein. The Amended Loan Agreement has been attached to provide investors with information on its terms. It is not intended to provide other factual information about the Company. In addition, certain representations and warranties contained in the Amended Loan Agreement were used for the purpose of allocating risk between the Company and Nantahala, rather than establishing facts. Accordingly, the representations and warranties contained in the Amended Loan Agreement should not be taken as characterizing the true state of the facts concerning the Company.

For more information on the amended loan agreement, please see (i) the company’s current report on Form 8-K, filed with the United States Securities and Exchange Commission on January 4, 2022and (ii) the company’s current report on Form 8-K, filed with the United States Securities and Exchange Commission on June 8, 2022.

Item 9.01 Financial statements and supporting documents.

(d) Exhibit Index

Exhibit No.   Description
  10.1  *     Second Amendment to the Loan and Security Agreement, dated July 13,
              2022, among ImageWare Systems, Inc., and certain funds and separate
              accounts managed by Nantahala Capital Management, LLC, and the other
              lenders set forth on the signature pages thereto.*
104           Cover Page Interactive Data File (embedded within the Inline XBRL
              document)


*Some non-significant exhibits and attachments to this exhibit have been omitted in accordance with SK Rule 601(b)(2). The declarant hereby undertakes to provide additional copies of the annexes and omitted exhibits at the request of the SECOND.

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