On April 28, 2020 (the \”Execution Date\”), ImageWare Systems, Inc. (the \”Company\”) entered into a purchase agreement, dated as of the Execution Date (the \”Purchase Agreement\”), and a registration rights agreement, dated as of the Execution Date (the \”Registration Rights Agreement\”), with Lincoln Park Capital Fund, LLC (\”Lincoln Park\”), to which Lincoln Park has committed to purchase up to $10,250,000 of the Company\’s common stock, $0.01 par value per share (the \”Common Stock\”).

Under the terms and subject to the conditions of the Purchase Agreement, including stockholder approval of an amendment to the Company’s Certificate of Incorporation to increase the number of shares of the Company’s capital stock to 350 million shares, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $10,250,000 worth of shares of Common Stock. Such sales of Common Stock by the Company, if any, will be subject to certain limitations, and may occur from time to time, at the Company\’s sole discretion, over the 24-month period commencing on the date that a registration statement covering the resale of shares of Common Stock that have been and may be issued under the Purchase Agreement, which the Company agreed to file with the Securities and Exchange Commission (the \”SEC\”) to the Registration Rights Agreement, is declared effective by the SEC and a final prospectus in connection therewith is filed and the other conditions set forth in the Purchase Agreement are satisfied, all of which are outside the control of Lincoln Park (such date on which all of such conditions are satisfied, the \”Commencement Date\”). The Company has 30 business days to file the registration statement from the Execution Date.

Under the Purchase Agreement, on any business day over the term of the Purchase Agreement, the Company has the right, in its sole discretion, to present Lincoln Park with a purchase notice (each, a \”Purchase Notice\”) directing Lincoln Park to purchase up to 125,000 shares of Common Stock per business day, which increases to up to 425,000 shares in the event the price of the Company’s Common Stock is not below $0.40 per share (the \”Regular Purchase\”) (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase Agreement). In each case, Lincoln Park\’s maximum commitment in any single Regular Purchase may not exceed $500,000. The Purchase Agreement provides for a purchase price per Purchase Share (the \”Purchase Price\”) equal to the lesser of:

In addition, on any date on which the Company submits a Purchase Notice to Lincoln Park, the Company also has the right, in its sole discretion, to present Lincoln with an accelerated purchase notice (each, an \”Accelerated Purchase Notice\”) directing Lincoln Park to purchase an amount of stock (the \”Accelerated Purchase\”) equal to up to the lesser of (i) three times the number of shares of Common Stock purchased to such Regular Purchase; and (ii) 30% of the aggregate shares of the Company\’s Common Stock traded during all or, if certain trading volume or market price thresholds specified in the Purchase Agreement are crossed on the applicable Accelerated Purchase Date, the portion of the normal trading hours on the applicable Accelerated Purchase Date prior to such time that any one of such thresholds is crossed (such period of time on the applicable Accelerated Purchase Date, the \”Accelerated Purchase Measurement Period\”), provided that Lincoln Park will not be required to buy shares of Common Stock to an Accelerated Purchase Notice that was received by Lincoln Park on any business day on which the last closing trade price of the Company\’s Common Stock on the OTC Markets (or alternative national exchange in accordance with the Purchase Agreement) is below $0.25 per share. The purchase price per share of Common Stock for each such Accelerated Purchase will be equal to the lesser of:

The Company may also direct Lincoln Park on any business day on which an Accelerated Purchase has been completed and all of the shares to be purchased thereunder have been properly delivered to Lincoln Park in accordance with the Purchase Agreement, to purchase an amount of stock (the \”Additional Accelerated Purchase\”) equal to up to the lesser of (i) three times the number of shares purchased to such Regular Purchase; and (ii) 30% of the aggregate number of shares of the Company\’s Common Stock traded during a certain portion of the normal trading hours on the applicable Additional Accelerated Purchase date as determined in accordance with the Purchase Agreement (such period of time on the applicable Additional Accelerated Purchase date, the \”Additional Accelerated Purchase Measurement Period\”), provided that the closing price of the Company\’s Common Stock on the business day immediately preceding such business day is not below $0.25 (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase Agreement). Additional Accelerated Purchases will be equal to the lower of:

The aggregate number of shares that the Company can sell to Lincoln Park under the Purchase Agreement may in no case exceed that number which, together with Lincoln Park’s then current holdings of Common Stock, exceed 4.99% of the Common Stock outstanding immediately prior to the delivery of the Purchase Notice.

Lincoln Park has no right to require the Company to sell any shares of Common Stock to Lincoln Park, but Lincoln Park is obligated to make purchases as the Company directs, subject to certain conditions. There are no upper limits on the price per share that Lincoln Park must pay for shares of Common Stock.

The Company has agreed with Lincoln Park that it will not enter into any \”variable rate\” transactions with any third party for a period defined in the Purchase Agreement.

The Company issued to Lincoln Park 2,500,000 shares of Common Stock as commitment shares in consideration for entering into the Purchase Agreement on the Execution Date.

The Purchase Agreement and the Registration Rights Agreement contain customary representations, warranties, agreements and conditions to completing future sale transactions, indemnification rights and obligations of the parties. The Company has the right to terminate the Purchase Agreement at any time, at no cost or penalty, subject to the survival of certain provisions set forth in the Purchase Agreement. During any \”event of default\” under the Purchase Agreement, all of which are outside of Lincoln Park\’s control, Lincoln Park does not have the right to terminate the Purchase Agreement; however, the Company may not initiate any regular or other purchase of shares by Lincoln Park, until such event of default is cured. In addition, in the event of bankruptcy proceedings by or against the Company, the Purchase Agreement will automatically terminate.

Actual sales of shares of Common Stock to Lincoln Park under the Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the Common Stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations. Lincoln Park has no right to require any sales by the Company but is obligated to make purchases from the Company as it directs in accordance with the Purchase Agreement. Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company\’s shares.

Item 3.02 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

See Item 3.02 of this Current Report on Form 8-K.

Item 3.02. Unregistered Sales of Equity Securities

See Item 3.02 of this Current Report onForm8-K. The net proceeds under the Purchase Agreement to the Company, other than the Original Purchase, will depend on the frequency and prices at which the Company sells shares of its Common Stock to Lincoln Park. The Company expects that any proceeds received by the Company from such sales to Lincoln Park under the Purchase Agreement, including proceeds from the Original Purchase, will be used for general corporate purposes.

Item 3.02 Other Events

Triton Financing

As previously disclosed by the Company on its Current Report on Form 8-K filed February 27, 2020, the Company entered into a securities purchase agreement (the \”Agreement\”) with Triton Funds LP, a Delaware limited partnership (\”Triton\”), which Agreement provides the Company the right to sell to Triton, and Triton is obligated to purchase, up to $2.0 million worth of shares of the Company\’s Common Stock under the Agreement.

On April 29, 2020, the Company closed on the offer and sale to Triton of 6.0 million shares of Common Stock resulting in gross proceeds to the Company of $765,000, or a per share purchase price of $0.13 per share. The offering follows the offer and sale to Triton of 4.0 million shares of Common Stock for $0.16 per share, which offering closed on April 15, 2020, resulting in gross proceeds to the Company of $640,000.

The Common Stock sold to Triton in the offering were offered and sold by the Company to an effective shelf registration statementonFormS-3,whichwas initially filed with the Securities and Exchange Commission (the “SEC”) on June 2018 and declared effective by the SEC on July 10, 2018(FileNo.333-225935), and the base prospectus dated as of July 10, 2018 contained therein. The Company will file a prospectus supplement with the SEC in connection with the sale of the Common Stock.

Management Financing.

Two members of the Company’s Board of Directors, Messrs. Neal Goldman and James Miller, advanced $450,000 and $100,000, respectively, to the Company. In consideration for the advances, the Company expects to issue to Messrs. Goldman and Miller convertible promissory notes convertible into shares of the Company’s Common Stock at $0.16 per share. In addition, Dana Kammersgard, also a member of the Board of Directors, advanced $360,000 to the Company, to a factoring arrangement collateralized by certain receivables of the Company totaling approximately $500,000. Amounts advanced by Mr. Kammersgard are due within seven days of collection by the Company of the factored accounts.

IMAGEWARE SYSTEMS INC Exhibit
EX-10 2 ex10-1.htm PURCHASE AGREEMENT ex10-1   Exhibit 10.1 PURCHASE AGREEMENT   THIS PURCHASE AGREEMENT (this “Agreement”),…
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About ImageWare Systems, Inc. (OTCMKTS:IWSY)

ImageWare Systems Incorporated (ImageWare) provides biometrically enabled software-based identity management solutions. The Company’s product, IWS Biometric Engine, is a multi-biometric software platform that is hardware and algorithm independent, enabling the enrollment and management of unlimited population sizes. It allows a user to utilize one or more biometrics on an integrated platform. Its products are used to manage and issue secure credentials, including national identifications (IDs), passports, driver licenses and access control credentials. It also provides authentication security software using biometrics to secure physical and logical access to facilities or computer networks or Internet sites. ImageWare categorizes its identity management products and services into three markets, including Biometrics, Secure Credential, and Law Enforcement and Public Safety markets.