On July 13, 2022, ImageWare Systems, Inc. entered into the Second Amendment to the Term Loan and Security Agreement (as amended and supplemented, the “Amended Loan Agreement”), by and between the Company and certain funds and separate accounts managed by Nantahala Capital Management, LLC (collectively, “Nantahala”). Pursuant to the Amended Loan Agreement, Nantahala (i) increased the Maximum Draw Amount (as defined in the Amended Loan Agreement) by $150,000, so that the Company may, and on the Effective Date did, request an additional draw in the amount of $150,000 (the “Additional Draw”) under the credit facility (the “Credit Facility”), and (ii) provided a continued waiver of the Minimum Cash Threshold (as defined in the Amended Loan Agreement) through the Effective Date. The Amended Loan Agreements provides for, among other things: (i) the payment to Nantahala fees in the amount of $50,000 (the “PIK Fees”), to be paid-in-kind by increasing the total outstanding principal amount under the Credit Facility (collectively, the “Loans”); (ii) the accrual, following July 5, 2022, of 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 Stock, par value $0.01 per share (“Series D Preferred”), held by Nantahala, with a stated value equal to $150,000 (plus all accrued and unpaid dividends on such shares of Series D Preferred), for additional Loans under and pursuant to the terms of the Amended Loan Agreement.

As a result, the aggregate principal amount due and owing to Nantahala under the Amended Loan Agreement as of the Effective Date is approximately $5,995,465, payable on or before December 29, 2022.