**UNITED STATES**

**SECURITIES ANDEXCHANGE COMMISSION**

**Washington, D.C. 20549**

----

**FORM 10-K/A**

**(Amendment No. 2)**

**x**                              ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934.

**For the fiscal year endedDecember 31, 2006.**

**o**                                 TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

**Forthe transitionperiod               to               .**

**CommissionFile Number**

----

**IMAGEWARESYSTEMS, INC.**

(Exact name of Registrant as Specified in its Charter)

| **Delaware**                                                    |   | **33-0224167**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State or Other  Jurisdiction of Incorporation or Organization) |   | (I.R.S. Employer  Identification No.) |
|                                                            |   |                                  |
| **10883  Thornmint Road, San Diego, California**                |   | **92127**                             |
| (Address of  Principal Executive Offices)                       |   | (Zip Code)                            |

 

(Registrant’s telephone number, including areacode):   **(858) 673-8600**

**Securities registered pursuant toSection 12(b) of the Exchange Act:**

|                                    | ** ** | **Name of Each Exchange** |
|------------------------------------|------------|---------------------------|
| **Title of Each Class**            | ** ** | **on Which Registered**   |
| Common Stock,  $0.01 par value     |       | American Stock  Exchange  |
| Warrants to  Purchase Common Stock |       | American Stock  Exchange  |

 

Securities registered pursuant to Section 12(g)of the Act: **None**

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o     No x

Indicate by check mark if the registrant is notrequired to file reports pursuant to Section 13 or Section 15(d) ofthe Exchange Act. Yes o     No x

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past90 days. Yes x     No o

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not containedherein, and will not be contained, to the best of registrant’s knowledge, indefinitive proxy or information statements incorporated by reference inPart III of this Form 10-K or any amendment to this Form 10-K.  Yes x     No o

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o     Acceleratedfiler o     Non-acceleratedfiler x

Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).     Yes o   No x

Theaggregate market value of the voting and non-voting common equity held bynon-affiliates of the registrant, based on the closing sales price of theissuer’s Common Stock on June 30, 2006, as reported on the American Stock Exchangewas approximately $22,555,987.  Excludedfrom this computation were 388,315 shares of Common Stock held by all currentexecutive officers and directors and 1,586,987 shares held by each person whois known by the registrant to own 5% or more of the outstanding CommonStock.  Share ownership information ofcertain persons known by the issuer to own greater than 5% of the outstandingCommon Stock for purposes of the preceding calculation is based solely oninformation on Schedule 13G filed with the Commission and is as of June30, 2006. Exclusion of shares held by any person or entity should not beconstrued to indicate that such person or entity possesses the power, directlyor indirectly, to direct or cause the direction of the management or the policiesof the Registrant.

Thenumber of shares of the registrant’s common stock outstanding as of May 6, 2007was 14,680,623.

**DOCUMENTS INCORPORATED BY REFERENCE**

**None.**

 

----

**EXPLANATORYNOTE**

 

This Amendment No. 2 onForm 10-K/A amends the Registrant’s Annual Report on Form 10-K, as filed by theRegistrant on April 17, 2007 (the “Initial Form 10-K”), as amended by AmendmentNo. 1 to the Initial Form 10-K, as filed by the Registrant on April 30,2007.  This Amendment No. 2 is beingfiled solely to amend (i) Item 5 to incorporate the stock performance graph inaccordance with Item 201(e) of Regulation S-K and (ii) Item 12 to incorporatethe equity compensation plan information in accordance with Item 201(d) ofRegulation S-K.  The requiredcertifications are included with this amendment as Exhibits 31.1 and 31.2 ofthis Amendment No. 2.

** **

**TABLE OF CONTENTS**
| **PART II**  |   |                                                                                                               |   |   |
|-------------------|--------|--------------------------------------------------------------------------------------------------------------------|--------|--------|
| ** **        |   |                                                                                                               |   |   |
| Item 5.           |   | Market for Registrant’s Common Equity, Related  Stockholder Matters and Issuer Purchases of Equity Securities |   |   |
|              |   |                                                                                                               |   |   |
| **PART III** |   |                                                                                                               |   |   |
| ** **        |   |                                                                                                               |   |   |
| Item 12.          |   | Security Ownership of Certain Beneficial Owners and  Management and Related Stockholder Matters                    |   |   |
|              |   |                                                                                                               |   |   |
| Signatures        |   |                                                                                                               |   |   |
|              |   |                                                                                                               |   |   |
| Exhibit Index     |   |                                                                                                               |   |   |

 

2

----

**PART II**

 

**Item 5. Marketfor Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities**

***StockPerformance Graph***

The following performance graph and related information shall not bedeemed “soliciting material” or to be “filed” with the Commission, nor shallsuch information be incorporated by reference into any future filing under theSecurities Act of 1933 or Securities Exchange Act of 1934 except to the extentthat we specifically incorporate it by reference into such filing.

The following performance graph compares ImageWareSystems, Inc.’s cumulative 5-yeartotal shareholder return relative to the cumulative total returns of theS&P 500 Index and the AMEX Computer Technology Index.  The graph tracks the performance of a $100investment in our common stock and each of the referenced indexes from January1, 2001 through December 31, 2006.  Thecomparisons in the graph below are based on historical data and are notintended to forecast the possible performance of our common stock.
| ** **                     | ** ** | **Dec. 31, 2001** | ** ** | **Dec. 31, 2002** | ** ** | **Dec. 31, 2003** | ** ** | **Dec 31, 2004** | ** ** | **Dec. 31, 2005** | ** ** | **Dec. 31, 2006** | ** ** |
|--------------------------------|------------|-----------------------------|------------|-----------------------------|------------|-----------------------------|------------|----------------------------|------------|-----------------------------|------------|-----------------------------|------------|
|                           |       |                        |       |                        |       |                        |       |                       |       |                        |       |                        |       |
| ImageWare                      |       | $                           | 100.00     |                        | $          | 44.27                       |       | $                          | 43.54      |                        | $          | 44.12                       |       | $ | 28.45 |   | $ | 24.67 |   |
| S&P 500                    |       | $                           | 100.00     |                        | $          | 76.63                       |       | $                          | 96.85      |                        | $          | 105.56                      |       | $ | 108.73 |   | $ | 123.54 |   |
| AMEX Computer Technology Index |       | $                           | 100.00     |                        | $          | 78.42                       |       | $                          | 114.00     |                        | $          | 133.38                      |       | $ | 137.81 |   | $ | 161.24 |   |

 

**PART III**

**Item 12.   Security Ownership of Certain BeneficialOwners and Management and Related Stockholder Matters**

***SecuritiesAuthorized for Issuance Under Equity Compensation Plans***

The following table setsforth additional information as of December 31, 2006 with respect to the sharesof common stock that may be issued upon the exercise of options and otherrights under our existing equity compensation plans and arrangements.  The information includes the number of sharescovered by, and the weighted average exercise price of, 

3

----

outstanding options andother rights and the number of shares remaining available for future grants,excluding the shares to be issued upon exercise of outstanding options andother rights.  

**EquityCompensation Plan Information**
| Plan category                                               | ** ** | **Number of securities to be issued  upon exercise of outstanding  options, warrants and rights** | ** ** | **Weighted-average exercise price of  outstanding options, warrants and  rights** | ** ** | **Number of securities remaining  available for future issuance  under equity compensation plans  (excluding securities reflected in  column (a))** | ** ** |
|------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                       | ** ** | **(a)**                                                                                                                                                  | ** ** | **(b)**                                                                                                         | ** ** | **(c)**                                                                                                                                                                                                              | ** ** |
| **Equity compensation plans approved by security holders:**      |       |                                                                                                                                                     |       |                                                                                                            |       |                                                                                                                                                                                                                 |       |
| 1994 Employee  Stock Option Plan                                 |       | 43,770                                                                                                                                                   |       | $ 2.15                                                                                                     |       | —                                                                                                                                                                                                               |       |
| 1999 Stock Award Plan  amended and restated as of June 7, 2005   |       | 1,291,572                                                                                                                                                |       | $ 2.07                                                                                                     |       | 90,899                                                                                                                                                                                                               |       |
| **Equity compensation plans not  approved by security holders:** |       |                                                                                                                                                     |       |                                                                                                            |       |                                                                                                                                                                                                                 |       |
| 2001 Equity Incentive Plan                                       |       | 420,606                                                                                                                                                  |       | $ 2.67                                                                                                     |       | —                                                                                                                                                                                                               |       |
| Total                                                            |       | 1,755,948                                                                                                                                                |       | $ 2.20                                                                                                     |       | 90,899                                                                                                                                                                                                               |       |

 

**Description of Equity Compensation Plans NotApproved by Security Holders.**

*2001Equity Incentive Plan.*

OnSeptember 12, 2001, the Company’s Board of Directors adopted the 2001Equity Incentive Plan (the “2001 Plan”). Under the terms of the 2001 Plan, theCompany may issue stock awards to employees, directors and consultants ofthe Company, and such stock awards may be given for non-statutory stockoptions (options not intended to qualify as an “incentive stock option” withinthe meaning of Section 422 of the Internal Revenue Code of 1986, asamended), stock bonuses, and rights to acquire restricted stock. The number ofoptions issued and outstanding and the number of options remaining available forfuture issuance are shown in the table above.

The 2001 Plan isadministered by the Board of Directors or a Committee of the Board as providedin the 2001 Plan. Options granted under the 2001 Plan shall not be less than85% of the market value of the Company’s common stock on the date of the grant,and, in some cases, may not be less than 110% of such fair market value.The term of options granted under the 2001 Plan as well as their vesting aredetermined by the Board and to date, options have been granted with a ten yearterm 

4

----

and vesting over a threeyear period. While the Board may suspend or terminate the 2001 Plan at anytime, if not terminated earlier, it will terminate on the day before its tenthanniversary of the date of adoption.

**Item 15.   Exhibits and Financial Statement Schedules**
| (b)    | Exhibits                                   |
|--------|--------------------------------------------|
|   |                                       |
|   | The following exhibits are filed herewith: |

 
| Exhibit  Number | ** ** | **Description**                                                                                            |
|-----------------|------------|------------------------------------------------------------------------------------------------------------|
| 31.1            |       | Certification of the Principal Executive Officer pursuant  to Rule 13a-14(a) and 15d-14(a).                |
| 31.2            |       | Certification of the Principal Financial and  Accounting Officer pursuant to Rule 13a-14(a) and 15d-14(a). |

 

**SIGNATURES**

Inaccordance with Section 13 or 15(d) of the Exchange Act, the registrantcaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.
|                  | IMAGEWARE SYSTEMS, INC. |
|------------------|------------------------------|
|             |                         |   |
|             |                         |   |
| May 7, 2007 | By:                          | /s/ Wayne G.  Wetherell |
|             |                         | Wayne G.  Wetherell |
|             |                         | Chief Financial  Officer |

 

5

----