**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**FORM 10-K/A**

**(AmendmentNo. 3)**

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

**Forthe fiscal year ended December 31, 2006.**

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

**Forthe transitionperiod               to               .**

**CommissionFile Number**

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**IMAGEWARE SYSTEMS, INC.**

(Exact name of Registrantas 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 telephonenumber, including area code):  **(858) 673-8600**

**Securitiesregistered pursuant to Section 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 registeredpursuant to Section 12(g) of the Act: **None**

Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act.  Yes o     No x

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 orSection 15(d) of the Exchange Act. Yes o     No x

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes x     No o

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendmentto this Form 10-K.  Yes x     No o

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act.

Large acceleratedfiler o     Acceleratedfiler o     Non-acceleratedfiler x

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes o   No x

The aggregate marketvalue of the voting and non-voting common equity held by non-affiliates of theregistrant, based on the closing sales price of the issuer’s Common Stock onJune 30, 2006, as reported on the American Stock Exchange was approximately$22,555,987. Excluded from this computation were 388,315 shares of Common Stockheld by all current executive officers and directors and 1,586,987 shares heldby each person who is known by the registrant to own 5% or more of the outstandingCommon Stock. Share ownership information of certain persons known by theissuer to own greater than 5% of the outstanding Common Stock for purposes ofthe preceding calculation is based solely on information on Schedule 13Gfiled with the Commission and is as of June 30, 2006. Exclusion of shares heldby any person or entity should not be construed to indicate that such person orentity possesses the power, directly or indirectly, to direct or cause thedirection of the management or the policies of the Registrant.

The number of shares of the registrant’s common stockoutstanding as of May 6, 2007 was 14,680,623.

**DOCUMENTS INCORPORATED BYREFERENCE**

None.

 

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**EXPLANATORYNOTE**

This Amendment No.3 on Form 10-K/A amends the Registrant’s Annual Report on Form 10-K, as filedby the Registrant on April 17, 2007 (the “Initial Form 10-K”), as amended byAmendment No. 1 to the Initial Form 10-K, as filed by the Registrant on April30, 2007 (the “Amendment No. 1”) and Amendment No. 2 to the Initial Form 10-K,as filed by the Registrant on May 7, 2007 (the “Amendment No. 2”). ThisAmendment No. 3 is being filed solely to amend (i) Item 5 to consolidate theinformation previously provided under Item 5 in the Initial Form 10-K andAmendment No. 2 in accordance with Item 5 of Form 10-K and (ii) Item 12 toconsolidate the information previously provided in the Initial Form 10-K,Amendment No. 1 and Amendment No. 2 in accordance with Item 12 of Form10-K. The required certifications are included with this amendment as Exhibits31.1 and 31.2 of this Amendment No. 3.

**TABLEOF 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                    |   |   |
| **PART IV**       |   |                                                                                                               |   |   |
| Item 15.          |   | Exhibits and Financial Statement Schedules                                                                         |   |   |
| Signatures        |   |                                                                                                               |   |   |
| Exhibit Index     |   |                                                                                                               |   |   |

 

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**PART II**

**Item5. Market for Registrant’s Common Equity, Related Stockholder Matters andIssuer Purchases of Equity Securities**

*MarketInformation*

Our Common Stocktrades under the symbol “IW” on the American Stock Exchange.

The followingtable sets forth the high and low sales prices per share for our Common Stockas reported by the American Stock Exchange for each quarter in 2005 and 2006:

| 2005 Fiscal Quarters | ** ** | ** ** | ** ** | **High** | ** ** | **Low** | ** ** |
|--------------------------------|------------|------------|------------|----------|------------|---------|------------|
| First Quarter                  |       | $          | 3.380      |     | $          | 2.190   |       |
| Second Quarter                 |       | $          | 3.890      |     | $          | 3.000   |       |
| Third Quarter                  |       | $          | 3.390      |     | $          | 2.150   |       |
| Fourth Quarter                 |       | $          | 2.250      |     | $          | 1.520   |       |

 

| 2006 Fiscal Quarters | ** ** | ** ** | ** ** | **High** | ** ** | **Low** | ** ** |
|--------------------------------|------------|------------|------------|----------|------------|---------|------------|
| First Quarter                  |       | $          | 2.540      |     | $          | 1.350   |       |
| Second Quarter                 |       | $          | 2.560      |     | $          | 1.580   |       |
| Third Quarter                  |       | $          | 2.300      |     | $          | 1.110   |       |
| Fourth Quarter                 |       | $          | 2.250      |     | $          | 1.200   |       |

 

There is no publictrading market for our preferred stock.

*Holders*

As ofMarch 25, 2007, there were approximately 2,400 holders of record of ourCommon Stock.

*Dividends*

We have neverdeclared or paid dividends on our Common Stock and do not anticipate paying anycash dividends on our shares of Common Stock in the foreseeable future. We areobligated to pay cumulative cash dividends on shares of Series B PreferredStock from legally available funds at the annual rate of $0.2125 per share,payable in two semi-annual installments of $0.10625 each, which cumulativedividends must be paid prior to payment of any dividend on our CommonStock.  The holders of our Series C Preferred Stock are entitled toreceive cumulative dividends, at the option of the Company, payable (i) incommon stock upon conversion of the Series C Preferred Stock, or (ii) in cashafter the payment of cash dividends to the holders of our Series B PreferredStock at the rate of 8% per annum (as a percentage of stated value pershare).  As of December 31, 2006, the Company had cumulativeundeclared dividends of approximately $9,000 relating to our Series B PreferredStock and approximately $25,000 relating to our Series C Preferred Stock.

*Repurchases*

We did notrepurchase any shares of our common stock during fiscal 2006.

*Stock Performance Graph*

The followingperformance graph and related information shall not be deemed “solicitingmaterial” or to be “filed” with the Commission, nor shall such information beincorporated by reference into any future filing under the Securities Act of1933 or Securities Exchange Act of 1934 except to the extent that wespecifically incorporate it by reference into such filing.

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The followingperformance graph compares ImageWare Systems, Inc.’s cumulative 5-year totalshareholder return relative to the cumulative total returns of the S&P 500Index and the AMEX Computer Technology Index.  The graph tracks theperformance of a $100 investment in our common stock and each of the referencedindexes from January 1, 2001 through December 31, 2006.  The comparisonsin the graph below are based on historical data and are not intended toforecast 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**

**Item12. Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters**

The followingtable sets forth certain information regarding the ownership of the Company’scommon stock as of April 15, 2007 by: (i) each director; (ii) each ofthe executive officers named in the Summary Compensation Table; (iii) allexecutive officers and directors of the Company as a group; and (iv) allthose known by the Company to be beneficial owners of more than five percent ofits common stock.
| ** **                                                        | ** ** | **Beneficial Ownership(1)** | ** ** |
|-------------------------------------------------------------------|------------|----------------------------------|------------|
| **Name and Address of Beneficial Owner** | ** ** | ** **                       | ** ** | **Number of  Shares** | ** ** | **Percent of  Class** | ** ** |
| S. James  Miller, Jr.(2)                                     |       | 584,406                          |       | 3.9 | % |
| John Callan(3)                                                    |       | 64,145                           |       |   | * |
| Patrick Downs(4)                                                  |       | 68,032                           |       |   | * |
| G. Steve Hamm (5)                                                 |       | 11,940                           |       |   | * |
| John Holleran(6)                                                  |       | 22,533                           |       |   | * |
| David Loesch(7)                                                   |       | 35,936                           |       |   | * |
| Wayne Wetherell(8)                                                |       | 263,265                          |       | 1.8 | % |
| William Willis (9)                                                |       | 141,500                          |       |   | * |
| Charles AuBuchon (10)                                             |       | 117,000                          |       |   | * |
| David Harding(11)                                                 |       | 33,400                           |       |   | * |
|                                                                   |            |                                  |            |  |  |  |  |

 

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| David Carey(12)                                                                      |   | 8,336     |   |   | * |
|--------------------------------------------------------------------------------------|--------|-----------|--------|--------|---|
| Gruber &  McBaine Capital Management LLC  50 Osgood Place  San Francisco, CA(13) |   | 3,673,045 |   | 25.2   | % |
| Total Shares Held By Directors And Executive Officers                                |   | 1,350,492 |   | 8.8    | % |

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*                                         Lessthan one percent.

(1)                                  Thistable is based upon information supplied by officers, directors and principalshareholders and Form S-3 filed with the SEC on April 23, 2007. Unlessotherwise indicated in the footnotes to this table and subject to communityproperty laws where applicable, the Company believes that each of theshareholders named in this table has sole voting and investment power withrespect to the shares indicated as beneficially owned. Applicable percentagesare based on 14,543,341 shares of common stock outstanding on April 15, 2007,calculated on an as-converted basis and adjusted as required by rules promulgatedby the SEC. Unless otherwise indicated, the address for each listed shareholderis c/o ImageWare Systems, Inc. 10883 Thornmint Road, San Diego, CA 92127.

(2)                                  Mr. Millerserves as Chairman of the Board of Directors and Chief Executive Officer of theCompany. Includes 269,908 options exercisable within 60 days of the datereported and vesting of 9,141 shares within 60 days of the date reported.

(3)                                  Includes24,145 options exercisable within 60 days of the date reported.

(4)                                  Includes25,381 options exercisable within 60 days of the date reported.

(5)                                  Includes11,940 options exercisable within 60 days of the date reported.

(6)                                  Includes21,871 options exercisable within 60 days of the date reported.

(7)                                  Includes26,936 options exercisable within 60 days of the date reported.

(8)                                  Includes122,536 options exercisable within 60 days of the date reported andvesting of 4,383 shares within 60 days of the date reported.

 (9)                               Includes141,500 options exercisable within 60 days of the date reported.

(10)                            Includes97,000 options exercisable within 60 days of the date reported.

(11)                            Includes33,400 options exercisable within 60 days of the date reported.

(12)                            Includes3,336 options exercisable within 60 days of the date reported.

(13)                            Includes635,864 shares issuable upon the exercise of warrants.

*SecuritiesAuthorized for Issuance Under Equity Compensation Plans*

The followingtable sets forth additional information as of December 31, 2006 with respect tothe shares of common stock that may be issued upon the exercise of options andother rights under our existing equity compensation plans andarrangements.  The information includes the number of shares covered by,and the weighted average exercise price of, outstanding options and otherrights and the number of shares remaining available for future grants,excluding the shares to be issued upon exercise of outstanding options andother rights.

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**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                                                                                                          |       |

 

**Descriptionof Equity Compensation Plans Not Approved 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 availablefor future 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 and vesting over a three year period. While the Board may suspend orterminate the 2001 Plan at any time, if not terminated earlier, it willterminate on the day before its tenth anniversary of the date of adoption.

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**PART IV**

**Item15.   Exhibits and Financial Statement Schedules**

(b)    Exhibits

 

                           The following exhibits are filedherewith:

 

| 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**

In accordance withSection 13 or 15(d) of the Exchange Act, the registrant caused this reportto be signed on its behalf by the undersigned, thereunto duly authorized.
|                  |   | IMAGEWARE SYSTEMS, INC. |
|------------------|--------|------------------------------|
| May 9, 2007 |   | By:                          |   | /s/  Wayne G. Wetherell |
|             |   |                         |   | Wayne G.  Wetherell |
|             |   |                         |   | Chief Financial  Officer |

 

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**EXHIBIT INDEX**

| 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). |

 

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