ImageWare Systems, Inc. announced that it entered into a term loan and security agreement with certain funds and separate accounts managed by Nantahala Capital Management, LLC for a private placement of a secured term loan credit facility for gross proceeds of up to $2,500,000 on December 29, 2021. All loans under the credit facility will bear interest at a rate of 12% for the initial six months after the closing date, and at 17% thereafter until the maturity date of 12 months from the closing date. All amounts borrowed by the company under the credit facility are secured by a first-priority lien on all the assets of the company. The company may prepay amounts borrowed under the credit facility in whole or in part, at a price equal to 105% of the principal amount borrowed under the credit facility. Pursuant to the agreement, each lender shall have the right, but not the obligation, on mutually agreed upon terms, to exchange each such lender's pro rata portion of shares of the company's series D convertible preferred stock held by such Lender for a mutually agreed upon portion of any subsequent delayed draw loan. Upon the company's receipt by a lender of a notice stating a lender's intent to participate in an exchange, the company is required to offer to all holders of Series D preferred stock the opportunity, but not the obligation, to exchange each such holder's pro rata portion of shares of the company's Series D Preferred held by such holder for participation in any subsequent delayed draw loan, upon substantially similar terms as those provided in the applicable notice of exchange by a Lender.

On the same date, the company received in initial draw-down on the credit facility of $600,000.