SAN DIEGO, CA, August 13, 2001 - ImageWare Systems, Inc. (AMEX:IW) today announced it has completed the acquisition of two affiliated digital imaging software companies from Castle Holdings LLC for approximately $2.2 million in ImageWare common stock and cash. The two entities, Castleworks LLC and E-Focus West LLC, service the professional photographer market and had combined annual revenues in excess of $3.0 million in 2000. Both companies are based in Costa Mesa, California.

Castleworks sells several software products to Eastman Kodak that are bundled with Kodak's line of digital cameras and printers for professional photographers. These software products allow photographers to import, store, manipulate and print digital images. Castleworks also sells other digital imaging software directly to professional photographers and processing labs for capturing and printing images and creating an associated database. Castleworks also operates a related web-hosting service named PictureMore.com that is used by professional photographers and their clients to store and share photos.

E-Focus West sells, through a direct sales force, integrated digital imaging systems to professional photographers, studios and processing labs. The company is an authorized dealer of Kodak Professional Photographer Systems and is a reseller of other Kodak products that incorporate Castleworks' software.

"The acquisitions dovetail perfectly with our growth strategy of acquiring synergistic companies and our goal of becoming the preeminent digital imaging software company," said Jim Miller, ImageWare's chairman and chief executive officer. "We believe digital photography is a fast growing sector that represents an excellent opportunity for ImageWare. Through these acquisitions, we have added complementary software to our product portfolio and an important new private-sector market."

About ImageWare Systems, Inc.
ImageWare Systems, Inc. (AMEX:IW), is a leading developer and provider of identity management solutions, providing biometric, secure credential, law enforcement and digital imaging technologies. Scalable for worldwide deployment, the Company's biometric product line includes a multi-biometric engine that is hardware and algorithm independent, enabling the enrollment and management of unlimited population sizes. ImageWare's identification products are used to manage and issue secure credentials including national IDs, passports, driver licenses, smart cards and access control credentials. ImageWare's digital booking products provide law enforcement with integrated mug shot, fingerprint Livescan and investigative capabilities. The Company also provides comprehensive digital workflow solutions for the professional photography industry. ImageWare is headquartered in San Diego, with offices in Washington DC and Canada. For more information visit www.iwsinc.com.

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