SAN DIEGO, CA, March 5, 2003 - ImageWare Systems, Inc. (AMEX: IW) today announced that it had signed an agreement to sell newly issued shares of 8.5% convertible preferred stock and warrants to purchase common stock to a San Diego-based investment group. The preferred stock is convertible into common stock at conversion price of $2.20 per share. The Company expects to raise approximately $4.8 million on the initial closing of the private placement, which is subject to closing conditions and is expected to occur during the week of March 10, 2003. Additional issuances of up to an aggregate of $2 million of preferred stock are possible upon the satisfaction (or waiver) of certain future milestones. The purchasers also will receive warrants to purchase a total of 850,000 shares of common stock, at a weighted average exercise price of $2.27 per share.

The initial closing is subject to certain conditions, including (i) that the shares of common stock underlying the preferred stock be listed for trading on the American Stock Exchange, (ii) the limited exercise of certain first refusal rights and the waiver of certain debt conversion rights held by existing company investors and (iii) the purchasers' completion of their legal due diligence review of the Company.

ImageWare Systems intends to use the proceeds for working capital and to pay certain outstanding obligations including the retirement, in its entirety, of the Company's senior secured debt.

The offering is being made to the purchasers pursuant to Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"). This announcement is neither an offer to sell nor a solicitation of an offer to buy any of these securities. The securities being offered have not been registered under the Securities Act, or applicable state securities laws. Unless so registered, the convertible preferred stock and any common stock issued upon conversion of the convertible preferred stock may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act and applicable state securities laws.

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.

Safe Harbor Statement
This news release may contain forward-looking statements made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. While these statements are meant to convey to the public the company's progress, business opportunities and growth prospects, readers are cautioned that such forward-looking statements represent management's opinion. While management believes such representation to be true and accurate based on the information available to the company, actual results may differ materially from those described. The company's operations and business prospects are always subject to risks and uncertainties. Important facts that may cause actual results to differ are set forth in the company’s periodic filings with the U.S. Securities and Exchange Commission.

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