ImageWare Systems (IWSY) 10-Q 23 Nov 20 2020 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2020	Nov. 20, 2020
Cover [Abstract]
Entity Registrant Name	IMAGEWARE SYSTEMS INC
Entity Central Index Key	0000941685
Document Type	10-Q
Document Period End Date	Sep. 30, 2020
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Shell Company	false
Entity Interactive Data Current	Yes
Entity Incorporation, State or Country Code	DE
Entity File Number	001-15757
Entity Common Stock, Shares Outstanding		139,492,122
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2020

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Current Assets:
Cash and cash equivalents	$ 2,906	$ 1,030
Accounts receivable, net of allowance for doubtful accounts of $7 at September 30, 2020 and December 31, 2019.	473	657
Inventory, net	22	615
Other current assets	178	243
Total current assets	3,579	2,545
Property and equipment, net	169	216
Other assets	512	257
Operating lease right-of-use assets	1,649	1,906
Intangible assets, net of accumulated amortization	61	70
Goodwill	3,416	3,416
Total assets	9,386	8,410
Current Liabilities:
Accounts payable	1,380	515
Deferred revenue	1,256	1,629
Accrued expenses	1,346	1,312
Notes payable to related parties	900	0
Operating lease liabilities, current portion	412	373
Notes payable, current portion	2,905	0
Derivative liabilities	0	369
Total current liabilities	8,199	4,198
Other long-term liabilities	69	118
Notes payable, net of current portion	853	0
Lease liabilities, net of current portion	1,406	1,716
Pension obligation	2,380	2,256
Total liabilities	12,907	8,288
Mezzanine Equity:
Series C Convertible Redeemable Preferred Stock, $0.01 par value, designated 1,000 shares, 1,000 shares issued and outstanding at September 30, 2020 (unaudited) and December 31, 2019, respectively; liquidation preference $10,000 at September 30, 2020 (unaudited) and $10,000 at December 31, 2019.	9,401	8,884
Shareholders' Deficit:
Common Stock, $0.01 par value, 345,000,000 and 175,000,000 shares authorized at September 30, 2020 (unaudited) and December 31, 2019, respectively; 138,263,629 and 113,353,176 shares issued at September 30, 2020 (unaudited) and December 31, 2019, respectively, and 138,256,925 and 113,346,472 shares outstanding at September 30, 2020 (unaudited) and December 31, 2019, respectively.	1,382	1,133
Additional paid in capital	199,870	195,079
Treasury stock, at cost 6,704 shares	(64)	(64)
Accumulated other comprehensive loss	(1,815)	(1,741)
Accumulated deficit	(212,297)	(203,171)
Total shareholders' deficit	(12,922)	(8,762)
Total liabilities, mezzanine equity and shareholders' deficit	9,386	8,410
Series A Preferred Stock
Shareholders' Deficit:
Preferred stock	0	0
Series A-1 Preferred Stock
Shareholders' Deficit:
Preferred stock	0	0
Series B Preferred Stock
Shareholders' Deficit:
Preferred stock	$ 2	$ 2

CONDENSED CONSOLIDATED BALANC_2

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Current Assets:
Accounts receivable, net of allowance for doubtful accounts	$ 7	$ 7
Shareholders' deficit:
Preferred stock, shares authorized	5,000,000	4,000,000
Common stock, par value	$ .01	$ 0.01
Common stock, shares authorized	175,000,000	175,000,000
Common stock, shares issued	138,263,629	113,353,176
Common stock, shares outstanding	138,256,925	113,346,472
Treasury stock, shares	6,704	6,704
Mezzanine Preferred Stock
Shareholders' deficit:
Preferred stock, par value	$ .01	$ .01
Preferred stock, shares authorized	1,000	1,000
Preferred stock, shares issued	1,000	1,000
Preferred stock, shares outstanding	1,000	1,000
Preferred stock, liquidation preference	$ 10,000	$ 10,000
Series A Preferred Stock
Shareholders' deficit:
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	38,000	38,000
Preferred stock, shares issued	37,467	37,467
Preferred stock, shares outstanding	18,917	37,467
Preferred stock, liquidation preference	$ 18,917	$ 37,467
Series A-1 Preferred Stock
Shareholders' deficit:
Preferred stock, par value	$ .01	$ 0.01
Preferred stock, shares authorized	31,021	31,021
Preferred stock, shares issued	18,550	0
Preferred stock, shares outstanding	18,200	0
Preferred stock, liquidation preference	$ 18,200	$ 18,200
Series B Preferred Stock
Shareholders' deficit:
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	750,000	750,000
Preferred stock, shares issued	389,400	389,400
Preferred stock, shares outstanding	239,400	239,400
Preferred stock, liquidation preference	$ 620	$ 607

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenues	$ 2,471	$ 785	$ 3,999	$ 2,527
Cost of revenue	838	138	1,099	481
Gross profit	1,633	647	2,890	2,046
Operating expense:
General and administrative	953	791	2,875	2,793
Sales and marketing	615	985	2,239	2,924
Research and development	1,117	1,898	4,503	5,511
Depreciation and amortization	18	17	54	53
Total	2,703	3,691	9,671	11,281
Loss from operations	(1,070)	(3,044)	(6,781)	(9,235)
Interest expense (income), net	56	(27)	131	(80)
Other expense	(3)	0	(4)	(1)
Change in fair value of derivative liabilities	(535)	(388)	(369)	(445)
Other components of net periodic pension expense	31	35	106	113
Loss before income taxes	(625)	(2,664)	(6,653)	(8,824)
Income tax expense (income)	1	1	(1)	1
Net loss	(626)	(2,665)	(6,652)	(8,825)
Preferred dividends, preferred stock discount accretion and deemed dividends from preferred stock exchange	(2,529)	(1,300)	(5,275)	(3,968)
Net loss available to common shareholders	$ (3,155)	$ (3,965)	$ (11,927)	$ (12,793)
Basic income and diluted loss per common share - see Note 3:
Basic and diluted loss per share available to common shareholders	$ (0.02)	$ (0.04)	$ (0.09)	$ (0.13)
Basic and diluted weighted-average shares outstanding	133,341,134	106,571,261	125,558,524	102,830,312
Product
Revenues	$ 1,858	$ 155	$ 2,129	$ 592
Cost of revenue	715	41	781	158
Maintenance
Revenues	613	630	1,870	1,935
Cost of revenue	$ 123	$ 97	$ 328	$ 323

CONDENSED CONSOLIDATED STATEM_2

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Statement of Other Comprehensive Income [Abstract]
Net loss	$ (626)	$ (2,665)	$ (6,652)	$ (8,825)
Other comprehensive income (loss):
Foreign currency translation adjustment	(41)	39	(74)	34
Comprehensive loss	$ (667)	$ (2,626)	$ (6,726)	$ (8,791)

CONSOLIDATED STATEMENTS OF SHAR

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT - USD ($) $ in Thousands	Series A Preferred Stock	Series A-1 Preferred Stock	Series B Preferred Stock	Common Stock	Treasury Stock	Additional Paid-In Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit	Total
Beginning balance, shares at Dec. 31, 2018	37,467	0	239,400	98,230,336	(6,704)
Beginning balance, amount at Dec. 31, 2018	$ 0	$ 0	$ 2	$ 981	$ (64)	$ 184,130	$ (1,428)	$ (186,648)	$ (3,027)
Accretion of preferred stock discount						(186)			(186)
Issuance of common stock pursuant to option exercises, shares				286,834
Issuance of common stock pursuant to option exercises, amount				$ 3		103			106
Stock-based compensation expense, amount						166			166
Common stock issued in exchange for unexercised options, amount									0
Foreign currency translation adjustment							15		15
Dividends on Series A preferred stock, shares				591,803
Dividends on Series A preferred stock, amount				$ 6		858		(864)	0
Dividends on Series C preferred stock, shares				157,945
Dividends on Series C preferred stock, amount				$ 2		229		(231)	0
Net loss								(3,612)	(3,612)
Ending balance, shares at Mar. 31, 2019	37,467	0	239,400	99,266,918	(6,704)
Ending balance, amount at Mar. 31, 2019	$ 0	$ 0	$ 2	$ 992	$ (64)	185,300	(1,413)	(191,355)	(6,538)
Beginning balance, shares at Dec. 31, 2018	37,467	0	239,400	98,230,336	(6,704)
Beginning balance, amount at Dec. 31, 2018	$ 0	$ 0	$ 2	$ 981	$ (64)	184,130	(1,428)	(186,648)	(3,027)
Accretion of preferred stock discount									(551)
Stock-based compensation expense, amount									515
Net loss									(8,825)
Ending balance, shares at Sep. 30, 2019	37,647	0	239,400	108,905,340	6,704
Ending balance, amount at Sep. 30, 2019	$ 0	$ 0	$ 2	$ 1,089	$ (64)	193,634	(1,394)	(198,878)	(5,611)
Beginning balance, shares at Mar. 31, 2019	37,467	0	239,400	99,266,918	(6,704)
Beginning balance, amount at Mar. 31, 2019	$ 0	$ 0	$ 2	$ 992	$ (64)	185,300	(1,413)	(191,355)	(6,538)
Accretion of preferred stock discount						(184)			(184)
Issuance of common stock net of financing costs, shares				5,954,545
Issuance of common stock net of financing costs, amount				$ 60		6,035			6,095
Issuance of common stock pursuant to option exercises, shares				64,500
Issuance of common stock pursuant to option exercises, amount				$ 1		59			60
Stock-based compensation expense, amount						181			181
Common stock warrants issued as compensation, amount						8			8
Foreign currency translation adjustment							(20)		(20)
Dividends on Series A preferred stock, shares				999,633
Dividends on Series A preferred stock, amount				$ 9		921		(930)	0
Dividends on Series B preferred stock, amount								(26)	(26)
Dividends on Series C preferred stock, shares				266,793
Dividends on Series C preferred stock, amount				$ 3		245		(248)	0
Net loss								(2,548)	(2,548)
Ending balance, shares at Jun. 30, 2019	37,467	0	239,400	106,552,389	6,704
Ending balance, amount at Jun. 30, 2019	$ 0	$ 0	$ 2	$ 1,065	$ (64)	192,565	(1,433)	(195,107)	(2,972)
Accretion of preferred stock discount						(181)			(181)
Stock-based compensation expense, amount						168			168
Foreign currency translation adjustment							39		39
Dividends on Series A preferred stock, shares				1,857,263
Dividends on Series A preferred stock, amount				$ 19		854		(873)	0
Dividends on Series C preferred stock, shares				495,688
Dividends on Series C preferred stock, amount				$ 5		228		(233)	0
Net loss								(2,665)	(2,665)
Ending balance, shares at Sep. 30, 2019	37,647	0	239,400	108,905,340	6,704
Ending balance, amount at Sep. 30, 2019	$ 0	$ 0	$ 2	$ 1,089	$ (64)	193,634	(1,394)	(198,878)	(5,611)
Beginning balance, shares at Dec. 31, 2019	37,467	0	239,400	113,353,176	(6,704)
Beginning balance, amount at Dec. 31, 2019	$ 0	$ 0	$ 2	$ 1,133	$ (64)	195,079	(1,741)	(203,171)	(8,762)
Accretion of preferred stock discount						(175)			(175)
Issuance of common stock net of financing costs, shares				10,000,000
Issuance of common stock net of financing costs, amount				$ 100		1,287			1,287
Stock-based compensation expense, amount						124			124
Common stock issued in exchange for unexercised options, shares				400,000
Common stock issued in exchange for unexercised options, amount				$ 4		58			62
Foreign currency translation adjustment							31		31
Dividends on Series A preferred stock, amount								(937)	(937)
Dividends on Series C preferred stock, amount								(250)	(250)
Net loss								(3,124)	(3,124)
Ending balance, shares at Mar. 31, 2020	37,467		239,400	123,753,176	(6,704)
Ending balance, amount at Mar. 31, 2020	$ 0		$ 2	$ 1,237	$ (64)	196,373	(1,710)	(207,482)	(11,644)
Beginning balance, shares at Dec. 31, 2019	37,467	0	239,400	113,353,176	(6,704)
Beginning balance, amount at Dec. 31, 2019	$ 0	$ 0	$ 2	$ 1,133	$ (64)	195,079	(1,741)	(203,171)	(8,762)
Accretion of preferred stock discount									(517)
Issuance of common stock net of financing costs, shares				15,700,000
Stock-based compensation expense, amount									449
Conversion of series A-1 to common stock, shares				538,452
Dividends on Series A preferred stock, shares				219,374
Dividends on Series C preferred stock, shares				5,176,734
Net loss									(6,652)
Ending balance, shares at Sep. 30, 2020	18,917	18,200	239,400	138,263,629	(6,704)
Ending balance, amount at Sep. 30, 2020	$ 0	$ 0	$ 2	$ 1,382	$ (64)	199,870	(1,815)	(212,297)	(12,922)
Beginning balance, shares at Mar. 31, 2020	37,467		239,400	123,753,176	(6,704)
Beginning balance, amount at Mar. 31, 2020	$ 0		$ 2	$ 1,237	$ (64)	196,373	(1,710)	(207,482)	(11,644)
Accretion of preferred stock discount						(172)			(172)
Issuance of common stock net of financing costs, shares				2,500,000
Issuance of common stock net of financing costs, amount				$ 25		225			250
Issuance of common stock for financing facility, shares				2,500,000
Issuance of common stock for financing facility, amount				$ 25		375			400
Stock-based compensation expense, amount						40			40
Common stock issued in exchange for unexercised options, shares				288,695
Common stock issued in exchange for unexercised options, amount				$ 3		93			96
Foreign currency translation adjustment							(64)		(64)
Dividends on Series A preferred stock, amount								(937)	(937)
Dividends on Series B preferred stock, amount								(25)	(25)
Dividends on Series C preferred stock, amount								(250)	(250)
Net loss								(2,936)	(2,936)
Ending balance, shares at Jun. 30, 2020	37,467		239,400	129,041,871	(6,704)
Ending balance, amount at Jun. 30, 2020	$ 0		$ 2	$ 1,290	$ (64)	196,934	(1,774)	(211,630)	(15,242)
Accretion of preferred stock discount						(170)			(170)
Issuance of common stock net of financing costs, shares				3,200,000
Issuance of common stock net of financing costs, amount				$ 32		601			633
Modification of Series A preferred stock from issuance of Series A-1, shares	(18,550)	18,550
Modification of Series A preferred stock from issuance of Series A-1, amount	$ 0	$ 0				1,849			1,849
Stock-based compensation expense, shares				74,448
Stock-based compensation expense, amount				$ 1		121			122
Common stock issued in exchange for unexercised options, shares				12,750
Common stock issued in exchange for unexercised options, amount				$ 0		5			5
Foreign currency translation adjustment							(41)		(41)
Conversion of series A-1 to common stock, shares		(350)		538,452
Conversion of series A-1 to common stock, amount		$ 0		$ 5		(5)			0
Dividends on Series A preferred stock, shares				219,374
Dividends on Series A preferred stock, amount				$ 2		22			24
Dividends on Series C preferred stock, shares				5,176,734
Dividends on Series C preferred stock, amount				$ 52		523		(75)	500
Net loss								(626)	(626)
Ending balance, shares at Sep. 30, 2020	18,917	18,200	239,400	138,263,629	(6,704)
Ending balance, amount at Sep. 30, 2020	$ 0	$ 0	$ 2	$ 1,382	$ (64)	$ 199,870	$ (1,815)	$ (212,297)	$ (12,922)

CONDENSED CONSOLIDATED STATEM_3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash flows from operating activities
Net loss	$ (6,652)	$ (8,825)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization	54	53
Stock-based compensation	449	515
Warrants issued in lieu of cash as compensation for services	0	9
Application of rent deposit in lieu of cash payments	89	0
Change in fair value of derivative liabilities	(369)	(445)
Change in assets and liabilities
Accounts receivable	184	402
Inventory	593	(479)
Other assets	36	(56)
Operating lease right-of-use assets	(13)	138
Accounts payable	863	(154)
Deferred revenue	(374)	775
Accrued expense	37	44
Contract costs	0	(29)
Pension obligation	124	45
Total adjustments	1,673	818
Net cash used in operating activities	(4,979)	(8,007)
Cash flows from investing activities
Purchase of property and equipment	0	(19)
Net cash used in investing activities	0	(19)
Cash flows from financing activities
Proceeds from issuance of common stock, net	2,296	6,520
Proceeds from issuance of related party notes payable	900	0
Proceeds from issuance of notes payable to bank	3,758	0
Dividends paid	(25)	(26)
Proceeds from exercise of stock options	0	167
Net cash provided by financing activities	6,929	6,661
Effect of exchange rate changes on cash	(74)	34
Net increase (decrease) in cash and cash equivalents	1,876	(1,331)
Cash and cash equivalents at beginning of period	1,030	5,694
Cash and cash equivalents at end of period	2,906	4,363
Supplemental disclosure of cash flow information:
Cash paid for interest	35	0
Cash paid for income taxes	0	0
Summary of non-cash investing and financing activities:
Issuance of common stock for financing facility	400	0
Stock dividends on Series A Convertible Preferred Stock	25	2,667
Stock dividends on Series C Convertible Redeemable Preferred Stock	575	712
Conversion of series A-1 into common stock	5	0
Accretion of discount on Series C convertible redeemable preferred stock	517	551
Preferred stock exchange	2,272	0
Recognition of operating lease right-of-use assets from adoption of ASC 842	0	2,265
Recognition of lease liabilities from adoption of ASC 842	0	(2,280)
Accrued financing costs	$ 0	$ 425

DESCRIPTION OF BUSINESS AND OPE

DESCRIPTION OF BUSINESS AND OPERATIONS	9 Months Ended
	Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
DESCRIPTION OF BUSINESS AND OPERATIONS	Overview As used in this Quarterly Report, “we”, “us”, “our”, “ImageWare”, “ImageWare Systems”, "IWS", or the “Company” refers to ImageWare Systems, Inc. and all of its subsidiaries. ImageWare Systems, Inc. is incorporated in the state of Delaware. The Company is a pioneer and leader in the emerging market for biometrically enabled software-based identity management solutions. Using those human characteristics that are unique to us all, the Company creates software that provides a highly reliable indication of a person’s identity. The Company’s “flagship” product is the patented IWS Biometric Engine®. The Company’s products are used to manage and issue secure credentials, including national IDs, passports, driver licenses and access control credentials. The Company’s products also provide law enforcement with integrated mug shot, fingerprint LiveScan and investigative capabilities. The Company also provides comprehensive authentication security software using biometrics to secure physical and logical access to facilities or computer networks or internet sites. Biometric technology is now an integral part of all markets the Company addresses, and all the products are integrated into the IWS Biometric Engine. The Company's common stock, par value $0.01 per share (the " Common Stock Liquidity, Going Concern and Management’s Plan Historically, our principal sources of cash have included customer payments from the sale of our products, proceeds from the issuance of common and preferred stock and proceeds from the issuance of debt. Our principal uses of cash have included cash used in operations, product development, and payments relating to purchases of property and equipment. We expect that our principal uses of cash in the future will be for product development, including customization of identity management products for enterprise and consumer applications, further development of intellectual property, development of Software-as-a-Service (“ SaaS Related Party Financings On February 12, 2020, the Company entered into a factoring agreement (the " Factoring Agreement Factoring Lender Factoring Principal Factoring Collateral Closing Series D Preferred Series D Financing During the nine months ended September 30, 2020, the Company received advances from a second member of the Board of Directors (the " Board Lender Board Note Board Note Principal During the nine months ended September 30, 2020, the Company received advances from a third member of the Board of Directors (the " Second Board Lender Board Lenders Second Board Note Board Notes Second Board Note Principal During the three and nine months ended September 30, 2020, the Company recorded approximately $7,000 and $13,000, respectively, in interest expense related to the Board Notes. Accrued unpaid interest at September 30, 2020 approximated $13,000 and is included in the Company’s condensed consolidated balance sheet under the caption “Accrued expense”. 2020 Common Stock Financings Triton Funds LP On February 20, 2020, the Company entered into a securities purchase agreement (the “ Triton Purchase Agreement Triton Triton Offering Triton Purchase Notice Triton Purchase Notice Amount Triton Shares In February and March of 2020, the Company sold, and Triton purchased, an aggregate of 10,000,000 shares of Common Stock for cash. In February, the Company sold 4,000,000 shares of Common Stock for $0.16 per share resulting in gross proceeds to the Company of $640,000. In March 2020, the Company sold 6,000,000 shares of Common Stock resulting in gross proceeds to the Company of $765,000, or a per share purchase price of $0.13 per share. Aggregate net proceeds from this financing approximated $1,387,000 after recognition of direct offering costs. Lincoln Park Capital Fund, LLC On April 28, 2020, the Company entered into a purchase agreement, and as amended on June 11, 2020 (the “ Lincoln Purchase Agreement Lincoln Registration Rights Agreement Lincoln Park Under the terms and subject to the conditions of the Lincoln Purchase Agreement, including stockholder approval of an amendment to the Company’s Certificate of Incorporation, as amended from time to time (the " Certificate of Incorporation Initial Purchase Shares”) Commencement Purchase Shares Commencement Date After the Commencement Date, on any business day over the term of the Lincoln Purchase Agreement, the Company has the right, in its sole discretion, to direct Lincoln Park to purchase up to 125,000 shares of its Common Stock on such business day (the “ Regular Purchase Pursuant to the terms of the Lincoln Purchase Agreement, in no event may the Company issue or sell to Lincoln Park under the shares of Common Stock under the Lincoln Purchase Agreement which, when aggregated with all other shares of Common Stock then beneficially owned by Lincoln Park and its affiliates (as calculated pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act Beneficial Ownership Limitation The Lincoln Purchase Agreement and the Lincoln Registration Rights Agreement contain customary representations, warranties, agreements and conditions and indemnification obligations of the parties. The Company has the right to terminate the Purchase Agreement at any time, at no cost or penalty. The Company issued to Lincoln Park 2,500,000 shares of Common Stock in consideration for entering into the Lincoln Purchase Agreement. Pursuant to this issuance, $400,000 was recorded by the Company as a deferred stock issuance cost. Such amount was recorded in the Company’s condensed consolidated balance sheet under the caption “Other assets”. Such deferred stock issuance costs will be recognized as a charge against paid in capital in proportion to securities sold under this Lincoln Purchase Agreement. During the three and nine months ended September 30, 2020, the Company recognized approximately $26,000 and $36,000, respectively, as a charge against paid- in capital relating to securities sold under the Lincoln Purchase Agreement. During the three months ended September 30, 2020, the Company sold an aggregate 3,200,000 shares of Common Stock to Lincoln Park under the terms of the Lincoln Purchase Agreement resulting in cash proceeds to the Company of approximately $669,000. Due to the terms of the Lincoln Purchase Agreement as described above, management is not currently expecting the related proceeds from the Lincoln Purchase Agreement to be sufficient to sustain operations for an extended period of time. CARES Act Financing On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief and Economic Security Act (“ CARES Act PPP Loan Comerica PPP SBA Creation of Series A-1 Convertible Redeemable Preferred Stock On July 14, 2020, the Company filed the Certificate of Designations, Preferences, and Rights of Series A-1 Convertible Redeemable Preferred Stock (“ Series A-1 Certificate Preferred Stock Series A-1 Preferred On September 28, 2020, the Company's holders of Common Stock and Preferred Stock voted to further revise the Series A-1 Certificate, as more specifically set forth below in this Note 1 to Item 1, Part 1, entitled "September 28, 2020 Action by Written Consent of Stockholders." Series A Restructuring During July 2020, the Company entered into an Exchange Agreement, Consent and Waiver (“ Series A Exchange Agreement Series A Holders Series A Preferred Series A Restructuring During the three months ended September 30, 2020, certain Holders of Series A-1 Preferred converted 350 shares of Series A-1 Preferred into 538,452 shares of the Company’s Common Stock. On September 28, 2020, the Company's holders of Common Stock and Preferred Stock voted to revise the Certificate of Designations, Preferences, and Rights of Series A Convertible Preferred Stock (the " Series A Certificate September 28, 2020 Action by Written Consent of the Shareholders; Amendment to Certificate of Incorporation On September 28, 2020, the Company received executed written consents from holders of our Common Stock and Preferred Stock representing 104,228,110 voting shares on an as-converted basis, or approximately 54.3% of our outstanding voting class on an as-converted basis, approving the following actions: (i) amending and restating the Series A Certificate and the Series A-1 Certificate to, without limitation, provide for (i) the voluntary conversion of all outstanding shares of the Company's Series A Preferred and Series A-1 Preferred into shares of the Company’s Common Stock at a reduced conversion price of $0.20 per share of Common Stock, and (ii) the automatic conversion of all issued and outstanding shares of Series A Preferred and Series A-1 Preferred into shares of Common Stock at a rate of 10% per month, beginning on November 1, 2020, and ending on August 1, 2021, at the reduced conversion price of $0.20 per share of Common Stock; (ii) amending and restating the Certificate of Designations, Preferences and Rights of the Series C Convertible Preferred Stock (the " Series C Certificate Series C Preferred (iii) increasing the number of authorized shares of the Company’s Common Stock from 345,000,000 shares to 1,000,000,000 shares (the “ Capital Increase (iv) amending and restating the Company’s Certificate of Incorporation, in its entirety to give effect to the Capital Increase, among other amendments (the “ Amended Charter (v) authorizing our Board of Directors, in its sole and absolute discretion, without further action of the shareholders, to amend the Amended Charter to implement a reverse stock split of our issued and outstanding shares of Common Stock at a specific ratio, ranging from one-for-thirty (1:30) to one-for-one hundred (1:100), within one year from September 28, 2020 (the “ Reverse Split These aforementioned actions did not become effective until 20 calendar days after an Information Statement was delivered to our shareholders. Such Information Statement was delivered on October 13, 2020. Furthermore, the following actions were approved by the affirmative vote of the holders of the requisite number of shares of the below-referenced series of the Company's Preferred Stock, consisting of Series A Preferred, Series A-1 Preferred, and Series C Preferred, with each series voting as a separate class pursuant to its respective governing documentation: (i) for the Series A Preferred, (a) amending and restating the Series A Certificate (the " Amended and Restated Series A Certificate Permitted Loan Series D Certificate (ii) for the Series A-1 Preferred, (a) amending and restating the Series A-1 Certificate (the “ Amended and Restated Series A-1 Certificate (iii) for the Series C Preferred, (a) amending and restating Series C Certificate (the " Amended and Restated Series C Certificate Series D Preferred Stock Financing On September 28, 2020, the Company entered into a Securities Purchase Agreement (the “ Purchase Agreement Investors New Organizational Documents Concurrently with the execution of the Purchase Agreement, the Company and the Investors executed (i) a Registration Rights Agreement, pursuant to which the Company agreed to file a registration statement with the SEC within thirty days of Closing to register the shares of Common Stock issuable upon conversion of the Series D Preferred; (ii) a Series C Exchange Agreement (the " Exchange Agreement Loan Agreement Bridge Loan Bridge Loan Closing Under the terms of the Purchase Agreement, at the Closing of the Series D Financing, the holders of Series D Preferred will own approximately 50% of the voting securities of the Company on an as-converted basis, with the holders of the Common Stock and remaining classes of Preferred Stock, including Series A Preferred, Series A-1 Preferred, Series B Convertible Preferred Stock (“ Series B Preferred Series D Directors Upon Closing of the Series D Financing, or shortly thereafter, the Company will: (i) sell and issue 11,560 shares of its Series D Preferred, for a purchase price of $1,000 per share, to the Investors, for aggregate gross proceeds to the Company at Closing of $11.56 million less placement fees and expenses; (ii) convert all 1,000 shares of Series C Preferred into 10,000 shares of Series D Preferred pursuant to the Exchange Agreement and Amended Series C Certificate, and (iii) exchange approximately $661,000 of liabilities of the Company for 661.3 shares of Series D Preferred. The Purchase Agreement contains covenants, requiring the Company to, among other things, file an application to list its Common Stock on the NASDAQ Global Select Market, the NASDAQ Global Market or the NASDAQ Capital Market on or before December 31, 2020. The Purchase Agreement, Registration Rights Agreement, Series C Exchange Agreement, Escrow Agreement, and Loan Agreement contain customary representations, warranties, agreements and conditions to Closing, as well as indemnification rights and other obligations of the parties. The Series D Purchase agreement did not become effective until 20 calendar days after an Information Statement was delivered to our shareholders. Such Information Statement was delivered on October 13, 2020. See Note 12, Subsequent Events, for more information regarding the Closing of the Series D Financing. Bridge Loan Upon consummation of the Bridge Loan Closing on September 28, 2020, approximately $2.2 million was released to the Company from escrow pursuant to the Escrow Agreement. The Bridge Loan bears interest at a fixed rate of 12% and is due and payable in arrears on the earlier of the Loan Conversion Date, as such term is defined in the Loan Agreement, or six months after the disbursement of the Bridge Loan. All amounts due and payable pursuant to the Bridge Loan are automatically convertible, without further action by the Investors, into shares of Series D Preferred at Closing at a purchase price of $1,000 for each share of Series D Preferred. The repayment of all amounts due under the terms of the Loan Agreement are secured by all assets of the Company. Such amounts are included in the Company’s Condensed Consolidated September 30, 2020 balance sheet under the caption “Notes payable, current portion”. The Company expects to use the proceeds from the Bridge Loan for working capital requirements and general corporate purposes. See Note 12, Subsequent Events, for more information regarding the conversion of the Bridge Loan into Series D Preferred. Going Concern At September 30, 2020, we had negative working capital of approximately $4,620,000. Our principal sources of liquidity at September 30, 2020 consisted of approximately $2,906,000 of cash and cash equivalents. On March 11, 2020, the World Health Organization declared the rapidly growing outbreak of a novel strain of coronavirus (" COVID-19 Considering the financings consummated in 2020, as well as our projected cash requirements, and assuming we are unable to generate incremental revenue, our available cash will be insufficient to satisfy our cash requirements for the next twelve months from the date of this filing. At November 18, 2020, cash on hand approximated $9,572,000 which includes the proceeds from the closing of the Series D Financing. The Series D Financing is more fully described in Note 12, Subsequent Events. As a result of the Company’s historical losses and financial condition, there is substantial doubt about the Company’s ability to continue as a going concern. To address our working capital requirements, management has instituted several cost cutting measures and has utilized cash proceeds available under the Lincoln Purchases Agreement and that will be available pursuant to the Series D Financing to satisfy the Company’s working capital requirements. In view of the matters described in the preceding paragraphs, recoverability of a major portion of the recorded asset amounts shown in the accompanying condensed consolidated balance sheet is dependent upon continued operations of the Company, which, in turn, is dependent upon the Company’s ability to continue to generate positive cash flows from operations. However, the Company operates in markets that are emerging and highly competitive. There is no assurance that the Company will be able to obtain additional capital, operate at a profit or generate positive cash flows in the future. Therefore, management’s plans do not alleviate the substantial doubt regarding the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION	9 Months Ended
	Sep. 30, 2020
Accounting Policies [Abstract]
SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION	Basis of Presentation The accompanying condensed consolidated balance sheet as of December 31, 2019, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“ GAAP Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, or any other future periods. Significant Accounting Policies Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company’s wholly-owned subsidiaries are: XImage Corporation, a California Corporation; ImageWare Systems ID Group, Inc., a Delaware corporation (formerly Imaging Technology Corporation); I.W. Systems Canada Company, a Nova Scotia unlimited liability company; ImageWare Digital Photography Systems, LLC, a Nevada limited liability company (formerly Castleworks LLC); Digital Imaging International GmbH, a company formed under German laws; and Image Ware Mexico S de RL de CV, a company formed under Mexican laws. All significant intercompany transactions and balances have been eliminated. Operating Cycle Assets and liabilities related to long-term contracts are included in current assets and current liabilities in the accompanying condensed consolidated balance sheets, although they will be liquidated in the normal course of contract completion which may take more than one operating cycle. Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expense during the reporting period. Significant estimates include the evaluation of our ability to continue as a going concern, the allowance for doubtful accounts receivable, deferred tax asset valuation allowances, assumptions used in the Black-Scholes model to calculate the fair value of share based payments, fair value of financial instruments issued with and affected by the Series C Preferred Financing, assumptions used in the application of revenue recognition policies, assumption used in the evaluation of the modification of our Series A Preferred Stock and exchange for shares of Series A-1 Preferred Stock, assumptions used in the derivation of the Company’s incremental borrowing rate used in the computation of the Company’s operating lease liabilities and assumptions used in the application of fair value methodologies to calculate the fair value of pension assets and obligations. Actual results could differ from estimates. Accounts Receivable In the normal course of business, the Company extends credit without collateral requirements to its customers that satisfy pre-defined credit criteria. Accounts receivable are recorded net of an allowance for doubtful accounts. Accounts receivable are considered delinquent when the due date on the invoice has passed. The Company records its allowance for doubtful accounts based upon its assessment of various factors. The Company considers historical experience, the age of the accounts receivable balances, the credit quality of its customers, current economic conditions and other factors that may affect customers’ ability to pay to determine the level of allowance required. Accounts receivable are written off against the allowance for doubtful accounts when all collection efforts by the Company have been unsuccessful. Inventories Finished goods inventories are stated at the lower of cost, determined using the average cost method, or net realizable value. See Note 4. Property, Equipment and Leasehold Improvements Property and equipment, consisting of furniture and equipment, are stated at cost and are being depreciated on a straight-line basis over the estimated useful lives of the assets, which generally range from three to five years. Maintenance and repairs are charged to expense as incurred. Major renewals or improvements are capitalized. When assets are sold or abandoned, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized. Expenditures for leasehold improvements are capitalized. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements. Fair Value of Financial Instruments For certain of the Company’s financial instruments, including accounts receivable, accounts payable, accrued expense, and deferred revenue, the carrying amounts approximate fair value due to their relatively short maturities. Lease Liabilities and Operating Lease Right-of-Use Assets The Company is a party to certain contractual arrangements for office space which meet the definition of leases under Accounting Standards Codification (“ ASC ASC 842 A package of practical expedients to not reassess: ● Whether a contract is or contains a lease ● Lease classification, and ● Initial direct costs Revenue Recognition Effective January 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers (“ ASC 606 In accordance with ASC 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The core principle of the standard is that we should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. To achieve that core principle, we apply the following five step model: 1. Identify the contract with the customer; 2. Identify the performance obligation in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the contract; and 5. Recognize revenue when (or as) each performance obligation is satisfied. At contract inception, we assess the goods and services promised in a contract with a customer and identify as a performance obligation each promise to transfer to the customer either: (i) a good or service (or a bundle of goods or services) that is distinct, or (ii) a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. We recognize revenue only when we satisfy a performance obligation by transferring a promised good or service to a customer. Determining the timing of the satisfaction of performance obligations as well as the transaction price and the amounts allocated to performance obligations requires judgement. We disclose disaggregation of our customer revenue by classes of similar products and services as follows: ● Software licensing and royalties; ● Sales of computer hardware and identification media; ● Services; and ● Post-contract customer support. Software Licensing and Royalties Software licenses consist of revenue from the sale of software for identity management applications. Our software licenses are functional intellectual property and typically provide customers with the right to use our software in perpetuity as it exists when made available to the customer. We recognize revenue from software licensing at a point in time upon delivery, provided all other revenue recognition criteria are met. Royalties consist of revenue from usage-based arrangements and guaranteed minimum-based arrangements. We recognize revenue for royalty arrangements at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied. Computer Hardware and Identification Media We generate revenue from the sale of computer hardware and identification media. Revenue for these items is recognized upon delivery of these products to the customer, provided all other revenue recognition criteria are met. Services Services revenue is comprised primarily of software customization services, software integration services, system installation services and customer training. Revenue is generally recognized upon completion of services and customer acceptance provided all other revenue recognition criteria are met. Post-Contract Customer Support (“PCS”) Post contract customer support consists of maintenance on software and hardware for our identity management solutions. Arrangements with Multiple Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. In addition to selling software licenses, hardware and identification media, services and post-contract customer support on a standalone basis, certain contracts include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on our best estimate of the relative standalone selling price. The standalone selling price for a performance obligation is the price at which we would sell a promised good or service separately to a customer. The primary methods used to estimate standalone selling price are as follows: (i) the expected cost-plus margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service, and (ii) the percent discount off of list price approach. Contract Costs We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We apply a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period is one year or less. At September 30, 2020 and December 31, 2019, we had capitalized incremental costs of obtaining a contract with a customer of approximately $69,000 and $118,000, respectively. We recorded no additional contract costs during the three and nine months ended September 30, 2020. Additionally, we recognized approximately $1,513,000 in revenue during the three and nine months ended September 30, 2020 that was related to contract costs at the beginning of the period. Other Items We do not offer rights of return for our products and services in the normal course of business. Sales tax collected from customers is excluded from revenue. The following table sets forth our disaggregated revenue for the three and nine months ended September 30, 2020 and 2019: Three Months Ended September 30, Nine Months Ended September 30, Net Revenue 2020 2019 2020 2019 (dollars in thousands) Software and royalties $ 587 $ 73 $ 780 $ 306 Hardware and consumables 13 15 75 53 Services 1,258 67 1,274 233 Maintenance 613 630 1,870 1,935 Total revenue $ 2,471 $ 785 $ 3,999 $ 2,527 Customer Concentration For the three months ended September 30, 2020, two customers accounted for approximately 82% or $2,037,000 of our total revenue and had trade receivables at September 30, 2020 of $193,000. For the nine months ended September 30, 2020, two customers accounted for approximately 65% or $2,588,000 of our total revenue and had trade receivables at September 30, 2020 of $193,000. For the three months ended September 30, 2019, one customer accounted for approximately 28% or $216,000 of our total revenue and had trade receivables at September 30, 2019 of $0. For the nine months ended September 30, 2019, two customers accounted for approximately 40% or $1,009,000 of our total revenue and had trade receivables at September 30, 2019 of $161,000. Recently Issued Accounting Standards From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“ FASB FASB Accounting Standards Update (‘ASU”) No. 2018-14 “Compensation —Retirement Benefits —Defined Benefit Plans —General (Subtopic 715-20) —Disclosure Framework —Changes to the Disclosure Requirements for Defined Benefit Plans” ASU 2018-14 FASB ASU No. 2019-12 Income Taxes (Topic 740) FASB ASU No. 2020-01 Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”, FASB ASU No. 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

NET LOSS PER COMMON SHARE

NET LOSS PER COMMON SHARE	9 Months Ended
	Sep. 30, 2020
Basic income and diluted loss per common share - see Note 3:
NET LOSS PER COMMON SHARE	Basic loss per common share is calculated by dividing net loss available to common shareholders for the period by the weighted-average number of common shares outstanding during the period. Diluted loss per common share is calculated by dividing net loss available to common shareholders for the period by the weighted-average number of common shares outstanding during the period, adjusted to include, if dilutive, potential dilutive shares consisting of convertible preferred stock, convertible related party lines of credit, stock options and warrants, calculated using the treasury stock and if-converted methods. For diluted loss per share calculation purposes, the net loss available to common shareholders is adjusted to add back any preferred stock dividends and any interest on convertible debt reflected in the condensed consolidated statement of operations for the respective periods. The table below presents the computation of basic and diluted loss per share: (Amounts in thousands except share and per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Numerator for basic and diluted loss per share: Net loss $ (626 ) $ (2,665 ) $ (6,652 ) $ (8,825 ) Preferred dividends, preferred stock discount accretion and deemed dividends from preferred stock exchange (2,529 ) (1,300 ) (5,275 ) (3,968 ) Net loss available to common shareholders $ (3,155 ) $ (3,965 ) $ (11,927 ) $ (12,793 ) Denominator for basic and dilutive loss per share – weighted-average shares outstanding 133,341,134 106,571,261 125,558,524 102,830,312 Basic and diluted loss per share available to common shareholders $ (0.02 ) $ (0.04 ) $ (0.09 ) $ (0.13 ) The following potential dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding, as their effect would have been antidilutive: Potential Dilutive Securities Nine Months Ended September 30, 2020 2019 Convertible related party notes payable 3,517,338 — Restricted stock units 1,823,463 — Convertible redeemable preferred stock 54,495,592 42,627,000 Stock options 2,474,670 7,199,668 Warrants 904,484 1,733,856 Total potential dilutive securities 63,215,546 51,560,524

SELECT BALANCE SHEET DETAILS

SELECT BALANCE SHEET DETAILS	9 Months Ended
	Sep. 30, 2020
Balance Sheet Related Disclosures [Abstract]
SELECT BALANCE SHEET DETAILS	Inventory Inventories of $22,000 as of September 30, 2020 were comprised of work in process of $12,000 representing direct labor costs on in-process projects and finished goods of $10,000 net of reserves for obsolete and slow-moving items of $3,000. Inventories of as of December 31, 2019 were comprised of work in process of representing direct labor costs on in-process projects and finished goods of net of reserves for obsolete and slow-moving items of . Intangible Assets The carrying amounts of the Company’s patent intangible assets were $61,000 and $70,000 as of September 30, 2020 and December 31, 2019, respectively, which includes accumulated amortization of $598,000 and $589,000 as of September 30, 2020 and December 31, 2019, respectively. Amortization expense for patent intangible assets was $3,000 and $9,000 for the three and nine months ended September 30, 2020 and 2019, respectively. Patent intangible assets are being amortized on a straight-line basis over their remaining life of approximately 5.7 years. There was no impairment of the Company’s intangible assets during the three and nine months ended September 30, 2020 and 2019. The estimated intangible amortization expense for the next five fiscal years is as follows: Fiscal Year Ended December 31, Estimated Amortization Expense ($ in thousands) 2020 (three months) $ 3 2021 12 2022 12 2023 12 2024 12 Thereafter 10 Totals $ 61 Goodwill The Company annually, or more frequently if events or circumstances indicate a need, tests the carrying amount of goodwill for impairment. The Company performs its annual impairment test in the fourth quarter of each year. In December 2018, the Company adopted the provisions of ASU 2017-04, " Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment Other Assets In conjunction with the Lincoln Purchase Agreement, the Company issued to Lincoln Park, in May 2020, 2,500,000 shares of Common Stock as consideration for entering into the Lincoln Purchase Agreement. Pursuant to this issuance, the Company recorded $400,000 as a deferred stock issuance cost. Such deferred stock issuance costs will be recognized as a charge against paid in capital in proportion to securities sold under the Lincoln Purchase Agreement. During the three and nine months ended September 30, 2020, the Company recognized approximately $26,000 and $36,000, respectively, as a charge against paid in capital relating to securities sold under the Lincoln Park Purchase Agreement.

LEASES

LEASES	9 Months Ended
	Sep. 30, 2020
Leases [Abstract]
LEASES	The Company is a party to certain contractual arrangements for office space which meet the definition of leases under ASC 842 – Leases. In accordance with ASC 842, the Company has determined that such arrangements are operating leases and accordingly the Company has, as of January 1, 2019, recorded operating lease right-of-use assets and related lease liability for the present value of the lease payments over the lease terms using the Company’s estimated weighted-average incremental borrowing rate of approximately 14.5% as the discount rates implicit in the Company’s leases cannot be readily determined. Such assets and liabilities aggregated approximately $2,265,000 and $2,280,000 as of January 1, 2019, respectively and $1,906,000 and $2,089,000 as of December 31, 2019, respectively. At September 30, 2020, such assets and liabilities aggregated approximately $1,649,000 and $1,818,000, respectively. The Company determined that it had no arrangements representing finance leases. The Company’s operating leasing arrangements are summarized below: ● The Company’s corporate headquarters is located in San Diego, California, where it occupies 8,511 square feet of office space at an average cost of approximately $28,000 per month. This facility’s lease was entered into by the Company in July 2018. This lease commenced on November 1, 2018 and terminates on April 30, 2025; ● 1,508 square feet in Ottawa, Province of Ontario, Canada, at a cost of approximately $3,000 per month until the expiration of the lease on March 31, 2021; ● 9,720 square feet in Portland, Oregon, at a cost of approximately $23,000 per month until the expiration of the lease on February 28, 2023; and ● 183 square feet of office space in Mexico City, Mexico, at a cost of approximately $2,000 per month until September 30, 2020. Effective October 1, 2020, the Company extended this lease for a period of 12 months. The above leases contain no residual value guarantees provided by the Company and there are no options to either extend or terminate the leases. The Company is not a party to any subleasing arrangements. For the three and nine months ended September 30, 2020 and 2019, the Company recorded approximately $169,000 and $508,000, and $154,000 and $503,000, respectively, in lease expense using the straight-line method. Under the provisions of ASC 842, lease expense is comprised of the total lease payments under the lease plus any initial direct costs incurred less any lease incentives received by the lessor amortized ratably using the straight-line method over the lease term. The weighted-average remaining lease term of the Company’s operating leases as of September 30, 2020 is 3.85 years. Cash payments under operating leases aggregated approximately $162,000 and $485,000, respectively, for the three and nine months ended September 30, 2020 and $122,000 and $366,000, respectively, for the comparable periods in 2019, and are included in operating cash flows. The Company’s lease liability was computed using the present value of future lease payments. The Company has utilized the practical expedient regarding lease and non-lease components and combined such components into a single combined component in the determination of the lease liability. The Company has excluded the lease of its office space in Mexico City, Mexico in the determination of the lease liability as of January 1, 2019 as its term is less than 12 months. At September 30, 2020, future minimum undiscounted lease payments are as follows: ($ in thousands) 2020 (three months) $ 164 2021 642 2022 652 2023 424 2024 386 Thereafter 132 Total 2,400 Short-term leases not included in lease liability — Present Value effect on future minimum undiscounted lease payments at September 30, 2020 (582 ) Lease liability at September 30, 2020 $ 1,818 Less current portion (412 ) Non-current lease liability at September 30, 2020 $ 1,406

MEZZANINE EQUITY

MEZZANINE EQUITY	9 Months Ended
	Sep. 30, 2020
Equity [Abstract]
MEZZANINE EQUITY	Series C Convertible Redeemable Preferred Stock On September 10, 2018, the Company filed the Series C Certificate with the Secretary of State for the State of Delaware – Division of Corporations, designating 1,000 shares of the Company’s preferred stock, par value $0.01 per share, as Series C Preferred, each share with a stated value of $10,000 per share (the “ Series C Stated Value accrue dividends cumulatively and are payable quarterly at a rate of 8% per annum if paid in cash, or 10% per annum if paid by the issuance of shares of Common Stock. Each share of Series C Preferred has a liquidation preference Series C Liquidation Preference Amount Series C Conversion Shares On September 10, 2018, the Company offered and sold a total of 890 shares of Series C Preferred at a purchase price of $10,000 per share, and on September 21, 2018, the Company offered and sold an additional 110 shares of Series C Preferred at a purchase price of $10,000 per share (the “ Series C Financing There were no issuances or conversions of Series C Preferred during the three and nine months ended September 30, 2020 or September 30, 2019. During the three months ended September 30, 2020, the Company issued the holders of Series C Preferred 1,623,150 shares of Common Stock as payment of dividends due on March 31, 2020; 693,896 shares of Common Stock as payment of dividends due on June 30, 2020; and 2,859,688 shares of Common Stock as payment of dividends due as of September 30, 2020. The Company issued the holders of Series C Preferred 157,945, 266,793 and 495,688 shares of Common Stock on March 31, 2019, June 30, 2019 and September 30, 2019, respectively, as payment of dividends due on these dates. Guidance for accounting for freestanding financial instruments that contain characteristics of both liabilities and equity are contained in ASC 480, Distinguishing Liabilities From Equity ASR 268 Redeemable Preferred Stocks. The Company noted that the Series C Preferred instrument was a hybrid instrument that contains several embedded features. In November 2014, the FASB issued ASU 2014-16 to amend ASC 815, “ Derivatives and Hedging ASC 815 The whole instrument approach requires an issuer or investor to consider the economic characteristics and risks of the entire hybrid instrument, including all of its stated and implied substantive terms and features. Under this approach, all stated and implied features, including the embedded feature being evaluated for bifurcation, must be considered. Each term and feature should be weighed based on the relevant facts and circumstances to determine the nature of the host contract. This approach results in a single, consistent determination of the nature of the host contract, which is then used to evaluate each embedded feature for bifurcation. That is, the host contract does not change as each feature is evaluated. The revised guidance further clarifies that the existence or omission of any single feature, including an investor-held, fixed-price, noncontingent redemption option, does not determine the economic characteristics and risks of the host contract. Instead, an entity must base that determination on an evaluation of the entire hybrid instrument, including all substantive terms and features. However, an individual term or feature may be weighed more heavily in the evaluation based on facts and circumstances. An evaluation of all relevant terms and features, including the circumstances surrounding the issuance or acquisition of the equity share, as well as the likelihood that an issuer or investor is expected to exercise any options within the host contract, to determine the nature of the host contract, requires judgement. Using the whole instrument approach, the Company concluded that the host instrument is more akin to debt than equity as the majority of identified features contain more characteristics of debt. The Company evaluated the identified embedded features of the Series C Preferred host instrument and determined that certain features meet the definition of and contained the characteristics of derivative financial instruments requiring bifurcation at fair value from the host instrument. Accordingly, the Company has bifurcated from the Series C Preferred host instrument the conversion options, redemption option and participating dividend feature in accordance with the guidance in ASC 815. These bifurcated features aggregated approximately $833,000 at issuance and have been recorded as a discount to the Series C Preferred. Such amount will be accreted to the point of earliest redemption which is the third anniversary of the Series C Financing or September 10, 2021 using the effective interest rate method. The accretion of these features is recorded as a deemed dividend. For the three and nine months ended September 30, 2020, the Company recorded the accretion of debt issuance costs and derivative liabilities aggregating approximately $170,000 and $517,000, respectively, using the effective interest rate method. For the three and nine months ended September 30, 2019, the Company recorded the accretion of debt issuance costs and derivative liabilities aggregating approximately $181,000 and $551,000, respectively, using the effective interest rate method. There were no conversions of Series C Preferred into Common Stock during the three and nine months ended September 30, 2020 and 2019. See Note 12, Subsequent Events, regarding the pending exchange of all shares of Series C Preferred into Series D Preferred pursuant to the Exchange Agreement and Amended Series C Certificate, as defined in Note 1 of Item 1, Part 1 of this Quarterly Report. The Company reflected the following in Mezzanine Equity for the Series C Preferred Stock as of December 31, 2019 and September 30, 2020: Series C Convertible, Redeemable Preferred (amounts in thousands, except share amounts) Shares Amount Total Series C Preferred Stock as of December 31, 2019 1,000 $ 8,884 Accretion of discount – deemed dividend for the nine months ended September 30, 2020 — 517 Total Series C Preferred Stock as of September 30, 2020 1,000 $ 9,401

DERIVATIVE LIABILITIES

DERIVATIVE LIABILITIES	9 Months Ended
	Sep. 30, 2020
Derivative Liability [Abstract]
DERIVATIVE LIABILITIES	The Company accounts for its derivative instruments under the provisions of ASC 815, “ Derivatives and Hedging The Company determined that the conversion option, redemption option and participating dividend feature contained in the Series C Preferred host instrument required bifurcation. The Company valued the bifurcatable features at fair value. Such liabilities aggregated approximately $833,000 at inception and are classified as current liabilities on the Company’s condensed consolidated balance sheets under the caption “Derivative liabilities”. The Company will revalue these features at each balance sheet date and record any change in fair value in the determination of period net income or loss. Such amounts are recorded in the caption “Change in fair value of derivatives liabilities” in the Company’s condensed consolidated statements of operations. During the three and nine months ended September 30, 2020, the Company recorded a decrease to these derivative liabilities using fair value methodologies of approximately $535,000 and $369,000, respectively. As a result of this decrease, such liabilities aggregated approximately $0 at September 30, 2020. During the three and nine months ended September 30, 2019, the Company recorded a decrease to these derivative liabilities using fair value methodologies of approximately $388,000 and $445,000, respectively. See Note 9 to these condensed consolidated financial statements for a reconciliation of amounts recorded at September 30, 2020. In November 2020, pursuant to the Series D Preferred Stock financing, all holders of Series C Preferred will be exchanging their shares of Series C Preferred for Series D Preferred and the embedded derivative liabilities bifurcated in the Series C Preferred will cease to exist upon the consummation of the exchange transaction.

NOTES PAYABLE

NOTES PAYABLE	9 Months Ended
	Sep. 30, 2020
Notes Payable [Abstract]
NOTES PAYABLE	Concurrently with the execution of the Purchase Agreement, the Company and the Investors executed the Loan Agreement, pursuant to which each Investor signatory thereto agreed to the Bridge Loan, secured by all assets of the Company, in an amount equal to 20% of such Investor’s purchase commitment as set forth in the Purchase Agreement, which Bridge Loan, plus accrued interest, will roll into, and be used to purchase, Series D Preferred at Closing. For more information regarding the Purchase Agreement, the Investors, the Loan Agreement, and the Bridge Loan, see Note 1, Description of Business and Operations. Pursuant to the Bridge Loan, the Company received proceeds of $2,187,000 in September 2020. The Bridge Loan bears interest at a fixed rate of 12% and is due and payable in arrears on the earlier of the Loan Conversion Date, as such term is defined in the Loan Agreement, or six months after the disbursement of the Bridge Loan. All amounts due and payable pursuant to the Bridge Loan are automatically convertible, without further action by the Investors, into shares of Series D Preferred at Closing at a purchase price of $1,000 for each share of Series D Preferred. The repayment of all amounts due under the terms of the Loan Agreement are secured by all assets of the Company. At September 30, 2020, the Company has recorded the Bridge Loan of $2,187,000 as a current liability under the caption “Notes payable, current portion” in its condensed consolidated balance sheet. On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief and Economic Security Act (“ CARES Act PPP Loan Comerica PPP SBA The Company has notes payable to certain members of the Company’s Board of Directors. These notes are fully described in Note 1, Description of Business and Operations, and Note 11, Related Party Transactions. For more information regarding the Closing of the Series D Financing and conversion of the Bridge Loan, see Note 12 – Subsequent Events.

EQUITY

EQUITY	9 Months Ended
	Sep. 30, 2020
Equity [Abstract]
EQUITY	The Company’s Certificate of Incorporation authorizes the issuance of two classes of stock to be designated “Common Stock” and “Preferred Stock”. The Preferred Stock may be divided into such number of series and with the rights, preferences, privileges and restrictions as the Board of Directors may determine. On June 9, 2020, the Company amended its Certificate of Incorporation to increase the number of shares of the Company’s Common Stock and the number of shares of the Company’s Preferred Stock authorized thereunder from an aggregate of 179 million to 350 million, consisting of 345 million shares of Common Stock and 5 million shares of Preferred Stock. On September 28, 2020, the Company received executed written consents from the requisite holders of the Company's voting securities, voting on an as-converted basis, approving the Amended Charter, which, among other things, will increase the authorized number of shares of Common Stock from 345 million shares to 1.0 billion shares, with no change to the number of authorized shares of Preferred Stock. This action did not become effective until 20 calendar days after an Information Statement was delivered to our shareholders. Such Information Statement was delivered on October 13, 2020. Series A Convertible Preferred Stock The Company had 18,917 and 37,467 shares of Series A Preferred outstanding as of September 30, 2020 and December 31, 2019, respectively. During July 2020, the Company entered into the Series A Exchange Agreement (as defined in Note 1, Description of Business and Operations) with the Series A Holders, pursuant to the Series A Restructuring (as defined in Note 1, Description of Business and Operations), which such Series A Holders exchanged 18,550 shares of Series A Preferred for an equivalent number of Series A-1 Preferred in consideration for their waiver of approximately $1,849,000 in dividends payable to the Series A Holders and payable for the quarters ended March 31, 2020 and June 30, 2020. During the three months ended September 30, 2020, the Company issued an aggregate of 219,374 shares of its Common Stock as payment for dividends due on the Company’s Series A Preferred for the periods ended March 31, 2020, June 30, 2020 and September 30, 2020 and there were no accrued unpaid dividends as of September 30, 2020. There were no conversions of Series A Preferred into Common Stock during the three and nine months ended September 30, 2020 and 2019. Each share of Series A Preferred has a liquidation preference equal to the greater of (i) $1,000 per share plus all accrued and unpaid dividends, or (ii) such amount per share as would have been payable had each such share been converted into Common Stock immediately prior to such liquidation, dissolution or winding up (the " Series A Liquidation Preference Amount On September 28, 2020, the Company received executed written consents from (i) the requisite holders of the Company's voting securities, voting on an as-converted basis, and (ii) the requisite holders of Series A Preferred, voting as a separate class, approving the Amended Series A Certificate, which, among other things, provides for (i) the automatic conversion of all Series A Preferred into Common Stock at a rate of 10% per month following the Closing of the Series D Financing, with the conversion price for such conversion reduced from $1.15 per share of Common Stock, to $0.20 per share of Common Stock, and (ii) a reduction of the dividend rate from 8% of the stated Series A Liquidation Preference Amount if paid in cash and 10% of the stated Series A Liquidation Preference Amount if paid in Common Stock, to 4% of the Series A Liquidation Preference Amount, with the dividends being paid only in shares of Common Stock. Series A-1 Convertible Preferred Stock In July 2020, the Company filed the Series A-1 Certificate with the Secretary of State for the State of Delaware – Division of Corporations, designating 31,021 shares of the Company’s Preferred Stock as Series A-1 Preferred. Shares of Series A-1 Preferred accrue cumulative dividends and are payable quarterly beginning March 31, 2021 at a rate of 8% per annum if paid in cash, or 10% per annum if paid by the issuance of shares of the Company’s Common Stock. Shares of Series A-1 Preferred rank senior to the Company’s Common Stock, pari-passu to the Company's Series A Preferred, and are subordinate and rank junior to (i) the Series B Preferred; (ii) the Series C Preferred; (iii) any Preferred Stock (“ New Preferred Qualified Financing Each share of Series A-1 Preferred has a liquidation preference equal to the greater of (i) $1,000 per share plus all accrued and unpaid dividends, or (ii) such amount per share as would have been payable had each such share been converted into Common Stock immediately prior to such liquidation, dissolution or winding up (the amount payable pursuant to the foregoing is referred to herein as the “Series A-1 Liquidation Preference Amount”) before any payment shall be made or any assets distributed to the holders of the Common Stock or any other classes and series of equity securities of the Company which by their terms rank junior to the Series A-1 Preferred. Each share of Series A-1 Preferred is convertible into that number of shares of the Company’s Common Stock (“ Series A-1 Conversion Shares The Series A-1 Preferred is a freestanding financial instrument that contains characteristics of both liabilities and equity. Guidance for accounting for freestanding financial instruments that contain characteristics of both liabilities and equity are contained in ASC 480 and ASR 268 . The Company noted that the Series A-1 Preferred Stock instrument was a hybrid instrument that contains several embedded features. In November 2014, the FASB issued ASU 2014-16 to amend ASC 815, “ Derivatives and Hedging ASC 815 Using the whole instrument approach (described more fully in Note 6), the Company concluded that the host instrument is more akin to equity than debt as the majority of identified features contain more characteristics of equity. The Company evaluated the identified embedded features of the Series A-1 Preferred host instrument and determined that certain features did not meet the definition of and did not contain the characteristics of derivative financial instruments requiring bifurcation at fair value from the host instrument. During July 2020, the Company entered into an Exchange Agreement, Consent and Waiver (“ Exchange Agreement Series A Holders Series A Restructuring As there is no specific guidance under GAAP on whether an amendment to, or exchange of, an equity-classified preferred stock instrument (whether presented in temporary or permanent equity) that is not within the scope of ASC 718 should be accounted for as an extinguishment or a modification, the Company used, by analogy, the Guidance in ASC 470, (“Debt”) regarding the modification of debt instruments and determined that the exchange transaction was an extinguishment. If a modification or exchange represents an extinguishment for accounting purposes, it is accounted for as a redemption of the existing equity instrument and the issuance of a new instrument. ASC 260-10-S99-2 (“SEC Staff Announcement: The Effect on the Calculation of Earnings Per Share for a Period That Includes the Redemption or Induced Conversion of Preferred Stock” The Company measured the fair value of the Series A and A-1 Preferred stock immediately before and after the modification date by measuring the value of Common Stock each instrument was convertible into and determined that the modification resulted in a deemed dividend of approximately $2,272,000. During the three months ended September 30, 2020, certain Holders of Series A-1 Preferred converted 350 shares of Series A-1 Preferred into 538,452 shares of the Company’s Common Stock. As of September 30, 2020, there were 18,200 shares of Series A-1 Preferred outstanding. During the three and nine months ended September 30, 2020, there were no dividends paid nor any accrued unpaid dividends on Series A-1 Preferred. On September 28, 2020, the Company received executed written consents from (i) the requisite holders of the Company's voting securities, voting on an as-converted basis, and (ii) the requisite holders of Series A-1 Preferred, voting as a separate class, approving the Amended Series A-1 Certificate, which, among other things, provides for (i) the automatic, mandatory conversion of all Series A-1 Preferred into Common Stock at a rate of 10% per month following the Closing of the Series D Financing until all shares of Series A-1 Preferred have been converted, with the conversion price for such conversion reduced from $0.65 per share of Common Stock, to $0.20 per share of Common Stock, and (ii) a reduction of the dividend rate from 8% of the stated Series A-1 Liquidation Preference Amount if paid in cash and 10% of the stated Series A-1 Liquidation Preference Amount if paid in Common Stock, to 4% of the Series A-1 Liquidation Preference Amount, with the dividends being paid only in shares of Common Stock. This action did not become effective until 20 calendar days after an Information Statement was delivered to our shareholders. Such Information Statement was delivered on October 13, 2020. Series B Convertible Preferred Stock The Company had 239,400 shares of Series B Convertible Preferred stock, par value $0.01 per share (“ Series B Preferred Common Stock The following table summarizes Common Stock activity for the nine months ended September 30, 2020: Common Stock Shares outstanding at December 31, 2019 113,346,472 Shares issued pursuant to option exchange 775,893 Shares issued pursuant to Series A-1 conversion 538,452 Shares issued as payment of stock dividend on Series A Preferred 219,374 Shares issued as payment of stock dividend on Series C Preferred 5,176,734 Shares issued to secure financing facility 2,500,000 Shares issued for cash 15,700,000 Shares outstanding at September 30, 2020 138,256,925 In February and March of 2020, the Company sold, and Triton purchased, an aggregate of 10,000,000 shares of the Company’s Common Stock for cash. In February, the Company sold 4,000,000 shares of Common Stock for $0.16 per share resulting in gross proceeds to the Company of $640,000. In March 2020, the Company sold 6,000,000 shares of Common Stock resulting in gross proceeds to the Company of $765,000, or a per share purchase price of $0.13 per share. Aggregate net proceeds from this financing approximated $1,387,000 after recognition of direct offering costs. In May 2020, the Company issued to Lincoln Park 2,500,000 shares of its Common Stock as consideration for entering into the Lincoln Purchase Agreement. The Company has recorded this issuance as a deferred stock issuance cost in the amount of $400,000. Such deferred stock issuance costs will be recognized as a charge against paid in capital in proportion to securities sold under the Lincoln Purchase Agreement. During May 2020, the Company sold 2,500,000 shares of its Common Stock to Lincoln Park pursuant to the Lincoln Park Purchase Agreement for $0.10 per share resulting in proceeds to the Company of $250,000. At various dates in July and August 2020, the Company sold an aggregate of 3,200,000 shares of its Common Stock to Lincoln Park pursuant to the Lincoln Park Purchase Agreement resulting in net proceeds to the Company of approximately $659,000. During the three months ended September 30, 2020, the Company issued an aggregate of 219,374 shares of its Common Stock as payment for dividends due on the Company’s Series A Preferred for the periods ended March 31, 2020, June 30, 2020 and September 30, 2020. Also during the three months ended September 30, 2020, the Company issued an aggregate of 5,176,734 shares of its Common Stock as payment for dividends due on the Company’s Series C Preferred for the periods ended March 31, 2020, June 30, 2020 and September 30, 2020. During the three months ended September 30, 2020, the Company issued 538,452 shares of its Common Stock pursuant to the conversion of 350 shares of Series A-1 Preferred. During the nine months ended September 30, 2020, the Company issued 612,750 shares of its Common Stock pursuant to exchange agreements with certain terminated employees whereby such employees exchanged an aggregate 1,225,500 Common Stock purchase options for 612,750 shares of Common Stock as a component of their severance agreement. Disclosure of any incremental compensation expense and the related accounting is set forth in the Stock-Based Compensation section of this note. During the nine months ended September 30, 2020, the Company granted 708,916 restricted stock units (“ RSUs Warrants The following table summarizes warrant activity for the following periods: Warrants Weighted-Average Exercise Price Balance at December 31, 2019 1,733,856 $ 0.14 Granted — — Expired/Canceled (90,000 ) 1.28 Cancelled in conjunction with Series A-1 issuance (739,372 ) 0.01 Exercised — — Balance at September 30, 2020 904,484 $ 0.14 As of September 30, 2020, warrants to purchase 904,484 Stock-Based Compensation The Company’s 1999 Stock Award Plan (the “ 1999 Plan On June 9, 2020, pursuant to authorization obtained from the Company’s stockholders, the Company adopted the 2020 Omnibus Stock Incentive Plan (the ” 2020 Plan Code The 2020 Plan supersedes and replaces the 1999 Plan and therefore no new awards will be granted under the 1999 Plan. Any awards outstanding under the 1999 Plan on the date of approval of the 2020 Plan will remain subject to the 1999 Plan. All shares of Common Stock remaining authorized and available for issuance under the 1999 Plan and any shares subject to outstanding awards under the 1999 Plan that subsequently expire, terminate, or are surrendered or forfeited for any reason without issuance of shares will automatically become available for issuance under the 2020 Plan. As of September 30, 2020, 27,149,707 shares are available for issuance under the 2020 Plan. The Company estimates the fair value of its stock options using a Black-Scholes option-pricing model, consistent with the provisions of ASC 718, “ Compensation – Stock Compensation ASC 718 requires the use of a valuation model to calculate the fair value of stock-based awards. The Company has elected to use the Black-Scholes option-pricing model, which incorporates various assumptions including volatility, expected life, and interest rates. The Company is required to make various assumptions in the application of the Black-Scholes option-pricing model. The Company has determined that the best measure of expected volatility is based on the historical weekly volatility of the Company’s Common Stock. Historical volatility factors utilized in the Company’s Black-Scholes computations for the nine months ended September 30, 2020 and 2019 ranged from 57% to 84%. The Company has elected to estimate the expected life of an award based upon the SEC approved “simplified method” noted under the provisions of Staff Accounting Bulletin Topic 14. The expected term used by the Company during the nine months ended September 30, 2020 was 5.17 years. The difference between the actual historical expected life and the simplified method was immaterial. The interest rate used is the risk-free interest rate and is based upon U.S. Treasury rates appropriate for the expected term. Interest rates used in the Company’s Black-Scholes calculations for the nine months ended September 30, 2020 and 2019 averaged 2.58%. Dividend yield is zero as the Company does not expect to declare any dividends on the Company’s common shares in the foreseeable future. In addition to the key assumptions used in the Black-Scholes model, the estimated forfeiture rate at the time of valuation is a critical assumption. The Company has adopted the provisions of ASU 2016-09 and will continue to use an estimated annualized forfeiture rate of approximately 0% for corporate officers, 4.1% for members of the Board of Directors and 6.0% for all other employees. A summary of the activity under the Company’s stock option plans is as follows: Options Weighted-Average Exercise Price Balance at December 31, 2019 7,204,672 $ 1.32 Granted 2,320,000 $ 0.15 Expired/Cancelled (7,050,002 ) $ 1.35 Exercised — $ — Balance at September 30, 2020 2,474,670 $ 0.20 During the nine months ended September 30, 2020, the Company issued an aggregate 2,320,000 options to purchase common stock at exercise prices of $0.13 to $0.15. During the nine months ended September 30, 2020, certain terminated employees exchanged 1,200,000 Common Stock purchase options for 600,000 shares of Common Stock as a component of their severance agreement. The Company recorded the grant date fair value of these Common Stock issuances as severance expense in the amount of approximately $86,000. During t he nine months ended September 30, 2020, certain employees exchanged 1,417,832 Common Stock purchase options for 708,916 Restricted Stock Units (“ RSUs During the nine months ended September 30, 2020, certain members of the Company’s Board of Directors and certain officers exchanged 3,467,000 Common Stock purchase options for 1,733,500 RSUs. In addition to the aggregate 6,084,832 options exchanged or pending exchange as disclosed above, an additional 965,170 Common Stock purchase options expired unexercised during the nine months ended September 30, 2020. There were no options exercised during the three and nine months ended September 30, 2020. The intrinsic value of options exercisable and outstanding at September 30, 2020 was $0. T he aggregate intrinsic value for all options outstanding as of September 30, 2020 was $0. The Company periodically issues RSUs to certain employees which vest over time. When vested, each RSU represents the right to that number of shares of Common Stock equal to the number of RSUs granted. The grant date fair value for RSU’s is based upon the market price of the Company's Common Stock on the date of the grant. The fair value is then amortized to compensation expense over the requisite service period or vesting term. A summary of the activity related to RSUs is as follows: RSU’s Weighted-Average Issuance Price Balance at December 31, 2019 — $ — Granted 2,942,416 $ 0.16 Expired/Cancelled (572,952 ) $ 0.17 Vested (546,016 ) $ 0.17 Balance at September 30, 2020 1,823,448 $ 0.16 During t he nine months ended September 30, 2020, the Company granted 708,916 RSUs to certain employees in exchange for options to purchase 1,417,832 shares of Common Stock held by such employees. During the nine months ended September 30, 2020, 163,143 of these RSUs vested with the remainder of such RSUs vesting quarterly over a period of two years. During the nine months ended September 30, 2020, the Company agreed to grant 1,733,500 RSUs to certain officers and members of the Company’s Board of Directors in exchange for options to purchase 3,467,000 shares of Common Stock held by such officers and directors. During the nine months ended September 30, 2020, 366,203 of these RSUs vested with the remainder of such RSUs vesting quarterly over a period of two years. However, principally due to the lack of authorized but unissued shares of Common Stock to satisfy certain commitments of the Company, and in lieu of pending efforts to restructure certain issued and outstanding preferred stock and secure additional working capital, the Company and certain officers and directors have agreed to suspend the issuance common stock under the RSU agreements. The Company determined that the exchange agreements are a modification of a share-based payment award under ASC 718. Accordingly, the Company computed any incremental compensation expense as a component of the total compensation cost to be measured at the modification date. Aggregate incremental compensation expense measured from the modifications of stock options was approximately $385,000. In addition and unrelated to the aforementioned exchanges, on July 29, 2020, the Company granted 500,000 RSUs at a per share price of $0.13 to certain employees. During the three months ended September 30, 2020, 16,670 of these RSUs vested with the remainder of the RSU’s vesting at various dates over a two-year period. During the nine months ended September 30, 2020, 572,952 RSUs expired unexercised. Stock-based compensation expense for employees, officers and members of the Company’s Board of Directors, related to RSU’s, equity options, and the modifications of equity options, has been classified as follows in the accompanying condensed consolidated statements of operations (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Cost of revenue $ 2 $ 3 $ 6 $ 10 General and administrative 83 92 240 282 Sales and marketing 19 38 120 119 Research and development 23 35 83 104 Total $ 127 $ 168 $ 449 $ 515

FAIR VALUE ACCOUNTING

FAIR VALUE ACCOUNTING	9 Months Ended
	Sep. 30, 2020
Fair Value Disclosures [Abstract]
FAIR VALUE ACCOUNTING	The Company accounts for fair value measurements in accordance with ASC 820, “ Fair Value Measurements and Disclosures ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below: Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Level 2 Applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by ASC 820, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Fair Value at September 30, 2020 ($ in thousands) Total Level 1 Level 2 Level 3 Assets: Pension assets $ 1,785 $ — $ — $ 1,785 Totals $ 1,785 $ — $ — $ 1,785 Liabilities: Derivative liabilities $ — $ — $ — $ — Totals $ — $ — $ — $ — Fair Value at December 31, 2019 ($ in thousands) Total Level 1 Level 2 Level 3 Assets: Pension assets $ 1,713 $ — $ — $ 1,713 Totals $ 1,713 $ — $ — $ 1,713 Liabilities: Derivative liabilities $ 369 $ — $ — $ 369 Totals $ 369 $ — $ — $ 369 The Company’s German pension plan is funded by insurance contract policies whereby the insurance company guarantees a fixed minimum return. The Company has determined that the pension assets are appropriately classified within Level 3 of the fair value hierarchy because they are valued using actuarial valuation methodologies which approximate cash surrender value that cannot be corroborated with observable market data. All plan assets are managed in a policyholder pool in Germany by outside investment managers. The investment manager is responsible for the investment strategy of the insurance premiums that Company submits and does not hold individual assets per participating employer. The German Federal Financial Supervisory oversees and supervises the insurance contracts. As of September 30, 2020, the Company had embedded features contained in the Series C Preferred host instrument (issued in September 2018) that qualified for derivative liability treatment. The recorded fair market value of these features was approximately $0 and $369,000 at September 30, 2020 and December 31, 2019, respectively, and are classified as a current liability in the condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019. The fair value of the Company’s derivative liabilities is classified within Level 3 of the fair value hierarchy because they are valued using pricing models that incorporate management assumptions that cannot be corroborated with observable market data. The Company uses the lattice framework, Monte-Carlo simulations and other fair value methodologies in the determination of the fair value of derivative liabilities. In November 2020, pursuant to the Series D Financing, all holders of Series C Preferred will be exchanging their shares of Series C Preferred for shares of Series D Preferred and the embedded derivative liabilities bifurcated in the Series C Preferred cease to exist. Some of the aforementioned fair value methodologies are affected by the Company’s stock price as well as assumptions regarding the expected stock price volatility over the term of the derivative liabilities in addition to the probability of future events. Significant assumptions used in the fair value methodologies during the nine months ended September 30, 2020 are a risk-free rate of 0.10%, equity volatility of 150%, effective life of 0.25 years and a preferred stock dividend rate of 0%. These assumptions incorporate management’s estimate of the probability of future financings (Series D Financing) with terms requiring the conversion of the Series C Preferred and the timing of potential change of control events. The primary assumptions impacted by Series D Financing were the effective life of 0.25 years and equity volatility. Significant assumption used in the fair value methodologies during the nine months ended September 30, 2019 are a risk-free rate of 1.54% - 1.62%, equity volatility of 68% - 70%, effective life of 1.95 – 3.95 years and a preferred stock dividend rate of 10%. The Company monitors the activity within each level and any changes with the underlying valuation techniques or inputs utilized to recognize if any transfers between levels are necessary. That determination is made, in part, by working with outside valuation experts for Level 3 instruments and monitoring market related data and other valuation inputs for Level 1 and Level 2 instruments. The reconciliations of Level 3 pension assets measured at fair value during the three months ended September 30, 2020 and 2019 are presented below: ($ in thousands) Three months ended September 30, 2020 Three months ended September 30, 2019 Pension assets: Fair value at beginning of period $ 1,711 $ 1,721 Return on plan assets 19 14 Company contributions and benefits paid, net (28 ) (4 ) Effect of exchange rate changes 83 (82 ) Fair value at end of period $ 1,785 $ 1,649 The reconciliations of Level 3 pension assets measured at fair value during the nine months ended September 30, 2020 and 2019 are presented below: ($ in thousands) Nine months ended September 30, 2020 Nine months ended September 30, 2019 Pension assets: Fair value at beginning of period $ 1,713 $ 1,733 Return on plan assets 49 44 Company contributions and benefits paid, net (61 ) (34 ) Effect of exchange rate changes 84 (94 ) Fair value at end of period $ 1,785 $ 1,649 The reconciliations of Level 3 derivative liabilities measured at fair value during the three months ended September 30, 2020 and 2019 are presented below: ($ in thousands) Three months ended September 30, 2020 Three months ended September 30, 2019 Derivative liabilities: Fair value at beginning of period $ 535 $ 1,008 Change in fair value included in earnings (535 ) (388 ) Fair value at end of period $ — $ 620 The reconciliations of Level 3 derivative liabilities measured at fair value during the nine months ended September 30, 2020 and 2019 are presented below: ($ in thousands) Nine months ended September 30, 2020 Nine months ended September 30, 2019 Derivative liabilities: Fair value at beginning of period $ 369 $ 1,065 Change in fair value included in earnings (369 ) (445 ) Fair value at end of period $ — $ 620

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS	9 Months Ended
	Sep. 30, 2020
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS	Notes Payable On February 12, 2020, the Company entered into a factoring agreement (the " Factoring Agreement Factoring Lender Factoring Principal Factoring Collateral Closing Series D Preferred Series D Financing Factoring Settlement During the nine months ended September 30, 2020, the Company received advances from a second member of the Board of Directors (the " Board Lender Board Note Board Note Principal During the nine months ended September 30, 2020, the Company received advances from a third member of the Board of Directors (the " Second Board Lender Second Board Note Board Notes Second Board Note Principal

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS	9 Months Ended
	Sep. 30, 2020
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	Amended and Restated Certificate of Incorporation On November 12, 2020, the Company filed its Amended Charter. The Amended Charter increases the number of authorized shares of Common Stock from 345 million shares to 1.0 billion shares, resulting in a total increase of 655 million shares of Common Stock. The Amended Charter, among other things, includes an exclusive jurisdiction provision, which provides that Delaware is the exclusive jurisdiction, and the Delaware Court of Chancery as the exclusive forum, for all disputes relating to the internal affairs of the Company, and the federal district courts of United States of America as the exclusive forum for the resolution of any causes of action arising under the Securities Act. New Section 13 is not intended to apply to derivative actions brought by shareholders for claims arising under the Securities Exchange Act of 1934, as amended, as the federal district courts have exclusive jurisdiction over all matters arising thereunder. Amendment to Series A Convertible Preferred Stock On November 12, 2020, the Company filed the Amended Series A Certificate, as approved by the shareholders of the Company pursuant to the action by written consent received by the Company on September 28, 2020. The Amended Series A Certificate, among other things: (i) amends the terms of conversion from Series A Preferred to Common Stock by (A) amending the conversion price from $1.15 per share of Common Stock to $0.20 per share of Common Stock, (B) amending the voluntary conversion process by providing a voluntary conversion window, beginning on the consummation of the Series D Financing and ending on August 1, 2021 (the “ Conversion Period Amendment to Series A-1 Convertible Preferred Stock On November 12, 2020, the Company filed Amended Series A-1 Certificate. The Amended Series A-1 Certificate, among other things: (i) amends the terms of conversion from Series A-1 Preferred to Common Stock, by (A) amending the conversion price from $0.65 per share of Common Stock to $0.20 per share of Common Stock, (B) amending the voluntary conversion process by providing a voluntary conversion window, beginning on the consummation of the Series D Financing and ending on August 1, 2021 (the “ Conversion Period Amendment to Series C Convertible Preferred Stock On November 12, 2020, the Company filed the Amended Series C Certificate to, without limitation, provide for a drag-along right whereby if at any time one or more holders of Series C Preferred then holding, in the aggregate, more than 50% of the outstanding shares of Series C Preferred, exchange all (but not less than all) of each such exchanging shareholder’s shares of Series C Preferred for shares of Series D Preferred, then such initiating shareholder(s), in their sole discretion, shall have the right to require that all the holders of Series C Preferred similarly exchange their shares of Series C Preferred into shares of Series D Preferred on identical terms and conditions to the majority shareholders that elected to exchange their Series C Preferred into Series D Preferred. Additionally, the Series C Certificate was amended to provide that the Series C Preferred shall rank junior to the newly authorized and issued Series D Preferred. Creation of Series D Convertible Preferred Stock On November 12, 2020, the Company filed the Series D Certificate. Pursuant to the Series D Certificate, the Series D Preferred ranks senior to all Common Stock and all other present and future classes or series of capital stock, except for Series B Preferred, and upon liquidation will be entitled to receive the Liquidation Preference Amount (as defined in the Series D Certificate) plus any accrued and unpaid dividends, before the payment or distribution of the Company’s assets or the proceeds thereof is made to the holders of any junior securities. Additionally, dividends on shares of Series D Preferred will be paid prior to any junior securities, and are to be paid at the rate of 4% of the Stated Value (as defined in the Series D Certificate) per share per annum in the form of cash or shares of Series D Preferred. Holders of Series D Preferred shall vote together with holders of Common Stock on an as-converted basis, and not as a separate class, except (i) the holders of Series D Preferred, voting as a separate class, shall be entitled to elect two directors, (ii) the holders of Series D Preferred have the right to vote as a separate class regarding the waiver of certain protective provisions set forth in the Series D Certificate, and (iii) as otherwise required by law. The holders of Series D Preferred may voluntarily convert their shares of Series D Preferred into Common Stock at any time that is at least ninety days following the issuance date, at the conversion price calculated by dividing the Stated Value by the conversion price of $0.0583 per share of Common Stock, subject to adjustments as set forth in Section 5(e) of the Series D Certificate. The shares of Common Stock issuable upon conversion of the Series D Preferred shall be subject to the following registration rights: (i) one demand registration starting three months after the Closing, (ii) two demand registrations starting one year after the Closing, and (iii) unlimited piggy-back and Form S-3 registration rights with reasonable and customary terms. On the fourth anniversary of the Issuance Date, or in the event of the consummation of a Change of Control, if any shares of Series D Preferred are outstanding, then each holder of Series D Preferred shall have the right (the “ Holder Redemption Right Holder Redemption Price Closing of Series D Financing On November 12, 2020 (“ Closing Date Bridge Note Conversion Purchase Agreement Securities Act On the Closing Date, the Company exchanged approximately $661,000 of liabilities of the Company for 661.3 shares of Series D Preferred, and received notice from the holders of a majority of the Series C Preferred (the “ Series C Exchange Notice Series C Exchange Series C Exchange Agreement In connection with the Purchase Agreement, the Company entered into an Exchange Agreement with certain holders of the Series C Preferred which hold, in the aggregate, more than 50% of the outstanding shares of Series C Preferred (the “ Exchange Agreement Payment of Factoring Settlement On November 12, 2020, the Company and the Factoring Lender entered into that certain Satisfaction and Release Agreement (the " Factoring Release Satisfaction of Board Notes On November 12, 2020, in connection with the Closing of the Series D Financing, the Board Lenders (See Note 1) entered into (i) Debt Exchange Agreements (collectively, the " Debt Exchange Agreements Release Agreements In November 2020, the Company issued 127,842 shares of its Common Stock as payment of dividends on its Series C Preferred for the period October 1, 2020 up to the closing date of the Company’s Series D Preferred financing. In November 2020, the Company issued an aggregate 1,107,355 shares of its Common Stock to certain employees and member of management and the Company’s Board of directors pursuant to the vesting of RSUs held by these individuals.

SIGNIFICANT ACCOUNTING POLICI_2

SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Policies)	9 Months Ended
	Sep. 30, 2020
Accounting Policies [Abstract]
Basis of Presentation	The accompanying condensed consolidated balance sheet as of December 31, 2019, which has been derived from audited financial statements, and the unaudited interim condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“ GAAP Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, or any other future periods.
Principles of Consolidation	The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. The Company’s wholly-owned subsidiaries are: XImage Corporation, a California Corporation; ImageWare Systems ID Group, Inc., a Delaware corporation (formerly Imaging Technology Corporation); I.W. Systems Canada Company, a Nova Scotia unlimited liability company; ImageWare Digital Photography Systems, LLC, a Nevada limited liability company (formerly Castleworks LLC); Digital Imaging International GmbH, a company formed under German laws; and Image Ware Mexico S de RL de CV, a company formed under Mexican laws. All significant intercompany transactions and balances have been eliminated.
Operating Cycle	Assets and liabilities related to long-term contracts are included in current assets and current liabilities in the accompanying condensed consolidated balance sheets, although they will be liquidated in the normal course of contract completion which may take more than one operating cycle.
Use of Estimates	The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expense during the reporting period. Significant estimates include the evaluation of our ability to continue as a going concern, the allowance for doubtful accounts receivable, deferred tax asset valuation allowances, assumptions used in the Black-Scholes model to calculate the fair value of share based payments, fair value of financial instruments issued with and affected by the Series C Preferred Financing, assumptions used in the application of revenue recognition policies, assumption used in the evaluation of the modification of our Series A Preferred Stock and exchange for shares of Series A-1 Preferred Stock, assumptions used in the derivation of the Company’s incremental borrowing rate used in the computation of the Company’s operating lease liabilities and assumptions used in the application of fair value methodologies to calculate the fair value of pension assets and obligations. Actual results could differ from estimates.
Accounts Receivable	In the normal course of business, the Company extends credit without collateral requirements to its customers that satisfy pre-defined credit criteria. Accounts receivable are recorded net of an allowance for doubtful accounts. Accounts receivable are considered delinquent when the due date on the invoice has passed. The Company records its allowance for doubtful accounts based upon its assessment of various factors. The Company considers historical experience, the age of the accounts receivable balances, the credit quality of its customers, current economic conditions and other factors that may affect customers’ ability to pay to determine the level of allowance required. Accounts receivable are written off against the allowance for doubtful accounts when all collection efforts by the Company have been unsuccessful.
Inventories	Finished goods inventories are stated at the lower of cost, determined using the average cost method, or net realizable value. See Note 4.
Property, Equipment and Leasehold Improvements	Property and equipment, consisting of furniture and equipment, are stated at cost and are being depreciated on a straight-line basis over the estimated useful lives of the assets, which generally range from three to five years. Maintenance and repairs are charged to expense as incurred. Major renewals or improvements are capitalized. When assets are sold or abandoned, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized. Expenditures for leasehold improvements are capitalized. Amortization of leasehold improvements is computed using the straight-line method over the shorter of the remaining lease term or the estimated useful lives of the improvements.
Fair Value of Financial Instruments	For certain of the Company’s financial instruments, including accounts receivable, accounts payable, accrued expense, and deferred revenue, the carrying amounts approximate fair value due to their relatively short maturities.
Lease Liabilities and Operating Lease Right-of-Use Assets	The Company is a party to certain contractual arrangements for office space which meet the definition of leases under Accounting Standards Codification (“ ASC ASC 842 A package of practical expedients to not reassess: ● Whether a contract is or contains a lease ● Lease classification, and ● Initial direct costs
Revenue Recognition	Effective January 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers (“ ASC 606 In accordance with ASC 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. The core principle of the standard is that we should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. To achieve that core principle, we apply the following five step model: 1. Identify the contract with the customer; 2. Identify the performance obligation in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the contract; and 5. Recognize revenue when (or as) each performance obligation is satisfied. At contract inception, we assess the goods and services promised in a contract with a customer and identify as a performance obligation each promise to transfer to the customer either: (i) a good or service (or a bundle of goods or services) that is distinct, or (ii) a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer. We recognize revenue only when we satisfy a performance obligation by transferring a promised good or service to a customer. Determining the timing of the satisfaction of performance obligations as well as the transaction price and the amounts allocated to performance obligations requires judgement. We disclose disaggregation of our customer revenue by classes of similar products and services as follows: ● Software licensing and royalties; ● Sales of computer hardware and identification media; ● Services; and ● Post-contract customer support. Software Licensing and Royalties Software licenses consist of revenue from the sale of software for identity management applications. Our software licenses are functional intellectual property and typically provide customers with the right to use our software in perpetuity as it exists when made available to the customer. We recognize revenue from software licensing at a point in time upon delivery, provided all other revenue recognition criteria are met. Royalties consist of revenue from usage-based arrangements and guaranteed minimum-based arrangements. We recognize revenue for royalty arrangements at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied. Computer Hardware and Identification Media We generate revenue from the sale of computer hardware and identification media. Revenue for these items is recognized upon delivery of these products to the customer, provided all other revenue recognition criteria are met. Services Services revenue is comprised primarily of software customization services, software integration services, system installation services and customer training. Revenue is generally recognized upon completion of services and customer acceptance provided all other revenue recognition criteria are met. Post-Contract Customer Support (“PCS”) Post contract customer support consists of maintenance on software and hardware for our identity management solutions. Arrangements with Multiple Performance Obligations A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. In addition to selling software licenses, hardware and identification media, services and post-contract customer support on a standalone basis, certain contracts include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on our best estimate of the relative standalone selling price. The standalone selling price for a performance obligation is the price at which we would sell a promised good or service separately to a customer. The primary methods used to estimate standalone selling price are as follows: (i) the expected cost-plus margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service, and (ii) the percent discount off of list price approach. Contract Costs We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We apply a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period is one year or less. At September 30, 2020 and December 31, 2019, we had capitalized incremental costs of obtaining a contract with a customer of approximately $69,000 and $118,000, respectively. We recorded no additional contract costs during the three and nine months ended September 30, 2020. Additionally, we recognized approximately $1,513,000 in revenue during the three and nine months ended September 30, 2020 that was related to contract costs at the beginning of the period. Other Items We do not offer rights of return for our products and services in the normal course of business. Sales tax collected from customers is excluded from revenue. The following table sets forth our disaggregated revenue for the three and nine months ended September 30, 2020 and 2019: Three Months Ended September 30, Nine Months Ended September 30, Net Revenue 2020 2019 2020 2019 (dollars in thousands) Software and royalties $ 587 $ 73 $ 780 $ 306 Hardware and consumables 13 15 75 53 Services 1,258 67 1,274 233 Maintenance 613 630 1,870 1,935 Total revenue $ 2,471 $ 785 $ 3,999 $ 2,527
Customer Concentration	For the three months ended September 30, 2020, two customers accounted for approximately 82% or $2,037,000 of our total revenue and had trade receivables at September 30, 2020 of $193,000. For the nine months ended September 30, 2020, two customers accounted for approximately 65% or $2,588,000 of our total revenue and had trade receivables at September 30, 2020 of $193,000. For the three months ended September 30, 2019, one customer accounted for approximately 28% or $216,000 of our total revenue and had trade receivables at September 30, 2019 of $0. For the nine months ended September 30, 2019, two customers accounted for approximately 40% or $1,009,000 of our total revenue and had trade receivables at September 30, 2019 of $161,000.
Recently Issued Accounting Standards	From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“ FASB FASB Accounting Standards Update (‘ASU”) No. 2018-14 “Compensation —Retirement Benefits —Defined Benefit Plans —General (Subtopic 715-20) —Disclosure Framework —Changes to the Disclosure Requirements for Defined Benefit Plans” ASU 2018-14 FASB ASU No. 2019-12 Income Taxes (Topic 740) FASB ASU No. 2020-01 Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815”, FASB ASU No. 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

SIGNIFICANT ACCOUNTING POLICI_3

SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Tables)	9 Months Ended
	Sep. 30, 2020
Accounting Policies [Abstract]
Disaggregation of revenue	Three Months Ended September 30, Nine Months Ended September 30, Net Revenue 2020 2019 2020 2019 (dollars in thousands) Software and royalties $ 587 $ 73 $ 780 $ 306 Hardware and consumables 13 15 75 53 Services 1,258 67 1,274 233 Maintenance 613 630 1,870 1,935 Total revenue $ 2,471 $ 785 $ 3,999 $ 2,527

NET LOSS PER COMMON SHARE (Tabl

NET LOSS PER COMMON SHARE (Tables)	9 Months Ended
	Sep. 30, 2020
Basic income and diluted loss per common share - see Note 3:
Computation of basic and diluted loss per share	(Amounts in thousands except share and per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Numerator for basic and diluted loss per share: Net loss $ (626 ) $ (2,665 ) $ (6,652 ) $ (8,825 ) Preferred dividends, preferred stock discount accretion and deemed dividends from preferred stock exchange (2,529 ) (1,300 ) (5,275 ) (3,968 ) Net loss available to common shareholders $ (3,155 ) $ (3,965 ) $ (11,927 ) $ (12,793 ) Denominator for basic and dilutive loss per share – weighted-average shares outstanding 133,341,134 106,571,261 125,558,524 102,830,312 Basic and diluted loss per share available to common shareholders $ (0.02 ) $ (0.04 ) $ (0.09 ) $ (0.13 )
Antidilutive securities excluded from earnings per share	Potential Dilutive Securities Nine Months Ended September 30, 2020 2019 Convertible related party notes payable 3,517,338 — Restricted stock units 1,823,463 — Convertible redeemable preferred stock 54,495,592 42,627,000 Stock options 2,474,670 7,199,668 Warrants 904,484 1,733,856 Total potential dilutive securities 63,215,546 51,560,524

SELECT BALANCE SHEET DETAILS (T

SELECT BALANCE SHEET DETAILS (Tables)	9 Months Ended
	Sep. 30, 2020
Balance Sheet Related Disclosures [Abstract]
Estimated acquired intangible amortization expense	Fiscal Year Ended December 31, Estimated Amortization Expense ($ in thousands) 2020 (three months) $ 3 2021 12 2022 12 2023 12 2024 12 Thereafter 10 Totals $ 61

LEASES (Tables)

LEASES (Tables)	9 Months Ended
	Sep. 30, 2020
Leases [Abstract]
Future minimum undiscounted lease payments	($ in thousands) 2020 (three months) $ 164 2021 642 2022 652 2023 424 2024 386 Thereafter 132 Total 2,400 Short-term leases not included in lease liability — Present Value effect on future minimum undiscounted lease payments at September 30, 2020 (582 ) Lease liability at September 30, 2020 $ 1,818 Less current portion (412 ) Non-current lease liability at September 30, 2020 $ 1,406

MEZZANINE EQUITY (Tables)

MEZZANINE EQUITY (Tables)	9 Months Ended
	Sep. 30, 2020
Equity [Abstract]
Mezzanine equity	Series C Convertible, Redeemable Preferred (amounts in thousands, except share amounts) Shares Amount Total Series C Preferred Stock as of December 31, 2019 1,000 $ 8,884 Accretion of discount – deemed dividend for the nine months ended September 30, 2020 — 517 Total Series C Preferred Stock as of September 30, 2020 1,000 $ 9,401

EQUITY (Tables)

EQUITY (Tables)	9 Months Ended
	Sep. 30, 2020
Equity [Abstract]
Summary of common stock activity	Common Stock Shares outstanding at December 31, 2019 113,346,472 Shares issued pursuant to option exchange 775,893 Shares issued pursuant to Series A-1 conversion 538,452 Shares issued as payment of stock dividend on Series A Preferred 219,374 Shares issued as payment of stock dividend on Series C Preferred 5,176,734 Shares issued to secure financing facility 2,500,000 Shares issued for cash 15,700,000 Shares outstanding at September 30, 2020 138,256,925
Summary of warrant activity	Warrants Weighted-Average Exercise Price Balance at December 31, 2019 1,733,856 $ 0.14 Granted — — Expired/Canceled (90,000 ) 1.28 Cancelled in conjunction with Series A-1 issuance (739,372 ) 0.01 Exercised — — Balance at September 30, 2020 904,484 $ 0.14
Summary of stock option plans activity	Options Weighted-Average Exercise Price Balance at December 31, 2019 7,204,672 $ 1.32 Granted 2,320,000 $ 0.15 Expired/Cancelled (7,050,002 ) $ 1.35 Exercised — $ — Balance at September 30, 2020 2,474,670 $ 0.20
Summary of restricted stock unit activity	RSU’s Weighted-Average Issuance Price Balance at December 31, 2019 — $ — Granted 2,942,416 $ 0.16 Expired/Cancelled (572,952 ) $ 0.17 Vested (546,016 ) $ 0.17 Balance at September 30, 2020 1,823,448 $ 0.16
Stock based compensation expense allocation	Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Cost of revenue $ 2 $ 3 $ 6 $ 10 General and administrative 83 92 240 282 Sales and marketing 19 38 120 119 Research and development 23 35 83 104 Total $ 127 $ 168 $ 449 $ 515

FAIR VALUE ACCOUNTING (Tables)

FAIR VALUE ACCOUNTING (Tables)	9 Months Ended
	Sep. 30, 2020
Fair Value Disclosures [Abstract]
Fair value measurement of assets and liabilities	Fair Value at September 30, 2020 ($ in thousands) Total Level 1 Level 2 Level 3 Assets: Pension assets $ 1,785 $ — $ — $ 1,785 Totals $ 1,785 $ — $ — $ 1,785 Liabilities: Derivative liabilities $ — $ — $ — $ — Totals $ — $ — $ — $ — Fair Value at December 31, 2019 ($ in thousands) Total Level 1 Level 2 Level 3 Assets: Pension assets $ 1,713 $ — $ — $ 1,713 Totals $ 1,713 $ — $ — $ 1,713 Liabilities: Derivative liabilities $ 369 $ — $ — $ 369 Totals $ 369 $ — $ — $ 369
Pension assets measured at fair value on a recurring basis	($ in thousands) Three months ended September 30, 2020 Three months ended September 30, 2019 Pension assets: Fair value at beginning of period $ 1,711 $ 1,721 Return on plan assets 19 14 Company contributions and benefits paid, net (28 ) (4 ) Effect of exchange rate changes 83 (82 ) Fair value at end of period $ 1,785 $ 1,649 The reconciliations of Level 3 pension assets measured at fair value during the nine months ended September 30, 2020 and 2019 are presented below: ($ in thousands) Nine months ended September 30, 2020 Nine months ended September 30, 2019 Pension assets: Fair value at beginning of period $ 1,713 $ 1,733 Return on plan assets 49 44 Company contributions and benefits paid, net (61 ) (34 ) Effect of exchange rate changes 84 (94 ) Fair value at end of period $ 1,785 $ 1,649
Schedule of derivative liabilities	The reconciliations of Level 3 derivative liabilities measured at fair value during the three months ended September 30, 2020 and 2019 are presented below: ($ in thousands) Three months ended September 30, 2020 Three months ended September 30, 2019 Derivative liabilities: Fair value at beginning of period $ 535 $ 1,008 Change in fair value included in earnings (535 ) (388 ) Fair value at end of period $ — $ 620 The reconciliations of Level 3 derivative liabilities measured at fair value during the nine months ended September 30, 2020 and 2019 are presented below: ($ in thousands) Nine months ended September 30, 2020 Nine months ended September 30, 2019 Derivative liabilities: Fair value at beginning of period $ 369 $ 1,065 Change in fair value included in earnings (369 ) (445 ) Fair value at end of period $ — $ 620

DESCRIPTION OF BUSINESS AND O_2

DESCRIPTION OF BUSINESS AND OPERATIONS (Details Narrative) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
State of incorporation	DE
Working capital deficit	$ (4,620)
Cash	$ 2,906	$ 1,030	$ 4,363	$ 5,694

SIGNIFICANT ACCOUNTING POLICI_4

SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenue	$ 2,471	$ 785	$ 3,999	$ 2,527
Software and Royalties
Revenue	587	73	780	306
Hardware and Consumables
Revenue	13	15	75	53
Services
Revenue	1,258	67	1,274	233
Maintenance
Revenue	$ 613	$ 630	$ 1,870	$ 1,935

SIGNIFICANT ACCOUNTING POLICI_5

SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenue	$ 2,471	$ 785	$ 3,999	$ 2,527
Two Customers
Percentage of revenue	82.00%		65.00%	40.00%
Revenue	$ 2,037		$ 2,588	$ 1,009
Trade receivables	$ 193	$ 161	$ 193	161
One Customer
Percentage of revenue		28.00%
Revenue		$ 216
Trade receivables		$ 0		$ 0

NET LOSS PER COMMON SHARE (Deta

NET LOSS PER COMMON SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019
Basic income and diluted loss per common share - see Note 3:
Net loss	$ (626)	$ (2,936)	$ (3,124)	$ (2,665)	$ (2,548)	$ (3,612)	$ (6,652)	$ (8,825)
Preferred dividends, preferred stock discount accretion and deemed dividends from preferred stock exchange	(2,529)			(1,300)			(5,275)	(3,968)
Net loss available to common shareholders	$ (3,155)			$ (3,965)			$ (11,927)	$ (12,793)
Denominator for basic and dilutive loss per share - weighted-average shares outstanding	133,341,134			106,571,261			125,558,524	102,830,312
Basic and diluted loss per share available to common shareholders	$ (0.02)			$ (0.04)			$ (0.09)	$ (0.13)

NET LOSS PER COMMON SHARE (De_2

NET LOSS PER COMMON SHARE (Details 1) - shares	3 Months Ended	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2020	Sep. 30, 2019
Total potential dilutive securities		63,215,546	51,560,524
Convertible Related Party Notes Payable
Total potential dilutive securities		3,517,338	0
Restricted stock units
Total potential dilutive securities	0	1,823,463
Convertible Redeemable Preferred Stock
Total potential dilutive securities		54,495,592	42,627,000
Stock Options
Total potential dilutive securities		2,474,670	7,199,668
Warrants
Total potential dilutive securities		904,484	1,733,856

SELECT BALANCE SHEET DETAILS (D

SELECT BALANCE SHEET DETAILS (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Balance Sheet Related Disclosures [Abstract]
2020 (three months)	$ 3
2021	12
2022	12
2023	12
2024	12
Thereafter	10
Totals	$ 61	$ 70

SELECT BALANCE SHEET DETAILS _2

SELECT BALANCE SHEET DETAILS (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Balance Sheet Related Disclosures [Abstract]
Inventory	$ 22		$ 22		$ 615
Work in process	120		120		608
Finished goods	10		10		7
Reserves for obsolete and slow-moving items	3		3		3
Carrying amounts of patent assets	61		61		70
Accumulated amortization	598		598		$ 589
Patent amortization expense	$ 3	$ 3	9	$ 9
Weighted-average remaining life of intangible assets	5 years 8 months 12 days
Impairment of intangible assets	$ 0	$ 0	$ 0	$ 0

LEASES (Details)

LEASES (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Leases [Abstract]
2020 (three months)	$ 164
2021	642
2022	652
2023	424
2024	386
Thereafter	132
Total	2,400
Short-term leases not included in lease liability	0
Present value effect on future minimum undiscounted lease payments	(582)
Lease liability	1,818
Less current portion	(412)	$ (373)
Non-current lease liability	$ 1,406	$ 1,716

MEZZANINE EQUITY (Details)

MEZZANINE EQUITY (Details) - Series C Preferred Stock $ in Thousands	9 Months Ended
	Sep. 30, 2020USD ($)shares
Issuance of Series C preferred stock, shares | shares	1,000
Accretion of discount - deemed dividend, shares | shares	0
Total Series C preferred stock, shares | shares	1,000
Issuance of Series C preferred stock, amount | $	$ 8,884
Accretion of discount - deemed dividend, amount | $	517
Total Series C preferred stock, amount | $	$ 9,401

DERIVATIVE LIABILITIES (Details

DERIVATIVE LIABILITIES (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Derivative Liability [Abstract]
(Gain) loss on change in fair value of derivative liabilities	$ (535)	$ (388)	$ (369)	$ (445)

NOTES PAYABLE (Details Narrativ

NOTES PAYABLE (Details Narrative) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Notes payable, current portion	$ 2,905	$ 0
Notes payable, net of current portion	853	$ 0
PPP Loan
Notes payable, current portion	718
Notes payable, net of current portion	$ 853

EQUITY (Details)

EQUITY (Details) - Common Stock - shares	3 Months Ended						9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020
Beginning balance, shares	129,041,871	123,753,176	113,353,176	106,552,389	99,266,918	98,230,336	113,353,176
Shares issued pursuant to option exchange							775,893
Shares issued pursuant to Seriess A-1 conversion	538,452						538,452
Shares issued as payment of stock dividend on Series A Preferred	219,374			1,857,263	999,633	591,803	219,374
Shares issued as payment of stock dividend on Series C Preferred	5,176,734			495,688	266,793	157,945	5,176,734
Shares issued to secure financing facility							2,500,000
Shares issued for cash	3,200,000	2,500,000	10,000,000		5,954,545		15,700,000
Ending balance, shares	138,263,629	129,041,871	123,753,176	108,905,340	106,552,389	99,266,918	138,263,629

EQUITY (Details 1)

EQUITY (Details 1) - Warrants	9 Months Ended
	Sep. 30, 2020$ / sharesshares
Number of warrants, begining balance | shares	1,733,856
Number of warrants, granted | shares	0
Number of warrants, expired/cancelled | shares	(90,000)
Number of warrants, cancelled in conjunction with Series A-1 issuance | shares	(739,372)
Number of warrants, exercised | shares	0
Number of warrants, ending balance | shares	904,484
Weighted-average exercise price, begining balance | $ / shares	$ .14
Weighted-average exercise price, granted | $ / shares	.00
Weighted-average exercise price, expired/cancelled | $ / shares	1.28
Weighted-average exercise price, cancelled in conjunction with Series A-1 issuance | $ / shares	.01
Weighted-average exercise price, exercised | $ / shares	.00
Weighted-average exercise price, ending balance | $ / shares	$ .14

EQUITY (Details 2)

EQUITY (Details 2) - Stock Options	9 Months Ended
	Sep. 30, 2020$ / sharesshares
Number of options, begining balance | shares	7,204,672
Number of options, granted | shares	2,320,000
Number of options, expired/cancelled | shares	(7,050,002)
Number of options, exercised | shares	0
Number of options, ending balance | shares	2,474,670
Weighted-average exercise price, begining balance | $ / shares	$ 1.32
Weighted-average exercise price, granted | $ / shares	.15
Weighted-average exercise price, expired/cancelled | $ / shares	1.34
Weighted-average exercise price, exercised | $ / shares	.00
Weighted-average exercise price, ending balance | $ / shares	$ .22

EQUITY (Details 3)

EQUITY (Details 3)	9 Months Ended
	Sep. 30, 2020$ / sharesshares
Equity [Abstract]
Number of RSUs, beginning balance | shares	0
Number of RSUs, granted | shares	2,942,416
Number of RSUs, expired/cancelled | shares	(572,952)
Number of RSUs, vested | shares	546,016
Number of RSUs, ending balance | shares	1,823,448
Weighted-average issuance price, beginning balance | $ / shares	$ .00
Weighted-average issuance price, granted | $ / shares	.16
Weighted-average issuance price, expired/cancelled | $ / shares	.17
Weighted-average issuance price, vested | $ / shares	.17
Weighted-average issuance price, ending balance | $ / shares	$ .16

EQUITY (Details 4)

EQUITY (Details 4) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Stock based compensation	$ 127	$ 168	$ 449	$ 515
Cost of Revenue
Stock based compensation	2	3	6	10
General and Administrative
Stock based compensation	83	92	240	282
Sales and Marketing
Stock based compensation	19	38	120	119
Research and Development
Stock based compensation	$ 23	$ 35	$ 83	$ 104

EQUITY (Details Narrative)

EQUITY (Details Narrative) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Dec. 31, 2019
Shares available for issuance under the 1999 Plan	350,000
Intrinsic value of options exercisable	$ 0
Intrinsic value of options outstanding	368
Unrecognized compensation cost	$ 238
Unrecognized compensation cost, recognition period	1 year 4 months 24 days
Series A Preferred Stock
Preferred stock, shares outstanding	18,917	37,467
Series B Preferred Stock
Preferred stock, shares outstanding	239,400	239,400

FAIR VALUE ACCOUNTING (Details)

FAIR VALUE ACCOUNTING (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Jun. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019	Dec. 31, 2018
Assets:
Pension assets	$ 1,785		$ 1,713
Totals	1,785		1,713
Liabilities:
Derivative liabilities	0	$ 535	369	$ 620	$ 1,008	$ 1,065
Totals	0		369
Fair Value, Inputs, Level 1
Assets:
Pension assets	0		0
Totals	0		0
Liabilities:
Derivative liabilities	0		0
Totals	0		0
Fair Value, Inputs, Level 2
Assets:
Pension assets	0		0
Totals	0		0
Liabilities:
Derivative liabilities	0		0
Totals	0		0
Fair Value, Inputs, Level 3
Assets:
Pension assets	1,785		1,713
Totals	1,785		1,713
Liabilities:
Derivative liabilities	0		369
Totals	$ 0		$ 369

FAIR VALUE ACCOUNTING (Details

FAIR VALUE ACCOUNTING (Details 1) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Fair Value Disclosures [Abstract]
Fair value of plan assets, beginning	$ 1,711	$ 1,721	$ 1,713	$ 1,733
Return on plan assets	19	14	49	44
Company contributions and benefits paid, net	(28)	(4)	(61)	(34)
Effect of rate changes	83	(82)	84	(94)
Fair value of plan assets, ending	$ 1,785	$ 1,649	$ 1,785	$ 1,649

FAIR VALUE ACCOUNTING (Detail_2

FAIR VALUE ACCOUNTING (Details 2) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Fair Value Disclosures [Abstract]
Derivative liabilities, beginning	$ 535	$ 1,008	$ 369	$ 1,065
(Gain) loss on change in fair value of derivative liabilities	(535)	(388)	(369)	(445)
Derivative liabilities, ending	$ 0	$ 620	$ 0	$ 620