L-1 Identity Solutions, Inc. – IPO: ‘424B4’ on 11/8/96

As of:  Friday, 11/8/96   ·   Accession #:  927016-96-1580   ·   File #:  333-10649

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Initial Public Offering (IPO):  Prospectus   —   Rule 424(b)(4)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B4       Prospectus                                            70    428K 

Document Table of Contents

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                                                Filed pursuant to Rule 424(b)(4)
                                          Registration No. 333-10649

2,500,000 SHARES  

[VIISAGE LOGO APPEARS HERE] 

COMMON STOCK  

----------------  

Of the 2,500,000 shares of Common Stock offered hereby, 2,000,000 shares are
being sold by Viisage Technology, Inc. ("Viisage" or the "Company") and         
500,000 shares are being sold by the selling stockholder (the "Selling          
Stockholder"). See "Principal and Selling Stockholders." The Company will not   
receive any of the proceeds from the sale of shares by the Selling              
Stockholder.                                                                    

Prior to this offering, there has been no public market for the Common Stock
of the Company. See "Underwriting" for information relating to the factors to   
be considered in determining the initial public offering price. The Common      
Stock has been approved for quotation on the Nasdaq National Market under the   
symbol "VISG."                                                                  

----------------  

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON 
PAGE 6. 

----------------  

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND  
EXCHANGE  COMMISSION  OR  ANY  STATE SECURITIES  COMMISSION  NOR  HAS  THE  
SECURITIES AND EXCHANGE COMMISSION  OR ANY STATE SECURITIES COMMISSION  
PASSED  UPON  THE  ACCURACY  OR ADEQUACY  OF  THIS  PROSPECTUS.  ANY  
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.               

------------------------------------------------------------------------------- 
------------------------------------------------------------------------------- 

                                                                [Download Table]

                                                                     Proceeds to
                                 Price to   Underwriting Proceeds to   Selling  
                                  Public    Discount(1)  Company(2)  Stockholder
--------------------------------------------------------------------------------
                                                                                
Per Share.....................    $10.50       $0.74        $9.76       $9.76   
Total(3)......................  $26,250,000  $1,850,000  $19,520,000 $4,880,000 

------------------------------------------------------------------------------- 
------------------------------------------------------------------------------- 
(1) The Company and the Selling Stockholder have agreed to indemnify the        
 Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."                             
(2) Before deducting expenses, estimated to be $825,000, payable by the         
Company.                                                                
(3) The Company has granted the Underwriters an option, exercisable within 30   
 days of the date hereof, to purchase up to an aggregate of 375,000 shares
at the Price to Public less the Underwriting Discount to cover over-    
allotments, if any. If all such shares are purchased, the total Price to
  Public, Underwriting Discount and Proceeds to Company will be $30,187,500,
$2,127,500 and $23,180,000, respectively. See "Underwriting."           

----------------  

The Common Stock is offered by the several Underwriters named herein when,  
as and if received and accepted by them, subject to their right to reject       
orders in whole or in part and subject to certain other conditions. It is       
expected that delivery of certificates for the shares will be made at the       
offices of Cowen & Company, New York, New York on or about November 14, 1996.   

COWEN & COMPANY                                         NEEDHAM & COMPANY, INC. 

November 8, 1996.                                                               

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[Photograph of the Image Workstation and SensorMast being used by an operator   
to capture the image of a card applicant.]                                      

[Photographs or depictions of representative tamper-resistant identification    
cards capable of being produced by the Company's systems. Representative cards  
are: a driver's license; a law enforcement identification card; a corporate     
identification card; and an entitlement program identification card.]           

----------------  

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT 
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK   
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN  
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.        

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[Picture of the card production facility at Viisage.]                           

[Diagram of representative work flow for a typical client server-based          
identification card installation. There will be a brief description of each     
step as part of the overall schematic.]                                         

                                                                [Download Table]
                                                             
[PICTURE]          [PICTURE]              [PICTURE]          
Image Workstation  Facebase Image Server  Main Frame Computer

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[Picture and descriptive captions of Viisage hardware products. They will       
include:                                                                        

A workstation displaying an image capture screen;                           
A SensorMast (camera, light source, signature input);                       
A "RAID" storage cabinet representing the Image Server technology;          
A production printer used by Viisage for card creation; and                 
A picture of the Viisage Visual Inspection System.]                         

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed     
information and financial statements, including the notes thereto, appearing    
elsewhere in this Prospectus. Prospective investors should carefully consider   
the information set forth under the heading "Risk Factors." Unless otherwise    
indicated, all information contained in this Prospectus (i) gives effect to the 
transfer to the Company from Lau Acquisition Corp., a corporation doing         
business as Lau Technologies ("Lau" or "Lau Technologies"), of substantially    
all of the assets of Lau's facial imaging and identification systems and        
services business (the "Viisage Technology Division") in exchange for the       
assumption by the Company of the liabilities of the Viisage Technology Division 
and the issuance to Lau of 5,680,000 shares of Common Stock, which was          
completed on November 6, 1996, and (ii) assumes no exercise of the              
Underwriters' over-allotment option. Unless the context otherwise requires, all 
references to the "Company" or "Viisage" in this Prospectus refer to Viisage    
Technology, Inc. and the Viisage Technology Division.                           

THE COMPANY 

The Company designs, sells and implements turnkey digital identification    
systems intended to deter fraud and to reduce customers' identification program 
costs. These systems capture facial images, demographic information and other   
biological identifiers, produce identification cards, and create relational     
databases containing this information. Using its software design and systems    
integration capabilities, the Company is able to combine its proprietary        
software and hardware products with commercially available components and       
customers' existing systems, creating a complete customized solution. In        
addition, the Company is developing proprietary facial recognition software     
designed to identify individuals in a large database of faces on a real-time    
basis.                                                                          

Historically, identification cards have been produced by enclosing a        
photograph and paper product in a laminated pouch. However, since               
identification cards are often used to administer rights and benefits, control  
access, and serve as a primary means of personal identification, these          
laminated cards have been a target for fraud and tampering. The use of          
fraudulent driver's licenses, credit cards or other identification cards has    
significant financial and societal implications. As a result, both the public   
and private sectors are increasing their use of tamper-resistant digital        
identification systems. Digital systems enable information and images to be     
imbedded within the fabric of the card itself, making the card more resistant   
to tampering than laminated pouches.                                            

 In addition to deterring fraud, digital identification systems are efficient,
cost-effective and flexible. They facilitate the storage of information in      
computer databases, thereby increasing record-keeping efficiency and enabling   
information to be shared and distributed across geographic and organizational   
boundaries. Digital systems also enable biological identifiers (biometrics),    
such as facial images, fingerprints, voice data, or hand geometry, to be stored 
in the card itself and in databases as an additional means of reducing fraud    
and for other applications.                                                     

 The Company offers a range of identification card delivery systems to address
a customer's specific needs. The Company provides "instant issue" systems which 
produce identification cards on location that can be delivered to recipients in 
minutes. Alternatively, the Company offers central processing systems, which    
electronically receive information from the point of data capture and produce   
cards at a secure off-site processing location for later mailing. The Company's 
systems incorporate the Company's proprietary SensorMast workstation, which is  
a fully-integrated, secure tower unit for computer-controlled image capture.    
Central production systems also include the Company's proprietary Visual        
Inspection System, which is used for automated quality assurance. Viisage's     
proprietary software and services integrate the various components of its own   
SensorMast and Visual Inspection System as well as integrate the Company's      
products with a variety of third-party components and technologies used by its  
customers. The facial images captured by the Company's identification systems   
provide the content for a variety of public and private sector applications of  
the Company's facial recognition technologies.                                  

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The Company has three proprietary facial recognition products which it      
currently is testing in pilot programs and plans to make generally available in 
the first quarter of 1997. These products are designed to determine whether a   
face appears in a database more than once, or to perform one-to-one face        
verification at, for example, a point-of-sale or an automated teller machine    
("ATM").                                                                        

The Company's strategy is to continue to provide complete identification    
systems tailored to address specific customer requirements. While the Company   
will continue to focus on providing solutions to public sector customers        
worldwide, it also believes that there are significant opportunities to         
leverage its public sector expertise into a variety of commercial applications. 
The Company will continue its commitment to product development with a focus on 
facial recognition technologies for a large number of public and private sector 
applications.                                                                   

The Company's proprietary digital identification system products are        
currently operating at over 365 locations under multi-year contracts with       
twelve public sector agencies (either via contract or, in certain               
circumstances, as a subcontractor). These systems produce driver's licenses,    
welfare cards, pistol permits, prison cards, electronic benefits transfer cards 
and immigration cards. The Company believes there is a large demand in the      
public sector for identification systems that not only incorporate digital      
technology to deter fraud and reduce costs, but also store data for convenient  
access and dissemination. The Company also believes its technology is well      
suited for a variety of commercial applications including access to ATMs,       
networks, databases, and facilities, as well as for retail point-of-sale        
transaction processing and benefits administration.                             

Prior to this offering, the Company has operated as the Viisage Technology  
Division of Lau Technologies, a provider of systems integration services and    
products for sophisticated electronic systems. Upon the completion of this      
offering, Lau Technologies will own approximately 67% (approximately 64% if the 
over-allotment option is exercised in full) of the Company's outstanding Common 
Stock.                                                                          

The Company's principal executive offices are located at 531 Main Street,   
Acton, Massachusetts 01720, and the Company's telephone number is (508) 263-    
3560.                                                                           

THE OFFERING

                                                                [Download Table]
                                                                              
Common Stock offered:                                                         
  By the Company...............  2,000,000 shares                             
  By Selling Stockholder.......    500,000 shares                             
Common Stock to be outstanding                                                
 after the offering............  7,680,000 shares(1)                          
Use of proceeds................  To repay certain indebtedness and for general
                                 corporate purposes, including working capital
Nasdaq National Market symbol..  VISG                                         

--------                                                                        
(1) Excludes 1,427,100 shares of Common Stock reserved for issuance upon the    
exercise of options which have been granted, with a weighted average    
exercise price of $3.20 per share, under the Company's 1996 Management  
Stock Option Plan and 1996 Director Stock Option Plan. See "Management--
Incentive and Stock Plans."                                             

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SUMMARY FINANCIAL DATA(1) 
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                                [Download Table]

                          YEARS ENDED DECEMBER 31,          SIX MONTHS ENDED     
                         ----------------------------  --------------------------
                           1993      1994      1995    JULY 2, 1995 JUNE 30, 1996
                         --------  --------  --------  ------------ -------------
                                                                                 
STATEMENT OF OPERATIONS                                                          
 DATA:                                                                           
 Revenues............... $    505  $  1,257  $ 11,221    $ 5,395       $11,870   
 Operating income                                                                
  (loss)................   (1,472)   (2,361)   (2,432)    (1,118)          464   
 Net income (loss)......   (1,472)   (2,401)   (2,947)    (1,251)           74   
 Net income (loss) per                                                           
  share(2).............. $  (0.24) $  (0.39) $  (0.47)   $ (0.20)      $  0.01   
 Weighted average number                                                         
  of common shares(2)...    6,225     6,225     6,225      6,225         6,225   

                                                                [Download Table]

                                                          JUNE 30, 1996         
                                                  ------------------------------
                                                                   PRO FORMA    
                                                  PRO FORMA(3) AS ADJUSTED(3)(4)
                                                  ------------ -----------------
                                                                                
BALANCE SHEET DATA:                                                             
 Cash and cash equivalents.......................   $   --          $ 9,886     
 Working capital.................................     9,077          18,963     
 Total assets....................................    14,959          24,845     
 Long-term obligations...........................    10,203           1,394     
 Net assets(5)...................................       802             --      
 Stockholders' equity............................       --           19,497     

--------                                                                        
(1) The summary financial data are derived from the financial statements of the 
Viisage Technology Division and cover the period from the Viisage       
Technology Division's inception through June 30, 1996.                  
(2) See Note 2 of the Notes to the Financial Statements for information         
concerning the computation of net income (loss) per share.              
(3) Pro forma amounts reflect the estimated net deferred income tax liability   
  that will be recorded as a result of the transfer by Lau of the assets and
  liabilities of the Viisage Technology Division to the Company as discussed
  in "Relationship and Certain Transactions with Lau Technologies" and Notes
1 and 2 of the Notes to Financial Statements.                           
(4) Adjusted to give effect to the sale of 2,000,000 shares of Common Stock     
offered by the Company hereby at the initial public offering price of   
 $10.50 per share, after deducting the underwriting discount and estimated
offering expenses payable by the Company, and the application of the net
proceeds thereof. See "Use of Proceeds" and "Capitalization."           
(5) Net assets represent Lau's net investment in the Company during the time    
the Company operated as the Viisage Technology Division.                

----------------

This Prospectus contains forward-looking statements which involve risks and 
uncertainties. The Company's actual results may differ significantly from the   
results discussed in the forward-looking statements. Factors that might cause   
such differences include, but are not limited to, those discussed in "Risk      
Factors."                                                                       

Viisage, Viisage Technology, SensorMast, Visual Inspection System and       
Electronic Facial Identification Systems are trademarks of the Company. All     
other trademarks or trade names referred to in this Prospectus are the property 
of their respective owners.                                                     

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RISK FACTORS  

An investment in the shares of Common Stock offered hereby involves a high  
degree of risk. This Prospectus contains certain forward-looking statements.    
Actual results could differ materially from those projected in the forward-     
looking statements as a result of certain of the risk factors set forth below   
and elsewhere in this Prospectus. In addition to the other information in this  
Prospectus, prospective investors should carefully consider the following risk  
factors in evaluating an investment in the Company and its business before      
purchasing any shares of Common Stock offered hereby.                           

HISTORY OF LOSSES; POTENTIAL ADDITIONAL CAPITAL REQUIREMENTS                    

The business operations of the Company commenced in 1993 and have resulted  
in losses from inception through December 31, 1995. As of June 30, 1996, the    
Company had a cumulative net loss of approximately $6.8 million. Although the   
Company was profitable during the first two quarters of 1996, there can be no   
assurance that the Company will be profitable for the remainder of 1996 or      
that it will sustain profitability on either a quarterly or annual basis.       

Further, no assurance can be given that the Company will not need to raise  
additional funds through public or private financings. Expansion of the         
Company's business, including the financing of the development, production and  
installation of its digital identification systems, will require the Company    
to make significant project expenditures. If the net proceeds of this offering  
and its other available cash resources prove to be insufficient (due to         
unanticipated expenses or otherwise), the Company may be required to seek       
additional financing or curtail its expansion activities. The Company may       
determine, depending upon the opportunities available to it, to seek            
additional debt or equity financing to fund the cost of continuing expansion.   
To the extent that the Company obtains equity financing or finances an          
acquisition with equity securities, such issuances of equity securities could   
result in dilution to the interests of the Company's stockholders. There can    
be no assurance that additional financing will be available to the Company on   
acceptable terms, or at all. See "Use of Proceeds" and "Management's            
Discussion and Analysis of Financial Condition and Results of Operations."      

FLUCTUATIONS IN QUARTERLY RESULTS MAY ADVERSELY AFFECT MARKET PRICE OF COMMON   
STOCK                                                                           

The Company has experienced fluctuations in its quarterly operating results 
and anticipates that such fluctuations will continue and could intensify. The   
Company's quarterly operating results are affected by a number of factors that  
could materially and adversely affect revenues and profitability, including     
the size of customer contracts, the timing of contract awards and the timing    
of the Company's performance on contracts; competitive conditions including     
pressures inherent in the competitive bidding process; the availability and     
cost of key components; modifications to contracts after their award;           
financing costs related to large project expenditures which are often           
necessary at the outset of a customer contract; changes in management           
estimates incident to accounting for contracts; the timing of the introduction  
or market acceptance of new or enhanced products and services offered by the    
Company or its competitors; variations in the mix of products and services      
sold by the Company; and general economic and political conditions and other    
factors affecting project spending by customers. Further, the sales cycles for  
the Company's products typically involve lengthy marketing and procurement      
processes. After a contract is awarded, delays in the design and start-up of a  
system may require that revenues associated with such implementation be         
recognized later than originally anticipated. Such delays have caused, and may  
in the future cause, material fluctuations in the Company's operating results.  
The Company's revenues in any period are generally derived from large orders    
from a limited number of customers. As the Company's project margin on such     
orders can differ significantly, the Company's overall margin may vary          
significantly from period to period. In addition, project margin may be         
adversely affected by competitive pressures, or customer requirements.          
Accordingly, there can be no assurance that the Company will be able to         
sustain satisfactory project margins. The Company also may choose to reduce     
prices or increase spending in response to competition or to pursue new market  
opportunities, all of which may adversely affect the Company's business,        
operating results and financial condition.                                      

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Due to the foregoing factors, and the risks associated with the timing of   
revenue recognition discussed below, it is possible that the Company's results  
of operations could fail to meet the expectations of securities analysts or     
investors. In such event, or in the event that adverse conditions prevail or    
are perceived to prevail, the price of the Company's Common Stock would likely  
be materially adversely affected. See "Management's Discussion and Analysis of  
Financial Condition and Results of Operations--Quarterly Results."              

RISKS ASSOCIATED WITH THE TIMING OF REVENUE RECOGNITION                         

The Company expects to continue investing in the research, development and  
engineering of its systems, software and products, as well as in the Company's  
sales and marketing efforts. Given these and other fixed costs that the         
Company will incur, a small variation in the timing of revenue recognition      
could cause material variations in operating results from quarter to quarter    
and may result in losses or have a material adverse effect on the Company's     
business, results of operations or financial condition. See "Management's       
Discussion and Analysis of Financial Condition and Results of Operations."      

DEPENDENCE ON LARGE ORDERS AND CUSTOMER CONCENTRATION                           

The Company's revenues have primarily been, and are expected to be, derived 
from large orders from a limited number of customers.                           

The Company provides systems and services principally under contracts that  
have five-year terms, with several annual renewals after the initial contract   
term and include an implementation period of up to twelve months after the      
contract has been awarded. Contracts generally provide for a fixed price for    
the system and/or for each card produced. Contract prices vary depending on,    
among other things, design and integration complexities, the nature and number  
of workstations and sites, the projected number of cards to be produced, the    
level of post-installation support and the competitive environment. The         
Company recognizes revenues and project costs using the percentage of           
completion method based on labor costs incurred and/or cards produced. These    
amounts are typically higher during the implementation phase of a contract due  
to the higher level of labor costs incurred during this period. Contract        
losses, if any, and changes in management estimates incident to accounting for  
contracts are recognized in the period in which they become determinable.       
Generally, contracts provide for billing when contract milestones are met       
and/or cards are produced.                                                      

Revenues from a single customer accounted for all of the Company's 1993 and 
1994 revenues. Three customers each accounted for greater than 10% of the       
Company's revenues in 1995; in the aggregate, these three customers accounted   
for approximately 85% of the Company's 1995 revenues. Four customers each       
accounted for greater than 10% of the Company's revenues during the six months  
ended June 30, 1996; in the aggregate, these four customers accounted for       
approximately 81% of the Company's revenues during the first six months of      
1996. The loss of any large customer could have a material adverse impact on    
the Company's business, operating results and financial condition. See          
"Business--Customers and End Users." As of June 30, 1996, 77% of the Company's  
accounts receivable and costs and estimated earnings in excess of billings      
related to four customers.                                                      

There can be no assurance that the Company will continue to obtain large    
orders on a consistent basis. The Company's inability to obtain sufficient      
large orders would have a material adverse effect on the Company's business,    
operating results and financial condition. Moreover, the timing of the award    
of and performance on such orders may cause the operating results of the        
Company in any given quarter to differ from operating results in other          
quarters and from estimates of securities analysts or investors, which could    
adversely affect the trading price of the Company's Common Stock. Customer      
disputes regarding contract performance, or the Company's inability to          
collect, or delays in collecting, accounts receivable from any major customer   
could also have a material adverse effect on the Company's business, operating  
results and financial condition. See "Management's Discussion and Analysis of   
Financial Condition and Results of Operations--Overview" and "--Quarterly       
Results."                                                                       

RISKS ASSOCIATED WITH LENGTHY SALES AND IMPLEMENTATION CYCLES                   

Historically, the Company's revenues have depended upon the decision of a   
public sector agency to install a digital identification system and to procure  
such a system from the Company. Such purchasing decisions are                   

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often subject to delays associated with the lengthy procurement processes that  
typically accompany large public sector capital expenditures. The Company's     
systems therefore often have a lengthy sales cycle while the customer prepares  
system specifications and requests for proposals, evaluates all aspects of bid  
proposals and obtains approvals for the selection of the Company's systems.     
Typically, six to twelve months may elapse between a new customer's initial     
evaluation of the Company's system and bid proposal and the execution of a      
contract. Another six to twelve months may elapse before final implementation   
of the system while the system is being designed and products are being         
integrated. Further, customers may seek to modify the system either during or   
after the implementation of the system. During the sales and implementation     
cycles, the Company expends substantial funds and management effort yet often   
has to defer billing because of contractual terms. Any significant failure by   
the Company to execute a contract or successfully implement a system after      
expending such funds and effort or interruptions in the operation of a system   
could have a material adverse effect on its business, operating results and     
financial condition. It may be difficult to predict accurately the sales cycle  
of any large order. If one or more large orders fail to be implemented as       
forecasted for a quarter, the Company's revenues and operating results for      
such quarter could be materially adversely affected. See "Management's          
Discussion and Analysis of Financial Condition and Results of Operations--      
Overview" and "--Quarterly Results."                                            

BURDENS IMPOSED BY PUBLIC SECTOR CUSTOMERS                                      

The Company currently derives substantially all of its revenues from public 
sector customers or contractors for such customers. There are significant       
risks inherent in depending on such customers which may cause material          
fluctuations in the Company's operating results. For each contract with a       
public sector customer, the Company is typically subject to a protracted        
procurement process which includes a detailed written response to the           
customer's request for proposal, sealed competitive bids, system                
demonstrations, the design of software which addresses customer-specified       
needs and the integration of Company and third-party products. The process can  
also include political influences, award protests initiated by unsuccessful     
bidders and changes in budgets or appropriations which are beyond the           
Company's control. Contracts with public sector customers are typically         
subject to procurement policies which may be onerous and may include profit     
limitations and rights of the agency to terminate for convenience or if funds   
are unavailable. Contracts typically provide for a fixed price for the system   
and/or for each card produced, in which case the Company bears the risk of      
cost overruns. Some public sector customers require liquidated damages for      
defective products and/or for delays or interruptions caused by system          
failures. Payments under some public sector contracts are subject to achieving  
implementation milestones, and the Company has had, and may in the future       
have, differences with customers as to whether milestones have been achieved.   
Although these risks also generally apply to the Company's competitors, there   
can be no assurance that the Company will continue to be successful in          
marketing and selling its systems and products to public sector customers.      
Because increased penetration of the public sector market is important to the   
Company's future success, the failure of the Company to achieve such market     
penetration due to these or other factors could have a material adverse effect  
on the Company's business, operating results and financial condition. See       
"Business--Customers and End Users" and "--Sales and Marketing."                

LIMITED HISTORY OF OPERATIONS; NO HISTORY AS A SEPARATE COMPANY                 

The Company has been operated as a division of Lau Technologies since its   
inception in 1993 and has no operating history as a separate concern. The       
Company's historical financial statements reflect the period when the Company   
was a division of Lau. Since its inception, the Viisage Technology Division     
received certain financial, accounting, marketing and other services from Lau.  
While the Company will continue to receive certain services from Lau after the  
completion of this offering, there can be no assurance that the Company's       
operating results will not be adversely affected as a result of the reduction   
of general service assistance from Lau. See "Relationship and Certain           
Transactions with Lau Technologies--Administration and Services Agreement."     

EXPOSURE TO RAPID TECHNOLOGICAL CHANGE; DEPENDENCE ON TECHNOLOGICAL             
DEVELOPMENT                                                                     

The markets for the Company's products and services are characterized by    
rapidly changing technologies, the increasingly sophisticated needs of          
customers, and evolving industry standards. The introduction of products        

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and services by either the Company or its competitors that embody new           
technologies or the emergence of new industry standards could render the        
Company's existing or future products and services obsolete. The Company's      
future performance will depend upon its ability to address the increasingly     
sophisticated needs of its customers by enhancing its products and services     
and by developing, introducing and integrating on a timely basis new products   
and services that are compatible with emerging industry standards and are       
responsive to evolving end-user requirements. The development and integration   
of new, technologically-advanced products, services and enhancements are        
complex and uncertain processes requiring high levels of innovation, as well    
as the accurate anticipation of technological and market trends. Any failure    
by the Company to anticipate or respond adequately to technological             
developments or end-user requirements, or any significant delays in product     
and service development, introduction or integration, could result in a loss    
of competitiveness or revenue.                                                  

There can be no assurance that the Company will be successful in developing 
and marketing new or enhanced products and services on a timely basis (if at    
all), that the Company will not experience difficulties that could delay or     
prevent the successful development, introduction, sale and integration of       
these products and services, or that any of its new products and services will  
adequately meet the requirements of the marketplace and achieve or sustain      
market acceptance. If the Company is unable, for any technological or other     
reason, to develop, introduce and sell its products and services in a timely    
manner, the Company's business, operating results and financial condition       
could be materially adversely affected. From time to time, the Company or its   
present or future competitors may announce new or enhanced products and         
services, capabilities, or technologies that have the potential to replace or   
shorten the life cycles of the Company's existing products and services. There  
can be no assurance that the announcement of new or enhanced products and       
services will not cause customers to delay or alter their purchasing decisions  
in anticipation of such products and services, which could have a material      
adverse effect on the Company's business, operating results and financial       
condition. See "Management's Discussion and Analysis of Financial Condition     
and Results of Operations" and "Business--Products and Services," "--           
Competition" and "--Intellectual Property and Proprietary Rights."              

A significant aspect of the Company's strategy is to introduce systems and  
products which use its facial recognition technologies. The Company's facial    
recognition products have not yet been fully deployed for any customer.         
Moreover, there can be no assurance that the Company's facial recognition       
technologies will be able to operate with databases that are large enough to    
satisfy customer needs or that the Company's competitors will not develop the   
ability to provide a similar or better system. See "Business--The Viisage       
Solution" and "--Strategy."                                                     

RISKS ASSOCIATED WITH MANAGING EXPANSION OF OPERATIONS                          

Since its inception in 1993, the Company has experienced substantial growth 
in its revenues and operations, and has undergone substantial changes in its    
business that have placed significant demands on the Company's management,      
working capital and financial and management control systems. Failure to        
upgrade the Company's operating, management and financial control systems or    
difficulties encountered during such upgrades could adversely affect the        
Company's business, financial condition and results of operations. Although     
the Company believes that its systems and controls are adequate to address its  
current needs, there can be no assurance that such systems will be adequate to  
address any future expansion of the Company's business. The Company's results   
of operations will be adversely affected if revenues do not increase            
sufficiently to compensate for the increase in operating expenses resulting     
from expansion and there can be no assurance that expansion will be profitable  
or that it will not adversely affect the Company's business, results of         
operations and financial condition. In addition, the success of any future      
expansion plans will depend in part upon the Company's ability to continue to   
improve and expand management and financial control systems and to attract,     
retain and motivate key personnel. There can be no assurance that the Company   
will be successful in these regards. See "Business--Sales and Marketing" and    
"--Employees," and "Management--Executive Officers and Directors."              

INTENSE COMPETITION                                                             

The market for the Company's products and services is extremely competitive 
and management expects this competition to intensify as the markets in which    
the Company's products and services are sold continue to develop.               

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The Company faces competition in the identification systems market (for both
digital and conventional systems) from technologically sophisticated            
companies, including Polaroid Corporation, Unisys Corporation, DataCard         
Corporation, and NBS Imaging Systems, Inc., all of which have substantially     
greater technical, financial, and marketing resources than the Company. In      
some cases, the Company may be competing with an entity which has a pre-        
existing relationship with a potential customer which could put the Company at  
a significant competitive disadvantage. As the digital identification market    
expands, additional competitors may seek to enter the market.                   

In the field of biometric identification, the Company competes with other   
facial recognition providers as well as other providers of biometric            
solutions. Fingerprint recognition solutions have a long history of use,        
particularly in law enforcement applications. Other current suppliers of        
facial recognition solutions are software development firms. The Company        
expects that as the market for biometric solutions develops, larger companies   
with greater resources will enter the market and competition will intensify.    

To be successful in the future, the Company must continue to respond        
promptly and effectively to the challenges of technological change and its      
competitors' innovations by continually enhancing its own product and service   
offerings. There can be no assurance, however, that the Company will continue   
to compete favorably or that the Company will be successful in the face of      
increasing competition from new products and enhancements introduced by         
existing competitors or new companies entering the market. See "Business--      
Competition."                                                                   

RISK OF SYSTEM FAILURES; FAILURE TO MEET PERFORMANCE CRITERIA                   

The success of the Company is largely dependent upon its ability to provide 
complex systems which can operate on an "as needed" basis. Customer contracts   
typically specify quality standards and include liquidated damage obligations   
for product or system failures. Although the Company attempts to mitigate the   
risk of system failure by, in some cases, deploying back-up systems and having  
skilled maintenance personnel on call, product or system failures could result  
in increased costs, lower margins, liquidated damage payment obligations and    
damage to the Company's reputation. Such damage could result in contract        
terminations and have a material adverse effect on the Company's business,      
operating results and financial condition and on its ability to attract new     
customers.                                                                      

Systems and products as complex as those offered by the Company can contain 
undetected errors. There can be no assurance that errors will not be found in   
systems after implementation, resulting in loss or delay in market acceptance,  
increased service and maintenance costs, or damage to the Company's standing    
in its industry. Such loss or delay may have a material adverse effect on the   
Company's business, financial condition or results of operations.               

The Company's contracts typically require that identification cards that    
become defective within a specified number of years be replaced without         
additional charge. Historically, the digital identification card industry has   
experienced problems with color dye-migration. Although the Company has         
subjected its cards to tests that are designed to assess their durability, the  
Company's cards have not been subject to actual use over an extended number of  
years. A substantial failure of the Company's cards to meet performance         
requirements could have a material adverse effect upon the Company's business,  
operating results and financial condition. See "Business--Products and          
Services."                                                                      

RISK OF TAMPERING                                                               

The Company's systems produce identification cards which can have           
significant value to those intent on committing fraud. Accordingly, the         
Company's systems or the cards produced by those systems may be susceptible to  
tampering attempts. If the Company's systems or cards do not prove to be        
sufficiently tamper-resistant, relations with customers could be strained,      
customer contracts could be cancelled or not renewed and, as a result, there    
could be a material adverse effect on the Company's business, operating         
results, financial condition and reputation.                                    

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RISK OF MISIDENTIFICATION OR FAILURE TO MAKE ACCURATE IDENTIFICATIONS           

The Company's facial recognition technologies are being designed to, among  
other things, detect fraud, control access and provide point-of-sale            
verification. Although the Company's customers will be responsible for the      
application of the Company's systems, the Company could be susceptible to       
claims from individuals who are wrongly accused of fraud, denied access or      
denied the opportunity to make a purchase. Moreover, the Company could be       
liable if its facial recognition technologies fail to detect such fraud and     
material damage results. Such liability could have a material adverse effect    
on the Company's business, operating results, financial condition and           
reputation. See "Business--Products and Services."                              

LIMITED PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS; POTENTIAL   
COSTS OF ENFORCEMENT OR DEFENSE                                                 

The Company's business is substantially dependent on intellectual property  
which it licenses from Lau Technologies and Facia Reco Associates, Limited      
Partnership ("Facia Reco"). See "Business--Intellectual Property and            
Proprietary Rights" and "Relationship and Certain Transactions with Lau         
Technologies--License Agreement." Lau currently has four U.S. patent            
applications outstanding and has made corresponding copyright filings which     
relate to the Company's SensorMast, Visual Inspection System and proprietary    
software. Lau has filed foreign patent applications which correspond to three   
of these domestic applications. The Company's license agreement with Facia      
Reco includes the right to use and sublicense certain U.S. patents and          
registered copyrights for facial recognition systems which Facia Reco licenses  
from the Massachusetts Institute of Technology and Intelligent Vision Systems,  
Inc. The Massachusetts Institute of Technology has applied to extend its        
patent rights to certain jurisdictions in Europe and in Singapore. One of       
Lau's four filed patent applications is directed to an enhancement of one of    
the patents licensed to Lau by Facia Reco. At Lau's request and expense, the    
Massachusetts Institute of Technology has filed for a broadening reissue        
patent. Any broadening reissue patent will be licensed through Facia Reco.      

There can be no assurance that any of the U.S. or foreign patents applied   
for by Lau or the foreign patents applied for by the Massachusetts Institute    
of Technology will be issued or that, if issued, they will provide protection   
against competitive technologies or will be held valid and enforceable if       
challenged. Moreover, there can be no assurance that the Company's competitors  
would not be able to design around any such proprietary right or obtain rights  
that the Company would need to license or circumvent in order to practice       
under these patents and copyrights. See "Business--Intellectual Property and    
Proprietary Rights."                                                            

The Company may be notified, from time to time, that it is infringing       
certain patents and other intellectual property rights of others. The Company   
has been subject to such claims in the past. For example, the Company recently  
received a letter from an attorney on behalf of the holder of a patent on a     
system for scanning and encoding images from a personal identification card.    
Although the Company believes that its products and systems do not infringe     
such patent, there can be no assurance that this or other patent holders will   
not initiate patent litigation. Litigation, which could result in substantial   
cost to and diversion of resources of the Company, may be necessary to enforce  
patents or other intellectual property rights of the Company or to defend the   
Company against claimed infringement of the rights of others. In the event of   
an adverse ruling in such litigation, the Company might be required to          
discontinue the use of certain processes, cease the manufacture, use and sale   
of infringing products and services, expend significant resources to develop    
non-infringing technology or obtain licenses to the competing technology. No    
assurance can be given that licenses will be obtainable on acceptable terms or  
at all, that the damages for infringement will not be assessed or that          
litigation will not occur. The failure to obtain necessary licenses or other    
rights or adverse or protracted litigation arising out of any such claims       
could have a material adverse effect on the Company's business, financial       
condition and operating results. See "Business--Intellectual Property and       
Proprietary Rights."                                                            

In addition, the Company's ability to develop new technologies will depend  
on the continued innovation, technical expertise and know-how of its employees  
and consultants. Although the Company has a policy of requiring its employees   
and consultants to execute confidentiality agreements, there can be no          
assurance that this procedure will be adequate to prevent misappropriation of   
the Company's technology, nor can the Company be                                

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assured that its competitors will not independently develop technologies that   
are substantially equivalent or superior to those of the Company. See           
"Business--Intellectual Property and Proprietary Rights."                       

DEPENDENCE ON SOLE OR LIMITED SOURCES OF SUPPLY                                 

The Company relies to a substantial extent on outside vendors to manufacture
or develop certain components and software which are integrated with the        
Company's systems, some of which are obtained from a single supplier or a       
limited group of suppliers. The Company's reliance on outside vendors           
generally, and a sole or a limited group of suppliers in particular, involves   
several risks, including a potential inability to obtain an adequate supply of  
required components and reduced control over quality, pricing and timing of     
delivery of components. Because the production of certain of these components   
is specialized and requires long lead times, there can be no assurance that     
delays or shortages caused by vendors will not occur. Any inability to obtain   
adequate deliveries, or any other circumstance that would require the Company   
to seek alternative sources of supply, could delay implementation of the        
Company's systems, increase its project costs and materially adversely affect   
the Company's business, financial condition and results of operations. See      
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations" and "Business--Manufacturing."                                      

DEPENDENCE ON KEY PERSONNEL                                                     

The Company's performance depends to a significant extent upon a number of  
senior management and technical personnel. The loss of the services of one or   
more key employees could have a material adverse effect on the Company. The     
Company does not maintain key-person life insurance on any of its key           
employees. The Company's future financial results will depend in large part     
upon its ability to attract and retain highly skilled technical, managerial     
and marketing personnel and the ability of its officers and key employees to    
manage growth successfully, to implement appropriate management information     
systems and controls and to continue successful development of new products     
and services and enhancements to existing products and services. Competition    
for such personnel is intense, and there can be no assurance that the Company   
will continue to be successful in attracting and retaining the personnel it     
requires to develop successfully new and enhanced products. In addition, the    
Company has long-standing relationships with certain independent consultants    
which are important to the Company's ability to develop its products in a       
timely manner. The disruption of any of these relationships could have a        
material adverse effect on the Company. See "Business--Employees" and           
"Management."                                                                   

RISKS ASSOCIATED WITH INTERNATIONAL ACTIVITIES                                  

The Company expects sales to customers located outside the United States to 
increase in significance as it expands its international marketing efforts.     
Risks inherent in the Company's international business activities include       
difficulties in staffing and managing international operations, difficulties    
in enforcing intellectual property rights, currency fluctuations and currency   
management issues, imposition of public sector controls, trade restrictions,    
political and economic instability and the burdens of complying with a wide     
variety of foreign laws and regulations. To the extent that the Company is      
unable to expand international sales in a timely and cost-effective manner,     
the Company's business could be materially adversely affected. See "Business--  
Strategy."                                                                      

NO PRIOR TRADING MARKET; POTENTIAL VOLATILITY OF STOCK PRICE                    

Prior to this offering, there has been no public market for the Common      
Stock, and there can be no assurance that an active trading market will         
develop or be sustained or that the market price of the Common Stock will not   
decline below the initial public offering price. The initial public offering    
price for the Common Stock to be sold in this offering was determined by        
agreement between the Company and the Representatives of the Underwriters and   
may not be indicative of future market prices. See "Underwriting" for a         
discussion of the factors considered in determining the initial public          
offering price. The market price of the Common Stock could be subject to        
significant fluctuations in response to the Company's operating results and     
other factors, including announcements of developments related to the           
Company's business, general industry conditions or the worldwide economy,       
announcements of technological innovations, new products, product enhancements  
or services by the                                                              

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Company or its competitors, developments in patents or other intellectual       
property rights and developments in the Company's relationships with customers  
and suppliers. In addition, in recent years the stock market has experienced    
large price and volume fluctuations that have often been unrelated to the       
operating performance of specific companies or market sectors. Such             
fluctuations, as well as general economic and market conditions, could have a   
material adverse effect on the market price of the Company's Common Stock.      

RISKS ASSOCIATED WITH CONTROL BY LAU TECHNOLOGIES                               

Following the completion of this offering, Lau will own approximately 67% of
the Company's outstanding Common Stock (approximately 64% if the Underwriters'  
over-allotment option is exercised). As a result, Lau will be able to control   
matters requiring approval by the stockholders of the Company, including the    
election of all of the directors and most corporate actions. The voting power   
of Lau could have the effect of causing, delaying or preventing a change in     
control of the Company. There can be no assurance that Lau's ability to         
prevent or cause a change in control of the Company will not have a material    
adverse effect on the price of the Common Stock. See "Principal and Selling     
Stockholders."                                                                  

POTENTIAL CONFLICTS OF INTEREST                                                 

The Company has entered into certain agreements with Lau which govern       
certain aspects of the parties' relationship on an ongoing basis, including     
the licensing of certain technologies and the provision of certain              
administrative services and facilities. Under the terms of such agreements,     
Lau has reserved the right to use such technologies in a certain field. See     
"Business--Intellectual Property and Proprietary Rights." In addition, the      
Company and Lau have covenanted not to compete with each other for ten years.   

Further, the Company's Chairman of the Board of Directors is an employee of 
Lau and is married to Lau's majority stockholder. There can be no assurance     
that conflicts of interest between Lau and the Company will not arise with      
respect to the contractual arrangements, any services which might be provided   
by Lau in the future or other matters. Any adverse change in the Company's      
relationship with Lau could have a material adverse effect on the Company's     
business, financial condition and results of operations. See "Relationship and  
Certain Transactions with Lau Technologies."                                    

POTENTIAL ADVERSE IMPACT OF ANTITAKEOVER PROVISIONS ON MARKET PRICE OF SHARES   

The Company's Certificate of Incorporation and By-laws contain provisions   
that could discourage a proxy contest or make more difficult the acquisition    
of a substantial block of the Company's Common Stock. For example, the          
Company's Certificate of Incorporation requires that any action required or     
permitted to be taken by stockholders of the Company must be effected at a      
duly called annual or special meeting of stockholders and, unless approved in   
advance by the Board, may not be effected by any consent in writing. The By-    
laws require specified advance notice by a stockholder of a proposal or         
director nomination which such stockholder desires to present to any annual or  
special meeting of stockholders. The Certificate of Incorporation and By-laws   
also provide for a classified Board of Directors, and members of the Board may  
be removed only for cause upon the affirmative vote of holders of at least      
two-thirds of the shares of capital stock of the Company issued and             
outstanding and entitled to vote. Furthermore, the affirmative vote of the      
holders of at least two-thirds of the capital stock issued and outstanding and  
entitled to vote is required to amend or repeal these provisions. In addition,  
the Board of Directors, without further approval, may issue preferred or        
common stock that could have the effect of delaying, deterring or preventing a  
change in control of the Company. The issuance of preferred stock could also    
adversely effect the voting power of the holders of Common Stock, including     
the loss of voting control to others. The Company has no present plans to       
issue any preferred or additional shares of Common Stock. See "Description of   
Capital Stock."                                                                 

Following this offering, the Company will become subject to the antitakeover
provisions of Section 203 of the Delaware General Corporation Law, which will   
prohibit the Company from engaging in a "business                               

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combination" with an "interested stockholder" for a period of three years       
after the date of the transaction in which the person became an interested      
stockholder, unless the business combination is approved in a prescribed        
manner. The application of Section 203 may limit the ability of stockholders    
to approve a transaction that they deem to be in their best interests. The      
foregoing and other provisions of the Certificate of Incorporation and By-laws  
and the application of Section 203 could have the effect of deterring certain   
takeovers or delaying or preventing certain changes in control or management    
of the Company, including transactions in which the stockholders might          
otherwise receive a premium for their shares over then current market prices.   
See "Description of Capital Stock."                                             

SHARES ELIGIBLE FOR FUTURE SALE                                                 

Upon completion of this offering, the Company will have a total of 7,680,000
shares of Common Stock outstanding, of which the 2,500,000 shares offered       
hereby will be freely tradable without restriction under the Securities Act of  
1933, as amended (the "Securities Act"), by persons other than "affiliates" of  
the Company, as defined under the Securities Act. The remaining 5,180,000       
shares of Common Stock outstanding are "restricted securities" as that term is  
defined by Rule 144 and Rule 701 as promulgated under the Securities Act (the   
"Restricted Shares"). All 5,180,000 Restricted Shares will be eligible for      
sale upon the expiration of the respective two-year holding periods subject to  
the conditions of Rule 144, such holding periods to expire on or around the     
second anniversary of the date of this Prospectus. The Securities and Exchange  
Commission (the "Commission") has proposed certain amendments to Rule 144 that  
would reduce by one year the holding periods required for shares subject to     
Rule 144 to become eligible for resale in the public market. This proposal, if  
adopted, would permit earlier resale of shares of Common Stock currently        
subject to holding periods under Rule 144. No assurance can be given            
concerning whether or when the proposal will be adopted by the Commission.      
Furthermore, all 5,180,000 Restricted Shares are subject to a lock-up           
agreement expiring 180 days following the date of this Prospectus. Such         
agreements provide that Cowen & Company may, in its sole discretion and at any  
time without notice, release all or a portion of the shares subject to these    
lock-up agreements. Following the date of this Prospectus, the Company intends  
to register on one or more registration statements on Form S-8 approximately    
1,437,750 shares of Common Stock issuable under its stock option plans. Of the  
shares issuable under its option plans, 1,427,100 shares were subject to        
outstanding options as of October 8, 1996, of which 255,600 options were        
exercisable within 180 days following the date of this Prospectus. These        
255,600 options and the shares of Common Stock issuable upon the exercise       
thereof are subject to lock-up agreements described above. Shares covered by    
such registration statements will be eligible for sale in the public market     
after the effective date of such registration. See "Management--Incentive and   
Stock Plans" and "Shares Eligible for Future Sale."                             

IMMEDIATE AND FUTURE DILUTION                                                   

Purchasers of Common Stock offered hereby will incur immediate and          
substantial dilution from the initial public offering price. Additional         
dilution will occur upon the exercise of outstanding stock options. See         
"Dilution."                                                                     

LACK OF DIVIDENDS                                                               

The Board of Directors anticipates that for the foreseeable future the      
Company's earnings, if any, will be retained for use in the business and that   
no cash dividends will be paid on the Common Stock. In addition, the payment    
of cash dividends by the Company is expected to be restricted under the         
Company's financing facilities, prohibiting the Company from paying any cash    
dividends without lenders' prior approvals. See "Dividend Policy."              

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USE OF PROCEEDS 

The net proceeds to the Company from the sale of the 2,000,000 shares of    
Common Stock offered by it hereby are estimated to be $18,695,000 ($22,355,000  
if the Underwriters' over-allotment option is exercised in full) after          
deducting the underwriting discount and estimated offering expenses payable by  
the Company. Viisage will not receive any of the proceeds from the sale of      
Common Stock by the Selling Stockholder. The primary purposes of this offering  
are to repay certain indebtedness, increase the Company's equity capital and    
financial flexibility, create a public market for the Common Stock, facilitate  
future access by the Company to public capital markets and provide working      
capital to fund the Company's growth.                                           

The Company intends to use a portion of the net proceeds to repay all of the
Company's indebtedness under a bank line of credit maintained by Lau, of which  
approximately $8.8 million was outstanding as of September 29, 1996. Lau's      
credit facility provides a line of credit of up to $15.0 million, bears         
interest at the lender's base rate or LIBOR-based options (7.6% as of June 30,  
1996) and matures on June 30, 1998. The Company has used the proceeds from the  
line of credit for working capital. See "Management's Discussion and Analysis   
of Financial Condition and Results of Operations--Liquidity and Capital         
Resources." The Company is negotiating its own credit facility to take effect   
after completion of this offering.                                              

The Company expects to use the remainder of the net proceeds from this      
offering for general corporate purposes, including working capital. The         
Company may also use a portion of such net proceeds for acquisitions of         
businesses, products or technologies that are complementary to those of the     
Company. While the Company from time to time evaluates such potential           
acquisitions, the Company currently has no understandings, commitments or       
agreements with respect to any acquisitions. Except as stated above, the        
Company has not determined the amounts it plans to expend with respect to each  
of the expected uses or the timing of such expenditures. As a consequence,      
management will have the discretion to allocate the net proceeds from this      
offering. The amounts actually expended for each use may vary significantly     
depending on a number of factors, including the amount of future revenues, the  
amount of cash generated or used by the Company's operations, the progress of   
the Company's product development efforts, technological advances, the status   
of competitive products and services and acquisition opportunities presented    
to the Company. Pending such uses, the net proceeds of this offering will be    
invested in short-term, investment grade, interest-bearing securities.          

DIVIDEND POLICY 

The Company does not anticipate paying any cash dividends on its Common     
Stock in the foreseeable future. The Company currently intends to retain        
future earnings to fund the development and growth of its business. See "Risk   
Factors--Lack of Dividends."                                                    

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CAPITALIZATION  

The following table sets forth the capitalization of the Company as of June 
30, 1996 (i) on an actual basis, (ii) on a pro forma basis, reflecting the      
estimated net deferred income tax liability that will be recorded as a result   
of the transfer by Lau of its Viisage Technology Division to Viisage as         
discussed in "Relationship and Certain Transactions with Lau Technologies" and  
Notes 1 and 2 of the Notes to Financial Statements and (iii) as adjusted to     
reflect the transactions with respect to the transfer by Lau of the Viisage     
Technology Division to the Company as discussed in "Relationship and Certain    
Transactions with Lau Technologies," which transfer was completed on November   
6, 1996, and the sale by the Company of the Common Stock offered hereby at the  
initial public offering price of $10.50 per share and the application of the    
net proceeds therefrom. The table should be read in conjunction with the        
Financial Statements of the Company and related notes thereto. See also "Use    
of Proceeds," "Selected Financial Data" and "Management's Discussion and        
Analysis of Financial Condition and Results of Operations."                     

                                                                [Download Table]

                                                       AS OF JUNE 30, 1996     
                                                  -----------------------------
                                                                     PRO FORMA 
                                                  ACTUAL  PRO FORMA AS ADJUSTED
                                                  ------- --------- -----------
                                                         (IN THOUSANDS)        
                                                                               
Current portion of long-term obligations......... $   512  $   512    $   512  
                                                  =======  =======    =======  
Long-term debt...................................   8,809    8,809        --   
Capital lease obligations........................   1,394    1,394      1,394  
Net assets.......................................     902      802        --   
Shareholders' equity:                                                          
  Preferred Stock, $.001 par value, 2,000,000                                  
   shares authorized, no shares outstanding actu-                              
   al, pro forma and as adjusted.................     --       --         --   
  Common Stock, $.001 par value, 20,000,000                                    
   shares authorized, no shares issued and out-                                
   standing actual and pro forma; 7,680,000                                    
   shares issued and outstanding as adjusted(1)..     --       --           8  
  Additional paid-in capital.....................     --       --      19,489  
  Retained earnings..............................     --       --         --   
                                                  -------  -------    -------  
  Total stockholders' equity.....................     --       --      19,497  
                                                  -------  -------    -------  
    Total capitalization......................... $11,105  $11,005    $20,891  
                                                  =======  =======    =======  

--------                                                                        
(1) Excludes 1,437,750 shares of Common Stock reserved for issuance upon the    
exercise of options, of which 1,427,100 have been granted under the     
  Company's 1996 Management Stock Option Plan and 1996 Director Stock Option
Plan. See "Management--Incentive and Stock Plans."                      

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DILUTION  

The pro forma net tangible book value of the Company as of June 30, 1996 was
$802,000, or $0.14 per share. Pro forma net tangible book value per share is    
determined by dividing the number of shares of Common Stock outstanding into    
the tangible net worth (tangible assets less total liabilities) of the Company  
after giving effect to the transactions with Lau that are incident to the       
formation of the Company. See "Relationship and Certain Transactions with Lau   
Technologies." After giving effect to the sale by the Company of the 2,000,000  
shares of Common Stock offered by it hereby at the initial public offering      
price of $10.50 and the application of the net proceeds thereof (after          
deducting the underwriting discount and estimated offering expenses), the pro   
forma net tangible book value of the Company at June 30, 1996 would have been   
$19,497,000 or $2.54 per share. This represents an immediate increase in the    
net tangible book value of $2.40 per share to Lau and an immediate dilution of  
$7.96 per share to new investors. The following table illustrates this per      
share dilution:                                                                 

                                                                [Download Table]
                                                                           
Assumed initial public offering price per share...............       $10.50
  Pro forma net tangible book value........................... $ .14       
  Increase in net tangible book value attributable to new in-              
   vestors....................................................  2.40       
                                                               -----       
Pro forma net tangible book value after this offering.........         2.54
                                                                     ------
Pro forma dilution to new investors...........................       $ 7.96
                                                                     ======

The following table sets forth, on a pro forma basis at June 30, 1996, the  
number of shares of Common Stock purchased from the Company, the total          
consideration paid and the average price per share paid by Lau, and by          
purchasers of the shares of Common Stock offered hereby (at the initial public  
offering price of $10.50 per share), before deducting the underwriting          
discount and estimated offering expenses payable by the Company:                

                                                        [Enlarge/Download Table]

                         SHARES PURCHASED (1)    TOTAL CONSIDERATION (1)                   
                         ----------------------- ------------------------------            
                                                                              AVERAGE PRICE
                           NUMBER      PERCENT      AMOUNT          PERCENT     PER SHARE  
                         ------------ ---------- --------------    ------------------------
                                                                                           
Existing stockholder....    5,680,000      74.0% $      902,000(2)       4.1%    $ 0.16    
New investors...........    2,000,000      26.0      21,000,000         95.9      10.50    
                         ------------  --------  --------------     --------               
  Total.................    7,680,000     100.0% $   21,902,000        100.0%              
                         ============  ========  ==============     ========               

--------                                                                        
(1) Sales by Lau in this offering will reduce the number of shares held by Lau  
to 5,180,000 shares, or 67% (approximately 64% if the over-allotment    
option is exercised in full) of the total number of shares to be        
outstanding after this offering, and will increase the number of shares 
held by new investors to 2,500,000 shares, or 33% of the total shares of
Common Stock outstanding after this Offering. See "Principal and Selling
Stockholders."                                                          
(2) The investment by the existing stockholder represents the net assets of     
the Company as of June 30, 1996.                                        

The foregoing calculations assume no exercise of stock options after June   
30, 1996. At June 30, 1996, 1,427,100 shares of Common Stock were subject to    
options at a weighted average exercise price of $3.20 per share under the 1996  
Management Stock Option Plan and the 1996 Director Stock Option Plan. To the    
extent options are exercised, there will be further dilution to new investors.  
See "Risk Factors--Immediate and Future Dilution," "Management--Incentive and   
Stock Plans" and Note 9 of Notes to Financial Statements.                       

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SELECTED FINANCIAL DATA 

The selected financial data set forth below for all periods and dates       
indicated, except the period ended July 2, 1995, are derived from financial     
statements that have been audited by Arthur Andersen LLP, independent public    
accountants. Except for the balance sheet as of December 31, 1993, these        
financial statements are included elsewhere in this Prospectus. The selected    
financial data for the six months ended July 2, 1995 were derived from the      
unaudited Statement of Operations of the Company which is included elsewhere    
in this Prospectus. In the opinion of management, the unaudited Statement of    
Operations has been prepared on the same basis as the audited financial         
statements referred to above and includes all adjustments, consisting only of   
normal recurring accruals, necessary for a fair presentation of the Company's   
results of operations for the period indicated. The financial data set forth    
below covers the period from inception of the business that will comprise the   
Company through June 30, 1996. Operating results for the six months ended June  
30, 1996 are not necessarily indicative of the results that may be expected     
for any future period. The financial data set forth below should be read in     
conjunction with "Management's Discussion and Analysis of Financial Condition   
and Results of Operations" and the Financial Statements of the Company and      
related notes thereto included elsewhere in this Prospectus.                    

                                                                [Download Table]

                                  YEARS ENDED DECEMBER 31,    SIX MONTHS ENDED 
                                  --------------------------  -----------------
                                                              JULY 2,  JUNE 30,
                                   1993     1994      1995     1995      1996  
                                  -------  -------  --------  -------  --------
                                  (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)     
                                                                               
STATEMENT OF OPERATIONS DATA:                                                  
Revenues........................  $   505  $ 1,257  $ 11,221  $ 5,395  $11,870 
Project costs...................      456    1,140    10,361    4,972    9,653 
                                  -------  -------  --------  -------  ------- 
Project margin..................       49      117       860      423    2,217 
                                  -------  -------  --------  -------  ------- 
Operating expenses:                                                            
  Sales and marketing...........    1,185    1,596       999      431      735 
  Research and development......       47      201     1,089      597      128 
  General and administrative....      289      681     1,204      513      890 
                                  -------  -------  --------  -------  ------- 
    Total operating expenses....    1,521    2,478     3,292    1,541    1,753 
                                  -------  -------  --------  -------  ------- 
Operating income (loss).........   (1,472)  (2,361)   (2,432)  (1,118)     464 
Interest expense................      --        40       515      133      387 
                                  -------  -------  --------  -------  ------- 
Income (loss) before income tax-                                               
 es.............................   (1,472)  (2,401)   (2,947)  (1,251)      77 
Income taxes....................      --       --        --       --         3 
                                  -------  -------  --------  -------  ------- 
Net income (loss)...............  $(1,472) $(2,401) $ (2,947) $(1,251) $    74 
                                  =======  =======  ========  =======  ======= 
Net income (loss) per share(1)..  $( 0.24) $ (0.39) $  (0.47) $ (0.20) $  0.01 
                                  =======  =======  ========  =======  ======= 
Weighted average number of                                                     
 common                                                                        
 shares (1).....................    6,225    6,225     6,225    6,225    6,225 
                                  =======  =======  ========  =======  ======= 

                                                                [Download Table]

                                           DECEMBER 31,        JUNE 30, 1996    
                                        ------------------- --------------------
                                        1993  1994   1995   ACTUAL  PRO FORMA(2)
                                        ---- ------ ------- ------- ------------
                                                                                
BALANCE SHEET DATA:                                                             
Working capital........................ $368 $2,509 $ 7,413 $ 9,077   $ 9,077   
Total assets...........................  914  3,999  11,285  14,959    14,959   
Long-term obligations..................  --     955   8,319  10,203    10,203   
Net assets(3)..........................  368  1,554   1,323     902       802   

--------                                                                        
(1) See Note 2 of Notes to Financial Statements for information concerning the  
computation of net income (loss) per share.                             
(2) Pro forma amounts reflect the estimated net deferred income tax liability   
that will be recorded as a result of the transfer by Lau of its Viisage 
Technology Division to Viisage as discussed in "Relationship and Certain
Transactions with Lau Technologies" and Notes 1 and 2 of the Notes to   
Financial Statements.                                                   
(3) Net assets represent Lau's net investment in the Company during the time    
the Company operated as a division of Lau.                              

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

The following discussion and analysis should be read in conjunction with    
"Selected Financial Data" and the Company's Financial Statements and notes      
thereto included elsewhere in this Prospectus. The discussion in this           
Prospectus contains forward-looking statements that involve risks and           
uncertainties, such as statements of the Company's plans, objectives,           
expectations and intentions. The cautionary statements made in this Prospectus  
should be read as being applicable to all related forward-looking statements    
whenever they appear in this Prospectus. This Company's actual results could    
differ materially from those discussed herein. Factors that could cause or      
contribute to such differences include those discussed in "Risk Factors" as     
well as those discussed elsewhere herein.                                       

OVERVIEW                                                                        

Viisage's objective is to become a leading worldwide provider of digital    
identification systems and solutions. The Company designs, sells and            
implements turnkey digital identification systems intended to deter fraud and   
to reduce customers' identification program costs. These systems capture        
facial images, demographic information and other biological identifiers,        
produce identification cards, and create relational databases containing this   
information. Using its software design and systems integration capabilities,    
the Company is able to combine its proprietary software and hardware products   
with commercially available components and customers' existing systems,         
creating a complete customized solution. In addition, the Company is            
developing proprietary facial recognition software designed to identify         
individuals in a large database of faces on a real-time basis.                  

The Company began operations in 1993 as a division of Lau Technologies, a   
provider of systems integration services and products for sophisticated         
electronic systems. The Viisage Technology Division was formed as part of       
Lau's strategy to leverage its capabilities into emerging markets. On November  
6, 1996, Lau transfered substantially all of the assets, liabilities and        
operations of its Viisage Technology Division to the Company in exchange for    
5,680,000 shares of the Company's Common Stock. See "Relationship and Certain   
Transactions with Lau Technologies." Following these transactions and the       
offering contemplated by this Prospectus, Lau will own approximately 67% of     
the Company's Common Stock (approximately 64% if the over-allotment option is   
exercised in full).                                                             

Viisage's revenues increased from $505,000 in 1993 to $11.2 million in 1995 
and $11.9 million for the six months ended June 30, 1996. This growth was due   
primarily to an increase in the number of large competitively bid contracts     
for card-based digital identification systems awarded to the Company and, to a  
lesser extent, contract modifications from these customers. The Company         
believes that the increasing acceptance of digital identification technology    
in recent years, its commitment to providing customized solutions for its       
customers needs, its expertise in facial imaging and its proprietary software   
and hardware products have contributed to its growth and will be important to   
its future success.                                                             

Substantially all of the Company's revenues are currently derived from      
public sector customers and contractors to such customers. The Company          
believes for the foreseeable future that it will continue to derive a           
significant portion of its revenues from a limited number of large contracts.   
During 1993 and 1994 one contract accounted for all of the Company's revenues.  
For the year ended December 31, 1995 and the six months ended June 30, 1996,    
three customers and four customers, respectively, each accounted for more than  
10% of the Company's revenues, representing an aggregate of 85% and 81% of      
revenues in those periods, respectively.                                        

The Company provides systems and services principally under contracts that  
have five-year terms, provide for several annual renewals after the initial     
contract term and include an implementation period of up to twelve months       
after the contract has been awarded. Contracts generally provide for a fixed    
price for the system and/or for each card produced. Contract prices vary        
depending on, among other things, design and integration complexities, the      
nature and number of workstations and sites, the projected number of cards to   
be produced, the level of post-installation support and the competitive         
environment.                                                                    

The Company recognizes revenues and project costs using the percentage of   
completion method based on labor costs incurred and/or cards produced. These    
amounts are typically higher during the implementation phase                    

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of a contract due to the higher level of labor costs incurred during this       
period. Contract losses, if any, are recognized in the period in which they     
become determinable. Generally, contracts provide for billing when contract     
milestones are met and/or cards are produced.                                   

Project margin improved significantly during the first six months of 1996   
due to the Company's ability to reduce project costs by leveraging its          
experience with the design, development and implementation of large digital     
identification solutions. The Company believes that it will experience further  
improvements in project margin principally from cost savings for design,        
development and implementation. However, there can be no assurance that such    
improvements will be achieved.                                                  

The Company's ability to achieve revenue growth and profitability is        
dependent upon its ability to add new customers and retain existing customers.  
Accordingly, the Company anticipates that it will continue to make significant  
expenditures for sales and marketing as the Company adds resources and          
initiates operations in additional markets.                                     

In response to customer needs during 1993, 1994 and 1995, the Company       
developed proprietary software that supports all current industry standard      
operating systems, networking environments and proprietary image capture and    
inspection products. Development costs that benefited specific projects were    
recorded as project costs and costs that did not benefit specific projects      
were recorded as research and development expenses. The Company has not         
capitalized any software development costs because costs incurred subsequent    
to achieving technological feasibility have not been material. The Company      
believes that the software and hardware products developed in prior periods     
will support its card-based identification system offerings for the             
foreseeable future. In addition to its own development efforts, Viisage has     
also benefited from research and development conducted by Lau for projects      
that were not related to Viisage and, through Lau's license with Facia Reco     
Associates, Limited Partnership ("Facia Reco"), from certain research           
activities at the Massachusetts Institute of Technology. Following the          
transfer discussed above, the Company believes that it will continue to         
benefit from such activities under license arrangements with Lau and Facia      
Reco. The Company's ongoing development activities are expected to focus        
primarily on facial recognition products and services.                          

The Company's operations prior to the transfer discussed above were included
in the income tax returns of Lau, an S corporation. After the transfer, the     
Company will be subject to federal and state income taxation at the corporate   
level and will be required to file its own separate tax returns. The Company    
anticipates that it will recognize a non-recurring charge relating to a net     
deferred tax liability of approximately $100,000 arising from the change in     
its tax status in the quarter in which the transfer occurs.                     

The Company's results of operations are significantly affected by, among    
other things, the timing of award and performance on contracts. As a result,    
the Company's revenues and income may fluctuate from quarter to quarter, and    
comparisons over longer periods of time may be more meaningful. The Company's   
results of operations are not seasonal since contracts are awarded and          
performed throughout the year.                                                  

RECENT DEVELOPMENTS                                                             

The following table shows certain financial information for the periods     
ended October 1, 1995 and September 29, 1996. This information is derived from  
unaudited financial statements that include, in the opinion of management, all  
adjustments (consisting of normal recurring accruals) necessary for a fair      
presentation of the information for the periods presented. The operating        
results for any period are not necessarily indicative of results to be          
expected for any future period.                                                 

                                                                [Download Table]

                                THREE MONTHS ENDED       NINE MONTHS ENDED    
                             ------------------------ ------------------------
                             OCTOBER 1, SEPTEMBER 29, OCTOBER 1, SEPTEMBER 29,
                                1995        1996         1995        1996     
                             ---------- ------------- ---------- -------------
                                 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)     
                                                                              
Revenues....................   $2,711      $6,258       $8,106      $18,128   
Project margin..............      223       1,542          646        3,759   
Operating income (loss).....     (560)        507       (1,678)         971   
Net income (loss)...........     (748)        285       (1,999)         359   
Net income (loss) per                                                         
 share......................    (0.12)       0.05        (0.32)        0.06   
                               ======      ======       ======      =======   
Weighted average number of                                                    
 common shares..............    6,225       6,225        6,225        6,225   
                               ======      ======       ======      =======   

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For the three months and nine months ended September 29, 1996, as compared  
to the comparable periods for 1995, revenues increased 131% and 124%,           
respectively. Project margin increased 592% and 482%, respectively, and as a    
percentage of revenues, project margin increased to 25% and 21% for the 1996    
periods, from 8% for the 1995 periods. Operating income and net income also     
increased significantly. These increases are due primarily to the same factors  
discussed in the "--Results of Operations" section below for the six months     
ended June 30, 1996.                                                            

RESULTS OF OPERATIONS                                                           

The following table sets forth certain financial information as a percentage
of revenues for the periods indicated.                                          

                                                                [Download Table]

                              YEARS ENDED DECEMBER 31,        SIX MONTHS ENDED
                             ------------------------------   ----------------
                                                              JULY 2, JUNE 30,
                               1993       1994       1995      1995     1996  
                             --------   --------   --------   ------- --------
                                                                              
Revenues....................      100 %      100 %     100 %    100 %   100%  
Project costs...............       90         91        92       92      81   
                             --------   --------   -------      ---     ---   
Project margin..............       10          9         8        8      19   
Operating expenses:                                                           
  Sales and marketing.......      235        127         9        8       6   
  Research and development..        9         16        10       11       1   
  General and administra-                                                     
   tive.....................       57         54        11       10       8   
                             --------   --------   -------      ---     ---   
    Total operating ex-                                                       
     penses.................      301        197        30       29      15   
                             --------   --------   -------      ---     ---   
Operating income (loss).....     (291)      (188)      (22)     (21)      4   
Interest expense............       --          3         4        2       3   
                             --------   --------   -------      ---     ---   
Income (loss) before income                                                   
 taxes......................     (291)      (191)      (26)     (23)      1   
Income taxes................       --         --        --       --      --   
                             --------   --------   -------      ---     ---   
Net income (loss)...........     (291)%     (191)%     (26)%    (23)%     1%  
                             ========   ========   =======      ===     ===   

Six Months Ended June 30, 1996 and July 2, 1995                               

Revenues. Revenues are derived principally from systems implementation, card
production and related services under multi-year contracts. Revenues increased  
120% to $11.9 million for the six months ended June 30, 1996 from $5.4 million  
for the six months ended July 2, 1995. The increase was due to an increase in   
the number of contracts being performed during the six months ended June 30,    
1996.                                                                           

Project Costs and Margin. Project costs consist primarily of hardware,      
consumables (printer ribbons, cards, holographic overlays, etc.), system        
design, software development and implementation labor, maintenance and          
overhead. Project costs increased 94% to $9.7 million for the six months ended  
June 30, 1996 from $5.0 million for the six months ended July 2, 1995. This     
increase was due to the Company's increased level of contract performance       
during the 1996 period. As a percentage of revenues, project costs decreased    
to 81% for the 1996 period from 92% for the 1995 period. This decrease          
reflects cost savings on design, development and implementation activities      
resulting from the Company's increased experience with and resources for        
digital identification solutions. Project margin increased 424% to $2.2         
million for the six months ended June 30, 1996 from $423,000 for the six        
months ended July 2, 1995, reflecting the increase in revenues and cost         
savings discussed above. As a percentage of revenues, project margin increased  
to 19% for the 1996 period from 8% for the 1995 period.                         

Sales and Marketing. Sales and marketing expenses consist primarily of      
compensation and professional service fees for marketing, bid and proposal and  
customer support activities. Sales and marketing expenses increased 71% to      
$735,000 for the six months ended June 30, 1996 from $431,000 for the six       
months ended July 2, 1995. This increase principally reflects an increase in    
proposal activity and the addition of marketing personnel during the first six  
months of 1996. As a percentage of revenues, sales and marketing expenses       
decreased to 6% for the 1996 period from 8% for the 1995 period due to          
revenues increasing at a greater rate than such expenses during the 1996        
period.                                                                         

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Research and Development. Research and development expenses consist         
principally of compensation, outside services and materials utilized for        
product and software development activities that are not related to specific    
projects. Research and development expenses decreased 79% to $128,000 for the   
six months ended June 30, 1996 from $597,000 for the six months ended July 2,   
1995, and decreased as a percentage of revenues to 1% for the 1996 period from  
11% for the 1995 period. These decreases reflect the completion in 1995 of the  
development of certain proprietary software to support industry standard        
computing environments and proprietary hardware products for the Company's      
card-based systems and the increase in revenues in the 1996 period described    
above. Expenditures for the six months ended June 30, 1996 relate primarily to  
the Company's facial recognition products and do not reflect the benefits to    
the Company from the efforts of Lau and the Massachusetts Institute of          
Technology discussed in the "--Overview" section above.                         

General and Administrative. General and administrative expenses consist     
principally of compensation for executive management, finance and               
administrative personnel and outside professional fees. General and             
administrative expenses increased 74% to $890,000 for the six months ended      
June 30, 1996 from $513,000 for the six months ended July 2, 1995. The          
increase in expenses was due primarily to the addition of management personnel  
during the fourth quarter of 1995 and increased management activities related   
to the growth in the Company's business. As a percentage of revenues, general   
and administrative expenses decreased to 8% for the 1996 period from 10% for    
the 1995 period due to revenues increasing at a greater rate than such          
expenses in the 1996 period. The Company has employment and noncompetition      
agreements with certain officers. See "Management--Employment Agreements."      

Interest Expense. The increase in interest expense to $387,000 for the six  
months ended June 30, 1996 from $133,000 for the six months ended July 2, 1995  
principally reflects the increase in the level of borrowings during the six     
months ended June 30, 1996.                                                     

Years Ended December 31, 1995, 1994, and 1993                                 

Revenues. Revenues increased 793% to $11.2 million in 1995 from $1.3 million
in 1994 and 149% in 1994 from $505,000 in 1993. The increase in 1995 was due    
primarily to performance on several contracts awarded during the fourth         
quarter of 1994 and the first quarter of 1995. The Company began operations in  
1993 and its first contract was awarded late that year. Revenues for 1994 and   
1993 were derived solely from this contract and the increase in revenue for     
1994 was due to a full year of performance on the aforementioned contract.      

Project Costs and Margin. Project costs increased 809% to $10.4 million in  
1995 from $1.1 million in 1994 and 150% in 1994 from $456,000 in 1993. These    
increases reflect the increased level of contract performance each year. As a   
percentage of revenues, project costs increased to 92% in 1995 from 91% in      
1994 and 90% in 1993. These percentages reflect additional development costs    
incurred to design, develop, and integrate system components and industry       
standard software for the first time. Project margin increased 635% to          
$860,000 in 1995 from $117,000 in 1994 and 139% in 1994 from $49,000 in 1993    
reflecting the increases in revenues and development costs discussed above. As  
a percentage of revenues, project margin decreased to 8% in 1995 from 9% in     
1994 and 10% in 1993.                                                           

Sales and Marketing. Sales and marketing expenses decreased 37% to $1.0     
million in 1995 from $1.6 million in 1994 and increased 35% in 1994 from $1.2   
million in 1993. The decrease in 1995 reflects improved controls over bid and   
proposal costs and the Company's decision not to pursue certain opportunities   
due to funding constraints. The increase in expenses for 1994 reflects an       
increase in proposal activity. As a percentage of revenues, sales and           
marketing expenses decreased to 9% in 1995 from 127% in 1994 and 235% in 1993   
due primarily to revenues increasing at a greater rate than such expenses in    
the 1996 period.                                                                

Research and Development. Research and development expenses increased 442%  
to $1.1 million in 1995 from $201,000 in 1994 and increased 328% in 1994 from   
$47,000 in 1993. The significant increase in expenses during 1995 reflects the  
completion of the development of certain proprietary software to support        
industry                                                                        

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standard computing environments and the development of proprietary hardware     
products for the Company's card-based systems. As a percentage of revenues,     
these expenses decreased to 10% in 1995 from 16% in 1994 and increased in 1994  
from 9% in 1993. These fluctuations were due to the increase in revenues each   
period at a greater or lesser rate than such expenses.                          

General and Administrative. General and administrative expenses increased   
77% to $1.2 million in 1995 from $681,000 in 1994 and 136% in 1994 from         
$289,000 in 1993. These increases reflect the increased level of management     
activity due to the growth in the Company's business and the addition of        
certain management personnel during the fourth quarter of 1995. As a            
percentage of revenues, general and administrative expenses decreased to 11%    
in 1995 from 54% in 1994 and 57% in 1993 due primarily to revenues increasing   
at a greater rate than such expenses during the 1996 period.                    

Interest Expense. Interest expense increased to $515,000 in 1995 from       
$40,000 in 1994 and none in 1993. These increases were due principally to the   
increase in borrowings to fund operations.                                      

QUARTERLY RESULTS                                                               

The following table sets forth certain quarterly financial information for  
1995 and the first two quarters of 1996. This information is derived from       
unaudited financial statements that include, in the opinion of management, all  
adjustments (consisting of normal recurring accruals) necessary for a fair      
presentation of the information for the periods presented. The operating        
results for any quarter are not necessarily indicative of results to be         
expected for any future period.                                                 

                                                        [Enlarge/Download Table]

                                              THREE MONTHS ENDED                      
                          ------------------------------------------------------------
                          APRIL 2, JULY 2,  OCTOBER 1, DECEMBER 31, MARCH 31, JUNE 30,
                            1995    1995       1995        1995       1996      1996  
                          -------- -------  ---------- ------------ --------- --------
                                                (IN THOUSANDS)                        
                                                                                      
Revenues................   $2,549  $2,846     $2,711      $3,115     $5,737    $6,133 
Project costs...........    2,313   2,659      2,488       2,901      4,711     4,942 
                           ------  ------     ------      ------     ------    ------ 
Project margin..........      236     187        223         214      1,026     1,191 
                           ------  ------     ------      ------     ------    ------ 
Operating expenses:                                                                   
  Sales and marketing...      164     267        285         283        356       379 
  Research and develop-                                                               
   ment.................      380     217        198         294         85        43 
  General and adminis-                                                                
   trative..............      243     270        300         391        392       498 
                           ------  ------     ------      ------     ------    ------ 
    Total operating ex-                                                               
     penses.............      787     754        783         968        833       920 
                           ------  ------     ------      ------     ------    ------ 
Operating income                                                                      
 (loss).................     (551)   (567)      (560)       (754)       193       271 
Interest expense........       29     104        188         194        187       200 
                           ------  ------     ------      ------     ------    ------ 
Income (loss) before in-                                                              
 come taxes.............     (580)   (671)      (748)       (948)         6        71 
Income taxes............      --      --         --          --        --           3 
                           ------  ------     ------      ------     ------    ------ 
Net income (loss).......   $ (580) $ (671)    $ (748)     $ (948)    $    6    $   68 
                           ======  ======     ======      ======     ======    ====== 

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The following table sets forth, as a percentage of revenues, certain        
quarterly financial information for 1995 and the first two quarters of 1996.    

                                                        [Enlarge/Download Table]

                                              THREE MONTHS ENDED                     
                          -----------------------------------------------------------
                          APRIL 2, JULY 2, OCTOBER 1, DECEMBER 31, MARCH 31, JUNE 30,
                            1995    1995      1995        1995       1996      1996  
                          -------- ------- ---------- ------------ --------- --------
                                                                                     
Revenues................    100 %    100 %    100 %       100 %       100 %    100%  
Project costs...........     91       93       92          93          82       81   
                            ---      ---      ---         ---         ---      ---   
Project margin..........      9        7        8           7          18       19   
                            ---      ---      ---         ---         ---      ---   
Operating expenses:                                                                  
  Sales and marketing...      6        9       11           9           6        6   
  Research and develop-                                                              
   ment.................     15        8        7           9           2        1   
  General and adminis-                                                               
   trative..............     10       10       11          13           7        8   
                            ---      ---      ---         ---         ---      ---   
    Total operating ex-                                                              
     penses.............     31       27       29          31          15       15   
                            ---      ---      ---         ---         ---      ---   
Operating income                                                                     
 (loss).................    (22)     (20)     (21)        (24)          3        4   
Interest expense........      1        4        7           6           3        3   
                            ---      ---      ---         ---         ---      ---   
Income (loss) before in-                                                             
 come taxes.............    (23)     (24)     (28)        (30)        --         1   
Income taxes............     --      --        --          --         --        --   
                            ---      ---      ---         ---         ---      ---   
Net income (loss).......    (23)%    (24)%    (28)%       (30)%       --         1%  
                            ===      ===      ===         ===         ===      ===   

The Company's quarterly results reflect the factors discussed in the "--    
Overview" and "--Results of Operations" sections above. Project margin, as a    
percentage of revenues, increased in each of the first two quarters of 1996     
due to cost savings on design, development and implementation activities for    
new contracts.                                                                  

The Company has experienced fluctuations in its quarterly operating results 
and anticipates that such fluctuations will continue and could intensify. The   
Company's quarterly operating results are affected by a number of factors that  
could materially and adversely affect revenues and profitability, including     
the size of customer contracts, the timing of contract awards and the timing    
of the Company's performance on contracts; competitive conditions including     
pressures inherent in the competitive bidding process; the availability and     
cost of key components; modifications to contracts after their award;           
financing costs related to large project expenditures which are often           
necessary at the outset of a customer contract; changes in management           
estimates incident to accounting for contracts; the timing of the introduction  
or market acceptance of new or enhanced products and services offered by the    
Company or its competitors; variations in the mix of products and services      
sold by the Company; and general economic and political conditions and other    
factors affecting project spending by customers. Further, the sales cycles for  
the Company's products typically involve lengthy marketing and procurement      
processes. After a contract is awarded, delays in the design and start-up of a  
system may require that revenues associated with such implementation be         
recognized later than originally anticipated. Such delays have caused, and may  
in the future cause, material fluctuations in the Company's operating results.  
The Company's revenues in any period are generally derived from large orders    
from a limited number of customers. As the Company's project margin on such     
orders can differ significantly, the Company's overall margin may vary          
significantly from period to period. In addition, project margin may be         
adversely affected by competitive pressures, or customer requirements.          
Accordingly, there can be no assurance that the Company will be able to         
sustain satisfactory project margins. The Company may also choose to reduce     
prices or increase spending in response to competition or to pursue new market  
opportunities, all of which may adversely affect the Company's business,        
operating results and financial condition.                                      

The Company expects to make continued investments in the research,          
development and engineering of its systems, software and products, as well as   
in the Company's sales and marketing efforts. Given these and other fixed       
costs that the Company will incur, a small variation in the timing of revenue   
recognition can cause material variations in operating results from quarter to  
quarter and may result in losses or have a material adverse effect on the       
Company's business, results of operations or financial condition.               

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Due to the foregoing factors, it is possible that the Company's results of  
operations could fail to meet the expectations of securities analysts or        
investors. In such event, or in the event that adverse conditions prevail or    
are perceived to prevail, the price of the Company's Common Stock would likely  
be materially adversely affected.                                               

LIQUIDITY AND CAPITAL RESOURCES                                                 

Since inception, the Company has financed its operations and projects       
principally through borrowings under Lau's line of credit facility,             
investments by Lau and capital lease financing. The Company has not made        
substantial capital expenditures for facilities, office and computer equipment  
and has satisfied its needs in these areas principally through leasing.         

Cash flows from operations have been negative since inception due to losses 
from operations through December 31, 1995 and increases in accounts receivable  
and costs and estimated earnings in excess of billings, net of increases in     
accounts payable and accrued expenses. Cash flows from financing activities     
reflect borrowings under Lau's line of credit facility and investments by Lau   
that provided $1.3 million in the first six months of 1996 and $17.0 million    
from inception through December 31, 1995 to fund operations.                    

At June 30, 1996, working capital was $9.1 million compared to $7.4 million 
at December 31, 1995. The increase in working capital was due primarily to      
increases in accounts receivable and costs and estimated earnings in excess of  
billings, net of increases in accounts payable and accrued expenses. Working    
capital does not include any cash or cash equivalents and the Company will not  
receive any cash or cash equivalents in connection with Lau's transfer of the   
Viisage Technology Division to the Company. As part of the transfer, the        
Company will also assume certain obligations under Lau's line of credit         
facility, approximately $8.8 million at June 30, 1996, and will use a portion   
of the proceeds from this offering to repay such borrowings.                    

The Company is currently negotiating a line of credit arrangement, separate 
from that of Lau, that will take effect after the issuance of the shares        
offered hereby and the repayment of sums assumed under Lau's credit facility.   
The line of credit is expected to provide for borrowings of up to $10.0         
million, have a term of two years, provide for interest at prime rate or        
LIBOR-based options, include customary financial and other covenants relating   
to the maintenance of certain financial ratios (such as leverage and debt       
service coverage ratios) and restrict the Company's ability to incur            
additional indebtedness (except for the project lease facility described        
below).                                                                         

Lau has a system project lease arrangement, which will be assumed by Viisage
at the time of the transfer, with a commercial leasing organization providing   
for system project leases of up to $15.0 million. Pursuant to this              
arrangement, the lessor will purchase certain of the Company's digital          
identification systems and lease them back to Viisage for deployment with       
identified and contracted customers approved by the lessor. The lessor will     
retain title to systems and will have an assignment of Viisage's rights under   
the related customer contracts, including rights to use the software and        
technology underlying the related systems. Under this arrangement, the lessor   
will bear the credit risk associated with payments by Viisage's customers, but  
Viisage will bear performance and appropriation risk and will generally be      
required to repurchase a system in the event of a termination by a customer     
for any reason except credit default.                                           

The Company believes that the net proceeds from this offering, together with
cash flow from operations, available borrowings and project leasing, will be    
sufficient to meet the Company's working capital and capital expenditure needs  
for at least the next 12 months. There can be no assurance, however, that the   
Company will be able to obtain such financing on favorable terms or at all. If  
the Company is unable to finalize its credit arrangement or is otherwise        
unable to obtain additional capital, the Company may be required to reduce the  
scope of its presently anticipated expansion, which could adversely affect the  
Company's business, financial condition and results of operations.              

INFLATION                                                                       

Although certain of the Company's expenses increase with general inflation  
in the economy, inflation has not had a material impact on the Company's        
financial results to date.                                                      

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BUSINESS  

OVERVIEW                                                                        

The Company designs, sells and implements turnkey digital identification    
systems intended to deter fraud and to reduce customers' identification         
program costs. These systems capture facial images, demographic information     
and other biological identifiers, produce identification cards, and create      
relational databases containing this information. Using its software design     
and systems integration capabilities, the Company is able to combine its        
proprietary software and hardware products with commercially available          
components and customers' existing systems, creating a complete customized      
solution. In addition, the Company is developing proprietary facial             
recognition software designed to identify individuals in a large database of    
faces on a real-time basis.                                                     

The Company's proprietary digital identification system products are        
currently operating at over 365 locations under multi-year contracts with       
twelve public sector agencies (either via contract or, in certain               
circumstances, as a subcontractor). These systems produce driver's licenses,    
welfare cards, pistol permits, prison cards, electronic benefits transfer       
cards and immigration cards. The Company believes there is a large demand in    
the public sector for identification systems that not only incorporate digital  
technology to deter fraud and reduce costs, but also store data for convenient  
access and dissemination. The Company also believes its technology is well      
suited for a variety of commercial applications including access to ATMs,       
networks, databases, and facilities, as well as for retail point-of-sale        
transaction processing and benefits administration.                             

INDUSTRY BACKGROUND                                                             

Properly identifying individuals entitled to special rights and benefits has
presented problems for both the public and private sectors. Today, various      
forms of personal identification cards, often bearing a picture of the proper   
owner together with other demographic information, serve as the primary means   
of personal identification, providing the owner with the ability to exercise    
special rights, obtain benefits and process transactions. As a result of their  
importance, identification cards are often the target of fraud and tampering.   

The use of false identification cards can have significant financial and    
societal implications. A person may use a number of false cards to create       
multiple identities or use a single fake card as a basis for fraudulently       
obtaining other credentials. For example, a fake driver's license can enable a  
person to improperly open or access bank accounts, forge checks, obtain         
welfare or other benefits, or buy alcohol while underage. In addition to the    
direct costs and effects of improper identification, the indirect costs         
associated with the investigation, prosecution and incarceration of offenders   
are substantial. Public concern about security has also increased the demand    
for identification systems for controlling access to both secure and public     
facilities.                                                                     

In an effort to combat fraud and tampering, photographic identification     
cards encapsulated within laminated pouches were developed. However,            
photographic identification cards can be replicated using widely available      
advanced color copiers and printers, and laminated pouches have proven easy to  
delaminate. Further, records of these cards consist primarily of retained       
copies, which often require significant amounts of space and are inefficient    
to maintain and access.                                                         

Advances in and the growing acceptance of digital technology has led to an  
increasing demand for digital identification systems to replace existing        
systems. Digital systems enable information and images to be captured and       
imbedded within the fabric of the card through the use of dye-sublimation       
techniques, making digital cards more resistant to tampering than laminated     
pouches. Information can be stored in and later accessed from the card itself   
through the use of bar codes, magnetic stripes and "smart" cards (cards which   
contain computer chips). Digital systems also facilitate the storage of         
information in computer databases, thereby reducing the need for manual         
record-keeping, file cabinets, and cumbersome indexing systems. Finally,        
digital systems can be networked to enable up-to-date information to be shared  
and distributed across geographic and organizational boundaries.                

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As an additional means of deterring fraud, identification systems have      
increasingly used biometrics (unique biological characteristics) to verify      
personal identities. The most prevalent biometric identifiers include           
fingerprints, facial images, voice data or hand geometry, with fingerprints     
enjoying wide usage in law enforcement. However, unlike a fingerprint, a        
facial image can be easily verified visually and can be captured in an          
unobtrusive manner via a single photograph, making it a practical means of      
identification. When two or more biometric identifiers are used together, the   
statistical probability of properly identifying an individual increases.        

Applications for digital identification systems are increasing as they      
become more sophisticated and easier to use. For example, the typical U.S.      
state has multiple licensing or other agencies, including its department of     
motor vehicles, which require the verification of personal identity. The        
public sector is focusing on the value of sharing databases to avoid redundant  
data gathering efforts, distribute information in a timely manner, increase     
efficiency and deter fraud. In the private sector, the Company envisions that   
applications for digital identification systems will extend to ATMs, retail     
point-of-sale transaction processing, the administration of health care         
benefits and access to telecommunications services, personal computer networks  
and facilities.                                                                 

The emergence of digital identification systems also presents significant   
challenges for integrating these systems with customers' existing software,     
hardware and computing environments. Consequently, customers are seeking        
complete, integrated solutions to overcome these integration issues.            

THE VIISAGE SOLUTION                                                            

The Company designs, sells and installs digital identification systems which
provide complete integrated solutions for capturing images and data, producing  
and delivering identification cards, and creating and managing relational       
databases containing the captured information. These systems can utilize        
unique biological identifiers such as facial images, fingerprints, voice data   
or hand geometry to help deter fraud and to identify individuals for access     
control and transaction authorization purposes.                                 

The Company's systems integration and software design capabilities enable it
to provide complete solutions to customer-specified needs. The Company          
provides customized systems integration software and services which link the    
Company's proprietary software and hardware products with a wide variety of     
commercially available computers, printers, and networks, as well as the        
customer's existing systems. The Company believes that its ability to support   
all current industry standard platforms, operating systems, databases, and      
networks provides it with a significant competitive advantage.                  

While cards generated by the Company's systems can store and display a      
variety of biometrics, the Company has found that the image of a human face is  
a biological identifier that is prominent and easy to capture. The Company is   
developing proprietary facial recognition software that enables databases of    
facial images to be searched quickly and accurately for use in a variety of     
fraud deterrence and security applications.                                     

STRATEGY                                                                        

The Company's objective is to be a leading worldwide provider of digital    
identification systems and solutions. The Company intends to enhance these      
systems and solutions with its facial recognition products and technologies     
under development. Key elements of the Company's strategy are:                  

.  Deliver Complete Integrated Digital Identification Systems. The Company    
designs, sells and implements digital identification systems which provide
complete integrated solutions. Consistent with the Company's commitment to
provide customized solutions to meet its customers' specific requirements,
the Company intends to preserve its configurable system architecture to   
 enable it to integrate a wide variety of commercially available third party
products and to continue to adapt quickly to emerging technologies.       

.  Establish Leading Public Sector Market Share Worldwide. The Company intends
to focus on providing solutions to public sector customers worldwide, with
a particular current emphasis on domestic sales of solutions which produce
drivers' licenses. State departments of motor vehicles provide major      
contract opportunities for the Company because of the large number of     
licensed drivers and multiple branch                                      

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locations. The complex systems purchased by these entities also provide   
ongoing revenue-generating opportunities from product upgrades,           
enhancements, and maintenance services. In addition, other state agencies 
may desire to access the motor vehicle department's databases to satisfy  
their own licensing requirements, potentially leading to incremental      
revenues for the Company. Further, the Company plans to leverage its      
domestic public sector expertise into government applications worldwide,  
such as systems for the delivery of national identification, voting, and  
government assistance cards.                                              

.  Leverage Public Sector Expertise Into Commercial Applications. The Company 
believes significant commercial applications exist for the Company's      
digital identification systems and facial recognition capabilities. The   
private sector has many of the same technological needs and security      
concerns as the public sector, and the Company believes commercial        
 applications may involve ATMs, networks, databases, and facilities, as well
 as retail point-of-sale transaction processing and benefits administration.

.  Extend Technological Leadership. The Company believes that its customized  
systems and products, proprietary software and hardware, and integration  
capabilities make it a technological leader in the digital identification 
system market and constitute a competitive advantage. Viisage is committed
to maintaining its technological leadership, developing new systems,      
 solutions and enhancements, and responding to changes in market demands and
technologies.                                                             

.  Extend Leadership in Facial Recognition Technologies. The Company believes 
that it is among the leaders in facial recognition technologies, and that 
facial recognition products could significantly enhance the Company's     
 digital identification systems and provide it with a competitive advantage.
 The Company expects that in the future its facial recognition products will
be used with other vendors' identification systems and as stand-alone     
products. The Company believes that its focus on and its presence in the  
public sector will enable it to access an extensive database of facial    
images (facebase). Furthermore, the Company believes that an extensive    
facebase will become increasingly important to a variety of public and    
commercial organizations which wish to utilize the Company's proprietary  
facial recognition software to perform identification searches.           

.  Establish Strategic Relationships. An important part of Viisage's strategy 
is to establish strong working relationships with strategic partners,     
 particularly as the Company seeks to expand its international presence. The
Company intends to align itself with firms which have existing            
 relationships, established distribution channels, or marketing resources in
new markets. Potential partners could include entities which are renowned 
in a particular vertical market or firms with an established worldwide    
 presence. These may include component manufacturers, health care providers,
financial institutions, or computer networking firms.                     

PRODUCTS AND SERVICES                                                           

Viisage provides fully-integrated, turnkey digital identification systems   
intended to deter fraud and to reduce customers' identification program costs.  
These systems capture facial images, demographic information and other          
biological identifiers, produce identification cards and create relational      
databases containing this information. Using its design and systems             
integration capabilities, the Company combines its proprietary software and     
hardware products with commercially available components and customers'         
existing systems. In addition, the Company is developing proprietary facial     
recognition software designed to identify individuals in a large database of    
facial images on a real time basis.                                             

Digital Identification Systems                                                

The Company's digital identification systems provide complete integrated    
solutions for recording images and data, producing and delivering tamper-       
resistant identification cards, and creating and managing relational databases  
containing the recorded information. Depending on the customer's needs, the     
Company offers "instant issue" systems which produce identification cards on    
location that can be delivered to recipients in minutes, and central            
processing systems which receive the information to appear on the cards         
electronically from the point of capture and produce cards from a secure off-   
site processing location which are later mailed to recipients. The facial       
images captured by the Company's systems can provide the content for the        
identification and verification applications of the Company's facial            
recognition technologies.                                                       

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Operations. The following diagram illustrates the card-production operations
of the Company's systems:                                                       

[SCHEMATIC DEPICTION OF VIISAGE'S DIGITAL IDENTIFICATION SYSTEM IN OPERATION. 
CLIP ART ACCOMPANIED BY FOLLOWING CAPTIONS] 

                                                                [Download Table]
                                                                                
                                                                    Over The    
                                                                 Counter Printer
Demographic Data                                                                
                                                       YES                      
                                                                       Central  
                     Face Base          Instant                      Production 
                   Image Server        Card Issue                     Facility  
                                                       NO                       
Captured Image                                                          Viisage 
                                                                        Quality 
                                                                      Inspection

For both instant issue and central processing systems, Viisage's digital    
identification systems utilize an image workstation which incorporates the      
Company's proprietary SensorMast. The image workstation captures, inputs, and   
retrieves images and biometric and demographic information. With an instant     
issue system, a commercially available dye-sublimation printer produces         
single-piece, tamper-resistant identification cards on site in minutes.         
Alternatively, with a central production system, images are electronically      
transmitted to a secure processing location where a high speed manufacturing    
unit produces the cards, and an integrated card delivery unit prepares the      
cards for mailing. The Company's proprietary Visual Inspection System applies   
quality control to all of the cards produced in central processing systems.     
Under either process, the systems produce cards with holographic overlays and   
digitized images and other biometric and demographic information. Finally, all  
such digitized images and biometric and demographic information are stored in   
a central database for easy and efficient access and retrieval.                 

Proprietary Company Products. All of the Company's systems incorporate the  
Company's proprietary SensorMast product within the image workstations.         
Central production systems also typically include the Company's proprietary     
Visual Inspection System for quality assurance. These proprietary products and  
related software are described below:                                           

.  SensorMast. The SensorMast is a fully-integrated, secure tower unit        
developed by the Company which incorporates computer-controlled image     
capture equipment. This equipment includes commercially available digital 
cameras, adjustable lighting, frame grabbers, step motors, fingerprint and
signature capture devices and barcode readers. These are integrated into  
the SensorMast, which in turn is incorporated by the Company into a       
specially configured operator's workstation. This integrated workstation  
 provides operators with a durable and transportable apparatus with which to
capture images and data and initiate the card production process. The     
Company's proprietary software controls and integrates the elements within
the SensorMast and links the SensorMast with the rest of the system.      

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.  Visual Inspection System. The Visual Inspection System automatically       
evaluates cards produced by the Company's central production systems to   
determine whether the image and data on a person's identification card    
correspond to the information about that person in the system database. If
the information does not match, the Visual Inspection System rejects the  
printed card and identifies the defect for immediate corrective action.   
This system, which incorporates robotics and high-definition inspection   
 cameras, automates an activity which is otherwise performed manually and is
 a potential source of cost savings for customers. The Company's proprietary
software controls and integrates the various elements of the Visual       
Inspection System and audits the central production manufacturing and     
delivery systems.                                                         

Integration Software and Capabilities. An important aspect of the Company's 
services and ability to deliver solutions for its customers involves the        
design of customized software. Viisage's proprietary software and services      
integrate the various components of its own SensorMast and Visual Inspection    
System as well as integrate the Company's products with the variety of third    
party components and technologies used by its customers. The Company has        
designed software to support all current industry standard operating systems    
(e.g., Unix, Windows NT, Windows 95 and OS/2), network protocols (e.g., Novell  
Netware, TCP/IP and SNA), database products (e.g., Sybase or Oracle) and        
client/server architectures. The Company's software design and systems          
integration capabilities enable it to accommodate most computing environments   
and customers with special requirements.                                        

Customer Service and Support. The Company believes that customer service and
support are critical to its success and has committed significant resources to  
these efforts. Following the installation of its digital identification         
systems, the Company offers extensive customer training and help desk           
telephone support as well as ongoing maintenance services. The Company's        
service and support teams, which vary depending on the customer and contract,   
are able to draw extensively upon the expertise of the Company's software and   
hardware engineers. For some contracts, particularly when there are a large     
number of installations, the Company has contracted with third party service    
organizations for maintenance support, a practice the Company intends to        
continue.                                                                       

Contracts and Pricing of Systems and Services. The Company typically        
provides its digital identification systems and solutions pursuant to           
contracts which generally have five-year terms, provide for renewal options     
and have an implementation phase of six-to-twelve months. Particular system     
elements, products and services are not separately priced, but are instead      
included within an overall contract price that varies depending on, among       
other factors, design and integration complexities, the number of sites and     
installations, the projected number of cards to be produced, the level of       
desired post-installation support and the competitive environment. Depending    
on the contract, the Company may also be responsible for the provision of       
consumables (printer ribbons, cards, holographic overlays, etc.) required for   
the production of cards, in which case the Company builds such costs into its   
overall contract price. Consulting services are also available separately. The  
Company's contracts are typically awarded pursuant to a formal bid process.     
See "--Sales and Marketing" and "Risk Factors--Burdens Imposed by Public        
Sector Customers." As of June 30, 1996, the estimated total amount of revenue   
under the Company's contracts generally ranges up to $10 million per contract.  

Facial Recognition Technologies                                               

Background. The Company is working to improve the technology used in        
security and fraud control through the development of facial recognition        
technologies. The Company has three facial recognition products which it is     
currently testing in pilot programs and plans to make generally available in    
the first quarter of 1997. The Company has focused on the facial image as a     
key biometric because the human face is a unique and prominent feature that     
can be easily captured (in image) by a digital camera and verified visually.    
The Company's technologies enable facial databases to be searched quickly and   
accurately for identification and verification purposes.                        

The Company's facial recognition software is based on technology developed  
by Professor Alex Pentland of the Massachusetts Institute of Technology. The    
Company licenses that technology through Facia Reco, an entity formed by Dr.    
Pentland. See "--Intellectual Property and Proprietary Rights." While Dr.       
Pentland's software forms the basis of the Company's facial recognition         
technologies, the Company believes that the proprietary software it has         
developed is integral to making these technologies commercially viable.         

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The Company's facial recognition technologies are based on the premise that 
certain facial features tend to be associated with each other. For example,     
the combination of a thin nose and high forehead could constitute a face type.  
As a person is added to the database, his or her face types--known as           
"eigenfaces"--are measured against the eigenfaces of the "average" face         
created by the software through its compilation of all the faces in the         
database. This average face appears as an androgynous image. The difference     
between the eigenfaces of the person being enrolled and the eigenfaces of the   
average face is depicted numerically and becomes a unique identifier. The       
Company's software calculates that numeric depiction, indexes the data and      
stores it in a computer database and allows for searches using the numeric      
identifier rather than facial images or other depictions. This numeric          
depiction requires less database space and a smaller amount of bandwidth for    
electronic communication than a visual image. The Company believes that these   
features significantly increase the speed and cost effectiveness of its         
products as compared to competing facial recognition technologies based on      
neural networks.                                                                

The Company's facial recognition technologies are designed to compare one   
face to many faces stored in a database ("identification") or to compare one    
face to a particular face stored in a database ("verification"). Verification   
is less complex than identification because only a single comparison is         
necessary, while identification requires many more comparisons. The Company     
has recently announced facial recognition products that perform real-time       
identification, which the Company believes will be necessary for such products  
to achieve market acceptance.                                                   

[SCHEMATIC DEPICTION OF FUNCTIONS PERFORMED BY THE COMPANY'S FACIAL 
RECOGNITION PRODUCTS] 

Facial Recognition Process Flow 

Capture                         Take digital image        

Eye-Find                        Mark eyes electronically  
                          as a reference point

Mask                            Capture only facial       
              features

Compare                         Compare eigenfaces or     
                    "average" face

Identify                        Create a unique           
                          numerical identifier

Search        Face Base         Verify or identify        

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For identification searches, the computer constructs the numeric depiction  
of the person being enrolled and searches for the closest measurement of a      
face already in the database. The software performs a numeric table look-up     
and completes the search within seconds. The system then displays images of     
the persons in the database which most closely resemble the enrollee's image.   
The Company's software can also determine whether a face appears in the         
database more than once. This can be used to determine, for example, whether a  
person is applying for multiple driver's licenses or welfare benefits. This     
approach could also be used to identify an unknown person by comparing his or   
her photo image to those of individuals stored in databases.                    

For verification searches, the software compares the target face to a       
particular facial image stored in the database to determine whether there is a  
match. Since eigenface measurements can be included in a smart card or on a     
barcode, a comparison of the facial data stored on an identification card with  
the actual face of the card holder can be used for verification purposes. This  
can be used to control access to both secure and public facilities, ATMs and    
networks and databases. Verification can also have applications for identity    
confirmation at the point of sale or service.                                   

Facial Recognition Products and Services. The Company has three facial      
recognition products which it is currently testing in pilot programs and plans  
to make generally available in the first quarter of 1997. There can be no       
assurance, however, that the pilot programs will be successful or that the      
Company will not experience delays or difficulties in the introduction, sale    
and integration of these facial recognition products. Nor can there be any      
assurance that any of its facial recognition products will adequately meet the  
requirements of the marketplace and achieve or sustain market acceptance.       

.  Viisage Quality Advisor. This software product enables the analysis of the 
quality of digital images in a database. Image quality can be measured    
 against pass/fail criteria set by the customer to identify both substandard
images and more systemic problems or patterns (e.g., that a large         
percentage of the images captured at a particular branch are defective).  
Viisage Quality Advisor is currently being tested by a state welfare      
department.                                                               

.  Viisage Registry. This software product can be used to enable database     
search capabilities by enrolling faces in a database and searching the    
 database to determine whether a face appears more than once. This search is
used for one-to-many identifications. This product is currently undergoing
testing by a state welfare department.                                    

.  Viisage Gallery. This software product is designed to perform one-to-one   
 face verification at a point-of-sale or transaction device, such as an ATM.
The Company has entered into a letter of intent with a major international
bank for the use of the Viisage Gallery, as well as Viisage's Quality     
Advisor and Registry products, in one of its branches.                    

The Company intends to offer its facial recognition software products as    
enhancements to its digital identification systems. The Company also plans to   
offer its facial recognition software to customers using other providers'       
identification systems and to the users of such third party databases.          

PRODUCT DEVELOPMENT                                                             

The Company has made research and development an important part of its      
operating discipline. The Company's research efforts during its first three     
years of operations centered on making its systems capable of supporting a      
wide range of computing environments. The Company's current development         
activities are focused on its facial recognition products and the further       
commercialization of its facial recognition technology. In addition, among      
other projects, the Company continues its development activities in the area    
of platform engineering and is developing enhancements to the SensorMast as     
well as point-of-sale device prototypes.                                        

In addition to its own development efforts, the Viisage Technology Division 
has also benefited from research and development conducted by Lau for projects  
that were not related to the Viisage Technology Division and, through Lau's     
license with Facia Reco, from certain research activities at the Massachusetts  
Institute of Technology. Following the transfer discussed above, the Company    
believes that it will continue to benefit from such activities under license    
arrangements with Lau and Facia Reco. See "Relationships and Certain            
Transactions with Lau Technologies--License Agreement."                         

During the fiscal years ended December 31, 1993, 1994 and 1995, the Company 
spent $47,000, $201,000 and $1.1 million respectively, on research and          
development; the corresponding figures for the six months ended                 

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July 2, 1995 and June 30, 1996 were $597,000 and $128,000, respectively. Such   
figures do not include amounts for specific projects that are allocated to      
project costs. See "Management's Discussion and Analysis of Financial           
Condition and Results of Operations."                                           

CUSTOMERS AND END USERS                                                         

The Company's solutions are marketed to public and private sector customers 
who are concerned about maintaining or increasing security, reducing fraud and  
controlling costs. The Company currently has contracts with several state       
departments of motor vehicles for the production of drivers' licenses as well   
as with other public sector customers to produce welfare cards, pistol          
permits, prison cards, electronic benefits transfer cards and immigration       
cards. The Company envisions that public sector databases will ultimately have  
applications for the private sector. Commercial applications may involve        
access to ATMs, computer networks and databases, and facilities, as well as     
retail point-of-sale transaction processing and benefits administration.        

As of October 8, 1996, the Company's proprietary digital identification     
system products were operating at over 365 locations under multi-year           
contracts with twelve public sector agencies (either via contract or, in        
certain circumstances, as a subcontractor). The following lists and             
categorizes those customers and end users:                                      

STATE DEPARTMENTS OF MOTOR VEHICLES                                         

Arizona Department of Transportation                                    
Massachusetts Registry of Motor Vehicles                                
North Carolina Department of Transportation                             
Ohio Bureau of Motor Vehicles                                           

OTHER STATE AND LOCAL AGENCIES                                              

Auburn (Massachusetts) Police Department                                
Connecticut Department of Public Safety                                 
Connecticut Department of Social Services                               
Massachusetts Department of Transitional Assistance                     
New York Department of Social Services *                                
Ohio Department of Public Safety                                        

FEDERAL AGENCIES                                                            

U.S. Immigration and Naturalization Service *                           

FOREIGN CONTRACTS                                                           

Electoral Office of Jamaica*                                            
First National Bank of Southern Africa, Limited+                        

* By subcontract.                                                         
+ Letter of intent.                                                       

Revenues from the Massachusetts Registry of Motor Vehicles accounted for all
of the Company's 1993 and 1994 revenues. Three customers (Ohio Bureau of Motor  
Vehicles, Arizona Department of Transportation and the Massachusetts Registry   
of Motor Vehicles) each accounted for over 10% of revenues in 1995. For the     
six months ended June 30, 1996, four customers (New York Department of Social   
Services, Massachusetts Registry of Motor Vehicles, U.S. Immigration and        
Naturalization Service (by subcontract) and Massachusetts Department of         
Transitional Assistance) each accounted for over 10% of Company revenues. The   
loss of any such customers could have a material adverse impact on the          
Company's business, operating results and financial condition. See "Risk        
Factors--Dependence on Large Orders and Customer Concentration" and "--Risks    
Associated With Lengthy Sales and Implementation Cycles."                       

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SALES AND MARKETING                                                             

The Company markets its products directly through its internal sales force, 
which consisted of six individuals as of June 30, 1996. As it continues to      
increase its bid activity, the Company anticipates that it will increase the    
number of its sales and marketing personnel. In addition, the Company intends   
to ally strategically with prominent vendors, systems integrators and service   
organizations, particularly in international markets, in order to gain access   
to such organizations' existing relationships, marketing resources and          
credibility in new markets.                                                     

The Company's engineering department supports the direct sales staff by     
providing pre- and post-sale technical support. This support entails            
travelling with sales representatives to help explain the systems, defining     
solutions for customers, designing systems for proposal activity, supporting    
the implementation process and providing post-implementation support.           

The Company's systems are generally provided to public sector customers     
through a formal bidding process. The Company's sales and marketing personnel   
regularly conduct visits and attend industry trade shows to identify bid        
opportunities and particular customer preferences and to establish and          
cultivate relationships in advance of any bid. Once a request for proposals is  
issued, a six-to-twelve month proposal and award process ensues, followed by    
(if the bid is successful) a six-to-twelve month implementation and             
installation phase. In the aggregate, the time needed for agencies to secure    
funding for systems, the request for proposal and bid process, the execution    
of actual contracts and the installation of a system can extend over several    
years. Further, customers may seek to modify the system either during or after  
the implementation of the system. While this long sales and implementation      
cycle requires the commitment of marketing resources and investments of         
working capital, the Company believes that it also serves as a barrier to       
entry for smaller companies and as an early indicator of potential competitors  
for particular projects. For existing customers, a considerably shorter sales   
and implementation cycle may be involved. See "Risk Factors--Dependence on      
Large Orders and Customer Concentration" and "--Risks Associated With Lengthy   
Sales and Implementation Cycles."                                               

BACKLOG                                                                         

The Company measures backlog based on signed contracts, subcontracts and    
customer commitments for which revenue has not yet been recognized. However,    
backlog is not necessarily indicative of future revenue. A substantial amount   
of the Company's backlog can be cancelled at any time without penalty, except,  
in some cases, for the recovery of the Company's actual committed costs and     
profit on work performed through the date of cancellation. Any failure of the   
Company to meet an agreed-upon schedule could lead to the cancellation of the   
related order. The timing of award and performance on contracts as well as      
variations in size, complexity and requirements of the customer and             
modifications to contract awards may result in substantial fluctuations in      
backlog from period to period. Accordingly, the Company believes that backlog   
cannot be considered a meaningful indicator of future financial performance.    

The Company recognizes revenue on a percentage-of-completion basis. Revenue 
recognition may be delayed by the delivery of components, special software      
requirements of the customer, or by delays in integration with the customer's   
systems. At June 30, 1996, the Company's backlog was approximately $37.0        
million, compared to $26.0 million at July 2, 1995. Approximately 30% of the    
Company's backlog as of June 30, 1996, is expected to be earned during the      
current fiscal year.                                                            

MANUFACTURING                                                                   

Substantially all proprietary subsystems and assemblies are made to the     
Company's specifications by contract manufacturers, including Lau. See          
"Relationship and Certain Transactions with Lau Technologies." Other non-       
proprietary system components, such as personal computers, printers and         
related components, are purchased from third-party vendors. The Company's       
manufacturing operations consist solely of integration and testing. Systems go  
through several levels of testing, including configuration to customer          
specifications, prior to installation.                                          

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The Company generally purchases major contracted assemblies from single     
vendors to help ensure high quality, prompt delivery and low cost. The Company  
does, however, qualify second sources for most components, contracted           
assemblies and purchased subsystems, or at least identifies alternative         
sources of supply. The Company believes that the open architecture of its       
systems facilitates substitution of components or software when this becomes    
necessary or desirable. The Company has from time to time experienced delays    
as a result of the availability of component parts and assemblies, although     
the Company has never failed to meet a contractual requirement as a result of   
such delays. There can be no assurance that the Company will not experience     
such problems in the future, or that such problems will not have a material     
adverse effect on the Company's operations. See "Risk Factors--Dependence on    
Sole or Limited Sources of Supply."                                             

COMPETITION                                                                     

The market for the Company's products and services is extremely competitive 
and management expects this competition to intensify as the markets in which    
the Company's products and services are sold continue to develop.               

The Company faces competition in the identification systems market (for both
digital and conventional systems) from technologically sophisticated            
companies, including Polaroid Corporation, Unisys Corporation, DataCard         
Corporation, and NBS Imaging Systems, Inc., all of which have substantially     
greater technical, financial, and marketing resources than the Company. In      
some cases, the Company may be competing with an entity which has a pre-        
existing relationship with a potential customer which could put the Company at  
a significant competitive disadvantage. As the digital identification market    
expands, additional competitors may seek to enter the market.                   

The Company believes that competition in the digital identification systems 
market is based primarily upon the following factors: systems and product       
performance; price; flexibility in terms of accommodating customer needs,       
architectures, platforms, systems and networks; and service support. The        
relative importance of each of these and other factors depends upon the         
specific customer and situation involved. Substantially all of the Company's    
sales to new customers have been the result of competitive bidding for          
contracts pursuant to public sector procurement rules, which generally          
increases the importance of price as a competitive factor. The Company          
believes that its competitive strength lies primarily in its systems            
integration and software design capabilities, with additional strengths         
including system performance and proprietary technologies, system               
configuration flexibility, price, and relative ease of use. Nevertheless,       
there can be no assurance that the Company will be able to compete              
successfully with the companies mentioned above, or that new entrants, which    
may include foreign companies which may have substantially greater resources    
than the Company, will not seek to enter the digital identification systems.    

In the field of biometric identification technology, the Company competes   
with other facial recognition providers as well as other providers of           
biometric solutions. Fingerprint recognition solutions have a long history of   
use, particularly in law enforcement applications. Other current suppliers of   
facial recognition solutions are software development firms. The Company        
expects that as the market for biometric solutions develops, companies with     
significant resources and capabilities may enter the market and competition     
will intensify.                                                                 

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS                                    

The Company's business is substantially dependent on intellectual property  
which it licenses from Lau Technologies under an exclusive, perpetual,          
irrevocable, paid-up, royalty-free, worldwide license to use all of the         
technology relating to the Viisage Technology Division except for controlling   
human entry through doorways, gates, turnstiles, or similar thresholds in and   
to buildings or facilities located on properties owned or controlled by the     
United States federal government, or any other national government, using       
apparatus at the entry point ("federal access control"). See "Relationship and  
Certain Transactions with Lau Technologies--License Agreement" for a            
description of the license with Lau. The Company is also dependent on           
technology it licenses from Facia Reco. This license is exclusive in the field  
that relates to de-duplicating or querying databases created, controlled        
and/or managed by the Company or its sublicensees and/or utilizing, directly    
or indirectly, personal identification cards but does not extend to federal     
access control. This license includes rights in that same field to Facia        
Reco's exclusive license of patented technology from the Massachusetts          
Institute of                                                                    

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Technology (except for certain rights granted to sponsors of the Massachusetts  
Institute of Technology Media Lab and certain research rights). The Company's   
license agreement with Facia Reco terminates upon the expiration of the final   
patent covered under or through the license, and provides for a royalty of      
$350 per machine copy incorporating the licensed technology. Until the year     
2002, a minimum annual royalty applies of, generally, $21,000 for the U.S.      
rights and a figure ranging from $21,000 to $42,000 for the non-U.S. rights.    

Lau currently has four U.S. patent applications outstanding and has made    
copyright filings which relate to the Company's SensorMast, Visual Inspection   
System and proprietary software. Lau has filed foreign patent applications      
which correspond to three of these domestic applications. The Company's         
license agreement with Facia Reco includes the right to use and sublicense      
certain U.S. patents and registered copyrights for facial recognition systems   
which Facia Reco, licenses from the Massachusetts Institute of Technology and   
Intelligent Vision Systems, Inc. The Massachusetts Institute of Technology has  
applied to extend its patent rights to certain jurisdictions in Europe and in   
Singapore. One of Lau's four filed patent application is directed to an         
enhancement of one of the patents licensed to Lau by Facia Reco. At Lau's       
request and expense, MIT has filed for a broadening reissue patent. Any         
broadening reissue patent will be licensed through Facia Reco.                  

There can be no assurance that any of the U.S. or foreign patents applied   
for by Lau or the foreign patents applied for by the Massachusetts Institute    
of Technology will be issued or that, if issued, they will provide protection   
against competitive technologies or will be held valid and enforceable if       
challenged. Moreover, there can be no assurance that the Company's competitors  
would not be able to design around any such proprietary right or obtain rights  
that the Company would need to license or circumvent in order to practice       
under these patents and copyrights. See "Risk Factors--Limited Protection of    
Intellectual Property and Proprietary Rights."                                  

Although there are no pending lawsuits against the Company regarding        
infringement of any existing patents or other intellectual property rights,     
the Company recently received a letter from an attorney on behalf of the        
holder of a patent on a system for scanning and encoding images from a          
personal identification card. Although the Company believes that its product    
does not infringe such patent, there can be no assurance that such patent       
holder will not initiate litigation with respect to this patent or allege       
additional claims. There can be no assurance that the Company would prevail in  
any litigation seeking damages or expenses from the Company or to enjoin the    
Company from selling its products on the basis of any alleged infringement.     
See "--Legal Proceedings."                                                      

In some cases, litigation or other proceedings may be necessary to defend   
against or assert claims of infringement, to enforce patents issued to the      
Company or its licensors, to protect trade secrets, know-how or other           
intellectual property rights owned by the Company, or to determine the scope    
and validity of the proprietary rights of third parties. Such litigation could  
result in substantial costs to and diversion of resources by the Company. An    
adverse outcome in any such litigation or proceeding could subject the Company  
to significant liabilities, require the Company to cease using the subject      
technology or require the Company to license the competing technology from the  
third party, all of which could have a material adverse effect on the           
Company's business, financial condition and results of operations. If any such  
licenses are required, there can be no assurance that the Company will be able  
to obtain any such license on commercially favorable terms, if at all. See "--  
Legal Proceedings."                                                             

EMPLOYEES                                                                       

As of July 26, 1996, the Company had 42 employees, including 9 in           
engineering, 21 in operations, 7 in sales and marketing and 5 in general and    
administrative positions. The Company from time-to-time supplements its         
employee forces with independent contractors. As of July 26, 1996, the Company  
had 11 such contractors, mostly in the area of engineering and operations.      

The Company believes that its future success will depend in large part upon 
its continued ability to recruit and retain highly qualified technical,         
managerial and marketing personnel. To date, the Company has been successful    
in attracting and retaining skilled employees. None of the Company's employees  
is represented by a labor union, and the Company considers its relationship     
with its employees to be good.                                                  

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FACILITIES                                                                      

The Company's facilities are located in Acton, Massachusetts. The Company   
occupies approximately 15,000 square feet of space and has access to common     
areas under the terms of a Use and Occupancy Agreement with Lau Technologies.   
The term of the Use and Occupancy Agreement extends to the end of Lau's lease   
for the premises which expires on February 23, 1997, but may be terminated by   
the Company on 30 days' prior written notice to Lau. See "Relationship and      
Certain Transactions with Lau Technologies--Use and Occupancy Agreement."       

LEGAL PROCEEDINGS                                                               

The Company recently received a letter from an attorney on behalf of the    
holder of a patent on a system for scanning and encoding images from a          
personal identification card. Although the Company believes that its product    
does not infringe such patent, there can be no assurance that such patent       
holder will not initiate litigation with respect to this patent or allege       
additional claims. There can be no assurance that the Company would prevail in  
any litigation seeking damages or expenses from the Company or to enjoin the    
Company from selling its products on the basis of any alleged infringement.     
See "Risk Factors--Limited Protection of Intellectual Property and Proprietary  
Rights."                                                                        

On September 23, 1996, three minority shareholders of Lau filed suit against
Lau, the Company and others in Superior Court in Berkshire County,              
Massachusetts, alleging that certain defendants breached the fiduciary duty     
owed the plaintiffs as shareholders of Lau. The plaintiffs requested, among     
other things, an injunction to delay this offering in an effort to obtain a     
direct, rather than an indirect, ownership interest in the Company. On October  
4, 1996, the Superior Court denied plaintiffs' request for such relief,         
although plaintiffs' claims for unspecified money damages remain pending. Lau   
has agreed to indemnify and hold the Company harmless for any liabilities       
incurred by the Company as a result of judgments, settlements or litigation     
expenses arising out of this suit. Accordingly, the Company does not believe    
that the resolution of this matter would have a material adverse effect on its  
business, financial condition or results of operations.                         

RELATIONSHIP AND CERTAIN TRANSACTIONS WITH LAU TECHNOLOGIES 

Prior to this offering, the Company has operated as the Viisage Technology  
Division of Lau Technologies. Viisage Technology, Inc. was incorporated in      
Delaware on May 23, 1996. Pursuant to a series of agreements described below,   
on November 6, 1996 , Lau transfered substantially all of the assets and        
liabilities of its Viisage Technology Division to Viisage.                      

Lau Technologies is an integrator of sophisticated electronic systems based 
in Acton, Massachusetts. Lau was founded in 1990 and employs approximately 205  
people (excluding the employees of the Viisage Technology Division). Its        
Chairman, Chief Executive Officer and majority stockholder is Joanna T. Lau.    
Denis K. Berube, the Chairman of the Board of Directors of the Company, serves  
as the Executive Vice-President and General Manager of Lau and is married to    
Ms. Lau. See "Risk Factors--Potential Conflicts of Interest."                   

ASSET TRANSFER AGREEMENT WITH LAU                                               

The Company and Lau are parties to an Asset Transfer Agreement, which was   
amended and restated as of August 20, 1996 (the "Asset Transfer Agreement").    
Under the terms of the Asset Transfer Agreement, on November 6, 1996 the        
Company issued to Lau 5,680,000 shares of Common Stock (which will comprise     
all of the outstanding Common Stock other than the shares being sold in this    
offering) in exchange for substantially all of the assets, properties and       
business formerly constituting the Viisage Technology Division of Lau. In       
connection with this transaction, the Company agreed to assume substantially    
all the obligations and liabilities of Lau relating to the Viisage Technology   
Division. Each party has covenanted not to compete with the other for ten       
years. The Company's obligation not to compete with Lau is limited to the       
field of federal access control. The Asset Transfer Agreement, which includes   
representations and warranties from each party and indemnification provisions   
customary for an agreement of this nature, was conditioned upon the parties'    
entering into the Administration and Services Agreement and Use and Occupancy   
Agreement between the parties described below.                                  

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TAX ALLOCATION BETWEEN LAU AND VIISAGE                                          

Prior to the closing of the Asset Transfer Agreement, the Company was       
included in Lau's tax returns, but, for accounting purposes, income taxes were  
recorded as if the Company had filed its own separate tax returns. After the    
closing of the Asset Transfer Agreement, the Company will file its own          
separate tax returns. Any tax liability or refund that may arise relating to    
periods when the Company was a division of Lau is covered by a tax              
indemnification arrangement contained in the Asset Transfer Agreement. The      
indemnification provides for Lau to pay or receive reimbursement from the       
Company for any tax adjustment relating to the Viisage Technology Division for  
all periods prior to the consummation of the asset transfer if such             
adjustments will result in tax expense or tax benefit, as the case may be, to   
the Company.                                                                    

LICENSE AGREEMENT                                                               

Prior to this offering, the Company operated as a division of Lau and had   
broad access to the proprietary and licensed technology of Lau. The Company     
has entered into a License Agreement with Lau (the "License Agreement"), which  
became effective on November 6, 1996 pursuant to which Lau has granted Viisage  
an exclusive, perpetual, irrevocable, paid-up, royalty-free, worldwide license  
(with sublicensing rights) for all of the technology relating to the Viisage    
Technology Division. Such license does not allow the Company to use the         
technology in the federal access control field. Lau has retained the right to   
use such technology solely in the federal access control field. The licensed    
rights include all of Lau's technologies relating to SensorMast, the Visual     
Inspection System and facial recognition technology developed by Lau. See       
"Business--Intellectual Property and Proprietary Rights." In addition, under    
the terms of the License Agreement, Lau must disclose and provide to Viisage    
improvements to the licensed technology and Viisage must disclose and provide   
to Lau modifications it makes to the licensed technology for use in federal     
access control without any additional charge. See "Business--Intellectual       
Property and Proprietary Rights."                                               

ADMINISTRATION AND SERVICES AGREEMENT                                           

Lau has provided various services to its Viisage Technology Division since  
its inception, including, but not limited to, general accounting, data          
processing, payroll, human resources, employee benefits administration and      
certain executive services. Amounts reflected in the Company's financial        
statements as fees charged by Lau reflect the costs of these services, and      
amounted to approximately $280,000, $710,000, and $1.1 million, in 1993, 1994,  
and 1995, respectively, and $540,000 and $330,000 in the first six months of    
1995 and 1996, respectively. The Company does not believe that there would      
have been a material impact on its operations if the Company had obtained such  
services independent of Lau. See Note 3 of Notes to Financial Statements.       

In connection with this offering, the Company and Lau have entered into an  
Administration and Services Agreement (the "Services Agreement") for the        
purpose of defining their ongoing relationships. Under the Services Agreement,  
Lau will make available to the Company for so long as the Use and Occupancy     
Agreement between the parties described below remains in effect (February 23,   
1997, unless extended by the parties or earlier terminated by Viisage on 30     
days' notice) many of the same services currently provided to the Company, and  
will be paid for those services a fee of $55,000 per month, subject to          
adjustment as described below. This fee, payable in advance on the first day    
of each month, has been determined by Lau and the Company to be consistent      
with the historical cost for providing these services. Either party may reduce  
or modify the level of services to be provided, in which event the fee payable  
by the Company will be appropriately reduced or modified. The Services          
Agreement provides that Lau will not be liable for any loss or damage suffered  
by the Company in connection with Lau's provision of services except to the     
extent of the amounts billed or billable. To compensate Lau for fixed costs in  
making services available, the Company shall be required to pay fees for such   
services whether or not the Company elects to utilize such services until the   
Services Agreement is terminated as to those services. The Company believes     
that these fees are substantially equivalent to those that would be charged by  
such third parties or the cost that would be incurred in providing such         
services internally.                                                            

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USE AND OCCUPANCY AGREEMENT                                                     

The Company and Lau have entered into a Use and Occupancy Agreement which   
contains the terms and conditions relating to the Company's continued use and   
occupancy of certain office space for its corporate headquarters, which is      
part of the office space currently occupied by Lau. The terms of this           
Agreement provide that the Company has the right to occupy the space at Lau's   
premises formerly occupied by Viisage Technology Division until February 23,    
1997. The Company is required to pay Lau an occupancy fee equal to a            
percentage of the rent, property taxes, utilities, insurance and other charges  
payable by Lau with respect to the premises, based on the portion of the total  
area of the premises occupied and related services used by the Company. The     
Use and Occupancy Agreement may be terminated by either Lau on six (6) months'  
notice or by Viisage on thirty (30) days' notice. The monthly occupancy fee     
initially payable by the Company is estimated to be $18,333 in 1996. Amounts    
charged by Lau to Viisage for occupancy costs in prior periods consisted of     
$40,000, $90,000 and $140,000 in 1993, 1994 and 1995, respectively, and         
$70,000 and $110,000 for the six months ended July 2, 1995 and June 30, 1996,   
respectively.                                                                   

ADDITIONAL TRANSACTIONS                                                         

The Company from time to time has purchased or contracted for, and will     
likely continue to purchase or contract for from time to time, certain system   
components and technical personnel from Lau. The amounts for such components    
and services were approximately $282,000 in 1993, $1.4 million in 1994 and      
$2.8 million in 1995, and $2.0 million and $1.0 million for the first six       
months of 1995 and 1996, respectively.                                          

From the inception of the Viisage Technology Division until July 1, 1996,   
entities controlled by Yona Wieder, Vice President Marketing & Sales,           
Worldwide Public Sector of the Viisage Technology Division, provided            
consulting services to the Division. Amounts paid by Lau (and allocated to the  
Viisage Technology Division) to such entities were $199,000, $313,000 and       
$519,000 during 1993, 1994 and 1995, respectively, and $221,000 and $289,000    
during the first six months of 1995 and 1996, respectively. Until October       
1994, such services were provided by Novatech, Inc., a corporation one-third    
owned by Mr. Wieder and which he served as President. From October 1994         
through June 1996, such services were provided by YW Technologies, Mr.          
Wieder's sole proprietorship.                                                   

POLICY ON AFFILIATE TRANSACTIONS                                                

The Company has adopted a policy, included in its By-Laws, that all material
transactions between the Company and its officers, directors, and other         
affiliates (including Lau and its affiliates) must (i) be disclosed by the      
officer, director or affiliate and approved by a majority of the disinterested  
members of the Company's Board of Directors; (ii) be disclosed by the officer,  
director or affiliate and approved by vote of the stockholders; or (iii) be on  
terms no less favorable to the Company than could be obtained from              
unaffiliated third parties and determined as fair to the Company by its         
directors or the stockholders in accordance with the Delaware General           
Corporation Law.                                                                

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MANAGEMENT  

EXECUTIVE OFFICERS AND DIRECTORS                                                

The executive officers and directors of the Company are as follows:         

                                                                [Download Table]

                 NAME                  AGE POSITION                             
                 ----                  --- --------                             
                                                                                
Denis K. Berube.......................  54 Chairman of the Board                
Robert C. Hughes......................  56 President and Chief Executive Officer
William A. Marshall...................  44 Chief Financial Officer and Treasurer
Yona Wieder...........................  48 Vice President Marketing & Sales,    
                                            Worldwide Public Sector             
Robert J. Schmitt, Jr.................  53 Vice President Marketing & Sales,    
                                            Worldwide Private Sector            
Charles J. Johnson....................  41 Director and Secretary               
Harriet Mouchly-Weiss(1)..............  54 Director                             
Peter Nessen(1)(2)....................  60 Director                             
Thomas J. Reilly(1)(2)................  57 Director                             

--------                                                                        
(1) Member of the Compensation Committee.                                       
(2) Member of the Audit Committee.                                              

DENIS K. BERUBE has served as Executive Vice President and General Manager  
of Lau Technologies since co-founding it in 1990 and has chaired the Viisage    
Technology Division Advisory Board since the Board's formation in October       
1995. Since the Company's incorporation in May 1996, Mr. Berube has served as   
Chairman of its Board of Directors. Mr. Berube is married to Joanna T. Lau,     
the Chairman, Chief Executive Officer and majority stockholder of Lau           
Technologies.                                                                   

ROBERT C. HUGHES has served as President and Chief Executive Officer of the 
Viisage Technology Division of Lau since August 1995 and holds the same         
position with the Company. Mr. Hughes was Vice President, Worldwide Sales and   
Service, at Data General Corporation, a computer systems vendor, from April     
1993 through March 1995. Mr. Hughes was Chief Operating Officer at Bachman      
Information Systems, a provider of software engineering products and services,  
from April 1992 to April 1993. He was a senior manager at Digital Equipment     
Corporation, a computer systems and services vendor, from December 1976 to May  
1992, serving as Corporate Officer and Vice President from 1984 to 1992.        

WILLIAM A. MARSHALL has served as Chief Financial Officer of the Viisage    
Technology Division of Lau since December 1995 and serves as Chief Financial    
Officer and Treasurer of the Company. From September 1994 through November      
1995, Mr. Marshall was an independent consultant, providing general management  
and financial consulting services. Mr. Marshall was a partner with KPMG Peat    
Marwick LLP, a public accounting firm, from July 1987 through August 1994. Mr.  
Marshall is a certified public accountant.                                      

YONA WIEDER served as a consultant to the Viisage Technology Division from  
its inception through June 1996 and joined the division as its Vice President   
of Marketing & Sales, Worldwide Public Sector in July 1996. He holds the same   
position with the Company. Mr. Wieder was President and a principal of YW       
Technologies, a management consulting and marketing organization, from          
September 1994 through June 1996. He was President of Novatech, Inc., a         
management consulting organization, from May 1991 to September 1994.            

ROBERT J. SCHMITT, JR. has served as Vice President of Marketing & Sales,   
Worldwide Private Sector of the Viisage Technology Division since June 1996     
and will hold the same position with the Company. Mr. Schmitt was employed by   
Digital Equipment Corporation from 1977 through May 1996, serving as Manager    
of Technical Support from June 1991 to February 1993 and as Vice President of   
Marketing from February 1993 through May 1996.                                  

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CHARLES J. JOHNSON has served as a Director of Viisage since its            
incorporation in May 1996 and earlier served on the Advisory Board of the       
Viisage Technology Division. Mr. Johnson is a member of the law firm,           
Finnegan, Hickey, Dinsmoor & Johnson, P.C., in Boston, Massachusetts, which     
serves as counsel to the Company and Lau.                                       

HARRIET MOUCHLY-WEISS has served as a Director of Viisage since its         
incorporation in May 1996, and earlier served on Viisage's Advisory Board. Ms.  
Mouchly-Weiss founded Strategy XXI Group, an international communications and   
consulting firm in January 1993 and has served as managing partner since that   
time. From 1986 to December 1992, Ms. Mouchly-Weiss was President of GCI        
International, an international public relations and marketing agency.          

PETER NESSEN has served as a Director of Viisage since its incorporation in 
May 1996 and earlier served on its Advisory Board. Mr. Nessen has been          
Chairman of the Board of NCN Financial Corporation, a private banking firm,     
since January 1995. From June 1993 through December 1994, Mr. Nessen was a      
Dean at Harvard Medical School, responsible for special projects. Mr. Nessen    
was Secretary of Administration and Finance for the Commonwealth of             
Massachusetts from January 1991 through May 1993 and managing partner of the    
consulting practice in the Boston office BDO Seidman LLP, an accounting firm,   
from February 1990 through December 1990.                                       

THOMAS J. REILLY has served as a Director of Viisage since its incorporation
in May 1996 and earlier served on its Advisory Board. Mr. Reilly has been a     
self-employed financial consultant since December 1994. From June 1966 through  
November 1994, Mr. Reilly was with Arthur Andersen LLP, a public accounting     
firm, and became a partner in 1975.                                             

Under the Company's Certificate of Incorporation and By-Laws, the Company's 
Board of Directors is divided into three classes. The members of each class of  
directors serve for staggered three-year terms. Denis K. Berube is the sole     
Class I director (whose term expires in 1997); the Class II directors (whose    
term expires in 1998) are Charles J. Johnson and Harriet Mouchly-Weiss; and     
the Class III directors (whose term expires in 1999) are Peter Nessen and       
Thomas J. Reilly. All directors hold office until the annual meeting of         
stockholders at which their term expires and until their successors have been   
duly elected and qualified. There are no family relationships between any of    
the directors or executive officers of the Company.                             

Executive officers of the Company are elected by the Board of Directors on  
an annual basis and, subject to employment agreements with Messrs. Hughes,      
Marshall and Wieder, serve until their successors have been duly elected and    
qualified.                                                                      

DIRECTOR COMPENSATION                                                           

From October 1995 to June 1996, each director served on the Advisory Board  
to the Viisage Technology Division and in such capacity received $1,000 per     
meeting of the Advisory Board. For their service as directors, each director    
receives $1,000 per month. The Board has previously met on a monthly basis,     
although meetings in the future may be held less frequently. In addition,       
directors are reimbursed by the Company for their out-of-pocket expenses in     
connection with attending any Board or committee meeting. Directors do not      
currently receive any fees for service on any committee of the Board.           

Directors also received option grants under the Company's 1996 Directors'   
Plan (the "Director Plan"). Under the Director Plan, each director has been     
granted an option to purchase 16,330 shares of Common Stock (subject to         
adjustment as provided in the Director Plan) at an exercise price equal to      
$2.96 per share. Of each director's options, 1,420 shares vest upon the date    
of issuance of the shares offered hereby, and 4,970 shares vest upon each of    
the first, second and third anniversaries of the issuance of the options. See   
"--Incentive and Stock Plans."                                                  

EXECUTIVE COMPENSATION                                                          

The following table sets forth certain information with respect to the      
compensation for the year ended December 31, 1995 of Robert C. Hughes,          
President and Chief Executive Officer of the Company.                           

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SUMMARY COMPENSATION TABLE(1) 

                                                                [Download Table]

                                                ANNUAL COMPENSATION             
                                                -------------------  ALL OTHER  
          NAME AND PRINCIPAL POSITION            SALARY     BONUS   COMPENSATION
          ---------------------------           ------------------- ------------
                                                                                
Robert C. Hughes...............................   $67,692   $16,000   $10,139   
 President and Chief Executive Officer                                          

--------                                                                        
(1) No executive officer of the Company (including Mr. Hughes) earned in        
  excess of $100,000 in the fiscal year ended December 31, 1995; nor did any
executive officer of the Company receive or hold any restricted stock or
options or benefit from any other long-term compensation plan or program
during such year.                                                       

EMPLOYMENT AGREEMENTS                                                           

During 1996, Lau Technologies entered into employment agreements with       
Messrs. Hughes, Marshall and Wieder which by their terms will become            
agreements between the individuals and the Company upon the transfer of the     
assets, properties and business of Lau's Visage Technology Division to the      
Company. The agreements are substantially similar, varying principally in each  
executive's respective title and position and in his respective compensation    
level, which in each case includes salary ($220,000 for Mr. Hughes, $140,000    
for Mr. Marshall and $165,000 for Mr. Wieder), a discretionary bonus pursuant   
to the Company's Executive Incentive Compensation Plan (and, in the case of     
Mr. Marshall, a minimum non-discretionary bonus of $35,000 in 1996 and          
reimbursement of relocation costs) and certain health, pension and other        
benefits (including the stock option awards described below). The employment    
agreements expire on February 1, 2001, subject to early termination in the      
event of death or disability of the executive or as otherwise provided          
therein. The employment agreements also have a two year renewal term. The       
Company may terminate the executive's employment with or without "cause" (as    
defined therein), but in the event such termination is without "cause" the      
executive will be entitled to receive severance pay at the current salary and   
bonus levels for two years, in the case of Mr. Hughes, and one year in the      
cases of Messrs. Marshall and Wieder. In addition, the executive may terminate  
his employment in the event of the Company's "non-performance" (as defined in   
the agreements), and will be entitled to the severance described above in the   
event of such a termination. The agreements also contain non-competition        
provisions which generally survive two years beyond the executive's             
termination.                                                                    

INCENTIVE AND STOCK PLANS                                                       

Executive Incentive Compensation Plan                                         

The Company currently maintains an Executive Incentive Compensation Plan for
its executive officers and other key employees of the Company in order to       
motivate members of the Company's executive team. Each participant in the       
Executive Incentive Compensation Plan may receive a percentage of his or her    
base salary based upon the Company's and each participant's individual          
performance, as determined by success in meeting established goals approved by  
the Chief Executive Officer or the Board of Directors. The Compensation         
Committee administers the Plan.                                                 

1996 Management Stock Option Plan                                             

On February 1, 1996, Lau Technologies granted nonqualified options to       
acquire up to an aggregate 1,167,950 shares of Common Stock of Viisage, at an   
exercise price of $2.96 per share, to eight key employees in its Viisage        
Technology Division. Robert C. Hughes, the Company's President and Chief        
Executive Officer, received options to acquire 639,000 shares. On April 15,     
1996, Lau Technologies granted nonqualified options to acquire up to an         
additional 177,500 shares of Company Common Stock, at an exercise price of      
$4.86 per share, to a ninth key employee of its Viisage Technology Division.    
All of these options were ratified by the Board of Directors of the Company     
following its incorporation in connection with the adoption of the 1996         
Management Stock Option Plan described below (the "Option Plan"). Depending on  
the recipient, the options will be vested upon issuance for as few as none or   
as much as one-third of the total number of option shares; with respect to Mr.  
Hughes' options to purchase 639,000 shares, options to purchase 71,000 of such  
shares will vest upon the issuance of the shares of                             

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Common Stock being offered hereby. The balance of option shares will vest in    
seven years, subject to acceleration in benchmark increments based on each      
$1.0 million increase in the current value of the Company's Common Stock over   
a base value of $21.0 million (or, with respect to the options granted April    
15, 1996, $34.5 million), as measured (i) at each fiscal year end, (ii) upon a  
sale or change in control of the Company, or (iii) in the event of a            
termination (or constructive termination) of the option holder as an employee   
without cause, as of the end of the Company's most recent fiscal quarter        
immediately before such termination.                                            

Once a benchmark vesting increment of these nonqualified options has        
occurred, the shares so vested will remain vested even if the value of the      
Company's Common Stock thereafter declines. Achievement of future benchmarks    
will be measured cumulatively based on the highest Common Stock value at which  
the last benchmark incremental acceleration of vesting has occurred, without    
downward adjustment for intervening declines in Common Stock value. With        
limited exceptions (such as continuation of employment by a successor           
corporation that assumes the option, or in the case of one employee, the        
employee's termination without cause or simultaneous hiring, at the request of  
the Company's predecessor, by such predecessor or an affiliate thereof),        
vesting ceases and options for vested shares terminate upon termination of      
employment.                                                                     

The Option Plan was adopted by the Board of Directors in June 1996 to       
effectuate the option grants agreed to by Lau described above and for the       
purpose of providing executive officers and key personnel an opportunity to     
have an ownership interest in the Company. The Option Plan is expected to be    
approved by Lau in its capacity as the Company's sole stockholder following     
the issuance of the common shares to Lau and prior to the issuance of the       
Common Stock offered hereby. The Option Plan is administered by the             
Compensation Committee of the Board of Directors, which currently consists of   
Ms. Mouchly-Weiss and Messrs. Nessen and Reilly. A total of 1,356,100 shares    
of Common Stock are reserved for issuance under the Option Plan. Options under  
the Plan may be either (a) "incentive options" under Section 422 of the         
Internal Revenue Code of 1986, as amended (the "Code"), but only if the Plan    
is approved by the Company's stockholders within one year of its adoption by    
the Board of Directors, or (b) options that do not qualify under Section 422    
of the Code ("nonqualified options"). The Option Plan will remain in effect     
indefinitely (except in the case of incentive options, for which the Plan will  
expire in ten years), unless earlier terminated by the Board of Directors in    
accordance with the Option Plan's terms.                                        

Officers and key employees of the Company, but not directors, are eligible  
to receive options under the Option Plan. The exercise price of incentive       
options under the Option Plan may not be less than the fair market value of     
the underlying shares on the date of grant, except in the case of incentive     
options granted to holders of 10% or more of the total combined voting power    
of the Company, in which case the exercise price may not be less than 110% of   
such fair market value. The exercise price of nonqualified options is to be     
determined by the Stock Option Committee at the time of option issuance.        

Each option under the Option Plan will have a term not to exceed ten years, 
except in the case of incentive options granted to holders of 10% or more of    
the total combined voting power of the Company, with respect to which the term  
may not exceed five years. The Stock Option Committee will determine the        
vesting schedule with respect to any grant of options. All options are subject  
to adjustment in certain events, including any merger, consolidation,           
reorganization or recapitalization of the Company, and may not be exercised     
later than ten years after grant (five years with respect to incentive options  
granted to holders of 10% or more of the total combined voting power of the     
Company). In the event of a change in control of the Company, the Stock Option  
Committee may, in its discretion, (a) terminate all outstanding options with    
at least ten days' (and if circumstances permit, up to 30 days') notice, (b)    
continue application of the options to the securities of the successor          
corporation (with appropriate adjustments), or (c) cause the outstanding        
options to be purchased at a price equal to the difference between the          
exercise price and the current fair value of the shares then vested under such  
options.                                                                        

The Option Plan may be amended from time to time by the Board of Directors, 
subject to the rights of previously issued options, except that any such        
amendment will require a stockholder approval: (i) if affecting incentive       
options in a manner requiring stockholder approval under the Code at a time,    
if any, after the Option Plan has been approved by the Company's stockholders,  
or (ii) if stockholder approval is required under any                           

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applicable federal securities law, the Code, or rules of NASDAQ or any stock    
exchange on which the Company's stock is listed. If options intended to be      
incentive options are issued under the Option Plan and stockholder approval is  
not obtained, such options will be treated as nonqualified options.             

Shares reserved for issuance under an option that is cancelled or           
terminated, and shares that are used in payment of option exercise prices,      
will be restored and made available for reissuance of additional options under  
the Option Plan. The Option Plan permits reload options. With the reload        
option feature, if an option holder pays an option exercise price or option     
withholding tax obligation by assignment and delivery of Company shares that    
have been owned for more than six months, the option holder automatically will  
be issued a new nonqualified option for the number of shares so assigned, with  
an exercise price equal to the fair market value on the date of such exercise   
and a term equal to the then-remaining term of the underlying pre-existing      
option with respect to which such exercise occurred. The existing options will  
contain reload option features.                                                 

1996 DIRECTOR STOCK OPTION PLAN                                                 

On February 1, 1996, Lau Technologies granted nonqualified options to       
acquire up to an aggregate of 81,650 shares of Common Stock in the Company to   
the members of the Viisage Technology Division Advisory Board who now comprise  
the Company's Board of Directors. These options have an exercise price of       
$2.96 per share. These options were ratified by the Board of Directors of the   
Company following its incorporation and comprise the 1996 Director Stock        
Option Plan (the "Director Plan"). The Director Plan expires on December 31,    
1998 (unless terminated earlier in accordance with its terms) and will be       
administered by the Board of Directors. The options to purchase 16,330 shares   
granted to each Director will vest as follows: upon issuance, 1,420 shares,     
and upon each of the first, second and third anniversaries of issuance, 4,970   
shares. Vesting ceases when an option holder ceases to serve on the Company's   
Board of Directors.                                                             

Any additional options issued under the Director Plan after this offering   
will have an exercise price equal to the current fair market value of shares    
of Common Stock on the date of option issuance.                                 

Shares reserved for issuance under an option that is cancelled or           
terminated, and shares that are used in payment of option exercise prices,      
will be restored and made available for reissuance of additional options under  
the Director Plan. The Director Plan does not permit reload options.            

401(K) PLAN                                                                     

The Company will be a participating employer with respect to Lau's existing 
401(k) Plan (the "401(k) Plan"), thereby covering the Company's employees who   
are at least 21 and who have worked at least three months for the Company or    
its predecessor division of Lau. Pursuant to the 401(k) Plan, employees may     
elect to reduce their current compensation by the lesser of up to 15% of base   
compensation or the statutorily prescribed annual limit ($9,500 in 1996) and    
to have the amount of such deduction contributed to the 401(k) plan. The        
401(k) Plan permits, but does not require, additional matching and profit       
sharing contributions to the 401(k) Plan by the Company on behalf of all        
participants in the 401(k) Plan. The 401(k) Plan is intended to qualify under   
Section 401(k) of the Code so that deferrals to the 401(k) Plan by employees    
or contributions by the Company, and the investment earnings thereon, are not   
taxable to employees until withdrawn from the 401(k) Plan and so that           
contributions by the Company, if any, will be deductible by the Company when    
made. The Company's allocation of costs for all periods was not material.       

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION                     

The Company has heretofore been operated as a division of Lau Technologies. 
Accordingly, during the fiscal year ended December 31, 1995, Lau's Board of     
Directors (none of whom serve as directors, officers or employees of Viisage)   
determined executive officer compensation. Joanna T. Lau, who is a member of    
Lau's Board of Directors, is married to the Company's Chairman, Denis K.        
Berube. The Company's Board of Directors has established a Compensation         
Committee to determine and monitor executive compensation going forward. The    
Compensation Committee consists of Ms. Mouchly-Weiss and Messrs. Nessen and     
Reilly, none of whom are officers or employees of the Company and none of whom  
are directors, officers or employees of Lau.                                    

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PRINCIPAL AND SELLING STOCKHOLDERS  

The following table sets forth certain information regarding the beneficial 
ownership of the Company's Common Stock as of the date of this Prospectus (i)   
reflecting the completion of the transactions contemplated in the Asset         
Transfer Agreement between the Company and Lau (see "Relationship and Certain   
Transactions with Lau Technologies") and (ii) as adjusted to reflect the sale   
of 2,000,000 shares by the Company and 500,000 shares by Lau pursuant to this   
offering, by (a) each stockholder known by the Company to be the beneficial     
owner of more than 5% of the outstanding Common Stock, (b) each director of     
the Company, (c) each of the executive officers, (d) all directors and          
executive officers as a group, and (e) Lau Technologies. Except as otherwise    
indicated, the Company believes that the beneficial owners of the Common Stock  
listed below, based on information furnished by such owners, have sole          
investment and voting power with respect to such shares, subject to community   
property laws where applicable. Shares not outstanding but deemed beneficially  
owned by virtue of the right of a person or group to acquire them within 60     
days of the date of this Prospectus are treated as outstanding only for         
purposes of determining the amount and percent owned by such person or group.   

                                                        [Enlarge/Download Table]

                            SHARES BENEFICIALLY                      SHARES BENEFICIALLY      
                          OWNED PRIOR TO OFFERING                   OWNED AFTER OFFERING      
                          --------------------------------          --------------------------
                                                          NUMBER OF                           
                                                           SHARES                             
                                                            BEING                             
  NAME AND ADDRESS(1)        NUMBER            PERCENT     OFFERED    NUMBER         PERCENT  
  -------------------     -------------       --------------------- ------------    ----------
                                                                                              
Joanna T. Lau...........      5,681,420(2)         100.0%      --      5,181,420(2)     67.5% 
 c/o Lau Technologies                                                                         
 531 Main Street                                                                              
 Acton, MA 01720                                                                              
Denis K. Berube.........      5,681,420(3)         100.0%      --      5,181,420(3)     67.5% 
Lau Technologies........      5,680,000(4)(5)      100.0%  500,000     5,180,000(5)     67.4% 
 531 Main Street                                                                              
 Acton, MA 01720                                                                              
Robert C. Hughes........         71,000(6)           1.2%      --         71,000(6)     *     
William A. Marshall.....         71,000(6)           1.2%      --         71,000(6)     *     
Yona Wieder.............         71,000(6)           1.2%      --         71,000(6)     *     
Robert J. Schmitt, Jr...         35,500(6)         *           --         35,500(6)     *     
Charles J. Johnson......          1,420(6)         *           --          1,420(6)     *     
Harriet Mouchly-Weiss...          1,420(6)         *           --          1,420(6)     *     
Peter Nessen............          1,420(6)         *           --          1,420(6)     *     
Thomas J. Reilly........          1,420(6)         *           --          1,420(6)     *     
All directors and                                                                             
 executive officers as a                                                                      
 group (9 persons)......      5,935,600(7)         100.0%      --      5,435,600(7)     68.5% 

-------                                                                         

* Less than one percent.                                                        

(1) The address of all persons who are directors or executive officers of the   
Company is in care of the Company, 531 Main Street, Acton, Massachusetts
01720.                                                                  
(2) Consists of the shares held by Lau Technologies, of which Ms. Lau owns      
approximately 56.0% of the outstanding capital stock, and 1,420 shares  
issuable to Denis K. Berube, the spouse of Ms. Lau, pursuant to stock   
 options exercisable immediately upon the issuance of the shares of Common
Stock being offered hereby. Ms. Lau disclaims beneficial ownership of   
those 1,420 shares.                                                     
(3) Consists of the shares held by Lau Technologies, of which Mr. Berube's      
spouse owns approximately 56.0% of the outstanding capital stock, and   
 1,420 shares issuable to Mr. Berube pursuant to stock options exercisable
 immediately upon the issuance of the shares of Common Stock being offered
 hereby. Mr. Berube disclaims beneficial ownership of the shares of Common
Stock held by Lau Technologies.                                         
(4) Represents shares of Common Stock issuable by the Company upon the          
completion of the transactions contemplated in the Asset Transfer       
Agreement between Lau and the Company, to occur on the effective date of
the registration statement relating to this offering. See "Relationship 
and Certain Transactions with Lau Technologies."                        
(5) Includes shares of Common Stock of the Company held or to be held by Lau    
which are subject to certain option rights granted by Lau to the lenders
under its revolving credit facility. See "Shares Eligible for Future    
Sale."                                                                  
(6) Represents shares of Common Stock issuable pursuant to stock options        
exercisable immediately upon the issuance of the shares of Common Stock 
being offered hereby. The total number of shares issuable under options 
granted to Messrs. Hughes, Marshall, Wieder, Schmitt, each director and 
all directors and executive officers as a group are 639,000, 213,000,   
284,000, 177,500, 16,330 and 1,395,150, respectively.                   
(7) Represents shares described in Notes 3 and 6.                               

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DESCRIPTION OF CAPITAL STOCK  

The Company's authorized capital stock consists of 20,000,000 shares of     
Common Stock, $.001 par value per share, and 2,000,000 shares of Preferred      
Stock, $.001 par value per share.                                               

COMMON STOCK                                                                    

Holders of Common Stock are entitled to one vote per share on all matters to
be voted upon by the stockholders. Subject to the rights of holders of          
outstanding Preferred Stock, if any, the holders of Common Stock are entitled   
to receive such dividends, if any, as may be declared by the Board of           
Directors out of funds legally available therefor. In the event of a            
liquidation, dissolution, or winding up of the Company, holders of Common       
Stock have the right to a ratable portion of the assets remaining after         
payment of liabilities. Holders of Common Stock do not have cumulative voting,  
preemptive, redemption, or conversion rights. All outstanding shares of Common  
Stock are, and the shares to be sold in this offering will be, fully paid and   
non-assessable.                                                                 

PREFERRED STOCK                                                                 

The Company's Certificate of Incorporation provides, among other things, for
the authorization of 2,000,000 shares of Preferred Stock, $.001 par value per   
share (the "Preferred Stock"). The Board of Directors has the authority,        
without further stockholder approval, to issue these shares of Preferred Stock  
in one or more series from time to time, and to fix the designations, relative  
rights, priorities, preferences, qualifications, limitations and restrictions   
thereof. The Company has no immediate plans to issue any Preferred Stock.       
While issuance of Preferred Stock could provide needed flexibility in           
connection with possible acquisitions and other corporate purposes, such        
issuance could also make it more difficult for a third party to acquire a       
majority of the outstanding voting stock of the Company or discourage an        
attempt to gain control of the Company. In addition, the Board of Directors,    
without stockholder approval, can issue shares of Preferred Stock with voting   
and conversion rights which could adversely affect the voting power and other   
rights of the holders of Common Stock. See "--Anti-Takeover Effects of          
Provisions of the Company's Charter And By-Laws."                               

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS                             

The Company's By-laws provide that the Company, subject to limited          
exceptions, will indemnify its directors and officers and may indemnify its     
other employees and other agents to the fullest extent permitted by Delaware    
law.                                                                            

In addition, the Company's Certificate of Incorporation provides that, to   
the fullest extent permitted by Delaware law, the Company's directors will not  
be liable for monetary damages for breach of the directors' fiduciary duty of   
care to the Company and its stockholders. The provision in the Certificate of   
Incorporation does not eliminate the duty of care, and in appropriate           
circumstances equitable remedies such as an injunction or other forms of non-   
monetary relief would remain available under Delaware law. Each director will   
continue to be subject to liability for breach of the director's duty of        
loyalty to the Company, for acts or omissions not in good faith or involving    
intentional misconduct or knowing violations of law, for acts or omissions      
that the director believes to be contrary to the best interests of the Company  
or its stockholders, for any transaction from which the director derived an     
improper personal benefit, for acts or omissions involving a reckless           
disregard for the director's duty to the Company or its stockholders when the   
director was aware or should have been aware of a risk of serious injury to     
the Company or its stockholders, for acts or omissions that constitute an       
unexcused pattern of inattention that amounts to be abdication of the           
director's duty to the Company or its stockholders, for improper transactions   
between the director and the Company and for improper distributions to          
stockholders and loans to directors and officers. This provision also does not  
affect a director's responsibilities under any other laws, such as the federal  
securities laws or state or federal environmental laws.                         

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ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE COMPANY'S CHARTER AND BY-LAWS        

The Company's Certificate of Incorporation and By-Laws contain several      
features that could render it more difficult for a third party to acquire a     
controlling interest in Viisage. As discussed above, the Certificate of         
Incorporation grants the Board of Directors authority, without stockholder      
approval, to issue in one or more series up to 2,000,000 shares of Preferred    
Stock. Each series will have the number of shares, designations, preferences,   
voting powers, relative rights or privileges that the Board determines, and     
the rights of holders of Common Stock will be subject to the rights of holders  
of any Preferred Stock issued. Although the issuance of Preferred Stock may     
provide the Company flexibility in connection with possible acquisitions and    
other purposes, it could also have the effect of making it more difficult for   
a third party to acquire a controlling interest in the Company.                 

The Certificate of Incorporation provides for the division of the Board of  
Directors into three classes with staggered three-year terms. See               
"Management." Directors may be removed only for cause by the affirmative vote   
of the holders of two-thirds of the shares of the Company's voting stock. Any   
vacancy on the Board, including a vacancy resulting from an enlargement of the  
Board, may only be filled by vote of a majority of the directors then in        
office. The classification of the Board and the limitations on the removal of   
directors and filling of vacancies make it more difficult for a third party to  
acquire control of the Company.                                                 

The Certificate of Incorporation also provides that any action required or  
permitted to be taken by the stockholders of the Company may only be taken if   
it is "properly brought" before an annual or special stockholders' meeting and  
may not be taken by written consent in lieu of a meeting unless the action and  
taking of action by consent have expressly been approved in advance by the      
Board. The Certificate further provides that special meetings of the            
stockholders may only be called by the Board, the Chairman of the Board or the  
Chief Executive Officer. Under the Company's By-Laws, in order for any matter   
to be considered "properly brought" before a meeting, a stockholder must        
comply with rigorous requirements regarding advance notice to the Company.      
These corporate governance provisions could delay consideration of actions      
which may be popular with stockholders until the next stockholders meeting,     
unless the Board determines to override the action-by-consent prohibition.      
These provisions may also discourage tender offers for the Company's Common     
Stock, including tender offers at a price above the then-current market value   
of the Common Stock, because an offeror, even if it acquired a majority of the  
voting securities, would be able to take action as a stockholder (such as       
electing new directors or approving a merger) only at a duly called             
stockholders meeting.                                                           

Finally, the Company's Certificate and By-Laws require the affirmative vote 
of the holders of at least two-thirds of the voting stock to amend or repeal    
any of the protective governance provisions described above. See "Risk          
Factors--Potential Adverse Impact of Antitakeover Provisions on Market Price    
of Shares."                                                                     

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW                             

The Company is subject to the provisions of Section 203 of the Delaware     
General Corporation Law. That section provides, with certain exceptions, that   
a Delaware corporation may not engage in any of a broad range of business       
combinations with a person or affiliate, or associate of such person, who is    
an "interested stockholder" for a period of three years from the date that      
such person became an interested stockholder unless: (i) the transaction        
resulting in a person becoming an interested stockholder, or the business       
combination, is approved by the board of directors of the corporation before    
the person becomes an interested stockholder; (ii) the interested stockholder   
acquires 85% or more of the outstanding voting stock of the corporation in the  
same transaction that makes it an interested stockholder (excluding shares      
owned by persons who are both officers and directors of the corporation, and    
shares held by certain employee stock ownership plans); or (iii) on or after    
the date the person becomes an interested stockholder, the business             
combination is approved by the corporations board of directors and by the       
holders of at least 66 2/3% of the corporation's outstanding voting stock at    
an annual or special meeting, excluding shares owned by the interested          
stockholder. An "interested stockholder" is defined as any person that is (i)   
the owner of 15% or more of the outstanding voting stock of the corporation or  
(ii) an affiliate or associate of the corporation and was the owner of 15% or   
more of the outstanding voting stock of the corporation at any time within the  
three-year period immediately prior to the date on which it is sought to be     
determined whether such person is an interested stockholder.                    

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TRANSFER AGENT AND REGISTRAR                                                    

The Company has appointed Boston EquiServe Limited Partnership, an affiliate
of BankBoston, as transfer agent and registrar of the Common Stock.             

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SHARES ELIGIBLE FOR FUTURE SALE 

Upon completion of this offering, the Company will have 7,680,000 shares of 
Common Stock outstanding. Of these 7,680,000 shares, the 2,500,000 shares to    
be sold in this offering will be freely tradable in the public market without   
restriction under the Securities Act, unless they are purchased by an           
"affiliate" of the Company, as that term is defined in Rule 144 promulgated     
under the Securities Act.                                                       

SALES OF RESTRICTED SHARES                                                      

The remaining 5,180,000 shares, all of which will be held by Lau, are       
"restricted securities" as defined by Rules 144 or 701 (the "Restricted         
Shares"). Restricted securities may be sold in the public market only if they   
are registered under the Securities Act or if they qualify for an exemption     
from registration under Rules 144, 144(k) or 701 under the Securities Act. In   
addition, all Restricted Shares are "locked up," or subject to the lock-up      
agreements described below. Subject to Rules 144, 144(k) and 701 and to the     
lock-up agreements, 5,180,000 shares will be eligible for sale upon expiration  
of their respective two-year holding periods, subject to the restrictions and   
conditions of Rule 144, such holding periods to expire on or around the second  
anniversary of the date of this Prospectus.                                     

In general, under Rule 144 as currently in effect, any person (or persons   
whose shares are aggregated), who has beneficially owned restricted securities  
for at least two years is entitled to sell, within any three-month period, a    
number of such securities that does not exceed the greater of 1% of the then    
outstanding shares of the Common Stock (approximately 76,800 shares, based on   
the number of shares to be outstanding after this offering) or the average      
weekly trading volume in the public market during the four calendar weeks       
preceding the filing of the seller's Form 144, provided certain requirements    
concerning availability of public information concerning the Company, manner    
of sale and notice of sale are satisfied. A person who is not an affiliate,     
has not been an affiliate within three months prior to the sale and has         
beneficially owned the restricted securities for at least three years is        
entitled to sell such shares under Rule 144(k) without regard to any of the     
limitations described above. Rule 144 also provides that affiliates who are     
selling shares that are not restricted securities must nonetheless comply with  
the same restrictions applicable to restricted securities with the exception    
of the holding period requirement. The two- and three-year holding periods      
described above do not begin to run until the full purchase price or other      
consideration is paid by the person acquiring the restricted securities from    
the issuer or an affiliate of the issuer and may include the holding period of  
a prior owner who is not an affiliate of the issuer. The Commission has         
proposed certain amendments to Rule 144 that would reduce by one year the       
holding periods required for shares subject to Rule 144 to become eligible for  
resale in the public market.                                                    

Securities issued in reliance on Rule 701 (such as shares of Common Stock   
issued before the closing of this offering upon the exercise of options         
granted under the Option Plan or the Director Plan, if any) are also            
Restricted Shares and, beginning approximately 90 days after the date of this   
Prospectus, may be resold by persons other than affiliates of the Company       
subject only to the manner of sale provisions of Rule 144 and may be resold by  
affiliates under Rule 144 without compliance with its two-year holding period   
requirement. Outstanding options to purchase 255,600 shares of Common Stock     
were fully vested as of October 8, 1996, all of which are subject to 180-day    
lock-up agreements.                                                             

The Company intends to file one or more registration statements on Form S-8 
under the Securities Act to register all shares of Common Stock issued or       
issuable under the Option Plan and the Director Plan. See "Management--         
Incentive and Stock Plans." The registration statements are expected to be      
filed as soon as practicable after the date of this Prospectus and will become  
effective immediately upon filing. Shares covered by the registration           
statements will be eligible for resale in the public market after the           
effective date of the registration statements, subject to the lock-up           
agreements described below.                                                     

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Prior to this offering there has been no public market for the Common Stock 
of the Company and no prediction can be made as to the effect, if any, that     
market sales or the availability for sale of such shares will have on the       
market price of the Common Stock prevailing from time to time. Nevertheless,    
sales of substantial numbers of shares in the public market could adversely     
affect the market price of the Common Stock and could impair the Company's      
ability to raise capital through a sale of its equity securities. See "Risk     
Factors--No Prior Trading Market; Potential Volatility of Stock Price."         

LOCK-UP AGREEMENTS                                                              

The executive officers and directors of the Company and the Selling         
Stockholder, who upon the closing of this offering will beneficially own an     
aggregate of 255,600 fully vested options to purchase shares of Common Stock    
and 5,180,000 shares of Common Stock, respectively, have agreed that they will  
not, without the prior written consent of Cowen & Company, sell, offer,         
contract to sell or otherwise dispose of any shares of Common Stock or any      
securities convertible into or exchangeable for any shares of Common Stock for  
a period of 180 days after the date of this Prospectus.                         

REGISTRATION RIGHTS                                                             

In fulfillment of a requirement in its revolving credit facility agreement, 
Lau has issued to affiliates of its lender and a participating lender two       
options to acquire an aggregate of 71,000 of the 5,180,000 shares of Common     
Stock of the Company to be held by Lau following this offering. These options   
have an exercise price equal to 95% of the initial public offering price        
(after deduction of underwriting commissions and discounts), and are            
exercisable only if the principal outstanding under Lau's revolving credit      
facility has reached or exceeded $12.0 million prior to the issuance of the     
Common Stock offered hereby. Lau has also issued to the same parties two        
options to acquire an aggregate of 49,700 shares of the Company's Common Stock  
to be held by Lau, with an exercise price equal to 95% of the offering price    
to the public (after deduction of underwriting commissions and discounts)       
contained in the registration statement for the Company's second underwritten   
public offering, if any. These options are only exercisable if the principal    
outstanding under Lau's facility has reached or exceeded $12.0 million at the   
time of any such offering. In addition, Lau has granted the holders of such     
options certain registration rights which apply under certain circumstances in  
the event any of such options have become eligible for exercise and have been   
exercised. First, if the Company has qualified to register securities on Form   
S-3 under the Securities Act, holders of more than 50% of the shares under      
each of the two lenders' sets of options may request, on one occasion, that     
the Company file a registration statement on such form for a public offering    
of all or a portion of such shares. Second, the holders of such option shares   
have incidental ("piggyback") registration rights with respect to               
registrations of the Company's securities, pursuant to which holders may        
request that all or any portion of their option shares be included in a         
registration statement (other than a registration statement on Form S-4 or S-8  
or certain other forms) being filed by the Company for its own account or       
otherwise. Lau will pay certain expenses incurred by the Company and the        
holders of option shares in exercising the foregoing registration rights. The   
lenders' options and attendant registration rights have terms of five years     
following the expiration of the lock-up period after the public offering on     
which such options' exercise price is based.                                    

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UNDERWRITING  

Subject to the terms and conditions of the Underwriting Agreement, the      
Company and the Selling Stockholder have agreed to sell to each of the          
Underwriters named below, and each of the Underwriters, for whom Cowen &        
Company and Needham & Company, Inc. are acting as Representatives (the          
"Representatives"), has severally agreed to purchase from the Company and the   
Selling Stockholder, the respective number of shares of Common Stock set forth  
opposite its name below:                                                        

                                                                [Download Table]

                                                                  NUMBER OF  
                                                                  SHARES OF  
UNDERWRITER                                                      COMMON STOCK
-----------                                                      ------------
                                                                             
Cowen & Company.................................................    760,000  
Needham & Company, Inc..........................................    760,000  
Bear, Stearns & Co. Inc.........................................     70,000  
Alex, Brown & Sons Incorporated.................................     70,000  
Hambrecht & Quist LLC...........................................     70,000  
Lehman Brothers Inc.............................................     70,000  
Montgomery Securities...........................................     70,000  
Morgan Stanley & Co., Incorporated..............................     70,000  
PaineWebber Incorporated........................................     70,000  
Prudential Securities Incorporated..............................     70,000  
Robertson, Stephens & Company LLC...............................     70,000  
UBS Securities LLC..............................................     70,000  
Wasserstein Perella Securities, Inc.............................     70,000  
Furman Selz LLC.................................................     35,000  
Gerard Klauer Mattison & Co., L.L.C.............................     35,000  
Pennsylvania Merchant Group Ltd.................................     35,000  
Piper Jaffray Inc...............................................     35,000  
Raymond James & Associates, Inc.................................     35,000  
Tucker Anthony Incorporated.....................................     35,000  
                                                                  ---------  
  Total.........................................................  2,500,000  
                                                                  =========  

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including the absence of any       
material adverse change in the Company's business and the receipt of certain    
closing certificates, opinions and letters from the Company and its counsel     
and independent auditors. The nature of the Underwriters' obligations is such   
that they are committed to purchase all of the shares of Common Stock being     
offered hereby (other than those covered by the over-allotment option           
described below) if any of such shares are purchased.                           

The Underwriters propose to offer the shares of Common Stock in part        
directly to the public at the initial public offering price set forth on the    
cover page of this Prospectus and in part to certain dealers at such price      
less a concession not in excess of $.43 per share. The Underwriters may allow,  
and such dealers may re-allow, a concession not in excess of $.10 per share to  
certain brokers and dealers. After the shares of Common Stock are released for  
sale to the public, the offering price and other selling terms may from time    
to time be varied by the Representatives.                                       

The Company has granted the Underwriters an option exercisable for up to 30 
days after the date of this Prospectus to purchase up to an aggregate of        
375,000 additional shares of Common Stock to cover over-allotments, if any. If  
the Underwriters exercise their over-allotment option, the Underwriters have    
severally agreed, subject to certain conditions, to purchase approximately the  
same percentage thereof that the number of shares to be purchased by each of    
them as shown in the foregoing table bears to the 2,500,000 shares of Common    
Stock offered hereby. The Underwriters may exercise such option only to cover   
over-allotments made in connection with the sale of the Common Stock offered    
hereby.                                                                         

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The Company and the Selling Stockholder have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the       
Securities Act and to contribute to payments the Underwriters may be required   
to make in respect thereof.                                                     

The Company, the Company's executive officers and directors, the Selling    
Stockholder and all option holders of the Company have agreed that they will    
not, without the prior written consent of Cowen & Company, sell, offer,         
contract to sell, or otherwise dispose of any shares of Common Stock or any     
securities convertible into or exchangeable for any shares of Common Stock for  
a period of 180 days after the date of this Prospectus. See "Shares Eligible    
for Future Sale--Lock-up Agreements."                                           

The Representatives have advised the Company and the Selling Stockholders   
that the Underwriters do not intend to confirm sales of the shares offered      
hereby to any account over which they exercise discretionary authority.         

Prior to this offering, there has been no public market for the Common      
Stock. Consequently, the initial public offering price was determined by        
negotiation among the Company, the Selling Stockholder and the                  
Representatives. Among the factors considered in such negotiations were the     
prevailing market conditions, the market prices of securities of publicly       
traded companies engaged in activities similar to those of the Company, the     
Company's financial and operating history and condition, estimates of the       
business potential of the Company, the present state of the Company's           
development, and other factors deemed relevant.                                 

LEGAL MATTERS 

Certain legal matters in connection with the shares being offered hereby    
will be passed upon for the Company by Finnegan, Hickey, Dinsmoor & Johnson,    
P.C., Boston, Massachusetts. Charles J. Johnson, who is a Director of the       
Company, is a member of the firm of Finnegan, Hickey, Dinsmoor & Johnson, P.C.  
Effective upon the issuance and sale of the shares being offered hereby, Mr.    
Johnson will hold options to purchase 16,330 shares of Common Stock of the      
Company at $2.96 per share, of which options to purchase 1,420 shares shall be  
immediately exercisable. See "Management." Certain legal matters in connection  
with this offering will be passed upon for the Underwriters by Testa, Hurwitz   
& Thibeault, llp, Boston, Massachusetts.                                        

EXPERTS 

The financial statements and schedules included in this Prospectus and      
elsewhere in the Registration Statement, to the extent and for the periods      
indicated in their reports, have been audited by Arthur Andersen LLP,           
independent public accountants, as indicated in their reports with respect      
thereto, and are included herein in reliance upon the authority of said firm    
as experts in giving said reports.                                              

ADDITIONAL INFORMATION  

The Company has filed with the Commission a registration statement under the
Securities Act with respect to the shares of Common Stock offered hereby (the   
"Registration Statement"). This Prospectus, which constitutes a part of the     
Registration Statement, does not contain all of the information set forth in    
the Registration Statement and in the schedules and exhibits thereto. For       
further information about the Company and the securities offered hereby,        
reference is hereby made to the Registration Statement and to the exhibits and  
schedules thereto, which may be inspected without charge at the principal       
office of the Commission in Washington, D.C. and copies of all or any part of   
which may be obtained from the Commission upon payment of the prescribed fees.  
Statements made in this Prospectus as to the contents of any contract or other  
document are not necessarily complete and in each instance reference is made    
to the copy of such contract or other document filed as an exhibit to the       
Registration Statement, each such statement being qualified in all respects by  
such reference.                                                                 

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After consummation of this offering, the Company will be subject to the     
informational requirements of the Securities Exchange Act of 1934 and, in       
accordance therewith, will file reports, proxy and information statements, and  
other information with the Commission. Such reports, proxy and information      
statements and other information, and the Registration Statement and exhibits   
and schedules thereto filed by the Company with the Commission can be           
inspected and copied at the Public Reference Section of the Commission at Room  
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at   
the regional offices of the Commission located at 7 World Trade Center, Suite   
1300, New York, New York 10048 and 500 West Madison Street, Suite 1400,         
Chicago, Illinois 60661-2511. Copies of such material can be obtained from the  
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450   
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition,    
the Company is required to file electronic versions of these documents with     
the Commission through the Commission's Electronic Data Gathering, Analysis     
and Retrieval (EDGAR) system. The Commission maintains a World Wide Web site    
at http://www.sec.gov that contains reports, proxy and information statements   
and other information regarding registrants that file electronically with the   
Commission.                                                                     

The Company intends to furnish its stockholders annual reports containing   
financial statements audited by independent public accountants. In addition,    
the Company intends to furnish stockholders quarterly reports containing        
unaudited financial information for each of the first three quarters of each    
fiscal year.                                                                    

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VIISAGE TECHNOLOGY, INC.

INDEX 

                                                                [Download Table]

                                                                           PAGE
                                                                           ----
                                                                               
Report of Independent Public Accountants.................................. F-2 
Balance Sheets as of December 31, 1994 and 1995, June 30, 1996 and Pro         
 Forma as of June 30, 1996................................................ F-3 
Statements of Operations and Net Assets for Each of the Three Years Ended      
 December 31, 1995 and for the Six Months Ended July 2, 1995 and June 30,      
 1996..................................................................... F-4 
Statements of Cash Flows for Each of the Three Years Ended December 31,        
 1995 and for the Six Months Ended July 2, 1995 and June 30, 1996......... F-5 
Notes to Financial Statements............................................. F-6 

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS  

To Viisage Technology, Inc.:                                                    

We have audited the accompanying balance sheets of Viisage Technology, Inc. 
(a Delaware corporation and a majority-owned subsidiary of Lau Acquisition      
Corp.) as of June 30, 1996, December 31, 1995 and 1994, and the related         
statements of operations and net assets and cash flows for the six-month        
period ended June 30, 1996 and for each of the three years in the period ended  
December 31, 1995. These financial statements are the responsibility of the     
Company's management. Our responsibility is to express an opinion on these      
financial statements based on our audits.                                       

We conducted our audits in accordance with generally accepted auditing      
standards. Those standards require that we plan and perform the audit to        
obtain reasonable assurance about whether the financial statements are free of  
material misstatement. An audit includes examining, on a test basis, evidence   
supporting the amounts and disclosures in the financial statements. An audit    
also includes assessing the accounting principles used and significant          
estimates made by management, as well as evaluating the overall financial       
statement presentation. We believe that our audits provide a reasonable basis   
for our opinion.                                                                

In our opinion, the financial statements referred to above present fairly,  
in all material respects, the financial position of Viisage Technology, Inc.    
as of June 30, 1996, December 31, 1995 and 1994, and the results of its         
operations and its cash flows for the six-month period ended June 30, 1996 and  
for each of the three years in the period ended December 31, 1995, in           
conformity with generally accepted accounting principles.                       

Boston, Massachusetts               ARTHUR ANDERSEN LLP August 13, 1996         
(except for                                                                     
Notes 1 and 10 for which the date is                                            
November 6, 1996)                                                               

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VIISAGE TECHNOLOGY, INC.

BALANCE SHEETS

(IN THOUSANDS)

                                                                [Download Table]

                                              DECEMBER 31,           PRO FORMA  
                                             -------------- JUNE 30,  JUNE 30,  
                                              1994   1995     1996      1996    
                                             ------ ------- -------- ---------- 
                                                                     (UNAUDITED)
                                                                                
ASSETS                                                                          
Current assets:                                                                 
  Accounts receivable......................  $  --  $   378 $ 2,321   $ 2,321   
  Costs and estimated earnings in excess of                                     
   billings................................   3,999   8,678  10,606    10,606   
  Other current assets.....................     --      --        4         4   
                                             ------ ------- -------   -------   
    Total current assets...................   3,999   9,056  12,931    12,931   
Property and equipment, net (Note 4).......     --    2,229   2,028     2,028   
                                             ------ ------- -------   -------   
                                             $3,999 $11,285 $14,959   $14,959   
                                             ====== ======= =======   =======   
LIABILITIES AND NET ASSETS                                                      
Current liabilities:                                                            
  Accounts payable and accrued expenses                                         
   (Note 5)................................  $1,178 $ 1,153 $ 3,342   $ 3,342   
  Current maturities of long-term debt.....     312     --      --        --    
  Obligations under capital leases (Note                                        
   7)......................................     --      490     512       512   
                                             ------ ------- -------   -------   
    Total current liabilities..............   1,490   1,643   3,854     3,854   
Long-term debt (Note 6)....................     955   6,656   8,809     8,809   
Obligations under capital leases (Note 7)..     --    1,663   1,394     1,394   
Deferred income taxes......................     --      --      --        100   
                                             ------ ------- -------   -------   
                                              2,445   9,962  14,057    14,157   
Commitments and contingencies (Note 7)                                          
Net assets (Note 9)........................   1,554   1,323     902       802   
                                             ------ ------- -------   -------   
                                             $3,999 $11,285 $14,959   $14,959   
                                             ====== ======= =======   =======   

The accompanying notes are an integral part of these financial statements.

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VIISAGE TECHNOLOGY, INC.

STATEMENTS OF OPERATIONS AND NET ASSETS 
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                                [Download Table]

                                 YEAR ENDED DECEMBER 31,      SIX MONTHS ENDED  
                                 -------------------------  --------------------
                                                              JULY 2,   JUNE 30,
                                  1993     1994     1995       1995       1996  
                                 -------  -------  -------  ----------- --------
                                                            (UNAUDITED)         
                                                                                
Revenues.......................  $   505  $ 1,257  $11,221    $ 5,395   $11,870 
Project costs..................      456    1,140   10,361      4,972     9,653 
                                 -------  -------  -------    -------   ------- 
Project margin.................       49      117      860        423     2,217 
                                 -------  -------  -------    -------   ------- 
Operating expenses:                                                             
  Sales and marketing..........    1,185    1,596      999        431       735 
  Research and development.....       47      201    1,089        597       128 
  General and administrative...      289      681    1,204        513       890 
                                 -------  -------  -------    -------   ------- 
    Total operating expenses ..    1,521    2,478    3,292      1,541     1,753 
                                 -------  -------  -------    -------   ------- 
Operating income (loss)........   (1,472)  (2,361)  (2,432)    (1,118)      464 
Interest expense...............      --        40      515        133       387 
                                 -------  -------  -------    -------   ------- 
Income (loss) before income                                                     
 taxes.........................   (1,472)  (2,401)  (2,947)    (1,251)       77 
Income taxes (Note 2)..........      --       --       --         --          3 
                                 -------  -------  -------    -------   ------- 
Net income (loss)..............  $(1,472) $(2,401) $(2,947)   $(1,251)  $    74 
                                 =======  =======  =======    =======   ======= 
Net income (loss) per share                                                     
 (Note 2)......................  $ (0.24) $ (0.39) $ (0.47)   $ (0.20)  $  0.01 
                                 =======  =======  =======    =======   ======= 
Weighted average number of com-                                                 
 mon shares                                                                     
 (Note 2)......................    6,225    6,225    6,225      6,225     6,225 
                                 =======  =======  =======    =======   ======= 
Net assets, beginning of peri-                                                  
 od............................  $   --   $   368  $ 1,554    $ 1,554   $ 1,323 
Net income (loss)..............   (1,472)  (2,401)  (2,947)    (1,251)       74 
Stock compensation expense.....      --       --       --         --         92 
Net transactions with parent...    1,840    3,587    2,716      3,019      (587)
                                 -------  -------  -------    -------   ------- 
Net assets, end of period......  $   368  $ 1,554  $ 1,323    $ 3,322   $   902 
                                 =======  =======  =======    =======   ======= 

The accompanying notes are an integral part of these financial statements.

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VIISAGE TECHNOLOGY, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

                                                                [Download Table]

                                YEAR ENDED DECEMBER 31,      SIX MONTHS ENDED  
                                -------------------------  --------------------
                                                             JULY 2,   JUNE 30,
                                 1993     1994     1995       1995       1996  
                                -------  -------  -------  ----------- --------
                                                           (UNAUDITED)         
                                                                               
CASH FLOWS FROM OPERATING                                                      
ACTIVITIES:                                                                    
Net income (loss).............  $(1,472) $(2,401) $(2,947)   $(1,251)  $    74 
Adjustments to reconcile net                                                   
 income (loss) to net cash                                                     
 provided (used) by operating                                                  
 activities:                                                                   
  Depreciation and                                                             
   amortization...............      --       --        88         10       228 
  Stock compensation expense..      --       --       --         --         92 
  Changes in operating assets                                                  
   and liabilities:                                                            
   Accounts receivable........   (1,115)   1,115     (378)    (1,007)   (1,943)
   Costs and estimated                                                         
    earnings in excess of                                                      
    billings..................      --    (4,244)  (4,679)    (7,312)   (1,928)
   Other current assets.......      (44)      44      --         (12)       (4)
   Accounts payable and                                                        
    accrued expenses..........      791      632      (25)       395     2,189 
                                -------  -------  -------    -------   ------- 
    Net cash (used) by                                                         
     operating activities.....   (1,840)  (4,854)  (7,941)    (9,177)   (1,292)
                                -------  -------  -------    -------   ------- 
CASH FLOWS FROM INVESTING                                                      
 ACTIVITIES:                                                                   
Purchase of contract equipment                                                 
 converted to capital leases..      --       --    (2,216)       --        --  
Additions to property and                                                      
 equipment....................      --       --      (101)       (71)      (27)
                                -------  -------  -------    -------   ------- 
    Net cash (used) by                                                         
     investing activities.....      --       --    (2,317)       (71)      (27)
                                -------  -------  -------    -------   ------- 
CASH FLOWS FROM FINANCING                                                      
 ACTIVITIES:                                                                   
Net revolving credit                                                           
 borrowings...................      --        46    6,610      6,360     2,153 
Proceeds from long-term                                                        
 borrowings...................      --     1,580    1,862        --        --  
Proceeds from sale/leaseback                                                   
 of equipment.................      --       --     2,216        --        --  
Principal payments on long-                                                    
 term borrowings..............      --      (359)  (3,083)      (131)      --  
Principal payments on                                                          
 obligations under capital                                                     
 leases.......................      --       --       (63)       --       (247)
Net transactions with parent..    1,840    3,587    2,716      3,019      (587)
                                -------  -------  -------    -------   ------- 
    Net cash provided by                                                       
     financing activities.....    1,840    4,854   10,258      9,248     1,319 
                                -------  -------  -------    -------   ------- 
Increase (decrease) in cash                                                    
 and cash equivalents.........      --       --       --         --        --  
Cash and cash equivalents,                                                     
 beginning of period..........      --       --       --         --        --  
                                -------  -------  -------    -------   ------- 
Cash and cash equivalents, end                                                 
 of period....................  $   --   $   --   $   --     $   --    $   --  
                                =======  =======  =======    =======   ======= 
SUPPLEMENTAL CASH FLOW                                                         
 INFORMATION:                                                                  
Cash paid during the period                                                    
 for interest.................  $   --   $    34  $   465    $    99   $   387 
                                =======  =======  =======    =======   ======= 

The accompanying notes are an integral part of these financial statements.

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VIISAGE TECHNOLOGY, INC.  

NOTES TO FINANCIAL STATEMENTS 

(1) BASIS OF PRESENTATION AND BUSINESS                                          

Viisage Technology, Inc. (Viisage or the Company) was incorporated in       
Delaware on May 23, 1996 as part of a planned reorganization of Lau             
Acquisition Corp. (Lau Technologies). The ultimate establishment of the         
Company as a separate and independent corporation will involve a series of      
transactions, including the initial public offering of the Company's Common     
Stock.                                                                          

On the effective date of the registration statement relating to the initial 
public offering, Lau Technologies will transfer substantially all of the        
assets, liabilities and operations of its Viisage Technology Division to the    
Company in exchange for all of the outstanding capital stock of the Company.    
After the closing of such offering, the Company will be an approximately 67%    
owned subsidiary of Lau Technologies. These reorganization transactions are     
between entities under common control and will be accounted for using           
historical amounts in a manner similar to a pooling of interests. The           
financial statements for all periods presented reflect the financial position,  
results of operations and cash flows of the Viisage Technology Division         
business that will comprise the Company. All changes in the Company's equity    
prior to the reorganization are reflected in net assets which represent the     
net investment of Lau Technologies in the Company.                              

The statements of operations for all periods presented reflect allocations  
for the costs of shared facilities and certain administrative services. Such    
costs and expenses have been allocated to the Company based on actual usage or  
other methods that approximate actual usage. Management believes that the       
allocation methods are reasonable and that allocated costs and expenses         
approximate what such amounts would be if the Company had operated on a stand-  
alone basis. As discussed more fully in Note 3, the Company has entered into    
agreements with Lau Technologies covering certain facilities, equipment and     
administrative services after the reorganization. Although the Company has not  
filed separate income tax returns for periods prior to the reorganization,      
income taxes presented in the financial statements are computed on a separate   
return basis taking into consideration the tax-sharing arrangement with Lau     
Technologies described in Note 2.                                               

The financial information included herein may not necessarily reflect the   
financial position, results of operations and cash flows of the Company in the  
future or what the financial position, results of operations and cash flows     
would have been had it been a separate, stand-alone company throughout the      
periods covered.                                                                

The Company designs, sells and implements turnkey digital identification    
systems intended to deter fraud and to reduce customers' identification         
program costs. These systems capture facial images, demographic information     
and other biological identifiers, produce identification cards and create       
relational databases containing this information. Using its design and systems  
integration capabilities, the Company is able to combine its proprietary        
software and hardware products with commercially available components and       
customers' existing systems, creating a complete customized solution. In        
addition, the Company is developing proprietary facial recognition software     
designed to identify individuals in a large database of faces on a real-time    
basis.                                                                          

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                  

Use of Estimates                                                              

The preparation of financial statements in conformity with generally        
accepted accounting principles 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 financial    
statements and the reported amounts of revenues and expenses during the         
reporting period. Actual results could differ from those estimates.             

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VIISAGE TECHNOLOGY, INC.  

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)  

Contract Revenue and Cost Recognition                                         

The Company provides services principally under contracts that provide for a
fixed price for the system and/or for each card produced. Revenue is            
recognized using the percentage of completion method based on labor costs       
incurred and/or cards produced. Contract losses, if any, are recognized in the  
period in which they become determinable. Costs and estimated earnings in       
excess of billings are recorded as a current asset. Billings in excess of       
costs and estimated earnings and accrued contract costs are recorded as         
current liabilities. Generally, contracts provide for billing when contract     
milestones are met and/or cards are produced. Costs and estimated earnings in   
excess of billings includes approximately $1.8 million expected to be billed    
and collected after June 30, 1997 and approximately $3.1 million for which      
payment terms and pricing are related to a subcontract that is currently        
subject to negotiations. The subcontract is with a prime contractor that is     
currently engaged in negotiations with its customer regarding an increase in    
the contract amount for modifications requested by the customer, revised        
payment terms and timing of performance. The final amount and payment terms of  
the Company's subcontract will be based on the outcome of the prime             
contractor's negotiations. Management believes that the prime contractor has    
reached an understanding with the customer as to a substantial portion of the   
contract modifications related to work performed and to be performed by the     
Company. For the six months ended June 30, 1996 and for 1995, the Company       
recorded approximately $4.4 million and $0.6 million of revenues and $1.2       
million and $0.2 million of project margin, respectively, of which $1.9         
million has been collected. These amounts are based in part on management's     
best estimate of the final outcome of the negotiations and management believes  
the amounts recorded are fully recoverable. However, actual results and/ or     
timing of performance could differ based on the outcome of the aforementioned   
negotiations.                                                                   

Fair Value of Financial Instruments                                           

The carrying amounts of the Company's financial instruments, including cash 
and cash equivalents, accounts receivable and payable and short- and long-term  
borrowings, approximate fair values.                                            

Cash and Cash Equivalents                                                     

For purposes of the statement of cash flows, the Company considers all      
highly liquid investments with original maturities of three months or less to   
be cash equivalents.                                                            

Accounts Receivable                                                           

Accounts receivable are due principally from government agencies and        
contractors to government agencies. Management periodically reviews accounts    
receivable for possible uncollectible amounts. In the event management          
determines a specific need for an allowance, a provision for doubtful accounts  
is provided. Based on management's review, no allowance for doubtful accounts   
has been recorded for the periods presented.                                    

All of the Company's revenues related to one customer in 1993 and 1994. For 
1995 and the six months ended June 30, 1996, three customers and four           
customers, respectively, each accounted for more than 10% of revenues           
individually, and approximately 85% and 81%, in the aggregate of the Company's  
revenues, respectively.                                                         

At June 30, 1996, 77% of accounts receivable and costs and estimated        
earnings in excess of billings related to four customers.                       

Property and Equipment                                                        

Property and equipment are recorded at cost or the lesser of fair value or  
the present value of minimum lease payments for items acquired under capital    
leases. Depreciation and amortization are calculated using the                  

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VIISAGE TECHNOLOGY, INC.  

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)  

straight-line or usage-based methods over the estimated useful lives of the     
related assets that approximate 5 years or the lease term, whichever is         
shorter.                                                                        

Research and Development                                                      

Research and development costs are charged to expense as incurred.          

Software Development                                                          

The Company reviews software development costs incurred in accordance with  
the provisions of Statement of Financial Accounting Standards (SFAS) No. 86     
which requires that certain costs incurred in the development of computer       
software to be sold or leased be capitalized once technological feasibility is  
reached. The Company has not capitalized any software development costs         
because development costs incurred subsequent to the establishment of           
technological feasibility have not been material.                               

Costs related to internally developed software are expensed as incurred.    
Externally purchased software costs are capitalized and depreciated over their  
remaining useful lives not to exceed three years.                               

Income Taxes                                                                  

The Company's operations prior to the reorganization discussed in Note 1,   
were included in the income tax returns of Lau Technologies, an S corporation.  
Income tax allocations for such periods have been calculated as if the Company  
were filing separate income tax returns taking into consideration that          
operating losses and tax credits have been utilized by the shareholders of Lau  
Technologies.                                                                   

After the reorganization the Company will file its own separate tax returns.
Any tax liability or refund that may arise relating to periods when the         
Company was a division of Lau Technologies is covered by a tax indemnification  
arrangement contained in the Asset Transfer Agreement executed in connection    
with the reorganization. The indemnification provides for Lau Technologies to   
pay or receive reimbursement from the Company for any tax adjustment relating   
to the Viisage Technology Division for all periods prior to the effective date  
of the reorganization if such adjustments will result in tax expense or tax     
benefit, as the case may be, to the Company.                                    

The Company accounts for income taxes under SFAS No. 109. Deferred tax      
assets and liabilities are recognized for the estimated future tax              
consequences attributable to differences between the financial statement        
carrying amounts of existing assets and liabilities and their respective tax    
bases. Deferred income tax assets and liabilities are measured using enacted    
tax rates in effect for the year in which those temporary differences are       
expected to be recovered or settled. The effect on deferred tax assets and      
liabilities of a change in tax rates is recognized in income in the period      
that includes the enactment date. As more fully discussed in the pro forma      
financial information section, the Company will record a deferred tax           
liability and corresponding expense when it becomes a separate entity.          

Net Income (Loss) Per Share                                                   

Net income (loss) per share is computed based on the weighted average number
of 6,225,000 common and common equivalent shares outstanding during the         
period. This number is comprised of 5,680,000 shares of common stock issued in  
connection with the reorganization discussed in Note 1 and 545,000 shares       
related to common equivalents discussed in Note 9.                              

Pursuant to certain requirements of the Securities and Exchange Commission, 
common and common equivalent shares issued during the 12 months prior to the    
initial public offering date (using the treasury stock method and an assumed    
initial public offering price of $10.00 per share) have been included in the    
calculation of weighted average shares for all periods presented.               

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VIISAGE TECHNOLOGY, INC.  

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)  

Interim Financial Information                                                 

In the opinion of management, the unaudited interim financial statements for
the six months ended July 2, 1995 include all adjustments (consisting of        
normal recurring accruals) necessary for a fair presentation of the financial   
position, results of operations and cash flows for the interim period           
presented.                                                                      

The Company's results of operations are significantly affected by, among    
other things, the timing of award and performance on contracts. As a result,    
the Company's revenue and income may fluctuate from quarter to quarter and      
comparisons over longer periods of time may be more meaningful. The results of  
operations for the period ended June 30, 1996 are not necessarily indicative    
of the operating results to be expected for the full year.                      

Long-Lived Assets                                                             

In 1995, the Financial Accounting Standards Board adopted SFAS No. 121,     
Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets To Be  
Disposed Of, which is effective for 1996. Adoption of SFAS No. 121 did not      
have a material impact on the Company's financial position or results of        
operations.                                                                     

Stock-Based Compensation                                                      

The Company accounts for its stock-based compensation plans under Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. In   
October 1995, the Financial Accounting Standards Board issued SFAS No. 123,     
Accounting for Stock-Based Compensation, which is effective for 1996. SFAS No.  
123 establishes a fair value based method of accounting for stock-based         
compensation plans. The Company has adopted the disclosure only alternative     
under SFAS No. 123, which requires disclosure of the pro forma effects on       
earnings and earnings per share as if SFAS No. 123 had been adopted as well as  
certain other information. See Note 9 for required disclosures.                 

Pro Forma Financial Information (Unaudited)                                   

The pro forma balance sheet of the Company as of June 30, 1996 reflects the 
estimated net deferred income tax liability that will be recorded by the        
Company as a result of the reorganization discussed in Note 1. The deferred     
income tax liability represents the tax effect of the cumulative differences    
between the financial reporting and income tax bases of certain assets and      
liabilities on the effective date of the reorganization. The actual deferred    
income tax liability recorded will be adjusted to reflect the effect of the     
Company's operations for the period from July 1, 1996 through the               
reorganization date. The recording of the deferred income tax liability will    
result in a corresponding income tax expense that will be recorded in the       
statement of operations in the quarter in which the reorganization occurs.      

The deferred income tax liability relates principally to differences in the 
tax bases and financial statement carrying amounts of balance sheet amounts     
related to contracts.                                                           

(3) OTHER RELATED PARTY TRANSACTIONS                                            

In connection with the reorganization discussed in Note 1, the Company and  
Lau Technologies will enter into an Administration and Services Agreement, a    
Use and Occupancy Agreement and a License Agreement.                            

Under the Administration and Services Agreement, Lau Technologies provides  
general accounting, data processing, payroll, human resources, employee         
benefits administration and certain executive services to the Company. The      
agreement requires the Company to pay a monthly fee based on the estimated      
actual cost of such services and permits the Company to terminate selected      
services upon 30 days written notice. The annual fee for services is            
approximately $660,000 and will be revised if the level of services is          
changed. The Company utilized the same allocation methods for prior periods.    
Amounts for 1994 and 1995 reflect the use of additional services that were      
provided by Company personnel in 1996.                                          

The amounts for such services were approximately $280,000 in 1993, $710,000 
in 1994, $1.1 million in 1995 and $540,000 and $330,000 for the six month       
periods ended July 2, 1995 and June 30, 1996, respectively.                     

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VIISAGE TECHNOLOGY, INC.  

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)  

The Use and Occupancy Agreement requires the Company to pay its             
proportionate share of the cost of shared facilities and office services        
including rent, insurance, property taxes, utilities and other operating        
expenses, based on square footage or equipment utilized. The Agreement expires  
on February 23, 1997 and may be terminated by the Company in whole or in part   
upon 30 days written notice. The annual fee for facilities and services is      
approximately $220,000. See Note 7 for lease information. After the initial     
expiration of this Agreement, the Company will continue to share facilities     
with Lau Technologies under a comparable arrangement or will utilize separate   
facilities.                                                                     

Company employees will also participate in various Lau Technologies employee
benefit plans following the reorganization. The Company will pay its            
proportionate share of the costs of such plans based on the number of           
participating employees.                                                        

Management believes the methods for allocating expenses and those costs     
related to shared facilities and equipment are reasonable and approximate what  
these costs would be on a stand-alone basis.                                    

The License Agreement grants the Company an exclusive, worldwide, royalty-  
free, paid-up, perpetual, irrevocable license to use proprietary technology     
used by the Viisage Technology Division at the time of the reorganization and   
improvements thereto. The license excludes the use of such technology for       
federal access control as defined in the Agreement.                             

The Company purchases certain system components and technical personnel from
Lau Technologies. The amounts for such components and services were             
approximately $282,000 in 1993, $1.4 million in 1994, $2.8 million in 1995 and  
$2.0 million and $1.0 million for the six month periods ended July 2, 1995 and  
June 30, 1996, respectively.                                                    

The Company has employment and noncompetition agreements with certain       
officers. Such agreements provide for employment and related compensation for   
initial terms of five years, renewal options for two years, and restrict the    
individuals from competing, as defined, with the Company during the terms of    
their respective agreements and for up to two years thereafter. The agreements  
also provide for stock options under the Company's stock option plan and for    
severance payments upon termination under circumstances defined in such         
agreements.                                                                     

(4) PROPERTY AND EQUIPMENT                                                      

Property and equipment are summarized as follows (in thousands):            

                                                                [Download Table]

                                                       DECEMBER 31,         
                                                       ------------         
                                                                    JUNE 30,
                                                       1994   1995    1996  
                                                       ----- ------ --------
                                                                            
Assets held under capital leases...................... $ --  $2,216  $2,216 
Computer equipment....................................   --     101     128 
                                                       ----- ------  ------ 
                                                         --   2,317   2,344 
Less--Accumulated depreciation and amortization.......   --      88     316 
                                                       ----- ------  ------ 
                                                       $ --  $2,229  $2,028 
                                                       ===== ======  ====== 

During 1995, the Company sold and leased back under capital leases          
approximately $2.2 million of system equipment used to produce identification   
cards for certain contracts.                                                    

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VIISAGE TECHNOLOGY, INC.  

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)  

(5) ACCOUNTS PAYABLE AND ACCRUED EXPENSES                                       

Accounts payable and accrued expenses consist of the following (in          
thousands):                                                                     

                                                                [Download Table]

                                                       DECEMBER 31,          
                                                       -------------         
                                                                     JUNE 30,
                                                        1994   1995    1996  
                                                       ------ ------ --------
                                                                             
Accounts payable...................................... $1,079 $  835  $1,338 
Accrued contract costs................................    --     --    1,543 
Accrued payroll and related taxes.....................     72    108     202 
Accrued vacation......................................     21    136     202 
Other accrued expenses................................      6     74      57 
                                                       ------ ------  ------ 
                                                       $1,178 $1,153  $3,342 
                                                       ====== ======  ====== 

(6) BANK BORROWINGS                                                             

Long-term debt consists of borrowings under a revolving line of credit      
agreement between Lau Technologies and a commercial bank. Borrowings that       
relate to the Company's operations will be assumed in connection with the       
reorganization discussed in Note 1. Borrowings are unsecured and bear interest  
(7.6% at June 30, 1996) at the bank's corporate rate, rates based on the        
bank's cost of funds or LIBOR-based options. The arrangement provides for       
borrowings of up to $15.0 million, permits the Company to enter into equipment  
leases of up to $15.0 million and requires Lau Technologies to maintain         
certain financial ratios and minimum tangible net worth. At June 30 1996, Lau   
Technologies was in compliance with such covenants. The revolving line of       
credit expires on June 30, 1998 and, accordingly, all amounts due have been     
classified as long-term.                                                        

The Company is negotiating a revolving credit agreement to replace the      
existing arrangement. The new agreement is expected to provide for unsecured    
borrowings of up to $10.0 million at prime rate or other LIBOR-based options    
and permit additional lease obligations. Any agreement, among other things, is  
expected to limit the amount the Company may borrow from other sources,         
restrict certain expenditures and require the maintenance of debt coverage and  
leverage ratios.                                                                

(7) LEASES                                                                      

The Company leases certain equipment used in its operations and the shared  
facilities discussed in Note 3. Rental expense for operating leases was         
approximately $40,000 in 1993, $90,000 in 1994, $140,000 in 1995 and $70,000    
and $110,000 for the six month periods ended July 2, 1995 and June 30, 1996,    
respectively.                                                                   

At June 30, 1996, approximate future minimum rentals under the lease for    
shared facilities and capital leases for the six months ended December 31,      
1996 and the years ending December 31, thereafter are as follows (in            
thousands):                                                                     

                                                                [Download Table]

                                                            CAPITAL OPERATING
PERIOD ENDING                                                LEASE    LEASE  
-------------                                               ------- ---------
                                                                             
1996....................................................... $  329    $110   
1997.......................................................    659      36   
1998.......................................................    659     --    
1999.......................................................    559     --    
                                                            ------    ----   
  Total minimum lease payments.............................  2,206    $146   
                                                                      ====   
Less--Interest portion.....................................    300           
                                                            ------           
Present value of net minimum lease payments................  1,906           
Less--Current portion......................................    512           
                                                            ------           
                                                            $1,394           
                                                            ======           

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VIISAGE TECHNOLOGY, INC.  

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)  

Lau Technologies has a system project lease arrangement, which will be      
assumed by the Company at the time of the reorganization described in Note 1,   
with a commercial leasing organization providing for system project leases of   
up to $15.0 million. Pursuant to the facility, the lessor will purchase         
certain of the Company's digital identification systems and lease them back to  
Viisage for deployment with identified and contracted customers approved by     
the lessor. The lessor will retain title to the systems and will have an        
assignment of Viisage's rights under the related customer contracts, including  
rights to use the software and technology underlying the related systems.       
Under the facility, the lessor will bear the credit risk associated with        
payments by Viisage's customers, but Viisage will bear performance and          
appropriation risk and will generally be required to repurchase a system in     
the event of a termination by a customer for any reason except credit default.  

(8) RETIREMENT PLANS                                                            

The Company participates in the Lau Technologies 401(k) plan and pays its   
proportionate share of plan expenses based on the number of participants. The   
plan permits pretax contributions by participants of up to 15% of base          
compensation. The Company may make discretionary matching contributions of up   
to 3% of base compensation. Participants are fully vested in their              
contributions and vest 20% per year in employer contributions. The Company's    
allocation of costs for all periods was not material.                           

The Company does not offer any postretirement benefits.                     

(9) STOCK OPTION PLANS                                                          

Lau Technologies granted 1,167,950 nonqualified options for the Company's   
common stock on February 1, 1996 to management and 81,650 nonqualified options  
to directors. The exercise price for such options is $2.96 per share. The       
Company granted an additional 177,500 nonqualified options to management on     
April 15, 1996 at $4.86 per share, the estimated fair value of such shares at   
the grant date. At the closing date of the initial public offering 255,600      
options are exercisable. The remaining director options become exercisable      
over three years and management options become exercisable in seven years or    
earlier if certain performance measures are met. The performance measures are   
based on each $1.0 million increase in Company value up to $500 million. In     
connection with such options, the Company is recognizing compensation expense   
of approximately $700,000 over the estimated vesting period. The amount of      
compensation is calculated as the difference between the exercise price and     
the fair value of the Company's business on the grant dates based on an         
independent third-party appraisal. Stock compensation expense recorded for the  
six months ended June 30, 1996 was $92,000. The Company has reserved 1,437,750  
shares of common stock for issuance under the Plans of which 10,650 are         
available for grant. No options have been exercised or canceled under the       
Plans. The options expire ten years from the date of grant.                     

On June 17, 1996, the Board of Directors of the Company ratified the        
foregoing option grants in connection with its adoption of the Stock Option     
Plans (the Plans) under which incentive and nonqualified stock options may be   
granted to employees and officers and nonqualified stock options may be         
granted to directors. Generally, incentive stock options are granted at fair    
value and are subject to the requirements of Section 422 of the Internal        
Revenue Code of 1986, as amended. Nonqualified options are granted at exercise  
prices determined by the Board of Directors. Options vest over periods of up    
to seven years and vesting may be accelerated based on performance criteria     
set by the Board of Directors.                                                  

The Company has computed the pro forma disclosures required under SFAS No.  
123 for options granted in 1996 using the Black-Scholes option pricing model    
prescribed by SFAS No. 123. The weighted average assumptions used for 1996      
are:                                                                            

                                                                [Download Table]
                                                                        
Risk free interest rate........................................    6%   
Expected dividend yield........................................   --    
Expected lives................................................. 10 Years
Expected volatility............................................    66%  

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VIISAGE TECHNOLOGY, INC.  

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)  

The total value of options granted during 1996 was computed as approximately
$4.2 million. Of this amount $510,000 would be charged to operations for the    
six months ended June 30, 1996 for currently vested options and the remaining   
amount, $3.6 million, would be amortized over the related vesting periods. The  
pro forma affect of SFAS No. 123 for the period ended June 30, 1996 is as       
follows:                                                                        

                                                                [Download Table]

                                                     AS REPORTED PRO FORMA 
                                                     ----------- --------- 
                                                                           
Net income (loss)...................................   $74,000   $(206,000)
Net income per share (loss).........................      0.01       (0.03)
                                                       =======   ========= 

(10) SUBSEQUENT EVENTS                                                          

In August 1996, the Company filed a Registration Statement with the SEC     
covering the issuance and sale by the Company of approximately 2,000,000        
shares of common stock.                                                         

In September 1996, Lau Technologies entered into a system project lease     
arrangement as described in Note 7 providing for system project leases of up    
to $15.0 million, which will be assumed by the Company as a part of the         
reorganization described in Note 1.                                             

On the effective date of the aforementioned offering the Company completed  
the reorganization discussed in Note 1 and issued 5,680,000 shares of common    
stock to Lau Technologies.                                                      

The Company plans to use a portion of the proceeds from the aforementioned  
sale of common stock to repay long-term debt. Assuming such debt were repaid    
at the beginning of the period, net income (loss) per share would have been     
($0.34) and $0.05 for the year ended December 31, 1995 and the six months       
ended June 30, 1996, respectively.                                              

On September 23, 1996, three minority shareholders of Lau filed suit in     
Superior Court in Berkshire County, Massachusetts, alleging that certain        
defendants breached the fiduciary duty owed the plaintiffs as shareholders of   
Lau. The plaintiffs requested, among other things, an injunction to delay this  
offering in an effort to obtain a direct, rather than an indirect, ownership    
interest in the Company. On October 4, 1996, the Superior Court denied          
plaintiffs' request for such relief, although plaintiffs' claims for            
unspecified money damages remain pending. Lau has agreed to indemnify and hold  
the Company harmless for any liabilities incurred by the Company as a result    
of judgments, settlements or litigation expenses arising out of this suit.      
Accordingly, the Company does not believe that the resolution of this matter    
would have a material adverse effect on its business, financial condition or    
results of operations.                                                          

F-13  

424B4
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[Images and schematic representations of Viisage's facial recognition software  
performing enrollment, identification and verification.]                        

SEE "BUSINESS--PRODUCTS & SERVICES--
FACIAL RECOGNITION TECHNOLOGIES." 

424B4
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY        
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS     
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS NOT CONTAINED        
HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY    
OF THE UNDERWRITERS OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE    
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER     
THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN       
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES        
OFFERED HEREBY, TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO    
MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF      
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,     
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF   
ANY DATE SUBSEQUENT TO THE DATE HEREOF.                                         

------------------  

TABLE OF CONTENTS 

                                                                [Download Table]

                                                                          PAGE
                                                                          ----
                                                                              
Prospectus Summary.......................................................   3 
Risk Factors.............................................................   6 
Use of Proceeds..........................................................  15 
Dividend Policy..........................................................  15 
Capitalization...........................................................  16 
Dilution.................................................................  17 
Selected Financial Data..................................................  18 
Management's Discussion and Analysis of Financial Condition and Results       
 of Operations...........................................................  19 
Business.................................................................  26 
Relationship and Certain Transactions with Lau Technologies..............  37 
Management...............................................................  40 
Principal and Selling Stockholders.......................................  45 
Description of Capital Stock ............................................  46 
Shares Eligible for Future Sale..........................................  49 
Underwriting.............................................................  51 
Legal Matters............................................................  52 
Experts..................................................................  52 
Additional Information...................................................  52 
Financial Statements..................................................... F-1 

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UNTIL DECEMBER 3, 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEAL- 
ERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING    
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY    
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPEC-   
TUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR  
SUBSCRIPTIONS.                                                                  

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2,500,000 SHARES  

[Viisage Logo]  

COMMON STOCK  

------------------  

PROSPECTUS  

------------------  

COWEN & COMPANY 

NEEDHAM & COMPANY, INC. 

November 8, 1996  

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Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B4’ Filing		Date		First		Last			Other Filings
		2/1/01		44
		12/31/98		46					10-K,  NT 10-K
		6/30/98		17		66
		6/30/97		62
		2/23/97		39		65
		12/31/96		66					10-K405
		12/3/96		70
		11/14/96		1
Filed on:		11/8/96		1		70
		11/6/96		5		57
		10/8/96		16		51
		10/4/96		39		68
		9/29/96		17		23			10-Q
		9/23/96		39		68
		8/20/96		39
		8/13/96		57
		7/26/96		38
		7/1/96		41		64
		6/30/96		7		68
		6/17/96		67
		5/23/96		39		61
		4/15/96		44		67
		2/1/96		44		67
		12/31/95		8		68
		10/1/95		22
		7/2/95		7		66
		12/31/94		24		57
		12/31/93		20		34
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