UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

   
                                   FORM 10-K/A
                                  ANNUAL REPORT
    

(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the fiscal year ended      September 30, 1996


[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from ____________________ to _________________________
-
Commission File Number:              0-18856


                            DIGITAL BIOMETRICS, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                                     41-1545069
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

5600 Rowland Road, Minnetonka, Minnesota    55343         (612) 932-0888
(Address of principal executive offices)  (Zip Code)  (Registrant's telephone
                                                    number, including area code)

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  Common Stock, $.01
                                                             par value


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days. [X] Yes [ ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate the number of shares of each of the issuer's classes of common stock,
as of the latest practicable date.

    Common Stock, $.01 par value      November 30, 1996 - 10,873,687 shares
             (Class)                              (Outstanding)

The aggregate market value of common stock held by non-affiliates as of November
30, 1996: $25,551,408

                       DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement for its 1997 Annual Meeting
of Stockholders are Incorporated by Reference into Items 10, 11, 12 and 13 of
Part III.


                                TABLE OF CONTENTS
                                    FORM 10-K

                                                                            Page
                                                                            ----
                                     PART I

Item  1.  Business                                                             3

Item  2.  Properties                                                          10

Item  3.  Legal Proceedings                                                   10

Item  4.  Submission of Matters to a Vote of Security Holder                  10

                                     PART II

Item  5.  Market for the Registrant's Common Equity and Related Stockholder
          Matters                                                             11

Item  6.  Selected Financial Data                                             12

Item  7.  Management's Discussion and Analysis of Financial Condition and
          Results of Operations                                               13

Item  8.  Financial Statements and Supplementary Data                         20

Item  9.  Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure                                                35

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant                  35

Item 11.  Executive Compensation                                              36

Item 12.  Security Ownership of Certain Beneficial Owners and Management      36

Item 13.  Certain Relationships and Related Transactions                      36

                                     PART IV

Item 14.  Exhibits, Financial Statement Schedule and Reports on Form 8-K      37


TENPRINTER(R) and the Company's mechanical hand logo have been registered as
trademarks with the U.S. Patent and Trademark Office. The Company has applied
for registration of the TRAK-21(TM) and SQUID(TM) trademarks. In addition,
FC-5(TM), FC-6(TM), FC-7(TM), FC-11(TM), FC-21(TM) and FC-22(TM) are trademarks
of the Company.


                                     PART I

ITEM 1.      BUSINESS
                                     GENERAL

     The Company was organized in 1985 as a Minnesota corporation under the name
C.F.A. Technologies, Inc. and was reincorporated under the laws of the State of
Delaware in 1986. The Company changed its name to Digital Biometrics, Inc. on
February 1, 1990. The Company is engaged in the business of developing,
manufacturing and marketing biometric identification products based primarily on
electro-optical imaging technologies. The Company's products are marketed to law
enforcement and regulatory agencies, and for commercial applications where
positive identification is required of employees and customers.

     The Company's current strategies are to continue to market "live-scan"
technology to law enforcement agencies and to pursue other commercial
applications of its imaging technology. The Company's principal product is the
TENPRINTER(R)system, a computer-based inkless live-scan system that
electronically reads a fingerprint and creates a digital image. Approximately
99% of the Company's revenues in fiscal 1996 came from sales of live-scan
systems to law enforcement and regulatory agency customers and maintenance fees
related to this installed base of TENPRINTER(R)systems. The current focus of
commercial marketing efforts is the sale of new identification and player
tracking products into the gaming industry. The products described below were
first introduced in late 1995 and the Company has not yet completed production
level systems and consequently has not received any meaningful revenues from
sales of these products.

     Except for the historical information contained herein, the matters
discussed in this Form 10-K are forward looking statements made within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, and involve risks and uncertainties, including
development and market acceptance of the Company's products and the availability
of new employees experienced in the present and contemplated markets. Other
factors that may affect future performance of the Company include successful
expansion of distribution channels for products through OEM's and others;
changes in general economic conditions; availability of funding where customer
procurements are dependent on state or federal government grants and general tax
funding; concentrations of accounts receivable and other credit risk in single
large customers; or cost and availability of components. In addition, markets
for the Company's products are characterized by significant and increasing
competition, and the Company's financial results may be adversely affected by
the actions of existing and future competitors, including the development of new
technologies, the introduction of new products, and price reductions by such
competitors to gain or retain market share. It is important to note that the
Company's actual results could differ materially from those in such forward
looking statements and the Company assumes no obligation to update such forward
looking statements.

                  LAW ENFORCEMENT AND REGULATORY AGENCY MARKETS

     For nearly a century, fingerprints have been and remain the method of
choice to positively identify individuals. Forensic scientists use fingerprints
to match latent fingerprints lifted from crime scenes with the fingerprints of
suspected perpetrators of crimes. Criminal courts throughout the world accept
the testimony of fingerprint experts and countless convictions have been
achieved on the basis of fingerprint evidence. Other biometric identification
technologies also exist, including voice recognition, retinal eye scan and hand
geometry, but none has achieved the universal acceptance of fingerprints.

     Over 8,500,000 fingerprint cards are submitted every year to the Federal
Bureau of Investigation. As a result, it has become extremely time consuming, if
not impractical, to perform manual searches and comparisons of prints. With the
introduction of Automatic Fingerprint Identification Systems ("AFIS") in the
1970's, however, the time required to perform searches of fingerprint archives
was dramatically reduced. Modern AFIS systems are capable of performing several
thousand comparisons of fingerprints per second. The system then presents a
trained fingerprint examiner with a short list of candidate prints from which
the examiner makes the final visual determination of whether two prints are
identical.

     With the introduction of AFIS systems it has become apparent, however, that
in practice the quality of inked fingerprints is often not adequate to meet the
needs of this sophisticated technology. An unacceptably high percentage of inked
fingerprints in the archives cannot be properly read and classified by the AFIS
system in order for the system to be able to quickly perform a search. The
Company's TENPRINTER system solves several problems at once for police
departments. It consistently generates high quality fingerprint data and, at the
user's option, this data may be transmitted over ordinary telephone lines to any
location, including an AFIS site, or may be printed out on any number of card
formats and in any number of copies. The TENPRINTER system also permits the
booking officer to instantly review the quality of the prints as they are taken,
thereby screening out bad prints without having to re-do the entire fingerprint
card and speeding up the booking process considerably.

     While the technologies developed by the Company may be suitable for
application in several potential markets, the Company has elected to concentrate
its development and marketing efforts on law enforcement agencies and other
organizations requiring a high quality fingerprint device for identification
cards or similar applications. As of November 30, 1996, the Company had a
backlog of firm orders of approximately $3,777,000 compared with $2,640,000 at
November 30, 1995. The Company's sales include large purchases by individual
customers. For the fiscal years ended September 30, 1996, 1995 and 1994 sales to
two customers in 1996, two customers in 1995 and one customer in 1994 accounted
for 30%, 52% and 43%, respectively, of annual sales. This trend of concentration
of sales among few, relatively large customers may continue in the foreseeable
future. Furthermore, the nature of the law enforcement market and the government
procurement process are expected to result in the continuation of an irregular
and unpredictable revenue cycle for the Company.

PRODUCTS

THE TENPRINTER SYSTEM

     The Company's principal product, the TENPRINTER, is designed and marketed
as a complement to AFIS systems. Several large manufacturers produce and sell
AFIS systems, which are computerized central fingerprint data base systems
capable of storing fingerprint information for an entire demographic unit such
as a city, county, state or country. AFIS systems are designed to facilitate the
work of a law enforcement agency's fingerprint technicians. An AFIS system is
capable of electronically comparing a given set of fingerprints against all
fingerprints in its data base and producing a short list of candidate prints. A
fingerprint technician then visually compares the AFIS results with the
fingerprints in question. Optimal use of an AFIS system depends in part on the
clarity of the fingerprint images that are fed into the AFIS. The TENPRINTER
system consistently produces fingerprint images of higher clarity than those
achieved by conventional "ink-and-roll" methods and is being marketed as a
complementary product to AFIS systems.

     The TENPRINTER system is a computer-based inkless "live-scan" system that
electronically reads a fingerprint and creates a digital image. Fingerprints are
captured by rolling the fingers of a subject on a contact surface of an optical
assembly which creates an optical image of the fingerprint. The optical image is
converted into a digital image by a photo-imaging detector. The digital image
produced by the TENPRINTER system may be sent directly to the AFIS site by means
of telecommunications or may be printed on a given law enforcement agency's
standard fingerprint cards, either as a binary image or as a gray-scale image.
Binary printing is accomplished with standard laser printing technology, which
works by depositing a fixed amount of black toner in a single spot or "dot" on
the paper. When fingerprints are produced using this method, only black and
white, or binary, images are produced. With binary printing it is thus not
possible to reproduce the nuances, or shades of gray, that are present when
using the conventional "ink-and-roll" method. Such nuances are important visual
cues to aid the fingerprint examiner in making positive identifications. In the
gray scale printing technology available with the TENPRINTER system, the
fingerprint to be reproduced includes the nuances normally seen in a
conventional "ink-and-roll" fingerprint. The TENPRINTER was first marketed
commercially in 1988.

     While prices of AFIS systems and live-scan systems fluctuate widely
depending on the configuration of the systems, AFIS systems cost from $1 million
up to tens of millions of dollars and public bid documents show live-scan
systems to be priced between approximately $30,000 and $50,000 per unit. The
Company believes that the value of an expensive AFIS system cannot fully be
realized by its users without the addition of comparatively inexpensive
peripheral live-scan devices. An immediate target market for the TENPRINTER is
state and local law enforcement agencies which have purchased or are purchasing,
or which have access to, AFIS systems.

     Law enforcement agencies submit to the FBI one copy of a fingerprint card
for every suspect charged with a felony. Over 8,500,000 such cards are submitted
to the FBI each year. As a result, the FBI plays an important role in the
fingerprint identification process in the United States. The FBI has put into
place an extensive testing process for live-scan systems. Upon a live-scan's
successful completion of the testing process, the FBI will accept cards produced
by that live-scan for submission to the FBI's Identification Division and for
retention in the Division files. The Company's TENPRINTER system has received
accreditation under the FBI Image Quality Standards (IQS). To the best of the
Company's knowledge, competitors also have received or are in process of
receiving such approval. Regulatory standards such as IQS continue to evolve and
there can be no assurance what standards will be adopted in the future or that
the Company will be able, without significant cost and expense, comply with
future requirements.

     The FBI has awarded contracts in connection with a multi-phase program of
its well publicized fingerprint automation and revitalization project which,
when operational, will involve the paperless utilization of fingerprint data
and, ultimately, the capability to eliminate fingerprint cards at the FBI level.
Instead, the systems would accept electronic fingerprint images such as those
produced by live-scan equipment or similar technologies. These systems, which
will accept over 60,000 tenprint card submissions per day, will replace the
current card-based system in Washington with its new facility in West Virginia.
The FBI has stated that 62,000 contributors currently submit fingerprint cards
to the FBI. While not all of these contributors can be expected to be buyers of
live-scan systems, the Company believes that a significant portion ultimately
may choose to purchase live-scan equipment.

MANUFACTURING AND PRODUCT DELIVERY

    The manufacturing of the Company's S-Series TENPRINTER system and
installation at customer locations often involve unique technical solutions and
applications of the Company's technology which has from time to time resulted in
and may continue to result in late deliveries to customers. To date, the Company
has not incurred or paid any material amount for penalties or damages as a
result of late deliveries; however, there can be no assurance that the Company
will be able to successfully develop, manufacture and deliver new designs for
live-scan fingerprint capture systems in compliance with contracts or customer
requirements.

TECHNOLOGY PARTNERS

    The Company has sold certain of its TENPRINTER systems and related live-scan
technologies on an OEM basis and in connection with joint development projects.
In addition, the Company has participated and expects to continue to participate
with system integrators who purchase the Company's technology and integrate it
with other technologies in developing a more comprehensive solution for a
customer. These installations may require significant amounts of customization
and there can be no assurance that the Company will be able to meet its
contractual commitments or deliver its technologies on a timely basis.

     The Company has worked with NEC, an AFIS vendor and long-standing customer
and business partner of the Company, in Tokyo, Japan, since late 1993 in pursuit
of a fingerprint system for the National Police Agency of Japan (NPA). During
the fourth quarter of fiscal 1996, the formal Teaming Agreement has, by its
original terms, expired and the Company has since been in discussions with NEC
as to the nature of the joint business relationship going forward. In connection
with a recent live-scan bid in the state of Texas, NEC announced upon award to
NEC by the State of Texas that NEC intends to enter and compete directly with
the Company in the live-scan marketplace. It is possible other AFIS vendors or
systems integrators will employ similar strategies or tactics and these
companies have financial and other resources significantly greater than that of
the Company.

OTHER FINGERPRINT-BASED PRODUCTS

    The FC series single fingerprint capture units are marketed indirectly
through system integrators and are priced approximately from $1,250 to $2,500
per unit. The Company does not anticipate that sales of these products will
comprise a significant portion of sales in the foreseeable future. The Company
presently intends to continue to market the FC series primarily to systems
integrators on an OEM basis.

    The FC-7(TM) SQUID(TM) System is a light-weight, portable, hand-held unit
designed for use in the patrol car. The SQUID system captures "on-the-spot"
fingerprints which can then be relayed from the patrol car to a communications
center where identification can take place. This product will permit patrol
officers to obtain positive ID's without transporting suspects to the police
station. The SQUID system has been designed and manufactured to specifications
of the FBI's NCIC 2000 project which is currently planned to be operational in
1999. The Company presently intends to also market the SQUID to systems
integrators on an OEM basis.

IMAGING PRODUCTS

     The Company also markets imaging database software products which integrate
text and images. The information may then be categorized and correlated for
fast, easy and accurate retrieval, eliminating the traditional labor-intensive
process of link analysis that can take weeks to produce. Applications of the
imaging products include mugshots of suspects, gang information and other
circumstances requiring fast retrieval of images and case information. The
Company does not anticipate that sales of these products will comprise a
significant portion of sales in the foreseeable future.

COMPETITION

     The TENPRINTER system is offered to law enforcement and regulatory agencies
as an alternative to the conventional "ink-and-roll" method of fingerprint
recording. The Company believes that the law enforcement community is becoming
increasingly familiar with the advantages of live-scan technology over the
conventional "ink-and-roll" fingerprints as well as the advantages of live-scan
as a complement to AFIS systems. The market for live-scan systems is developing
and competitive. The Company currently has four principal competitors in
marketing live-scan fingerprint systems to law enforcement agencies. The Company
is also aware of several other companies that have developed products utilizing
the electronic imaging of fingerprints. The Company competes in the live-scan
market primarily on the basis of quality, features, performance, service and
support and price.

     Continued growth in demand for live-scan fingerprint systems may attract
additional competition. The manufacturers of AFIS systems are logical
participants in the live-scan market, as evidenced by the entry of Printrak,
Inc. into the live-scan market and the recent announcement by NEC that it also
will develop a competitive live-scan product. AFIS vendors and other potential
additional competitors could enter the law enforcement market from a related
biometric identification field, such as access control and may have financial
and other resources significantly greater than those of the Company.

     Also see "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Forward Looking Statements and Matters Affecting Future
Operations".

SUPPLIERS

     The Company buys substantially all components of the TENPRINTER system from
third parties for assembly and testing by the Company. Some of these components
are designed by the Company and/or are custom manufactured to the Company's
specifications. This permits the Company to produce the TENPRINTER without the
substantial commitment of resources that a complete manufacturing facility would
require. To assure the quality of such components, the Company may design
component parts and subassemblies and/or specify parts used in such components.
The Company also inspects and tests incoming parts and components, and conducts
test and burn-in procedures on all assembled finished products. Certain of the
Company's components used in the manufacture of its 500 series TENPRINTER
systems are currently supplied by a single vendor. Secondary sourcing is
available but would take several months to bring into production. Delays in
product deliveries to customers could occur until the secondary sourcing is
secured. Other than prototypes, for which the development time may vary, the
time required for product delivery averages approximately 60 days from the date
a purchase order is received.

     The Company provides hardware field maintenance services directly and also
through subcontract arrangements with companies specializing in this service.
For example, the Company has signed a teaming agreement with the Field Service
Division of Motorola, Inc. ("FSD") to participate in the development of
maintenance proposals for TENPRINTER installations. The teaming agreement
anticipates that to the extent such proposals are accepted by the Company's
customers, FSD will perform maintenance services as a subcontractor to the
Company under the main agreement. There may, however, be instances where
applicable procurement regulations may require, directly or indirectly, the use
of maintenance organizations other than FSD and such situations, should they
arise, will be dealt with on a case by case basis.


                       GAMING AND OTHER COMMERCIAL MARKETS

     The Company generally makes all of its products available to commercial
customers. The current focus of commercial marketing efforts is the sale of new
identification and player tracking products into the gaming industry. The
products described below were first introduced in late 1995 and the Company has
not yet completed production level systems and consequently has not received any
meaningful revenues from sales of these products. In fiscal 1997, the Company
intends to focus its gaming industry marketing efforts on products which provide
positive identification and tracking capabilities for patrons of table games and
employees of the gaming establishments.

PRODUCTS

TRAK-21(TM) PLAYER TRACKING SYSTEM

     TRAK-21 Player Tracking System (TRAK-21) is a fully automated system that
enables casinos to collect, track and utilize up-to-the-minute information on
their table players. TRAK-21 provides casinos with automatically calculated
wagers as well as player statistics such as start and end times and average bet
information, enabling pit personnel to concentrate on customer service.

     The gaming industry has experienced an unprecedented surge in revenue
growth that outpaces nearly all other U.S. industry groups. Record numbers of
players visit casinos, in fact, more than 30% of U.S. households gambled at a
casino last year. State, local, and tribal governments benefit from gaming's
ability to create new jobs, generate tax revenues, and spark capital investment.
New casinos are opening monthly.

     There is heavy competition among casinos to develop and maintain a loyal
customer base. Collectively, the Las Vegas casinos spent nearly $500 million in
complimentary benefits, or COMPS, last year to attract players to their floors.
Offering regular players COMPS, such as free drinks, meals, hotel rooms, etc.,
incents the player to return to the casino.

     Tracking important players is imperative to the success of the casino. The
more a casino knows about its clientele, the more directed, targeted marketing
efforts it can employ.

     DBI has sparked the interest of casinos with TRAK-21, an automated approach
to tracking a player's wagering activity at a blackjack table. Blackjack tables
utilizing a TRAK-21 system provide immediate benefits to the casino, such as:

     *    Immediate identification of players to pit personnel through the use
          of magnetic stripe card readers at the table, and

     *    Automatic calculation of bets via standard chip imaging technology --
          by player, position, and table -- with results immediately reported to
          casino personnel.

     TRAK-21 enables casino management to view all player data and wagering
activity on the floor at any time and, as a result, provide better service and
marketing to important players.

     TRAK-21 is currently planned for beta test with the Las Vegas Hilton and
has been approved by the Nevada State Gaming Control Board.

IMAGE VERIFICATION SYSTEM

     The Image Verification System, known as the "Verifier," is an automated,
photo image/signature management system providing an effective way of capturing
an individual's photo, signature and banking information in a precise manner to
prevent theft, decrease waiting time and provide positive identification.

     The Verifier is designed for use by casino management, casino security, and
casino marketing personnel. It offers several advantages over traditional
methods of identification currently being utilized, and offers other features
beneficial to casino marketing.

OTHER COMMERCIAL PRODUCTS

     The Company also markets employee badge and related imaging database
software products which integrate text and images. In addition to providing for
employee identification, demographic information may be categorized and
correlated for fast, easy and accurate retrieval.

COMPETITION

     There are a variety of companies providing player tracking information and
capabilities to the gaming industry. All of the known competitors have financial
and other resources significantly greater than those of the Company. The TRAK-21
Player Tracking System is, however, one of a very limited number of proposed
systems which uses high-level image processing for automatically calculating
wagers at table games.

SUPPLIERS

     Components necessary for the manufacture of the Verifier and TRAK-21
systems are primarily off-the-shelf and consequently available from a variety of
computer device suppliers.


                             PROPRIETARY TECHNOLOGY

     The Company owns a federally registered trademark for the TENPRINTER name
and the Company's mechanical hand logo. The Company has applied for trademark
registrations for TRAK-21 and SQUID.

     The Company owns several U. S. patents and has U. S. patent applications
pending which cover technology currently employed in its products. The Company
has also filed for patent protection in several foreign countries. The Company
believes that while its patents give it a competitive advantage, the uniqueness
of the Company's products derive from the Company's ability to produce a totally
integrated system incorporating diverse technologies such as optical scanning,
image processing and laser printing. Although additional features of the
Company's products may be patentable, the Company has chosen to preserve these
features as trade secrets rather than applying for patent protection. The
Company has obtained signed confidentiality and non-competition agreements from
all employees and from independent consultants who have access to confidential
information.

     The Company has recently had adverse rulings in pending patent litigation
against a competitor. See "Item 3. Legal Proceedings."


                                    EMPLOYEES

     At November 30, 1996, the Company employed 66 persons on a full time basis,
none of whom is represented by a union. Of these persons, five have general
management responsibilities and the remainder perform marketing, engineering,
assembly, or administrative functions. From time to time to meet critical
demands, the Company has utilized additional individuals to perform services for
the Company on a part time or a consulting basis. Personnel will be hired in the
future as the Company deems necessary.

ITEM 2.      PROPERTIES

     The Company does not own any real properties. The Company's primary offices
and facilities are located in approximately 33,382 square feet of space in an
industrial park at 5600 Rowland Road, Minnetonka, Minnesota. The space is
occupied under a lease expiring in April 30, 2001, and is believed to be
adequate for the Company's current business needs.

     A separate sales office, including spare parts and maintenance services,
has been established in Los Angeles, California located in approximately 3,400
square feet of space in an industrial office park. This space is occupied under
a lease expiring December, 1997. The Company's sales employee in Washington,
D.C. operates in approximately 170 square feet of a business park with shared
secretarial and office support services. This lease is a year-to-year
arrangement.

ITEM 3.      LEGAL PROCEEDINGS

     On June 1, 1995, the Company filed a complaint for patent infringement
against Identix, Inc., of Sunnyvale, California, in the United States District
Court for the Northern District of California. The complaint alleges that
Identix has willfully and deliberately infringed a Company patent through the
manufacture, use and/or sale of competing products. The complaint seeks, among
other things, an injunction prohibiting further infringement as well as
unspecified monetary damages. Identix has responded to the complaint alleging,
among other purported defenses, non-infringement and patent invalidity.

     On August 27, 1996 the judge assigned to the case granted a partial summary
judgment in favor of Identix dismissing the Company's claims of patent
infringement with respect to Identix's Touchprint 600 product line. A
predecessor product, the Touchprint 900, received a similar ruling in favor of
Identix on December 20, 1996. The Company intends to appeal the court's decision
of non-infringement. The interpretation of patents is ultimately decided by a
special patent Court of Appeals in Washington D.C. A prediction of the final
outcome of the appeal is not possible. However, in the event the Company does
not prevail in this litigation, its competitive position may be materially and
adversely affected.

     There are no material lawsuits pending or, to the Company's knowledge,
threatened against the Company.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of the stockholders during the three
months ended September 30, 1996.


                                     PART II

ITEM 5.      MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
             MATTERS

     MARKET INFORMATION. The Company's common stock has been traded on NASDAQ
under the symbol "DBII" since December, 1990. The following bid information is
provided for quarterly periods for the past three fiscal years. These quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
do not necessarily represent actual transactions.

           Fiscal Year ended September 30, 1996          High           Low
                                                         ----           ---
                 First Quarter                         $ 8.25         $ 5.25
                 Second Quarter                          5.88           2.63
                 Third Quarter                           8.75           3.13
                 Fourth Quarter                          6.63           3.00

           Fiscal Year ended September 30, 1995          High            Low
                                                         ----            ---
                 First Quarter                         $ 8.25         $ 6.50
                 Second Quarter                         10.00           7.25
                 Third Quarter                          12.00           8.00
                 Fourth Quarter                         11.25           6.63

           Fiscal Year ended September 30, 1994          High            Low
                                                         ----            ---
                 First Quarter                         $17.25         $12.25
                 Second Quarter                         14.50          10.75
                 Third Quarter                          10.75           5.00
                 Fourth Quarter                          8.75           5.75

     As of November 30, 1996, the Company had approximately 6,000 record holders
of its common stock. The closing price of its common stock on November 30, 1996,
as reported by the NASDAQ National Market System was $2.75.

     DIVIDEND POLICY. Holders of common stock are entitled to such dividends as
may be declared from funds legally available for such purpose by the Board of
Directors in its sole discretion. The Company has never paid a dividend on its
common stock and it is not anticipated that dividends will be paid in the
foreseeable future. If and to the extent that any operating profits are
realized, the Company intends to retain such profits for operating purposes.

     TRANSFER AGENT. The Transfer Agent and Registrar for the Company's common
stock is Norwest Bank, Minneapolis, Minnesota.

ITEM 6.      SELECTED FINANCIAL DATA

     The following selected financial data of the Company as of and for each of
the years in the five-year period ended September 30, 1996 has been derived from
financial statements audited by KPMG Peat Marwick LLP, independent certified
public accountants. The selected financial data should be read in connection
with the financial statements and notes thereto included elsewhere herein and is
qualified by reference to such financial statements and notes thereto.

<TABLE>
<CAPTION>
                                                                 YEAR ENDED SEPTEMBER 30,
                                      ------------------------------------------------------------------------------
                                            1996            1995            1994           1993            1992
                                            ----            ----            ----           ----            ----
STATEMENT OF OPERATIONS DATA:
<S>                                    <C>             <C>            <C>             <C>             <C>        
Sales                                   $ 8,327,272     $ 9,098,014(1) $ 8,005,390     $ 4,603,821     $ 3,039,564
Cost of sales                             6,181,481       5,273,412      4,997,103       2,631,860       1,867,077
                                      ------------------------------------------------------------------------------
   Gross margin                           2,145,791       3,824,602      3,008,287       1,971,961       1,172,487
                                      ------------------------------------------------------------------------------

Expenses:
   Sales and marketing                    3,369,441       2,394,916      1,786,075       1,157,439         906,231
   Engineering and development            4,569,751       2,854,592      3,618,385       2,022,521       1,198,777
   Depreciation and amortization          1,049,584         529,687        480,981         143,310         113,383
   General and administrative             2,753,444       1,700,017      1,296,864         972,644       1,110,601
                                      ------------------------------------------------------------------------------
     Total expenses                      11,742,220       7,479,212      7,182,305       4,295,914       3,328,992
                                      ------------------------------------------------------------------------------

   
Loss from operations                     (9,596,429)     (3,654,610)    (4,174,018)     (2,323,953)     (2,156,505)
Other income (expense)                   (2,090,474)        330,055        376,703         259,410         163,620
                                      ------------------------------------------------------------------------------

Net loss                               $(11,686,903)    $(3,324,555)   $(3,797,315)    $(2,064,543)    $(1,992,885)
                                      ==============================================================================

Net loss per common share                    $(1.24)(2)(3)   $(0.43)        $(0.49)         $(0.32)         $(0.35)
                                      ==============================================================================
    

Weighted average common shares            9,451,015       7,814,144      7,696,551       6,440,341       5,685,917
                                      ==============================================================================

(1)  Includes $1.8 million in fees related to an international development
     project.

(2)  Includes $.26 per share related to financial statement adjustments
     resulting primarily from a refocussing of business priorities, as well as
     severance expenses related to the retirement of the Company's President and
     Chief Executive Officer.

   
(3)  Includes $.20 per share related to a non-cash interest expense charge for
     the intrinsic value of the beneficial conversion feature of the Company's
     convertible debentures.
    

</TABLE>

<TABLE>
<CAPTION>
                                                         AS OF SEPTEMBER 30,
                              ---------------------------------------------------------------------------
                                  1996            1995            1994           1993            1992
                                  ----            ----            ----           ----            ----
BALANCE SHEET DATA:
<S>                           <C>             <C>             <C>            <C>             <C>         
   
Cash and cash equivalents     $    466,990    $    367,866    $    592,971   $  4,485,606    $  3,639,182
Working capital                  5,506,587      13,493,690      11,864,794     14,048,363       4,397,912
Total assets                    17,309,371      25,451,666      15,846,448     18,398,215       5,618,610
Long-term obligations            2,374,739       8,863,578               -              -               -
Total liabilities                6,853,999      12,362,412       2,077,368      1,495,057         820,253
Stockholders' equity            10,455,372      13,089,254      13,769,080     16,903,158       4,798,357
    

</TABLE>

The Company has paid no cash dividends on its common stock.

ITEM 7.      MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS
             OF OPERATIONS

GENERAL

     The Company develops, manufactures, assembles and markets identification
products based on electro-optical imaging technologies. Most of the Company's
sales have been to state and local law enforcement agencies and, to date, have
consisted primarily of TENPRINTER systems and related peripheral equipment and
software.

     The nature of the law enforcement market and the government procurement
process is subject to budgetary, economic and political considerations which may
vary significantly from state to state and among different agencies. These
market characteristics, along with the recent and continuing development of the
live-scan electronic fingerprint industry, have resulted in and are expected to
continue to result in an irregular revenue cycle for the Company and any
prediction of future trends is inherently difficult. The Company believes,
however, that its principal product line, which is designed to be sold to law
enforcement agencies, is a leader in its marketplace. To the extent that funds
become available to such customers for procurement purposes, the Company should
benefit from the continuing development of this market.

     The Company generally recognizes product sales on the date of shipment. The
Company's standard terms of sale are payment due net in 30 days, f.o.b. the
Company. Terms of sale and shipment for certain procurements by municipal or
other government agencies may, however, be subject to negotiation. In cases
where the Company is required to purchase a performance bond or to deposit
collateral in accordance with the terms of a contract, the Company's policy is
to defer recognition of revenues from such contracts until the amount shipped
exceeds the amount of the performance collateral or until the security is
released by the bonding company. Maintenance revenues are recognized over the
life of the contract on a straight-line basis. Maintenance costs are expensed as
incurred.


RESULTS OF OPERATIONS

FISCAL 1996 COMPARED TO 1995

     Fiscal 1996 operating results include a fourth quarter charge of $2,474,000
($.26 per share) related to a review of strategies and refocussing of the
business. This charge includes severance expenses, write-off of excess and
obsolete inventory and demonstration equipment resulting from the introduction
of the Company's new S-Series TENPRINTER, an increase in the allowance for
doubtful accounts, unreimbursed international development costs and the
write-off of unamortized technology rights as a result of the Company's decision
in the fourth quarter to no longer pursue the technology acquired in the Design
Data acquisition in 1994.

     Total revenues in 1996 decreased to $8,327,000 from $9,098,000 in 1995 due
primarily to the inclusion in prior year revenues of $1,800,000 in fees related
to an international development project. The increase in identification system
product sales from $6,069,000 in 1995 to $6,821,000 in 1996 resulted from an
increase in sales of TENPRINTER systems from 80 in 1995 to 95 in 1996 partially
offset by lower 1996 average selling prices. Product maintenance and service
revenues increased from $1,229,000 in 1995 to $1,506,000 in 1996, due primarily
to a larger installed base of TENPRINTER systems. Sales to two customers in 1996
accounted for 18% and 12% of total sales. Sales to two customers in 1995
accounted for 29% and 23% of total sales.

     Overall gross margins for 1996 and 1995 were 26% and 42% of sales,
respectively. As a result of the successful introduction of the new S-Series
TENPRINTER in the fourth quarter, overall gross margins for 1996 include a
fourth quarter write-off of $350,000 (4% overall gross margin impact) for excess
field service spare parts related to previous generations of TENPRINTER
products.

     Gross margins on identification system product sales were 44% in 1996
compared with 50% in 1995. This decrease is due primarily to an uneven
production schedule in fiscal 1996 as new product introductions of the S-Series
TENPRINTER system were delayed for approximately six months. During this period
there were only nominal TENPRINTER system deliveries. The fourth quarter which
included sales of 47 TENPRINTER systems included high initial costs of product
introduction, including training and installation of field service providers
resulting in lower gross margins during this quarter than quarters of comparable
numbers of TENPRINTER shipments.

     Product maintenance and support margins for 1996 and 1995 were (57%) and
(34%) of maintenance and support revenues, respectively. The increased costs of
product maintenance and support are due primarily to building of base field
service operations to accommodate maintenance of three generations of TENPRINTER
systems located in 37 states and 6 international countries. Product maintenance
costs for 1996 also include a fourth quarter write-off of $350,000 (23% fourth
quarter maintenance and support margin impact) for excess field service spare
parts related to previous generations of TENPRINTER products.

     Sales and marketing expenses increased to 40% of total sales in 1996 from
26% in 1995 due primarily to increased international marketing efforts, S-Series
promotional expenses, a fourth quarter write-off of $282,000 related to previous
generation TENPRINTER system demonstration equipment and a fourth quarter charge
of $540,000 related to an increase for the allowance for doubtful accounts.

     Engineering and development expenses increased to 55% of total sales in
1996 from 31% in 1995. Engineering and development expenses during 1996 include
fourth quarter charges of $374,000 related to adjustments of unreimbursed
manufacturing setup costs of an international development project. After
adjustment, engineering and development expenses for 1996 and 1995 are net of
reimbursements for international development costs of $87,700 and $772,500,
respectively.

     Depreciation and amortization costs include a fourth quarter write-off of
$549,000 for unamortized software of information systems products no longer
actively marketed. General and administrative expenses in 1996 increased to 33%
of total sales from 19% in 1995 due primarily to $757,000 of legal costs
associated with a patent infringement suit brought by the Company against a
competitor and a fourth quarter charge of $380,000 related to CEO transition
costs.

   
     Interest income increased to $586,000 in fiscal 1996 from $378,000 in
fiscal 1995, primarily as a result of increased levels of marketable securities.
Interest expense increased to $2,676,000 in fiscal 1996 from $48,000 in fiscal
1995, due to interest expense on the 8% convertible debentures and a non-cash
charge of $1,924,000 for the intrinsic value of the beneficial conversion
feature of the convertible debentures.
    

FISCAL 1995 COMPARED TO 1994

     Sales in 1995 increased to $9,098,000 from $8,005,000 in 1994. This
increase of 14% resulted primarily from an increase in sales of TENPRINTER
system add-ons and $1,800,000 in revenue related to an international development
project. This increase offsets a decline in TENPRINTER system sales to 80 in
1995 from 170 in 1994. The large number of units sold in 1994 was primarily due
to 98 TENPRINTER systems sold to the Los Angeles County Sheriff's Department.
Sales to two customers in 1995 accounted for 29% and 23%, respectively, of total
sales, and sales to the Los Angeles County Sheriff's Department in fiscal year
1994 accounted for 43% of total sales.

     Overall gross margins for 1995 and 1994 were 42% and 38% of sales,
respectively. Gross margins on identification system product sales were 50% in
1995 compared with 42% in 1994. This increase is due primarily to discounts in
fiscal 1994 relating to volume pricing on the Los Angeles County Sheriff's
Department sale. Gross margins on sales related to an international development
project were 67% in 1995.

     Product maintenance and support margins for 1995 and 1994 were (34%) and
(16%) of maintenance and support revenues, respectively. The increased costs of
product maintenance and support are due primarily to building of base field
service operations to accommodate maintenance of TENPRINTER systems located in
37 states and 6 international countries.

     Sales and marketing expenses increased to 26% of total sales in 1995 from
22% in 1994 due primarily to increased international marketing efforts.
Engineering and development expenses decreased to 31% of total sales in 1995
from 45% in 1994. Engineering and development expenses for 1995 and 1994 are net
of reimbursements of $772,500 and $546,500, respectively, related to an
international development project.

     General and administrative expenses in 1995 increased to 19% of total sales
from 16% in 1994 due primarily to legal costs associated with a patent
infringement suit brought by the Company against a competitor in June, 1995.

     Net interest income decreased to $330,000 in fiscal 1995 from $377,000 in
fiscal 1994, primarily as a result of decreased levels of marketable securities.

INFLATION

     The Company does not believe inflation has significantly impacted revenues
or expenses.

NET OPERATING LOSS CARRYFORWARDS

     At September 30, 1996, the Company had carryforwards of net operating
losses of approximately $23,700,000 that may allow the Company to reduce future
income taxes that would otherwise be payable. Of this amount approximately
$2,200,000 relates to compensation associated with the exercise of non-qualified
stock options which, when realized, would result in approximately $880,000
credited to additional paid-in capital. The carryforwards expire annually
beginning in 1999. The annual limitation on use of net operating losses is
calculated by multiplying the value of the corporation immediately prior to the
change in ownership by the long-term federal tax exempt rate. A total of
$3,700,000 of the net operating loss carryforwards at September 30, 1996 is
subject to an annual net operating loss limitation, estimated at $350,000,
resulting from the change in control of the Company which occurred, for income
tax purposes, on December 14, 1990, the date of the Company's initial public
offering. If the limited carryforward amount for any tax year exceeds the
regular taxable income for such year, then the unused portion may generally be
carried forward to increase the annual limitation for the following year.
Utilization of net operating losses aggregating $20,000,000 which were incurred
subsequent to the change of ownership are not limited. However, any future
ownership change could create a limitation with respect to these loss
carryforwards.

LIQUIDITY AND CAPITAL RESOURCES

BACKGROUND

   
     For the period from the Company's inception in 1985 through September 30,
1996, limited revenues have resulted from product sales and at September 30,
1996, the Company's cumulative deficit was $29,047,000. Losses are expected to
continue until the market development and acceptance of the technology
incorporated into the Company's products provides product sales sufficient to
cover the Company's operating expenses.    

     The Company's business has included large contract awards from
international, state and local law enforcement agencies and it is expected that
this trend will continue. Collection of receivables related to billings of these
contract amounts is often protracted as technical requirements specified by the
customer may be modified via contract addendums. As of September 30, 1996,
approximately $2,900,000 was due from such customers.

     The Company has a $4,000,000 line of credit with Norwest Bank Minnesota
N.A. Borrowings under this line of credit are secured by marketable securities
and are limited to the amount of marketable securities held as collateral by the
bank. Borrowings under the line were $1,255,000 on September 30, 1996 and bear
interest at rates from 7.66% to 7.81%. The line is payable upon demand and
expires in May 1997.

     The Company has a $200,000 line of credit with First Bank Minneapolis,
secured by cash deposits. Borrowings under the line bear interest at the prime
rate (8.25% on September 30), are payable upon demand. The line expires in March
1997. There were no borrowings under the line at September 30, 1996.

CURRENT OPERATIONS

     Net cash used in operating activities was $9,374,000 and $1,848,000 for the
years ended September 30, 1996 and 1995, respectively. The increase in cash used
in operating activities was primarily a result of the increased net loss in
fiscal 1996 adjusted for changes in operating assets and liabilities. Cash flows
from changes in operating assets and liabilities changed from cash provided of
$165,000 in fiscal 1995 to $2,837,000 of cash used in fiscal 1996. This
$3,132,000 change in cash flow from operating assets and liabilities resulted
primarily from the higher accounts receivable and inventory balances related to
the production and delivery of S-Series TENPRINTER systems.

     Net cash used in investing activities was $757,000 for the year ended
September 30, 1996 as compared with $102,000 of net cash provided by investing
activities for the year ended September 30, 1995. The change was primarily due
to increased capital expenditures in fiscal 1996. Capital expenditures in 1996
and 1995 were primarily for engineering and manufacturing test fixtures. The
Company's business does not require significant amounts of cash for capital
expenditures because substantial amounts of the manufacturing and assembly
processes utilized in the production of current products are performed by
outside vendors, as directed by the Company. Specifically, the Company purchases
electronics modules and standard mechanical assemblies from manufacturers of
such goods. In addition, sheet metal components, optical components and
specialized electronics modules are designed by the Company and manufactured to
the Company's proprietary specifications by outside sources.

   
     Net cash provided by financing activities was $10,230,000 for the year
ended September 30, 1996 as compared to $1,521,000 in 1995. Borrowings under
lines of credit were $1,255,000 and $1,450,000 at September 30, 1996 and 1995,
respectively. On September 29, 1995, the Company completed a private placement
to offshore accredited investors of $10,900,000 of 8% Convertible Debentures due
September 29, 1998 (the "Debentures"), of which $8,450,000 were converted to
2,751,868 shares of common stock as of September 30, 1996. The average
conversion price was $3.19 per share. Net proceeds to the Company during fiscal
1996 after placement fees but before legal and other expenses were $10,109,750.
Interest accrued on the Debentures is also payable in common stock at the time
of conversion at the conversion price as described above. In addition to the
cash placement fee, a warrant to purchase 112,893 shares of the Company's common
stock at $8.40 per share was granted to the placement agent for this offering.
The warrant was valued at $112,893, which is reflected as a discount on the
Debentures and is being amortized as interest expense over the term of the
Debentures. The Debentures include a beneficial conversion feature with an
intrinsic value of $1,924,000. The intrinsic value of the beneficial conversion
feature is to be allocated to additional paid-in capital with the resulting
discount on the debt resulting in a non-cash interest expense charge to earnings
(loss) over the vesting period of the conversion feature. Net proceeds to the
Company were used for working capital, product development and other corporate
purposes.
    

     At September 30, 1996, the Company had $467,000 in cash and cash
equivalents and $5,690,000 in marketable securities, which are classified as
available for sale. The unrealized loss on marketable securities at September
30, 1996 and 1995 was $135,000 and $176,000, respectively. These marketable
securities are collateral for borrowings under a line of credit. These
borrowings total $1,255,000 at September 30, 1996 and depending on timing of
accounts receivable collection, may reach the maximum borrowings under the line
during 1997.

FORWARD LOOKING COMMENTS AND MATTERS THAT MAY AFFECT FUTURE OPERATIONS

     Except for the historical information contained herein, the matters
discussed herein are forward looking statements made within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, and involve risks and uncertainties, including development
and market acceptance of the Company's products and the availability of new
employees experienced in the present and contemplated markets. Other factors
that may affect future performance of the Company include successful expansion
of distribution channels for products through OEM's and others; changes in
general economic conditions; availability of funding where customer procurements
are dependent on state or federal government grants and general tax funding;
concentrations of accounts receivable and other credit risk in single large
customers; or cost and availability of components. In addition, markets for the
Company's products are characterized by significant and increasing competition,
and the Company's financial results may be adversely affected by the actions of
existing and future competitors, including the development of new technologies,
the introduction of new products, and price reductions by such competitors to
gain or retain market share. It is important to note that the Company's actual
results could differ materially from those in such forward looking statements
and the Company assumes no obligation to update such forward looking statements.

     Due primarily to continuing operating losses, the Company has not yet
achieved positive cash flow. Management believes that cash and cash equivalents,
investments, accounts receivable and working capital provided from operations,
together with available financing sources, are sufficient to meet current and
foreseeable operating requirements. However, there can be no assurance that
additional financing, should it be required, will be available at terms
acceptable to the Company.

LAW ENFORCEMENT AND REGULATORY AGENCY MARKET

     In connection with a recent live-scan bid in the state of Texas, NEC, an
AFIS vendor and long-standing customer and business partner of the Company,
announced upon award to NEC by the State of Texas that NEC intends to enter and
compete directly with the Company in the live-scan marketplace. In addition, the
price bid by NEC to the State of Texas was approximately 40% less than that bid
by the Company and other competitors. It is possible other AFIS vendors or
systems integrators will employ similar strategies or tactics and these present
or future competitors have financial and other resources significantly greater
than that of the Company.

     The Company has worked with NEC in Tokyo, Japan since late 1993 in pursuit
of a fingerprint system for the National Police Agency of Japan (NPA). During
the fourth quarter of fiscal 1996, the formal Teaming Agreement has, by its
original terms, expired and the Company has since been in discussions with NEC
as to the nature of the joint business relationship going forward. NEC currently
owes the Company $1.2 million related to deliveries under the previous
agreement, payment of which has been delayed by NEC pending negotiations as to
the future business relationship. Discussions are ongoing as to the timing of
payment of this amount.

     The Company's performance in any one reporting period is not necessarily
indicative of sales trends or future performance. Law enforcement agencies are
subject to political and budgetary constraints and the nature of the law
enforcement market and the government procurement process are expected to
continue to result in an irregular and unpredictable revenue cycle for the
Company. For the years ended September 30, 1996, 1995 and 1994, sales to two
customers in 1996 accounted for 30%, two customers in 1995 accounted for 52%,
and one customer in 1994 accounted for 43%, respectively, of annual sales.
Export sales were 15%, 21%, and 3% of total sales, for the years ended September
30, 1996, 1995, and 1994, respectively.

     The Company extends credit to state and local governments in connection
with sales of products to law enforcement agencies. Approximately 70% of
customer accounts receivable at September 30, 1996 were from government
agencies, of which 40% was from a single customer. Sales to this and other
customers requiring large and sophisticated networks of TENPRINTER systems and
peripheral equipment often include technical requirements which are not fully
known at the time requirements are specified by the customer. In addition,
contracts may specify performance criteria which is required to be satisfied
before the customer accepts the products and services. The Company does not
record revenue for these products and services until acceptance criteria have
been satisfied.

     It is often not known until installation is in process if older and often
obsolete communication lines and local area networks will accommodate the large
amount of computer data transmitted by the TENPRINTER systems and related
peripherals. Due to the inherent difficulties for customers to receive
additional funding to upgrade facilities, hardware and/or communication lines to
the required level, collection of amounts due the Company for these systems
often occurs over longer periods of time during which the customer processes
contract amendments which allow the Company to charge the customer for
additional requested services. It is only upon completion of customer
requirements, which time periods are unpredictable and which may involve
investment of additional Company resources, that accounts receivable are
collected. These investments of additional resources are accrued when amounts
can be estimated but however, may be uncompensated and, other than increased
customer loyalty, negatively impact profit margins and the Company's liquidity.

GAMING AND OTHER COMMERCIAL MARKETS

     The Company has only recently began marketing products to the gaming
industry and has not yet completed production level systems of TRAK-21. Although
prototype models of TRAK-21 have been successfully demonstrated in laboratory
conditions, there can be no assurance that scheduled beta tests in live casino
environments will be successful. In addition, it has not been determined whether
or not the TRAK-21 system will be able to compete, on the basis of price and
performance, with player tracking systems of competitors whose systems have been
marketed for longer periods of time and whose financial and other resources are
far greater than that of the Company.

ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Digital Biometrics, Inc.:

     We have audited the accompanying balance sheets of Digital Biometrics, Inc.
as of September 30, 1996 and 1995, and the related statements of operations,
stockholders' equity and cash flows for each of the years in the three-year
period ended September 30, 1996. 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 Digital Biometrics, Inc. as
of September 30, 1996 and 1995, and the results of its operations and its cash
flows for each of the years in the three-year period ended September 30, 1996 in
conformity with generally accepted accounting principles.



                                            KPMG Peat Marwick LLP

   
Minneapolis, Minnesota
December 20, 1996, except as
      to note 14 which is as of
      March 28, 1997
    


<TABLE>
<CAPTION>

                                               DIGITAL BIOMETRICS, INC.
                                                    BALANCE SHEETS
                                              SEPTEMBER 30, 1996 AND 1995

                                                                                              1996              1995
                                                                                          ------------      ------------
<S>                                                                                      <C>               <C>         
Current assets:
     Cash and cash equivalents                                                            $    466,990      $    367,866
     Receivable from issuance of convertible debentures (note 7)                                  --          10,109,750
     Accounts receivable, less allowance for doubtful accounts of $692,534 and
         $111,000, respectively                                                              5,676,849         4,494,301
     Inventory (note 2)                                                                      3,633,659         1,875,682
     Prepaid expenses and other costs                                                          208,349           144,925
                                                                                          ------------      ------------
         Total current assets                                                                9,985,847        16,992,524
                                                                                          ------------      ------------

Property and equipment (note 3)                                                              2,471,754         1,639,319
     Less accumulated depreciation and amortization                                         (1,089,026)         (745,602)
                                                                                          ------------      ------------
                                                                                             1,382,728           893,717
                                                                                          ------------      ------------

Marketable securities (note 4)                                                               5,690,371         5,780,707
Patents, trademarks, copyrights and licenses, net of accumulated amortization of
     $909,803 and $610,282, respectively (note 1)                                              123,017           934,468
Deferred issuance costs on convertible debentures, net of accumulated amortization of
     $172,476 and $0, respectively (note 7)                                                    127,408           850,250
                                                                                          ------------      ------------
                                                                                          $ 17,309,371      $ 25,451,666
                                                                                          ============      ============


Current liabilities:
     Accounts payable                                                                     $  1,103,174      $    461,331
     Line of credit advances (note 5)                                                        1,255,000         1,450,000
     Deferred revenue                                                                          649,178           542,758
     Accrued expenses (note 6)                                                               1,471,908         1,044,745
                                                                                          ------------      ------------
         Total current liabilities                                                           4,479,260         3,498,834

   
Convertible debentures (note 7)                                                              2,374,739         8,863,578
                                                                                          ------------      ------------
         Total liabilities                                                                   6,853,999        12,362,412
                                                                                          ------------      ------------

Stockholders' equity (note 9):
     Common stock, $.01 par value. Authorized, 20,000,000 shares; issued
         and outstanding 10,777,288 and 7,833,633 shares, respectively                         107,773            78,336
     Additional paid-in capital                                                             39,743,380        31,061,754
     Unrealized losses on marketable securities (note 4)                                      (134,753)         (176,477)
     Deferred compensation                                                                     (96,000)         (216,684)
     Notes receivable from sale of common stock                                               (117,623)         (297,173)
     Accumulated deficit                                                                   (29,047,405)      (17,360,502)
                                                                                          ------------      ------------
         Total stockholders' equity                                                         10,455,372        13,089,254
    

Commitments (note 11)
                                                                                          ------------      ------------
                                                                                          $ 17,309,371      $ 25,451,666
                                                                                          ============      ============

                 See accompanying notes to financial statements.

</TABLE>


<TABLE>
<CAPTION>
                                    DIGITAL BIOMETRICS, INC.
                                    STATEMENTS OF OPERATIONS
                          YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994

                                                      1996              1995              1994
                                                  ------------      ------------      ------------
<S>                                              <C>               <C>               <C>         
Sales:
     Identification systems (note 1)              $  6,821,025      $  6,069,382      $  7,353,263
     Maintenance and other services                  1,506,247         1,228,632           652,127
     Other                                                --           1,800,000              --
                                                  ------------      ------------      ------------
         Total                                       8,327,272         9,098,014         8,005,390
                                                  ------------      ------------      ------------

Cost of sales:
     Identification systems (note 1)                 3,814,167         3,040,428         4,243,718
     Maintenance and other services                  2,367,314         1,644,330           753,385
     Other                                                --             588,654              --
                                                  ------------      ------------      ------------
         Total                                       6,181,481         5,273,412         4,997,103
                                                  ------------      ------------      ------------
Gross margin                                         2,145,791         3,824,602         3,008,287
                                                  ------------      ------------      ------------

Selling, general and administrative expenses:
     Sales and marketing                             3,369,441         2,394,916         1,786,075
     Engineering and development                     4,569,751         2,854,592         3,618,385
     Depreciation and amortization                   1,049,584           529,687           480,981
     General and administrative                      2,753,444         1,700,017         1,296,864
                                                  ------------      ------------      ------------
         Total expenses                             11,742,220         7,479,212         7,182,305
                                                  ------------      ------------      ------------

Loss from operations                                (9,596,429)       (3,654,610)       (4,174,018)

   
Interest income                                        585,708           377,881           431,275
Interest expense (notes 7 and 14)                   (2,676,182)          (47,826)          (54,572)

                                                  ------------      ------------      ------------
         Net loss                                 $(11,686,903)     $ (3,324,555)     $ (3,797,315)
                                                  ============      ============      ============

Loss per common share                             $      (1.24)     $      (0.43)     $      (0.49)
                                                  ============      ============      ============
    

Weighted average common shares outstanding           9,451,015         7,814,144         7,696,551
                                                  ============      ============      ============

                 See accompanying notes to financial statements.

</TABLE>


<TABLE>
<CAPTION>
                                                DIGITAL BIOMETRICS, INC.
                                           STATEMENTS OF STOCKHOLDERS' EQUITY


                                           Common Stock      Additional    Deferred
                                       --------------------    paid-in      Comp-                   Accumulated
                                          Shares    Amount     capital     ensation      Other        Deficit         Total
                                       ----------------------------------------------------------------------------------------
<S>                                    <C>          <C>     <C>          <C>         <C>           <C>            <C>
   
Balance September 30, 1993              7,394,837   $73,948 $27,263,230  $(195,388)  $        -    $(10,238,632)  $16,903,158
Restricted stock awards (note 9)           32,046       321     451,734   (452,055)           -               -             -
Amortization of deferred compensation           -         -           -    257,960            -               -       257,960
Exercise of employee stock options        317,838     3,178     492,761          -            -               -       495,939
Stock award for retirement plan (note 8)    5,090        51      57,733          -            -               -        57,784
Acquisition of Design Data, Inc.           38,148       382     581,370          -            -               -       581,752
Unrealized losses on marketable
    securities (note 4)                         -         -           -          -      (433,025)             -      (433,025)
Notes receivable from sale of
    common stock (note 9)                       -         -           -          -      (297,173)             -      (297,173)
Net loss                                        -         -           -          -            -      (3,797,315)   (3,797,315)
                                       ----------------------------------------------------------------------------------------
Balance September 30, 1994              7,787,959    77,880  28,846,828   (389,483)     (730,198)   (14,035,947)   13,769,080
Restricted stock awards (note 9)            6,360        63      41,937    (42,000)           -               -             -
Amortization of deferred compensation           -         -           -    214,799            -               -       214,799
Exercise of employee stock options         30,500       305      70,550          -            -               -        70,855
Stock award for retirement plan (note 8)    8,814        88      66,017          -            -               -        66,105
Change in unrealized loss on marketable
    securities (note 4)                         -         -           -          -      256,548               -       256,548
Issuance of warrant in connection with
    convertible debentures (note 7)             -         -     112,893          -            -               -       112,893
Intrinsic value of beneficial
    conversion feature of convertible
    debentures   (note 7)                       -         -   1,923,529          -            -               -     1,923,529
Net loss                                        -         -           -          -            -      (3,324,555)   (3,324,555)
                                       ----------------------------------------------------------------------------------------
Balance September 30, 1995              7,833,633    78,336  31,061,754   (216,684)     (473,650)   (17,360,502)   13,089,254
Restricted stock awards (note 9)           17,456       175      71,825    (72,000)           -               -             -
Amortization of deferred compensation           -         -           -    192,684            -               -       192,684
Stock award for retirement plan (note 8)   16,831       168      94,506          -            -               -        94,674
Change in unrealized loss on marketable
    securities (note 4)                         -         -           -          -       41,724               -        41,724
Debt conversion (note 7)                2,751,868    27,519   8,201,870          -            -               -     8,229,389
Warrant exercise                          157,500     1,575     313,425          -            -               -       315,000
Forgiveness of notes receivable from
    sale of common  stock (note 9)              -         -           -          -      179,550               -       179,550
Net loss                                        -         -           -          -            -     (11,686,903)  (11,686,903)
                                       ----------------------------------------------------------------------------------------
Balance September 30, 1996             10,777,288  $107,773 $39,743,380   $(96,000)    $(252,376)  $(29,047,405)  $10,455,372
                                       ========================================================================================
    

                 See accompanying notes to financial statements.

</TABLE>


<TABLE>
<CAPTION>
                            DIGITAL BIOMETRICS, INC.
                            STATEMENTS OF CASH FLOWS
                  YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994

                                                                       1996             1995             1994
                                                                   ------------     ------------     ------------
<S>                                                               <C>              <C>              <C>          
   
Cash flows from operating activities:
       Net loss                                                    $(11,686,903)    $ (3,324,555)    $ (3,797,315)
       Adjustments to reconcile net loss to net cash used in
       operating activities:
                  Provision for doubtful accounts receivable            651,000           48,000           25,000
                  Provision for technological obsolescence              631,243          486,738          521,007
                  Deferred compensation amortization                    192,684          214,799          257,960
                  Depreciation and amortization                         864,183          551,715          506,876
                  Write-off of technology rights                        548,788             --               --
                  Loss on sale of marketable securities                    --               --            113,201
                  Loss on disposal of fixed assets                        8,305           10,071             --
                  Interest expense amortization for the
                      intrinsic value of the beneficial
                      conversion feature of convertible
                      debentures                                      1,923,529             --               --
                  Interest expense on debentures converted into
                      common stock                                      329,754             --               --
         Changes in operating assets and liabilities:
                  Accounts receivable                                (1,833,548)          33,506       (2,838,110)
                  Inventories                                        (2,389,220)         177,059       (1,093,373)
                  Prepaid expenses                                      (63,424)         (23,144)          11,632
                  Accounts payable                                      641,843         (352,467)          25,938
                  Deferred revenue                                      106,420           81,083           81,193
                  Accrued expenses                                      701,291          248,955          341,902
                                                                   ------------     ------------     ------------
         Net cash used in operating activities                       (9,374,055)      (1,848,240)      (5,844,089)
                                                                   ------------     ------------     ------------
    

Cash flows from investing activities:
         Acquisition of Design Data, Inc.                                  --               --           (293,779)
         Purchase of property and equipment                            (849,755)        (491,318)        (610,984)
         Proceeds from disposal of property and equipment                  --              7,599             --
         Patents, trademarks, copyrights and licenses                   (36,859)        (101,966)         (69,390)
         Purchase of marketable securities                                 --               --           (151,500)
         Sale of marketable securities before maturity                  130,043          687,965        2,886,138
                                                                   ------------     ------------     ------------
         Net cash  (used in) provided by investing activities          (756,571)         102,280        1,760,485
                                                                   ------------     ------------     ------------

Cash flows from financing activities:
         Net line of credit (payments) advances                        (195,000)       1,450,000             --
         Exercise of warrants and options                               315,000           70,855          198,766
         Issuance of convertible debentures                          10,109,750             --               --
         Other                                                             --               --             (7,797)
                                                                   ------------     ------------     ------------
         Net cash provided by financing activities                   10,229,750        1,520,855          190,969
                                                                   ------------     ------------     ------------

Increase (decrease) in cash and cash equivalents                         99,124         (225,105)      (3,892,635)

Cash and cash equivalents at beginning of year                          367,866          592,971        4,485,606
                                                                   ------------     ------------     ------------

Cash and cash equivalents at end of year                           $    466,990     $    367,866     $    592,971
                                                                   ============     ============     ============

Supplemental disclosure of cash flow information:
         Cash paid during the year for interest                    $     13,210     $     47,826     $     54,572
                                                                   ============     ============     ============

                 See accompanying notes to financial statements.

</TABLE>


                            DIGITAL BIOMETRICS, INC.
                          NOTES TO FINANCIAL STATEMENTS

(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Digital Biometrics, Inc. (the Company) is engaged in the business of
developing, manufacturing and marketing biometric identification products based
primarily on electro-optical imaging technologies. The Company's products are
marketed to law enforcement and regulatory agencies, and for commercial
applications where positive identification is required of employees and
customers. The Company's principal product is the TENPRINTER(R), a
computer-based inkless "live-scan" system that electronically reads a
fingerprint and creates a digital image. Approximately 99% of the Company's
revenues in fiscal 1996 came from sales and maintenance of live-scan systems for
law enforcement and regulatory agency customers.

STATEMENTS OF CASH FLOWS

     CASH AND CASH EQUIVALENTS:

     For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments and certificates of deposit purchased with a
maturity date of three months or less to be cash equivalents.

     SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

     Effective with their election at the annual stockholders' meeting held on
February 21, 1996, the Company granted an aggregate of 17,456 shares of
restricted common stock to its four non-employee directors. The grant resulted
in $72,000 in additional common stock issued and an equal amount of deferred
compensation expense which is being amortized on a straight-line basis over the
three-year restriction period.

     Effective December 31, 1995, the Company issued 16,831 shares of common
stock to satisfy the Company's discretionary matching to employees electing
participation in the Company's 401(k) retirement plan. This issuance increased
common stock and additional paid-in capital by $94,674 and resulted in
compensation expense of the same amount.

     On September 29, 1995, the Company completed a private placement to
offshore accredited investors of $10,900,000 of 8% Convertible Debentures due
September 29, 1998 (the "Debentures"). Net proceeds to the Company after
placement fees but before legal and other expenses were $10,109,750, recorded as
a receivable on September 30, 1995.

     As of September 30, 1996, the Company has issued 2,751,868 shares of common
stock for the conversion of principal aggregating $8,450,000 of the 8%
Convertible Debentures plus $330,000 of accrued interest at an average
conversion price of $3.19 per share.

SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK

     The Company extends credit to state and local governments in connection
with sales of products to law enforcement agencies. Approximately 70% of
customer accounts receivable at September 30, 1996 were from government
agencies, of which 40% was from a single customer. For the years ended September
30, 1996, 1995 and 1994, sales to two customers in 1996 accounted for 30%, sales
to two customers in 1995 accounted for 52%, and one customer in 1994 accounted
for 43%, respectively, of annual sales. Export sales were 15%, 21% and 3% of
total sales, for the years ended September 30, 1996, 1995 and 1994,
respectively.

MARKETABLE SECURITIES

     Marketable securities consist of collateralized mortgage backed securities
and U.S. Treasury zero coupon bonds. Based on information provided by the
trustee, the average lives of these securities are 1.3 to 4.5 years. The Company
has adopted Statement of Financial Accounting Standards No. 115, Accounting for
Certain Investments in Debt and Equity Securities (SFAS 115). Under SFAS 115,
the Company classifies its marketable debt securities as available for sale and
records these securities at fair market value. Net realized and unrealized gains
and losses are determined on the specific identification cost basis.

     Unrealized gains and losses are reflected as a separate component of
stockholders' equity. A decline in the market value of any available-for-sale or
held-to-maturity security below cost that is deemed other than temporary results
in a charge to operations resulting in the establishment of a new cost basis for
the security.

PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES

     Costs associated with patents, trademarks and copyrights are capitalized
and amortized over sixty months or the remaining life of the patent, trademark
or copyright, whichever is shorter. The cost of software licenses related to
purchased software are capitalized and amortized over thirty-six months or the
life of the license, whichever is shorter. Accumulated amortization for the
years ended September 30, 1996 and 1995 was $909,803 and $610,282, respectively.
The Company wrote off $548,788 of unamortized technology rights costs during its
fourth quarter of fiscal 1996 as a result of the Company's decision to no longer
actively pursue the technology acquired in the Design Data acquisition in 1994.
Management periodically assesses the amortization period and recoverability of
the carrying amount of intangible assets based upon an estimation of their value
and future benefits of the recorded asset. Management has concluded that the
carrying amount of the intangible assets is realizable.

WARRANTY COSTS

     Estimated product warranty costs are accrued at date of shipment.

REVENUE RECOGNITION

     Revenues from product sales are generally recognized on the date of
shipment. The Company's standard terms of sale are payment due net in thirty
days, f.o.b. Digital Biometrics, Inc. Terms of sale and shipment for certain
procurements by municipal or other government agencies may, however, be subject
to negotiation. In cases where the Company is required to purchase a performance
bond or to deposit collateral in accordance with the terms of a contract, the
Company's policy is to defer revenues under such contracts until the amount
shipped exceeds the amount of the performance collateral or until the security
is released by the bonding company.

     Maintenance revenues are recognized over the life of the contract on a
straight-line basis.

     Revenue under contracts where a performance bond, collateral or customer
acceptance is required, is not recognized until collateral requirements have
been satisfied and customer acceptance has occurred. The Company's performance
for any period is not necessarily indicative of sales trends or future
performance. The nature of the law enforcement market and the government
procurement process are expected to result in an irregular and unpredictable
revenue cycle for the Company.

ENGINEERING AND DEVELOPMENT ARRANGEMENTS

     Engineering and development costs are expensed as incurred. Engineering and
development expenses during 1996 include fourth quarter charges of $374,000
related to adjustments of unreimbursed manufacturing setup costs related to an
international development project. After adjustments, engineering and
development expenses for fiscal 1996 and 1995 are net of a reimbursement of
$87,700 and $772,500, respectively, from a company with which there is a teaming
agreement for an international development project.

NET LOSS PER COMMON SHARE

     Net loss per common share is determined by dividing the net loss by the
weighted average number of shares of common stock and dilutive common share
equivalents outstanding. Common share equivalents have been excluded from the
computation of net loss per share as their effect is anti-dilutive.

INCOME TAXES

     The Company has adopted the asset and liability method of accounting for
income taxes of Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes (SFAS 109). Under the asset and liability method, deferred tax
assets and liabilities are recognized for the expected future tax consequences
of temporary differences between the financial statement carrying amount and tax
basis of assets and liabilities. The Company provides for deferred taxes at the
enacted tax rate that is expected to apply when the temporary differences
reverse. There was no cumulative effect of this accounting change.

ACCOUNTING 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.

(2) INVENTORY

     Inventory is valued at standard cost which approximates the lower of
first-in, first-out (FIFO) cost or market. Inventory consists of the following:

                                                        September 30,
                                                   1996                1995
                                               --------------     -------------
              Raw materials                       $1,934,371         $1,187,955
              Work in process                        717,696            197,947
              Finished goods                         981,592            489,780
                                               --------------     --------------
                                                  $3,633,659         $1,875,682
                                               ==============     ==============

     As a result of the successful introduction of the S-Series TENPRINTER in
the fourth quarter of fiscal 1996, inventory at September 30, 1996 is net of
$350,000 relating to excess field service spare parts and $282,000 relating to
prior generation demonstration TENPRINTER systems charged to operations in the
Company's fiscal 1996 fourth quarter.

(3) PROPERTY AND EQUIPMENT

     Furniture and equipment are recorded at cost. Depreciation and amortization
are computed on a straight-line basis over the estimated useful lives, generally
3 to 5 years. Leasehold improvements are amortized over the estimated useful
life of the asset or lease term, whichever is shorter. Property and equipment
consist of the following:


                                                          September 30,
                                                     1996              1995
                                                --------------    --------------
              Leasehold improvements               $  172,222        $  113,257
              Office furniture and equipment          835,933           639,370
              Manufacturing equipment                 193,612           138,391
              Engineering equipment and tooling     1,269,987           748,301
                                                --------------    --------------
                                                   $2,471,754        $1,639,319
                                                ==============    ==============

(4) MARKETABLE SECURITIES

     Marketable securities consist primarily of collateralized mortgage backed
securities. Net realized and unrealized gains and losses are determined on the
specific identification cost basis. Unrealized gains and losses are reflected as
a separate component of stockholders' equity. Current investments in marketable
securities have maturities ranging from 2005 to 2016.

     The unrealized loss for available-for-sale marketable securities is as
follows:

                                                          September 30,
                                                     1996               1995
                                                --------------    --------------
              Fair market value                    $5,690,371        $5,780,707
              Amortized cost                        5,825,124         5,957,184
                                                --------------    --------------
              Unrealized gain (loss)               $ (134,753)       $ (176,477)
                                                ==============    ==============

(5) LINES OF CREDIT

     The Company has a $4,000,000 line of credit with Norwest Bank Minnesota
N.A. Borrowings under this line of credit are secured by marketable securities
and are limited to the amount of marketable securities held as collateral by the
bank. Borrowings under the line were $1,255,000 on September 30, 1996 and bear
interest at rates from 7.66% to 7.81%. The line is payable upon demand and
expires in May 1997.

     The Company has a $200,000 line of credit with First Bank Minneapolis,
secured by cash deposits. Borrowings under the line bear interest at the prime
rate (8.25% on September 30, 1996), is payable upon demand and expires in March
1997. There were no amounts borrowed under the line at September 30, 1996.

(6) ACCRUED EXPENSES
                                                          September 30,
                                                     1996                1995
                                               --------------     --------------
              Accrued expenses consist of:
                  Accrued salaries                $  442,701         $  127,281
                  Accrued vacation                   112,665            105,734
                  Payroll taxes payable               55,561            500,000
                  Sales taxes payable                 22,953             34,818
                  Accrued warranty                   128,500             58,100
                  Accrued interest payable           205,529              2,799
                  Other accrued expenses             503,999            216,013
                                               --------------     --------------
                                                  $1,471,908         $1,044,745
                                               ==============     ==============

     Accrued salaries at September 30, 1996 include $330,000 for severance costs
related to the retirement of the Company's president and chief executive
officer. The Company is an unsecured creditor in the bankruptcy filing of
Minnesota-based Corporate Financial Services (CFS), the Company's former payroll
processing service provider. At September 30, 1995 an unsecured amount of
$500,000 represents payroll taxes paid by the Company to CFS for deposit with
the Internal Revenue Service and various state revenue agencies. Contrary to
deposits listed as paid on Company payroll tax returns filed by CFS with the
taxing authorities, the Company's deposits were not paid by CFS.

(7) CONVERTIBLE DEBENTURES

   
     On September 29, 1995, the Company completed a private placement to
offshore accredited investors of $10,900,000 of 8% Convertible Debentures due
September 29, 1998 (the "Debentures"). Net proceeds to the Company after
placement fees but before legal and other expenses were $10,109,750. The
Debentures are convertible one third after 45 days, one third after 75 days and
one third after 105 days at the option of the Debenture holder. The Company has
the right to redeem the debentures prior to conversion. The conversion price is
equal to the lesser of $7.00 per common share or 85% of the average trading
price for any five consecutive trading days before conversion. Interest accrued
on the Debentures is payable in common stock at the time of conversion at the
conversion price as described above. In addition to the cash placement fee, a
warrant to purchase 112,893 shares of the Company's common stock at $8.40 per
share was granted to the placement agent for this offering. The warrant was
valued at $112,893, which is reflected as a discount on the Debentures and is
being amortized as interest expense over the term of the Debentures. The
Debentures include a beneficial conversion feature with an intrinsic value of
$1,923,529 which has been recorded as a charge to interest expense. The
intrinsic value of the beneficial conversion feature is to be allocated to
additional paid-in capital with the resulting discount on the debt resulting in
a non-cash interest expense charge to earnings (loss) over the vesting period of
the conversion feature. Net proceeds to the Company were used for working
capital, product development and other general corporate purposes.
    

     As of September 30, 1996, the Company has issued 2,751,868 shares of common
stock for the conversion of principal aggregating $8,450,000 of the 8%
Convertible Debentures plus $330,000 of accrued interest at an average
conversion price of $3.19 per share.

(8) RETIREMENT PLAN

     Effective January 1, 1992, the Company adopted a profit-sharing and savings
plan (the Plan) classified as a defined contribution plan and qualifying under
Section 401(k) of the Internal Revenue Code. The Plan allows employees to defer
a portion of their annual compensation through pre-tax contributions to the
Plan. At the discretion of the Board of Directors, the Company may make matching
contributions up to an amount equal to 50 percent of the contributions made by
each employee, subject to a maximum contribution for each employee of five
percent of compensation. The Board may also make other discretionary
contributions to the Plan. Matching contributions for the years ended September
30, 1996 and 1995 resulted in accrued compensation expense of $81,184 and
$73,354, respectively. Matching contributions have been paid through issuance of
Company common stock.

(9) STOCKHOLDERS' EQUITY

CAPITAL STOCK

     Effective December 31, 1995, the Company issued 16,831 shares of common
stock to satisfy the Company's discretionary matching to employees electing
participation in the Company's 401(k) retirement plan. This issuance increased
common stock and additional paid-in capital by $94,674 and resulted in
compensation expense of the same amount.

SHAREHOLDER RIGHTS PLAN

     In May, 1996 the Board of Directors adopted a Shareholder Rights Plan. The
Plan is designed to enable the Company and its Board of Directors to develop and
preserve long-term value for stockholders and to protect stockholders in the
event an attempt is made to acquire control of the Company without an offer of
fair value to all stockholders. Under the Plan, each stockholder of record
beginning at the close of business on May 15, 1996, will receive as a dividend
one right for each share of DBI common stock held. The rights expire on April
30, 2006.

STOCK OPTIONS

     In order to attract and retain employees and directors, while preserving
cash resources, the Company has, since its inception, utilized stock option
awards issued through various stock option plans and employment arrangements. As
of September 30, 1996 there were issued and outstanding options for 882,600
shares of common stock issued to employees and directors of which options to
purchase 530,433 shares were currently exercisable.

     On January 14, 1994, two executive officers exercised options for 88,438
and 135,000 shares of common stock, respectively, at an exercise price of $1.33
per share. Pursuant to terms of the stock option plans, the Company loaned the
total exercise amount to the executive officers in return for non-interest
bearing promissory notes, secured by common stock issued. The notes, which
aggregate $117,623 and $297,173 at September 30, 1996 and 1995, are reflected as
a reduction of stockholders' equity. In the fourth quarter of fiscal 1996, the
President and Chief Executive Officer retired from the Company effective with
the hiring of his replacement. In connection with the executive's severance
package, $179,550 of notes receivable were forgiven by the Company.

     During fiscal 1996, the Company granted 110,500 discretionary stock option
awards to certain of its executive officers and employees. These options are
exercisable at prices from $5.50 to $6.25 per share and expire in 2006.

     Details of the status of stock options as of September 30, 1996 are
included in the table below.

<TABLE>
<CAPTION>
                                                                                                    As of September 30, 1996
                                                                                                  ------------------------------
                                                                     Options                                         Options
      Stock Options Issued           Exercise        Options         Canceled        Options         Options        Currently
          Pursuant to:                 Price         Granted        or Expired      Exercised      Outstanding     Exercisable
---------------------------------- -------------- --------------- --------------- --------------- --------------- --------------
<S>                                <C>                <C>              <C>              <C>            <C>             <C>
Employment Arrangements
      1991 and prior                  $1.33-2.00         193,388               -         179,888          13,500         13,500

1990 Stock Option Plan
      1991 and prior                       $1.67         174,000               -         156,500          17,500         17,500
      1992                            $8.00-8.50          40,200          12,800           7,900          19,500         19,500
      1993                          $10.63-15.75         240,500          22,500               -         218,000        218,000
      1994                          $5.875-14.75         170,100          25,500               -         144,600        106,600
      1995                          $7.4375-9.00         339,500          48,000               -         291,500         87,833
      1996                            $5.50-6.25         110,500               -               -         110,500              -
                                                  --------------- --------------- --------------- --------------- --------------
Total                                                  1,268,188         108,800         344,288         815,100        462,933
                                                  =============== =============== =============== =============== ==============

   Non-Employee Director Stock
           Option Plan

      1991 and prior                  $1.67-2.00          90,000               -          45,000          45,000         45,000
      1992                                 $9.50          30,000           7,500               -          22,500         22,500
                                                  --------------- --------------- --------------- --------------- --------------
Total                                                    120,000           7,500          45,000          67,500         67,500
                                                  =============== =============== =============== =============== ==============

</TABLE>

RESTRICTED STOCK

     Effective October 1, 1992 the Board of Directors adopted the 1992
Restricted Stock Plan (the Plan) pursuant to which awards of restricted stock
may be made to employees and non-employee directors of the Company. The Plan
serves as a means of providing annual bonus amounts to executive employees and
as the means of compensation of non-executive directors effective with each
director's election at the annual meeting of stockholders. Restricted stock
awards vest over a three-year period.

     Details of the status of restricted stock awards as of September 30, 1996
are included in the table below.

<TABLE>
<CAPTION>
                                                                                          Net Deferred       Balance of
                                                                           Deferred       Compensation        Deferred
                                       Restricted       Fair Market      Compensation        Expense        Compensation
  Restricted Stock Granted to            Shares          Value at         Expense at    Amortization for         at
      Executive Officers                Granted        Date of Grant    Date of Grant      Fiscal 1996     September 30,
--------------------------------------------------------------------------------------------------------------------------
<S>         <C>                             <C>              <C>            <C>            <C>                 <C>      
             1991                            15,000           $6.08          $  91,250       $        -         $  76,455
             1992                            15,000           $8.50            127,500                -           142,485
             1993                            11,000           $7.50             82,500                -           135,388
             1994                            24,546          $14.75            362,055          120,684           279,483
             1995                                 -               -                  -                -           120,684
             1996                                 -               -                  -                -                 -
                                      --------------
                  Total                      65,546
                                      ==============


  Restricted Stock Granted to
    Non-Executive Directors
             1993                             6,500          $12.00             78,000            8,000            60,000
             1994                             6,000          $12.00             72,000           24,000           110,000
             1995                             8,860           $8.13             72,000           24,000            96,000
             1996                            17,456           $4.13             72,000           16,000            96,000
                                      --------------
                  Total                      38,816
                                      ==============

</TABLE>


WARRANTS

     The Company has warrants outstanding at September 30, 1996 for the purchase
of 212,893 shares of its common stock. The warrants are currently exercisable
and expire at various times through September 29, 2000. The exercise prices per
share range from $8.40 to $12.10. On November 29, 1995 a warrant to purchase
157,500 shares of common stock was exercised at a price of $2.00 per share.

(10) INCOME TAXES

     There is no provision for income taxes since a valuation allowance has been
established equal to the corresponding net deferred tax asset.

     At September 30, 1996 the Company has carryforwards of net operating losses
and research and development tax credits of $23,700,000 and $1,000,731,
respectively. These carryforwards expire as follows:

                                                 Net             Research and
                                              Operating           Development
                                                Loss              Tax Credit
                                           ---------------      --------------

              1999                            $   346,711          $   15,236
              2000                                116,546               1,997
              2001                                      -               6,343
              2002                                547,523              40,774
              2003                                993,803              68,109
              2004                                 22,477               1,497
              2005                              1,387,756                   -
              2006                              1,310,521              34,307
              2007                              2,084,429              63,736
              2008                              2,248,457             133,548
              2009                              4,605,122             307,704
              2010                              2,734,225             111,480
              2011                              7,302,430             216,000
                                           ---------------      --------------
                                              $23,700,000          $1,000,731
                                           ===============      ==============

     Due to uncertainty of the realization of deferred tax assets, the Company
has established a valuation allowance equal to net deferred tax assets. The
change in the valuation allowance for the years ended September 30, 1996 and
1995 is as follows:

                                                   1996                1995
                                             ---------------      --------------

              Balance at beginning of year      $ 8,099,000          $6,458,000
              Change in valuation allowance       3,402,000           1,641,000
                                             ---------------      --------------
                                                $11,501,000          $8,099,000
                                             ===============      ==============

     The current and long-term deferred income tax asset and liability amounts
as of September 30, 1996 and 1995 were composed of the following:

<TABLE>
<CAPTION>
                                                                             1996                    1995
                                                                       ----------------        ---------------
<S>                                                                      <C>                     <C>        
         Current and long-term deferred income tax asset resulting
         from future deductible temporary differences are:
               Accounts receivable allowance                              $    277,000            $    44,000
               Inventory capitalization                                         39,000                 20,000
               Other accrued expenses                                          704,000                381,000
               Research and development tax credit carryforwards             1,001,000                894,000
               Net operating loss carryforwards                              9,480,000              6,760,000
                                                                       ----------------        ---------------
                                                                            11,501,000              8,099,000
                                                                           (11,501,000)            (8,099,000)
                                                                       ----------------        ---------------
                                                                          $          0            $         0
                                                                       ================        ===============
</TABLE>

     The aforementioned carryforwards are subject to the limitation provisions
of Internal Revenue Code sections 382 and 383. These sections provide
limitations on the availability of net operating losses and credits to offset
current taxable income and related income taxes when an ownership change has
occurred. The Company's initial public offering in December 1990 resulted in an
ownership change pursuant to these provisions and, accordingly, the use of the
above carryforwards is subject to an annual limitation. The annual limitation on
use of net operating losses is calculated by multiplying the value of the
corporation immediately prior to the change in ownership by the long-term
federal tax exempt rate. A total of $3,700,000 of the net operating loss
carryforwards at September 30, 1996 is subject to the annual net operating loss
limitation, estimated at $350,000. If the limited carryforward amount for any
tax year exceeds the regular taxable income for such year, then the unused
portion may generally be carried forward to increase the annual limitation for
the following year. Utilization of net operating losses aggregating $20,000,000
which were incurred subsequent to the change of ownership are not limited.
However, any future ownership change could create a limitation with respect to
these loss carryforwards. Approximately $2,200,000 of the $20,000,000 net
operating loss carryforwards relates to compensation associated with the
exercise of non-qualified stock options which, when realized, would result in
approximately $880,000 credited to additional paid-in capital.

(11) LEASE COMMITMENTS

     The Company leases its primary office and production facility under an
operating lease that expires in April, 2001. Annual base rent under the lease
agreement is approximately $237,000 and the Company is obligated to pay a pro
rata share for property taxes, maintenance and other operating expenses. The
Company leases a separate sales and service office in Los Angeles, California
under an operating lease that expires in December, 1997 and a sales office in
Washington, D.C. on a year-to-year lease arrangement. Rent expense for operating
leases for 1996, 1995 and 1994 was $329,400, $338,300 and $275,700,
respectively. Future minimum payments on operating leases for the years ending
September 30, 1997, 1998, 1999, 2000 and 2001 are $360,000, $303,500, $320,800,
$338,000 and $197,200, respectively.

(12) RELATED PARTY TRANSACTIONS

     In fiscal 1996, 1995 and 1994, legal services in the amount of $51,595,
$59,123 and $45,808, respectively, were provided to the Company by a law firm in
which a Director and stockholder of the Company is a partner.

(13) LITIGATION

     On June 1, 1995, the Company filed a complaint for patent infringement
against Identix, Inc., of Sunnyvale, California, in the United States District
Court for the Northern District of California. The complaint alleges that
Identix has willfully and deliberately infringed a Company patent through the
manufacture, use and/or sale of competing products. The complaint seeks, among
other things, an injunction prohibiting further infringement as well as
unspecified monetary damages. Identix has responded to the complaint alleging,
among other purported defenses, non-infringement and patent invalidity.

     On August 27, 1996, the judge assigned to the case granted a partial
summary judgment in favor of Identix dismissing the Company's claims of patent
infringement with respect to Identix's Touchprint 600 product line. A
predecessor product, the Touchprint 900, received a similar ruling in favor of
Identix on December 20, 1996. The Company intends to appeal the court's decision
of non-infringement. The interpretation of patents is ultimately decided by a
special patent Court of Appeals in Washington D.C. A prediction of the final
outcome of the appeal is not possible. However, in the event the Company does
not prevail in this litigation, its competitive position may be materially and
adversely affected.

     There are no material lawsuits pending or, to the Company's knowledge,
threatened against the Company.

   
(14) RESTATEMENT

     On March 28, 1997, the Securities and Exchange Commission (SEC) staff
announced its position on the accounting treatment for the issuance of
convertible debt securities with beneficial conversion features such as that
contained in the Company's convertible debentures issued in September 1995. The
SEC staff's announcement requires retroactive determination using the
intrinsic-value method of the beneficial conversion feature. The intrinsic value
of the beneficial conversion features is to be allocated to additional paid-in
capital with the resulting discount on the debt resulting in a non-cash interest
expense charge to earnings (loss) over the vesting period of the conversion
feature.

     As a result of this SEC announcement, the Company is restating its fiscal
1996, results to reflect the in-the-money beneficial conversion feature of the
convertible debentures which were issued by the Company in September 1995. An
additional charge of $1,923,529 has been recorded in fiscal 1996, for the
in-the-money beneficial conversion feature which vested during the first quarter
of fiscal 1996. As a result, interest expense, net loss and net loss per share
were restated from $752,653, $9,763,374 and $1.03 to $2,676,182, $11,686,903 and
$1.24, respectively. This restatement had no effect on cash flows or total
stockholders' equity.
    

ITEM 9.      CHANGES IN & DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING &
             FINANCIAL DISCLOSURE

     The Company has not changed its independent auditors nor has the Company
had any disagreements with its independent auditors on matters of accounting or
financial disclosure.


                                    PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information regarding the directors of the Company is incorporated herein
by reference to the descriptions set forth under the caption "Election of
Directors" in the Company's Proxy Statement for its Annual Meeting of
Shareholders to be held March 18, 1997 (the "1997 Proxy Statement"). Set forth
below are the names, ages and positions of the executive officers of the
Company.

<TABLE>
<CAPTION>
                                                                                         YEAR FIRST
                                                                                           BECAME
            NAME                                 TITLE                           AGE      OFFICER
<S>                             <C>                                              <C>       <C>
      Jack A. Klingert           President and Chief Executive Officer            67        1987

      Glenn M. Fishbine          Senior Vice President - Technology               44        1985

      Louis C. Petsolt           Vice President - Marketing and Sales             62        1989

      Paul J. Skrip              Vice President - Manufacturing                   51        1994

      Donald E. Berg             Vice President - Finance and Administration,     43        1991
                                 Secretary and Treasurer

</TABLE>

     The following discussion describes the business experience and background
of the executive officers of the Company.

     JACK A. KLINGERT. Mr. Klingert served as the Company's Chairman from 1987
through October 1996, and has served as the Company's President and Chief
Executive Officer since 1987. Mr. Klingert has announced his retirement from the
Company, effective with the hiring of a new President and Chief Executive
Officer. Prior to joining the Company in April 1987, Mr. Klingert, from 1964 to
1987, held a number of senior level management positions with Control Data
Corporation ("CDC") involving market development, regional management, corporate
administration and other management tasks, Mr. Klingert was also a member of
CDC's policy committee. While at CDC, Mr. Klingert was extensively involved in
identifying new markets and developing operations in emerging international
markets, including negotiating and concluding several sizable contracts with
foreign businesses and governments. From 1958 to 1964, Mr. Klingert worked on
various classified scientific and systems programming projects in the
Departments of Theoretical Physics and Computation at the Lawrence Livermore
National Laboratories, Livermore, California.

     GLENN M. FISHBINE. Mr. Fishbine is a founder of the Company and serves as
the Company's Senior Vice President - Technology. Mr. Fishbine is the principal
developer of the Company's TENPRINTER product. Prior to co-founding the Company,
Mr. Fishbine was a Project Manager from 1983 to 1985 for Saturn Systems, Inc., a
developer of software systems. From 1981 to 1983, Mr. Fishbine was Director of
Technical Services at PBS Computing. From 1981 to 1982, Mr. Fishbine also served
as a consultant to NEC Corporation, redesigning for use in the Japanese law
enforcement environment a computerized Crime Analysis System which had been
previously developed by him. Mr. Fishbine also provided NEC with consulting
services in connection with its first AFIS sale in the United States. From 1976
to 1981, Mr. Fishbine served as MIS Director for the Minnesota Crime Prevention
Center, Inc., a government-sponsored crime analysis program, where he directed
the systems division in its software engineering projects.

     LOUIS C PETSOLT. Mr. Petsolt joined the Company as a consultant in July
1989 and became a full time employee in October 1989. Prior to joining the
Company, from 1963 to 1986, Mr. Petsolt held a number of senior management
positions in marketing, sales and operations for Control Data Corporation, and
various executive positions, including President of IXI Laboratories, Inc. and
CEO of IXI's affiliated company, Quik Media Service Corporation from 1986 to
1987, and Executive Vice President of Caswell Shooting Clubs, Inc. from 1987 to
1989.

     PAUL J SKRIP. Mr. Skrip was employed by the Company effective June 20,
1994. Prior to joining the Company, Mr. Skrip was for the prior four years Vice
President of Operations, VerSaTil Associates, Inc., a manufacturer of precision
machined parts for the high technology and defense industries. Prior to Mr.
Skrip's employment at VerSaTil Associates, Inc., he was manager of Manufacturing
Engineering at the Physical Electronics Division of Perkin Elmer Corporation.

     DONALD E. BERG. Mr. Berg was employed by the Company effective May 1, 1991.
Prior to joining the Company, Mr. Berg was a partner in the Minneapolis office
of KPMG Peat Marwick LLP ("KPMG"). While at KPMG, Mr. Berg served as national
director of the firm's Medical Technology practice and provided services
primarily to emerging high technology businesses, including both privately held
and publicly traded companies. Mr. Berg was employed by KPMG from September 1976
to April 1991.

EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS

     All employees of the Company have executed Employee Confidentiality,
Non-Competition and Proprietary Rights Agreements which entitle the Company to
all inventions while an employee and prohibit the employee from disclosing
confidential information and competing with the Company directly or indirectly
for one year following termination of employment.

ITEMS 11, 12 AND 13.    EXECUTIVE COMPENSATION AND SECURITY OWNERSHIP

     The information called for by Items 11, 12 and 13 is incorporated by
reference from the Registrant's definitive proxy statement pursuant to
Regulation 14A which includes the election of directors and will be filed with
the Commission within 120 days after the end of the fiscal year.


                                     PART IV

ITEM 14.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)    1.    Financial Statements
                  Independent Auditors' Report
                  Balance Sheets: September 30, 1996 and 1995
                  Statements of Operations: Years ended September 30, 1996, 1995
                       and 1994
                  Statements of Stockholders' Equity: Years ended September 30,
                       1996, 1995 and 1994
                  Statements of Cash Flows: Years ended September 30, 1996, 1995
                       and 1994
                  Notes to Financial Statements

       2.     Exhibits
       3.1    Articles of Incorporation of Digital Biometrics, Inc., as
              amended**
       3.2    By-Laws of Digital Biometrics, Inc., as amended
       4.0    8% Convertible Debentures(##)
       4.1        Registration Rights Agreement(##)
       4.2        Warrant Agreement(##)
       4.3        Rights Agreement dated as of May 2, 1996 between the Company 
                       and Norwest Bank Minnesota NA(###)
       10.1   1990 Stock Option Plan*
       10.2   1992 Restricted Stock Plan*
       10.3   Lease for Company Premises dated April 18, 1996
       11.0   Statement re Computation of Earnings (Loss) Per Share
       23.0   Consent of KPMG Peat Marwick LLP
       99.0   Registration Statement on Form S-8 and Post-effective Amendment
              No. 1 thereto (Incorporated by reference to Commission File No.
              33-41510)
       99.1   Registration Statement on Form S-8 (Incorporated by reference to
              Commission File No. 33-63984)

                     *      Incorporated by reference from the Company's
                            Registration Statement on Form S-1, effective April
                            21, 1993 (Commission File No. 33-58650)

                     **     Incorporated by reference from the Company's
                            Registration Statement on Form S-1, effective August
                            14, 1991 (Commission File No. 33-41080)

                     ***    Incorporated by reference from the Company's Annual
                            Report Form 10-K for the fiscal year ended September
                            30, 1993

                     #      Incorporated by reference from the Company's
                            Registration Statement on Form S-18, effective
                            December 6, 1990 (Commission File No. 33-36939C)

                     ##     Incorporated by reference from the Company's Form
                            8-K dated October 19, 1995

                     ###    Incorporated by reference from the Company's Form
                            8-A filed May 10, 1996 (File No. 18856)

(b)    Reports on Form 8-K
       There were no reports on Form 8-K filed during the three months ended
       September 30, 1996.

(c)    Exhibits begin on page 38 and financial statement schedule begins on page
       40.


                                   SIGNATURES

   
     PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS FORM 10-K/A TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
MINNETONKA, MINNESOTA, ON THIS 11TH DAY OF JULY, 1997.

DIGITAL BIOMETRICS, INC.
       (REGISTRANT)                 s/ James C. Granger
                                   ---------------------
                                     James C. Granger
                           President and Chief Executive Officer
                                   Dated: July 11, 1997

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
FORM 10-K/A HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES
INDICATED.
    

                                 TITLE
                                 -----

   
s/ James C. Granger
----------------------------
James C. Granger                 President, Chief Executive Officer and Director
                                 (principal executive officer)


s/ John J. Metil
----------------------------
John J. Metil                    Chief Operating Officer and Chief Financial
                                 Officer


s/ Jack A. Klingert
----------------------------
Jack A. Klingert                 Director
    


s/ George Latimer
----------------------------
George Latimer                   Director


s/ C. McKenzie Lewis II
----------------------------
C. McKenzie Lewis III            Chairman of the Board of Directors


s/ Stephen M. Slavin
----------------------------
Stephen M. Slavin                Director