<PAGE>

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

                                   FORM 10-K


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

For the Fiscal Year  Ended December 31, 1996

OR

[    ] 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 000-21559

                           VIISAGE TECHNOLOGY, INC.
                       --------------------------------
            (Exact name of registrant as specified in its charter)


Delaware                                                    04-3320515
----------------------------------------                    --------------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)

30 Porter Road,  Littleton,  MA                             01460
----------------------------------------                    --------------
(Address of principal executive offices)                    (Zip Code)

Registrant's telephone number, including area code          (508)-952-2200
                                                            -----------------

Securities registered pursuant to Section 12(b) of the Act:

      Title of each Class                 Name of exchange on which registered
      -------------------                 ------------------------------------
  Common Stock $.001 par value                   NASDAQ National Market

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

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 such 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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference into Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of March 6,  1997,was approximately $34,080,000.

As of March 6, 1997, the registrant had 8,055,000 shares of Common Stock
outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Annual Report to Shareholders for the year ended
December 31, 1996, are incorporated by reference into  Parts I and II.

Portions of the registrant's definitive Proxy Statement for the Annual Meeting
of Shareholders to be held on May 21, 1997, are incorporated by reference into
Part III.

                                       1
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                                    PART 1

Item 1. Business
        --------

  (a) General Development of Business
      -------------------------------

      Viisage Technology, Inc. (Viisage or the Company) develops and implements
  turnkey digital identification systems and solutions intended to deter fraud,
  reduce customers' identification program costs and improve security. The
  Company combines its systems integration and software design capabilities with
  its proprietary software and hardware products to create complete customized
  solutions. Viisage's products are currently operating at over 450 locations.
  Applications can include systems and cards for national IDs, driver's
  licenses, social services, voter registration, law enforcement, corrections,
  healthcare, financial services, retail and access control. Viisage is also
  commercializing patented facial recognition technology for the real-time
  identification and verification of individuals.

      The Company began operations in 1993 as a division of Lau Technologies, a
  provider of systems integration services and products for sophisticated
  electronic systems. On November 6, 1996, Lau transferred substantially all of
  the assets, liabilities and operations of the division to the Company in
  exchange for 5,680,000 shares of the Company's common stock and the Company
  completed its initial public offering in November 1996. The Company is
  currently a 64% owned subsidiary of Lau Technologies. All references to
  "Viisage" or "the Company" for the periods prior to the transfer, refer to the
  Viisage Technology Division of Lau Technologies.

      Viisage has experienced significant revenue growth since 1993. The Company
  believes that the increasing acceptance of and demand for digital
  identification technology in recent years, its commitment to providing
  customized solutions for its customers needs, its expertise in facial imaging
  and its proprietary software and hardware products have contributed to its
  growth. The Company provides systems and services principally under contracts
  that have five-year terms and provide for several annual renewals after the
  initial contract term. Contracts generally provide for a fixed price for the
  system and/or for each card produced. Contract prices vary depending on, among
  other things, design and integration complexities, the nature and number of
  workstations and sites, the projected number of cards to be produced, the
  level of post-installation support and the competitive environment.
  Substantially all of the Company's revenues are currently derived from public
  sector customers and contractors to such customers. The Company believes for
  the foreseeable future that it will continue to derive a significant portion
  of its revenues from a limited number of large contracts.

  (b) Financial Information about Industry Segments
      ----------------------------------------------

      The Company is engaged in one business segment; the design and
  implementation of digital identification systems and solutions intended to
  deter fraud, reduce identification program costs and improve security.

                                       2
<PAGE>

  (c) Description of Business
      -----------------------

  (i) Principal Products and Services
      --------------------------------

  Industry Background

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

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

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

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

      As an additional means of deterring fraud, identification systems have
  increasingly used biometrics (unique biological characteristics) to verify
  personal identities. Biometric identifiers include facial images,
  fingerprints, iris scans, retinal scans, voice data, hand geometry and

                                       3
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  others, with fingerprints enjoying wide usage in law enforcement. However,
  unlike a fingerprint, a facial image can be easily verified visually and can
  be captured in an unobtrusive manner via a single photograph, making it a
  practical means of identification. When two or more biometric identifiers are
  used together, the statistical probability of properly identifying an
  individual increases.

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

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

  Products and Services

      The Company develops and implements turnkey digital identification systems
  which provide complete integrated solutions for capturing images and data,
  producing and delivering tamper-resistant identification cards, and creating
  and managing relational databases containing the captured information. These
  systems can utilize unique biological identifiers such as facial images,
  fingerprints, voice data and others to help deter fraud, reduce costs and
  improve security.

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

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

                                       4
<PAGE>

  Digital Identification Systems

      Depending on the customer's needs, the Company offers ''instant issue''
  systems which produce identification cards on location that can be delivered
  to recipients in minutes, and central processing systems which receive the
  information to appear on the cards electronically from the point of capture
  and produce cards from a secure off-site processing location which are later
  mailed to recipients. The facial images captured by the Company's systems can
  provide the content (face bases) for the identification and verification
  applications of the Company's facial recognition technologies.

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

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

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

    .  SensorMast. The SensorMast is a fully-integrated, secure tower unit
       developed by the Company which incorporates computer-controlled image
       capture equipment. This equipment includes commercially available digital
       cameras, adjustable lighting, frame

                                       5
<PAGE>

       grabbers, step motors, fingerprint and signature capture devices and
       barcode readers. These are integrated into the SensorMast, which in turn
       is incorporated by the Company into a specially configured operator's
       workstation. This integrated workstation provides operators with a
       durable and transportable apparatus with which to capture images and data
       and initiate the card production process. The Company's proprietary
       software controls and integrates the elements within the SensorMast and
       links the SensorMast with the rest of the system.

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

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

  Facial Recognition Technologies

    The Company is working to improve the technology used in security and fraud
  control through the development of facial recognition technologies. The
  Company has focused on the facial image as a key biometric because the human
  face is a unique and prominent feature that can be easily captured (in image)
  by a digital camera and verified visually. The Company's technologies enable
  facial databases to be searched quickly and accurately for identification and
  verification purposes.

    The Company's facial recognition software is based on technology developed
  by Professor Alex Pentland of the Massachusetts Institute of Technology. The
  Company licenses that technology through Facia Reco Associates Limited
  Partnership (Facia Reco), an entity formed by Dr. Pentland. While Dr.
  Pentland's software forms the basis of the Company's facial recognition
  technologies, the Company believes that the proprietary software it has
  developed is integral to making these technologies commercially viable.

    The Company's facial recognition technologies are based on the premise that
  certain facial features tend to be associated with each other. For example,
  the combination of a thin nose

                                       6
<PAGE>

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

      The Company's facial recognition technologies are designed to compare one
  face to many faces stored in a database (identification) or to compare one
  face to a particular face stored in a database (verification). Verification is
  less complex than identification because only a single comparison is
  necessary, while identification requires many more comparisons.

      For identification searches, the computer constructs the numeric depiction
  of the person being enrolled and searches for the closest measurement of a
  face already in the database. The software performs a numeric table look-up
  and completes the search within seconds. The system then displays images of
  the persons in the database which most closely resemble the enrollee's image.
  The Company's software can also determine whether a face appears in the
  database more than once. This can be used to determine, for example, whether a
  person is applying for multiple driver's licenses or welfare benefits. This
  approach could also be used to identify an unknown person by comparing his or
  her photo image to those of individuals stored in databases. For verification
  searches, the software compares the target face to a particular facial image
  stored in the database to determine whether there is a match. Since eigenface
  measurements can be included in a smart card or on a barcode, a comparison of
  the facial data stored on an identification card with the actual face of the
  card holder can be used for verification purposes. This can be used to control
  access to both secure and public facilities, ATMs and networks and databases.
  Verification can also have applications for identity confirmation at the point
  of sale or service.

      Facial Recognition Products and Services. The Company has three facial
  recognition products which it is testing in pilot programs that have been
  generally available since the first quarter of 1997.

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

                                       7
<PAGE>

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

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

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

  Sales and Marketing

      The Company markets its products directly through its internal sales
  force, which consisted of seven individuals as of December 31, 1996. As it
  continues to increase its bid activity, the Company anticipates that it will
  increase the number of its sales and marketing personnel. In addition, the
  Company intends to ally strategically with prominent vendors, systems
  integrators and service organizations, particularly in international markets,
  in order to gain access to such organizations' existing relationships,
  marketing resources and credibility in new markets.

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

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

                                       8
<PAGE>

  (ii) and (xi) Product Development
                --------------------

      The Company has made research and development an important part of its
  operating discipline.  In response to customer needs during 1993, 1994 an
  1995, the Company developed proprietary software that supports all current
  industry standard operating systems and  networking environments, and
  proprietary image capture and inspection products.  Development costs that
  benefited specific projects were recorded as project costs and costs that did
  not benefit specific projects were recorded as research and development
  expenses.  The Company has not capitalized any software development costs
  because costs incurred subsequent to achieving technological feasibility have
  not been material. The Company believes that the software and hardware
  products developed in prior periods will support its card-based identification
  system offerings for the foreseeable future.  The Company's current
  development activities are focused on its facial recognition products and the
  further commercialization of its facial recognition technology. The Company
  continues its development activities in the area of platform engineering and,
  among other projects, is developing enhancements to the SensorMast as well as
  point-of-sale device prototypes.  In addition to its own development efforts,
  the Company has benefited and expects to continue to benefit from research and
  development conducted by Lau Technologies for projects that are not related to
  Viisage  and, through its license with Facia Reco, from certain research
  activities at the Massachusetts Institute of Technology.  The Company also
  benefits from research and development activities conducted by the
  manufacturers of the components integrated into the Company's systems such as
  PC's, printers, etc.

      During the fiscal years ended December 31, 1994, 1995 and 1996 the Company
  spent $201,000, $1.1 million and $235,000, respectively, on research and
  development. Such amounts do not include amounts for specific projects that
  are allocated to project costs or the benefits from the other research and
  development activities referred to above.

  (iii) Manufacturing and Sources of Supply
        -----------------------------------

      Substantially all proprietary subsystems and assemblies are made to the
  Company's specifications by contract manufacturers, including Lau
  Technologies. Other non-proprietary system components, such as personal
  computers, printers and related components, are purchased from third-party
  vendors. The Company's manufacturing operations consist solely of integration
  and testing. Systems go through several levels of testing, including
  configuration to customer specifications, prior to installation. The Company
  generally purchases major contracted assemblies from single vendors to help
  ensure high quality, prompt delivery and low cost. The Company does, however,
  qualify second sources for most components, contracted assemblies and
  purchased subsystems, or at least identifies alternative sources of supply.
  The Company believes that the open architecture of its systems facilitates
  substitution of components or software when this becomes necessary or
  desirable. The Company has from time to time experienced delays as a result of
  the availability of component parts and assemblies, although the Company has
  never failed to meet a contractual

                                       9
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  requirement as a result of such delays. There can be no assurance that the
  Company will not experience such problems in the future.

  (iv) Patents, Trademarks and Licences
       --------------------------------

      The Company's business is substantially dependent on intellectual property
  which it licenses from Lau Technologies under an exclusive, perpetual,
  irrevocable, paid-up, royalty-free, worldwide license to use all of the
  technology relating to the Viisage Technology business except for controlling
  human entry through doorways, gates, turnstiles, or similar thresholds in and
  to buildings or facilities located on properties owned or controlled by the
  United States federal government, or any other national government, using
  apparatus at the entry point (''federal access control''). The Company is also
  dependent on technology it licenses from Facia Reco. This license is exclusive
  in the field that relates to de-duplicating or querying databases created,
  controlled and/or managed by the Company or its sublicensees and/or utilizing,
  directly or indirectly, personal identification cards but does not extend to
  federal access control. This license includes rights in that same field to
  Facia Reco's exclusive license of patented technology from the Massachusetts
  Institute of Technology (except for certain rights granted to sponsors of the
  Massachusetts Institute of Technology Media Lab and certain research rights).
  The Company's license agreement with Facia Reco terminates upon the expiration
  of the final patent covered under or through the license, and provides for a
  royalty of $350 per machine copy incorporating the licensed technology. Until
  the year 2002, a minimum annual royalty applies of, generally, $21,000 for the
  U.S. rights and a figure ranging from $21,000 to $42,000 for the non-U.S.
  rights.

      The Company protects its intellectual property as trade secrets and, where
  appropriate, uses trademarks or registers its products.  In addition,  Lau
  currently has several U.S. patent applications outstanding and has made
  copyright filings which relate to the Company's SensorMast, Visual Inspection
  System and proprietary software. Lau has filed foreign patent applications
  which correspond to three of these domestic applications. The Company's
  license agreement with Facia Reco includes the right to use and sublicense
  certain U.S. patents and registered copyrights for facial recognition systems
  which Facia Reco, licenses from the Massachusetts Institute of Technology and
  Intelligent Vision Systems, Inc. The Massachusetts Institute of Technology has
  applied to extend its patent rights to certain jurisdictions in Europe and in
  Singapore. At Lau's request and expense, MIT obtained a broadening patent
  which is licensed through Facia Reco.

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

                                       10
<PAGE>

      Although there are no pending lawsuits against the Company regarding
  infringement of any existing patents or other intellectual property rights,
  the Company has in the past received a letter from an attorney on behalf of
  the holder of a patent on a system for scanning and encoding images from a
  personal identification card. The Company believes, based on the advice of its
  patent counsel, that none of its products infringe such patent. However, there
  can be no assurance that such patent holder will not initiate litigation with
  respect to this patent or allege additional claims.

  (v) Seasonality
      -----------

      The Company's operations are not seasonal since contracts are awarded and
  performed throughout the year.

  (vi) Working Capital Requirements
       ----------------------------

      The Company is generally required to fund the development and
  implementation of large digital identification system projects for public
  sector customers.  Historically, the Company has utilized bank borrowings and
  project lease financing to meet these needs.  There are no special
  requirements or customer terms that are expected to have a material adverse
  effect on the Company's working capital.

  (vii)  Customers and End Users
         -----------------------

      The following lists and categorizes the Company's customers and end users
  as of December 31, 1996:

<TABLE>
<CAPTION>
  STATE DEPARTMENTS OF MOTOR VEHICLES           OTHER STATE AND LOCAL AGENCIES
<S>                                           <C>
  Arizona Department of Transportation          Auburn (Massachusetts) Police Department
  Massachusetts Registry of Motor Vehicles      Connecticut Department of Public Safety
  New Mexico Department of Taxation and         Connecticut Department of Social Services
    Revenue                                     Massachusetts Department of Transitional
  North Carolina Department of Transportation      Assistance
  Ohio Bureau of Motor Vehicles                 New York Department of Social Services *
  Wisconsin Department of Transportation        Ohio Department of Public Safety

  FEDERAL AGENCIES                               FOREIGN CONTRACTS

  U.S. Immigration and Naturalization Service *   Electoral Office of Jamaica*
                                                  First National Bank of Southern Africa,
                                                     Limited
</TABLE>
   * By subcontract.


                                       11
<PAGE>

     Revenues from three customers (Ohio Bureau of Motor Vehicles, Arizona
  Department of Transportation and the Massachusetts Registry of Motor Vehicles)
  each accounted for over 10% and an aggregate of 85% of revenues of revenues in
  1995. For 1996, two customers (New York Department of Social Services and
  North Carolina Department of Transportation) each accounted for over 10% of
  Company revenues and an aggregate of 50% of revenues for the year. The loss of
  any such customers could have a material adverse impact on the Company's
  business, operating results and financial condition.

  (viii) Backlog
        --------

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

     The Company recognizes revenue on a percentage-of-completion basis. Revenue
  recognition may be delayed by the delivery of components, special software
  requirements of the customer, or by delays in integration with the customer's
  systems. At December 31, 1996, the Company's backlog was approximately $34
  million, compared to approximately $30 million at December 31, 1995.
  Approximately 33% of the Company's backlog as of December 31, 1996, is
  expected to be earned during the current fiscal year.

  (ix) Government Contacts
       -------------------

     Government contracts are generally subject to termination for convenience
  or lack of appropriation at the election of the subject agency.  At December
  31, 1996, amounts subject to future negotiation are not material.

  (x) Competition
      -----------

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

     The Company faces competition in the identification systems market (for
  both digital and conventional systems) from technologically sophisticated
  companies, including Polaroid Corporation, Unisys Corporation, DataCard
  Corporation, and NBS Imaging Systems, Inc., all

                                       12
<PAGE>

  of which have substantially greater technical, financial, and marketing
  resources than the Company. In some cases, the Company may be competing with
  an entity which has a pre-existing relationship with a potential customer
  which could put the Company at a significant competitive disadvantage. As the
  digital identification market expands, additional competitors may seek to
  enter the market.

     The Company believes that competition in the digital identification systems
  market is based primarily upon the following factors: systems and product
  performance; price; flexibility in terms of accommodating customer needs,
  architectures, platforms, systems and networks; and service support. The
  relative importance of each of these and other factors depends upon the
  specific customer and situation involved. Substantially all of the Company's
  sales to new customers have been the result of competitive bidding for
  contracts pursuant to public sector procurement rules, which generally
  increases the importance of price as a competitive factor. The Company
  believes that its competitive strength lies primarily in its systems
  integration and software design capabilities, with additional strengths
  including system performance and proprietary technologies, system
  configuration flexibility, price, and relative ease of use.

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

  (xi) Research and Development
       ------------------------

     See Product Development Section

  (xii) Environmental Protection Regulations
        ------------------------------------

     The Company believes that compliance by the Company with federal, state and
  local environmental regulations will not have a material adverse effect on its
  financial position or results of operations.

  (xiii) Employees
         ---------

     As of December 31, 1996, the Company had 47 employees. The Company from
  time-to-time supplements its employee forces with independent contractors. As
  of December 31, 1996, the Company had 28 such contractors. None of the
  Company's employees is represented by a labor union, and the Company considers
  its relationship with its employees to be good.

  (d) Financial Information about Foreign and Domestic Operations and Export
      ----------------------------------------------------------------------
  Sales
  ------

     The Company's foreign operations and export sales are currently not
  material.

                                       13
<PAGE>

Item 2. Properties
        ----------

        In February 1997, the Company moved to facilities located in Littleton,
    Massachusetts. The Company occupies approximately 23,000 square feet of
    space and has access to common areas under the terms of a Use and Occupancy
    Agreement with Lau Technologies through February 2002. The Company believes
    that its facilities are in good condition and are suitable and adequate for
    its present operations and that suitable space is available if such lease is
    not extended.

Item 3. Legal Proceedings
        ------------------
        On September 23, 1996, three minority shareholders of Lau Technologies
    filed suit against Lau Technologies, the Company and others in Superior
    Court in Berkshire County, Massachusetts, alleging that certain defendants
    breached the fiduciary duty owed the plaintiffs as shareholders of Lau
    Technologies. The plaintiffs requested, among other things, an injunction to
    delay the Company's public offering in an effort to obtain a direct, rather
    than an indirect, ownership interest in the Company. On October 4, 1996, the
    Superior Court denied plaintiffs' request for such relief, although
    plaintiffs' claims for unspecified money damages remain pending. Lau
    Technologies has agreed to indemnify and hold the Company harmless for any
    liabilities incurred by the Company as a result of judgments, settlements or
    litigation expenses arising out of this suit. Accordingly, the Company does
    not believe that the resolution of this matter would have a material adverse
    effect on its business, financial condition or results of operations.


Item 4. Submission of Matters to a Vote of Security Holders
        ---------------------------------------------------

        Not applicable.



                                    PART II

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

        Information concerning the market and market price for the registrant's
    stock, $.001 par value, and dividend policy is included under the sections
    labeled "Common Stock Information" and "Dividend Policy" in the registrant's
    1996 Annual Report to Shareholders and is incorporated herein by reference.

Item 6. Selected Financial Data
        -----------------------

        The information required under this item is included under the section
    labeled "Selected Financial Information" in the registrant's 1996 Annual
    Report to Shareholders and is incorporated herein by reference.

                                       14
<PAGE>

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

         The information required under this item is included under the heading
    "Management's Discussion and Analysis of Financial Condition and Results of
    Operations" in the registrant's 1996 Annual Report to Shareholders and is
    incorporated herein by reference.

Item 8.  Financial Statements and Supplementary Data
        -------------------------------------------

         The financial statements required under this item are included in the
    registrant's 1996 Annual Report to Shareholders and are incorporated herein
    by reference.

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

         Not applicable.


                                    PART III

Item 10. Directors and Executive Officers of the Registrant
         --------------------------------------------------

         The information concerning directors required under this item is
    incorporated herein by reference from the material contained under the
    caption "Election of Director" in the registrant's definitive proxy
    statement to be filed with the Securities and Exchange Commission pursuant
    to Regulation 14A, not later than 120 days after the close of the fiscal
    year. The information concerning delinquent filers pursuant to Item 405 of
    Regulation S-K is incorporated herein by reference from the material
    contained under the heading "Compliance with Section 16(a)" in the
    registrant's definitive proxy statement to be filed with the Securities and
    Exchange Commission pursuant to Regulation 14A, not later than 120 days
    after the close of the fiscal year.

Item 11. Executive Compensation
         ----------------------

         The information required under this item is incorporated herein by
    reference from the material contained under the caption "Executive
    Compensation" in the registrant's definitive proxy statement to be filed
    with the Securities and Exchange Commission pursuant to Regulation 14A, not
    later than 120 days after the close of the fiscal year.

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

         The information required under this item is incorporated herein by
    reference from the material contained under the caption "Security Ownership"
    in the registrant's definitive proxy statement to be filed with the
    Securities and Exchange Commission pursuant to Regulation 14A, not later
    than 120 days after the close of the fiscal year.

                                       15
<PAGE>

Item 13.  Certain Relationships and Related Transactions
          ----------------------------------------------

     The information required under this item is incorporated herein by
  reference from the material contained under the caption "Certain Relationships
  and Related Transactions" in the registrant's definitive proxy statement to be
  filed with the Securities and Exchange Commission pursuant to Regulation 14A,
  not later than 120 days after the close of the fiscal year.

                                    PART IV

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

  (a), (d)   Financial Statements and Schedules
             ----------------------------------

       (1)   The financial statements set forth in the list below are filed as
             part of this Report.

       (2)   There are no financial statement schedules filed as part of this
             Report.

       (3)   Exhibits filed herewith or incorporated herein by reference are set
             forth in Item 14(c) below.

             List of  Financial Statements and Schedules Referenced in this
             --------------------------------------------------------------
             Item 14
             -------

             Information incorporated by reference from Exhibit 13 filed
             herewith:

             Balance Sheets
             Statements of Operations
             Statements of Changes in Stockholders' Equity/Net Assets
             Statements of Cash Flows
             Notes to Financial Statements
             Report of Independent Public Accountants

         Financial Statement Schedules

         All schedules are omitted because they are not applicable or not
     required, or because the required information is shown either in the
     financial statements or in the notes thereto.

  (b)    Reports on Form 8-K
         -------------------

         During the quarter ended December 31, 1996, the Company was not
         required to file, and did not file, any Current Report on Form 8-K.

  (c)    Exhibits
         --------

         See Exhibit Index on page 18.

                                       16
<PAGE>

                                   SIGNATURES

  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on this 28th day of  March,
1997.


                                        Viisage Technology, Inc.


                                By:      /s/ Robert C. Hughes
                                   ----------------------------------
                                           Robert C. Hughes
                                   President and Chief Executive Officer

  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities indicated on the 28th day of  March, 1997:

<TABLE>
<CAPTION>


          Signature                                  Title
          ---------                                  -----
<S>                                   <C>

                 *
By:________________________________         Chairman of the Board of Directors
           Denis K. Berube

                 *
By:________________________________         President and Chief Executive Officer
          Robert C. Hughes                  (Principal Executive Officer)

                 *
By:________________________________         Vice President, Chief Financial Officer and Treasurer
         William A. Marshall                (Principal Financial and Accounting Officer)

                 *
By:________________________________         Secretary and Director
         Charles J. Johnson

                 *
By:________________________________         Director
       Harriet Mouchly-Weiss

                 *
By:________________________________         Director
         Peter Nessen

                 *
By:_______________________________          Director
          Thomas J. Reilly

                 *
*By: /s/  Robert C. Hughes
    ______________________________
          Robert C. Hughes
          Attorney-in-fact

</TABLE>



                                       17
<PAGE>

                                 EXHIBIT INDEX
EXHIBIT                                                                     PAGE
-------                                                                     ----
  NO.                             DESCRIPTION                                NO
 ---                              -----------                                --

2.1*    Amended and Restated Asset Transfer Agreement, dated as of
        August 20, 1996, between the Registrant and Lau Technologies.

3.1*    Restated  Certificate of Incorporation of the Registrant.

3.2*    By-Laws of the Registrant.

4.1*    Specimen certificates for shares of the Registrant's Common
        Stock.

10.1*   Amended and Restated License Agreement, dated as of August 20,
        1996, between the Registrant and Lau Technologies.

10.2*   Form of Administration and Services Agreement between the
        Registrant and Lau Technologies.

10.3*   Form of Use  and Occupancy Agreement between the Registrant and
        Lau Technologies.

10.4*   License Agreement, dated as of August 20, 1996, between the
        Registrant and Facia Reco Associates, Limited Partnership.

10.5*   Employment Agreement, dated as of February 1, 1996, between the
        Registrant and Robert C. Hughes.

10.6*   Employment Agreement, dated as of February 1, 1996, between the
        Registrant and William A. Marshall.

10.7*   Employment Agreement, dated as of July 1, 1996, between the
        Registrant and Yona Wieder.

10.8*   1996 Management Stock Option Plan.

10.9*   1996 Director Stock Option Plan.

10.10*  Form of Option Agreement for the 1996 Management Stock
        Option Plan.

10.11*  Form of Option Agreement for the 1996 Director Stock Option
        Plan.

10.12** Revolving Credit Facility between the Registrant and State
        Street Bank and Trust Company, dated November 22, 1996.

10.13*  Contract between the Registrant and the North Carolina
        Department of Transportation, dated as of  April 26, 1996.

10.14*  Purchase Agreement (Project Finance Facility) between the
        Registrant and Sanwa Business Credit Corporation, dated as
        of September 12, 1996.

                                       18
<PAGE>

                                 EXHIBIT INDEX
EXHIBIT                                                                     PAGE
-------                                                                     ----
  NO.                             DESCRIPTION                                NO
 ---                              -----------                                --

13      Annual Report to Shareholders for the year ended December 31,
        1996 (only those portions incorporated herein by reference).

23      Consent of Arthur Andersen LLP.

24.1    Power of Attorney.

27.1    Financial Data Schedule.


*  Filed as an exhibit to the registrant's Form S-1 Registration Statement
     dated November 8, 1996 (File No. 333-10649)
** Filed as an exhibit to the registrant's Quarterly Report on Form 10-Q for
     the quarter ended September 29, 1996 (File No. 000-21559)

                                       19