Viisage Technology Reports Seventh Consecutive Quarterly Profit; Face Recognition Revenues Double

Business Wire, August 1, 2001

Business Editors

LITTLETON, MA--(BUSINESS WIRE)--Aug. 1, 2001

Viisage Technology, Inc. (NASDAQ: VISG), the leader in face-recognition technology and identification systems and solutions that improve security and conveniently protect personal privacy, announced today its seventh consecutive quarterly profit and ninth consecutive quarter of earnings improvement.

"We are particularly pleased that we are the only major biometric company that is profitable and has a record of consistent profitability," said Tom Colatosti, Viisage President & CEO. Net income applicable to common shareholders increased 102% to $220,000, or $0.01 per share, for the quarter ended July 1, 2001, compared with a net income applicable to common shareholders of $109,000 for the second quarter of 2000. Revenues for the quarter were $6.9 million, a 12% increase over the second quarter of 2000.

For the six months ended July 1, 2001, net income applicable to common shareholders increased 112% to $432,000, or $0.03 per share, compared with a net income applicable to common shareholders of $204,000, or $0.02 per share, for the first half of 2000. Revenues for the first two quarters of 2001 were $13.2 million, representing growth of 15% over the first half of 2000.

Colatosti went on to say, "Our financial results continue to demonstrate consistent, predictable earnings improvement quarter-over-quarter. The growth in our face recognition business is particularly impressive and gratifying, reflecting significant customer acceptance for face recognition applications and in our leadership technology. We will continue to focus our marketing on those markets that have wide consumer acceptance because they improve security and convenience and protect personal privacy."

During the quarter, Viisage announced an $8 million contract to provide a digital driver's license system to the Commonwealth of Kentucky, a licensing arrangement and equity investment with Vision Systems of Korea, and an important distribution partnership with Silver Networks, a 130-year-old Kuwaiti company. The company also announced an agreement with RAPOR, Inc. to integrate face-recognition technology into "Fast Trac(TM)" the industry leading secure access control portal system. Viisage also announced a far ranging agreement with Graphco Technologies to integrate the two most compatible biometric solutions, voice and face-recognition technology, to offer customers a dual biometric solution that is convenient, non-intrusive, cost-effective and secure.

After the close of the quarter, the company announced a $3.1 million order with Pinellas County Sheriff's Department for a law enforcement/jail management system that includes face-recognition technology and the creation of a new business unit focused on face recognition security for personal computers, mobile devices and Internet authentication.

Looking to the rest of the year, Colatosti said, "We expect at least six states to make decisions for new digital drivers' license systems in the second half of this year. We believe we will be very competitive in all these potential awards because we have emerged as the industry's most secure, stable and quality supplier to the digital drivers' license market. Equally, we see increasing interest in biometrics and face recognition across all the market sectors we have interest in." Colatosti concluded his outlook comments by stating that despite the apparent general economic slowdown, backlog and order activity level remain strong. As a result, the company will continue on its plan to make substantial investments in R & D and marketing to develop the biometric market for the long term while delivering consistent short-term profitability.

FaceEXPLORER(TM), Viisage's technology for image retrieval and analysis, is recognized for its leadership technology performance in real-time and large-database applications. FaceEXPLORER is deployed in the world's largest face-recognition application with a database of more than six million images enrolled and growing by 15,000 new images per day. The product family of face-recognition applications also includes: FaceNET(TM) for Internet and e-commerce security; FacePIN(TM) for point-of-sale transaction verification; FacePASS(TM) used for physical-access control; and FaceFINDER(TM) for surveillance and identification.

Additionally, Viisage's systems annually deliver, through 1,500 U.S. locations in 14 states, more than 20 million high-quality and high-security digital-identification documents for government agencies responsible for issuing drivers' licenses, social services cards and law enforcement credentials.

                       VIISAGE TECHNOLOGY, INC.
                    Condensed Statements of Income
               (in thousands, except per share amounts)
                              (Unaudited)

                              Three Months Ended      Six Months Ended
                              July 1,     July 2,     July 1,  July 2,
                               2001        2000        2001     2000
                              ------      ------      -------  -------
Revenue                    $  6,871    $  6,150     $  13,239 $ 11,486
Project costs                 5,248       4,475         9,969    8,330

   Project Margin             1,623       1,675         3,270    3,156

Operating Expenses:
   Sales & marketing             67         160           220      354
   Research & development       416         243           865      261
   General & administrative     635         644         1,156    1,248
    Total operating expenses  1,118       1,047         2,241    1,863
      Operating income          505         628         1,029    1,293

Interest expense                285         434           592      912

   Income before income taxes   220         194           437      381

Provision for income taxes        -           -             -        -

   Net income                   220         194           437      381

Preferred stock dividends         -          85             5      177

Net income applicable to common
   shareholders            $    220    $    109     $     432 $    204

Net income per basic share $    0.01   $   0.01     $    0.03 $   0.02

Basic shares                  16,446     10,116        15,970    9,913

Net income per diluted
    share                  $    0.01   $   0.01     $    0.03 $   0.02

Diluted shares                16,863     14,110        16,377   13,908


                       VIISAGE TECHNOLOGY, INC.
                       Condensed Balance Sheets
                            (in thousands)
                              (Unaudited)

                                       July 1,             July 2,
                                        2001                2000
                                       ------              -------
   Assets
   Current assets:
       Cash & cash equivalents             -     $            790
       Accounts receivable             4,255                2,100
       Costs & estimated earnings
        in excess of
         billings                     28,939               26,396
       Other current assets              637                  617

          Total current assets        33,831               29,903
   Property and equipment, net        11,790               14,848
   Other assets                          341                  585

                                      45,962     $         45,336

   Liabilities & Shareholder's Equity
   Current liabilities:
       Accounts payable & accrued
        expenses                      10,570     $          8,489
       Convertible subordinated debt       -                1,000

       Obligations under capital
            leases                     3,147                4,191

          Total current liabilities   13,717               13,680
   Long-term debt                      2,274                2,875
   Obligations under capital leases    5,355                6,008
   Obligations under related party
    capital
   leases                              2,005                2,584
                                      23,351               25,147
   Shareholders' equity               22,611               20,189
                                      45,962     $         45,336