PRINTRAK INTERNATIONAL INC, 10-K405, 1998-07-14

PRINTRAK INTERNATIONAL INC
10-K405, 1998-07-14
COMPUTER INTEGRATED SYSTEMS DESIGN

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

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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 MARCH 31, 1998

[ ] 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: 000-20719

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PRINTRAK INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)

DELAWARE 33-0070547
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)

1250 NORTH TUSTIN AVENUE, ANAHEIM, CALIFORNIA 92807
(Address of principal executive offices) (Zip Code)

(714) 238-2000
(Registrant's telephone number, including area code)

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

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.0001 par value

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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. Yes /x/ 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 in Part III of this Form
10-K or any amendment to this Form 10-K. /x/

The aggregate market value of the Registrant's Common Stock held by
non-affiliates on June 29, 1998 (based upon the average of the high and low
sales prices of such stock on such date) was $25,472,659. As of June 29,
1998, 11,296,241 shares of the Registrant's common stock, par value $0.0001
per share, were outstanding.

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PRINTRAK INTERNATIONAL INC.

FORM 10-K

FOR THE FISCAL YEAR ENDED MARCH 31, 1998

INDEX

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PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders

PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions

PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
Signatures
</TABLE>

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PART I

ITEM 1. BUSINESS

GENERAL

Printrak International Inc. (the "Company") is a worldwide supplier of
integrated identification and information systems used primarily in criminal
justice and public safety applications, as well as in emerging applications
in civil markets such as welfare and immigration control. The Company
provides networked fingerprint, photo imaging, computer-aided dispatch and
automated records management systems, as well as digital scanning devices.
The Company's integrated systems serve approximately 700 national, state,
county and municipal agencies in 36 countries.

The Company was originally formed in 1974 as a business unit of the
Navigation Systems division of Rockwell International. The business and
technology of the Company were acquired by Thomas De La Rue and Company
Limited in 1981, and the Company was incorporated in California in December
1984 as "De La Rue Printrak, Inc." The Company was acquired by management in
1991 and was renamed "Printrak International Incorporated." The Company was
reincorporated in Delaware in March 1996 under the name "Printrak
International Inc."

On May 7, 1997, the Company acquired all of the issued and outstanding
capital stock of TFP Inc. ("TFP"), a South Carolina corporation. As a result
of the transaction, TFP became a wholly-owned subsidiary of the Company. The
business combination was accounted for by the pooling of interests method of
accounting. Founded in 1988, TFP is considered a premier supplier of digital
mugshot systems used by law enforcement, jail and correctional agencies.
TFP's software applications also include jail management systems.

On July 21, 1997, the Company acquired a business unit of SCC
Communications Corp. ("SCC") located in Boulder, Colorado, in a transaction
accounted for under purchase accounting. The Boulder business unit provides
computer-aided dispatch systems and records management systems for law
enforcement and fire and emergency medical services agencies. As a result of
the transaction, the business unit operates as a division of the Company (the
"Boulder Division").

On September 9, 1997, the Company acquired SunRise Imaging ("SunRise"),
a California corporation, in a transaction accounted for under the purchase
method of accounting. As a result of the transaction, SunRise became a
wholly-owned subsidiary of the Company. SunRise is a leading developer and
manufacturer of high performance systems which digitize microfilm and
microfiche records.

The Company commenced restructuring the operations of its TFP subsidiary
and its SunRise subsidiary in the 3rd and 4th quarters, respectively, of
fiscal 1998. The restructuring plans included relocating TFP's headquarters
from Greenville, South Carolina and SunRise's operations from Fremont,
California to the Company's headquarters in Anaheim, California. The
restructuring of the business units further resulted in the integration of
product development, marketing and sales and customer support. The
administrative functions of each of the two subsidiaries are being absorbed
into the Company's Anaheim operations. The Company anticipates that the
restructurings will be completed by September 30, 1998.

The Company's fiscal year ends on March 31 and references to a fiscal
year denote the calendar year in which the fiscal year ended; for example,
"fiscal 1998" refers to the 12 months ended March 31, 1998.

PRODUCTS

The following hardware and software products represent the Company's
current product offerings:

AUTOMATED FINGERPRINT IDENTIFICATION SYSTEMS. The Company's automated
fingerprint identification system ("AFIS") products represent a
comprehensive, fully integrated architecture for the capture and input of

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fingerprint images, including image processing, search processing and overall
database management. Each AFIS system is comprised of a number of components,
including: 1) tenprint workstations which scan inked fingerprint cards and
palmprints while performing quality control, data descriptor entry and
fingerprint search initiation. The tenprint workstations also perform search
verification and disposition; 2) livescan stations, typically installed in a
booking environment, to electronically capture and transmit fingerprints,
mugshots and arrest information; 3) latent workstations which are used by
latent fingerprint examiners to capture, enhance, encode, search, verify and
dispose latent prints from a crime scene; 4) image processing technology that
extracts the searchable features from raw fingerprint data; 5) scalable
search processing technology that matches the extracted features of the
search fingerprint against the agencies' fingerprint databases; 6) data
storage and retrieval systems which encompass large databases that house the
compressed fingerprint and palmprint images as well as the searchable
fingerprint feature data; and 7) a NIST server which provides an open
interface between the customer agency's Printrak AFIS system and outside
agencies such as the FBI or state-wide AFIS network. Additionally, the
Company provides software products which allow an agency to customize its
workflow based on individual agency specifications.

Utilizing an individual's fingerprints, the Company's fully integrated
AFIS system gives agencies the ability to quickly and automatically associate
the individual with their previous criminal history data and also allows the
agency to check for outstanding warrants. This ability significantly
increases the efficiency of the investigation, booking, suspect
identification, incarceration and release functions.

The Company's sixth generation system, the AFIS 2000 series, is based on
UNIX open systems hardware and software. Series 7 AFIS is the Company's
latest generation of products, and certain Series 7 subsystems shipped for
the first time in December 1997. Series 7 products are PC-based applications
incorporating a Microsoft Windows NT operating environment.

The AFIS systems described above are usually used in law enforcement
applications. However, the Company's AFIS systems are also increasingly used
in civil applications such as national ID card issuance, welfare fraud
reduction and immigration control.

DIGITAL PHOTO MUGSHOT. The Company's InstantImage mugshot product line
consists of the Multicapture product and the Investigative Search product.
Multicapture is typically used in the law enforcement booking environment to
digitally capture and store photo-images of mugshots, tattoos, scars and
other distinguishing marks. Investigative Search is the engine for searching
criminal suspects based on demographic or physical attributes. After
identifying potential suspects who match the criteria, the software
electronically creates and reviews photo lineups. This mugshot system
increases an agency's overall efficiency by automating photo taking,
processing, storing, and viewing photo lineups.

A typical mugshot system consists of various hardware and software
components including booking stations, which utilize high resolution video or
digital cameras for the capturing of mugshots and viewing workstations for
searching the mugshot database, as well as for creating and viewing photo
lineups. Additionally, the systems are interfaced to data storage and
retrieval systems that store the compressed photographic images and
searchable data. The range of InstantImage mugshot installations encompasses
stand-alone workstations to complex wide-area networks where multiple
agencies share mugshot information.

The digital photo mugshot system is fully integrated with the Company's
Livescan station product. A typical installation would utilize the livescan
unit to capture mugshot images, along with fingerprints and booking
information. The mugshots are then stored in the InstantImage system for
searching, viewing, and lineup creation at a viewing workstation.

JAIL MANAGEMENT. The Company's jail management system assists jail
administrators and staff in analyzing inmate populations and in developing
the most effective jail policies. The system provides comprehensive inmate
background information including past and present incarcerations, criminal
histories, current offense and court status, and prior institutional
behavior. By providing jail administrators the tools to identify potential
problem inmates, house similar inmates together, and target direct
supervision toward those inmates who require it most, problems can be

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minimized. The Jail Manager software also includes statistical inmate
reporting, calculates release dates, and provides software for inmate
accounting.

COMPUTER AIDED DISPATCH. The Company's computer aided dispatch ("CAD")
application automates public safety agencies' call-taking and incident
dispatching process by managing service calls and the patrol units that are
assigned to each service incident. The Company's system provides public
safety agencies with a fully integrated and configurable computer aided
dispatch system allowing call-takers and dispatchers to quickly and
effectively handle incident information, thus increasing officer safety and
the overall potential for saving lives. The CAD application supports, not
only law enforcement agencies, but also fire and emergency medical service
agencies.

Because the CAD system provides mission critical information, the
Company utilizes fault tolerant servers. These high availability hardware
platforms enable the Company to provide continuous availability and
performance to support critical applications such as communications center
operations 24 hours per day, 365 days a year. Additionally, the Company
provides configurable software which allows an agency to customize its
workflow based on individual agency specifications.

RECORDS MANAGEMENT. The Company's records management system ("RMS")
manages the recording, indexing, tracking, viewing and analyzing of data for
law enforcement, fire and emergency medical service agencies. The Law RMS
provides complete records functionality for a law enforcement agency handling
every phase of law enforcement activity from incident generation to assigning
and tracking cases through arrest and booking. The Fire RMS provides a
comprehensive suite of functionality for managing Fire and EMS activities.
Both the RMS and Fire RMS provide extensive functionality for capturing the
data required for local, state and national law and fire agency reporting.

The Company's law and fire records systems are fully integrated with the
Company's CAD product and operate on a Microsoft Windows NT platform.

DIGITIZATION PRODUCTS. The Company's SunRise Imaging division produces
microfilm scanners capable of scanning the three commonly used microforms:
roll film, microfiche and aperture cards. Targeted to satisfy the conversion
requirements of companies with large archival backfiles, the system provides
high-speed throughput, image enhancement capabilities and quality control
functionality which increases flexibility for microform scanning. The system
is comprised of proprietary imaging hardware and software and is based on a
Microsoft Windows NT platform.

Additionally, the Company provides the following services to complement
its product offerings:

FILE CONVERSION. The file conversion function converts agencies'
tenprint cards into an electronic format. This process includes capture of
images, entry or download of descriptive data, automatic encoding and
classification of prints, quality review, identification of duplicates,
database creation synchronization, as well as database loading. Other
services include the conversion of palm print and mug-shot records, and the
conversion of data from existing databases on previous generation systems.

MAPPING. Printrak's mapping product manages location, address and other
relevant geofile data used by the CAD system to dispatch police, fire and
emergency medical units. It is also used in conjunction with CAD to provide
a graphical map display for dispatchers to use to keep track of their
assigned incidents. This display provides both a spatially accurate map
combined with user defined layers that allow for the designation of different
jurisdictions, beats and zones. Additionally, the interface between the CAD
system and the mapping product provides for the automatic placement of icons
on the map that corresponds with incidents recorded and tracked in CAD. When
used in conjunction with automated vehicle locator ("AVL"), the map also
graphically displays the locations and status of units in service.

SYSTEM MAINTENANCE. The Company typically warrants its systems for a
period of up to 12 months, such warranty includes full support and
maintenance. In addition, the Company sells annual maintenance contracts to
most of its customers, which provide for system maintenance, ongoing
technical support, system documentation materials and user training.

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COMPETITION

The market for law enforcement information systems is highly competitive
and is characterized by rapidly changing technology. Historically, the
principal competitors in the market for AFIS systems within the law
enforcement information systems market have been Printrak, Nippon Electronics
Corporation (NEC), and SAGEM Morpho, a large, privately held company based in
France. NEC and SAGEM Morpho each has the technological and market expertise
to provide large scale AFIS solutions, and each has substantially greater
financial resources than the Company.

In the ten fingerprint live-scan market, the Company's principal
competitors are Identix Inc. and Digital Biometrics Incorporated, although
other competitors are also present within the marketplace. The nature of
competition in this market is centered primarily on system functionality,
image quality, price, service, and ease of integration into other systems
within the customer's environment.

In civil and commercial applications encompassing fingerprint
identification technologies, there are many market competitors including IBM,
TRW, NRI, as well as others. The Company competes in these markets on the
basis of system functionality, price and customer service.

In the digital photo mugshot market, the Company's principal competitors
are EPIC Solutions, Imageware, DDSI, and Dynamic Imaging. A large number of
minor competitors are also present in the marketplace. The Company competes
in the digital photo mugshot market on the basis of system functionality,
image quality, ease of integration with other customer systems, price and
customer service.

The market for computer aided dispatch and records management systems,
like the AFIS market, is highly competitive and involves rapidly changing
technology. The principal competitors in the CAD and RMS market have been and
continue to be Intergraph, Tiburon, and PRC. A significant number of
secondary competitors are also present within the marketplace. Each of the
principal competitors has the expertise to provide large scale, integrated
CAD and RMS solutions. The nature of the competition is centered on
functionality, reliability, ability to interface with the customer's mobile
communication and in-vehicle systems, price, and service.

The Company's subsidiary, SunRise continues to compete for the most part
with Mekel and Photomatrix at the high end of the microfilm conversion
segment of the micrographics industry. Companies at the lower end of the
market such as Fuji and Wicks & Wilson are attempting to bid for the same
business at a lower price point. SunRise competes in this marketplace based
upon throughput, image quality and flexibility in that it markets the only
scanner able to accept all three forms of film format - roll film,
fiche and aperture cards.

Printrak has several competitors that offer some elements
of enterprise-wide computing solutions for public safety agencies. However,
Printrak currently offers the most comprehensive solution, which may include
any or all of the following: AFIS, live scan, CAD, RMS, jail management,
mugshot, and microfilm scanners. No other single company owns such a broad
array of public safety technologies. However, certain competitors such as
Tiberon and Intergraph do provide solutions which include both CAD and RMS
technologies.

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS

The Company currently holds five patents and has two patent applications
pending in the United States, holds three patents in Europe and five in
Canada. Although the Company has implemented these protective measures,
policing unauthorized use of the Company's technology or products is
difficult and there can be no assurance that these measures will be
successful. In addition, the laws of certain foreign countries may not
protect the Company's proprietary rights to the same extent as do the laws of
the United States. There can be no assurance that the Company's patents are
or will be sufficiently broad to protect the Company's technology. There can
be no assurance that additional U.S. or foreign patents will issue. In
addition, there can be no assurance that any patents that may be issued to
the Company, or which the Company may license from third parties, will not be
challenged, invalidated or circumvented, or that any rights granted would
ultimately provide protection to the Company. Further, there can be no
assurance that others will not independently develop similar products or
duplicate the Company's products.

RESEARCH AND PRODUCT DEVELOPMENT

The Company considers research, development and engineering to be a
vital part of its operating discipline and continues to make substantial
investments in research, development and engineering to enhance the
performance,

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functionality and reliability of its hardware and software products, as well
as to develop new product offerings. During the fiscal years ended March 31,
1996, 1997 and 1998, the Company invested 17.8% 16.6%, and 15.3%,
respectively, of its revenues in research, development and engineering.

MANUFACTURING AND SOURCING PRODUCTS

The Company's manufacturing operations consist primarily of the
integration and testing of off the shelf components, such as computers and
disks, and of subsystems and computer assemblies. Substantially all
assemblies are manufactured by outside vendors based on specifications
provided by the Company. The Company's subsidiaries, TFP and SunRise,
manufactured mugshot and digital scanning systems through fiscal year 1998,
however, with the integration of TFP and SunRise into the Company's
operations in Anaheim, this manufacturing is being outsourced to the same
vendor from which the Company procures its AFIS assemblies. The Company's
CAD product is required to be fault tolerant and, as such, utilizes Tandem
hardware which is purchased directly from the manufacturer.

The Company generally purchases major assemblies from a single vendor as
this promotes higher quality, prompt delivery and aids cost savings. The
Company is dependent upon the ability of vendors to deliver these items in
accordance with the Company's specifications and delivery schedules. The
failure of these suppliers to deliver on schedule could delay or interrupt
the Company's delivery of products and thereby adversely affect the Company's
operating results. To date, the Company has not experienced any delays in
deliveries from its suppliers that have had a major impact on its business.

As a turnkey supplier of digital justice solutions, the Company also
provides file conversion services for its AFIS product line which allows the
customer's existing database of hardcopy records to be electronically encoded
prior to delivery of a Printrak AFIS system. This file conversion service is
performed at the Company's headquarters in Anaheim, California. The
Company's computer aided dispatch application requires significant data
mapping of the geographic points included within an agency's service
jurisdiction. This data mapping is performed by a third party in Boulder,
Colorado, and to date, the Company has not experienced any delays in the
performance of service by this subcontractor.

CUSTOMER SERVICE AND SUPPORT

The Company believes that excellent customer service and support is
essential to its success and has committed significant resources to these
functions. As part of the Company's warranty and maintenance service
agreements, on-site maintenance service is provided for the Company's AFIS
systems five days per week, eight hours per day, during normal working hours.
The Company's CAD/RMS and mugshot products are supported via on-site
maintenance service or on-call phone service, depending on the requirements
of the customer's maintenance agreement. Telephone support is provided for
the Company's AFIS, mugshot, and CAD/RMS products twenty four hours per day,
seven days per week. The Company's customer support center is designed to
provide focused hardware and software support to customer sites via a
designated phone number. The Company's service organization includes
customer service engineers, who provide on-site support and maintenance, and
product support engineers, who are primarily located in the Company's
headquarters facility, the Boulder, Colorado facility or in regional offices
around the world.

The Company sells annual maintenance service agreements to most of its
customers, which provide for system maintenance, ongoing technical support,
system documentation materials, and user training. Typically, the price of
AFIS, mugshot, and CAD/RMS systems include a 12 month warranty which includes
full support and maintenance. The Company provides a 90 day warranty with
the sale of a SunRise Imaging scanner. Individual components within any of
the Company's product lines are typically warranted for 90 days.

BACKLOG

The Company measures its backlog of system revenues as orders for which
contracts or purchase orders have been signed, but for which revenues have
not been recognized. In those instances where revenue is recognized on a
percentage of completion basis, the Company includes in backlog contract
revenue not recognized at the period end. The Company typically delivers its
products within six to nine months after receiving an order, however, in some

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instances, products are provided on a shorter delivery schedule, and
occasionally, more time is required. As of March 31, 1998, the Company's
system revenue backlog was approximately $29.7 million, compared to $13.1
million as of March 31, 1997.

Orders comprising the Company's backlog may include requirements for
custom software development or file conversion that may require extensive
resources to be completed prior to shipment. Any failure of the Company to
meet an agreed upon schedule could lead to the cancellation of the related
order. The Company believes that it is important for competitive reasons and
to better satisfy customer requirements to reduce order lead times.
Additionally, variations in the size, complexity and delivery requirements of
customer orders may result in substantial fluctuations in backlog on a
regular basis. Accordingly, the Company believes that backlog is not a
meaningful indicator of future financial performance.

EMPLOYEES

As of March 31, 1998, the Company employed 417 people on a full-time
basis, 394 domestically and 23 internationally. Of this total, 94 were in
research, development and engineering, 140 in customer support, 59 in
assembly, materials and file conversion services, 76 in sales and marketing,
and 48 in finance, information technology and administration. Printrak's
success is highly dependent on its ability to attract and retain qualified
employees. Competition for employees is increasingly intense in the software
industry, and the Company believes this competition will continue. To date,
the Company believes it has been successful in its efforts to recruit and
retain qualified employees, but there is no assurance that it will continue
to be as successful in the future. None of the Company's employees are
subject to collective bargaining agreements. The Company believes that its
relations with its employees are good.

CERTAIN CONSIDERATIONS

The Company's future operating results, and stock price, may be affected
by a number of factors that could cause actual results to differ from those
stated herein. These factors include the following:

LENGTHY SALES AND COLLECTION CYCLE

The sale of the Company's products is often subject to delays associated
with the lengthy approval processes that typically accompany large capital
expenditures. The Company's total revenues depend in significant part upon
the decision of a government agency to upgrade and expand existing
facilities, alter workflows, and hire additional technical expertise in
addition to procuring the Company's products, all of which involve a
significant capital commitment as well as significant future support costs.
The Company's systems therefore often have a lengthy sales cycle while the
customer evaluates and receives approvals for the purchase of the Company's
products, while existing workflows are augmented so as to properly assimilate
the Company's system, and while the system is configured and shipped.
Typically, the evaluation and execution of a customer contract may take one
year. Another six to nine months elapse while the system is configured,
professional services are performed and the customer site is prepared. As
such, it is not uncommon for the sales cycle to approximate two years.
During this time, the Company expends substantial resources yet may receive
no associated revenue. Any significant failure by the Company to execute a
contract after expending such effort and funds could have a material adverse
effect on its business, operating results and financial condition.

A customer contract typically provides payment terms associated with the
achievement of certain contractual milestones. Often, the contract provides
for a customer deposit at contract signature, however, portions of the
customer's payment may ultimately be associated with the delivery and final
acceptance of the complete system. Because the system configuration, file
conversion, and system acceptance testing consumes a six to nine month time
period, the Company's collection cycle is often quite lengthy. As such, the
Company expends substantial resources but may not receive payment from the
customer until the completion of a substantial portion of the contract. Any
significant failure by the Company to perform to the requirements of a
specific contract could have a material adverse effect on its business,
operating results and financial condition.

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DEPENDENCE ON LARGE ORDERS; CUSTOMER CONCENTRATION

In any given fiscal year, the Company's revenues have principally
consisted, and will continue to consist, of large orders from a limited
number of customers. While the individual customer may vary from period to
period, the Company is still dependent upon large orders for a significant
portion of its total system revenues. During fiscal year 1998, no sales
exceeding 10% of total revenues existed. During the fiscal year ended March
31, 1997, revenues from the Royal Canadian Mounted Police and the Florida
Department of Law Enforcement were $9.0 million, or 13.7%, and $6.9 million,
or 10.5%, respectively, of the Company's total revenues. During the fiscal
year ended March 31, 1996, revenues from the State of Louisiana were $8.3
million, or 15.9% of the Company's total revenues. There can be no assurance
that the Company will continue to obtain such large orders on a consistent
basis, and as such, the Company's inability to obtain sufficient large orders
would have a material adverse effect on the Company's business, operating
results and financial condition. Moreover, the timing and shipment of such
orders may cause the operating results of the Company in any given quarter to
differ from projections of securities analysts which could adversely affect
the trading price of the Company's Common Stock.

DEPENDENCE ON CAPITAL SPENDING BY PUBLIC AGENCIES

Substantially all of the Company's revenues are derived from the sale
and maintenance of products delivered to domestic and foreign governmental
agencies. The decision to purchase an AFIS, CAD, RMS, mugshot or jail
management systems generally involves a significant commitment of capital and
frequent delays are often associated with significant capital expenditures.
The Company's future performance is directly dependent upon the capital
expenditure budgets of its customers and the continued demand by such
customers for the Company's products. Many domestic and foreign governmental
agencies have experienced budget deficits that have also led to significant
reductions in capital expenditures. The Company's operations in the future
may be subject to period-to-period fluctuations as a consequence of such
deficits or other negative factors affecting capital spending. There can be
no assurance that such factors will not have a material adverse effect on the
Company's business, operating results and financial condition.

RISKS ASSOCIATED WITH EXPANSION INTO ADDITIONAL MARKETS; RELIANCE ON TEAMING
ARRANGEMENTS

The Company believes that its future performance is, in part, dependent
upon its ability to successfully market AFIS technology for use outside of
the law enforcement market. These markets include the detection of welfare
fraud, voter registration and identification, verification of immigration
status, drivers' license identification and verification of eligibility of
pension or medical benefits. Furthermore, the size of these contracts, when
awarded, is significantly larger than contracts which the Company typically
fulfills and often requires multiple contractors. The requirements for a
national ID system, for example, incorporate AFIS technology, but may also
incorporate other technologies provided by other parties. In order to
successfully pursue civil and commercial applications, the Company has
entered into and will continue to enter into, where appropriate, teaming
arrangements with third party system integrators. There can be no assurance
regarding the performance of such third parties, or the overall success, if
any, of such teaming arrangements. Additionally, there can be no assurance
regarding the performance of other third parties associated with such large
scale implementations, and the Company has no control over this aspect of
any installation.

Although the Company has successfully performed on some of the largest
AFIS installations in the world, the applications associated with national ID
programs or other civil and commercial applications, typically are much
larger. Although the Company is confident that it can successfully implement
its technology in these markets, there can be no assurance that the Company
will be successful.

RISKS ASSOCIATED WITH ACQUISITIONS

An important element of the Company's strategy has been to expand its
operations by acquiring companies with complementary product offerings in
order to augment market coverage and strengthen technological capabilities.
The Company has, in the last fiscal year, completed the acquisitions of TFP
Inc., the CAD/RMS division of SCC Communications and SunRise Imaging, Inc.,
and the Company may make additional acquisitions of businesses, products or
technologies in the future. These acquisitions have, and may continue to,
result in dilutive issuance of
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securities, the incurrence of debt and amortization expense related to
goodwill or other intangible assets. Any of these factors could adversely
affect the Company's business, operating results and financial condition.

Acquisitions and their assimilation into the operations of the Company
have presented and may continue to present the Company with numerous
challenges. These challenges may include, but are not limited to,
assimilating the technologies and products of acquired companies, locating
qualified resources and incorporating separate geographic operations into the
consolidated company. These challenges absorb and may continue to absorb
significant management attention that would otherwise be available to the
ongoing development of the Company's core AFIS business. Moreover, there can
be no assurance that the anticipated benefits of any acquisition, upon
complete integration, will ultimately be realized. If the Company's
management does not effectively respond to these challenges, the Company's
business, operating results and financial condition could be adversely
impacted.

YEAR 2000 COMPLIANCE

Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. These date
code fields will need to accept four digit entries, or be modified in some
fashion, to distinguish 20th century dates. This problem could force
computers to either shut down or provide incorrect data. As a result,
computer systems and software used by many companies may need to be upgraded
to comply with such "Year 2000" requirements. The Company believes that
certain of its internal systems are not Year 2000 compliant and is currently
in the process of purchasing upgrades or transitioning to systems which the
Company's vendors have represented as being Year 2000 compliant. The Company
anticipates that its internal systems will be Year 2000 compliant by June 30,
1999. While it is difficult to quantify the total cost to the Company of the
Year 2000 compliance activities, the Company's best estimate of expenditures
is between $200,000 - $300,000. With regard to the Company's products, the
Company believes that the current versions of all products are Year 2000
compliant. However, certain older products versions are not Year 2000
compliant. The Company is in the process of notifying its customers of
potential Year 2000 compliance problems. For customers with current systems
under maintenance agreements, the Company intends to offer Year 2000 upgrades
as part of the maintenance process. Customers not under maintenance
agreements or with older generation systems will be offered the opportunity
to purchase upgrades. The Company does not anticipate a material cost to
upgrading its products to be Year 2000 compliant. However, there can be no
guarantee that Year 2000 issues will not have a material impact on the
Company's business, operating results and financial condition.

OTHER MATTERS

In October 1997, the AICPA issued SOP 97-2, "Software Revenue
Recognition" which supersedes SOP 91-1 under which the Company currently
recognizes revenue. The provisions of SOP 97-2 are effective for transactions
entered into in fiscal years beginning after December 31, 1997. The Company
has historically recognized revenue on contracts with insignificant vendor
obligations, as defined by SOP 91-1, when a system is shipped and has accrued
for the estimated costs of the future obligations. For those contracts which
have been considered long-term contracts due to a significant amount of
customization, the Company has historically recognized revenue on a
percentage of completion basis.

One of the provisions of SOP 97-2 eliminates the concept of
insignificant vendor obligations and will require the Company to allocate
revenue, based on vendor specific objective evidence, to individual elements
of its contracts and recognize revenue on each element as it is delivered or
as services are performed, assuming certain other specified criteria are met.
In addition, SOP 97-2 provides revised guidance and clarification on numerous
other topics related to the Company's revenue recognition policies. The
ultimate impact of SOP 97-2 on the Company will be dependent on the nature
and timing of specific contracts entered into, as well as subsequent
interpretations of this pronouncement by the Company, its independent
auditors and the Securities Exchange Commission, but will likely result in
delays in the recognition of revenue on some contracts. In addition, the
Company may elect to adopt changes in its licensing or services practices to
conform to aspects of SOP 97-2, and such changes, if adopted, could result in
delays or cancellations of potential sales of the Company's products.

-10-
<PAGE>

ITEM 2. PROPERTIES

The Company leases an approximately 88,000 square foot facility in
Anaheim, California from Kilroy Realty, L.P. This building is used as the
Company's headquarters and includes administration, engineering and
development, marketing and sales, customer service, and manufacturing
facilities.

The Company leases office space in Greenville, South Carolina from Barry
White, a former director and Vice President of Printrak. Prior to the
restructuring of the Company's subsidiaries and the relocation of TFP's
operations to Anaheim, California, this facility was used as TFP's principal
place of business. Pursuant to an Amendment of Lease dated November 12,
1997, the Company has provided Written Notice of its intent to terminate the
lease effective August 7, 1998.

The Company leases an approximately 6,700 square foot facility in
Fremont, California from Aetna Life Insurance Company. Prior to the
restructuring of the Company's subsidiaries and the relocation of SunRise's
operations to Anaheim, California, the facility was used as SunRise's
principal place of business. The Company is actively pursuing a subtenant to
sublease the premises through the remaining term of the lease. Pursuant to
the terms of the lease, the Company pays $10,598 per month, subject to
periodic adjustments. The term of the lease expires April 2002.

The Company leases an approximately 21,800 square foot facility in
Boulder, Colorado from Lookout, LLC for use by the Boulder Division. Pursuant
to the terms of the lease, the Company pays $18,195 per month, subject to
periodic adjustments. The term of the lease expires in November 2002.

Additionally, the Company leases office space in Basingstoke, England
and in Queensland, Australia which are used for international sales and
customer support services.

ITEM 3. LEGAL PROCEEDINGS.

From time to time, the Company may be involved in litigation relating to
claims arising out of its operations in the normal course of business. As of
the date of this report, the Company is not a party to any legal proceedings,
the adverse outcome of which, in management's opinion, individually or in the
aggregate, would have a material adverse effect on the Company's results of
operations or financial position.

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

A special meeting of the stockholders was held on January 29, 1998. Of
the 11,236,483 shares of the Company's common stock issued and outstanding
and entitled to vote at the meeting, there were present at the meeting, in
person or by proxy, the holders of 9,062,599 common shares, representing
80.65% of the total number of shares entitled to vote at the meeting. This
percentage represents a quorum.

At the meeting, the stockholders approved a proposal to amend the
Company's 1996 Stock Incentive Plan to increase the number of shares issuable
thereunder by 1,000,000 shares, bringing the total number of shares available
for issuance thereunder to a total of 1,500,000. The voting results were as
follows: For: 8,472,936; Against: 577,121; Abstain 12,542; and Broker
Non-Vote: 0.

PART II

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

The Company's common stock, par value $.0001 per share (the "Common
Stock"), is traded on the Nasdaq National Market under the symbol "AFIS".
The table below establishes the high and low sale prices for the Common Stock
for the period from July 2, 1996 through March 31, 1998 (as reported on the
Nasdaq National Market). The last reported closing price of the Common Stock
on the Nasdaq National Market on June 30, 1998 was $5.25.

-11-
<PAGE>

<TABLE>
<CAPTION>
FISCAL QUARTER ENDED:

HIGH LOW
-------- --------
<S> <C> <C>
September 30, 1996 (commenced trading July 2, 1996) ........ $ 10.63 $ 6.38
December 31, 1996 .......................................... 11.13 7.63
March 31, 1997 ............................................. 12.75 8.00
June 30, 1997 .............................................. 9.63 8.63
September 30, 1997 ......................................... 11.75 11.13
December 31, 1997 .......................................... 10.88 10.00
March 31, 1998 ............................................. 10.50 8.00
</TABLE>

As of June 30, 1998, there were 117 holders of record based on the
records of the Company's transfer agent which does not include beneficial
owners of Common Stock whose shares are held in the names of various
securities brokers, dealers and registered clearing agencies.

The terms of the Company's revolving credit agreement restrict the
ability of the Company to pay dividends on the Common Stock. Any payment of
future dividends will be at the discretion of the Company's Board of
Directors and depend upon, among other things, the Company's earnings,
financial condition, capital requirements, extent of indebtedness, as well as
any other contractual restrictions. The Company does not anticipate paying
cash dividends on the Common Stock in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data set forth below for the periods
and the dates indicated and summary consolidated financial data are derived
from the audited consolidated financial statements of the Company. The
statement of operations data for each of the three fiscal years to the period
ended March 31, 1998, and the balance sheet data at March 31, 1997 and 1998,
are derived from the audited consolidated financial statements and notes
thereto, which are included elsewhere in this report, and are qualified by
reference to such financial statements and notes related thereto. The data
set forth below should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and Notes thereto included elsewhere in
this report.

-12-
<PAGE>

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
System. . . . . . . . . . . . . . . . . . . . . $20,512 $22,036 $41,400 $54,728 $58,742
Maintenance . . . . . . . . . . . . . . . . . . 8,580 9,607 10,667 10,855 13,134
------- ------- ------- ------- -------
Total revenues. . . . . . . . . . . . . . . . . 29,092 31,643 52,067 65,583 71,876
Cost of revenues(1) . . . . . . . . . . . . . . . 14,787 18,215 29,782 34,143 45,852
------- ------- ------- ------- -------
Gross profit. . . . . . . . . . . . . . . . . . . 14,305 13,428 22,285 31,440 26,024
Operating expenses:
Research, development and engineering . . . . . 3,907 4,867 9,274 10,859 11,002
Selling, general and administrative . . . . . . 8,012 9,353 12,283 13,861 21,841
In process research and development . . . . . . 5,900
Merger related expenses . . . . . . . . . . . . 874
Restructuring costs . . . . . . . . . . . . . . 987
------- ------- ------- ------- -------
Total operating expenses. . . . . . . . . . . . 11,919 14,220 21,557 24,720 40,604
Operating income (loss) . . . . . . . . . . . . . 2,386 (792) 728 6,720 (14,580)
Other income, net . . . . . . . . . . . . . . . . 976 1,315 848 53 185
------- ------- ------- ------- -------
Income (loss) before provision for income taxes and
cumulative effect of accounting change . . . . . 3,362 523 1,576 6,773 (14,395)
Provision for income taxes. . . . . . . . . . . . 1,001 221 386 2,141 95
------- ------- ------- ------- -------
Income (loss) before cumulative effect of
accounting change. . . . . . . . . . . . . . . . 2,361 302 1,190 4,632 (14,490)
Cumulative effect of accounting change(2) . . . . 5,750 - - - -
------- ------- ------- ------- --------
Net income (loss) . . . . . . . . . . . . . . . . $ 8,111 $ 302 $ 1,190 $ 4,632 $(14,490)
------- ------- ------- ------- --------
------- ------- ------- ------- -------
Net income (loss) per share(3):
Basic . . . . . . . . . . . . . . . . . . . . . $ 0.14 $ 0.44 $ (1.30)
Diluted . . . . . . . . . . . . . . . . . . . . $ 0.13 $ 0.42 $ (1.30)
Weighted average common and common equivalent
shares outstanding(3):
Basic . . . . . . . . . . . . . . . . . . . . . 8,620 10,425 11,151
Diluted . . . . . . . . . . . . . . . . . . . . 9,085 10,963 11,151

BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments . . . . . . . . . . . . . . . . . . $1,816 $1,272 $3,625 $8,431 $4,864
Working capital . . . . . . . . . . . . . . . . . 5,736 5,475 10,130 24,842 18,315
Total assets. . . . . . . . . . . . . . . . . . . 25,649 29,964 34,657 49,558 58,595
Long-term liabilities . . . . . . . . . . . . . . 5,405 7,834 5,742 1,683 10,960
Total stockholders' equity. . . . . . . . . . . . 12,554 11,931 14,041 33,997 20,552
</TABLE>

- ---------------
(1) Amount in 1996 includes additional amortization of $832,000 due to a
change in the estimated useful life of capitalized software development
costs.

(2) Effective April 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, ACCOUNTING FOR INCOME TAXES. The
cumulative effect of the adoption of this statement resulted in the
recognition of a $5,750,000 gain during the year ended March 31, 1994.

(3) Effective December 31, 1997, the Company adopted SFAS No. 128, EARNING
PER SHARE. Earnings per share information for prior periods has been
restated to reflect the adoption of this statement.

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

This discussion contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 and the Company intends that such

-13-
<PAGE>

forward-looking statements be subject to the safe harbors created thereby.
Words such as "anticipates", "expects", "intends", "plans", "believes",
"seeks", "estimates", variations of such words and similar expressions are
intended to identify such forward-looking statements, which include (i) the
existence and development of the Company's technical and manufacturing
capabilities, (ii) anticipated competition, (iii) potential future growth in
revenues and income, (iv) potential future decreases in costs, and (v) the
need for, and availability of, additional financing.

The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These
forward-looking statements are based on assumptions that the Company's
markets will continue to grow, that the Company's products will remain
accepted within their respective markets and will not be replaced by new
technology, that competitive conditions within the Company's markets will not
change materially or adversely, that the Company will retain key technical
and management personnel, that the Company's forecasts will accurately
anticipate market demand, and that there will be no material adverse change
in the Company's operations or business. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions, and future business decisions,
all of which are difficult or impossible to predict accurately and many of
which are beyond the control of the Company. In addition, the business and
operations of the Company are subject to substantial risks which increase the
uncertainty inherent in such forward-looking statements, including those
discussed in Item 1, "Business -Certain Considerations". In light of the
significant uncertainties inherent in the forward-looking information
included herein, the inclusion of such information should not be regarded as
a representation by the Company or any other person that the objectives or
plans of the Company will be achieved.

The following is management's discussion and analysis of certain
significant factors which have affected the earnings and financial position
of the Company during the period included in the accompanying consolidated
financial statements. This discussion compares the year ended March 31, 1998
with the year ended March 31, 1997 and the year ended March 31, 1997 is
compared against the year ended March 31, 1996. This discussion should be
read in conjunction with the consolidated financial statements and associated
notes to the financial statements.

FISCAL YEARS ENDED MARCH 31, 1998 AND 1997

TOTAL REVENUES. The Company's total revenues are comprised of system
revenues, which include products, file conversion and data mapping services,
and system installations; and maintenance revenues related to hardware and
software support.

Total revenues increased 9.6% to $71.9 million for the year ended March
31, 1998, in comparison to revenues of $65.6 million for the year ended March
31, 1997. The overall increase in revenues is entirely attributable to the
Company's acquisitions during the fiscal year. Subsequent to completing the
acquisition of the CAD/RMS division of SCC in July 1997, the Boulder Division
contributed $8.2 million of total revenue while SunRise added $3.9 million in
total revenues for the period of September 9, 1997 (date of acquisition)
through March 31, 1998. In addition, TFP contributed $10.3 million in total
revenues, a 52.6% increase over prior year revenues of $6.7 million. This
increase is representative of a significant increase in mugshot installations
to existing AFIS customers, as well as an expanding of TFP's overall customer
base.

These increases were partially offset by a reduction in revenues from
the AFIS division during the current year. The reduction is primarily due to
revenues in fiscal 1997 being impacted by the sale of a large document
storage system for approximately $8.5 million while no similar systems were
sold in fiscal 1998. Revenues from core AFIS systems remained consistent
between fiscal 1997 and 1998.

Of total current year revenues of $71.9 million, system revenues
comprised $58.8 million with maintenance revenues contributing the remaining
$13.1 million. For fiscal year 1997, system revenues equaled $54.7 million
while maintenance revenues equaled $10.9 million. The increase in
maintenance revenues of $2.2 million from the prior year is primarily due to
the Company's increased maintenance base due to acquisitions. The Boulder
Division and TFP

-14
<PAGE>

contributed incremental maintenance revenue of $1.3 million and $0.8 million,
respectively. Anaheim's maintenance revenues of $9.5 million were generally
consistent with previous year maintenance revenues of $9.7 million.

COST OF REVENUES. Cost of revenues primarily consists of purchased
materials procured for use in the assembly of the Company's products,
manufacturing or assembly labor and overhead, file conversion costs and data
mapping costs, as well as maintenance expenses and estimated costs to
complete systems installations.

Overall gross profit decreased to $26.0 million for the year ended March
31, 1998, down from $31.4 million for the year ended March 31, 1997. As a
percentage of sales, gross margin for fiscal year 1998 declined to 36.2% from
47.9% for fiscal year 1997. The gross profit for system revenues decreased
$4.4 million to $22.2 million for the current year while the prior year's
system gross profit equaled $26.6 million. System margin as a percentage of
sales declined as well, approximating 37.8% for the year ended March 31,
1998, down from 48.6% for the year ended March 31, 1997. Maintenance revenue
gross profit equaled $3.8 million for the current year, versus a gross profit
of $4.8 million for the previous fiscal year. As a percentage of sales,
gross profit on maintenance revenue approximated 29.1% for the year ended
March 31, 1998 as compared to 44.4% for the year ended March 31, 1997.

The decline in overall system margins is partially attributable to the
Boulder Division's contracts yielding lower margins than typical AFIS
contracts. This was due to numerous low margin contracts acquired from SCC
which the Company expended significant resources to complete. Additionally,
margins in the Boulder Division are inherently lower than in the rest of the
Company since a significant proportion of sales relate to the delivery of
special fault tolerant equipment the gross margin on which is much less than
that of hardware sold with AFIS systems and since the cost of engineering the
Boulder Division contracts is generally contract specific and therefore is
charged to cost of revenues rather than research, development and engineering
expenses. Also included within system cost of sales are approximately
$882,000 of expenses associated with the restructuring of TFP and Sunrise
into the Company's Anaheim operations. Additionally, the Company incurred
higher than estimated costs in completing certain system installations.

The decline in maintenance gross margin is partially attributable to TFP
and the Boulder Division's cost in maintaining certain systems for which the
Company had not yet received a maintenance contract from the customer. This
service was performed to encourage all customers to assign their contracts to
the Company; however, in some instances, costs were incurred without
receiving a maintenance contract during this transition period. The decrease
in margin for Anaheim is attributable to an increase in fixed maintenance
support costs to support new contracts which were still under warranty in
fiscal 1998 and without a corresponding increase in the price of existing
maintenance contracts.

RESEARCH, DEVELOPMENT AND ENGINEERING. Research, development and
engineering expenses (RD&E) are comprised primarily of compensation paid to
personnel engaged in research, development and engineering activities,
amounts paid for outside services and consultants and the cost of materials
used in the development of hardware and software products.

RD&E expenses increased 1.3% to $11.0 for the year ended March 31, 1998,
up from $10.9 million for the same period of the previous year. RD&E
expenses, as a percentage of revenue, decreased to 15.3% for the year ended
March 31, 1998 from 16.6% for the year ended March 31, 1997. One factor in
the decline of RD&E expenses, as a percentage of revenue, is that the Boulder
Division's investment in engineering expenses are more typically contract
specific, and as such, are classified as cost of sales which lowers both the
overall RD&E expenses, as a percentage of revenue, and lowers the Company's
overall gross margin.

Included within current year RD&E expense are $249,000 of expenses
associated with the restructuring of the engineering operations of SunRise
and TFP into the Company's corporate engineering organization. The Company
experienced a decrease in contract labor expense in comparison to prior year
as a reduced number of outside contractors were utilized. In the previous
year, the Company had used significant contract labor to develop the
Company's document storage. This software application is now part of the
AFIS family of products.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative (SG&A) expense consist principally of compensation paid to
sales, marketing and administrative personnel, commissions paid to sales
personnel, professional service fees, travel and related expenses, and other
marketing expenses.

For the year ended March 31, 1998, SG&A expenses increased to $21.8
million for fiscal year 1998, up from $13.9 million for fiscal year 1997.
This represented an increase of $8.0 million or 57.6%. As a percentage of
revenue,

-15-
<PAGE>

SG&A expenses approximated 30.4%, up from 21.1% in the prior year.
Approximately $2.0 million of the increase was attributable to higher labor
costs associated with additional personnel resulting primarily from the
Company's acquisitions, as well as the implementation of a sales commission
plan that resulted in incremental expense of approximately $1.0 million.
Travel and marketing expenses also increased approximately $.8 million due to
the acquisitions. Furthermore, during the year, approximately $.5 million of
international travel expense was incurred as the Company invested significant
resources in marketing its civil applications for AFIS technology.
Professional fees and insurance costs also incrementally increased due to the
Company's three acquisitions during fiscal year 1998.

Also included within SG&A are $1.1 million of expenses associated with
the restructuring of the operations of TFP and SunRise to reduce duplication
of resources. These costs are primarily comprised of relocation and
retention bonuses for certain employees, costs of relocating TFP and SunRise
production facilities, and additional bad debt reserves due to employee
transitions and changes in the customer base.

IN-PROCESS RESEARCH & DEVELOPMENT EXPENSE. The in-process research and
development expense of $5.9 million was due to the allocation of a portion of
the purchase price to technology acquired related to the SunRise acquisition.
The purchase price was allocated based on management's estimates and
projections of future cash flows using the discounted cash flow valuation
method.

MERGER EXPENSE. Merger expenses of $.9 million were associated with the
TFP Inc. acquisition. The expenses primarily consisted of investment
banking, legal and accounting fees associated with the pooling of interests
transaction.

RESTRUCTURING COSTS. The restructuring expense of $1.0 million consists
of expenditures for the termination of SunRise and TFP personnel, losses on
the disposal of fixed assets and the estimated loss associated with the lease
termination of SunRise's Fremont facility and TFP's Greenville facility. The
Company anticipates that the restructuring will be completed by September 30,
1998.

OTHER INCOME, NET. Other income equaled $185,000 in the current year
and was primarily comprised of interest income of approximately $629,000,
offset, in part, by interest expense of $467,000 and foreign currency losses
of $136,000. In the previous year, other income totaled $53,000 and was
principally associated with interest income of $364,000, interest expense of
$450,000 and certain miscellaneous income items.

PROVISION FOR INCOME TAXES. Income tax expense for the year ended March
31, 1998 equaled $95,000, versus $2.1 million for the year ended March 31,
1997. The effective tax rate differs from the statutory rate principally due
to the nondeductible in-process research and development expense and an
increase in the valuation allowance on deferred tax assets.

FISCAL YEARS ENDED MARCH 31, 1997 AND 1996

TOTAL REVENUES. The Company's total revenues are comprised of system
revenues, which include products, file conversion services, and system
installation; and maintenance revenues related to hardware and software
support.

Revenues increased 26.0% to $65.6 million for the year ended March 31,
1997 from $52.1 million for the year ended March 31, 1996. TFP contributed
$368,000 or 2.7% of the revenue increase over the prior period. System
revenues experienced an increase of 32.2%, or $13.3 million, to $54.7 million
for fiscal year 1997, up from $41.4 million for the previous fiscal year.
The system revenue increase is primarily attributable to the sale of a large
document storage system and an increasing number of AFIS 2000 system
installations worldwide.

Maintenance revenues equaled $10.9 million for the year ended March 31,
1997, up 1.8% from prior year revenues of $10.7 million. Year-over-year,
TFP's maintenance base increased, offsetting Printrak Anaheim's maintenance
revenue decrease. Anaheim's year-over-year decrease is the result of sales
to existing customers, reducing maintenance revenue during the customer's
warranty period.

-16-
<PAGE>

GROSS PROFIT. Cost of revenues primarily consist of purchased
materials procured for use in the assembly of the Company's products,
manufacturing labor and overhead, file conversion costs and maintenance
expenses.

Overall gross profit increased to $31.4 million for the year ended March
31, 1997, up from $22.3 million for the same period of the previous year.
Overall gross margin for fiscal year 1997 increased to 47.9% from 42.8% for
fiscal year 1996. The gross profit for system revenues increased to $26.6
million for the year ended March 31, 1997 in comparison to $17.3 million for
the year ended March 31, 1996. Additionally, system gross margin equaled
48.6% for the 1997 fiscal year, a significant increase from 41.8% for the
previous fiscal year. The gross margin associated with maintenance revenues
declined to 44.4% for the year ended March 31, 1997 from 46.6% for the year
ended March 31, 1996. Overall maintenance gross profit also declined and
approximated $4.8 million for the year ended March 31, 1997, versus $5.0
million for the prior year.

The overall increase in system gross margin to 48.6% is partially
related to $2.2 million of software amortization, present in the prior year
but absent in the current year because all capitalized software was fully
amortized in the previous fiscal year. Absent the software amortization in
the prior year, the Company's system margin would have approximated 47.1%.
Additionally, favorable order mix and favorable raw material prices resulted
in an increase in the overall system margin. The reduction in the Company's
maintenance revenue margin is the result of increased maintenance support
costs without a corresponding increase in the price of maintenance support
service.

RD&E expenses increased 17.1% to $10.9 million for the year ended March
31, 1997, up from $9.3 million for the year ended March 31, 1996. The
increase in RD&E expense is comprised of increased salary and contract labor
expense related to additional personnel engaged in research, as well as
engineering enhancement of existing products. Depreciation expense also
increased due to a higher amount of equipment used principally for
development efforts. RD&E expense, as a percentage of revenues, decreased to
16.6% for the current year, down from 17.8% for the same period of the
previous year, primarily due to the increased level of total revenues.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative (SG&A) expenses consist principally of compensation paid to
sales, marketing, and administrative personnel, professional service fees,
travel and related expenses, and other marketing expenses.

For the year ended March 31, 1997, SG&A expenses increased to $13.9
million from $12.3 million for the year ended March 31, 1996. This reflects
an overall SG&A expense increase of $1.6 million or 12.8%. The increase in
SG&A expenses results from increased sales and administrative salary expense
to support the infrastructure of a higher level of revenues, increased travel
costs, and increased professional service fees. SG&A expenses, as a
percentage of revenues, decreased to 21.1% for the current year, down from
23.6% for the prior year, due primarily to the increased level of total
revenues.

OTHER INCOME, NET. Other income in the current year is primarily
associated with interest income of $364,000 and other miscellaneous income
items, offset, in part, by interest expense of $450,000. For the previous
year, other income is associated with the amortization of the deferred credit
which became fully amortized in March 1996. Approximately $1.2 million of
this credit was amortized to income in 1996.

PROVISION FOR INCOME TAXES. Income tax expense for the year ended March
31, 1997 equaled $2.1 million in comparison to tax expense of $386,000 in the
prior year. This represents an overall increase in tax expense of
approximately $1.8 million. The Company's tax provision is based on the
federal statutory rate of 35% and reflects the impact of state and foreign
taxes and the changes in the deferred tax valuation allowance, primarily
associated with net operating loss carryforwards.

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<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company finances its operations through the cash provided by its
operations and the utilization of its revolving credit line. The Company's
operating activities used net cash of approximately $3.6 million for the year
ended March 31, 1998, primarily as a result of the cash portion of the net
loss and increases in accounts receivable, inventories, and prepaid expenses,
offset by cash generated from increases in accrued liabilities and deferred
revenue. The Company's operating activities used net cash of approximately
$5.2 million for the year ended March 31, 1997 primarily as a result of an
increase in accounts receivable, offset by net income and other changes in
working capital.

The Company's investing activities used net cash of approximately $7.7
million for fiscal year 1998, due to capital expenditures of $1.5 million and
business acquisitions of $9.6 million offset by the proceeds received from
the sale of short term investments of $3.4 million. The $9.6 million cash
used for business acquisitions is related to the acquisition of the CAD/RMS
division of SCC Communications and the acquisition of SunRise Imaging, net of
cash received. For fiscal year 1997, the Company used net cash of $4.8
primarily associated with short-term investment purchases of $4.2 million.
Additionally in fiscal 1997, the Company expended $1.5 million, consistent
with the current year, for capital expenditures and received approximately
$900,000 from the collection of notes receivable.

Financing activities provided net cash of approximately $11.2 million
for the year ended March 31, 1998 while financing activities for the same
period of the previous year generated net cash of $10.6 million. For the
current period, the Company increased its use of the revolving credit
facility, and net borrowings exceeded repayments by $10.2 million.
Furthermore, the Company collected approximately $1.0 million from the
exercise of stock options and employees' participation in the employee stock
purchase plan. Net cash provided by financing activities for the year ended
March 31, 1997 of $10.6 million is primarily due to net proceeds of
approximately $14.4 million realized from exercise of stock options and the
Company's initial public offering, proceeds of $1.0 million from exercise
of stock options and employees' participation in the Company's employee
stock purchase plan offset by net debt repayments of $4.8 million.

On July 7, 1998, the Company received a written commitment letter from
its bank to refinance its debt into a $15.0 million revolving credit
facility, expiring in July 1999 and a $4.0 million term loan payable in
quarterly installments beginning November 1, 1998 and maturing February 1,
2001. As such, the Company believes that cash generated from operations, as
well as the use of the revolving credit facility, will provide sufficient
resources to fund the Company through at least fiscal year 1999.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data of the Registrant
required by this Item 8 are set forth at the pages indicated at Item 14 (a)
(1).

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

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

DIRECTORS. The following persons served as directors as of March 31, 1998:

RICHARD M. GILES, 50, Chief Executive Officer, President and acting
Chief Financial Officer, joined the Company as Chief Financial Officer in May
1989, became President and Chief Executive Officer and a Director in June
1990 and has served as Chairman of the Board since April 1991. Mr. Giles is
serving as acting Chief Financial Officer. Prior to joining Printrak, from
1988 to 1989, Mr. Giles served as Chief Financial Officer for subsidiaries of
De La Rue, p.l.c., an international financial printing company. From 1986 to
1988 Mr. Giles served as Managing Director of Boardman Panels & Boards, a
printed circuit board company in the United Kingdom. From 1983 to

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<PAGE>

1986, Mr. Giles served as Financial Controller and Finance Director of Racal
Marine Radar Ltd., a manufacturer of defense electronics and marine radar
equipment. In 1994, Mr. Giles was named Entrepreneur of the Year in the
turnaround category by Inc. Magazine for the Orange County, California
region. Mr. Giles received a first class honors degree in chemistry and
mathematics from Bristol University.

JOHN G. HARDY, 49, President of Products Division, joined the Company in
October 1989 as Director of Software Engineering. He has served as Vice
President of Engineering since April 1990, as Chief Operating Officer of the
Company since August 1996 and as a Director of the Company since June 1990.
Mr. Hardy has recently been named President of Products Division. Prior to
joining Printrak, from 1985 to 1989, Mr. Hardy was employed as Senior Vice
President of Engineering by Color Systems Technology, Inc., a company which
converts black and white movies to color. From 1978 to 1985, Mr. Hardy was
employed by Technology Service Corporation, a manufacturer of image
simulation products, as manager of its imaging systems business unit. Prior
to 1978, Mr. Hardy held various engineering positions with Xontech, Inc., a
manufacturer of x-ray equipment, and with the radar systems division of
Hughes Aircraft Company. Mr. Hardy received a B.S. in electrical engineering
from the University of Utah in 1972 and a M.S. in electrical engineering from
the University of Southern California in 1975.

ALFRED CASTLEMAN, 60, joined the Company as Vice President, Chief
Financial Officer and Director in December 1997. From February 1994 to
December 1997, Mr. Castleman served as Vice President and Chief Financial
Officer of Smartflex Systems, Inc. From February 1991 to September 1993, Mr.
Castleman served as Vice President and Chief Financial Officer of Sherpa
Corporation. Mr. Castleman resigned from all positions with the Company in
June 1998.

CHARLES L. SMITH, 63, director, joined the Company as Director of
Operations in August 1989, served as Vice President of Operations from
January 1990 to March 1990, and served as the Company's Chief Operating
Officer from April 1990 until his retirement in August 1996. Mr. Smith
became a Director of the Company in June 1990. Prior to joining Printrak,
Mr. Smith was employed for approximately two years as Vice President,
Operations for EG&G Corporation, a manufacturer of defense related products.
Prior to 1987, Mr. Smith was Executive Vice President of Dolphin Systems, a
manufacturer of computer data storage devices, and held various positions,
including Division General Manager, with Computer Automation, a manufacturer
of mini computer systems. Mr. Smith received a B.S. degree in Industrial
Management from California State University, Long Beach.

KENNETH W. SIMONDS, 63, director, joined the Company as a Director in
August 1996. Prior to his retirement in 1992, Mr. Simonds was employed as
Chief Executive Officer of Teradata Corp., a manufacturer of fault tolerant
database management computer systems. Previously, Mr. Simonds was an
executive officer of Amdahl Corp. where he was responsible for domestic and
international marketing, support and service operation, and three product
divisions over a ten year period. Mr. Simonds also served as Executive Vice
President and Chairman of the Operating Committee during his ten years with
Amdahl. Previously, Mr. Simonds was employed by IBM in a number of sales,
sales management, and technical management positions over an 18 year period.
Mr. Simonds resigned from his position as a director in June 1998.

ALBERT C. WONG, 49, director, joined the Company as a Director in
November 1996. Since 1989, Mr. Wong has been an executive officer and
director of AMKLY Systems, a developer of PC and networking products. Prior
to 1989, Mr. Wong directed worldwide engineering and manufacturing operations
of AST Computer which he co-founded in 1980. Mr. Wong received a B.S. degree
in Electrical Engineering from California State University, Fullerton.

OTHER EXECUTIVE OFFICERS. The following persons served as executive
officers as of March 31, 1998:

DANIEL J. DRISCOLL, 39, President of Digital Justice Division, joined
the Company as Director of Marketing in August 1993. He served as Vice
President of Engineering and Product Marketing since September 1995 and was
recently named President of Digital Justice Division. Prior to joining
Printrak, from October 1992 to August 1993, Mr. Driscoll was employed as
Director of Marketing and Product Development for the Hoskins division of
Sheldahl, Inc., which division manufacturers aviation illumination systems.
From 1989 to 1992, Mr. Driscoll was employed by Cymbolic Sciences
International, a manufacturer of film recorders, as Vice President, Marketing
and Product

-19-
<PAGE>

Development. Prior to 1989, Mr. Driscoll was employed by Lincoln Laser
Company, a manufacturer of laser scanning systems, as Vice President of its
Systems Division, and by Intel Corporation as a Senior Industrial Engineer in
its advanced manufacturing technology group. Mr. Driscoll received a B.S. in
industrial engineering from Arizona State University. Mr. Driscoll was
appointed to the Company's Board of Directors in June 1998.

DAVID L. MCNEFF, 50, Executive Vice President of Sales, joined the
Company in 1985 and served as Vice President, Worldwide Sales from November
1991 to May 1998, as a Director from November 1991 to August 1997, as
Director of North American Sales from 1990 to 1991, as Director, Systems
Engineering, Proposals and Contracts from 1989 to 1990, and as Manager of
Programs and Contracts from 1985 to 1989. Prior to joining Printrak, from
1978 to 1985, Mr. McNeff was employed as Program Manager for Magnavox
Advanced Products and Systems Co., which develops and manufactures high speed
chips and printed circuit boards for government agencies. Mr. McNeff
received his B.A.S. degree and two masters degrees from Biola University, all
with highest honors.

SUSANNA H. BENNETT, 44, Vice President of Finance, Treasurer, and
Corporate Secretary, joined the Company in March 1987 and served as Vice
President of Corporate Administration from July 1997 to June 1998, Vice
President, Treasurer from April 1996 to July 1997, Vice President of Finance
from April 1995 to March 1996, Controller from April 1989 to March 1995 and
Finance Manager from March 1987 to April 1989. Prior to joining Printrak,
Ms. Bennett served in accounting and management positions, from 1985 to 1987
at MDB Systems, and from 1984 to 1985 at Excel-O-Corp., a manufacturer of
computer peripheral devices. Ms. Bennett received a B.A. with honors in
Accounting from California State University, Fullerton and an M.B.A. from
Pepperdine University.

STEPHEN YEICH, 38, Vice President, Worldwide Marketing, joined the
Company as Director of Marketing in July 1991 and held such position until
January 1993, served as Director of Business Development from January 1993 to
April 1997, as Vice President of Marketing from April 1997 to May 1998 and
was promoted to Vice President, Worldwide Marketing in May 1998. Prior to
joining Printrak, Mr. Yeich held consulting, marketing and sales positions
with McKinsey & Company, IBM and GTE. Mr. Yeich received a bachelor's degree
from Pennsylvania State University and a master's degree with honors from
Harvard Graduate School of Business Administration.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based solely upon its review of the copies of Forms 3 and 4 and
amendments thereto furnished to the Company, or written representations that
no annual Form 5 reports were required, the Company believes that all filing
requirements under Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") applicable to its directors, officers and any
persons holding 10% or more of the Company's Common Stock were made with
respect to the Company's fiscal year ended March 31, 1998.

-20-
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth compensation earned during the three fiscal years
ended March 31, 1996, 1997 and 1998 by the Company's Chief Executive Officer and
the four other most highly compensated executive officers who were serving as
executive officers at March 31, 1998 and whose total salary and bonus during
such year exceeded $100,000 (collectively, the "Named Executive Officers").

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
--------------------- ------------
AWARDS
------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMP.(1)
- ------------------------------- ---- ---------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Richard M. Giles 1998 374,039 144,250(2) -- --
CEO, President and acting CFO 1997 403,077 153,000 -- --
1996 500,000 500,000 -- --

Barry B. White 1998 150,733(3) 20,156 -- 100,000(4)
Former Vice President

Daniel J. Driscoll 1998 191,269 55,838(5) 127,000 --
President of Digital Justice 1997 151,955 53,550 -- --
Division 1996 117,986 43,750 56,000 --

John G. Hardy 1998 179,157 53,918(6) 20,000 --
President of Products Division 1997 168,819 53,585 -- --
1996 148,706 37,177 -- --

David L. McNeff 1998 160,888 65,512(7) 75,000 --
Vice President of Sales 1997 152,877 53,585 -- --
1996 148,706 37,177 48,000 --
</TABLE>

- ----------------
(1) Does not reflect certain personal benefits, which in the aggregate are
less than the lower of $50,000 or 10% of each Named Executive Officer's
annual salary and bonus.

(2) Includes $91,750 performance bonus paid in fiscal year 1998 related to
performance during fiscal year 1997. The remaining bonus amount was
based on the executive officer's individual performance during fiscal
year 1998.

(3) Includes $14,866 paid by TFP prior to the Company's acquisition of TFP in
May 1997.

(4) Mr. White resigned on March 31, 1998 from all positions with the Company.
In connection with Mr. White's resignation, Mr. White was paid $100,000
severance.

(5) Includes $26,775 performance bonus paid in fiscal year 1998 related to
performance during fiscal year 1997. The remaining bonus amount was
based on the executive officer's individual performance during fiscal
year 1998.

(6) Includes $26,793 performance bonus paid in fiscal year 1998 related to
performance during fiscal year 1997. The remaining bonus amount was
based on the executive officer's individual performance during fiscal
year 1998.

(7) Includes $26,803 performance bonus paid in fiscal year 1998 related to
performance during fiscal year 1997. The remaining bonus amount was
based on the executive officer's individual performance during fiscal
year 1998.

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<PAGE>

OPTION MATTERS

OPTION GRANTS. The following table sets forth certain information
concerning grants of options to each of the Company's Named Executive
Officers during the fiscal year ended March 31, 1998.

OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(3)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION -----------------------------
NAME GRANTED (#) FISCAL YEAR (1) ($/SHARE) DATE (2) 5% ($) 10% ($)
- -------------------- ----------- --------------- -------------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Richard M. Giles -- -- -- -- -- --

Barry B. White -- -- -- -- -- --

Daniel J. Driscoll 27,000 2.7% 11.63 05/08/07 197,370 500,580
100,000 10.1% 9.88 09/10/07 62,100 1,575,000

John G. Hardy 10,000 1.0% 11.63 05/08/07 73,100 185,400
10,000 1.0% 9.88 09/10/07 6,210 157,000

David L. McNeff 25,000 2.5% 11.63 05/08/07 182,750 463,500
50,000 5.0% 9.88 09/10/07 31,050 787,500
</TABLE>

- ---------------
(1) Options to purchase an aggregate of 993,289 shares of Common Stock were
granted to employees, including the Named Executive Officers, during the
year ended March 31, 1998.

(2) Options granted have a term of 10 years, subject to earlier termination in
certain events related to termination of employment. These options vest
in equal quarterly installments over five years.

(3) Based on fair market value, in accordance with the rules and regulations of
the Securities and Exchange Commission, such gains are based on assumed
rates of annual compound stock appreciation of 5% and 10% from the date on
which the options were granted over the full term of the options. The
rates do not represent the Company's estimate or projection of future
Common Stock prices, and no assurance can be given that the rates of annual
compound stock appreciation assumed will be achieved.

OPTION EXERCISES. No options were exercised by any of the Named Executive
Officers during the year ended March 31, 1998. The following table sets forth
the fiscal year end options values for all options held by the Company's Named
Executive Officers. The values for "in the money" options represent the
positive spread between the exercise prices of any such existing stock options
and the fiscal year end price of the Company's Common Stock ($8.38 per share).

-22-
<PAGE>

FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END (#) AT FISCAL YEAR END ($)(1)
------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Richard M. Giles -- -- -- --

Barry B. White -- -- -- --

Daniel J. Driscoll 45,149 145,851 $ 48,784 $37,696

John G. Hardy 273,500 16,500 $1,657,800 --

David L. McNeff 46,450 92,550 $ 105,536 $10,944
</TABLE>

- -------------
(1) On May 26, 1998, the Company repriced an aggregate of 452,000 options
held by certain executive officers which had exercise prices greater
than $7.50 per share, to $6.94 per share, the fair market value of the
Company's Common Stock on the date of repricing. The values stated
above do not reflect such repricing.

EMPLOYMENT AND SEVERANCE AGREEMENTS

The Company entered into an employment agreement with Richard M. Giles,
effective July 2, 1996, for a term expiring July 1, 2002, pursuant to which
he will serve as Chief Executive Officer and President of the Company. The
Employment Agreement provides for a base salary of $350,000 per year, with
annual raises to be determined by the Compensation Committee. On April 1,
1997, Mr. Giles base salary was increased to $375,000. Mr. Giles may earn a
performance bonus based upon the attainment of certain operating goals of the
Company. For fiscal 1998, Mr. Giles' target performance bonus was $150,000.
Such performance bonus may be increased or decreased depending on the
Company's financial performance in relation to its operating income budget.
Mr. Giles is also eligible to participate in incentive compensation and other
employee benefit plans established by the Company from time to time. Mr.
Giles' employment agreement provides for a severance benefit equal to
eighteen months' base salary in the event of termination of his employment by
the Company under certain circumstances.

The Company entered into an employment agreement with Barry B. White,
effective May 7, 1997 for a term of two years, pursuant to which he would
serve as President of TFP, and as a Vice President and director of the
Company. The Employment Agreement provided for a base salary of $150,000 per
year, with annual raises to be determined by the Compensation Committee. Mr.
White resigned from all positions with the Company and its subsidiaries
effective March 31, 1998.

The Company has agreements with a number of executive officers and
several key employees which grant such officers and employees severance
benefits upon termination by the Company. Such benefits range in amount from
six to twelve months' base salary.

DIRECTORS' FEES

During fiscal 1998, the Company's outside directors received cash
compensation for their services on the Company's Board of Directors.
Accordingly, Mr. Smith, Mr. Simonds and Mr. Wong received $19,750, $18,000
and $19,750, respectively, during fiscal year 1998. All directors may be
reimbursed for certain expenses incurred for meetings of the Board of
Directors which they attended. Mr. Smith received additional compensation of
$16,622 for reimbursement of medical insurance costs.

Pursuant to the Company's 1996 Stock Incentive Plan, each outside
director shall receive an initial grant of 10,000 shares, vesting 25%
immediately and the remaining 75% over the following three years, plus an
annual grant of

-23-
<PAGE>

2,000 shares on each anniversary of such director's election, vesting 25%
immediately and the remaining 75% over the following three years.
Accordingly, in fiscal year 1998, Messrs. Simonds and Wong were each granted
options to purchase 2,000 shares.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Compensation Committee is comprised of three directors
selected by the Board of Directors of the Company. As of March 31, 1998, the
members of the Compensation Committee were Charles Smith and Albert C. Wong.
Charles Smith served as the Company's Chief Operating Officer from April 1990
until his retirement in August 1996. The functions of the Compensation
Committee include advising the Board of Directors on officer and employee
compensation. The Board of Directors, based on input from the Compensation
Committee establishes the annual compensation rates for the Company's
executive officers. The Compensation Committee met four times during the
fiscal year ended March 31, 1998.

The Company has entered into indemnification agreements with its
directors, including the members of the Compensation Committee. Such
agreements require the Company to indemnify such individuals to the fullest
extent permitted by Delaware law.

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

The following report is submitted by the Compensation Committee of the
Board of Directors with respect to the executive compensation policies
established by the Compensation Committee and recommended to the Board of
Directors and compensation paid or awarded to executive officers for the
fiscal year ended March 31, 1998.

The Compensation Committee determines the annual salary, bonus and other
benefits, including incentive compensation awards, of the Company's executive
officers and recommends new employee benefit plans and changes to existing
plans to the Company's Board of Directors. The salary and performance bonus
of Richard M. Giles, the Company's President and Chief Executive Officer, is
determined in accordance with Mr. Giles' Employment Agreement with the
Company (see "Employment and Severance Agreements," above). The Compensation
Committee met four times during fiscal year 1998.

COMPENSATION POLICIES AND OBJECTIVES

The Company's executive compensation policy is designed to attract and
retain exceptional executives by offering compensation for superior
performance that is highly competitive with other well-managed organizations.
The Compensation Committee measures executive performance on an individual
and corporate basis.

There are three components to the Company's executive compensation
program, and each is consistent with the stated philosophy as follows:

- BASE SALARY. Base salaries for executives and other key employees
are determined by individual financial and non-financial
performance, position in salary range and general economic
conditions of the Company. For purposes of administering base pay,
all executive positions are evaluated and placed in appropriate
salary grades. Salary range midpoint levels are reviewed on an
annual basis to ensure competitiveness with a peer group of
comparable computer software and systems companies. In
recommending salaries for executive officers, the Compensation
Committee (i) reviews the historical performance of the executives,
and (ii) formally reviews specific information provided by its
accountants and other consultants, as necessary, with respect to
the competitiveness of salaries paid to the Company's executives.

- ANNUAL BONUS. Annual bonuses for executives and other key
employees are tied directly to the Company's financial performance
as well as individual performance. The purpose of annual cash
bonuses are to reward executives for achievements of corporate,
financial and operational goals. Annual cash bonuses are intended
to reward the achievement of outstanding performance. When

-24-
<PAGE>

certain objective and subjective performance goals are not met,
annual bonuses would be reduced or not paid. The bonuses paid in
fiscal year 1998 were solely based upon each individual's
performance during the year.

- LONG-TERM INCENTIVES. The purpose of these plans is to create an
opportunity for executives and other key employees to share in the
enhancement of stockholder value through stock options. The
overall goal of this component of pay is to create a strong link
between the management of the Company and its stockholders through
management stock ownership and the achievement of specific
corporate financial measures that result in the appreciation of
Company share price. Stock options are awarded if the Company and
individual goals are achieved or exceeded. The Compensation
Committee generally has followed the practice of granting options
quarterly on terms which provide that the options become
exercisable in cumulative monthly installments over a three to five
year period. The Compensation Committee believes that this feature
not only provides an employee retention factor but also makes
longer term growth in share prices important for those receiving
options.

FISCAL YEAR 1998 COMPENSATION

The Company is required to disclose its policy regarding qualifying
executive compensation deductibility under Section 162(m) of the Internal
Revenue Code of 1986, as amended, which provides that, for purposes of the
regular income tax and the alternative minimum tax, the otherwise allowable
deduction for compensation paid or accrued with respect to a covered employee
of a public corporation is limited to no more than $1 million per year. It
is not expected that the compensation to be paid to the Company's executive
officers for fiscal 1998 will exceed the $1 million limit per officer. The
Company's Executive Stock Option Plan, 1994 Stock Option Plan and 1996 Stock
Incentive Plan are structured so that any compensation deemed paid to an
executive officer when he exercises an outstanding option under the plan,
with an exercise price equal to the fair market value of the option shares on
the grant date, will qualify as performance-based compensation that will not
be subject to the $1 million limitation.

The Compensation Committee of the
Board of Directors
Charles Smith
Albert C. Wong

NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE
FILINGS, INCLUDING THIS FORM 10-K, IN WHOLE OR IN PART, THE FOREGOING
REPORT AND THE PERFORMANCE GRAPH ON PAGE 26 SHALL NOT BE INCORPORATED BY
REFERENCE INTO ANY SUCH FILINGS.

-25-
<PAGE>

STOCK PERFORMANCE GRAPH

Set forth below is a line graph comparing the cumulative stockholder
return on the Company's Common Stock with the cumulative total return of the
Russell 2000 Index and the SIC Code Index (Number 7373 - Computer Integrated
Systems Design) for the period that commenced July 2, 1996, the date on which
the Company's Common Stock was first registered under the Exchange Act, and
ended on March 31, 1998. The Performance Graph is not necessarily an
indicator of future price performance. The graph assumes the reinvestment of
all dividends.

COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG PRINTRAK INTERNATIONAL INC.,
THE RUSSELL 2000 INDEX
AND THE SIC CODE INDEX

[PLOT POINTS FOR GRAPH]

<TABLE>
<CAPTION>
07/02/96 09/30/96 12/31/96 03/31/97 06/30/07 09/30/97 12/31/97 03/31/98
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRINTRAK INTERNATIONAL INC 100.00 121.88 106.25 143.75 118.75 145.31 135.94 103.13
SIC CODE INDEX 100.00 97.27 90.17 76.80 93.92 107.72 106.13 131.71
RUSSELL 2000 INDEX 100.00 100.34 105.56 100.10 116.33 133.62 129.14 142.13
</TABLE>

ASSUMES $100 INVESTED ON JUL. 02, 1998
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING MAR. 31, 1998

-26-
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Set forth below is certain information as of June 30, 1998 regarding the
beneficial ownership of the Company's Common Stock by (i) any person who was
known by the Company to own more than five percent (5%) of the voting
securities of the Company, (ii) all directors and nominees, (iii) each of the
Named Executive Officers identified in the Summary Compensation Table, and
(iv) all current directors and executive officers as a group.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNERS (1) OWNERSHIP(2) OF CLASS
- ----------------------------------------- -------------------- --------
<S> <C> <C>
Richard M. Giles(3) 5,967,600 52.8%

Barry B. White(4) 732,179 6.5%

John G. Hardy(5) 374,375 3.2%

Charles L. Smith(6) 369,500 3.3%

Daniel Driscoll(7) 56,790 *

David L. McNeff(8) 50,506 *

Albert C. Wong(9) 7,330 *

All current executive officers and directors as a
group (8 persons)(10) 6,884,955 58.7%
</TABLE>

- --------------
* less than 1%

(1) Unless otherwise indicated, the business address of such stockholder is
c/o Printrak International Inc., 1250 North Tustin Avenue, Anaheim, CA
92807.

(2) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options, warrants and convertible notes currently exercisable
or convertible, or exercisable or convertible within 60 days of June 30,
1998, are deemed outstanding for computing the percentage of the person
holding such options but are not deemed outstanding for computing the
percentage of any other person. Except as indicated by footnote, and
subject to community property laws where applicable, the persons named
in the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them.

(3) Includes 81,000 shares owned by the Alexander Giles Education Trust,
Richard Giles Trustee and his son as beneficiary; 6,400 shares owned by
Richard Giles' son, Alexander Giles; and 76,000 shares owned by The
Giles Family Foundation, a California non-profit public benefit
corporation, of which Richard Giles shares voting power with his spouse.
Mr. Giles disclaims beneficial ownership of the above-mentioned shares.
The remaining 5,804,200 shares are held by The Giles Living Trust.

(4) Mr. White's business address is 213 Michaux Drive, Greenville, SC 29605.

(5) The shares of Common Stock are held by John G. Hardy and Irene P. Hardy,
as co-trustees of the John G. Hardy and Irene P. Hardy, Family Trust,
July 24, 1996, of which Mr. Hardy has shared voting power. Includes
274,375 shares issuable upon the exercise of an option exercisable
within 60 days of June 30, 1998 by Mr. Hardy.

(6) Such shares are held by Charles L. Smith and Janet Smith, as Trustees of
the Smith Family Trust, of which Mr. Smith has shared voting power.

(7) Includes 56,790 shares issuable upon the exercise of an option
exercisable within 60 days of June 30, 1998.

(8) Includes 50,506 shares issuable upon the exercise of an option
exercisable within 60 days of June 30, 1998.

(9) Includes 6,000 shares issuable upon the exercise of an option
exercisable within 60 days of June 30, 1998.

(10) Includes an aggregate of 440,649 shares subject to options exercisable
within 60 days of June 30, 1998.

-27-
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

During the year ended March 31, 1998, the Company's Board of Directors,
based upon the recommendations of the Compensation Committee, established the
levels of compensation for the Company's executive officers, provided,
however, the Company's Chief Executive Officer and President, Richard M.
Giles, has an employment agreement with the Company and his compensation is
determined in accordance with the terms and conditions of such agreement. As
of March 31, 1998, the Compensation Committee consisted of Charles Smith and
Albert C. Wong.

On May 13, 1995, the Company sold its facility located at 1250 North
Tustin Avenue, Anaheim, California (the "Property") to RICOL, LLC, a
California limited liability company ("RICOL") which is controlled by Richard
M. Giles, the Company's Chairman, President and Chief Executive Officer, for
a total purchase price equal to $4,630,000, which was equal to the appraised
fair market value of the Property plus $70,000, to cover certain closing
costs. Such purchase price was paid to the Company by delivery of cash in
the amount of $3,400,000 and a promissory note in the principal amount of
$1,230,000 (the "Note"), which Note bore interest at the rate of 10% per
annum and principal on which Note was payable at the rate of $38,000 per year
until fully paid. Such purchase was financed by RICOL by borrowing
$3,400,000 from Union Bank and executing a promissory note in the principal
amount of $3,400,000 and a related deed of trust on the Property. Pursuant
to a Loan Guaranty dated May 12, 1995, the Company unconditionally guaranteed
such obligations of RICOL to Union Bank. Such guarantee was terminated in May
1996. On July 11, 1996, in exchange for partial payment of the Note, the
Note was amended and restated to reflect the remaining principal balance of
$500,000 (the "Amended Note") and amended the interest rate to be equal to
the prime interest rate charged by Union Bank of California. Interest
payments were due monthly until the entire principal balance was paid in
full. The outstanding principal and accrued interest was due in full on July
11, 2003. In April 1998, the Property was sold to an unaffiliated party, the
unpaid principal and interest were paid in full, and the Amended Note was
cancelled.

In connection with the May 1995 real estate transaction, the Company and
RICOL entered into a lease for the Property for a term of five years,
expiring May 12, 2000, with rent of $58,930 per month. Pursuant to the lease
provision which provides for increases based on increases in the Consumer
Price Index, not to exceed 6% or be less than 2% during any year of such
term, the rent was increased to $60,109 per month beginning on May 12, 1996
and was further increased to $61,311 per month beginning May 12, 1997. On
June 5, 1997, the Company, which had not previously paid the scheduled
increase for the twelve months ending May 12, 1997, issued a check for
$18,014 to cover the additional rent. The Company believes the increased
rent is comparable to rents being charged for similar properties at the time
of such increase. The Company believes that the transactions described above
were on terms as favorable to the Company as they would have been if they had
been with unrelated third parties. In connection with the sale of the
Property in April 1998, the Company entered into a new lease for a term of
six years, expiring April 30, 2004, with rent of $58,088 per month.

From time to time, the Company has made loans to Mr. Giles, which have
been evidenced by promissory notes. During fiscal 1997, the principal amount
outstanding equaled $50,000. During fiscal 1996, the principal amount
outstanding under such loans ranged from $23,000 to $147,000, and all of such
loans had been repaid as of March 31, 1996. In February 1996, the Company
loaned $150,000 to Mr. Giles. Such loan was collateralized by a pledge of
150,000 of the shares of the Company's common stock owned by Mr. Giles, bore
interest at 5.5%, and principal and interest were due as of March 1, 1998.
The principal amount along with accrued interest was repaid during fiscal
year 1997. No loans were outstanding during fiscal year 1998.

In February 1996, the Company loaned to John G. Hardy, President of
Products Division, the sum of $310,000 to enable Mr. Hardy to exercise
120,000 options to purchase shares of the Company's Common Stock which were
held by Mr. Hardy and to pay certain tax obligations resulting from the
exercise of such options. Such loan bears interest at the rate of 5.5% per
annum, and principal and accrued interest on such loan were originally due on
March 1, 1998. However, on March 1, 1998, the Company entered into a written
agreement to extend the repayment date to March 1, 2000.

In connection with the acquisition of TFP, the Company's consolidated
liabilities reflect an obligation to make lease payments under that certain
Lease Agreement dated July 23, 1996 and entered into between TFP and Barry B.

-28-
<PAGE>

White, the then current President of TFP who later became a director and
officer of Printrak. Mr. White resigned from all positions of the Company
and its subsidiaries effective March 31, 1998. A Lease Amendment was
executed in November 1997, providing among other things, (i) an increase in
the monthly rental payment from $5,750 to $16,667 per month, and (ii)
permitting for the termination of the lease upon 180 days notice, but in no
event shall the termination occur prior to August 7, 1998. The Company
provided written notice of its intention to terminate the lease effective
August 7, 1998.

Any future transactions between the Company and its officers, directors
or affiliates will either be on terms no less favorable to the Company than
could be obtained from third parties, will be subject to approval by a
majority of the Company's outside directors or will be consistent with
policies approved by a majority of such outside directors.

PART IV

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

(a) 1. Financial Statements:

See Index to Financial Statements and Schedule on page F-1

2. Financial Statement Schedule:

See Index to Financial Statements and Schedule on page F-1.

3. Exhibits. The following exhibits are filed (or incorporated by
reference herein) as part of this Form 10K:

2.1 Agreement and Plan of Reorganization and Merger, dated as of
April 7, 1997, between the Company, TFP Acquisition Corp., and
TFP Inc. (Incorporated by reference to Exhibit 10.1 of the
Company's Form 8-K as filed with the Securities and Exchange
Commission on April 17, 1997)

2.2 Agreement and Plan of Reorganization and Merger, dated as of
August 29, 1997, between the Company, SunRise Acq. Corp.,
SunRise Imaging and the principal shareholders of SunRise
Imaging (Incorporated by reference to Exhibit 2.1 of the
Company's Form 8-K as filed with the Securities and Exchange
Commission on September 24, 1997)

3.1 Certificate of Incorporation of the Company (Incorporated by
reference to Exhibit 3.1 of the Company's Registration
Statement on Form S-1 as filed with the Securities and
Exchange Commission on May 3, 1996, File No. 333-4610)

3.2 Amended and Restated Certificate of Incorporation of the
Company (Incorporated by reference to Exhibit 3.2 of Amendment
No. 2 the Company's Registration Statement on Form S-1 as
filed with the Securities and Exchange Commission on June 28,
1996, File No. 333-4610)

3.3 Bylaws of the Company, as currently in effect (Incorporated by
reference to Exhibit 3.3 of the Company's Annual Report on
Form 10-K as filed with the Securities and Exchange Commission
on June 30, 1997)

4.1 Form of Common Stock Certificate (Incorporated by reference to
Exhibit 4.1 of Amendment No. 2 to the Company's Registration
Statement on Form S-1 as filed with the Securities and
Exchange Commission on June 28, 1996, File No. 333-4610)

10.1 * Printrak International Inc. Executive Stock Option Plan (the
"Executive Plan"), as amended (Incorporated by reference to
Exhibit 10.1 of the Company's Registration Statement on Form
S-1 as filed with the Securities and Exchange Commission on
May 3, 1996, File No. 333-4610)

-29-
<PAGE>

10.2 * Form of Nonqualified Stock Option Agreement pertaining to the
Executive Plan (Incorporated by reference to Exhibit 10.2 of the
Company's Registration Statement on Form S-1 as filed with the
Securities and Exchange Commission on May 3, 1996, File No. 333-4610)

10.3 * Printrak International Inc. 1994 Stock Option Plan (the "1994
Plan")(Incorporated by reference to Exhibit 10.3 of the Company's
Registration Statement on Form S-1 as filed with the Securities and
Exchange Commission on May 3, 1996, File No. 333-4610)

10.4 * Form of Nonqualified Stock Option Agreement pertaining to the 1994
Plan (Incorporated by reference to Exhibit 10.4 of the Company's
Registration Statement on Form S-1 as filed with the Securities and
Exchange Commission on May 3, 1996, File No. 333-4610)

10.5 * First Amended and Restated Printrak International Inc. 1996 Stock
Incentive Plan (the "1996 Plan") (Incorporated by reference to Exhibit
4.1 of the Company's Registration Statement on Form S-8 as filed with
the Securities and Exchange Commission on February 27, 1998, File
No. 333-47009)

10.6 * Form of Stock Option Agreement pertaining to the 1996 Plan
(Incorporated by reference to Exhibit 10.6 of the Company's
Registration Statement on Form S-1 as filed with the Securities and
Exchange Commission on May 3, 1996, File No. 333-4610)

10.7 * Form of Restricted Stock Purchase Agreement pertaining to the 1996
Plan (Incorporated by reference to Exhibit 10.7 of the Company's
Registration Statement on Form S-1 as filed with the Securities and
Exchange Commission on May 3, 1996, File No. 333-4610)

10.8 * First Amended and Restated Printrak International Inc. Employee
Stock Purchase Plan - 1996 (Incorporated by reference to Exhibit 4.1
of the Company's Registration Statement on Form S-8 as filed with the
Securities and Exchange Commission on October 10, 1997, File No.
333-38275)

10.9 * Printrak International Inc. Voluntary Deferred Compensation Plan
(Incorporated by reference to Exhibit 10.9 of the Company's
Registration Statement on Form S-1 as filed with the Securities and
Exchange Commission on May 3, 1996, File No. 333-4610)

10.10 * Employment Agreement dated May 1, 1996 between the Company and
Richard M. Giles (Incorporated by reference to Exhibit 10.10 of the
Company's Registration Statement on Form S-1 as filed with the
Securities and Exchange Commission on May 3, 1996, File No. 333-4610)

10.11 Promissory Note dated March 1, 1996 by Richard M. Giles, in favor of
the Company (Incorporated by reference to Exhibit 10.11 of the
Company's Registration Statement on Form S-1 as filed with the
Securities and Exchange Commission on May 3, 1996, File No. 333-4610)

10.12 Stock Pledge Agreement dated March 1, 1996 between the Company and
Richard M. Giles (Incorporated by reference to Exhibit 10.12 of the
Company's Registration Statement on Form S-1 as filed with the
Securities and Exchange Commission on May 3, 1996, File No. 333-4610)

10.13 Promissory Note dated March 1, 1996 by John G. Hardy in favor of the
Company (Incorporated by reference to Exhibit 10.13 of the Company's
Registration Statement on Form S-1 as filed with the Securities and
Exchange Commission on May 3, 1996, File No. 333-4610)

10.14 Stock Pledge Agreement dated March 1, 1996 between the Company and
John G. Hardy (Incorporated by reference to Exhibit 10.14 of the
Company's Registration Statement on Form S-1 as filed with the
Securities and Exchange Commission on May 3, 1996, File No. 333-4610)

-30-

<PAGE>

10.15 * Form of Severance Agreement between the Company and its executive
officers (Incorporated by reference to Exhibit 10.15 of the Company's
Registration Statement on Form S-1 as filed with the Securities and
Exchange Commission on May 3, 1996, File No. 333-4610)

10.16 Form of Indemnification Agreement for Officers and Directors of the
Company (Incorporated by reference to Exhibit 10.16 of the Company's
Registration Statement on Form S-1 as filed with the Securities and
Exchange Commission on May 3, 1996, File No. 333-4610)

10.17 Purchase and Sale Agreement dated May 12, 1995 between the Company and
RICOL, LLC (Incorporated by reference to Exhibit 10.17 of the
Company's Registration Statement on Form S-1 as filed with the
Securities and Exchange Commission on May 3, 1996, File No. 333-4610)

10.18 Promissory Note of RICOL, LLC, dated May 12, 1995 in favor of the
Company (Incorporated by reference to Exhibit 10.18 of the Company's
Registration Statement on Form S-1 as filed with the Securities and
Exchange Commission on May 3, 1996, File No. 333-4610)

10.19 Deed of Trust dated May 12, 1995 by RICOL, LLC in favor of the
Company, as beneficiary (Incorporated by reference to Exhibit 10.19 of
the Company's Registration Statement on Form S-1 as filed with the
Securities and Exchange Commission on May 3, 1996, File No. 333-4610)

10.20 Commercial Lease dated May 13, 1995 between the Company and RICOL, LLC
(Incorporated by reference to Exhibit 10.20 of the Company's
Registration Statement on Form S-1 as filed with the Securities and
Exchange Commission on May 3, 1996, file No. 333-4610)

10.21 First Amendment to Lease dated April 1, 1998 between the Company and
Kilroy Realty, L.P.

10.22 Loan Agreement between the Company and Union Bank dated August 12,
1996 (Incorporated by reference to Exhibit 10.1 the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, as filed with the Securities and Exchange
Commission on November 13, 1996)

10.23 Promissory Note between the Company and Union Bank of California dated
January 30, 1997 (Incorporated by reference to Exhibit 10.1 the
Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1996, as filed with the Securities and Exchange
Commission on February 13, 1997)

10.24 * TFP Stock Option Plan (Incorporated by reference to Exhibit 4.1 of
the Company's Registration Statement on Form S-8 as filed with the
Securities and Exchange Commission on October 20, 1997, File No.
333-38277)

10.25 * Employment and Non-Competition Agreement between the Company and
Barry B. White, dated as of May 7, 1997 (Incorporated by reference to
Exhibit 99.1 of Barry B. White's Schedule 13-D as filed with the
Securities and Exchange Commission on May 16, 1997)

10.26 * Nonqualified Stock Option Agreement between the Company and Alfred
Castleman, dated as of December 5, 1997 (Incorporated by reference to
Exhibit 4.2 of the Company's Registration Statement as filed with the
Securities and Exchange Commission on February 27, 1998, File No.
333-47009)

21 Significant Subsidiaries of the Company

23.1 Consent of Independent Auditors, Deloitte & Touche LLP, dated July 13,
1998
-31-

<PAGE>

27 Financial Data Schedule

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

* These exhibits are identified as management contracts or compensatory
plans or arrangements of the Registrant pursuant to Item 14(a) of Form
10-K

(b) Reports on Form 8-K

The Registrant filed a Form 8-K on January 9, 1998 to announce its plans to
integrate the operations of SunRise Imaging, Inc. into the Registrant's
principal operations in Anaheim, California.

-32-

<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, in the City of Anaheim,
State of California, on July 13, 1998.

PRINTRAK INTERNATIONAL INC.

/s/ RICHARD M. GILES
--------------------------------------------
Richard M. Giles, Chairman of the Board,
Chief Executive Officer, acting Chief
Financial Officer and President

Pursuant to the requirements of the Securities Act of 1934 this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.

SIGNATURE TITLE DATE
- ------------------------------- ------------------------------------------------ -------------------------------
<S> <C> <C>

/s/ RICHARD M. GILES
- -------------------------------- Chairman of the Board, Chief Executive July 13, 1998
Richard M. Giles Officer, acting Chief Financial Officer
and President (Principal Executive Officer
and Principal Financial Officer)

/s/ JOHN G. HARDY
- -------------------------------- President of Products Division and Director July 13, 1998
John G. Hardy

/s/ DANIEL J. DRISCOLL
- -------------------------------- President of Digital Justice Division and Director July 13, 1998
Daniel J. Driscoll

/s/ CHARLES L. SMITH
- ------------------------------- Director July 13, 1998
Charles L. Smith

/s/ ALBERT WONG
- ------------------------------- Director July 13, 1998
Albert Wong
</TABLE>

-33-

<PAGE>
PRINTRAK INTERNATIONAL INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations . . . . . . . . . F-4
Consolidated Statements of Stockholders' Equity . . . . F-5
Consolidated Statements of Cash Flows. . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . F-8

</TABLE>
F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Stockholders and Board of Directors
Printrak International Inc.:

We have audited the accompanying consolidated balance sheets of Printrak
International Inc. and subsidiaries (the Company) as of March 31, 1997 and 1998
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended March 31, 1998. Our
audits also included the financial statement schedule listed in the index at
14(a)(2). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, such consolidated financial statements present fairly, in
all material respects, the financial position of Printrak International Inc. and
subsidiaries as of March 31, 1997 and 1998 and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
1998, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

DELOITTE & TOUCHE LLP

June 19, 1998 (except as to the last paragraph of Note 9 for which the date is
July 7, 1998)
Costa Mesa, California

F-2

<PAGE>

PRINTRAK INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1997 AND 1998

1997 1998
------------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . $ 3,832,000 $ 3,763,000
Short-term investments . . . . . . . . . . . . . . . . . . . 4,599,000 1,101,000
Accounts receivable, net, (Notes 4 and 5). . . . . . . . . . 23,539,000 28,129,000
Inventories, net (Note 6). . . . . . . . . . . . . . . . . . 5,174,000 8,229,000
Prepaid expenses and other current assets. . . . . . . . . . 518,000 2,413,000
Deferred income taxes (Note 10). . . . . . . . . . . . . . . 1,058,000 1,763,000
------------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . 38,720,000 45,398,000
NOTES RECEIVABLE FROM RELATED PARTIES (Note 14). . . . . . . 543,000 558,000
PROPERTY AND EQUIPMENT, net (Notes 7 and 9). . . . . . . . . 5,570,000 5,086,000
DEFERRED INCOME TAXES (Note 10). . . . . . . . . . . . . . . 2,867,000 2,243,000
OTHER LONG-TERM ASSETS . . . . . . . . . . . . . . . . . . . 1,858,000 2,475,000
GOODWILL AND OTHER INTANGIBLE ASSETS, net (Note 2) . . . . . 2,835,000
------------- -----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . $49,558,000 $58,595,000
------------- -----------
------------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . $ 4,431,000 $ 6,538,000
Accrued wages and employee benefits. . . . . . . . . . . . . 1,807,000 3,178,000
Other accrued liabilities (Note 8) . . . . . . . . . . . . . 2,843,000 7,194,000
Current portion of long-term debt (Notes 9 and 11) . . . . . 247,000 1,056,000
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . 3,919,000 8,640,000
Income taxes payable (Note 10) . . . . . . . . . . . . . . . 631,000 477,000
------------- -----------
Total current liabilities . . . . . . . . . . . . . . . 13,878,000 27,083,000
LONG-TERM DEBT, less current portion (Notes 9 and 11). . . . 1,524,000 10,960,000
OTHER LONG-TERM LIABILITIES. . . . . . . . . . . . . . . . . 159,000
------------- -----------
Total liabilities . . . . . . . . . . . . . . . . . . . 15,561,000 38,043,000
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' EQUITY (Note 12):
Preferred stock, $0.0001 par value; 5,000,000 shares
authorized; no shares outstanding. . . . . . . . . . . . .
Common stock, $0.0001 par value; 20,000,000 shares
authorized; 11,075,202 (1997) and 11,269,203 (1998)
shares issued and outstanding . . . . . . . . . . . . . . 1,000 1,000
Additional paid-in capital . . . . . . . . . . . . . . . . . 16,756,000 17,850,000
Retained earnings. . . . . . . . . . . . . . . . . . . . . . 17,542,000 3,052,000
Note receivable from stockholder (Note 14) . . . . . . . . . (300,000) (300,000)
Unrealized gain on short-term investments. . . . . . . . . . 46,000 11,000
Cumulative foreign exchange translation adjustments. . . . . ( 48,000) (62,000)
------------- -----------
Total stockholders' equity. . . . . . . . . . . . . . . 33,997,000 20,552,000
------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . $49,558,000 $58,595,000
------------- -----------
------------- -----------
</TABLE>

See accompanying notes to consolidated financial statements

F-3

<PAGE>

PRINTRAK INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1996, 1997 AND 1998

<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES (Note 5):
System . . . . . . . . . . . . . . . . . . . . . . . . . . . $41,400,000 $54,728,000 $58,742,000
Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . 10,667,000 10,855,000 13,134,000
------------ ------------ ------------
Total revenues . . . . . . . . . . . . . . . . . . . . . . 52,067,000 65,583,000 71,876,000
COST OF REVENUES:
System . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,088,000 28,111,000 36,535,000
Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . 5,694,000 6,032,000 9,317,000
------------ ------------ ------------
Total cost of revenues . . . . . . . . . . . . . . . . . . 29,782,000 34,143,000 45,852,000
------------ ------------ ------------
GROSS PROFIT . . . . . . . . . . . . . . . . . . . . . . . . 22,285,000 31,440,000 26,024,000
OPERATING EXPENSES:
Research, development and engineering. . . . . . . . . . . . 9,274,000 10,859,000 11,002,000
Selling, general and administrative. . . . . . . . . . . . . 12,283,000 13,861,000 21,841,000
In-process research and development. . . . . . . . . . . . . 5,900,000
Merger expenses (Note 3) . . . . . . . . . . . . . . . . . . 874,000
Restructuring charges (Note 16). . . . . . . . . . . . . . . 987,000
------------ ------------ ------------
Total operating expenses . . . . . . . . . . . . . . . . . 21,557,000 24,720,000 40,604,000
------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS. . . . . . . . . . . . . . . . 728,000 6,720,000 (14,580,000)
OTHER INCOME (EXPENSE):
Amortization of deferred credit (Note 2) . . . . . . . . . . 1,207,000
Foreign currency gain (loss) . . . . . . . . . . . . . . . . 67,000 (144,000) (136,000)
Interest expense . . . . . . . . . . . . . . . . . . . . . . (426,000) (450,000) (467,000)
Interest income. . . . . . . . . . . . . . . . . . . . . . . 364,000 629,000
Other income . . . . . . . . . . . . . . . . . . . . . . . . 283,000 159,000
------------ ------------ ------------
Total other income, net. . . . . . . . . . . . . . . . . . 848,000 53,000 185,000
------------ ------------ ------------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES. . . . . . . 1,576,000 6,773,000 (14,395,000)
PROVISION FOR INCOME TAXES (Note 10). . . . . . . . . . . . . 386,000 2,141,000 95,000
------------ ------------ ------------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . . . . . . $ 1,190,000 $ 4,632,000 (14,490,000)
------------ ------------ ------------
------------ ------------ ------------
NET INCOME (LOSS) PER COMMON SHARE:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.14 $ 0.44 $ (1.30)
------------ ------------ ------------
------------ ------------ ------------
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.13 $ 0.42 $ (1.30)
------------ ------------ ------------
------------ ------------ ------------

WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic. . . . . . . . . . . . . . . . . . . . . . . . . . . 8,620,000 10,425,000 11,151,000
------------ ------------ ------------
------------ ------------ ------------
Diluted. . . . . . . . . . . . . . . . . . . . . . . . . . 9,085,000 10,963,000 11,151,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-4

<PAGE>
PRINTRAK INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1996, 1997 AND 1998

<TABLE>
<CAPTION>
CUMULATIVE
COMMON STOCK NOTE UNREALIZED GAIN FOREIGN
----------------- ADDITIONAL RECEIVABLE ON EXCHANGE TOTAL
NUMBER PAR PAID-IN RETAINED FROM SHORT-TERM TRANSLATION STOCKHOLDERS'
OF SHARES VALUE CAPITAL EARNINGS STOCKHOLDER INVESTMENTS ADJUSTMENT EQUITY
---------- ------ --------- ----------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, April 1, 1995 8,213,514 $1,000 $83,031 $11,771,000 $ $ $76,000 $11,931,031
Exercise of common stock
options and receipt of
note receivable from
stockholder 123,200 308,000 (300,000) 8,000
Issuance of Common Stock 385,980 909,969 909,969

Unrealized gain on short
term investments 41,000 41,000
Foreign currency
translation adjustment (39,000) (39,000)
Net income 1,190,000 1,190,000
---------- ------ --------- ----------- ------------ ------------ ----------- -------------

BALANCE, March 31, 1996 8,722,694 1,000 1,301,000 12,961,000 (300,000) 41,000 37,000 14,041,000
Exercise of common stock
options 151,944 432,000 432,000
Issuance of common stock
under employee stock
purchase plan 79,564 541,000 541,000
Issuance of common stock
in initial public
offering 2,121,000 14,432,000 14,432,000
Unrealized gain on short
term investments 5,000 5,000
Foreign currency
translation adjustment (85,000) (85,000)
Accretion of TFP
Preferred Stock Prior to
Merger 50,000 (50,000)
Other (1,000) (1,000)
Net income 4,632,000 4,632,000
---------- ------ --------- ----------- ------------ ------------ ----------- -------------
BALANCE, March 31, 1997 11,075,202 1,000 16,756,000 17,542,000 (300,000) 46,000 (48,000) 33,997,000

Exercise of common stock
options 110,704 385,000 385,000
Issuance of common stock
under employee stock
purchase plan 83,297 601,000 601,000
Issuance of warrants in
exchange for services 108,000 108,000
Unrealized loss on short
term investments (35,000) (35,000)
Foreign currency
translation adjustment (14,000) (14,000)
Net loss (14,490,000) (14,490,000)
----------- ------ ---------- ------------ ------------ ------------ ----------- -------------
BALANCE, March 31, 1998 11,269,203 $1,000 $17,850,000 $3,052,000 $(300,000) $11,000 $(62,000) $20,552,000
----------- ------ ---------- ----------- ------------ ------------ ----------- -------------
----------- ------ ---------- ----------- ------------ ------------ ----------- -------------

</TABLE>

See accompanying notes to consolidated financial statements.

F-5

<PAGE>
PRINTRAK INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1996, 1997 AND 1998

<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . . . . . . . . . . . . . . $1,190,000 $4,632,000 $(14,490,000)
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization. . . . . . . . . . . . . 4,087,000 2,659,000 3,631,000
Loss on disposal of assets . . . . . . . . . . . . . . 845,000
In process research and development. . . . . . . . . . 5,900,000
Amortization of deferred credit. . . . . . . . . . . . (1,207,000)
Deferred taxes . . . . . . . . . . . . . . . . . . . . 136,000 1,008,000
Changes in operating assets and liabilities, net of the
effect of acquisitions:
Accounts receivable, net. . . . . . . . . . . . . . . . (4,874,000) (11,824,000) (1,028,000)
Inventories, net. . . . . . . . . . . . . . . . . . . . (2,463,000) 601,000 (1,859,000)
Prepaid expenses and other assets . . . . . . . . . . . 57,000 (1,725,000) (1,942,000)
Accounts payable. . . . . . . . . . . . . . . . . . . . 2,512,000 (852,000) 440,000
Accrued liabilities . . . . . . . . . . . . . . . . . . 978,000 1,061,000 5,071,000
Deferred revenue. . . . . . . . . . . . . . . . . . . . 1,693,000 (899,000) 1,440,000
Income taxes payable. . . . . . . . . . . . . . . . . . 58,000 397,000 (253,000)
Other . . . . . . . . . . . . . . . . . . . . . . . . . 40,000 (254,000) (1,309,000)
------------ ------------ ------------
Net cash provided by (used in) operating activities 2,207,000 (5,196,000) (3,554,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . . . . . (2,580,000) (1,459,000) (1,517,000)
Cash paid for acquisitions, net of cash acquired . . . . . . (9,609,000)
Proceeds from sale of land and building, net . . . . . . . . 3,330,000
Sale and maturities of short term investments. . . . . . . . 3,463,000
Purchases of short-term investments. . . . . . . . . . . . . (4,235,000)
Notes receivable from related parties. . . . . . . . . . . . (219,000) 888,000 (15,000)
------------ ------------ ------------
Net cash provided by (used in) financing activities. . 531,000 (4,806,000) (7,678,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt . . . . . . . . . . . . . . . . 3,607,000 6,116,000 46,176,000
Principal payments on long-term debt . . . . . . . . . . . . (4,681,000) (10,878,000) (35,979,000)
Net proceeds from issuance of redeemable preferred stock . . 690,000
Proceeds from common stock issuances . . . . . . . . . . . . 8,000 15,405,000 986,000
------------ ------------ ------------
Net cash (used in) provided by financing activities. . (376,000) 10,643,000 11,183,000
EFFECT OF EXCHANGE RATE CHANGES ON CASH BALANCES. . . . . . (50,000) (70,000) (20,000)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS. . . . 2,312,000 571,000 (69,000)
CASH AND CASH EQUIVALENTS, beginning of year. . . . . . . . 949,000 3,261,000 3,832,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of year. . . . . . . . . . . $3,261,000 $3,832,000 $3,763,000
------------ ------------ ------------
------------ ------------ ------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the year for:

Interest. . . . . . . . . . . . . . . . . . . . . . . . . $565,000 $450,000 $470,000
------------ ------------ ------------
------------ ------------ ------------
Income taxes. . . . . . . . . . . . . . . . . . . . . . . $96,000 $833,000 $828,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

NONCASH TRANSACTIONS:

For the years ended March 31, 1997 and 1998, the Company entered into capital
lease agreements for equipment amounting to $551,000 and $65,000, respectively.

During the year ended March 31, 1998, the Company issued 20,000 warrants in
exchange for services received from a vendor valued at $108,000.

F-6

<PAGE>

During the years ended March 31, 1997 and 1998, the Company capitalized
$3,391,000 and $1,104,000, respectively, of equipment and materials, previously
classified as inventory, into fixed assets.

During the year ended March 31, 1996, the Company received a note for $1,230,000
from a related party in conjunction with the sale of land and a building, and
received a note of $300,000 from an officer for the exercise of stock options
(Note 13).

Detail of businesses acquired in purchase transactions:

<TABLE>
<S> <C>
Purchased in-process research and development . . $ 5,900,000
Fair value of assets acquired . . . . . . . . . . 10,645,000
Liabilities assumed . . . . . . . . . . . . . . . (6,936,000)
-----------
Cash paid for acquisitions, net of cash acquired $ 9,609,000
-----------
-----------

</TABLE>

See accompanying notes to consolidated financial statements.

F-7

<PAGE>

PRINTRAK INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1996, 1997 AND 1998

1. DESCRIPTION OF THE BUSINESS

Printrak International Inc. ("the Company") is a worldwide supplier of
integrated identification and information systems used primarily in criminal
justice and public safety applications, as well as in emerging applications
in civil markets such as welfare and immigration control. The Company
provides networked fingerprint, photo imaging, computer-aided dispatch and
automated records management systems, as well as digital scanning devices.
The Company's integrated systems serve approximately 700 national, state,
county and municipal agencies in 36 countries.

The Company primarily markets its products to national, regional and
local law enforcement agencies around the world. The Company's prospective
customers are subject to public agency contract requirements which vary from
jurisdiction to jurisdiction. Public agency contracts typically contain
provisions that permit cancellation in the event that funds are unavailable
to the public agency.

In March 1996, the Company was reincorporated in the State of Delaware
and established a par value of $0.0001 on its common and preferred stock.
Concurrent with this reincorporation, the Company enacted a 1-for-2.5 reverse
stock split. The accompanying consolidated financial statements and notes
thereto have been restated to reflect the reincorporation and stock split for
all periods presented.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION--The consolidated financial statements
include the accounts of Printrak International Inc. and its wholly-owned
subsidiaries, SunRise Imaging, TFP Inc. and TFP GmbH, Printrak Australia Pty.
and Printrak Limited. All significant intercompany balances and transactions
have been eliminated.

REVENUE RECOGNITION--Revenue is recognized for system sales with
insignificant customer obligations when the system is shipped. The Company
records an accrual for any remaining obligations which typically consist of
installation and warranty costs. The Company's policy is to defer
recognition of revenue if significant uncertainties exist with regard to
customer acceptance until such uncertainties become insignificant. Certain
of the Company's system sales are considered long-term contracts due to a
significant amount of custom modification to the basic system or to extended
delivery terms. Under these types of contracts, the Company recognizes
revenue under the percentage of completion method principally based on units
of delivery. The Company's Boulder Division recognizes revenue on a
percentage of completion basis, consistent with the achievement of contractual
milestones. These contracts dictate percentage of completion accounting due
to a higher content of customized software services. For all of the Company's
divisions, if a loss on a contract becomes known, the entire amount of the
estimated loss on the contract is accrued. Revenue for file conversions is
recognized as such services are performed. Revenue for maintenance service
contracts is recognized on a monthly basis ratably over the period of the
contract. Cash payments for systems sales or maintenance received in advance
of revenue recognition are accounted for as deferred revenue.

The American Institute of Certified Public Accountants recently issued
Statement of Position No. 97-2, SOFTWARE REVENUE RECOGNITION ("SOP 97-2")
which supersedes SOP 91-1. SOP 97-2 is effective for transactions entered
into in fiscal years beginning after December 15, 1997. Accordingly, the
Company will recognize revenue in accordance with SOP 97-2 beginning April 1,
1998. The impact of SOP 97-2 will be dependent on the nature and timing of
specific contracts entered into by the Company, but will likely result in
delays in the recognition of revenue on some contracts.

FOREIGN CURRENCY--The financial position and results of operations of the
Company's foreign subsidiaries are measured using the local currency as the
functional currency. Assets and liabilities of these subsidiaries are
translated at the exchange rate in effect at each year-end. Income statement
accounts are translated at the average rate of exchange prevailing during the
year. Translation adjustments arising from differences in exchange rates
from period to
F-8
<PAGE>

period are included in the cumulative foreign currency translation
adjustments account in stockholders' equity. Realized gains or losses from
foreign currency transactions are included in operations as incurred.

CASH EQUIVALENTS--Cash equivalents are deemed to be highly-liquid
investments with an original maturity of three months or less.

SHORT-TERM INVESTMENTS--The Company accounts for its investments in
accordance with Statement of Financial Accounting Standards (SFAS) No. 115,
ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. Marketable
equity and debt securities available for current operations are classified in
the balance sheet as current assets. Unrealized holding gains and losses, if
any, are included as a component of stockholders' equity until realized. At
March 31, 1997 and 1998, short-term investments consist of common stock based
mutual funds which have been categorized as available for sale and, as a
result, are stated at fair value.

INVENTORIES--Inventories are stated at the lower of cost or market, with
cost being determined on a first-in, first-out (FIFO) basis.

PROPERTY AND EQUIPMENT--Property and equipment are recorded at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, which range from three to five years. Leasehold
improvements are amortized over the shorter of the lease term or the useful
lives of the related assets. Maintenance, repairs and minor renewals are
charged to expense, as incurred. Additions and improvements are capitalized.

LONG LIVED ASSETS--The Company accounts for the impairment and
disposition of long-lived assets in accordance with Statement of Financial
Accounting Standards No. 121 (SFAS 121), ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. In accordance
with SFAS 121, long-lived assets to be held are reviewed for events or
changes in circumstances which indicate that their carrying value may not be
recoverable. The Company periodically reviews the carrying value of
long-lived assets to determine whether or not an impairment to such value has
occurred and has determined that there was no impairment at March 31, 1998.

GOODWILL AND OTHER INTANGIBLES-- Goodwill represents the excess purchase
cost over the net assets acquired and is amortized over 10 years using the
straight-line method. Other intangible assets include acquired workforce
value and acquired technology which are being amortized using the
straight-line methods over 36 and 42 months, respectively. Accumulated
amortization on goodwill and other intangible assets amounted to $542,000 as
of March 31, 1998. The Company periodically evaluates the recoverability of
goodwill based on a profitability analysis related to its product sales and
evaluates the recoverability of other intangible assets based on the
requirements of SFAS 121.

DEFERRED CREDIT--The deferred credit (negative goodwill) relates to the
excess of the fair market value of current assets acquired and liabilities
assumed over the purchase price of the Company in 1991 and was amortized on a
straight-line basis over five years. This credit was fully amortized in
March 1996.

INCOME TAXES-- The Company accounts for income taxes under SFAS No.
109, ACCOUNTING FOR INCOME TAXES which provides that deferred income taxes
are recognized for the tax consequences in future years for differences
between the tax basis of assets and liabilities (temporary differences) and
their financial reporting amounts at each year-end based on enacted tax laws
and statutory rates applicable to the periods in which the temporary
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized.

SOFTWARE DEVELOPMENT COSTS--Development costs incurred in the research,
development and engineering of new software products and enhancements to
existing software products are expensed as incurred until technological
feasibility has been established. For the years ended March 31, 1996, 1997
and 1998 software development was substantially completed concurrent with the
establishment of technological feasibility due to the nature of the

F-9

<PAGE>

development effort and, accordingly, no costs were capitalized. The Company
considers technological feasibility to be established when all planning,
designing, coding and testing has been completed according to design
specifications. After technological feasibility is established, any
additional costs are capitalized in accordance with SFAS No. 86, ACCOUNTING
FOR COSTS OF COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE MARKETED.

Prior to fiscal 1996, the Company capitalized software development costs
related to the development of its AFIS 2000 system. Such costs were being
amortized over a three-year period. In fiscal 1996, the Company changed the
estimated remaining life of such costs due to the increased exposure to
continued modifications of the software to meet changing demands of its
customers as well as more rapid technological changes. This change resulted
in the remaining balance being fully amortized as of March 31, 1996 and
additional costs of $832,000 being expensed during fiscal 1996.

RESEARCH, DEVELOPMENT AND ENGINEERING--Research, development and
engineering costs are expensed as incurred. Research, development and
engineering includes costs for the development of new products and prototype
units. The Company also incurs engineering costs associated with
modifications to its system, testing of such systems and the integration of
equipment to comply with customer requirements. Management believes that
system modifications can generally be utilized by other customers and
accordingly, has combined such costs with research, development and
engineering. Any customized modification for a customer contract is charged
to cost of sales as management believes these costs are specific to a
customer's workflow requirements.

ACCOUNTING FOR STOCK-BASED COMPENSATION--The Company accounts for
stock-based awards to employees using the intrinsic value method in
accordance with Accounting Principles Board (APB) Opinion No. 25, ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES (Note 12).

USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

NET INCOME (LOSS) PER SHARE--In February 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 128, EARNINGS PER SHARE ("SFAS No.
128"). This statement is effective for periods ending after December 15,
1997 and requires restatement of all prior periods. The Statement redefines
earnings per share ("EPS") under generally accepted accounting principles,
making EPS comparable to international standards. SFAS No. 128 requires dual
presentation of "Basic" and "Diluted" EPS, by entities with complex capital
structures, replacing "Primary" and "Fully diluted" EPS under APB Opinion
No. 15.

Basic EPS excludes dilution from common stock equivalents and is
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution from common stock equivalents, similar to
fully diluted EPS, but uses only the average stock price during the period as
part of the computation.

The Company has adopted the provisions of SFAS No. 128 in the
accompanying consolidated financial statements and has restated prior periods
to reflect the adoption of SFAS No. 128. Common stock equivalents are
excluded from the calculation of diluted EPS in loss years, as the impact is
antidilutive.

F-10

<PAGE>
The number of shares used in computing EPS is as follows for the year
ended March 31:

<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ----------
<S> <C> <C> <C>
Weighted average shares outstanding - basic 8,620,000 10,425,000 11,151,000
Common stock equivalents 465,000 538,000
--------- --------- ----------
Weighted average shares outstanding - diluted 9,085,000 10,963,000 11,151,000
--------- --------- ----------
--------- --------- ----------
</TABLE>

RECENT ACCOUNTING PRONOUNCEMENTS--Additionally, during 1997, the
Financial Accounting Standards Board issued SFAS No. 130, REPORTING
COMPREHENSIVE INCOME and SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. These pronouncements are effective for
fiscal years beginning after December 15, 1997. The Company is reviewing the
impact of these pronouncements on its financial statements.

RECLASSIFICATIONS--Certain amounts in the accompanying consolidated
financial statements have been reclassified to conform with the March 31,
1998 presentation.

3. ACQUISITIONS

On May 7, 1997, the Company acquired all of the issued and outstanding
capital stock of TFP, Inc. (TFP), a South Carolina corporation, in accordance
with the terms and conditions of the Agreement and Plan of Reorganization and
Merger dated as of April 7, 1997, by and among Printrak, TFP Acquisition
Corp., a South Carolina corporation and wholly-owned subsidiary of Printrak,
and TFP. Pursuant to the Merger Agreement, TFP became a wholly-owned
subsidiary of Printrak and the outstanding shares and outstanding warrants to
purchase shares of TFP common stock and Series A preferred stock were
converted into an aggregate of 1,399,494 shares of Printrak common stock.
Additionally, all the outstanding options to purchase shares of TFP common
stock were converted into options to purchase 116,496 shares of Printrak
common stock. The terms of the Merger Agreement were the result of arm's
length negotiations among the parties. The transaction was accounted for
under the pooling of interests method of accounting.

The following table shows the separate historical results of the Company
and TFP for the years ended March 31, 1996 and 1997.

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------
1996 1997
---------- ----------
(in thousands)
<S> <C> <C>
Revenues
Printrak . . . . . . . . . . . $45,717 $58,865
TFP. . . . . . . . . . . . . . 6,350 6,718
---------- ----------
Total $52,067 $65,583
---------- ----------
---------- ----------

Net income (loss)
Printrak . . . . . . . . . . . $ 1,836 $ 4,428
TFP. . . . . . . . . . . . . . (646) 204
---------- ----------
Total $ 1,190 $ 4,632
---------- ----------
---------- ----------
</TABLE>

Merger expenses incurred to consummate the TFP transaction totaled
$874,000, consisting of investment banking fees, accounting fees, legal fees,
financial printing fees, stock transfer fees and certain other transaction
costs, all of which are included in the accompanying consolidated statement
of operations for the year ended March 31, 1998.

F-11
<PAGE>

On July 21, 1997, the Company acquired a business unit of SCC
Communications Corp. ("SCC") located in Boulder, Colorado, in a transaction
accounted for under the purchase method of accounting. As a result of the
acquisition, the business unit operates as a division of the Company (the
Boulder Division) and its operating results have been included in the
Company's consolidated statement of operations from the date of acquisition.
The Boulder Division provides computer-aided dispatch systems and records
management systems for law enforcement, fire and emergency medical services
agencies. The total purchase price for the transaction was $697,000, which
was allocated to $4,253,000 of acquired identified assets, $1,966,000 of
goodwill, and ($5,522,000) of assumed liabilities. The pro forma impact of
the SCC acquisition in fiscal 1997 and 1998 was not significant.

On September 9, 1997, the Company acquired the outstanding shares of
SunRise Imaging ("SunRise"), a California corporation, in a transaction
accounted for under the purchase method of accounting. As a result of the
acquisition, SunRise became a wholly owned subsidiary of the Company and its
operating results have been included in the Company's consolidated statement
of operations from the date of acquisition. SunRise develops and
manufactures automated systems which digitize microfilm and microfiche
records. The total purchase price for the transaction was $10,175,000, which
was allocated to $5,002,000 of acquired identified assets, $5,900,000 of
acquired in-process research and development, $687,000 of goodwill, and
($1,414,000) of assumed liabilities. As of the acquisition date, the
technological feasibility of the acquired in-process research and development
had not been established and, accordingly, the allocated value was charged to
operations during the year ended March 31, 1998. The consolidated results of
operations on a pro forma basis as though the SunRise acquisition had been
consummated on April 1, 1996 and 1997 are as follows:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------
1997 1998
--------------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Total revenues ........................ $ 63,123 $ 77,871
Net income (loss) ..................... $ 5,530 $ (3,755)
Net income (loss) per common share
Basic .............................. $ .53 $ (.34)
Diluted ............................ $ .50 $ (.34)
</TABLE>

The pro forma information is not necessarily indicative of the results
of operations that would have occurred nor of future results of the combined
enterprise.

4. ACCOUNTS RECEIVABLE

Accounts receivable consist of the following at March 31:

<TABLE>
<CAPTION>
1997 1998
------------ ------------
<S> <C> <C>
Billed receivables ..................... $ 15,495,000 $ 18,641,000
Unbilled receivables ................... 8,337,000 10,840,000
------------ ------------
23,832,000 29,481,000
Less allowance for doubtful accounts ... (293,000) (1,352,000)
------------ ------------
$ 23,539,000 $ 28,129,000
------------ ------------
------------ ------------
</TABLE>

Unbilled receivables consist of system and maintenance revenues which
have been earned but not invoiced because of contractual terms of the
underlying agreements.

F-12
<PAGE>
5. CONCENTRATIONS OF REVENUE AND CREDIT RISK

MAJOR CUSTOMERS The Company's revenues are generated from credit sales
to customers primarily in the public safety market. The Company performs
ongoing credit evaluations of its customers and maintains reserves for
potential credit losses and generally does not require collateral. The
Company's ten largest customers represented 32% of total revenues in fiscal
1998. Because of this, the Company has a large proportion of its receivables
outstanding with these customers. Accounts receivable from the Company's ten
largest customers were $11,504,000 as of March 31, 1998.

Major customers have varied from year to year but a significant portion
of the Company's revenue has historically consisted of large orders from a
limited number of customers. Sales to individual customers amounting to more
than 10% of total revenues were $8,300,000 in fiscal 1996, and $9,040,000 and
$6,863,000 in fiscal 1997. No customers exceeded more than 10% of total
revenues in fiscal year 1998. Given the significant amount of revenues
derived from such customers in any given year, the uncollectibility of
related receivables or a decrease in the number of large orders received
could have a material adverse effect on the Company's financial condition and
results of operations.

INTERNATIONAL SALES--A substantial portion of the Company's total
revenues are derived from international sales. International sales as a
percent of the Company's total revenues are summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------
GEOGRAPHIC AREA 1996 1997 1998
- ----------------------- ------ ------ ------
<S> <C> <C> <C>
Europe. . . . . . . . . 24.2% 10.8% 11.9%
Canada. . . . . . . . . 7.6 18.8 1.5
Latin America . . . . . 5.2
Other International . . 1.5 1.3 5.8
------- ------- -------
33.3% 30.9% 24.4%
------- ------- -------
------- ------- -------
</TABLE>

International sales are subject to inherent risks, including unexpected
changes in regulatory requirements, tariffs and other barriers, fluctuating
exchange rates, difficulties in staffing and managing foreign sales and
support operations, greater working capital requirements, political and
economic instability, and potentially limited intellectual property
protection.

6. INVENTORIES

Inventories consist of the following at March 31:

<TABLE>
<CAPTION>
1997 1998
---------- -----------
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . . . . . . . . $3,827,000 $ 4,979,000
Work in process . . . . . . . . . . . . . . . . . . . . . . 1,758,000 4,657,000
Finished goods. . . . . . . . . . . . . . . . . . . . . . . 36,000
---------- -----------
5,621,000 9,636,000
Less allowance for excess and obsolete inventories . . . . (447,000) (1,407,000)
---------- -----------
$5,174,000 $ 8,229,000
---------- -----------
---------- -----------
</TABLE>

F-13
<PAGE>

7. PROPERTY AND EQUIPMENT

Property and equipment consist of the following at March 31:

<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Building and improvements . . . . . . . . . . . $ 97,000 $ 365,000
Computer equipment. . . . . . . . . . . . . . . 7,944,000 8,616,000
Purchased software. . . . . . . . . . . . . . . 735,000 697,000
Other equipment and furniture . . . . . . . . . 551,000 1,436,000
----------- -----------
9,327,000 11,114,000
Less accumulated depreciation and amortization . . (3,757,000) (6,028,000)
----------- -----------
$ 5,570,000 $ 5,086,000
----------- -----------
----------- -----------
</TABLE>

Assets under capital lease were $1,019,000 and $968,000 as of March 31,
1997 and 1998, respectively. Accumulated amortization on such leased
equipment amounted to $497,000 and $466,000, respectively (Note 11).

8. OTHER ACCRUED LIABILITIES

Other accrued liabilities consist of the following at March 31:

<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Warranty and estimated costs to complete
system installations. . . . . . . . . . . . . $1,238,000 $4,776,000
Sales and foreign taxes . . . . . . . . . . . . 532,000 804,000
Professional fees . . . . . . . . . . . . . . . 208,000 145,000
Insurance . . . . . . . . . . . . . . . . . . . 266,000 38,000
Restructuring . . . . . . . . . . . . . . . . . 618,000
Other . . . . . . . . . . . . . . . . . . . . . 599,000 813,000
---------- ----------
$2,843,000 $7,194,000
---------- ----------
---------- ----------
</TABLE>

F-14
<PAGE>

9. LONG-TERM DEBT

Long-term debt consists of the following at March 31:

<TABLE>
<CAPTION>
1997 1998
------------- -------------
<S> <C> <C>
Revolving line of credit with bank,
collateralized by substantially all assets
of the Company, interest payable monthly
at the bank's reference rate or the bank's
LIBOR rate, plus 1.75%. The revolving line
has two borrowing lines.
$15 million Working Capital Line . . . . . $ 1,000,000 $ 7,488,000
$5 million Acquisition Line . . . . . . . 4,000,000

Obligations under capital leases (Note 11) . . . 771,000 528,000
----------- ------------
1,771,000 12,016,000
Less current portion of long-term debt . . . . . (247,000) (1,056,000)
----------- ------------
$ 1,524,000 $ 10,960,000
----------- ------------
----------- ------------
</TABLE>

The bank's reference rate and LIBOR rate at March 31, 1998 were 8.5% and
5.8%, respectively.

Annual debt principal repayments are as follows:

<TABLE>
<CAPTION>
Year ending March 31:
<S> <C>
1999 . . . . . . . . . . . . . . . . . . . $ 1,056,000
2000 . . . . . . . . . . . . . . . . . . . 10,779,000
2001 . . . . . . . . . . . . . . . . . . . 96,000
2002 . . . . . . . . . . . . . . . . . . . 80,000
2003 . . . . . . . . . . . . . . . . . . . 5,000
-----------
$12,016,000
-----------
-----------
</TABLE>

The revolving line of credit and term loan agreements with a bank
contain certain restrictive covenants which restrict the Company's ability to
pay dividends and require the Company to maintain minimum tangible net worth
and certain financial ratios such as current ratio, cash flow to debt service
ratio and total liabilities to tangible net worth ratio. The Company was in
compliance with or had subsequently obtained waivers for all covenants as of
March 31, 1998. On July 7, 1998, the Company received a written commitment
letter from its bank to refinance its debt into a $15.0 million revolving
credit facility, expiring in July 1999 and a $4.0 million term loan payable in
quarterly installments beginning November 1, 1998 and maturing February 1,
2001. As a result, the portion of the related debt has been classified as
long term in the accompanying consolidated balance sheet as of March 31,
1998, reflecting the terms of commitment.

F-15
<PAGE>

10. INCOME TAXES

The Company's provision for income taxes consists of the following for
the year ended March 31:

<TABLE>
<CAPTION>
1996 1997 1998
-------- ---------- ---------
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . $ 90,000 $ 499,000 $(236,000)
State . . . . . . . . . . . . . . . . . . 42,000 551,000 51,000
Foreign . . . . . . . . . . . . . . . . . 100,000 280,000 280,000
-------- --------- ---------
Total current . . . . . . . . . . . . . 232,000 1,330,000 95,000
-------- --------- ---------

Deferred:
Federal . . . . . . . . . . . . . . . . . 145,000 528,000 -0-
State . . . . . . . . . . . . . . . . . . 9,000 283,000 -0-
-------- --------- ---------
Total deferred . . . . . . . . . . . . 154,000 811,000 -0-
-------- --------- ---------
Total provision . . . . . . . . . . . . . . . . $386,000 $2,141,000 $ 95,000
-------- --------- ---------
-------- --------- ---------
</TABLE>

The reconciliation between the Company's effective tax rate and the
statutory federal income tax rate follows:

<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Statutory federal income tax rate . . . . . . . 35.0% 35.0% (35.0%)
State taxes net of federal benefit. . . . . . . 1.3 8.1 (1.7)
Amortization of deferred credit . . . . . . . . (26.0)
Foreign operations. . . . . . . . . . . . . . . 3.1 1.2 (0.1)
Increase (decrease) in valuation allowance. . . 12.1 (15.8) 22.2
In-process research and development . . . . . . 14.3
Goodwill and other intangibles. . . . . . . . . 1.3
Other . . . . . . . . . . . . . . . . . . . . . (1.0) 3.1 (0.3)
--------- --------- ---------
24.5% 31.6% 0.7%
--------- --------- ---------
--------- --------- ---------
</TABLE>

The Company has not provided for U.S. federal income and foreign
withholding taxes on the earnings of its foreign subsidiary because it is
currently anticipated that these earnings will be permanently reinvested. If
these earnings are distributed, foreign tax credits will become available
under U.S. law to reduce the effect on the Company's overall tax liability.

Income (loss) before provision for income taxes was comprised of the
following for the year ended March 31:

<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ------------
<S> <C> <C> <C>
Income (loss) before provision for income taxes:
Domestic . . . . . . . . . . . . . . . . . $1,279,000 $5,968,000 $(15,041,000)
Foreign. . . . . . . . . . . . . . . . . . 297,000 805,000 646,000
---------- ---------- ------------
$1,576,000 $6,773,000 $(14,395,000)
---------- ---------- ------------
---------- ---------- ------------
</TABLE>

F-16
<PAGE>

Deferred tax assets consist primarily of the following temporary
differences at March 31:

<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Net operating loss carryforwards. . . . . . . . $ 3,169,000 $ 3,901,000
Intangible asset basis. . . . . . . . . . . . . 1,854,000 1,252,000
Deferred revenue. . . . . . . . . . . . . . . . 776,000 876,000
Reserves. . . . . . . . . . . . . . . . . . . . 663,000 3,613,000
Employee benefits . . . . . . . . . . . . . . . 378,000 245,000
Depreciation. . . . . . . . . . . . . . . . . . 300,000 537,000
Other . . . . . . . . . . . . . . . . . . . . . (252,000) (263,000)
----------- -----------
Gross deferred assets . . . . . . . . . . . . . 6,888,000 10,161,000
Valuation allowance . . . . . . . . . . . . . . (2,963,000) (6,155,000)
----------- -----------
Net deferred tax assets . . . . . . . . . . . . $ 3,925,000 $ 4,006,000
----------- -----------
----------- -----------
</TABLE>

At March 31, 1998, the Company has net operating loss carryforwards of
approximately $11,108,000 and $2,076,000, respectively, for federal and
California income tax purposes, which begin to expire in 2003. As a result
of an equity ownership change in a prior year, the use of certain of the
federal and California net operating loss carryforwards is subject to
limitations.

11. COMMITMENTS AND CONTINGENCIES

COMMITMENTS--The Company is obligated under noncancelable capital and
operating leases for its principal operating facility and certain furniture
and office equipment. The Company incurred $191,000, $849,000 and $958,000
in rent expense during the years ended March 31, 1996, 1997 and 1998,
respectively. During each of the years ended March 31, 1997 and 1998,
$773,000 of rent expense was to a related party (Note 14).

Future minimum lease commitments at March 31, 1998 under noncancelable
leases that have initial or remaining terms in excess of one year are as
follows:

CAPITAL OPERATING
LEASES LEASES
----------- -----------
<S> <C> <C>
Year ending March 31:
1999 . . . . . . . . . . . . . . . . . . . . . . . $ 270,000 $ 1,220,000
2000 . . . . . . . . . . . . . . . . . . . . . . . 147,000 1,216,000
2001 . . . . . . . . . . . . . . . . . . . . . . . 110,000 509,000
2002 . . . . . . . . . . . . . . . . . . . . . . . 86,000 393,000
2003 . . . . . . . . . . . . . . . . . . . . . . . 5,000 204,000
---------- -----------
Total minimum payments required . . . . . . . . . . . . 618,000 $ 3,542,000
Less amount representing interest . . . . . . . . . . . (90,000) -----------
---------- -----------
Capital lease obligations . . . . . . . . . . . . . . . 528,000
Less current portion of capital lease obligations . . . (223,000)
----------
$ 305,000
----------
----------
</TABLE>

Certain of the Company's customers require the Company to be bonded to
ensure performance under certain contracts or to guarantee outstanding bids.
At March 31, 1998, the Company had outstanding performance bonds ensuring
performance under various contracts which totaled $12,748,000.

F-17
<PAGE>

LITIGATION--From time to time, the Company may be involved in litigation
relating to claims arising out of its operations in the normal course of
business. As of March 31, 1998, the Company is not a party to any legal
proceedings, the adverse outcome of which, in management's opinion,
individually or in aggregate, would have a material adverse effect on the
Company's results of operations or financial position.

12. STOCK BENEFIT PLANS

EXECUTIVE STOCK OPTION PLAN--The Company adopted the Executive Stock
Option Plan (the Executive Plan) in May 1992 which provides for the granting
of incentive stock options and nonstatutory options to purchase shares of the
Company's common stock and restricted stock grants covering an aggregate of
800,000 shares of the Company's common stock. As of March 31, 1998, there
were options outstanding to purchase 648,600 shares under the Executive Plan
at a weighted average exercise price of $6.93 per share.

1994 STOCK OPTION PLAN--The Company adopted the 1994 Stock Option Plan
(the 1994 Plan) in December 1993. The 1994 Plan provides for the granting of
incentive stock options and nonstatutory options to purchase shares of the
Company's common stock and restricted stock grants covering an aggregate of
744,000 shares of the Company's common stock. As of March 31, 1998, there
were options outstanding to purchase 552,506 shares under the 1994 Plan at a
weighted average exercise price of $6.27 per share.

1996 STOCK INCENTIVE PLAN--The Company adopted the 1996 Stock Incentive
Plan (the 1996 Plan) in April 1996. The 1996 Plan provides for the granting
of incentive stock options and nonstatutory options. The 1996 Plan provides
for options to purchase shares of the Company's common stock and restricted
stock grants covering an aggregate of 1,500,000 shares of the Company's common
stock. As of March 31, 1998, there were options outstanding to purchase
589,840 shares under the 1996 Plan at a weighted average exercise price of
$10.47 per share.

TFP STOCK INCENTIVE PLAN TFP--adopted a stock option plan in August
1994. In conjunction with the acquisition of TFP, the outstanding options
were converted into the right to acquire 116,496 shares of common stock of
Printrak. As of March 31, 1998, there were options outstanding to purchase
74,826 shares under the Plan at a weighted average exercise price of $2.66
per share.

The exercise price of incentive stock options under the above Plans must
at least be equal to the fair market value of a share of common stock on the
date the option is granted (110% with respect to optionees who own at least
10% of the outstanding common stock). Nonstatutory options shall have an
exercise price of not less than 85% of the fair market value of a share of
common stock on the date such option is granted (110% with respect to
optionees who own at least 10% of the outstanding common stock). The options
must expire no later than ten years from the date of grant (five years with
respect to optionees who own at least 10% of the outstanding common stock).
Vesting is generally 20% at the end of the first year with the remaining
vesting over four years on a pro rata basis. As of March 31, 1998, options
to purchase 1,011,000 shares were available for future grant under these
Plans.

F-18
<PAGE>

The following is a summary of stock option activity:

<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE
SHARES EXERCISE PRICE
----------- --------------
<S> <C> <C>
BALANCE, April 1, 1995. . . . . . . . . . . . . 806,200 $2.50
Granted (weighted average fair value of $3.16) . . . . 689,500 8.94
Exercised. . . . . . . . . . . . . . . . . . . . . . . (123,200) 2.50
Canceled . . . . . . . . . . . . . . . . . . . . . . . (23,200) 5.12
----------
BALANCE, March 31, 1996 . . . . . . . . . . . . . . . . 1,349,300 5.74
Granted (weighted average fair value of $5.62) . . . . 260,600 8.45
Exercised. . . . . . . . . . . . . . . . . . . . . . . (151,944) 2.84
Canceled . . . . . . . . . . . . . . . . . . . . . . . (166,456) 10.21
----------
BALANCE, March 31, 1997 . . . . . . . . . . . . . . . . 1,291,500 6.06
Granted (weighted average fair value of $9.57) . . . . 874,800 10.52
Exercised. . . . . . . . . . . . . . . . . . . . . . . (110,704) 3.47
Canceled . . . . . . . . . . . . . . . . . . . . . . . (189,824) 11.35
----------
BALANCE, March 31, 1998 . . . . . . . . . . . . . . . . 1,865,772 7.72
----------
----------
</TABLE>

Stock options outstanding at March 31, 1998 are summarized as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------- ---------------------------------
NUMBER WEIGHTED WEIGHTED
OUTSTANDING AT AVERAGE AVERAGE NUMBER WEIGHTED
RANGE OF EXERCISE MARCH 31, REMAINING EXERCISE EXERCISABLE AT AVERAGE
PRICES 1998 CONTRACTUAL LIFE PRICE MARCH 31, 1998 EXERCISE PRICE
- ------------------ -------------- ---------------- -------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$2.46-$2.46 44,436 9.10 $ 2.46 44,436 $ 2.46
$2.50-$2.50 467,268 5.04 2.50 423,708 2.50
$2.96-$9.00 390,415 7.73 8.68 190,160 6.09
$9.31-$9.88 406,540 9.39 9.85 43,450 9.85
$10.00-$18.75 557,113 8.90 11.86 126,496 12.49
--------- -------
$2.46-$18.75 1,865,772 7.78 $ 7.72 828,250 $ 5.23
--------- -------
--------- -------
</TABLE>

EMPLOYEE STOCK PURCHASE PLAN--The Company adopted the Employee Stock
Purchase Plan (the Purchase Plan) in April 1996, covering an aggregate of
100,000 shares of common stock. The number of shares available for purchase
was increased to 350,000 during the current year. Employees are eligible to
participate if they are employed by the Company for at least 30 hours per
week and if they have been employed by the Company for at least one year.
The Purchase Plan permits eligible employees to purchase common stock through
payroll deductions, which may not exceed 15% of an employee's compensation or
a specified number of shares. The price of stock purchased under the
Purchase Plan is equal to 85% of the lower of the fair market value of the
common stock at the beginning or end of each six month offer period. The
Purchase Plan will terminate on December 31, 2006.

F-19
<PAGE>

Activity under the Purchase Plan is summarized as follows:

<TABLE>
<CAPTION>
FISCAL SHARES WEIGHTED AVERAGE WEIGHTED AVERAGE
YEAR ISSUED PRICE PER SHARE FAIR VALUE PER SHARE
------ ------ ---------------- --------------------
<S> <C> <C> <C>
1997 79,564 $ 6.80 $ 8.50
1998 83,297 $ 7.21 $ 11.62
</TABLE>

At March 31, 1998, 187,139 shares were reserved for future issuances
under the Purchase Plan.

ADDITIONAL STOCK PLAN INFORMATION (SFAS NO. 123)

As discussed in Note 1, the Company continues to account for its
stock-based awards using the intrinsic value method in accordance with APB
Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and its related
interpretations. No compensation expense has been recognized in the financial
statements for employee stock arrangements, as all grants have been at
exercise prices equal to or greater than the market value of the underlying
shares at the date of grant.

SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, requires the
disclosure of pro forma net income and earnings per share had the Company
adopted the fair value method as of the beginning of fiscal 1996. Under SFAS
No. 123, the fair value of stock-based awards to employees is calculated
through the use of option pricing models, even though such models were
developed to estimate the fair value of freely tradable, fully transferable
options without vesting restrictions, which significantly differ from the
Company's stock option awards. These models also require subjective
assumptions, including future stock price volatility and expected time to
exercise, which greatly affect the calculated values.

The Company's calculations were made using the Black-Scholes option
pricing model with the following weighted average assumptions: expected life,
approximately two years following vesting; stock volatility, 55% in 1996, 78%
in 1997 and 63% in 1998; risk free interest rates, 5.80% in 1996, 6.00% in
1997 and 6.00% in 1998 and no dividends during the expected term. The
Company's calculations are based on a single option approach and forfeitures
are recognized as they occur.

Had compensation cost been determined under all of the Company's plans
using the provisions of SFAS No. 123, the Company's net income (loss) and
income (loss) per share would have been reduced to the pro forma amounts
indicated below:

<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net income (loss): As reported $ 1,190 $ 4,632 $ (14,490)
Pro forma $ 770 $ 3,922 $ (16,541)

Income (loss) per share:
Basic: As reported $ 0.14 $ 0.44 $ (1.30)
Pro forma $ 0.09 $ 0.38 $ (1.48)

Diluted: As reported $ 0.13 $ 0.42 $ (1.30)
Pro forma $ 0.08 $ 0.36 $ (1.48)

</TABLE>

F-20

<PAGE>

The impact of stock options granted prior to 1996 has been excluded from
the pro forma calculation; accordingly, the 1997 and 1998 pro forma
adjustments are not indicative of future period pro forma adjustments, when
the calculation may apply to all applicable stock options.

13. EMPLOYEE BENEFIT PLANS

The Company's 401(k) Savings Plan (the Savings Plan) covers domestic
full-time employees with 90 days of consecutive service. In May 1997, the
Board approved a resolution to match employee contributions. Employee
deferrals during fiscal year 1998 were eligible for a matching contribution
equal to fifty percent (50%) of the employee's salary deferral, not to exceed
4% of the employee's annual salary. Matching contributions vest over a
period of four years of service. The aggregate expense related to the
contributions was $270,000 in 1998.

Effective April 1, 1993, the Company adopted a Profit Sharing Plan (the
Plan) that covers all domestic full-time employees with 90 days of
consecutive service. Under the Plan, each eligible employee received a
bonus, determined under a formula set forth in the Plan, based on the
Company's earnings. Bonuses incurred under the Plan totaled approximately
$408,000 and $747,000 for the years ended March 31, 1996 and 1997,
respectively. The Plan was terminated as of December 31, 1996.

14. RELATED-PARTY TRANSACTIONS

On May 14, 1998, RICOL, LLC, a California limited liability company
(RICOL), which is controlled by Richard M. Giles, the Company's Chairman,
President, Chief Executive Officer and Acting Chief Financial Officer, sold
the principal operating facility (the Property) utilized by the Company.
Upon the sale of the building, RICOL repaid a note of $500,000 to the Company
associated with the original sale of the building from the Company to RICOL
on May 13, 1995. During fiscal year 1997, the Company received $730,000 of
principal payments on the note receivable from RICOL. In connection with the
sale of the property, the Company entered into a lease for the Property with
the unrelated third party for a term of six years, expiring April 30, 2004
with rent of $58,087 per month, subject to increases, not to exceed six
percent, but not less than three percent for any single year during the lease
term.

From time to time, the Company has made loans to Mr. Giles, which have
been evidenced by promissory notes. During fiscal 1997, the principal amount
outstanding equaled $50,000. During fiscal 1996, the principal amount
outstanding under such loans ranged from $23,000 to $147,000, and all of such
loans had been repaid as of March 31, 1996. In February 1996, the Company
loaned $150,000 to Mr. Giles. Such loan is collateralized by a pledge of
150,000 of the shares of the Company's common stock owned by Mr. Giles, bears
interest at 5.5%, and principal and interest were due as of March 1, 1998.
The principal amount along with accrued interest was repaid during fiscal
year 1997. No loans were outstanding during fiscal year 1998.

In February 1996, the Company loaned an executive of the Company the sum of
$300,000 to enable him to exercise 120,000 vested options to purchase shares of
the Company's common stock and $10,000 to pay certain tax obligations. The loan
was collateralized by the related shares, bears interest at 5.5%, and principal
and interest was due as of March 1, 1998. The loan was extended during the
current year and is now due on March 1, 2000. Due to its nature, the loan has
been classified as a reduction of stockholders' equity in the accompanying
consolidated financial statements.

15. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's balance sheets include the following financial instruments:
cash and cash equivalents, trade accounts receivable, notes receivable from
related parties, accounts payable, accrued liabilities and debt. The Company
considers the carrying amounts in the financial statements of all financial
instruments to approximate their fair value

F-21
<PAGE>

because of the relatively short period of time between origination of the
instruments and their expected realization or the fact that such instruments
have interest rates which approximate current market rates.

16. RESTRUCTURING CHARGES

In fiscal 1998, the Company announced a formal plan for restructuring
both its Sunrise and TFP subsidiaries to realize cost savings and capitalize
on synergies by consolidating the subsidiaries into the Company's Anaheim
operations. The restructuring charges of $987,000 include lease termination
and facility closure costs, losses on the disposition of fixed assets and
severance costs for terminated employees. As a result of the restructuring,
the Company also incurred inventory write-offs, the value of which was
impacted by the Company's decision to relocate and outsource manufacturing
operations, personnel relocation costs, and other integration costs. These
additional costs amounted to approximately $2,191,000 and are included in
cost of sales ($882,000), research, development and engineering ($249,000),
and selling general and administrative expenses ($1,060,000) in the
accompanying consolidated statements of operations. The Company anticipates
that the restructuring will be completed by September 30, 1998.

F-22
<PAGE>

PRINTRAK INTERNATIONAL INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
ADDITIONS
-------------------------
BALANCE AT BALANCE AT
BEGINNING CHARGED TO FROM END OF
DESCRIPTION OF PERIOD EXPENSES ACQUISITIONS DEDUCTIONS PERIOD
- -------------------------------------------------------- ---------- ---------- ------------ ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1996:
Allowance for doubtful accounts receivable . . . . . . . $ $ 402 $ (75) $ 327
Allowance for excess and obsolete inventories . . . . . 392 652 (460) 584
------- ------- --------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 392 $ 1,054 $ (535) $ 911
------- ------- --------- --------- ---------
------- ------- --------- --------- ---------
Year ended March 31, 1997:
Allowance for doubtful accounts receivable . . . . . . . $ 327 $ 47 $ (81) $ 293
Allowance for excess and obsolete inventories . . . . . 584 603 (740) 447
------- ------- --------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 911 $ 650 $ (821) $ 740
------- ------- --------- --------- ---------
------- ------- --------- --------- ---------
Year ended March 31, 1998:
Allowance for doubtful accounts receivable . . . . . . . $ 293 $ 1,051 $ 420 $ (412) $ 1,352
Allowance for excess and obsolete inventories . . . . . 447 995 743 (778) 1,407
------- ------- --------- --------- ---------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 740 $ 2,046 $ 1,163 $ (1,190) $ 2,759
------- ------- --------- --------- ---------
------- ------- --------- --------- ---------
</TABLE>

F-23

<PAGE>

FIRST AMENDMENT TO LEASE

THIS FIRST AMENDMENT TO LEASE (the "First Amendment") is entered into
effective as of April 1, 1998 by and between KILROY REALTY, L.P, a Delaware
limited partnership ("Landlord") and PRINTRAK INTERNATIONAL INCORPORATED, a
California corporation ("Tenant") with respect to the following facts:

REALTY

A. Landlord is under contract to purchase certain real property commonly
known as 1250 North Tustin Avenue, Anaheim, California (the "Premises") from
RICOL, LLC, a California limited liability company ("RICOL"). Tenant is the
tenant of the Premises pursuant to the certain written Commercial Lease,
dated May 12, 1995, by and between RICOL and Tenant (the "Lease").

B. Subject to Landlord's acquisition of title to the Premises, Landlord
and Tenant desire to amend the Lease upon the terms and conditions set forth
herein.

AGREEMENT

NOW, THEREFORE, IN CONSIDERATION OF the foregoing Recitals and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Landlord and Tenant hereby agree as follows:

1. CAPITALIZED TERMS. The defined terms used in this First Amendment,
as indicated by the first letter of a word being capitalized, shall have the
same meaning in this First Amendment as such terms and provisions have in the
Lease.

2. CONDITION TO FIRST AMENDMENT. The effectiveness of this First
Amendment shall be conditioned solely upon the close of escrow and Landlord's
acquisition of legal title to the Premises.

3. COMMENCEMENT DATE AND TERM. Section 2.1 of the Lease is hereby
amended to extend the Term of the Lease such that the Term shall be for a
period of six (6) years commencing May 1, 1998, and ending April 30, 2004,
unless sooner terminated in accordance with the provisions of the Lease. In
the event that Landlord obtains title to the Premises prior to May 1, 1998,
rent shall be prorated on a daily basis and payable by Tenant to Landlord
with the first installment of rent due under the Lease, unless April rent is
prorated through escrow in connection with Landlord's acquisition of the
Premises.

1
<PAGE>

4. MONTHLY RENTAL. Section 4.1 of the Lease is hereby amended to
provide that Monthly Rental shall be Fifty-Eight Thousand Eighty-Seven
Dollars and Sixty-Five Cents ($58,087.65) per month, commencing May 1, 1998,
subject to adjustment as set forth in the Lease.

5. ADJUSTMENT TO RENTAL. Section 4.2 of the Lease is hereby amended to
provide that the annual increases in Monthly Rental pursuant to Section 4.2
shall not be greater than six percent (6%), nor less than three percent (3%),
for any single year during the Term.

6. OPTION TO RENEW: Tenant shall have the option to extend the Term of
the Lease for one (1) additional five (5) year period (the "Additional
Term"). Such option shall be exercised, if at all, by written notice of
Tenant's election to exercise the option delivered to Landlord no earlier
than two hundred seventy (270) days, nor later than one hundred eighty (180)
days, prior to the expiration of the Term of the Lease. If Tenant fails
timely to exercise or is not entitled to exercise this option to renew, then
Tenant's option to renew shall automatically lapse and thereafter not be
exercisable by Tenant. If Tenant is entitled to and does give notice in the
manner and within the time frame set forth in this paragraph, then the Term
shall be extended by the Additional Term, on all of the conditions set forth
in the original Lease; provided, however, that:

(1) Monthly Rental for the Additional Term shall be equal to the
then "Fair Market Rental Rate" (as defined below) of the Premises. Landlord
shall, in response to and within thirty (30) days after receipt of Tenant's
notice of exercise of the option to renew, give Tenant written notice of the
then applicable "Fair Market Rental Rate" as determined in good faith by
Landlord. "Fair Market Rental Rate" means the then prevailing annual rental
rate per square foot of rentable area in comparable buildings in the Anaheim,
CA, industrial area, comparable in area and location to a Premises. Not later
than thirty (30) days after Landlord's notice to Tenant of the applicable
"Fair Market Rental Rate", Tenant shall timely notify Landlord of Tenant's
election to (i) have the "Fair Market Rental Rate" determined by the
"appraisal" procedure described below, or (ii) accept Landlord's
determination of the "Fair Market Rental Rate", or (iii) elect not to
exercise Tenant's option to extend. If Tenant fails to notify Landlord within
such thirty (30) day period of Tenant's election, then Tenant shall be deemed
to have accepted Landlord's determination of "Fair Market Rental Rate" and to
have waived its right to an appraisal. Tenant's notice under subparagraphs
(i) or (ii) shall be deemed Tenant's exercise of the option to extend the
Term.

2
<PAGE>

If Tenant exercises its option to renew and timely elects to have the
"Fair Market Rental Rate" determined by appraisal, then each party shall
appoint an appraiser within forty (40) days after such exercise date. The two
appraisers shall within a period of five additional days, agree upon and
appoint an additional appraiser. The three appraisers shall, within thirty
(30) days after the appointment of the third appraiser, determine the Fair
Market Rental Value of the Premises in writing and submit their report to all
of the parties. The Fair Market Rental Value shall be determined by
disregarding the appraiser's valuation that diverges the greatest from each
of the other two appraisers' valuations, and the arithmetic mean of the
remaining two appraisers' valuations shall be the Fair Market Rental Value.
Each party shall pay for the services of the appraiser selected by it, plus
one half of the fee charged by the third appraiser, and one half of all other
costs relating to the determination of Fair Market Rental Value;

(2) There shall be no commissions payable in connection with the
exercise of the option to renew; and

(3) This option is personal to Tenant and there shall be no further
options to extend the Term.

7. PERMITTED USE. Notwithstanding anything set forth in Section 7.1 of
the Lease to the contrary, Landlord's written consent to Tenant's request to
change the permitted use of the Premises shall not be unreasonably withheld.

8. POLICY FORM--DEDUCTIBLE. Notwithstanding the last sentence of
Section 11.2, the policies maintained by Tenant pursuant to Section 11.1(a)
(comprehensive or commercial general liability), Section 11.1(e) (leasehold
improvements) and Section 11.1(g) (all-risk, direct physical loss or damage)
may be subject to a deductible of not more than Twenty Five Thousand Dollars
($25,000).

9. ESTOPPEL CERTIFICATE AND NON-DISTURBANCE AGREEMENT. The Estoppel
Certificate referred to in Section 15.3, and the non-disturbance agreement
referred to in Section 15.4 of the Lease shall, at the option of Landlord or
Landlord's lender, each be in the customary, commercially reasonable, form of
the requesting lender or of the purchaser of all or a portion of the Premises.

10. MEMORANDUM OF LEASE. Section 19.14 is hereby deleted in its
entirety, and, at Tenant's option, Landlord and Tenant shall execute and
record a short form memorandum of lease in form and substance reasonably
acceptable to Landlord.

3
<PAGE>

11. SERVICE CHARGE. Section 19.24 is hereby deleted in its entirety.

12. ENVIRONMENTAL MATTERS--TENANT'S OBLIGATIONS. Section 19.25(b)(1)(i)
is hereby amended by the addition of the following language: "provided,
however, that the foregoing covenant shall not extend to materials typically
found or used in computer software and hardware research and development
applications so long as (a) such materials and any equipment which generates
such materials are maintained only in such quantities as are reasonably
necessary for Tenant's operations in the Premises, (b) such materials are
used strictly in accordance with all Environmental Laws and the
manufacturers' instructions therefor, (c) such materials are not disposed of
in or about the Premises in a manner which would constitute a release or
discharge thereof, and (d) all such materials and any equipment which
generates such materials are removed from the Premises by Tenant upon the
expiration or earlier termination of this Lease."

In addition, Section 11.5 of the Lease is hereby amended by adding the
following to the end of both clauses (iv) and (v): "...as a result of the
negligence or willful misconduct of Tenant, its agents, employees, invitees
or contractors; provided, that Tenant acknowledges its duty to supervise and
control access to the Premises in a commercially reasonable and prudent
manner."

13. BROKERS. Tenant warrants and represents that it has not dealt with
any real estate broker or agent in connection with this First Amendment or
its negotiation. Tenant shall indemnify and hold Landlord harmless from any
cost, expense or liability (including costs of suit and reasonable attorneys'
fees) for any compensation, commission or fees claimed by any other real
estate broker or agent in connection with this First Amendment or its
negotiation by reason of any act of Tenant.

14. NOTICE. The address of Lessor for purposes of notices is hereby
amended to provide the following addresses for notice to Landlord:

To Landlord: Kilroy Realty, L.P.
c/o Kilroy Realty Corporation
2250 East Imperial Highway, Suite 1200
El Segundo, California 90245
Attention: Jeffrey C. Hawken
Phone No. (213) 772-1193
Fax No. (310) 322-5981

4
<PAGE>

With a copy McDaniel & McDaniel
to: 2250 East Imperial Highway, Suite 1200
El Segundo, California 90245
Attention: Marshall McDaniel
Tel. No. (310) 640-1960
Fax. No. (310) 322-8790

15. IMPROVEMENTS. Notwithstanding Section 8.3, but subject to
Landlord's prior written approval of detailed plans and specifications to be
submitted by Tenant at least thirty (30) days prior to commencement, Tenant
shall be permitted to construct certain improvements and alterations to the
Premises consisting of administrative offices in the central area of the
first floor and the installation of an elevator near the lobby. Tenant shall
be responsible for all such construction and obtaining all necessary permits
and approvals therefor, and shall give Landlord at least twenty (20) days
notice prior to commencement to allow Landlord to record and post notices of
non-responsibility. Tenant shall maintain the Premises free of mechanic's or
materialmens' liens and shall indemnify defend and hold Landlord harmless
from and against any claims, liability or damages, including reasonable
attorneys' and experts' fees arising out of such construction. All such
improvements and alterations shall be the property of Landlord and shall
remain upon and be surrendered with the Premises upon expiration of the Term,
unless Landlord elects to require their removal. Landlord shall reimburse
Tenant for the actual costs, in the approximate amount of Two Hundred
Thousand Dollars ($200,000), incurred by Tenant in constructing the approved
improvements and alterations; provided, that the amount reimbursed, plus
interest thereon at the rate of ten percent (10%) per annum, shall be
amortized over the portion of the Term remaining as of the date of such
reimbursement payment, and shall be repaid to Landlord thereafter in monthly
installments which shall be added to and considered a part of the Monthly
Rental due and payable by Tenant under the Lease.

16. LEASE IN EFFECT. Landlord and Tenant acknowledge and agree that the
Lease, except as amended by this First Amendment, remains unmodified and in
full force and effect in accordance with its terms.

17. ENTIRE AGREEMENT. This First Amendment, together with the Lease,
embodies the entire understanding between Landlord and Tenant with respect to
the subject matter hereof and can be changed only by an instrument in writing
executed by both Landlord and Tenant.

5
<PAGE>

18. CONFLICT OF TERMS. In the event that there is any conflict or
inconsistency between the terms and conditions of the Lease and those of this
First Amendment, the terms and conditions of this First Amendment shall
control and govern the rights and obligations of the parties.

19. COUNTERPARTS. This First Amendment may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which,
together, shall constitute but one and the same instrument.

IN WITNESS WHEREOF, the undersigned have entered into this First
Amendment to be effective as of the date first above written.

"Landlord"

KILROY REALTY, L.P.,
a Delaware limited partnership

By: Kilroy Realty Corporation,
a Maryland corporation,
its general partner

By:
------------------------------
Name:
----------------------------
Title:
---------------------------

"Tenant"

PRINTRAK INTERNATIONAL INCORPORATED,
a California corporation

By: /s/ A.B. Castleman, Jr.
-----------------------------------
Name: A.B. Castleman, Jr.
---------------------------------
Title: Vice Pres/CFO
--------------------------------

<PAGE>

IN WITNESS WHEREOF, the undersigned have entered into this First
Amendment to be effective as of the date first above written.

"Landlord"

KILROY REALTY, L.P.,
a Delaware limited partnership

By: Kilroy Realty Corporation,
a Maryland corporation,
its general partner

By: /s/ T. Patrick [illegible]
------------------------------
Name:
----------------------------
Title:
---------------------------

"Tenant"

PRINTRAK INTERNATIONAL INCORPORATED,
a California corporation

By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------

<PAGE>

Exhibit 21

SIGNIFICANT SUBSIDIARIES OF PRINTRAK INTERNATIONAL INC.

As of March 31, 1997, Printrak International Inc. (the "Company") had one
subsidiary, Printrak Limited. On May 7, 1997, the Company acquired TFP Inc.,
a South Carolina corporation, which became a wholly-owned subsidiary of the
Company. On September 9, 1997, SunRise Imaging, a California corporation, was
acquired and became a wholly owned subsidiary of the Company. On December 10,
1997, the Company established Printrak International PTYLTD, in Australia, as
a wholly-owned subsidiary of the Company.

<PAGE>
EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement Nos.
333-47009, 333-38277 and 333-38275 on Form S-8 of our report dated June 19,
1998 (except as to the last paragraph of Note 9 for which the date is July 7,
1998) appearing in this Annual Report on Form 10-K of Printrak International
Inc. for the year ended March 31, 1998.

Costa Mesa, California
July 13, 1998

<PAGE>
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