<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC  20549
                                   FORM 10-Q


(Mark one)
   X   Quarterly report pursuant to Section 13 or 15(d) of the Securities
-------

Exchange Act of 1934.

For the quarterly period ended September 30, 1999 or

       Transition report pursuant to Section 13 or 15(d) of the Securities
-------
Exchange Act of 1934
                ----
For the transition period from ______________________ to ______________________

Commission File Number:  1-9641
                         ------

                              IDENTIX INCORPORATED
                              --------------------
             (Exact name of registrant as specified in its charter)


<TABLE>
<S>                                                                          <C>
                 Delaware                                                                94-2842496
----------------------------------------------                             --------------------------------------
      (State or other jurisdiction of                                         (IRS Employer Identification No.)
       incorporation of organization)

510 N. Pastoria Avenue, Sunnyvale, California                                              94086
----------------------------------------------                                          ------------
   (Address of principal executive offices)                                              (Zip Code)
</TABLE>

Registrant's telephone number, including area code (408) 731-2000
                                                   --------------

     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 requirement for the past 90 days.  YES   X    NO
                                              -----     -----

                     APPLICABLE ONLY TO CORPORATE ISSUERS:

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

                       30,839,111 shares of Common Stock
                             as of October 31, 1999

                                       1
<PAGE>

                              IDENTIX INCORPORATED

                                     INDEX





<TABLE>
<S>   <C>        <C>                                                                                                <C>

PART I           FINANCIAL INFORMATION

     Item 1      Unaudited Financial Statements

                 Consolidated Balance Sheets -
                 September 30, 1999 and June 30, 1999...................................................................3

                 Consolidated Statements of Operations -
                 Three months ended September 30, 1999 and 1998.........................................................4

                 Consolidated Statements of Cash Flows -
                 Three months ended September 30, 1999 and 1998.........................................................5

                 Notes to Consolidated Financial Statements.............................................................6

     Item 2      Management's Discussion and Analysis of Financial
                 Condition and Results of Operations....................................................................9

     Item 3      Quantitative and Qualitative Disclosures about Market Risk............................................23

PART II          OTHER INFORMATION

     Item 1      Legal Proceedings.....................................................................................24

     Item 6      Exhibits..............................................................................................24

     Signature.........................................................................................................25

</TABLE>

                                       2
<PAGE>

                              IDENTIX INCORPORATED
                          CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)
Item 1. Financial Statements
<TABLE>
<CAPTION>
                                                                        September 30,              June 30,
                                                                             1999                    1999
                                                                    -------------------      -----------------

                                                    ASSETS
<S>                                                                   <C>                      <C>
Current assets:
    Cash and cash equivalents.......................................       $  9,318,000           $  3,013,000
    Accounts receivable, less allowance for doubtful accounts
        of $931,000 and $809,000                                             26,804,000             25,993,000
    Inventories.....................................................          5,434,000              5,275,000
    Prepaid expenses and other assets...............................          1,059,000              1,043,000
                                                                           ------------           ------------
        Total current assets........................................         42,615,000             35,324,000

Property and equipment, net.........................................          2,195,000              2,141,000
Intangibles and other assets........................................         32,714,000             33,981,000
                                                                           ------------           ------------
        Total assets................................................       $ 77,524,000           $ 71,446,000
                                                                           ============           ============

                                    LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
    Notes payable...................................................       $  1,119,000           $  4,796,000
    Accounts payable................................................          8,947,000              9,767,000
    Accrued compensation............................................          2,204,000              1,940,000
    Other accrued liabilities.......................................            934,000              1,324,000
    Deferred revenue................................................          1,830,000              1,784,000
                                                                           ------------           ------------
        Total current liabilities...................................         15,034,000             19,611,000

  Deferred revenue..................................................             40,000                156,000
  Other liabilities.................................................             90,000                 90,000
                                                                           ------------           ------------
        Total liabilities...........................................         15,164,000             19,857,000
                                                                           ------------           ------------


Shareholders' equity:
    Common stock, $0.01 par value; 50,000,000 shares authorized;
        30,783,402 and 28,625,958 shares issued and outstanding             108,868,000             94,625,000
    Accumulated deficit.............................................        (46,327,000)           (42,855,000)
    Accumulated other comprehensive loss                                       (181,000)              (181,000)
                                                                           ------------           ------------
           Total shareholders' equity...............................         62,360,000             51,589,000
                                                                           ------------           ------------

                   Total liabilities and shareholders' equity.......       $ 77,524,000           $ 71,446,000
                                                                           ============           ============
</TABLE>


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

                                       3
<PAGE>

                              IDENTIX INCORPORATED
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                     Three months ended
                                                                       September 30,
                                                          ----------------------------------------
                                                                  1999                 1998
                                                          --------------------  ------------------
<S>                                                       <C>                   <C>
Revenues:
   Product revenues                                               $ 7,038,000         $ 9,749,000
   Services revenues                                               10,429,000          11,067,000
                                                                  -----------         -----------
       Total revenues                                              17,467,000          20,816,000
                                                                  -----------         -----------

Cost and expenses:
   Cost of product revenues                                         3,271,000           4,818,000
   Cost of services revenues                                        9,010,000           9,593,000
   Research, development and engineering                            2,207,000           1,461,000
   Marketing and selling                                            2,924,000           2,462,000
   General and administrative                                       2,794,000           1,781,000
   Amortization of acquired intangible assets                         885,000              46,000
                                                                  -----------         -----------

       Total costs and expenses                                    21,091,000          20,161,000
                                                                  -----------         -----------
Income (loss) from operations                                      (3,624,000)            655,000

Interest and other income (expense), net                              181,000              32,000
Interest expense                                                      (47,000)           (133,000)
                                                                  -----------         -----------

Income (loss) before taxes                                         (3,490,000)            554,000

Provision for incomes taxes                                                 -             (30,000)
Equity interest in joint venture                                       18,000             (74,000)
                                                                  -----------         -----------

Net income (loss)                                                 $(3,472,000)        $   450,000
                                                                  ===========         ===========

Net income (loss) per share:
       Basic                                                           $(0.11)              $0.02
                                                                  ===========         ===========
       Diluted                                                         $(0.11)              $0.02
                                                                  ===========         ===========

Shares used in computing net income (loss) per share:
       Basic                                                       30,644,000          25,285,000
       Diluted                                                     30,644,000          25,575,000
</TABLE>



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

                                       4
<PAGE>

                              IDENTIX INCORPORATED
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                Three months ended
                                                                                  September 30,
                                                                    ------------------------------------------
                                                                           1999                    1998
                                                                    ------------------      ------------------
<S>                                                                 <C>                     <C>
Cash flows from operating activities:
    Net income (loss)                                                     $(3,472,000)            $   450,000
    Adjustments to reconcile net income (loss) to net
         cash provided by (used for) operating activities:
        Depreciation                                                          465,000                 297,000
        Amortization of intangibles                                         1,090,000                 171,000
        Amortization of deferred revenue                                     (801,000)               (749,000)
        Interest in joint venture                                             (18,000)                 74,000
        Increase in inventory reserve                                         475,000                  37,000
        Write-off of capitalized software                                     154,000                       -
    Changes in assets and liabilities:
        Accounts receivable                                                  (811,000)                985,000
        Inventories                                                          (634,000)                195,000
        Prepaid expenses and other assets                                     (16,000)               (242,000)
        Accounts payable                                                     (820,000)             (1,527,000)
        Accrued compensation                                                  264,000                 377,000
        Other accrued liabilities                                            (372,000)                (30,000)
        Deferred revenue                                                      731,000                 641,000
                                                                          -----------             -----------
    Net cash provided by (used for) operating activities                   (3,765,000)                679,000
                                                                          -----------             -----------

Cash flows used for investing activities:
    Capital expenditures                                                     (519,000)               (229,000)
    Deletions (additions) to intangibles and other assets                      23,000                 (64,000)
                                                                          -----------             -----------
    Net cash used for investing activities                                   (496,000)               (293,000)
                                                                          -----------             -----------

Cash flows provided by (used for) financing activities:
    Borrowings under bank lines of credit                                     431,000               5,935,000
    Payments under bank lines of credit                                    (3,908,000)             (6,897,000)
    Principal payments on short-term note                                    (200,000)                      -
    Proceeds from sale of common stock and warrants                        14,243,000                 282,000
                                                                          -----------             -----------
    Net cash provided by (used for) financing activities                   10,566,000                (680,000)
                                                                          -----------             -----------

Net increase (decrease) in cash and cash equivalents                        6,305,000                (294,000)

Cash and cash equivalents at beginning of period                            3,013,000                 753,000
                                                                          -----------             -----------

Cash and cash equivalents at end of period                                $ 9,318,000             $   459,000
                                                                          ===========             ===========


Supplemental disclosures of cashflow information
    Cash paid during the period for interest                              $    47,000             $   139,000
    Cash paid during the period for income taxes                                    -             $    30,000
</TABLE>

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

                                       5
<PAGE>

                             IDENTIX INCORPORATED
                     THREE MONTHS ENDED SEPTEMBER 30, 1999
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. Basis of Presentation

   These accompanying consolidated financial statements and related notes are
   unaudited. However, in the opinion of management, all adjustments (consisting
   only of normal recurring adjustments) which are necessary for a fair
   presentation of the financial position and results of operations for the
   interim periods presented have been included. These consolidated financial
   statements should be read in conjunction with the audited consolidated
   financial statements and notes thereto for the fiscal year ended June 30,
   1999 included in the Company's Form 10-K. The results of operations for the
   three months ended September 30, 1999 are not necessarily indicative of
   results to be expected for the entire fiscal year, which ends on June 30,
   2000.

   The consolidated financial statements include the accounts of Identix
   Incorporated ("Identix" or the "Company") and its wholly owned subsidiaries:
   ANADAC, Inc. ("ANADAC"), Identix Australia Pty Limited ("Identix Australia"),
   Biometric Applications and Technologies, Inc. ("BA&T") and Identicator
   Technology, Inc, ("Identicator Technology"). The Company also owns a 50%
   interest in Sylvan/Identix Fingerprinting Centers, L.L.C. ("SIFC")


2. Inventories

   Inventories are stated at the lower of cost (determined on the first-in,
   first-out method) or market and consisted of the following:

<TABLE>
<CAPTION>
                                                            September 30,              June 30,
                                                                1999                     1999
                                                        -------------------       ----------------

<S>                                                       <C>                       <C>
Purchased parts and materials                                    $1,136,000             $1,713,000
Work-in-process                                                     504,000                706,000
Finished goods, including spares                                  3,794,000              2,856,000
                                                                 ----------             ----------
                                                                 $5,434,000             $5,275,000
                                                                 ==========             ==========
</TABLE>

   The Company provides for obsolete, slow moving or excess inventories in the
   period when obsolescence or inventory in excess of expected demand is first
   identified. During the three months ended September 30, 1999, the Company
   physically disposed of $83,000 of inventory, which had been provided for at
   June 30, 1999. During the three months ended September 30, 1999, the Company
   provided $439,000 to write-down to market certain Biometric Security
   products.



3. Bank Covenant Waiver

   At September 30, 1999, the Company was in default on one of its bank line of
   credit covenants.  The Company has obtained a waiver of default from the bank
   for the breach of the covenant.

4. Private Placement of Common Stock

   In July, 1999, the Company received net cash of $14,014,000 through a private
   placement of its common stock. The Company sold 1,811,594 shares of common
   stock at $8.28 per share, which represented a 5.0% discount from the average
   closing bid price for the 10 trading days prior to the closing date. In
   addition, the Company issued to the investors warrants to purchase 905,798
   shares of common stock for $11.33 per share until January 1, 2001 and an
   additional 362,319 shares at $11.18 per share until July 1, 2004. Under the
   terms of the private placement, Identix has registered for resale the shares
   and warrants.

                                       6
<PAGE>

5. Net Income (Loss) Per Share

   Basic earnings (loss) per share is computed using the weighted average number
   of common shares outstanding during the period. Diluted earnings (loss) per
   share is computed using the weighted average number of common shares
   outstanding during the period after considering the effect of dilutive common
   stock options and warrants under the treasury stock method.

<TABLE>
<CAPTION>
                                                                Three months ended
                                                                  September 30,
                                                        ----------------------------------
                                                              1999              1998
                                                        -----------------  ---------------

<S>                                                     <C>                <C>
Net income (loss)                                            $(3,472,000)      $   450,000
                                                             ===========       ===========

Shares used in computing net income (loss) per share:
     Basic                                                    30,644,000        25,285,000
     Dilutive effect of stock options and warrants                     -           290,000
                                                             -----------       -----------
     Diluted                                                  30,644,000        25,575,000
                                                             ===========       ===========

Net income (loss) per share:
     Basic                                                   $     (0.11)      $      0.02
                                                             ===========       ===========
     Diluted                                                 $     (0.11)      $      0.02
                                                             ===========       ===========
</TABLE>


   Options and warrants outstanding during the three months ended September 30,
   1999, were not included in the computation of net loss per share as their
   effect was anti-dilutive.

6. Comprehensive Income

   Other comprehensive income (loss) includes charges or credits to equity that
   are not the result of transactions with owners. Accumulated other
   comprehensive income (loss) consisted of foreign currency translation
   adjustment. As the Company substantially liquidated its foreign operation in
   February 1998, there has been no other comprehensive income (loss) from that
   date.

                                       7
<PAGE>

7. Operating Segments Data

   The Company has adopted the Statement of Financial Accounting Standards No.
131,  "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). Pursuant to SFAS 131, the Company's revenues are attributed to the
operating segment of the sales or service organizations, and costs directly and
indirectly incurred in generating revenues are similarly assigned.  The factors
used to identify the operating segments are: the nature of the product and
service; the type of customer for the product or service; the distribution
method and the way in which management has organized the Company for making
operating decisions and assessing performance. Management has organized the
Company on product and service lines rather than geographical or regulatory
lines.


<TABLE>
<CAPTION>
                                                                    For the three months ending
                                                                           September 30,
                                                               --------------------------------------
                                                                      1999                1998
                                                               ------------------  ------------------
<S>                                                            <C>                 <C>
Total revenues:
   Biometric Imaging                                                 $ 5,484,000         $ 7,630,000
   Biometric Security                                                  1,554,000           2,119,000
   Government Services                                                10,429,000          11,067,000
                                                                     -----------         -----------
                                                                     $17,467,000         $20,816,000
                                                                     ===========         ===========
Net income (loss):
   Biometric Imaging                                                 $  (541,000)        $   481,000
   Biometric Security                                                 (3,251,000)           (436,000)
   Government Services                                                   320,000             405,000
                                                                     -----------         -----------
                                                                     $(3,472,000)        $   450,000
                                                                     ===========         ===========

                                                                        As of               As of
                                                                    September 30,          June 30,
                                                                        1999                 1999
                                                                     -----------         -----------
Identifiable assets:
   Biometric Imaging                                                 $15,991,000         $14,591,000
   Biometric Security                                                 41,714,000          37,556,000
   Government Services                                                19,819,000          19,299,000
                                                                     -----------         -----------
                                                                     $77,524,000         $71,446,000
                                                                     ===========         ===========
</TABLE>


                                       8
<PAGE>

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

Item 2.

   The statements in this report on Form 10-Q that relate to future plans,
events, or performance are forward-looking statements. Actual results, events
and performance may differ materially due to a variety of factors including the
factors described under "Risk Factors" below. The Company undertakes no
obligation to publicly update these forward-looking statements to reflect events
or circumstances that occur after the date hereof or to reflect the occurrence
of unanticipated events.

Overview

   Identix designs, develops, manufactures and markets two categories of
products for security, anti-fraud, law enforcement and other applications: (i)
Biometric Security products that verify the identity of an individual through
the unique biological characteristics of a fingerprint and (ii) Biometric
Imaging products that electronically capture forensic quality fingerprint images
directly from an individual's fingers for law enforcement and other
applications. The Company provides information technology, engineering and
management consulting services to private and public sector clients through its
wholly owned subsidiary ANADAC. ANADAC's services support the development,
installation, integration and operation of hardware and software technology
solutions, including Identix products, for a variety of client operating
environments.

   On April 26, 1999, the Company acquired Identicator Technology, a privately
held developer of biometric fingerprint identification technology for
information technology applications. The acquisition was accounted for as a
purchase. Identicator Technology is now part of the Company's Biometric Security
Division and its operations are currently located in San Bruno, California.

   On July 31, 1999, the Company closed its Kansas City office of BA&T and
terminated most of the staff. Development work in-process at BA&T was
transferred to other operations within the Company.


Results of Operations

Revenues
--------

   Revenues for the three months ended September 30, 1999 were $17,467,000
compared to $20,816,000 for the same period in the prior fiscal year.  The
decrease in revenues of 16% for the three months was primarily due to decreased
product revenues and, also to decreased services revenues.

   Product revenues were $7,038,000 for the three months ended September 30,
1999, compared to $9,749,000 for the same period in the prior fiscal year.  For
the three months ended September 30, 1999, the decrease in product revenues of
28% was due to a decrease in Biometric Imaging and Biometric Security sales.
The decrease in Biometric Imaging sales was caused by certain governmental
orders and certain OEM orders for live-scan systems being delayed due to
governmental spending-approval authorization cycles. In addition, certain state
and local government agencies are delaying purchases of Biometric Imaging
products while such agencies are expanding or enhancing the capabilities of
their communication networks and, in some cases, their Automated Fingerprint
Indentification Systems ("AFIS"). The decrease in Biometric Security sales was
due to a decrease in purchases of the Company's Biometric Security Physical
Access products caused by market price pressures as well as a delay in purchases
of the Company's current biometric physical access products in anticipation of
new product releases by the Company.

                                       9
<PAGE>

IDENTIX INCORPORATED
Management's Discussion and Analysis - Continued . . .

   International sales accounted for $769,000 or 11% of the Company's product
revenues for the three months ended September 30, 1999 compared to $1,058,000 or
11% for the same period in the prior fiscal year. The decrease in international
sales for the three months was due to a decline in sales of Biometric Security -
Physical Access products to Latin America as well as a general decline in
Biometric Security - Physical Access product sales for the reasons specified
above. Biometric Security - Physical Access products have traditionally composed
the majority of the Company's international revenues. The Company expects
international sales to continue to represent a significant portion of product
revenues although the percentage may fluctuate from period to period. Identix's
international sales are predominately denominated in U.S. dollars, and the
Company actively monitors its foreign currency exchange exposure and, if
significant, will take action to reduce foreign exchange risk. To date, the
Company has not entered into any hedging transactions.

   The Company did not have any product business customer that accounted for
more then 10% of total revenues for the three months ended September 30, 1999
and 1998.

   Services revenues were $10,429,000 for the three months ended September 30,
1999 compared to $11,067,000 for the same period in the prior fiscal year.  The
decrease in services revenues of 6% for the three months ended September 30,
1999 was due to the delay of the award of certain contracts which were received
late in the quarter.  The Company's General Services Administration ("GSA")
contract allows Government agencies to purchase the Company's products and
services as well as third party products and services at agreed upon prices and
rates.  The Company and the GSA negotiate the prices and terms periodically or
as new products or services are added.  The majority of the Company's services
revenues are generated directly from contracts with the U.S. government,
principally the Department of Defense ("DOD").  For the three months ended
September 30, 1999, revenues directly from the DOD and from other U. S.
government agencies accounted for 92% of the Company's total services revenues
compared to 91% for the same period in the prior fiscal year.

   The Company's services business generates a significant amount of its
revenues from time-and-materials ("T&M") contracts and from firm fixed-price
("FFP") contracts. During the three months ended September 30, 1999 and 1998,
the Company derived 82% of its services revenues from FFP and T&M contracts. FFP
contracts provide for a fixed price for stipulated services or products,
regardless of the costs incurred, which may result in losses from cost overruns.
T&M contracts typically provide for payment of negotiated hourly rates for labor
incurred plus reimbursement of other allowable direct and indirect costs. The
Company assumes greater performance risk on T&M and FFP contracts and the
failure to accurately estimate ultimate costs or to control costs during
performance of the work can result in reduced profit margins or losses. There
can be no assurance that the Company's services business will not incur cost
overruns for any FFP and T&M contracts it is awarded. The Company's services
business also generates revenues from cost plus fixed fee ("CPFF") contracts,
which accounted for approximately 18% of its services revenues for the three
months ended September 30, 1999 and 1998. CPFF contracts provide for the
reimbursement of allowable costs, including indirect costs plus a fee or profit.
Revenues generated from contracts with government agencies are subject to audit
and subsequent adjustment by negotiation between the Company and representatives
of such government agencies. ANADAC is currently undergoing such an audit by the
Defense Contract Audit Agency for the period from July 1, 1995 to June 30, 1997.

                                       10
<PAGE>

IDENTIX INCORPORATED
Management's Discussion and Analysis - Continued . . .

Gross Margin
------------

   Gross margin on product revenues was 54% for the three months ended September
30, 1999, as compared to 51% for the same period in the prior fiscal year. The
percentage increase in gross margin for the three months was primarily due to
reduced sales to Biometric Imaging OEM customers, which generally carry a lower
gross margin than sales to end users. The increase was partially offset by
reduced margins on Biometric Security - Physical Access products. During the
three months ended September 30, 1999 a charge was made against cost of product
revenues of $439,000 for a write down in inventory due to market price
pressures. The Company expects gross margins to fluctuate in future periods due
to changes in the product mix, the costs of components and the competition in
the industry.

   Gross margin on services revenues was 14% for the three months ended
September 30, 1999 as compared to 13% for the same period in the prior fiscal
year. The increase in gross margin for the three months was primarily due to
less revenues being generated from contracts that include value added services
from subcontractors which typically provide a lower gross margin.

Research, Development and Engineering
-------------------------------------

   Research, development and engineering expenses were $2,207,000 or 31% of
product revenues for the three months ended September 30, 1999 compared to
$1,461,000 or 15% of net product revenues for the same period in the prior
fiscal year.  The increase in research, development and engineering expenses for
the three months is primarily due to the inclusion of research, development and
engineering efforts of Identicator Technology.  Management believes that
investment in research and development is critical to maintaining a strong
technological position in the industry and therefore expects research,
development and engineering expenses to continue to be a substantial expense in
future quarters.

Marketing and Selling
---------------------

   Marketing and selling expenses were $2,924,000 or 17% of total revenues for
the three months ended September 30, 1999 compared to $2,462,000 or 12% of total
revenues for the same period in the prior fiscal year. The increase in marketing
and selling expenses is due to the inclusion of marketing and selling expenses
of Identicator Technology and the increased staffing and expenses to promote the
Company's products and services.

General and Administrative
--------------------------

   General and administrative expenses were $2,794,000 or 16% of total revenues
for the three months ended September 30, 1999 compared to $1,781,000 or 9% of
total revenues for the same period in the prior fiscal year. The increase in the
three months in general and administrative expenses was primarily due to the
inclusion of Identicator Technology's general and administrative costs and the
write-off of capitalized software.

Interest and Other Income (Expense), net
----------------------------------------

   For the three months ended September 30, 1999, interest and other income
(expense), net was $181,000 compared to $32,000 for the same period in the prior
fiscal year. The increase in interest and other income (expense), net was
primarily due to an increase in interest income generated from investing the
proceeds from the placement of common stock in July 1999 (see Liquidity and
Capital Resources).

                                       11
<PAGE>

IDENTIX INCORPORATED
Management's Discussion and Analysis - Continued . . .

Interest Expense
----------------

   Interest expense was $47,000 for the three months ended September 30, 1999
compared to $133,000 for the same period in the prior fiscal year.  The decrease
was due to lower borrowings under the Company's lines of credit during the three
months ended September 30, 1999 compared to the same period in the prior fiscal
year. Working capital requirements were met with the proceeds from the private
placement of common stock.

   The Identix Line of Credit was repaid in full on July 2, 1999.  The weighted
average interest rate paid by ANADAC on borrowings under its line of credit (the
"ANADAC Line of Credit") during the three months ended September 30, 1999 was
8.0%.

Income Taxes
------------

   The Company did not record any income tax provision for the three months
ended September 30, 1999 compared to a provision of $30,000 for the same period
in the prior fiscal year which consisted of certain State franchise taxes.


Equity Interest in Joint Venture
--------------------------------

   The equity interest in joint venture represents the Company's share of the
results of SIFC.  For the three months ended September 30, 1999, equity interest
in joint venture was $18,000 compared to a loss of $74,000 for the same period
in the prior fiscal year.

Liquidity and Capital Resources

   In July 1999, the Company received net cash of $14,014,000 through a private
placement of its common stock. The Company sold 1,811,594 shares of common stock
at $8.28 per share, which represented a 5.0 % discount from the average closing
bid price for the 10 trading days prior to the closing date. In addition, the
Company issued to the investors warrants to purchase 905,798 shares of common
stock for $11.33 per share until January 1, 2001 and an additional 362,319
shares at $11.18 per share until July 1, 2004. Under the terms of the privite
placement, Identix agreed to register for resale the shares and warrants.

   On July 2, 1999, the Identix Line of Credit was repaid in full and certain
other debts have been repaid since that date.

   The Company financed its operations during the three months ended September
30, 1999 primarily from the proceeds of the private placement and borrowings
under the ANADAC Line of Credit.  As of September 30, 1999, the Company's
principal sources of liquidity consisted of $27,581,000 of working capital
including $9,318,000 in cash and cash equivalents, and amounts available for
future borrowings under the Identix Line of Credit and the ANADAC Line of
Credit.

   The Identix Line of Credit is a $10,000,000 bank line of credit secured by
the personal property of Identix. Under the Identix Line of Credit, the Company
may borrow up to 80% of eligible accounts receivable. Amounts drawn bear
interest at the bank's prime rate of interest plus one half of one percent
(8.75% at September 30, 1999). The line of credit expires on December 25, 1999
and the Company expects to renew it prior to that date. There can be no
assurances that the Company will be able to renew such line of credit, or that
the terms of the new line of credit will be as favorable to the Company as those
currently in place. At September 30, 1999, there was no amount outstanding and
$7,564,000 was available under the Identix Line of Credit. The Identix Line of
Credit agreement

                                       12
<PAGE>

IDENTIX INCORPORATED
Management's Discussion and Analysis - Continued . . .

contains financial and operating covenants, including restrictions on the
Company's ability to pay dividends on its common stock.  At September 30, 1999,
the Company was in default on one covenant on this bank line of credit. The
Company has obtained a waiver from the bank for the breach of the covenant.

   The ANADAC Line of Credit is a $6,000,000 bank line of credit secured by
ANADAC's accounts receivable and certain other assets.  Under the ANADAC Line of
Credit, ANADAC may borrow against qualified accounts receivable.  Amounts drawn
bear interest at the bank's prime rate of interest (8.25% at September 30,
1999).  The line of credit expires on March 30, 2000.  At September 30, 1999,
$1,119,000 was outstanding and $4,730,000 was available under the ANADAC Line of
Credit.  The ANADAC Line of Credit agreement contains financial and operating
covenants.

   The Company used cash for operating activities of $3,765,000 during the three
months ended September 30, 1999. The primary use of cash was due to (i) the net
loss of $3,472,000 which includes amortization of $1,090,000, depreciation of
$465,000 and an increase in the inventory reserve of $475,000, (ii) a decrease
in accounts payable of $820,000, (iii) an increase in inventory of $634,000 and
(iv) an increase in accounts receivable of $811,000.

   The Company used cash of $496,000 for investing activities during the three
months ended September 30, 1999 primarily for the purchase of property and
equipment of $519,000.

   The Company generated cash of $10,566,000 from financing activities during
the three months ended September 30, 1999. Financing activities consisted of
proceeds from the sales of common stock and warrants of $14,243,000, net of
issuance costs, partially offset by net repayments of $3,477,000 against the
Company's lines of credit.

   The Company did not have any material capital expenditure commitments as of
September 30, 1999.

   The Company believes that cash flow from operations, together with existing
working capital and the two bank lines of credit will be adequate to fund the
Company's cash requirements for at least the remainder of Fiscal 2000. However,
the Company will need to renew the Identix Line of Credit prior to December 25,
1999 and may require additional equity or debt financing to meet its working
capital or capital equipment needs. There can be no assurance that the Company
will be able secure an extension of the Identix Line of Credit or that it will
be able to obtain such additional financing or that the terms of such financing
will be favorable to the Company.

Impact of Year 2000

   Identix has instituted a program to determine whether Identix has exposure to
Year 2000 problems.  Year 2000 problems are caused by computer systems that only
use a two-digit year value and, accordingly, will be subject to error or failure
when the year 2000 arrives.

   Identix's Year 2000 program consists of the following:  (1) evaluation of
Identix products; (2) development of solutions to Year 2000 issues for Identix
products; (3) customer notification and support regarding Identix products; (4)
evaluation and remediation of Identix's information technology infrastructure;
(5) assessment of Year 2000 compliance of third party providers of critical
components and services; and (6) development of contingency plans to address
Year 2000 issues.  Identix's Year 2000 program is overseen by its Year 2000
Committee.

                                       13
<PAGE>

IDENTIX INCORPORATED
Management's Discussion and Analysis - Continued . . .

   Identix has substantially completed phases 1, 2, 3, 4 and 5 of the Year 2000
program.  In phases 1,2 and 4, Identix performed an evaluation of its products
and information technology infrastructure to determine their Year 2000
readiness.  To the extent that a Year 2000 issue was identified, Identix has
developed solutions to remediate the Year 2000 issues.  Identix is not taking
remedial action for those products that will reach the end of their support life
before the end of 1999.

   Phase 3 consisted of notifying customers of Year 2000 issues with Identix
products and providing support to the customer's remediation efforts.  The
notification process was substantially completed by June 30, 1999.  Identix's
remediation support activities have commenced and will continue at least through
December 31, 1999.  Identix's products are included in complex systems and the
process undertaken by its customers to assess and remediate Year 2000 issues may
be lengthy.  For example, Identix has sold TouchPrint products that, at the
request of the customers, use a two-digit value for the year.  In this case,
customer remediation is likely to require a change in the customer's workflow.
Separate and a part from issues associated with remediation of product related
year 2000 compliance issues.  Order flow for Identix products and services are
at risk of disruption if Identix customers experience year 2000 compliance
problems resulting in their own internal information technology systems.

   Phase 4 was completed by March 31, 1999.  Identix identified certain internal
software that required updating in order to be Year 2000 complaint.  As part of
Identix's maintenance contract for that software, the vendor of that software
has provided Identix with an upgrade that it expects to address the year 2000
issues associated with the Identix's internal information and operating systems.
Further, certain hardware that was identified as non-compliant has been
replaced.

   Identix is at risk of disruption to its business if Year 2000 problems are
experienced by its key suppliers.  The purpose of phase 5 is to determine the
Year 2000 readiness of suppliers of critical components and services.  Identix
has sent inquiries to its suppliers to determine their readiness with respect to
Year 2000 problems. As of September 30, 1999, substantially all of Identix's
critical suppliers have made written assurances to Identix that they will be
able to continue to supply Identix into the year 2000. A failure of a key
supplier to provide Identix with necessary components or services could result
in a significant delay by Identix in providing products or services to its
customers and have a severe negative impact on Identix's stock price or
financial performance.

   Identix continues to develop contingency plans to address Year 2000 concerns
as part of its Year 2000 program.  As of September 30, 1999, Identix is in the
process of formulating and planning for the event the Company may experience
unforeseen Year 2000 problems.  Identix plans to complete this in the last
quarter of calendar 1999 to the extent that it identifies areas where there is a
significant possibility that Year 2000 compliance will not be achieved.

   Identix believes that its costs, not borne by customers, for its Year 2000
program will be less than $250,000, excluding costs associated with existing
internal personnel.  The costs of the program to date have been less than
$40,000.  Identix has used existing personnel for the Year 2000 program and has
no current plans to add staff specifically for this purpose.  Identix has not
separately tracked the internal costs associated with the Year 2000 program.

The Year 2000 problem is pervasive and complex and there is a risk that Identix
has not identified all of the Year 2000 issues that may affect it and that any
remedial efforts it takes will not adequately address any potential Year 2000
problems.  Identix's products are used in systems that perform a number of
critical functions.  For example, the biometric security products are used to
verify individual identity in a number of high-risk situations such as prisons
and airports. The biometric security products are also used to protect computer
data and to verify

                                       14
<PAGE>

IDENTIX INCORPORATED
Management's Discussion and Analysis - Continued . . .

commercial transactions, such as the authorization of money transfers by bank
personnel. Although Identix believes that it should not have liability for a
system failure relating to the Year 2000, such a failure in these or other
critical applications could potentially require Identix to expend substantial
resources to assist in remedying the failure or result in litigation to
ascertain liability or recover costs. Identix believes that this represents the
most reasonably likely worst-case scenario with respect to the Year 2000.

   Identix has made forward-looking statements regarding its Year 2000 program.
These statements include the expected completion schedule for various phases of
the Year 2000 program, the costs to and liabilities of Identix associated with
the Year 2000 and Identix's Year 2000 readiness.  There are many factors that
could cause actual events or results to differ materially from those stated in
the forward-looking statements.  These factors include the complexity associated
with identifying Year 2000 problems, the inability of Identix, its customers and
suppliers to ascertain Year 2000 readiness and compliance issues and to become
year 2000 compliant, and the reaction of customers to Year 2000 issues.  All of
these factors make it impossible for Identix to ensure that it has identified
all Year 2000 issues that may affect it or all costs or liabilities that it may
be exposed to as a result of Year 2000 issues.

   The information contained in this Form 10-Q related to the Year 2000
constitutes Year 2000 Readiness Disclosure for purposes of the Year 2000
Information and Readiness Disclosure Act.  That act does not limit liability
under the securities laws.

                                       15
<PAGE>

RISK FACTORS

   The Company's operations, financial performance, business and share price may
be affected by a number of factors, including the following, any of which could
cause actual results to vary materially from anticipated results or from those
expressed in any forward-looking statements made by the Company in this
quarterly report Form 10-Q or in other reports, press releases or other
statements issued from time to time.

All of our product revenues are derived from the sale of biometric products
and our business will not grow unless the market for biometric products expands
both domestically and internationally.

   Biometric products have not gained widespread commercial acceptance. We
cannot accurately predict the future growth rate, if any, or the ultimate size
of the biometric technology market. The expansion of the market for our products
depends on a number of factors including:

   .  the cost, performance and reliability of our products and products of
      competitors
   .  customers' perception of the perceived benefit of these products
   .  public perceptions of the intrusiveness of these products and the manner
      in which firms are using the fingerprint information collected
   .  public perceptions regarding the confidentiality of private information
   .  customers' satisfaction with our products
   .  marketing efforts and publicity regarding these products.

   Certain groups have publicly objected to the use of biometric products for
some applications on civil liberties grounds and legislation has been proposed
to regulate the use of biometric security products.  Even if biometric markets
develop, our products may not gain wide market acceptance.

We face intense competition from other biometric identification providers as
well as traditional identification and security systems providers.

   A significant number of established and startup companies are developing and
marketing software and hardware for fingerprint biometric security applications
that do or will compete directly with our biometric security products.  Some of
these companies are developing semiconductor or optically based direct contact
fingerprint image capture devices. Other companies are developing and marketing
other methods of biometric identification such as retinal blood vessel or iris
pattern, hand geometry, voice and facial structure. If one or more of these
approaches were widely adopted, it would significantly reduce the potential
market for our products.

   Our biometric security products also compete with non-biometric technologies
such as traditional key, card, surveillance systems and passwords.

   Our biometric imaging products face intense competition from a number of
competitors who are actively engaged in developing and marketing livescan
products, including Digital Biometrics, Inc., Heimann Biometric Systems GmbH and
Printrak International Inc.

   We expect competition to increase further as other companies introduce
products that are competitively priced, that may have increased performance or
functionality or that incorporate technological advances not yet developed or
implemented by us. Some present and potential competitors have financial,
marketing, research resources substantially greater than ours. In order to
compete effectively in this environment, we must continually develop and market
new and enhanced products at competitive prices and must have the resources
available to invest in significant research and development activities.

                                       16
<PAGE>

In our services business, we face substantial competition from professional
services providers of all sizes in the government marketplace.

   ANADAC is increasingly being required to bid on firm fixed price and similar
contracts that result in greater performance risk to ANADAC. If ANADAC is not
able to maintain a competitive cost structure, support specialized market
niches, retain highly qualified personnel or align with technology leaders, we
may lose our ability to compete successfully in the services business.

The biometrics industry is characterized by rapid technological change and
evolving industry standards, which could render existing products obsolete.

   Our future success will depend upon our ability to develop and introduce a
variety of new products and product enhancements to address the changing,
sophisticated needs of the marketplace. Material delays in introducing new
products and enhancements or the failure to offer innovative products at
competitive prices may cause customers to forego purchases of our products and
purchase those of our competitors.

Our revenues and operating results often vary significantly from quarter to
quarter and may be negatively affected by a number of factors, including the
timing of large orders.

   Usually, most of our revenues in a quarter come from a small number of large
orders. Accordingly, revenues in a particular quarter depend on the timing and
size of major orders.  The following are some other reasons why our financial
results may fluctuate from quarter to quarter:

   .  reduced demand for products caused by a competitor's price reductions or
      introduction of new competitors or new or enhanced products
   .  changes in the mix of products and services we or our distributors sell
   .  cancellation, delays or contract amendments by government agency customers
   .  the lack of avilability of government funds
   .  litigation costs
   .  expenses related to acquisitions
   .  other one-time financial charges
   .  the lack of availability or increase in cost of key components
   .  economic downturns domestically or internationally.

   We also may reduce prices or increase spending in response to competition or
to pursue new market opportunities.

   Our products often have a lengthy sales cycle while the customer evaluates
and receives approvals for purchase. If after expending significant funds and
effort we fail to receive an order, a severe negative impact on our financial
results and stock price could result. It is difficult to predict accurately the
sales cycle of any large order. If we do not ship one or more large orders as
forecasted for a fiscal quarter, our total revenues and operating results for
that quarter could be materially and adversely affected.

   Further, the lead-time for ordering parts and materials and building our
products can be many months. As a result, we must order parts and materials and
build our products based on forecasted demand. If demand for our products lags
significantly behind our forecasts, we may produce more products than we can
sell, which can result in cash flow problems and write-offs or write-downs of
obsolete inventory.

                                       17
<PAGE>

We derive a majority of our services revenue from government contracts, which
are often non-standard, involve competitive bidding and may be subject to
cancellation without penalty.

   Government contracts frequently include provisions that are not standard in
private commercial transactions. For example, government contracts may include
bonding requirements and provisions permitting the purchasing agency to cancel
the contract without penalty in certain circumstances. As public agencies, our
prospective customers are also subject to public agency contract requirements
that vary from jurisdiction to jurisdiction. Some of these requirements may be
onerous or impossible to satisfy.

   In addition, public agency contracts are frequently awarded only after formal
competitive bidding processes, which have been and may continue to be
protracted, and typically impose provisions that permit cancellation in the
event that funds are unavailable to the public agency. There is a risk that we
may not be awarded any of the contracts for which our products are bid or, if
awarded, that substantial delays or cancellations of purchases may follow as a
result of protests initiated by losing bidders. In addition, local government
agency contracts may be contingent upon availability of matching funds from
state or federal entities.

   For the three months ended September 30, 1999, we derived approximately 92%
of our services revenue directly from contracts relating to the Department of
Defense and other U.S. Government agencies. The loss of a material government
contract due to budget cuts or otherwise could have a severe negative impact on
our financial results and stock price.

   For the three months ended September 30, 1999, we derived approximately 82%
of our services revenue from time and materials contracts and firm-fixed-price
contracts. We assume certain performance risk on these contracts. If we fail to
estimate accurately ultimate costs or to control costs during performance of the
work, our profit margins may be reduced and we may suffer losses. In addition,
revenues generated from government contracts are subject to audit and subsequent
adjustment by negotiation with representatives of the government agencies.
ANADAC is currently undergoing such an audit by the Defense Contract Audit
Agency for the period from July 1, 1995 to June 30, 1997. While the Company
believes that the results of such audit will have no material effect on the
Company's profits, there can be no assurance that no adjustments will be made
and that, if made, such adjustments will not have a material effect on the
Company's business, financial condition and results of operation.

We rely on marketing partners to distribute our products and may be adversely
affected if those parties do not actively promote our products or pursue
installations that use our equipment.

   A significant portion of our product revenues comes from sales to marketing
partners including OEMs, systems integrators, distributors and resellers. Some
of these relationships are formalized in agreements; however, the agreements are
often terminable with little or no notice and subject to periodic amendment. We
cannot control the amount and timing of resources that our marketing partners
devote to activities on our behalf.

   We intend to continue to seek strategic relationships to distribute and sell
certain of our products. We, however, may not be able to negotiate acceptable
distribution relationships in the future and cannot predict whether current or
future distribution relationships will be successful.

We depend on products and services provided by International Technology
Concepts, Inc.

  Our Biometric Security Division, Information Technology purchases certain
complete biometric security I.T. products, components of I.T. products and
engineering services related to the development of products from International
Technology Concepts. If we were to lose International Technology Concepts as a
supplier of these products and engineering services, we would be required to
find alternative suppliers for the products and services or hire additional
engineering personnel to provide the services, which could delay shipment of
products to customers and the development of new technology and products. There
is a risk that we would not be able to find

                                       18
<PAGE>

such personnel or suppliers at a reasonable cost, or at all. Any delay in
product development or shipment may have a material adverse effect on our
financial results and stock price.

Loss of sole or limited source suppliers may result in delays or additional
expenses.

   We obtain certain components and complete products from a single source or a
limited group of suppliers. We do not have long-term agreements with any of our
suppliers. We will experience signifiant delays in manufacturing and shipping of
products to customers if we lose these sources or if supplies from these sources
are delayed.

   As a result, we may be required to incur additional development manufacturing
and other costs to establish alternative sources of supply. It may take several
months to locate alternative suppliers, if required, or to re-tool our products
to accommodate components from different suppliers. We cannot predict if we will
be able to obtain replacement components within the time frames we require at an
affordable cost, or at all. Any delays resulting from suppliers failing to
deliver components or products on a timely basis in sufficient quantities and of
sufficient quality or any significant increase in the price of components from
existing or alternative suppliers could have a severe negative impact on our
financial results and stock price.

The success of our strategic plan to pursue sales in international markets may
be limited by risks related to international trade and marketing.

   For the three months ended September 30, 1999, we derived 11% of our product
revenues from international sales. We currently have offices in Australia,
Singapore, Brazil, Britain and Switzerland. There is a risk that we may not be
able to market, sell and deliver our products in foreign countries. Our product
revenues attributable to international sales declined by 36% in fiscal 1999 from
fiscal 1998, mainly due to a decline in sales resulting from economic
instability in Asia.

   In addition to the uncertainty as to our ability to maintain and expand our
international presence, there are certain risks inherent in foreign operations
and international markets, including:

   .  regional economic conditions
   .  delays in or prohibitions on exporting products resulting from export
      restrictions for certain products and technologies, including "crime
      control" products and encryption technology
   .  fluctuations in foreign currencies and the U.S. dollar
   .  loss of revenue, property and equipment from expropriation,
      nationalization, war, insurrection, terrorism and other political risks
   .  the overlap of different tax structures
   .  seasonal reductions in business activity
   .  risks of increases in taxes and other government fees
   .  involuntary renegotiation of contracts with foreign governments.

   In addition, foreign laws treat the protection of proprietary rights
differently from laws in the United States and may not protect our proprietary
rights to the same extent as U.S. laws.

We may need to raise additional debt or equity financing in the next twelve
months.

   As of September 30, 1999, we had $27,581,000 in working capital, which
included $9,318,000 in cash and cash equivalents. In addition, we had $7,564,000
available under the Identix bank line of credit, which expires in December 1999.
ANADAC had $4,730,000 available under its bank line of credit, which expires in
March 2000. In July 1999, the Company received net cash proceeds of $14,014,000
through a private placement of its common stock. However, we may need to raise
additional debt or equity financing in the next 12 months if current sources of
capital are not sufficient to finance our operations or if our lines of credit
are not renewed or if we fail to obtain a

                                       19
<PAGE>

waiver of any covenant breaches under our lines of credit. During the three
months ended September 30, 1999, the Company defaulted on one covenant in the
Identix bank line of credit, for which the Company obtained a waiver of default
from the bank. We may not be able to obtain additional equity or debt financing
on terms that are not excessively dilutive to existing stockholders or more
costly than existing sources of debt financing.

One stockholder owns a significant portion of our stock and may delay or prevent
a change in control or adversely affect the stock price through sales in the
open market.

   As of October 31, 1999, Ascom USA, Inc. beneficially owned approximately 15%
of our outstanding common stock. This concentration of ownership may delay or
prevent a change in control of the Company. Ascom deposited all of its shares
into a voting trust that expires in 2004. Ascom has preemptive rights with
respect to issuances of Identix securities and registration rights with respect
to the securities it holds. The Company filed a registration statement covering
the resale of 1,700,000 shares by Ascom. If Ascom sells a significant number of
our shares in the open market pursuant to the registration statement or
otherwise, our common stock price may be adversely affected. In addition, we may
not be able to obtain additional financing on favorable terms in the future
because of Ascom's preemptive rights and registration rights.

We may experience unanticipated expenses and other problems related to Year 2000
issues.

   Year 2000 problems are caused by computer systems that only use a two-digit
year value and, accordingly, will be subject to error or failure when the year
2000 arrives. We have a program for evaluating and addressing risks related to
the Year 2000 that is described under "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The Year 2000 problem is
pervasive and complex and there is a risk that we have not identified all of the
Year 2000 issues that may affect us or that our remedial efforts do not
adequately address identified Year 2000 problems. Our products are used in
systems that perform a number of critical functions. For example, the biometric
security products are used to verify individual identity in a number of high-
risk situations such as prisons and airports. The biometric security products
are also used to protect computer data and to verify commercial transactions,
such as the authorization of money transfers by bank personnel.  Further,
biometric imaging products are used in law enforcement to automate the booking
process and used to screen applicants for various public programs.  Although we
believe that we should not have liability for a system failure relating to the
Year 2000, any failure in these or other critical applications could potentially
require us to expend substantial resources to assist in remediating the failure
or result in litigation to ascertain liability or recover costs.

Our products are complex and may contain undetected or unresolved defects when
sold or may not meet customer's performance criteria.

   Performance failure in our products may cause loss of market share, delay in
or loss of market acceptance, additional warranty expense or product recall, or
other contractual liabilities. The negative effects of any failure could be
exacerbated if the failure occurred in products that provide personal security,
secure sensitive computer data, authorize significant financial transactions or
perform other functions where a security breach could have significant
consequences.

   If a product fails to meet performance criteria, we may delay recognizing
revenue associated with a product and face higher operating expenses during the
period required to correct the defects. There is a risk that for unforeseen
reasons we may be required to repair or replace a substantial number of products
in use or to reimburse customers for products that fail to work or meet strict
performance criteria. We carry product liability insurance, but existing
coverage may not be adequate to cover potential claims.

                                       20
<PAGE>

Failure by us to maintain the proprietary nature of our technology, products and
manufacturing processes would negatively impact our ability to compete
effectively.

   We principally rely upon patent, copyright, trade secret and contract law to
establish and protect our proprietary rights. There is a risk that claims
allowed on any patents or trademarks we hold may not be broad enough to protect
our technology. In addition, our patents or trademarks may be challenged,
invalidated or circumvented and we cannot be certain that the rights granted
thereunder will provide competitive advantages to us. Moreover, any current or
future issued or licensed patents, trade secrets or know-how may not afford
sufficient protection against competitors with similar technologies or
processes, and the possibility exists that already issued patents or trademarks
may infringe upon or be designed around by others. In addition, there is a risk
that others may independently develop proprietary technologies and processes,
which are the same as, substantially equivalent or superior to ours, or  become
available in the market at a lower price.

   There is a risk that we have infringed or in the future will infringe patents
or trademarks owned by others, that we will need to acquire licenses under
patents or trademarks belonging to others for technology potentially useful or
necessary to us, and that licenses will not be available to us on acceptable
terms, if at all.

   We may have to litigate to enforce our patents or trademarks or to determine
the scope and validity of other parties' proprietary rights. Litigation could be
costly and divert management's attention. An adverse outcome in any litigation
may have a severe negative impact on our financial results and stock price. To
determine the priority of inventions, we may have to participate in interference
proceedings declared by the United States Patent and Trademark Office or
oppositions in foreign patent and trademark offices, which could result in
substantial cost to us and limitations on the scope or validity of our patents
or trademarks.

   We also rely on trade secrets and proprietary know-how, which we seek to
protect by confidentiality agreements with our employees, consultants, service
providers and third parties. There is a risk that these agreements may be
breached, and that the remedies available to us may not be adequate. In
addition, our trade secrets and proprietary know-how may otherwise become known
to or be independently discovered by others.

If we fail to adequately manage growth of our business, it could have a severe
negative impact on our financial results or stock price.

   We believe that in order to be successful we must grow rapidly. In order to
do so, we must expand, train and manage our employee base, particularly skilled
technical, marketing and management personnel. Rapid growth will also require an
increase in the level of responsibility for both existing and new management. In
addition, we will be required to implement and improve operational, financial
and management information procedures and controls. The management skills and
systems currently in place may not be adequate and we may not be able to manage
any significant growth we experience effectively.

We may encounter difficulties in acquiring and effectively integrating
complementary assets and businesses.

   As part of our business strategy, we may to acquire assets and businesses
principally relating to or complementary to our current operations. We acquired
Identicator Technology in fiscal 1999, one company in fiscal 1998 and two
companies in fiscal 1996. These and any other acquisitions by Identix are and
will be accompanied by the risks commonly encountered in acquisitions of
companies.  These risks include, among other things:

   .  potential exposure to unknown liabilities of acquired companies
   .  higher than anticipated acquisition costs and expenses
   .  effects of costs and expenses of acquiring and integrating new businesses
      on our operating results and financial condition

                                       21
<PAGE>

   .  the difficulty and expense of assimilating the operations and personnel of
      the companies
   .  the potential disruption of our ongoing business
   .  diversion of management time and attention
   .  failure to maximize our financial and strategic position by the successful
      incorporation of acquired technology
   .  the maintenance of uniform standards, controls, procedures and policies
   .  loss of key employees and customers as a result of changes in management
   .  the incurrence of amortization expenses
   .  possible dilution to our stockholders.

   In addition, geographic distances may make integration of businesses more
difficult. We may not be successful in overcoming these risks or any other
problems encountered in connection with any acquisitions.

Loss of current senior executives and key technical, marketing and sales
personnel would adversely affect our business.

   Our personnel may voluntarily terminate their relationship with us at any
time, and competition for qualified personnel, especially engineers, and is
intense. The process of locating additional personnel with the combination of
skills and attributes required to carry out our strategy could be lengthy,
costly and disruptive. We are dependent on the services of certain key
personnel, including the following:

   .  Randall C. Fowler, Chairman, CEO and founder of Identix, has approximately
      thirty years of experience in the biometrics industry and is considered
      one of the industry's pioneers.

   .  James P. Scullion, President and Chief Financial Officer, and Daniel F.
      Maase, Vice President, Biometric Imaging Division, have a combined total
      of 20 years experience with Identix and have a substantial amount of
      acquired knowledge regarding Identix and the biometrics industry generally
      and play a major role in the execution of Identix's strategic plan.

   .  Oscar Pieper, Vice President, Business Development, has approximately
      thirty years of experience in the biometrics industry and is considered
      one of the industry's pioneers.

   .  Grant Evans, Vice President, Biometric Security Division, Information
      Technology, has established relationships with major companies and plays a
      central role in the company's marketing strategy.

   .  Yuri Khidekel, Vice President, Software, Biometric Security Division,
      Information Technology, and Yury Shapiro, Vice President, Hardware,
      Biometric Security Division, Information Technology, serve as key
      researchers and developers and are responsible for Identicator
      Technology's research and development activities.

If we lose the services of key personnel, it could have a severe negative impact
on our financial results and stock price.

Our business operations may be adversely affected in the event of an earthquake.

   Our corporate headquarters and most of our research and development
operations are located in Silicon Valley in Northern California, a region known
for seismic activity. An earthquake or other significant natural disaster could
have a material adverse impact on our business, financial condition and
operating results.

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<PAGE>

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk - The Company does not use derivative financial instruments
in its investment portfolio.  The Company's investment portfolio is generally
comprised of municipal government securities that mature within one year.  The
Company places investments in instruments that meet high credit quality
standards.  These securities are subject to interest rate risk, and could
decline in value if interest rates fluctuate.  Due to the short duration and
conservative nature of the Company's investment portfolio, the Company does not
expect any material loss with respect to its investment portfolio.

Foreign Currency Exchange Rate Risk - Certain of the Company's revenues, cost of
revenues and marketing expenses are transacted in local currencies.  As a
result, the Company's international results of operations are subject to foreign
exchange rate fluctuations.  The Company does not currently hedge against
foreign currency rate fluctuations. Gains and losses from such fluctuations are
not material to the Company's consolidated results of operations.

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<PAGE>

IDENTIX INCORPORATED

PART II   OTHER INFORMATION

 Item 1.  Legal Proceedings


          The Company is not party to any material legal proceedings.


 Item 6.    Exhibits and Reports on Form 8-K.

            (a) Exhibits

                Exhibit
                Number    Description

                27.1      Financial Data Schedule

            (b) During the three months ended September 30, 1999, the Company
                filed one report on Form 8-K, dated July 8, 1999, to report $15
                million private placement of its common stock.

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<PAGE>

                              IDENTIX INCORPORATED

                                   SIGNATURES


   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant, Identix Incorporated, a corporation
organized and existing under the laws of the State of Delaware, has duly caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Sunnyvale, State of California, on November 12, 1999.

                        IDENTIX INCORPORATED




                         BY:        /s/James P. Scullion
                              ----------------------------------------------
                         James P. Scullion
                         President, Chief Financial Officer, Director
                         and Secretary

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