<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 December 31, 2000 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)


                  Delaware                                  94-2842496
    -----------------------------------           -----------------------------
      (State or other jurisdiction of                     (IRS Employer
      incorporation of organization)                   Identification No.)

510 N. Pastoria Avenue, Sunnyvale, California                 94085
----------------------------------------------                -----
   (Address of principal executive offices)                (Zip Code)

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:

                       33,993,326 shares of Common Stock
                            as of January 31, 2001

                                       1
<PAGE>

                             IDENTIX INCORPORATED

                                     INDEX

<TABLE>
<S>                                                                           <C>
PART I      FINANCIAL INFORMATION

   Item 1   Unaudited Financial Statements

            Consolidated Balance Sheets -
            December 31, 2000 and June 30, 2000............................    3

            Consolidated Statements of Operations -
            Three and six months ended December 31, 2000 and 1999..........    4

            Consolidated Statements of Cash Flows -
            Six months ended December 31, 2000 and 1999....................    5

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

   Item 2   Management's Discussion and Analysis of Financial
            Condition and Results of Operations............................   10

   Item 3   Quantitative and Qualitative Disclosures
            about Market Risk..............................................   20

PART II     OTHER INFORMATION

   Item 1   Legal Proceedings..............................................   20

   Item 2   Changes in Securities..........................................   20

   Item 4   Submission of Matters to a Vote of Security Holders............   20

   Item 6   Exhibits.......................................................   21

   Signature...............................................................   22
</TABLE>

                                       2

<PAGE>

                             IDENTIX INCORPORATED
                          CONSOLIDATED BALANCE SHEETS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                  December 31,      June 30,
                                                  ------------   -------------
                                                      2000            2000
                                                  ------------   -------------
<S>                                               <C>            <C>
                         ASSETS
Current assets:
  Cash and cash equivalents.....................  $ 10,639,000   $  15,620,000
  Restricted cash...............................     1,817,000               -
  Accounts receivable, less allowance for
   doubtful accounts of $1,143,000 and
   $1,066,000...................................    30,887,000      28,352,000
  Inventories...................................     4,757,000       5,180,000
  Prepaid expenses and other assets.............     1,786,000       1,188,000
                                                  ------------   -------------
     Total current assets.......................    49,886,000      50,340,000
Property and equipment, net.....................     2,919,000       2,632,000
Intangibles and other assets....................    30,178,000      30,546,000
                                                  ------------   -------------
          Total assets..........................  $ 82,983,000   $  83,518,000
                                                  ============   =============

                 LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
                       STOCK AND SHAREHOLDERS' EQUITY

Current liabilities:
  Accounts payable..............................  $ 10,489,000   $   8,570,000
  Notes payable.................................             -         430,000
  Accrued compensation..........................     3,268,000       2,894,000
  Other accrued liabilities.....................     1,973,000       1,700,000
  Deferred revenue..............................     3,297,000       2,561,000
                                                  ------------   -------------
     Total current liabilities..................    19,027,000      16,155,000
                                                  ------------   -------------
Other liabilities...............................        56,000          90,000
                                                  ------------   -------------
     Total liabilities..........................    19,083,000      16,245,000
Redeemable convertible preferred stock, $0.01
  par value; 2,000,000 shares authorized;
  234,558 and no shares issued and
  outstanding...................................     3,702,000               -
                                                  ------------   -------------
Shareholders' equity:
  Common stock, $0.01 par value; 100,000,000 and
    50,000,000 shares authorized; 33,513,794 and
    33,026,964 shares issued and outstanding....       335,000         330,000
  Additional paid-in capital....................   126,050,000     123,365,000
  Accumulated deficit...........................   (66,006,000)    (56,241,000)
  Accumulated other comprehensive loss..........      (181,000)       (181,000)
                                                  ------------   -------------
     Total shareholders' equity.................    60,198,000      67,273,000
                                                  ------------   -------------
          Total liabilities, redeemable
           convertible preferred stock and
            shareholders' equity................  $ 82,983,000   $  83,518,000
                                                  ============   =============
</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                      Six months ended
                                                                   December 31,                            December 31,
                                                           -------------------------------         -------------------------------
                                                               2000               1999                 2000               1999
                                                           -----------         -----------         ------------        -----------
<S>                                                        <C>                 <C>                 <C>                 <C>
Revenues:
     Product revenues...................................   $ 8,445,000         $ 7,459,000         $ 17,615,000        $14,497,000
     Services revenues..................................    12,781,000          10,067,000           24,978,000         20,496,000
                                                           -----------         -----------         ------------        -----------
          Total revenues................................    21,226,000          17,526,000           42,593,000         34,993,000
                                                           -----------         -----------         ------------        -----------
Cost and expenses:
     Cost of product revenues...........................     4,973,000           4,534,000           10,296,000          8,626,000
     Cost of services revenues..........................    11,047,000           8,725,000           21,732,000         17,734,000
     Research, development and engineering..............     2,387,000           1,757,000            4,551,000          3,964,000
     Marketing and selling..............................     4,161,000           3,051,000            7,467,000          5,154,000
     General and administrative.........................     3,310,000           1,742,000            6,250,000          4,536,000
     Amortization of acquired intangible assets.........       832,000             863,000            1,664,000          1,748,000
     Preferred stock and warrant expense................             -                   -            1,259,000                  -
                                                           -----------         -----------         ------------        -----------
          Total costs and expenses......................    26,710,000          20,672,000           53,219,000         41,762,000
                                                           -----------         -----------         ------------        -----------

Loss from operations....................................    (5,484,000)         (3,146,000)         (10,626,000)        (6,769,000)
Interest and other income (expense), net................       444,000             192,000              844,000            372,000
Interest expense........................................       (42,000)            (30,000)             (65,000)           (77,000)
                                                           -----------         -----------         ------------        -----------

Loss before taxes and equity interest in
     joint venture......................................    (5,082,000)         (2,984,000)          (9,847,000)        (6,474,000)
Provision for income taxes..............................       (39,000)                  -              (56,000)                 -
                                                           -----------         -----------         ------------        -----------

Loss before equity interest in joint venture............    (5,121,000)         (2,984,000)          (9,903,000)        (6,474,000)
Equity interest in joint venture........................        64,000             (73,000)             135,000            (55,000)
                                                           -----------         -----------         ------------        -----------

Net loss................................................   $(5,057,000)        $(3,057,000)        $ (9,768,000)       $(6,529,000)
                                                           ===========         ===========         ============        ===========

Net loss per share:
     Basic and diluted..................................   $     (0.15)        $     (0.10)        $      (0.29)       $     (0.21)
                                                           ===========         ===========         ============        ===========

Weighted average common shares used in basic
     and diluted net loss per share computation.........    33,439,000          30,915,000           33,323,000         30,780,000
</TABLE>

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

                                       4
<PAGE>

                             IDENTIX INCORPORATED
                     CONSOLIDATED STATEMENTS OF CASHFLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                             Six months ended
                                                                                December 31,
                                                                        ---------------------------
                                                                            2000           1999
                                                                        ------------   ------------
<S>                                                                     <C>            <C>
Cash flows from operating activities:
  Net loss...........................................................   $ (9,768,000)  $ (6,529,000)
  Adjustments to reconcile net loss to net cash
    used for operating activities:
      Depreciation...................................................        895,000        793,000
      Gain on disposal of property and equipment.....................          7,000              -
      Amortization of intangibles....................................      1,885,000      2,088,000
      Amortization of deferred revenue...............................     (3,423,000)    (1,996,000)
      Interest in joint venture......................................       (135,000)        55,000
      Inventory reserves.............................................       (118,000)       506,000
      Write-off of capitalized software..............................              -        154,000
      Allowances for doubtful accounts...............................        309,000        235,000
      Preferred stock and warrant expense............................      1,259,000              -
  Changes in Assets and Liabilities
      Restricted cash................................................     (1,817,000)             -
      Accounts receivable............................................     (2,844,000)       356,000
      Inventories....................................................        541,000       (643,000)
      Prepaid expenses and other assets..............................       (598,000)       (73,000)
      Accounts payable...............................................      1,921,000       (576,000)
      Accrued compensation...........................................        374,000         14,000
      Other accrued liabilities......................................        375,000       (155,000)
      Deferred revenue...............................................      4,159,000      2,452,000
                                                                        ------------   ------------
  Net Cash used for operating activities.............................     (6,978,000)    (3,319,000)
                                                                        ------------   ------------
Cash flows from investing activities:
  Capital expenditures...............................................     (1,189,000)    (1,054,000)
  Additions and deletions to intangibles and other assets............     (1,517,000)      (289,000)
                                                                        ------------   ------------
  Net Cash used for investing activities.............................     (2,706,000)    (1,343,000)
                                                                        ------------   ------------
Cash flows from financing activities:
  Borrowings under bank lines of credit..............................      2,452,000      1,818,000
  Payments under bank lines of credit................................     (2,882,000)    (5,301,000)
  Principal payments on short-term note..............................              -       (200,000)
  Proceeds from sales of common and preferred stock..................      5,133,000     14,985,000
                                                                        ------------   ------------
  Net cash provided by financing activities..........................      4,703,000     11,302,000
                                                                        ------------   ------------
Net increase in cash and cash equivalents............................     (4,981,000)     6,640,000
Cash and cash equivalents at period beginning........................     15,620,000      3,013,000
                                                                        ------------   ------------
Cash and case equivalents at period end..............................   $ 10,639,000   $  9,653,000
                                                                        ============   ============
Supplemental disclosures of cash flow information:
  Cash paid during the period for interest...........................   $     65,000   $     75,000
</TABLE>

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

                                       5
<PAGE>

                             IDENTIX INCORPORATED
                      SIX MONTHS ENDED DECEMBER 31, 2000
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)

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, 2000 included in the Company's Form 10-K. The results of
     operations for the six months ended December 31, 2000 are not necessarily
     indicative of results to be expected for the entire fiscal year, which ends
     on June 30, 2001.

     Certain prior year's amounts have been reclassified to conform to the
     current years' presentation.

2.   Inventories

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

                                                     December 31    June 30
                                                    --------------------------
                                                        2000          2000
                                                    -----------    -----------

     Purchased parts and materials..............    $ 2,094,000    $ 2,141,000
     Work-in-process............................      1,165,000        860,000
     Finished goods, including spares...........      1,498,000      2,179,000
                                                    -----------    -----------
                                                    $ 4,757,000    $ 5,180,000
                                                    ===========    ===========





     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 six months ended December 31, 2000, the Company
     physically disposed of $247,000 of inventory, which had been provided for
     at June 30, 2000. In addition, the Company sold $199,000 of inventory that
     had been fully provided for at June 30, 2000.

3.   Sale of Series A Redeemable Convertible Preferred Stock and Warrant

     In July 2000, the Company entered into a Securities Purchase Agreement with
     Motorola, Inc. ("Motorola"), whereby the Company sold 234,558 shares of
     Series A Redeemable Convertible Preferred Stock (the "Series A Preferred
     Stock") at $15.99 per share, resulting in cash proceeds to the Company of
     $3,702,000, net of issuance costs. In accordance with the Securities
     Purchase Agreement, the price per share was determined using the average
     closing price of the Company's common stock during the ten trading days
     immediately prior to the sale. The sale of the Series A Preferred Stock was
     exempt from registration under applicable securities laws, however,
     Motorola has demand registration rights, which were effective beginning on
     January 7, 2001.

     The Series A Preferred Stock is convertible into shares of the Company's
     common stock on a one-to-one basis, subject to adjustment for anti-
     dilution. The Series A Preferred Stock is redeemable upon a change in
     control or sale of all or substantially all of the assets of the Company at
     a redemption price equal to all accrued or declared but unpaid dividends of
     the Series A Preferred Stock, plus the greater (as adjusted for any stock
     dividends, combinations, or splits with respect to such shares) of (x) the
     then current market price of each such share (i.e. the average closing
     price of the common stock during the ten trading days immediately prior to
     the change of control) or (y) $15.99 per share.

     In connection with the issuance of the Series A Preferred Stock, the
     Company also issued Motorola a warrant to purchase 187,647 shares of the
     Company's common stock at $17.11 per share. The Warrant is immediately
     exercisable and expires on July 7, 2005. The Company determined the fair
     value of the Warrant to be $1,908,370 using the Black-Scholes option
     pricing model and the following assumptions: fair value of common stock of
     $15.99 per share, a contractual life of five

                                       6
<PAGE>

     years, an annual risk free interest rate of 6%, volatility of 73.9%, and no
     future dividends.

     Based on the net cash proceeds received from the sale of Series A Preferred
     Stock of $3,702,000, the relative fair values of the Series A Preferred
     Stock and the Warrant totaled $2,443,000 and $1,259,000, respectively. The
     net cash proceeds allocated to the warrant of $1,259,000 were credited to
     additional paid-in capital within shareholders' equity. The issuance of the
     Series A Preferred Stock and Warrant also resulted in a beneficial
     conversion feature which was recorded in the consolidated statement of
     operations. Such amount was included in operating costs and expenses in
     light of the relationship with Motorola contemplated in the Master OEM
     Agreement and certain other agreements.

     The proceeds from the sale of the Series A Preferred Stock will be used
     solely for the research, design, development, marketing and manufacturing
     of product and service solutions related to the Company's itrust division.
     The remaining proceeds from this sale at December 31, 2000 are presented as
     restricted cash on the accompanying balance sheets.

4.   Earnings Per Share

     Basic earnings per share are computed by dividing net income (loss)
     available to common shareholders by the weighted average number of common
     shares outstanding during the period. Diluted earnings per share gives
     effect to all dilutive potential common shares outstanding during the
     period, including stock options and warrants, using the treasury stock
     method.

     Following is the calculation of basic and diluted loss per share for the
     periods presented (unaudited):

<TABLE>
<CAPTION>
                                       Three months ended           Six months ended
                                          December 31,                 December 31,
                                   --------------------------    --------------------------
                                       2000          1999           2000           1999
                                   -----------    -----------    -----------    -----------
<S>                                <C>            <C>            <C>            <C>
Net loss.......................    $(5,057,000)   $(3,057,000)   $(9,768,000)   $(6,529,000)
                                   -----------    -----------    -----------    -----------
Shares used in computing net
loss per share:
     Basic and Diluted.........     33,439,000     30,915,000     33,323,000     30,780,000
                                   -----------    -----------    -----------    -----------
Net loss per share:
     Basic and Diluted.........    $     (0.15)   $     (0.10)   $     (0.29)   $     (0.21)
                                   ===========    ===========    ===========    ===========
</TABLE>

     Options and warrants outstanding during the three and six months ended
     December 31, 2000 and 1999, were not included in the computation of net
     loss per share as their effect was anti-dilutive.

5.   Comprehensive Loss

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

6.   Reportable Segments Data

     The Company has determined its reportable segments based on its method of
     internal reporting. The Company's reportable segments are Imaging,
     Security, Government Services and Fingerprinting Services. Management has
     organized the Company on product lines. The Company's reportable segments
     are strategic business units that offer different products and services and
     include inter-segment revenues, corporate allocations and administrative
     expenses. Revenues are attributed to the reportable segment of the sales or
     service organizations, and costs directly and indirectly incurred in
     generating revenues are similarly assigned. Segment information is as
     follows (unaudited):

<TABLE>
<CAPTION>
                                       Three months ended           Six months ended
                                          December 31,                 December 31,
                                   --------------------------    --------------------------
<S>                                <C>                           <C>

</TABLE>

                                       7
<PAGE>

<TABLE>
<CAPTION>
                                                      2000           1999           2000           1999
                                                  ------------   ------------   ------------   ------------
<S>                                               <C>            <C>            <C>            <C>
Total revenues:
   Imaging.....................................   $  6,356,000   $  5,124,000   $ 13,993,000   $ 10,574,000
   Security....................................      2,089,000      2,335,000      3,622,000      3,922,000
   Government Services.........................     13,938,000     10,792,000     27,089,000     22,340,000
   Elimination of inter-segment revenues.......     (1,157,000)      (725,000)    (2,111,000)    (1,843,000)
                                                  ------------   ------------   ------------   ------------
                                                  $ 21,226,000   $ 17,526,000   $ 42,593,000   $ 34,993,000
                                                  ============   ============   ============   ============

Depreciation and amortization:
   Imaging.....................................   $    273,000   $    240,000   $    520,000   $    640,000
   Security....................................        931,000        858,000      1,857,000      1,852,000
   Government Services.........................        204,000        213,000        403,000        389,000
                                                  ------------   ------------   ------------   ------------
                                                  $  1,408,000   $  1,311,000   $  2,780,000   $  2,881,000
                                                  ============   ============   ============   ============

Interest and other income, net:
   Imaging.....................................   $     78,000   $     81,000   $    165,000   $    167,000
   Security....................................        117,000         47,000        292,000         41,000
   Government Services.........................        181,000         15,000        250,000         52,000
   Fingerprinting Services.....................         68,000         49,000        137,000        112,000
                                                  ------------   ------------   ------------   ------------
                                                  $    444,000   $    192,000   $    844,000   $    372,000
                                                  ============   ============   ============   ============

Interest expense:
   Imaging.....................................   $          -   $      6,000   $          -   $     16,000
   Security....................................              -              -              -         14,000
   Government Services.........................         42,000         24,000         65,000         47,000
                                                  ------------   ------------   ------------   ------------
                                                  $     42,000   $     30,000   $     65,000   $     77,000
                                                  ============   ============   ============   ============

Net income (loss):
   Imaging.....................................   $     35,000   $   (440,000)  $    609,000   $   (979,000)
   Security....................................     (5,676,000)    (2,910,000)   (11,503,000)    (6,245,000)
   Government Services.........................        452,000        318,000        854,000        638,000
   Fingerprinting Services.....................        132,000        (25,000)       272,000         57,000
                                                  ------------   ------------   ------------   ------------
                                                  $ (5,057,000)  $ (3,057,000)  $ (9,768,000)  $ (6,529,000)
                                                  ============   ============   ============   ============
Capital expenditures:
   Imaging.....................................   $    517,000   $    495,000   $    667,000   $    848,000
   Security....................................        157,000          8,000        215,000        141,000
   Government Services.........................        153,000         79,000        307,000         65,000
                                                  ------------   ------------   ------------   ------------
                                                  $    827,000   $    582,000   $  1,189,000   $  1,054,000
                                                  ============   ============   ============   ============
</TABLE>


<TABLE>
<CAPTION>
                                                  December 31,     June 30,
                                                  ------------   ------------
                                                      2000           2000
                                                  ------------   ------------
<S>                                               <C>            <C>
Identifiable assets:
   Imaging.....................................   $ 29,906,000   $ 31,042,000
   Security....................................     31,883,000     32,987,000
   Government Services.........................     21,194,000   $ 19,489,000
                                                  ------------   ------------
                                                  $ 82,983,000   $ 83,518,000
                                                  ============   ============
</TABLE>

7.  Foreign Operations Data

                                       8
<PAGE>

     In geographical reporting, revenues are attributed to the geographical
     location of the sales and service organizations as follows (unaudited):

<TABLE>
<CAPTION>
                                  Three months ended             Six months ended
                                      December 31,                 December 31,
                              ---------------------------   ---------------------------
                                  2000           1999           2000           1999
                              ------------   ------------   ------------   ------------
<S>                           <C>            <C>            <C>            <C>
Total revenues:
     North America.........   $ 20,327,000   $ 16,383,000   $ 40,734,000   $ 33,081,000
     International.........        854,000      1,143,000      1,859,000      1,912,000
                              ------------   ------------   ------------   ------------
                              $ 21,226,000   $ 17,526,000   $ 42,593,000   $ 34,993,000
                              ============   ============   ============   ============
</TABLE>

<TABLE>
<CAPTION>
                              December 31,     June 30,
                              ------------   ------------
                                  2000           2000
                              ------------   ------------
<S>                           <C>            <C>
Identifiable assets:
     North America.........   $ 81,288,000   $ 81,043,000
     International.........      1,695,000      2,475,000
                              ------------   ------------
                              $ 82,983,000   $ 83,518,000
                              ============   ============
</TABLE>

8.   Recent Accounting Pronouncements

     On July 1, 2000, the Company adopted the Financial Accounting Standards
     Board Interpretation No. 44 ("FIN No. 44") "Accounting for Certain
     Transactions Involving Stock Compensation," an interpretation of APB No.
     25. FIN No. 44 clarifies the application of APB No. 25 for (a) the
     definition of employee for purposes of applying APB No. 25, (b) the
     criteria for determining whether a plan qualifies as a non-compensatory
     plan, (c) the accounting consequences of various modifications to the terms
     of a previously fixed stock option or award, and (d) the accounting for an
     exchange of stock compensation awards in a business combination. The
     adoption of FIN No. 44 did not have a material effect on the Company's
     financial position or results of operations.

     In December 1999, the Securities and Exchange Commission issued Staff
     Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
     Statements". SAB 101 provides guidance on applying generally accepted
     accounting principles to revenue recognition in financial statements. SAB
     101, as amended, is effective for the Company in the fourth quarter of
     fiscal 2001. The potential impact of implementing SAB 101 on the Company's
     financial position or results of operations is still being assessed by
     management and was unknown at December 31, 2000. However, since the
     implementation of SAB 101 could result in changes to the timing of the
     Company's revenue recognition, its effect could be material and adverse to
     the Company's financial position and results of operations in the period of
     implementation.

9.   Subsequent Event

     On December 22, 2000, the Company entered into a Common Stock Purchase
     Agreement with VeriSign Capital Management, Inc. ("VeriSign") pursuant to
     which, the Company sold, on January 2, 2001, 264,901 shares of its common
     stock at $7.55. The sale resulted in net cash proceeds to the Company of
     $2,000,000. In accordance with the Common Stock Purchase Agreement, the
     price per share was determined using the average closing price of the
     Company's common stock during the ten trading days immediately prior to the
     sale. The proceeds from the sale will be used solely for the research,
     design, development, marketing and manufacturing of product and service
     solutions designed by the Company's itrust division and, accordingly, will
     be presented as restricted cash.


                                       9
<PAGE>

               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 Incorporated ("Identix" or the "Company") is a leader in designing,
developing, manufacturing and marketing comprehensive biometric technology based
solutions for security, fraud prevention, law enforcement and other
applications. Identix's products and services are classified into business
segments: (i) biometric security ("Security") solutions that verify the identity
of an individual through the unique physical biological characteristics of a
fingerprint; (ii) biometric imaging ("Imaging") solutions that electronically
capture forensic quality fingerprint images directly from an individual's
fingers for law enforcement and other applications; and (iii) information
technology, engineering and management consulting services primarily to
government agencies ("Government Services"). These solutions employ the
Company's industry leading optical fingerprint capture technologies, its
proprietary algorithms and customizable application software suites. Identix's
technologies and know-how enable it to produce Security and Imaging solutions
for commercial, federal, state and local government customers worldwide. The
Company provides Government Services through ANADAC, Inc. ("ANADAC"), a wholly
owned subsidiary of the Company. The Company provides fingerprinting services
through Sylvan/Identix Fingerprinting Centers, LLC ("SIFC"), a joint venture
agreement with Sylvan Learning Systems, Inc.

     In July 2000, the Company formed itrust, a new division within Identix, in
conjunction with an investment of $3,750,000 by its initial partner, Motorola
Incorporated. The itrust division is to offer security and content management
solutions for the wireless web, internet and intranet markets.

RESULTS OF OPERATIONS

     The Company has reclassified certain costs totaling $371,000, incurred in
the three months ended September 30, 2000 related to its Government Services
Business, from cost of services revenues to general and administrative expenses
and marketing and selling expenses. The costs have been reclassified to conform
to the presentation of such costs for the three months ended December 31, 2000.

Revenues
--------

     Revenues for the three and six months ended December 31, 2000 were
$21,226,000 and $42,593,000 compared to $17,526,000 and $34,993,000,
respectively, for the same periods in the prior fiscal year. The increase in
revenues of 21% and 22% for the three and six months ended, respectively, was
due to increases in both product and services revenues. In the three and six
months ended December 31, 2000, the Company had one customer, the U.S.
Department of Defense, which accounted for 46% and 47% respectively, of total
revenue.

     Product revenues were $8,445,000 and $17,615,000 for the three and six
months ended December 31, 2000, compared to $7,459,000 and $14,497,000 for the
same periods in the prior fiscal year. For the three and six months ended
December 31, 2000, the increase in product revenues of 13% and 22%,
respectively, was due to an increase in Imaging Solutions revenues, primarily
from live-scan system shipments and customer service programs.

     International sales accounted for $854,000 and $1,859,000 or 10% and 11%,
respectively, of the Company's product revenues for the three and six months
ended December 31, 2000 compared to $1,143,000 and $1,912,000 or 15% and 13%
respectively, for the same periods in the prior fiscal year. The decrease in
international sales for the three and six months was primarily due to new
product transition issues of physical access Security products which have
traditionally accounted for a majority of the Company's international revenue.
The Company expects international sales to continue to represent a large 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.

     Services revenues were $12,781,000 and $24,978,000 for the three and six
months ended December 31, 2000 compared to $10,067,000 and $20,496,000 for the
same periods in the prior fiscal year. The increase in services revenues of 27%
and 22% for the three and six months ended December 31, 2000, respectively, was
primarily related to revenues recognized for equipment shipments under a
recently awarded contract with the NAVSEA Chief Information Office and revenue
from the U.S. Navy Special
                                       10
<PAGE>

Warfare Contract. 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 and six months ended December 31, 2000, revenues
directly from the DOD and from other U. S. government agencies accounted for 89%
and 90% respectively, of the Company's total services revenues compared to 88%
for the same periods 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 and six months ended December 31, 2000, the
Company derived 95% and 94% respectively, 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 4% and 6% respectively, of its
services revenues for the three and six months ended December 31, 2000. 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 has not yet
been audited by the Defense Contract Audit Agency for the period from July 1,
1997 to December 31, 2000.

     Gross margin on product revenues was 41% and 42% for the three and six
months ended December 31, 2000, as compared to 39% and 41% respectively, for the
same periods in the prior fiscal year. During the six months ended December 31,
1999, a charge was made against cost of product revenues of $439,000 for a write
down in inventory of certain physical access security products 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% and 13% for the three and six
months ended December 31, 2000, as compared to 13% and 14% for the same periods
in the prior fiscal year.

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

     Research, development and engineering expenses were $2,387,000 or 28% and
$4,551,000 or 26% of product revenues for the three and six months ended
December 31, 2000, compared to $1,757,000 or 24% and $3,964,000 or 27% of
product revenues for the same periods in the prior fiscal year. The increase in
research, development and engineering expenses for the three and six months was
primarily due to the addition of engineering staff, consultants and related
expenses to further develop the Company's Security products and itrust services
solutions. 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 $4,161,000 or 20% and $7,467,000 or 18%
of total revenues for the three and six months ended December 31, 2000, compared
to $3,051,000 or 17% and $5,154,000 or 15% of total revenues for the same
periods in the prior fiscal year. The increase in marketing and selling expenses
was primarily due to increased staffing and promotional costs for Imaging and
Security products.

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

     General and administrative expenses were $3,310,000 or 16% and $6,250,000
or 15% of total revenues for the three and six months ended December 31, 2000,
compared to $1,742,000 or 10% and $4,536,000 or 13% of total revenues for the
same periods in the prior fiscal year. The increase in general and
administrative expenses was primarily due to an increase in staffing and other
related administrative expenses to support growth in operations, primarily in
the Security business which includes the itrust division, and the development of
supporting infrastructure.

Preferred Stock and Warrant Expense
-----------------------------------

     In connection with the private sale of shares of Series A redeemable
convertible Preferred Stock and Warrant in July 2000 to Motorola, Inc., (see
Note 3 of Notes to Consolidated Financial Statements), the Company recognized a
one-time preferred

                                       11
<PAGE>

stock and warrant expense of $1,259,000 representing the relative fair value of
the warrant. The value of the warrant was calculated using the Black-Scholes
option-pricing model.

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

     For the three and six months ended December 31, 2000, interest and other
income (expense), net was $444,000 and $844,000 respectively, compared to
$192,000 and $372,000 for the same periods in the prior fiscal year. The
increase in interest and other income (expense), net was primarily related to an
increase in interest income generated from investing the proceeds from the sales
of both common and preferred stock.

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

     Interest expense was $42,000 and $65,000 for the three and six months ended
December 31, 2000 compared to $30,000 and $77,000 for the same periods in the
prior fiscal year and was primarily due to borrowings under the ANADAC Line of
Credit. The Identix Line of Credit was repaid in full on July 2, 1999 and there
have been no borrowings under this line of credit since July 2, 1999. The
weighted average interest rate paid on borrowings under the ANADAC Line of
Credit during the three months ended December 31, 2000 was 9.5%.

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

     The Company recorded income tax provisions of $39,000 and $56,000 for the
three and six months ended December 31, 2000, which consisted of certain state
franchise taxes. Income tax provisions for the three and six months ended
December 31, 1999, were immaterial.

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

     The equity interest in joint venture represents the Company's 50% share of
the results of SIFC. For the three and six months ended December 31, 2000, the
equity interest in joint venture was income of $64,000 and $135,000
respectively, compared to losses of $73,000 and $55,000 for the same periods in
the prior fiscal year. The increase in the equity interest was due to an
increase in net income of SIFC.

Liquidity and Capital Resources
-------------------------------

     The Company financed its operations during the six months ended December
31, 2000 primarily from working capital and from the proceeds of the sale of
preferred and common stock. As of December 31, 2000, the Company's principal
sources of liquidity consisted of $30,859,000 of working capital, including
$10,639,000 in cash and cash equivalents, $1,817,000 of restricted cash, and
$12,513,000 available for future borrowings under bank lines of credit. The
restricted cash is to be used solely for the research, design, development,
marketing and manufacturing of product and service solutions related to the
Company's itrust division.

     The Identix Line of Credit is a $7,500,000 bank line of credit
collateralized by the property of Identix. Under the bank line of credit, the
Company may borrow up to 80% of eligible accounts receivable and amounts drawn
bear interest at the bank's prime rate of interest plus one half of one percent
(10% at December 31, 2000). The line of credit expires on April 21, 2001. At
December 31, 2000, there was no amount outstanding and $6,796,000 was available
under the Identix Line of Credit. The Identix Line of Credit agreement contains
financial and operating covenants, including restrictions on the Company's
ability to pay dividends on its common stock. At December 31, 2000, 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.

     The ANADAC Line of Credit is a $6,000,000 bank line of credit
collateralized 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
(9.5% at December 31, 2000). The line of credit expires on March 30, 2001. At
December 31, 2000, no amount was outstanding and $5,717,000 was available under
the ANADAC Line of Credit. The ANADAC Line of Credit agreement contains
financial and operating covenants and the Company was in compliance with all
such covenants as at December 31, 2000.

     The Company used cash for operating activities of $6,978,000 during the six
months ended December 31, 2000 as compared to $3,319,000 for the same period in
the prior fiscal year. The primary use of cash for the six months ended December
31, 2000 was due to (i) the net loss of $9,768,000 which includes a one-time
non-cash charge for preferred stock and warrant expense of $1,259,000,
amortization of $1,885,000 and depreciation of $895,000, and (ii) an increase in
accounts receivable of $2,844,000 and restricted cash of $1,817,000, partially
offset by an increase in accounts payable of $1,921,000

                                       12
<PAGE>

and a decrease in inventories of $541,000. The primary use of cash during the
six months ended December 31, 1999 was due to (i) the net loss of $6,529,000
which includes amortization of $2,088,000, depreciation of $793,000 and an
increase in the inventory reserve of $506,000, (ii) a decrease in accounts
payable of $576,000, (iii) an increase in inventory of $643,000 and (iv) a
decrease in accounts receivable of $356,000.

     The Company used cash of $2,706,000 for investing activities during the six
months ended December 31, 2000 consisting of purchases of property and equipment
of $1,189,000 and additions to intangible assets of $1,517,000. During the six
months ended December 31, 1999, the Company used cash of $1,343,000 for
investing activities primarily for the purchase of property and equipment of
$1,054,000.

     The Company generated cash of $4,703,000 from financing activities during
the six months ended December 31, 2000 as compared to $11,302,000 for the same
period in the prior fiscal year. Financing activities for the six months ended
December 31, 2000, consisted of proceeds from the sale of preferred stock and a
warrant of $3,702,000, net of issuance costs, the sale of common stock of
$1,431,000, partially offset by net repayments of $430,000 against the ANADAC
line of credit. Financing activities during the six months ended December 31,
1999, consisted of proceeds from the sales of common stock and warrants of
$14,985,000, net of issuance costs, partially offset by net repayments of
$3,483,000 against the Company's lines of credit.

     The Company had capital expenditure commitments of $655,000 as of December
31, 2000.

     The Company believes that cash flows from operations, together with
existing working capital and two existing bank lines of credit, will be adequate
to fund the Company's cash requirements through fiscal 2001. Further, subsequent
to December 31, 2000, the Company received net cash proceeds of $2,000,000 from
the sale of common stock (see Note 9 of Notes to Consolidated Financial
Statements). However, the Company believes it may need to raise, in the next 12
months, additional equity or debt financing beyond the amounts currently
forecast to meet its working capital or capital equipment needs. In addition,
the Company may obtain additional equity financing from possible strategic
partners interested in establishing a relationship with the Company's itrust
division. There can be no assurance that the Company would be able to obtain
such financing or that the terms of financing will be favorable to the Company.

Recent Accounting Pronouncements
--------------------------------

     On July 1, 2000, the Company adopted the Financial Accounting Standards
Board Interpretation No. 44 ("FIN No. 44") "Accounting for Certain Transactions
Involving Stock Compensation," an interpretation of APB No. 25. FIN No. 44
clarifies the application of APB No. 25 for (a) the definition of employee for
purposes of applying APB No. 25, (b) the criteria for determining whether a plan
qualifies as a non compensatory plan, (c) the accounting consequences of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. The adoption of FIN No. 44 did not have a material effect on the
Company's financial position or results of operations.

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements. "SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition in financial statements. SAB 101 as amended is
effective for the Company in the fourth quarter of fiscal 2001. The potential
impact of implementing SAB 101 on the Company's financial position or results of
operations is still being assessed by management and was unknown at December 31,
2000. However, since the implementation of SAB 101 could result in changes to
the timing of the Company's revenue recognition, its effect could be material
and adverse to the Company's financial position and results of operations in the
period of implementation.

RISK FACTORS

     This report on Form 10-Q contains forward-looking statements that involve
risks and uncertainties. The Company's business, operating results, financial
performance, and share price may be materially adversely affected by a number of
factors, including but not limited to the following risk factors, any one 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 report on Form 10-Q or in other reports, press releases or other statements
issued from time to time. Additional factors that may cause such a difference
are set forth in the annual report on Form 10-K.

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

                                       13
<PAGE>

     Biometric solutions 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
and services depends on a number of factors including:

 .    the cost, performance and reliability of our products and services and the
     products and services of competitors
 .    customers' perception of the perceived benefit of biometric solutions
 .    public perceptions of the intrusiveness of these solutions 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 and services
 .    marketing efforts and publicity regarding these products and services

     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 and services may not gain wide market acceptance. Even if
biometric solutions gain wide market acceptance, there can be no assurance that
the Company's products and services will adequately address the market
requirements.

We face intense competition from other biometric solution providers as well as
------------------------------------------------------------------------------
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 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 Security products also compete with
non-biometric technologies such as certificate authorities, and traditional key,
card, surveillance systems and passwords. The biometric security market is a
rapidly evolving and intensely competitive market and the Company believes that
additional competitors may yet enter the market: certain of these competitors
may prove to be primary long-term competitors.

     Our 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 and intensify in the near term in both
the Security and Imaging markets. Companies competing with the Company may
introduce products that are competitively priced, that 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. The failure to do so could have a material adverse effect on our
business operations, financial results and stock price.

Future growth depends in part on the success of itrust, a new division with no
------------------------------------------------------------------------------
operating history; anticipation of future losses.
-------------------------------------------------

     A portion of the Company's future growth will depend on the success of the
Company's itrust division. itrust was formed in July 2000 and has no operating
history on which to base an evaluation of it's business and prospects. itrust's
success will depend on many factors, including, but not limited to: the ability
of the Company to form additional strategic partnerships that will contribute
technical and commercial value to itrust and fuel the division's growth; the
demand for the Company's Security products and itrust services; the ability of
the Company to successfully and rapidly manufacture, disseminate and deploy
biometric enabled products and itrust services, and the ability and willingness
of it's partners such as Motorola, Inc. and VeriSign, Inc. to successfully and
rapidly promote, manufacture, disseminate and deploy biometric enabled products
and itrust services; the levels of competition in the space for Internet and
Wireless Web security services; the perceived need for secure communications and
commerce in such markets; the Company's ability to successfully introduce new
products and services; and the ability of the Company to expand it's operations
and attract integrate, retain and motivate qualified sales, marketing, and
research and development personnel. In addition, the Company has experienced net
losses in each of the past two fiscal year periods. itrust is not expected to
contribute significant revenues to the Company in the foreseeable future. At the
same time, however, the Company will incur significant costs in the design,
development, manufacture, sale and deployment of itrust products and services
and in the execution of itrust's business plan. In part because of the
significant investment the Company will make in itrust, the Company expects to
incur substantial additional losses in the foreseeable future.

                                       14
<PAGE>

In our services business, we face substantial competition from professional
---------------------------------------------------------------------------
service 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 services enhancements thereto address the changing,
sophisticated needs of the marketplace. Material delays in introducing new
products and services and enhancements thereto or the failure to offer
innovative products at competitive prices may cause customers to forego
purchases and of our products and services and purchase those of our competitors
and services.

Our financial and operating results often vary significantly from quarter to
----------------------------------------------------------------------------
quarter and may be negatively affected by a number of factors.
--------------------------------------------------------------

The following are some other reasons why our financial and operating results may
fluctuate from quarter to quarter:

     .    downturns in the US, North American or international economies
     .    optical reduced demand for products and services caused by a
          competitor's price reductions or introduction of new competitors or
          enhanced products or services
     .    reduced pricing and/or increased spending in response to competition
          or new market opportunities
     .    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 availability 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
     .    the inability to successfully manufacture in volume certain of the
          Company's product that may contain complex designs and components.

Additionally, certain of our Imaging 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 negative
impact on our financial results and stock price could result.

     It is difficult to predict accurately the sales cycle of any large order
for any of our products. If we do not ship one or more large orders as forecast
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
Security or Imaging 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.

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

                                       15
<PAGE>

     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
federal or state entities.

     For the year ended June 30, 2000, we derived approximately 86% 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 year ended June 30, 2000, 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. The
Defense Contract Audit Agency has not yet audited ANADAC for the period from
July 1, 1997 to June 30, 2000. 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 and distribution 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 rely heavily on products and services provided by International Technology
-----------------------------------------------------------------------------
Concepts, Inc. ("IT Concepts")
------------------------------

     Both our Imaging and Security Divisions purchase certain complete biometric
security and imaging products, components of products and research, development
and engineering services related to the development of products from IT
Concepts. It is anticipated that itrust may also work with IT Concepts for the
development of certain of itrust's solutions. In turn IT Concepts subcontracts
portions of its development work to an affiliate in Russia and imports a portion
its engineering and personnel resources from Russia under applicable immigration
laws. In recent years competition for a limited number of available visas for
foreign high-technology workers and/or consultants has intensified as more U.S.
companies have chosen to look abroad for supplemental research, development and
engineering resources. If we were to lose IT Concepts as a supplier of products
and engineering services, or if IT Concepts were prohibited or restricted from
importing a portion of its engineering requirements or resources, because of
lack of availability of applicable immigration visas or otherwise, we would be
required to find alternative suppliers for products and services or hire
additional engineering personnel to provide the services. This could require the
company to incur significant additional research and development costs and 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 such personnel or
suppliers at a reasonable cost, or at all. Any delay in product development or
shipment could have a material adverse effect on our business, operations,
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 significant 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

                                       16
<PAGE>

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 and source certain
-----------------------------------------------------------------------
research, development and engineering services from international markets may be
--------------------------------------------------------------------------------
limited by risks related to socio-economic and political conditions in such
---------------------------------------------------------------------------
markets.
--------

          For the fiscal year ended June 30, 2000, we derived approximately 14%
of our product revenues from international sales. We currently have a local
presence in Singapore, Brazil, Britain and Switzerland. We rely on products and
services provided by I.T. Concepts which in turn relies on research development
and personnel support from Russia. There is a risk that we may not be able to
successfully market, sell and deliver our products in foreign countries, or
successfully rely on supplemental offshore research and development resources.

          Risks inherent in marketing, selling and delivering products in, and
sourcing research and development services from, foreign and international
markets, include those associated with:

     .    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
     .    loss of, or delays in importing products, services and intellectual
          property developed abroad, resulting from unstable or fluctuating
          social, political or governmental conditions
     .    fluctuations in foreign currencies and the U.S. dollar
     .    loss of revenue, property (including intellectual 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 renegotiations 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 The Company primarily enters into debt
obligations to support general corporate purposes including working capital
requirements and capital expenditures. The Company is subject to fluctuating
interest rates that may impact, adversely or otherwise, its results of operation
of cash flows for its variable rate lines of credit and cash equivalents.

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

          As of December 31, 2000, we had $30,859,000 in working capital, which
included $12,456,000 in cash and cash equivalents and restricted cash. In
addition, we had $6,796,000 available under the Identix Bank Line of Credit,
which has been renewed to April 20, 2001, and ANADAC had $5,717,000 available
under the ANADAC Bank Line of Credit, which has been renewed to March 31, 2001.
While the Company believes that cash flow from operations, together with
existing working capital and two existing bank lines of credit, will be adequate
to fund the Company's cash requirements through fiscal 2001, we may need to
raise additional debt or equity financing in the next 12 months. We may not be
able to obtain additional equity or debt financing and if successful in securing
additional financing, we may not be able to do so on terms that are not
excessively dilutive to existing stockholders or less costly than existing
sources of debt financing. Failure to secure additional financing on favorable
terms could have a severe negative impact on our financial performance and stock
price.

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 December 31, 2000, the State of Wisconsin Investment Board owns
approximately 11% of the Company's outstanding common stock. The concentration
of large percentages of ownership in any single shareholder may delay or prevent
change in control of the Company. Additionally, the sale of a significant number
of our shares in the open market could adversely affect our stock price.

Our products are complex, may contain undetected or unresolved defects when sold
--------------------------------------------------------------------------------
or may not meet customer's performance
--------------------------------------

                                       17
<PAGE>

criteria, and may be difficult to successfully manufacture in volume.
---------------------------------------------------------------------

         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 complexity of certain of our
fingerprint readers may make the manufacturing and assembly process of such
products, especially in volume, complex. This may in turn lead to delays or
shortages in the availability of certain products. The negative effects of any
delay or failure could be exacerbated if the delay or 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.

Failure by us to maintain the proprietary nature of our technology, products and
--------------------------------------------------------------------------------
manufacturing processes could have a material adverse effect on the Company's
-----------------------------------------------------------------------------
business, operating results, financial condition and stock price and on the
---------------------------------------------------------------------------
Company's ability to compete effectively.
-----------------------------------------

         We principally rely upon patent, trademark, 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 acquire assets and businesses
principally relating to or complementary to our current operations. We acquired
Identicator Technology, Inc. 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

                                       18
<PAGE>

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
     .   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, 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:

James P. Scullion, President and Chief Financial Officer, and Daniel F. Maase,
Vice President and Chief Technical Officer, Imaging Division, have a combined
total of 23 years experience with Identix and have a substantial amount of
acquired knowledge regarding Identix and the biometrics industry generally and
Mr. Scullion plays a major role in the execution of Identix's strategic plan.

Grant Evans, Executive Vice President itrust Global Strategy, has established
relationships with major companies and plays a central role in the Company's
itust division global marketing strategy.

Yuri Khidekel, Vice President and Chief Software Technology Officer, Security
Division, and Yury Shapiro, Vice President and Chief Hardware Technology
Officer, Security Division, serve as key researchers and developers and manage
the biometric security research and development activities of IT Concepts, a key
product and service provider to the Company.

         If we lose the services of key personnel, or fail to replace the
services of key personnel who depart from the Company, we could experience a
severe negative impact on our financial results and stock price. In addition,
there is intense competition for highly qualified engineering and marketing
personnel in the Silicon Valley where the Company principally operates. The loss
of the services of any key engineering, marketing or other personnel or the
failure of the Company to attract, integrate, motivate and retain additional key
employees could have a material adverse effect on the Company's business,
operating and 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 dramatic seismic activity. An earthquake or other significant natural
disaster could have a material adverse impact on our business, financial
condition, operating results and stock price.

Our business operations may be adversely affected by the California energy
--------------------------------------------------------------------------
crisis.
-------

         Our principal facilities are located in the Silicon Valley in Northern
California. California has been experiencing an energy crisis that has resulted
in disruptions in power supply and increases in utility costs to consumers and
business throughout the State. Should the energy crisis continue, together with
many other Silicon Valley companies, we may experience power interruptions and
shortages and be subject to significantly higher costs of energy. Although, we
have not experienced any material disruption to our business to date, if the
energy crisis continues and power interruptions or shortages occur in the
future, they may adversely affect our business. Any material increase in energy
costs may also adversely affect

                                       19
<PAGE>

our financial results.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

     Interest Rate Risk. The Company's exposure to market risk for changes in
     ------------------
interest rates relates primarily to the Company's cash equivalents and lines of
credit. The Company does not use derivative financial instruments in its
investment portfolio. The Company's investment portfolio is generally comprised
of money market 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.

     The Company primarily enters into debt obligations to support general
corporate purposes including working capital requirements and capital
expenditures. The Company is subject to fluctuating interest rates that may
impact, adversely or otherwise, its results of operation or cash flows for its
variable rate lines of credit and cash equivalents.

     Foreign Currency Exchange Rate Risk. Certain of the Company's foreign
     -----------------------------------
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.

PART II        OTHER INFORMATION

     Item 1. Legal Proceedings

           The Company is not party to any material legal proceedings.

     Item 2. Changes in Securities

           In July 2000, the Company entered into a Securities Purchase
Agreement with Motorola, Inc. ("Motorola"), whereby the Company sold 234,558
shares of Series A Redeemable Convertible Preferred Stock (the "Series A
Preferred Stock") at $15.99 per share, resulting in cash proceeds to the Company
of $3,702,000, net of issuance costs. In accordance with the Securities Purchase
Agreement, the price per share was determined using the average closing price of
the Company's common stock during the ten trading days immediately prior to the
sale. The sale of the Series A Preferred Stock was exempt from registration
under applicable securities laws, however, Motorola has demand registration
rights which are effective beginning on January 7, 2001.

           The Series A Preferred Stock is convertible into shares of the
Company's common stock on a one-to-one basis, subject to adjustment for
anti-dilution. The Series A Preferred Stock is redeemable upon a change in
control or sale of all or substantially all of the assets of the Company at a
redemption price equal to all accrued or declared but unpaid dividends of the
Series A Preferred Stock, plus the greater (as adjusted for any stock dividends,
combinations, or splits with respect to such shares) of (x) the then current
market price of each such share (i.e. the average closing price of the common
stock during the ten trading days immediately prior to the change of control) or
(y) $15.99 per share.

           In connection with the issuance of the Series A Preferred Stock, the
Company also issued Motorola a warrant to purchase 187,647 shares of the
Company's common stock at $17.11 per share. The warrant is immediately
exercisable and expires on July 7, 2005.

           The proceeds from the sale of the Series A Preferred Stock will be
used solely for the research, design, development, marketing and manufacturing
of product and service solutions related to the Company's itrust division.

         On December 22, 2000, the Company entered into a Common Stock Purchase
Agreement with VeriSign Capital Management, Inc. ("VeriSign") pursuant to which,
the Company sold, on January 2, 2001, 264,901 shares of its common stock at
$7.55. The sale resulted in net cash proceeds to the Company of $2,000,000. In
accordance with the Common Stock Purchase Agreement, the price per share was
determined using the average closing price of the Company's common stock during
the ten trading days immediately prior to the sale. The proceeds from the sale
will be used solely for the research, design, development, marketing and
manufacturing of product and service solutions designed by the Company's itrust
division and, accordingly, will be presented as restricted cash.

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

                                       20
<PAGE>

       (a)     The Annual Meeting of Shareholders was held on October 26, 2000.
       (b)     All Board of Directors nominees referenced in Item 4 (c) below
               were elected at the Annual Meeting of Shareholders on October 26,
               2000.
       (c)     The matters voted upon and the results of the voting were as
               follows: (1) The following nine persons were elected to the Board
               of Directors:

                     Name                    Votes For           Votes Withheld
                     ----                    ---------           --------------
               Randall C. Fowler             28,101,280              797,697
               Patrick H. Morton             28,099,065              799,912
               Randall Hawks, Jr.            28,045,634              853,343
               Fred U. Sutter                28,067,141              831,836
               Larry J. Wells                28,095,115              803,862
               Charles W. Richion            28,141,155              757,822
               James P. Scullion             28,187,829              711,148
               John E. Major                 28,198,267              700,710
               Paul J. Bulger                28,200,196              698,781


               (2)  Amendment to the Identix Incorporated Certificate of
                    Incorporation to increase the number of authorized shares of
                    the Company's common stock was approved. The approved
                    amendment increased the number of authorized common shares
                    by 50,000,000 to a total of 100,000,000. The number of
                    shares voted in favor of the amendment was 27,311,371, the
                    number of shares voted against was 1,436,184, and the number
                    of shares that abstained was 151,422.

               (3)  Amendment to the Identix Incorporated Equity Incentive Plan
                    (the "Incentive Plan") was approved. The approved amendment
                    increased the number of shares available for issuance under
                    the Incentive Plan by 1,700,000 shares to a total of
                    4,700,000. The number of shares voted in favor of the
                    amendment was 12,434,566, the number of shares voted against
                    was 2,032,362, and the number of shares that abstained was
                    242,734.

               (4)  Amendment to the Identix Incorporated Non-Employee Directors
                    Plan was approved. The approved amendment increased the
                    number of shares available for issuance under the Non-
                    Employee Directors Plan by 450,000 shares to a total of
                    860,000. In addition, the amendment increased the shares
                    covered by an option grant made to a Non-Employee Director
                    upon initial election from 20,000 shares to 30,000 shares or
                    from 10,000 shares to 15,000 shares in case more than six
                    months have passed since the date of the last annual
                    shareholders meeting at the time of such election. The
                    number of shares voted in favor of the amendment was
                    11,910,530, the number of shares voted against was
                    2,497,343, and the number of shares that abstained was
                    301,789.

               (5)  The appointment of PricewaterhouseCoopers LLP as independent
                    accountants of the Company for the fiscal year ending June
                    30, 2001 was ratified. The number of shares voted in favor
                    of the appointment was 28,611,829, the number of shares
                    voted against was 161,624, and the number of shares that
                    abstained was 125,524.

Item 6. Exhibits and Reports on Form 8-K.
           (a) Exhibits

               Exhibit
               Number           Description

               3.1   Certificate of Incorporation, Amended and Restated
                     dated October 26, 2000
               3.2   Bylaws, as amended dated October 26, 2000
               4.7   Common Stock Purchase Agreement between Identix and
                     VeriSign Capital Management, Inc. dated December 22, 2000
               10.33 Employment and Stock Option Agreements between Identix and
                     Robert McCashin dated

                                       21
<PAGE>

                      October 19, 2000
               10.34  Lease Agreement between Identix and Vasona Business Park
                      dated December 8, 2000
               10.35  Third Amendment to Second Amended and Restated Loan
                      Agreement between Identix and Imperial Bank dated October
                      24, 2000

          (b)  During the three months ended December 31, 2000, no reports were
               filed on Form 8-K.


                                   SIGNATURE

     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 February 9, 2001.

                                          IDENTIX INCORPORATED

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

                                       22