<PAGE>   1
                       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, 1997 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)

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

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

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:

                        25,109,844 shares of Common Stock
                             as of January 31, 1997





                                       1

<PAGE>   2
                              IDENTIX INCORPORATED

                                     INDEX


PART 1         FINANCIAL INFORMATION

     Item 1    Financial Statements

               Consolidated Balance Sheets - December 31, 1997 and June 30, 1997

               Consolidated Statements of Operations - three months ended
                 December 31, 1997 and 1996; and six months ended
                 December 31, 1997 and 1996

               Consolidated Statements of Cash Flows - six months ended
                 December 31, 1997 and 1996

               Notes to Consolidated Financial Statements

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


PART II        OTHER INFORMATION

     Item 1    Legal Proceedings

     Item 4    Submission of Matters to a Vote of Security Holders

     Item 6    Exhibits


     Signatures

<PAGE>   3
Item 1. Financial Statements

                              IDENTIX INCORPORATED
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                       DECEMBER 31,           JUNE 30,
                                                                            1997                1997
                                                                       ------------        ------------
                                                                       (UNAUDITED)
<S>                                                                    <C>                 <C>         
ASSETS
    Current assets:
      Cash and cash equivalents                                        $  1,236,000        $  2,510,000
      Accounts receivable, less allowance for doubtful accounts
        and sales returns of $768,000 and $625,000                       23,301,000          18,737,000
      Inventories                                                         6,581,000           5,295,000
      Prepaid expenses and other assets                                     877,000             323,000
                                                                       ------------        ------------
         Total current assets                                            31,995,000          26,865,000

    Property and equipment, net                                           2,418,000           2,567,000
    Intangibles and other assets                                          3,005,000           3,008,000
    Investment in joint venture                                             214,000                --
                                                                       ------------        ------------
             Total assets                                              $ 37,632,000        $ 32,440,000
                                                                       ============        ============

LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
      Notes payable to banks                                           $  4,658,000        $  1,919,000
      Accounts payable                                                    6,862,000           6,314,000
      Accrued compensation                                                1,645,000           1,515,000
      Other accrued liabilities                                           1,351,000           1,079,000
      Deferred revenue                                                      990,000             561,000
                                                                       ------------        ------------
         Total current liabilities                                       15,506,000          11,388,000

    Deferred revenue                                                         43,000              65,000
    Other liabilities                                                        89,000              89,000
                                                                       ------------        ------------
         Total liabilities                                               15,638,000          11,542,000
                                                                       ------------        ------------

    Commitments and contingencies (Note 6)

    Shareholders' equity:
      Common stock, no par; 50,000,000 shares authorized;
         25,108,844 and 24,942,778 shares issued and outstanding         51,994,000          51,283,000
      Accumulated deficit                                               (29,253,000)        (30,204,000)
      Cumulative translation adjustment                                    (747,000)           (181,000)
                                                                       ------------        ------------
         Total shareholders' equity                                      21,994,000          20,898,000
                                                                       ------------        ------------
             Total liabilities and shareholders' equity                $ 37,632,000        $ 32,440,000
                                                                       ============        ============
</TABLE>





       See accompanying notes to these consolidated financial statements.



                                       2

<PAGE>   4

                              IDENTIX INCORPORATED
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)




<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED                       SIX MONTHS ENDED
                                                             DECEMBER 31,                            DECEMBER 31,
                                                   --------------------------------        --------------------------------

                                                       1997                 1996               1997                1996
                                                   ------------        ------------        ------------        ------------
<S>                                                <C>                 <C>                 <C>                 <C>         
Revenues:
    Net product revenues                           $  8,089,000        $  6,295,000        $ 16,996,000        $ 12,674,000
    Fingerprint services revenues                       370,000                --               370,000                --
    Services revenues                                11,294,000           5,291,000          21,237,000          10,991,000
                                                   ------------        ------------        ------------        ------------
      Total revenues                                 19,753,000          11,586,000          38,603,000          23,665,000
                                                   ------------        ------------        ------------        ------------

Costs and expenses:
    Cost of product revenues                          3,974,000           3,172,000           8,110,000           6,544,000
    Cost of fingerprinting services revenues            352,000                --               352,000                --
    Cost of  services revenues                        9,489,000           3,861,000          18,053,000           8,511,000
    Research, development and engineering             1,127,000             662,000           2,164,000           1,199,000
    Marketing and selling                             2,195,000           2,037,000           4,401,000           3,703,000
    General and administrative                        2,134,000           1,924,000           4,538,000           3,692,000
                                                   ------------        ------------        ------------        ------------


      Total costs and expenses                       19,271,000          11,656,000          37,618,000          23,649,000
                                                   ------------        ------------        ------------        ------------

Income (loss) from operations                           482,000             (70,000)            985,000              16,000
Other income (expense), net                              58,000               8,000             102,000              (1,000)
Interest income (expense), net                          (61,000)            (74,000)            (82,000)           (141,000)
                                                   ------------        ------------        ------------        ------------

Net income (loss), before tax and
  interest in equity investments                        479,000            (136,000)          1,005,000            (126,000)
                                                   ------------        ------------        ------------        ------------

Income taxes                                            (25,000)               --               (25,000)               --
Equity interest in joint venture, net of tax            (29,000)               --               (29,000)               --
                                                   ------------        ------------        ------------        ------------


Net income (loss)                                  $    425,000        $   (136,000)       $    951,000        $   (126,000)
                                                   ============        ============        ============        ============


Basic earnings (loss) per share                    $       0.02        $      (0.01)       $       0.04        $      (0.01)
                                                   ============        ============        ============        ============

Diluted earnings (loss) per share                  $       0.02        $      (0.01)       $       0.04        $      (0.01)
                                                   ============        ============        ============        ============

Weighted average common shares                       25,060,000          24,781,000          25,011,000          24,777,000
                                                   ============        ============        ============        ============

Weighted average common
  shares assuming dilution                           25,756,000          24,781,000          25,690,000          24,777,000
                                                   ============        ============        ============        ============
</TABLE>




       See accompanying notes to these consolidated financial statements.




                                       3
<PAGE>   5

                              IDENTIX INCORPORATED
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                 FOR THE SIX MONTH PERIOD
                                                                     ENDED DECEMBER 31,
                                                              --------------------------------
                                                                  1997              1996
                                                              ------------        ------------
<S>                                                           <C>                 <C>          
Cash flows provided by operating activities:
   Net income (loss)                                          $    951,000        $   (126,000)
Adjustments to reconcile net income (loss) to net
  cash provided by (used for) operating activities:
   Depreciation and amortization                                 1,121,000             949,000
   Amortization of deferred revenue                               (860,000)           (341,000)
   Changes in assets and liabilities:
      Accounts receivable                                       (4,564,000)            112,000
      Inventories                                               (1,286,000)           (782,000)
      Prepaid expenses and other assets                           (554,000)           (336,000)
      Accounts payable                                             548,000             959,000
      Accrued compensation                                         130,000              51,000
      Other accrued liabilities                                    272,000             722,000
      Deferred revenue                                           1,267,000             550,000
                                                              ------------        ------------

Net cash provided by (used for) operating activities            (2,975,000)          1,758,000
                                                              ------------        ------------

Cash flows used for investing activities:
   Capital expenditures                                           (528,000)           (996,000)
   Additions to intangibles and other assets                      (441,000)           (485,000)
   Investment in joint venture                                    (214,000)               --
   Cash received in acquisitions                                      --                 6,000
                                                              ------------        ------------

Net cash used for investing activities                          (1,183,000)         (1,475,000)
                                                              ------------        ------------

Cash flows provided by financing activities:
   Borrowings under bank lines of credit                        11,080,000          11,026,000
   Payments under bank lines of credit                          (8,341,000)         (9,302,000)
   Principal payments on long-term note                               --               (53,000)
   Proceeds from sale of common stock and warrants, net            711,000             140,000
   Other, net                                                         --                 2,000
                                                              ------------        ------------

Net cash provided by financing activities                        3,450,000           1,813,000
                                                              ------------        ------------

Effects of exchange rate changes on cash
  and cash equivalents                                            (566,000)             12,000
                                                              ------------        ------------

Net increase (decrease) in cash and cash equivalents            (1,274,000)          2,108,000

Cash and cash equivalents at beginning of period                 2,510,000             981,000
                                                              ------------        ------------

Cash and cash equivalents at end of period                    $  1,236,000        $  3,089,000
                                                              ============        ============
</TABLE>


       See accompanying notes to these consolidated financial statements.




                                       4
<PAGE>   6

IDENTIX INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   BASIS OF PRESENTATION

     These accompanying consolidated financial statements and related notes are
     unaudited. However, in the opinion of management, all adjustments
     (consisting only of normal recurring adjustments) which are necessary for a
     fair presentation of the financial position and results of operations for
     the interim period 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,
     1997 included in the Company's Form 10-K. The results of operations for the
     three and six months ended December 31, 1997 are not necessarily indicative
     of results to be expected for the entire fiscal year, which ends on June
     30, 1998.

     The consolidated financial statements include the accounts of Identix
     Incorporated (the "Company") and its wholly owned subsidiaries: ANADAC,
     Inc. ("ANADAC"), Fingerscan Pty Limited ("Fingerscan") and Biometric
     Applications and Technologies, Inc. ("BA&T"). The Company acquired
     Fingerscan on March 26, 1996. The Company accounted for the acquisition of
     Fingerscan as a purchase. The Company acquired BA&T on July 23, 1997. The
     Company accounted for the acquisition of BA&T as a pooling of interests.
     Accordingly, the consolidated statement of operations for the three and six
     month periods ended December 31, 1996 and the consolidated statement of
     cash flows for the six month period ended December 31, 1996 have been
     restated to include the accounts and results of operations of BA&T and the
     consolidated balance sheet as of June 30, 1997 has been restated to include
     the accounts and results of operations of BA&T. In addition, the Company
     acquired Innovative Archival Solutions, Inc. ("IAS") on June 30, 1996. The
     Company accounted for the acquisition of IAS as a pooling of interests. On
     October 1, 1996, IAS was merged into Identix. All significant intercompany
     balances and transactions have been eliminated in consolidation.


2.   JOINT VENTURE

     On September 30, 1997, the Company entered into a joint venture agreement
     with Sylvan Learning Systems, Inc. for the purpose of providing
     fingerprinting services through Sylvan's testing centers nationwide. From
     October 1, 1997, the business of IAS was conducted through the joint
     venture, Sylvan/Identix Fingerprinting Centers LLC.

     For certain contracts held by Identix prior to the joint venture, Identix
     subcontracts the fingerprinting services to the joint venture. Revenues
     received by Identix under these contracts are presented separately as
     fingerprint services in the consolidated statement of operations.

3.   INVENTORIES

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

<TABLE>
<CAPTION>
                                                DECEMBER 31,       JUNE 30,
                                                   1997              1997
                                                ----------       ----------
<S>                                             <C>              <C>       
     Purchased parts and materials              $2,587,000       $3,027,000
     Work-in-process                             2,003,000        1,076,000
     Finished goods, including spares            1,991,000        1,192,000
                                                ----------       ----------
                                                $6,581,000       $5,295,000
                                                ==========       ==========
</TABLE>

4.   EARNINGS PER SHARE

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

     Previously reported earnings per share have been restated to comply with
     Statement of Financial Accounting Standards No. 128, "Earnings per Share."





                                       5
<PAGE>   7

<TABLE>
<CAPTION>
                                                           Three Months Ended                     Three Months Ended
                                                            December 31, 1997                      December 31, 1996
                                                 -------------------------------------  ------------------------------------- 


Basic earnings per share computation:             Net Income       Shares     Per-Share Net Income       Shares     Per-Share
                                                 (Numerator)   (Denominator)   Amount   (Numerator)   (Denominator)   Amount
<S>                                              <C>            <C>           <C>       <C>             <C>          <C>      
     Basic earnings per share:
       Income available to common shareholders   $   425,000    25,060,000    $   0.02  $  (136,000)    24,781,000   $  (0.01)
                                                                              ========                               ======== 

     Effect of dilutive securities
       Stock options and warrants                                  696,000                                      -- (1)
                                                                ----------                              ---------- 


     Dilutive earnings per share:
       Income available to common
       shareholders plus assumed conversions     $   425,000    25,756,000    $   0.02  $  (136,000)    24,781,000   $  (0.01)
                                                                              ========                               ======== 


                                                            Six Months Ended                    Six Months Ended
                                                            December 31, 1997                   December 31, 1996
                                                 -------------------------------------  ------------------------------------- 
Basic earnings per share computation:            Net Income      Shares       Per-Share  Net Income      Shares     Per-Share
                                                 (Numerator)  (Denominator)    Amount   (Numerator)   (Denominator)   Amount
<S>                                              <C>            <C>           <C>       <C>             <C>          <C>      
     Basic earnings per share:
       Income available to common shareholders   $  951,000     25,011,000    $   0.04  $  (126,000)    24,777,000   $  (0.01)
                                                                              ========                               ======== 

     Effective of dilutive securities
       Stock options and warrants                                  679,000                                      --  (1)
                                                                ----------                              ----------             

     Dilutive earnings per share:
       Income available to common
       shareholders plus assumed conversions     $   951,000    25,690,000    $   0.04  $  (126,000)    24,777,000   $  (0.01)
                                                                              ========                               ======== 
</TABLE>


(1) The effect of dilutive securities has been omitted when the effect is
    anti-dilutive.

5.    RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1997, the Financial Accounting Standards Board ("FASB") issued
     Statement of Financial Accounting Standards No. 130 "Reporting
     Comprehensive Income" ("SFAS 130"). This statement is effective for the
     Company's fiscal year ending June 30, 1999. The statement establishes
     presentation and disclosure requirements for reporting comprehensive income
     as defined. Comprehensive income includes charges or credits to equity that
     are not the result of transactions with owners. The Company plans to adopt
     the disclosure requirements and report comprehensive income as part of the
     Consolidated Statements of Shareholders' Equity as required under SFAS 130,
     and expects there to be no material impact on the Company's financial
     position and results of operations as a result of the adoption of this new
     accounting standard.

     In June 1997, FASB issued Statement of Financial Accounting Standards No.
     131 "Disclosures about Segments of an Enterprise and Related Information"
     ("SFAS 131"). This statement is effective for the Company's fiscal year
     ending June 30, 1999. This statement requires the Company to report certain
     financial information about operating segments in complete sets of
     financial statements of the Company and in condensed financial statements
     of interim periods. It also requires that the Company report certain
     information about its products and services, the geographic areas in which
     it operates and its major customers. The method FAS chose for determining
     what information to report is referred to as the "management approach". The
     management approach is based on the way that management organizes the
     segments within the enterprise for making operation decisions and assessing
     performance. The Company's management has not yet completed its assessment
     of how the " management approach" will impact segment disclosures.

6.   CONTINGENT LIABILITIES 

     The Company was named as a defendant in a class action lawsuit, which was
     filed in October 1996 in the United States District Court for the Northern
     District of California. Certain executive officers of the Company were also
     named as defendants. Plaintiffs sought to represent a class of all persons
     who purchased the Company's common stock between January 31, 1996 and
     August 26, 1996 (the "Class Period"). The complaint alleges claims under
     the federal securities laws and California laws. Plaintiffs allege that the
     Company and certain of its executive officers made false and






                                       6

<PAGE>   8

     misleading statements regarding the Company that caused the market price of
     its common stock to be "artificially inflated" during the Class Period. The
     Company and its officers deny plaintiffs' allegations. In December 1997,
     the Company and its officers reached an agreement with plaintiffs and their
     counsel to settle the lawsuit. The settlement was funded largely with
     directors and officers liability insurance proceeds. The Company's
     contribution came from a reserve established in a prior accounting
     period. The proposed settlement has received preliminary approval from the
     United States District Court. Under Federal laws governing class action
     litigation, the settlement is subject to final court approval following
     notice to class members.

     On May 31, 1995, Digital Biometrics, Inc. ("DBI"), a competitor, filed a
     lawsuit in the United States District Court in the Northern District of
     California against the Company alleging that certain of the Company's
     TouchPrint products violate a DBI patent and seeking injunctive relief and
     unspecified damages. The lawsuit has no implication for other Identix
     products. On August 22, 1996, the Court granted the Company's motion
     determining that the TouchPrint 600 does not infringe the patent. On
     December 7, 1996, the Court issued another ruling determining that the
     predecessor product of the TouchPrint 600, the TouchPrint 900 product, did
     not infringe the patent. As a result, the Court entered judgment in favor
     of Identix and awarded Identix its costs of suit. On January 7, 1997, DBI
     filed a Notice of Appeal. Oral argument on that appeal was held before the
     Federal Circuit Court of Appeals on October 8, 1997 and the matter is under
     consideration by the Court.








                                       7



<PAGE>   9

Item 2.
                              IDENTIX INCORPORATED
                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

Identix Incorporated ("Identix" or "the Company") designs, develops,
manufactures and markets comprehensive solutions for the capture or comparison
of fingerprints for security, fraud prevention, law enforcement and other
applications. Identix's products are classified into two groups: (i) biometric
identity verification ("Bio-ID") products that verify the identify of an
individual through the unique biological characteristics of a fingerprint and
(ii) biometric imaging products that electronically capture forensic quality
fingerprint images directly from an individual's fingers for law enforcement and
other applications. The Company's principal Bio-ID products are TouchNet II*,
TouchSafe II*, TouchLock II*, TouchClock II*, TouchBlock II*. The Company's
principal biometric imaging products are TouchPrint 600*, TouchView II*,
I3Workstation* and DocuColor*. The Company provides information technology,
engineering and management consulting services to private and public sector
clients through a wholly owned subsidiary, ANADAC, Inc. ("ANADAC"). ANADAC's
services support the development, installation, integration, and operation of
hardware and software technology solutions, including Identix products, for a
variety of client operating environments.

On March 26, 1996, the Company acquired Fingerscan Pty Limited ("Fingerscan"), a
privately held Australian-based company that designs and markets Bio-ID
products. Fingerscan had been a long-standing Identix OEM partner integrating
Identix fingerprint identification technology into Fingerscan's fingerprint
identity and verification products and systems. The acquisition was accounted
for as a purchase. Accordingly, the Company's financial statements include the
results of Fingerscan from the date of acquisition.

On June 30, 1996, the Company acquired Innovative Archival Solutions, Inc.
("IAS"), a privately held company which provides fingerprinting services using
the Company's biometric imaging products. The acquisition was accounted for as a
pooling of interests. Accordingly, the Company's fiscal 1996 consolidated
financial statements include the accounts and results of operations of IAS. For
the periods prior to fiscal 1996, the effects of the combination with IAS were
not significant, and the Company has not restated those years to include the
accounts and operations of IAS. On October 1, 1996, IAS was merged into Identix.

On July 23, 1997, the Company acquired Biometric Applications and Technology,
Inc. ("BA&T"), a privately held developer of biometric and "smart" card
applications and solutions. BA&T had been a software development partner that
integrated its software with Identix's Bio-ID products. The acquisition was
accounted for as a pooling of interests. Accordingly, the Company's fiscal 1997
consolidated financial statements include the accounts and results of operations
of BA&T. For the periods prior to fiscal 1997, the effects of the combination
with BA&T were not significant, and the Company has not restated those years to
include the accounts and results of operations of BA&T.

On September 30, 1997, the Company entered into a joint venture agreement with
Sylvan Learning Systems, Inc. for the purpose of providing fingerprinting
services through Sylvan's testing centers nationwide. As of October 1, 1997, the
business of IAS is being conducted through the joint venture, Sylvan/Identix
Fingerprinting Centers LLC ("SIFC").

The statements in this report 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. Readers are cautioned not to place
undo reliance on these forward-looking statements, which speak only as of the
date hereof. The Company undertakes no obligation to publicly release the result
of any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

-----------------------------
(*) The Company has adopted TouchNet II(TM), TouchSafe II(TM), TouchLock
II(TM), TouchClock II(TM), TouchBlock II(TM), TouchPrint 600(TM), TouchView
II(TM), I3 Workstation(TM) and DocuColor(R) as trademarks.



                                       8

<PAGE>   10

IDENTIX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED . . .

RESULTS OF OPERATIONS

Revenues

Revenues for the three and six month periods ended December 31, 1997 were
$19,753,000 and $38,603,000, respectively, compared to $11,586,000 and
$23,665,000 for the same period in the prior fiscal year. For the three and six
month periods ended December 31, 1997 the increase in revenues of 70% and 63% is
due to increases in the Company's net product revenues and services revenues.

The Company's net product revenues were $8,089,000 and $16,996,000 for the three
and six month periods ended December 31, 1997, respectively, compared to
$6,295,000 and $12,674,000 for the same periods in the prior fiscal year. For
the three and six month periods ended December 31, 1997, the increases in net
product revenues of 28% and 34% were due to increased shipments of the Company's
biometric imaging product group, mainly the TouchPrint 600 product line. In
addition, increased sales of the TouchPrint 600 product line have generated
additional revenues from maintenance support agreements and related customer
support. The increase in biometric imaging sales was partially offset by a
decline in the Company's Bio-ID product group sales, which resulted primarily
from a push-out or slow-down of Bio-ID sales to certain customers in Asia.
International sales accounted for $1,860,000 or 23% and $4,397,000 or 26% of the
Company's net product revenues for the three and six month periods ended
December 31, 1997, respectively, compared to $2,645,000 or 42% and $3,910,000 or
31% for the same periods in the prior fiscal year. The decrease in international
sales for the three month period was due to delays in delivery to certain Asian
customers; however, over the six month period ended December 31, 1997,
international sales for the biometric imaging product group increased over the
prior six month period. The Company expects international sales to continue to
represent a significant portion of net product revenues although the percentage
may fluctuate from period to period. The Company's international sales are
denominated in U.S. dollars except for sales by Fingerscan which are denominated
in Australian dollars. 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. For the three and six month periods ended December 31, 1997, the
Company had one product business customer that accounted for 14% and 13% of
total revenues, respectively. For the three month period ended December 31,
1996, the Company had one product business customer that accounted for 14% of
total revenues, and for the six month period ended December 31, 1996, the
Company had a different product business customer which accounted for 12% of
total revenues.

The Company's fingerprinting service revenues were $370,000 for the three month
and six month periods ended December 31, 1997. On September 30, 1997, the
Company entered into a joint venture agreement with Sylvan Learning Systems,
Inc. for the purpose of providing fingerprinting services through Sylvan's
testing centers nationwide. For certain contracts that Identix held prior to the
commencement of the joint venture, Identix subcontracts the fingerprinting
services to SIFC at amounts equal to the amounts billed to the customers;
therefore, no gross margin is recognized by the Company except for a 5% license
fee charged to SIFC for use of certain of the Company's trademarks. 

The Company's services revenues were $11,294,000 and $21,237,000 for the three
month and six month periods ended December 31, 1997 compared to $5,291,000 and
$10,991,000 for the same periods, in the prior fiscal year. The increases in
services revenues of 113% and 93% for the three and six month periods ended
December 31, 1997, respectively, were due primarily to increases in U.S.
government purchases through the Company's General Services Administration
("GSA") contract which is operated and maintained by ANADAC. The GSA contract
allows Government agencies to purchase the Company's products and services as
well as third party products and services at agreed upon prices and rates. The
Company and the General Services Administration negotiate the prices and rates
periodically or as new products or services are added. The majority of the
Company's services revenues are generated directly from contracts with the U.S.
government, principally the Department of Defense ("DOD"). For both the three
and six month periods ended December 31, 1997, revenues directly from the DOD
and from other U. S. government agencies accounted for 87% of the Company's
total services revenues compared to 73% and 71% for the same periods in the
prior fiscal year.

The Company's services business generates a significant amount of its revenues
from cost plus fixed fee ("CPFF") contracts, which accounted for approximately
19% and 21% of its services revenues for the three and six month periods ended
December 31, 1997, compared to 51% and 48% for the same periods in the prior
fiscal year. The decrease in the percentage of services revenues generated by
CPFF contracts is due to the increase in third party services purchased through
the GSA contract. CPFF contracts provide for the reimbursement of allowable
costs, including indirect costs plus a fee or profit. The Company's services
business also generates revenue from time-and-materials ("T&M") contracts and
from firm fixed-price



                                       9
<PAGE>   11


IDENTIX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED . . .

("FFP") contracts. During the three and six month periods ended December 31,
1997, the Company derived approximately 13% and 18%, respectively of its
services revenues from T&M and FFP contracts compared to 37% and 36% for the
same periods in the prior fiscal year. The decrease in the percentage of
services revenues generated by T&M and FFP contracts is due to the increase in
third party services purchased through the GSA contract. T&M contracts typically
provide for payment of negotiated hourly rates for labor incurred plus
reimbursement of other allowable direct and indirect costs. 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. 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. In addition, revenues generated from contracts
with government agencies are subject to audit and subsequent adjustment by
negotiation between the Company and representatives of such government agencies.
ANADAC is currently under going an audit by the Defense Contract Audit Agency
("DCAA") for the period from July 1, 1992 to June 30, 1995.

Gross Margin

Gross margin on net product revenues was 51% and 52% for the three month and six
month periods ended December 31, 1997, respectively, as compared to 50% and 48%
for the same periods in the prior fiscal year. The increases in gross margin
were primarily due to (i) the favorable mix of higher gross margin
products and related customer support, (ii) cost reductions in certain
components of the biometric imaging and Bio-ID product lines and (iii) increased
manufacturing efficiencies resulting from the increase in unit volume. 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 fingerprinting service revenues was 5%. Identix receives a
licensing fee for use of certain of the Company's trademarks.

Gross margin on services revenues was 16% and 15% for the three and six month
periods ended December 31, 1997, respectively, as compared to 27% and 23% for
the same periods in the prior fiscal year. The decreases in gross margin for the
three and six month periods were primarily due to an increase in third party
services purchased through the GSA contract maintained by ANADAC. When the
Company sells third party services through the GSA contract, the Company earns a
fee based on a percentage of the third party purchased services. The fee earned
on third party services is typically less than the fee earned on services
directly provided by the Company.

Research, Development and Engineering

Research, development and engineering expenses were $1,127,000 or 14% and
$2,164,000 or 13% of net product revenues for the three and six month periods
ended December 31, 1997, receptively, compared to $662,000 or 11% and $1,199,000
or 9% of net product revenues for the same periods in the prior fiscal year. For
the three and six month periods ended December 31, 1997, the Company had $16,000
in research, development and engineering expenditures funded by customers
compared to $61,000 and $186,000 for the same period in the prior fiscal year.
The increase in research, development and engineering expenses is primarily due
to the addition of engineering staff and related expenses to further develop and
enhance the Company's products including BA&T's Bio-ID software products. The
Company 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 increase
in absolute dollars in future fiscal 1998 quarters.

Marketing and Selling

Marketing and selling expenses were $2,195,000 or 11% and $4,401,000 or 11% of
total revenues for the three and six month periods ended December 31, 1997
compared to $2,037,000 or 18% and $3,703,000 or 16% of total revenues for the
same periods in the prior fiscal year. The increase in marketing and selling
expenses in absolute dollars is due to the increased staffing and expenses to
promote the Company's products and services and to expand its customer support
organization.




                                       10

<PAGE>   12


IDENTIX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED . . .

General and Administrative

General and administrative expenses were $2,134,000 or 11% and $4,538,00 or 12%
of total revenues for the three and six month periods ended December 31, 1997,
respectively, compared to $1,924,000 or 17% and $3,692,000 or 16% of total
revenues for the same period 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 the growth in operations and
the requirements of supporting infrastructure. The increase was partially offset
by a decrease in litigation reserves and expenses which were $37,000 and
$460,000 for the three months and six months ended December 31, 1997 compared to
$308,000 and $636,000 for the same periods in the prior fiscal year.

Other Income and Expense, Net

For the three and six month periods ended December 31, 1997 net other income was
$58,000 and $102,000, respectively, compared to net other income of $8,000 and
net other expense of $1,000 for the same periods in the prior fiscal year.

Net Interest Expense

Net interest expense was $61,000 and $82,000 for the three and six month periods
ended December 31, 1997 compared to $74,000 and $141,000 for the same periods in
the prior fiscal year. The difference was due to reduced borrowings under the
Company's lines of credit during the three and six month periods ended December
31, 1997 compared to the same periods in the prior fiscal year.

During the three and six month periods ended December 31, 1997, the weighted
average interest rate paid by the Company on borrowings under its line of credit
(the "Identix Line of Credit") was 8.5%. The weighted average interest rate paid
by ANADAC on borrowings under its bank line of credit (the "ANADAC Line of
Credit") during the three and six month periods ended December 31, 1997 was
8.5%.

Income Taxes

The provision for income taxes was $25,000 for the three and six months ended
December 31, 1997. The Company's tax rate is below the statutory rate due to
significant net operating loss carryforwards incurred in prior years. The
Company is subject to certain alternative minimum tax requirements for which an
estimate is made based on the Company's anticipated effective tax rate at the
end of the fiscal year.

Equity Interest in Joint Venture, Net of Tax

The equity interest in joint venture, net of tax represents the Company's share
of the results of SIFC. For the three and six month periods ended December 31,
1997 equity interest in joint venture net of tax was a loss of $29,000.

LIQUIDITY AND CAPITAL RESOURCES

The Company financed its operations during the three and six months ended
December 31, 1997 primarily from its existing working capital at June 30, 1997
and borrowings under the Identix Line of Credit and the ANADAC Line of Credit.
As of December 31, 1997, the Company's principal sources of liquidity consisted
of $ 16.5 million of working capital including $1.2 million in cash and cash
equivalents, the Identix Line of Credit and the ANADAC Line of Credit.

The Identix Line of Credit is a $6,000,000 bank line of credit secured by the
personal property of Identix. Under the bank line of credit, the Company may
borrow up to 80% of eligible accounts receivable and may borrow up to 35% of
eligible inventory. Amounts drawn bear interest at the bank's prime rate of
interest (8.5% at December 31, 1997). The line of credit expires on August 28,
1998. At December 31, 1997, $1,500,000 was outstanding and $4,500,000 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 the Company's common stock. 




                                       11

<PAGE>   13



IDENTIX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED . . .

The ANADAC Line of Credit is a $6,000,000 bank line of credit secured by
ANADAC's accounts receivable and certain other assets. Under the ANADAC Line of
Credit, ANADAC may borrow against qualified accounts receivable. Amounts drawn
bear interest at the bank's prime rate of interest (8.5% at December 31, 1997).
The line of credit expires on November 30, 1998. At December 31, 1997,
$3,158,000 was outstanding and $2,829,000 was available under the ANADAC Line of
Credit. The ANADAC Line of Credit agreement contains financial and operating
covenants.

The Company used cash of $2,975,000 in its operating activities during the six
months ended December 31, 1997 primarily due to increases in accounts receivable
of $4,564,000, inventory of $1,286,000 and prepaid expenses of $554,000. These
were partially offset by net income of $951,000 and increases in deferred
revenue of $1,267,000 and accounts payable of $548,000. The increase in accounts
receivable was due primarily to an increase in total revenues and delays with
certain U. S. government accounts receivables which were collected in early
January 1998, and the increase in inventories was due primarily to the stocking
of certain inventory for the Company's Bio-ID and biometric imaging product
groups. The increase in deferred revenue was primarily due to an increase in the
number of TouchPrint 600 systems under maintenance contracts. The increase in
accounts payable was due to financing the increase in inventories and timing of
vendor payments.

The Company used cash of $1,183,000 in investing activities during the six
months ended December 31, 1997 consisting of purchases of property and equipment
of $528,000, additions to intangibles and other assets of $441,000 and
investment in joint venture of $214,000.

The Company generated cash of $3,450,000 in its financing activities during the
six months ended December 31, 1997 consisting of increased net borrowings
against the Company's lines of credit of $2,739,000 and proceeds from exercises
of stock options to purchase common stock of $711,000.

Identix did not have any material capital expenditure commitments as of December
31, 1997.

The Company believes that cash flow from operations together with existing
working capital and two bank lines of credit maintained by the Company will be
adequate for the Company's cash requirements for fiscal 1998. However, the
Company may require additional equity or debt financing beyond the amounts
currently forecasted by the Company to meet its working capital or capital
equipment needs. There can be no assurance that the Company would be able to
obtain such financing or that the terms of financing would be favorable to the
Company.






                                       12

<PAGE>   14


IDENTIX INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS - CONTINUED . . .

RISK FACTORS

         The Company's future operation, financial performance, business and
share price may be affected by a number of factors, including the following, any
of which could cause actual results to vary materially from anticipated results
or from those expressed in any forward-looking statements made by the Company in
this Report on Form 10-Q for the three and six month periods ended December 31,
1997, or in other reports, press releases or other statements issued from time
to time.

FLUCTUATIONS IN QUARTERLY RESULTS

         The Company's quarterly operating results have in the past been, and
will continue to be, subject to significant variations resulting from a number
of factors, many of which are outside of the Company's control and any one of
which could substantially affect the Company's results of operations for any
particular fiscal period. The Company's revenues in any period have been, and in
the near term are expected to be, derived from large orders from a limited
number of customers. Accordingly, revenues in a particular quarter will be
dependent upon the timing and size of major orders and the timing of recognition
of revenues from those orders. A majority of the Company's revenues are derived
from the sale of products and services directly to governmental agencies or
original equipment manufacturers ("OEMs"), systems integrators or resellers who
sell products and services to government agencies. Government agencies are
subject to political and budgetary constraints and orders from them may be
canceled or substantially delayed or the receipt of revenues or payments
substantially delayed due to political and budgetary processes or other
scheduling delays relating to the contract or bidding process. In addition, the
Company's contracts with local government agencies may be contingent upon
availability of matching funds from state or federal entities. Other factors
which can result in fluctuations in quarterly results of operations include
budgetary and purchasing cycles of government agencies; changes in the mix of
products and services sold and the mix of product sales by distribution
channels; the pricing of existing and future products by the Company's
competitors; the introduction of new or enhanced products by the Company or its
competitors and the market acceptance thereof; expenses related to, and results
of, litigation; percentage of and costs associated with FFP contracts and T&M
contracts; the availability and cost of key components; and fluctuations in
general economic conditions. The Company also may choose to reduce prices or to
increase spending in response to competition or to pursue new market
opportunities, all of which may adversely affect the Company's business,
financial condition and results of operations. Further, the lead-time for
ordering parts and materials and building the Company's products can be many
months and the Company orders parts and materials and builds products based on
its forecasted demand for the products. If demand for the Company's products
lags significantly behind the Company's forecasts, the Company runs the risk of
building too large an inventory, which may adversely affect cash flow and may
result in write-offs or writedowns of inventory because of product obsolescence.
Due to the foregoing factors, the Company's operating results may differ from
the expectations of securities analysts and investors, which could adversely
affect the trading price of the Company's common stock. The Company believes
that period-to-period comparisons of its results of operations should not be
relied upon as indications of future performance.

DEPENDENCE UPON NEW AND UNCERTAIN MARKETS; UNCERTAINTY OF MARKET ACCEPTANCE

         Substantially all of the Company's product revenues to date have been,
and for the foreseeable future are anticipated to be, derived from Bio-ID
products and biometric imaging products. These products represent new
technologies, which have not gained widespread commercial acceptance. In
particular, Bio-ID products represent a new approach to identity verification,
which has only been used in limited applications to date. The expansion of the
market for the Company's products depends on a number of factors, including the
cost and reliability of the Company's products and products of competitors,
customers' perception of the perceived benefits of these products, public
perceptions of the intrusiveness of these products and the manner in which
agencies are using the fingerprint information collected, public confidence as
to confidentiality of private information, customers' satisfaction with the
Company's products and publicity regarding these products. Public objections
have been raised as to the use of biometric products for some applications on
civil liberties grounds. The Company's future success is dependent upon the
development and expansion of markets for Bio-ID products and biometric imaging
products both domestically and internationally. In addition, even if markets
develop for Bio-ID products and additional markets develop for biometric imaging
products, there can be no assurance that the Company's products will gain wide
market acceptance in these markets. A number of factors may limit the market
acceptance of the Company's products, including the performance and price of the
Company's products compared to competitive products or technologies, the
practicalities of developing the infrastructure necessary to support certain
Bio-ID applications such as






                                       13


<PAGE>   15

ATMs and point-of-sale applications, the nature of technological innovations and
new product development activities by the Company and its competitors, and the
extent of marketing efforts by the Company's collaborators or partners. If the
markets for the Company's products fail to develop or develop more slowly than
anticipated or if the Company's Bio-ID products fail to gain wide market
acceptance, or biometric imaging products lose market share, the Company's
business, financial condition and results of operations would be materially and
adversely affected.

COMPETITION AND TECHNOLOGICAL CHANGE

         The markets for Bio-ID products and biometric imaging systems are
extremely competitive and are characterized by rapid technological change, both
as a result of technical developments exploited by competitors, the changing
technical needs of customers and frequent introductions of new features. The
Company expects competition to increase as other companies introduce additional
and more competitive products. In order to compete effectively in this
environment, the Company must continually be able to develop and market new and
enhanced products and market those products at competitive prices. There can be
no assurance that the Company will be able to make the technological advances
necessary to compete successfully in its products business. Some of the
Company's present and potential competitors have financial, marketing and
research resources substantially greater than those of the Company. Existing and
new competitors may enter or expand their efforts in the Company's product
markets, or develop new products to compete against the Company's products. No
assurance can be given that the Company's competitors will not develop new
technologies or enhancements to existing products or introduce new products that
will offer superior price or performance features or that new products or
technologies will not render obsolete the products of the Company. For example,
other companies are developing currently or have developed other methods of
biometric identification such as retinal blood vessel or iris pattern, hand
geometry, voice and facial structure, which could significantly reduce the
potential market for the Company's products if widely adopted. In addition,
several companies, including Philips Electronics N.V., Harris Corporation, Sony
Corporation, SGS-Thomson Microelectronics, Inc. and Veridicom, Inc., are
developing semiconductor or optically-based direct contact fingerprint image
capture devices that could compete directly with the Company's Bio-ID image
capture devices. The Company's Bio-ID products also face competition from
non-biometric technologies such as traditional key, card and surveillance
systems, PINs and similar traditional verification methods. The Company believes
that in an effort to remain competitive in the future it will need to invest
increasing financial resources in research and development.

         In its services business, the Company faces substantial competition
from professional services providers of all sizes in the government professional
services market. ANADAC is increasingly being required to bid on FFP 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 its highly qualified personnel or align with technology leaders,
its ability to compete successfully will be materially and adversely affected.

DEPENDENCE ON NEW PRODUCT INTRODUCTIONS

         The Company's future success will depend upon its ability to address
the needs of the market by enhancing its current products and by developing and
introducing new products on a timely basis that keep pace with technological
developments and emerging industry standards (including FBI accreditation
standards), respond to evolving customer requirements and achieve market
acceptance. The development of new, technologically-advanced products and
product enhancements is a complex and uncertain process requiring high levels of
innovation, as well as the accurate anticipation of technological and market
trends. Any failure by the Company to anticipate or adequately respond to
technological developments or end user requirements, or any significant delays
in product development or introduction, could result in a loss of
competitiveness or revenue. There can be no assurance that the Company will be
successful in developing and marketing product enhancements or new products on a
timely basis if at all, that the Company will not experience difficulties that
could delay or prevent the successful development, introduction and sale of
these products, or that any of its new products and product enhancements will
adequately meet the requirements of the marketplace and achieve market
acceptance. If the Company is unable, for technological or any other reason, to
develop, introduce and sell its products in a timely manner, the Company's
business, financial condition and results of operations would be materially and
adversely affected. In addition, because a number of the Company's biometric
imaging products and Bio-ID products are incorporated into systems marketed by
other companies, or are co-marketed together with other products or services
sold by other companies, the failure to introduce products in a timely manner
may cause such companies to seek alternative suppliers or marketing partners.
From time to time, the Company or its present or future competitors may announce
new products, capabilities or technologies that have the potential to replace
the Company's existing products. There can be no assurance that announcements of
currently planned or other new products will not cause customers to delay or
alter their purchasing






                                       14
<PAGE>   16

decisions in anticipation of such products, which could have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, new product introductions may contribute to fluctuations in
quarterly operating results or result in the early obsolescence of the Company's
products, because customers may forego ordering the Company's existing products.
If the Company's new products have reliability or quality problems, the Company
may experience reduced orders, higher manufacturing costs, delays in collecting
accounts receivable and additional service and warranty expense.

DEPENDENCE ON STRATEGIC RELATIONSHIPS FOR PRODUCT DISTRIBUTION

         The Company's strategy for the distribution of certain of its products
requires entering into various strategic relationships with OEMs, systems
integrators and resellers. Some of these relationships are formalized in
agreements; however, such agreements are often terminable with little or no
notice, and subject to periodic amendment. Although the Company believes that
the OEMs, systems integrators and resellers with which it works have an economic
motivation to promote or use the Company's products, the amount and timing of
resources to be devoted to these activities are not within the control of the
Company. There can be no assurance that such parties will actively promote the
Company's products or pursue installations which use the Company's equipment,
that any distribution or other arrangements with the Company will not be
terminated or renegotiated or that the Company will derive any revenues from
such arrangements. The Company intends to continue to seek strategic
relationships to distribute and sell certain of its products. There can be no
assurance that the Company will be able to negotiate acceptable strategic
relationships in the future or that current or future strategic relationships
will be successful.

PUBLIC AGENCY CONTRACT CONSIDERATIONS

         A majority of the Company's revenues are derived from the sale of
products and services either directly to governmental agencies or to OEMs,
systems integrators or resellers who sell products to government agencies.
Government agencies frequently require provisions in contracts that are not
standard in private commercial transactions, such as bonding requirements and
provisions permitting the purchasing agency to cancel the contract without
penalty if funding for the contract is no longer available or is not obtained.
As public agencies, the Company's prospective customers are also subject to
public agency contract requirements, which vary from jurisdiction to
jurisdiction. Future sales to public agencies will depend on the Company's
ability to meet public agency contract requirements, certain of which may be
onerous or even impossible for the Company to satisfy. In addition, public
agency contracts are frequently awarded only after formal competitive bidding
processes, which have been and may continue to be protracted, and typically
contain provisions that permit cancellation in the event that funds are
unavailable to the public agency. There can be no assurance that the Company
will be awarded any of the contracts for which its products are bid or, if
awarded, that substantial delays or cancellations of purchases will not result
from protests initiated by losing bidders.

UNCERTAINTY RELATED TO CONTRACTS FOR SERVICES WITH GOVERNMENT AGENCIES

         During the six months ended December 31, 1997 and fiscal 1997, the
Company derived approximately 87% and 77%, respectively, of its services revenue
directly from contracts relating to the DOD and other U.S. Government agencies.
Loss of any material government contract due to budget cuts or otherwise could
have a material adverse effect on the Company's business, financial condition
and results of operations.

         During the six months ended December 31, 1997 and fiscal 1997, the
Company derived approximately 18% and 46%, respectively, of services revenues
from T&M contracts and FFP contracts. T&M contracts typically provide for
payment of negotiated hourly rates for labor incurred plus reimbursement of
other allowable direct and indirect costs. 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. The Company assumes certain
performance risk on FFP and T&M contracts and the failure to estimate accurately
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 such overruns for any FFP and T&M contracts it
is awarded. In addition, revenues generated from contracts with government
agencies are subject to audit and subsequent adjustment by negotiation between
the Company and representatives of such government agencies. ANADAC is currently
undergoing such an audit for the period from July 1, 1992 to June 30, 1995.
While the Company



                                       15

<PAGE>   17

believes that the results of the DCAA audit will have no material effect on
the Company's revenues, there can be no assurance that no adjustments will be
made and that, if made, such adjustments will not have a material adverse effect
on the Company's business, financial condition and results of operations.

RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION

         During the six months ended December 31, 1997 and fiscal 1997, the
Company's net product revenues from international sales were 26% and 31%,
respectively. A key component of the Company's strategy is to continue expansion
into international markets. There can be no assurance that the Company will be
able to market, sell and deliver its products in these foreign countries. In
addition to the uncertainty as to the Company's ability to expand its
international presence, there are certain risks inherent in foreign operations,
including longer accounts receivable payment cycles in certain countries,
general economic conditions in each country, seasonal reductions in business
activity during the summer months in Europe and certain other parts of the
world, delays in or prohibitions on exporting products resulting from export
restrictions for certain technologies (such as encryption technology),
fluctuations in foreign currencies, fluctuations in the U.S. dollar which can
increase the sales price of the Company's products in local currencies, loss of
revenue, property and equipment from expropriation, nationalization, war,
insurrection, terrorism and other political risks, the overlap of different tax
structures, risks of increases in taxes and other government fees and
involuntary renegotiation of contracts with foreign governments. The Company is
also at risk from changes in foreign and domestic laws, regulations and policies
governing foreign operations. There can be no assurance that laws or
administrative practices relating to taxation, foreign exchange or other matters
of countries within which the Company operates or will operate will not change.
Any such change could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the laws of foreign
countries treat the protection of proprietary rights differently from, and may
not protect the Company's proprietary rights to the same extent as, laws in the
United States.

     The Company's international sales are denominated in U.S. dollars, except
sales by Fingerscan which are denominated in Australian dollars. 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.

DEPENDENCE ON LARGE ORDERS BY CUSTOMERS

         The Company's revenues have principally consisted, and will continue to
consist principally, of large orders from a limited number of customers. While
the individual customers may vary from period to period, the Company is
nevertheless dependent upon these large orders for a substantial portion of its
total revenues. There can be no assurance that the Company will be able to
obtain large orders on a consistent basis. The Company's inability to obtain
sufficient large orders would have a material adverse effect on the Company's
business, financial condition and results of operations. Moreover, the timing
and shipment of such orders may cause the operating results of the Company in
any given quarter to differ from the expectations of securities analysts, which
could adversely affect the trading price of the Company's common stock. Losses
arising from customer disputes regarding shipping schedules, product condition
or performance, or the Company's inability to collect accounts receivable from
any major customer could also have a material adverse effect on the Company's
business, financial condition and results of operations.

         Orders for the Company's biometric imaging products are often subject
to delays associated with the lengthy approval processes that typically
accompany large capital expenditures by government agencies. The Company's total
revenues depend in significant part upon the decision of a government agency to
adopt and integrate the Company's systems, which often involves a significant
capital commitment as well as significant future support costs. Similar delays
may also be experienced from government agencies procuring the Company's
services. The Company often has a lengthy sales cycle while the customer
evaluates and receives approvals for the purchase of the Company's products or
services. Any significant failure by the Company to receive an order after
expending significant funds and effort could have a material adverse effect on
its business, financial condition and results of operations. It may be difficult
to predict accurately the sales cycle of any large order. In the event one or
more large orders fail to be shipped as forecasted for a fiscal quarter, the
Company's total revenues and operating results for such quarter could be
materially and adversely affected. In addition, even if the Company receives
such an order, the order may be contingent upon availability of matching funds
from state or federal entities or may be canceled or receipt of revenues may be
substantially delayed due to political and budgetary processes.





                                       16
<PAGE>   18


RISKS ASSOCIATED WITH ACQUISITIONS

         As part of its business strategy, the Company intends to acquire assets
and businesses principally relating to or complementary to its current
operations. The Company acquired Fingerscan in March 1996, IAS in June 1996 and
BA&T in July 1997. These and any other acquisitions by the Company will be
accompanied by the risks commonly encountered in acquisitions of companies. Such
risks include, among other things, potential exposure to unknown liabilities of
acquired companies or to acquisition costs and expenses exceeding amounts
anticipated for such purposes; fluctuations in the Company's quarterly and
annual operating results due to the costs and expenses of acquiring and
integrating new businesses; the difficulty and expense of assimilating the
operations and personnel of the companies; the potential disruption of the
Company's ongoing business and diversion of management time and attention; the
inability of management to maximize the Company's financial and strategic
position by the successful incorporation of acquired technology; the maintenance
of uniform standards, controls, procedures and policies; the impairment of
relationships with and possible loss of key employees and customers as a result
of changes in management; the incurrence of amortization expenses if an
acquisition is accounted for as a purchase; and dilution to the shareholders of
the Company if the consideration for the acquisition consists of the Company's
equity. In addition, the difficulty of integrating certain companies may be
increased by geographic distances. There can be no assurance that the Company
will be successful in overcoming these risks or any other problems encountered
in connection with such acquisitions.

RISK OF PRODUCT DEFECTS AND FAILURE TO MEET PERFORMANCE CRITERIA

         Complex products such as those offered by the Company may contain
undetected or unresolved defects or may fail initially to meet customers'
performance criteria when first introduced or as new versions are released.
There can be no assurance that, despite testing by the Company, defects or
performance flaws will not be found in new products or new versions of products
following commercial release or that performance failures will not result,
causing loss of market share, delay in or loss of market acceptance, additional
warranty expense or product recall. In addition, the failure of products to meet
performance criteria could result in delays in recognition of revenue and higher
operating expenses during the period required to correct such defects. There is
a risk, that for unforeseen reasons, the Company may be required to repair or
replace a substantial number of products in use or to reimburse persons for
products that fail to work or meet strict performance criteria. Any such
occurrence could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company does carry product
liability insurance, but there can be no assurance that existing coverage is
adequate for current operations or will be adequate for future operations. The
Company's business could be materially and adversely affected by the assertion
of product liability claims.

PROTECTION OF PROPRIETARY TECHNOLOGY

         The Company's ability to compete effectively will depend in part on its
ability to maintain the proprietary nature of its technology, products and
manufacturing processes. The Company principally relies upon patent, copyright,
trade secret and contract law to establish and protect its proprietary rights.
The success of the Company's products business will depend in part on its
proprietary technology and the Company's protection of such technology. The
Company holds United States and foreign patents covering certain of its products
and technologies and has other patent applications pending. Identix has an
ongoing policy of filing patent applications to seek protection for novel
features of its products.

         No assurance can be given that the claims allowed on any patents held
by the Company will be sufficiently broad to protect the Company's technology.
In addition, no assurance can be given that any patents issued to the Company
will not be challenged, invalidated or circumvented or that the rights granted
thereunder will provide competitive advantages to the Company. The loss of
patent protection on the Company's technology or the circumvention of its patent
protection by competitors could have a material adverse effect on the Company's
ability to compete successfully in its products business. There can be no
assurance that any existing or future patent applications by the Company will
result in issued patents with the scope of the claims sought by the Company, or
at all, that any current or future issued or licensed patents, trade secrets or
know-how will afford sufficient protection against competitors with similar
technologies or processes, or that any patents issued will not be infringed upon
or designed around by others. In addition, there can be no assurance that others
will not independently develop proprietary technologies and processes, which are
the same as, substantially equivalent or superior to those of the Company.
Further, there can be no assurance that the Company has not or will not infringe
prior or future patents owned by others, that the Company will not need to
acquire licenses under patents belonging to others for technology potentially
useful or necessary to the Company, or that such licenses will be available to
the Company, if at all, on terms acceptable to the Company.





                                       17
<PAGE>   19


         Litigation, which could result in substantial cost to the Company and
diversion of management attention, may also be necessary to enforce any patents
issued to the Company or to determine the scope and validity, of other parties'
proprietary rights. For example, the Company is engaged in litigation with a
competitor regarding the scope of a competitor's patent. If the outcome of any
such litigation is adverse to the Company, its business, financial condition and
results of operations could be materially and adversely affected. To determine
the priority of inventions, the Company may have to participate in interference
proceedings declared by the United States Patent and Trademark Office or
oppositions in foreign patent offices, which could result in substantial cost to
the Company and limitations on the scope or validity of the Company's patents.

         The Company also relies on trade secrets and proprietary know-how which
it seeks to protect by confidentiality agreements with its employees and
consultants and with third parties. There can be no assurance that these
agreements will not be breached, that the Company will have adequate remedies
for any breach, or that its trade secrets and proprietary know-how will not
otherwise become known or be independently discovered by others.

RISKS ASSOCIATED WITH MANAGING EXPANSION OF OPERATIONS

         The Company has experienced substantial growth in recent years and
believes that in order to be successful it must continue to grow rapidly. In
order to grow rapidly, the Company will be required to expand, train and manage
its 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 and will require the Company
to implement and improve operational, financial and management information
procedures and controls. The Company competes with some of the major technology,
consulting and software companies in seeking to attract qualified personnel.
There can be no assurance that the management skills and systems currently in
place will be adequate or that the Company will be able to manage effectively
any significant growth it experiences and to hire or assimilate new personnel
necessary to pursue its growth strategy. Any failure to adequately manage growth
could materially and adversely affect the Company's business, financial
condition and results of operations.

DEPENDENCE UPON SOLE AND LIMITED SOURCES OF SUPPLY; RISKS ASSOCIATED WITH
IMPLEMENTATION OF LARGER SCALE MANUFACTURING CAPABILITIES

         Certain of the components included in the Company's products are
obtained from a single source or a limited group of suppliers, the most
important of which are the charge coupled devices and application specific
integrated circuits ("ASICs") for the Bio-ID products and the charge coupled
devices for the biometric imaging products. The Company has no long term
agreements with any of its suppliers. Although the Company seeks to reduce
dependence on these sole and limited sources of suppliers, the partial or
complete loss of certain of these sources or the delay in receiving supplies
from these sources could result in delays in manufacturing and shipping of
products to customers. This may require the incurrence of development and other
costs to establish alternative sources of supply. While the Company attempts to
maintain a few months of inventory on sole source components, it may take the
Company several months to locate alternative suppliers if required, and/or to
re-tool its products to accommodate components from different suppliers. If the
Company is required to seek alternative suppliers, there can be no assurance
that the Company will be able to obtain such components within the time frames
required by the Company at an affordable cost, or at all. Any delays resulting
from suppliers failing to deliver components 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 material adverse
effect on the Company's business, financial condition and results of operations.

         Historically, the volume of the Company's production requirements for
the law enforcement and public sectors has not placed significant capacity
constraints on the Company's manufacturing and assembling capabilities. However,
as the Company begins to market its products for potentially larger volume
commercial applications, the Company may be required to fulfill larger orders in
a short period of time and to implement measures to decrease product costs.
There can be no assurance that the Company will be able to scale-up its
manufacturing and assembling capacities to fulfill such orders and to decrease
manufacturing costs. Any failure by the Company to implement higher volume
manufacturing or reduce product costs for commercial applications could have a
material adverse effect on the Company's business, financial condition and
results of operations.

DEPENDENCE UPON KEY PERSONNEL; NEED TO HIRE ADDITIONAL QUALIFIED PERSONNEL




                                       18

<PAGE>   20


         The Company's success will depend upon its ability to retain its
current senior management team and key technical, marketing and sales personnel
and its ability to identify, attract and retain additional highly qualified
personnel. The Company's employees may voluntarily terminate their employment
with the Company at any time, and competition for qualified employees,
especially engineers, is intense. The process of locating additional personnel
with the combination of skills and attributes required to carry out the
Company's strategy is often lengthy. The loss of the services of key personnel,
or the inability to attract additional qualified personnel, could have a
material adverse effect on the Company's business, financial condition and
results of operations.

ONGOING LITIGATION

         The Company was named as a defendant in a class action lawsuit, which
was filed in October 1996 in the United States District Court for the Northern
District of California. Certain executive officers of the Company were also
named as defendants. Plaintiffs sought to represent a class of all persons who
purchased the Company's common stock between January 31, 1996 and August 26,
1996 (the "Class Period"). The complaint alleges claims under the federal
securities laws and California laws. Plaintiffs allege that the Company and
certain of its executive officers made false and misleading statements regarding
the Company that caused the market price of its common stock to be "artificially
inflated" during the Class Period. The Company and its officers deny plaintiffs'
allegations. In December 1997, the Company and its officers reached an agreement
with plaintiffs and their counsel to settle the lawsuit. The settlement was
funded largely with directors and officers liability insurance proceeds. The
Company's contribution came from a reserve established in a prior accounting
period. The proposed settlement has received preliminary approval from the
United States District Court. Under Federal laws governing class action
litigation, the settlement is subject to final court approval following notice
to class members.

         On May 31, 1995, Digital Biometric, Inc. ("DBI"), a competitor, filed a
lawsuit in the United States District Court in Northern District of California
against the Company alleging that certain of the Company's TouchPrint products
violate a DBI patent and seeking injunctive relief and unspecified damages. The
lawsuit has no implication for other Identix products. On August 22, 1996, the
Court granted the Company's motion determining that TouchPrint 600 does not
infringe the patent. On December 7, 1996, the Court issued another ruling
determining that the predecessor product of the TouchPrint 600, the TouchPrint
900 product, did not infringe the patent. As a result, the Court entered
judgment in favor of Identix and awarded Identix its cost of suit. On January 7,
1997, DBI filed a Notice of Appeal. Oral argument on that appeal was held before
the Federal Circuit Court of Appeals on October 8, 1997 and the matter is under
consideration by the Court.

VOLATILITY OF STOCK PRICE

           The stock market has from time to time experienced significant price
and volume fluctuations that may be unrelated to the operating performance of
particular companies. In addition, the market price of the common stock, like
the stock prices of many technology companies, has been, and may continue to be,
highly volatile. Variations in quarterly operating results, the timing and
volume of procurements for the Company's products and services, announcements of
technological innovations or new products or services by the Company or by the
Company's competitors, announcements regarding product pricing by the Company or
its competitors, failure of the Company to meet earnings or revenue expectations
of securities analysts, the commencement of litigation, the developments in or
outcome of any litigation, developments in patent or other proprietary rights,
and economic and other external factors, among other factors, may have a
material adverse effect on the market price of the common stock.

SHARE HOLDINGS OF ASCOM HOLDING

         As of December 31, 1997, Ascom USA Inc. ("Ascom"), beneficially owned
approximately 21% of the outstanding common stock. This concentration of
ownership may have the effect of delaying or preventing a change in control of
the Company. The Company is a party to a Voting Trust Agreement ("Voting Trust
Agreement") with Ascom whereby Ascom deposited all of its 5,177,824 shares of
the Company's Common Stock ("Voting Stock") into a voting trust ("Voting
Trust"). The Trustee has voting control of the Voting Stock. The Voting Trust
Agreement expires in 2004. Ascom has preemptive rights with respect to issuances
of the Company's securities and registration rights with respect to the
securities it holds. The Company's ability to obtain additional financing on
favorable terms in the future may be adversely affected by the existence of
these preemptive rights and registration rights.




                                       19

<PAGE>   21


IDENTIX INCORPORATED

PART II           OTHER INFORMATION

      Item 1.     Legal Proceedings

                  The Company was named as a defendant in a class action
                  lawsuit, which was filed in October 1996 in the United States
                  District Court for the Northern District of California.
                  Certain executive officers of the Company were also named as
                  defendants. Plaintiffs sought to represent a class of all
                  persons who purchased the Company's common stock between
                  January 31, 1996 and August 26, 1996 (the "Class Period"). The
                  complaint alleges claims under the federal securities laws and
                  California laws. Plaintiffs allege that the Company and
                  certain of its executive officers made false and misleading
                  statements regarding the Company that caused the market price
                  of its common stock to be "artificially inflated" during the
                  Class Period. The Company and its officers deny plaintiffs'
                  allegations. In December 1997, the Company and its officers
                  reached an agreement with plaintiffs and their counsel to
                  settle the lawsuit. The settlement was funded largely with
                  directors and officers liability insurance proceeds. The
                  Company's contribution came from a reserve established in a
                  prior accounting period. The proposed settlement has received
                  preliminary approval from the United States District Court.
                  Under Federal laws governing class action litigation, the
                  settlement is subject to final court approval following notice
                  to class members.

                  On May 31, 1995, Digital Biometrics, Inc. ("DBI"), a
                  competitor, filed a lawsuit in the United States District
                  Court in the Northern District of California against the
                  Company alleging that certain of the Company's TouchPrint
                  products violate a DBI patent and seeking injunctive relief
                  and unspecified damages. The lawsuit has no implication for
                  other Identix products. On August 22, 1996, the Court granted
                  the Company's motion determining that the TouchPrint 600 does
                  not infringe the patent. On December 7, 1996, the Court issued
                  another ruling determining that the predecessor product of the
                  TouchPrint 600, the TouchPrint 900 product, did not infringe
                  the patent. As a result, the Court entered judgment in favor
                  of Identix and awarded Identix its costs of suit. On January
                  7, 1997, DBI filed a Notice of Appeal. Oral argument on that
                  appeal was held before the Federal Circuit Court of Appeals on
                  October 8, 1997 and the matter is under consideration by the
                  Court.

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

                  (a)      The Annual Meeting of Shareholders was held on
                           October 30, 1997.
                  (b)      All Board of Directors nominees referenced in Item 2
                           (c) below were elected at the Annual Meeting of
                           Shareholders on October 30, 1997
                  (c)      The matters voted upon and the results of the voting
                           were as follows:

                            (1) The following seven persons were
                                elected to the Board of Directors:

<TABLE>
<CAPTION>
                                 Name            Votes For    Votes Withheld
                                 ----            ---------    --------------
<S>                                             <C>             <C>    
                            Randall C. Fowler    22,745,456      139,880
                            Patrick M. Morton    22,747,484      137,852
                            Randall Hawks, Jr.   22,743,184      142,152
                            Fred U. Sutter       22,737,111      148,225
                            Larry J. Wells       22,743,184      142,152
                            Harrison N. Walther  22,742,889      142,447
                            Ed Zschau            22,738,651      146,685
</TABLE>


                            (2) 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 500,000 shares to a total
                                of 1,750,000. The number of shares voted in
                                favor of the amendments was 21,864,746, the
                                number of shares voted against was 860,686, and
                                the number of shares that abstained was 159,904.





                                       20

<PAGE>   22



                            (3) The appointment of Price Waterhouse LLP as
                                independent accountants of the Company for the
                                fiscal year ending June 30, 1998 was ratified.
                                The number of shares voted in favor of the
                                appointment was 22,740,740, the number of shares
                                voted against was 54,620, and the number of
                                shares that abstained was 89,976.


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

                           (a) Exhibits

                               Exhibit
                               Number                Description

                               27.1                  Financial Data Schedule

                           (b) No reports on Form 8-K were filed by the Company
                               during the quarter ended December 31, 1997.








                                       21



<PAGE>   23
                              IDENTIX INCORPORATED

                                   SIGNATURES


Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                     IDENTIX INCORPORATED
                                     February 14, 1998




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







                                       22



<PAGE>   24


                                 EXHIBIT INDEX



EXHIBIT             DESCRIPTION
NUMBER              


27.1                FINANCIAL DATA SCHEDULE