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

<Table>
<C>          <S>
 (Mark one)
    [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934



             FOR THE FISCAL YEAR ENDED JUNE 30, 2001



                                   OR



    [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934



             FOR THE TRANSITION PERIOD FROM           TO           .
</Table>

                         COMMISSION FILE NUMBER: 1-9641
                             ---------------------
                              IDENTIX INCORPORATED
             (Exact name of registrant as specified in its charter)

<Table>
<S>                                            <C>
                   DELAWARE                                      94-2842496
       (State or other jurisdiction of                         (IRS Employer
        incorporation or organization)                      Identification No.)
   100 COOPER COURT, LOS GATOS, CALIFORNIA                         95032
   (Address of principal executive offices)                      (Zip Code)
</Table>

              REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
                                 (408) 335-1400

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                         COMMON STOCK, $0.01 PAR VALUE

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      NONE

                   NAME OF EACH EXCHANGE ON WHICH REGISTERED:
                            AMERICAN STOCK EXCHANGE

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  [X]     No  [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [ ]

     The aggregate market value of the voting stock held by non-affiliates of
the registrant on September 4, 2001, based upon the closing price of the common
stock on the American Stock Exchange for such date, was approximately
$134,357,000. Shares of common stock held by each officer and director and by
each person who owns 5% or more of the outstanding common stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.

     The number of outstanding shares of the registrant's common stock on
September 4, 2001 was 36,622,069.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Definitive Proxy Statement filed with the Securities and
Exchange Commission in connection with the Annual Meeting of Stockholders
expected to be held October 25, 2001 are incorporated by reference in Part III
of this Form 10-K.
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<PAGE>   2

                              IDENTIX INCORPORATED
                            YEAR ENDED JUNE 30, 2001

                               TABLE OF CONTENTS

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<Caption>
                                                                          PAGE
                                                                          ----
<S>        <C>                                                            <C>
PART I
Item 1.    Business....................................................     2
Item 2.    Properties..................................................    26
Item 3.    Legal Proceedings...........................................    26
Item 4.    Submission of Matters to a Vote of Security Holders.........    26

PART II
Item 5.    Market for the Company's Common Stock and Related
           Stockholder Matters.........................................    28
Item 6.    Selected Financial Data.....................................    30
Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations...................................    31
Item 7A.   Quantitative and Qualitative Disclosures About Market
           Risk........................................................    38
Item 8.    Financial Statements and Supplementary Data.................    39
Item 9.    Changes In and Disagreements With Accountants on Accounting
           and Financial Disclosure....................................    64

PART III
Item 10.   Directors and Executive Officers of the Registrant..........    64
Item 11.   Executive Compensation......................................    64
Item 12.   Security Ownership of Certain Beneficial Owners and
           Management..................................................    64
Item 13.   Certain Relationships and Related Transactions..............    64

PART IV
Item 14.   Exhibits, Financial Statement Schedules, and Reports on Form
           8-K.........................................................    64
</Table>

                                        1
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                                     PART I

ITEM 1.  BUSINESS

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

OVERVIEW

     Identix Incorporated ("Identix" or the "Company") provides leading-edge
authentication security platforms and solutions for commercial and government
marketplaces. The Company offers hardware, software and consulting services to
protect information, control access, and maintain privacy and trust. A world
leader in biometric technology, Identix believes it has more fingerprint
biometric installations worldwide than any other company. Identix' products and
services are classified into three groups: (i) biometric security ("Security")
solutions that verify the identity of an individual through the unique physical
biological characteristics of a fingerprint including itrust(TM), Identix'
Security software solution that integrates authentication, access rights and
administration as a managed network security service to safeguard information
sharing and data transfer on open wired and wireless networks; (ii) biometric
imaging ("Imaging") solutions that electronically capture forensic quality
fingerprint images that can be transmitted to Automated Fingerprint
Identification Systems ("AFIS"); and (iii) information technology, engineering
and consulting services, including the installation and integration of Identix
products primarily to public sector agencies. The Company's solutions employ
industry leading optical fingerprint capture technologies, proprietary
algorithms and customizable application software suites. Identix' technologies
and intellectual property enable it to produce Security and Imaging solutions
for commercial, federal, state and local government customers worldwide. The
Company provides Public Sector Services through Identix Public Sector, Inc.
("IPS"), a wholly owned subsidiary of the Company (formerly ANADAC, Inc.).
Identix also formed a joint venture, Sylvan/Identix Fingerprinting Centers, LLC
(" SIFC"), in September 1997 with Sylvan Learning Systems, Inc. ("Sylvan"), for
the purpose of providing fingerprinting services for a variety of civilian
applications. In June 2001, Identix launched its first itrust Security solution
offering. itrust is supported in part by Motorola, Inc. ("Motorola") and
VeriSign Capital Management, Inc. ("VeriSign") investments in Identix.

BIOMETRIC INDUSTRY OVERVIEW

     The analysis of unique biological characteristics of an individual, also
known as biometrics, is being used increasingly for identification and
verification purposes. Examples of unique biological characteristics that can be
used to identify an individual include fingerprints, retinal blood vessel or
iris patterns of the eye, signature, hand geometry, voice and facial structure.
Among these, Identix believes fingerprint analysis has gained the most
widespread use for biometric identification and verification purposes.
Fingerprint analysis is an accurate and reliable method to distinguish one
individual from another, employs well-developed and proven technology and
processes and is viewed as less intrusive relative to certain other biometric
identification methods. The process of capturing, storing, retrieving and
comparing fingerprints has become increasingly automated as a result of advances
in optics, electronics and computing. These advances, coupled with a significant
decrease in the size and cost of the technology, have enabled fingerprint
verification technology to be used to confirm an individual's identity for a
variety of commercial and governmental applications. According to International
Data Corporation's ("IDC") latest market research report on the biometric
industry, Identix was distinguished as the leading provider of biometric
technology solutions and specifically biometric fingerprint identification
solutions.

  SECURITY SOLUTIONS AND ITRUST

     The costs of fraud are estimated to be in the billions of dollars each year
in the United States alone. In addition, damages resulting from security
breaches, such as unauthorized persons gaining improper access to
                                        2
<PAGE>   4

confidential information, may not be quantifiable, but can be equally as
problematic. According to Stamford, CT-based Gartner, Inc., the market for
business-to-business transactions is expected to increase from $148 billion in
1999 to $7.3 trillion by 2004; but this growth assumes that companies can
reliably and securely conduct business electronically. Accordingly, the ability
to verify the identity of a specific individual is of critical importance in
reducing acts of fraud and increasing security. Additionally, the U.S.
Government is promulgating legislation related to ensuring the privacy of
certain records in both the healthcare and financial industries. Each day an
individual is required to identify himself numerous times with something the
individual has in his possession or with the knowledge of certain information,
such as: magnetic stripe cards and Personal Identification Numbers ("PIN") to
transact business at Automatic Teller Machines ("ATM") or point-of-sale ("POS")
terminals; passwords to log-on to a computer or a computer network; keys, cards
or passwords to enter the workplace; PINs, passwords and account numbers to
complete a commercial transaction on-line; credit cards to make a credit
purchase; time cards to begin work; and a driver's license to write a check or
transact business at a bank.

     Common verification methods generally cannot provide positive
identification of the actual individual. Keys, credit cards, ATM cards and card
keys can be lost or stolen. Passwords, account numbers or other information used
for identity verification can be forgotten, divulged to or intercepted by
unauthorized users through electronic means and otherwise. In the workplace
time-and-attendance information can be improperly altered by an employee
punching a time card for a tardy or absent co-worker.

     The analysis of unique biological characteristics offers a more accurate
method of verifying an individual's identity. Over the last decade,
technological advances, including significant advances in imagers, high
performance microprocessors and computer memory, have enabled the commercial
development of equipment to read, record and analyze unique biometric data.
Potential applications of biometric identification and verification systems span
a broad range and include computer database and network access and security,
computer software, intranet and Internet security, data sharing and management,
electronic commerce, communications devices, POS terminals, bank transaction
authorization, facility access and security, ATMs, time-and-attendance, home
security and automobiles. However, implementation of biometric equipment for
these diverse applications may require network management software,
customer-specific applications software and interfaces that allow integration
with the customer's existing computer systems to provide complete biometric
solutions.

  IMAGING SOLUTIONS

     Fingerprint images have emerged as an important means of identification and
verification in both government and civilian markets. In law enforcement in
particular, fingerprint identification is widely utilized and has been accepted
by courts around the world. Historically, fingerprints have been collected using
the traditional "ink-and-roll" process. The Federal Bureau of Investigation
("FBI") has said that it receives over 65,000 fingerprint cards each workday.
Typically, this process starts at the local law enforcement agency where usually
three or more complete sets of ink-and-roll prints are taken, one for the local
agency, one for the state and one for the FBI. The fingerprint is then compared
at the local agency, state and/or FBI with a database of fingerprints by means
of AFIS, a computer-based system first developed in the 1970s, which uses
minutiae-based recognition algorithms that detect fingerprint characteristics to
accomplish fingerprint matching. Before AFIS can make the comparison, an
ink-and-roll card is run through a scanner, which creates a digital image of the
fingerprint. AFIS then compares the digital image with an existing database of
fingerprints to identify an individual, if that individual's fingerprint is in
the database, and at the same time, updates the database with that fingerprint
image.

     While the advent of computerized AFIS systems significantly improved the
ability to compare fingerprints against large databases of fingerprints, the
manual process of collecting and mailing ink-and-roll cards to the agency that
maintains AFIS and scanning the fingerprint image into AFIS has led to
significant bottlenecks. In addition, the fingerprinting process can be
complicated by a lack of cooperation of the person being fingerprinted, the need
to take multiple sets of prints and operator error. Various agencies have
reported that in excess of 30% of such cards are rejected because prints are
smudged or applied incorrectly. If the FBI or state agency rejects the card, the
local agency is often required to locate the individual, if possible, and have
                                        3
<PAGE>   5

another set of fingerprints taken. As a result, the time between taking a set of
fingerprints and receiving the results of the search may take several days,
several weeks or longer.

     Live Scan biometric imaging systems, which electronically capture and
digitize an image of the fingerprint directly from a person's finger, were
developed to replace the manual ink-and-roll process. The digitized fingerprint
image captured by the Live Scan system can then be compared with a database of
stored fingerprint images by AFIS. If a state or federal agency can receive
electronic fingerprint cards, then the image can be electronically relayed to
that agency for comparison and the results can be returned to the local agency
within minutes or hours. In addition, because the fingerprint images are
captured electronically, multiple cards can be printed from one set of images,
eliminating the need to roll the fingerprint numerous times. Live Scan systems
also generally have quality assurance features that help reduce the chance of
operator error during the fingerprinting process.

     A number of domestic and certain international law enforcement communities
have converted or are in the process of converting from manual ink-and-roll
fingerprint capture to Live Scan fingerprint capture. In the United States, the
FBI has recently upgraded its Identification Division and in July 1999 announced
that it has officially activated its new identification facility in West
Virginia to receive a majority of fingerprint submissions electronically for
matching on its new Integrated Automated Fingerprint System ("IAFIS"). This
announcement by the FBI, coupled with increased automation at the federal and
state levels, has prompted other federal, state and local agencies to adopt Live
Scan systems as their primary method for conducting background and
identification checks. Other federal agencies, including Immigration and
Naturalization Service ("INS"), Internal Revenue Service, U.S. Drug Enforcement
Agency, U.S. Marshals Service and the U.S. Secret Service use Live Scan systems
to perform identification and background checks.

     The ability to capture a forensic quality fingerprint image electronically
and compare that fingerprint with a database of fingerprint images also has
important civilian (non-law enforcement) applications, such as conducting
employee background checks for jobs in federal or state government, banking,
airport, child care, stock brokers, other securities professionals, gaming or
screening potential foster parents. Millions of fingerprint cards are taken each
year in the United States for civilian purposes. Traditionally, local police
stations have performed this service, with completed fingerprint cards submitted
to state authorities or the FBI to perform a background investigation. This
process usually takes several weeks to complete. In addition, if an ink-and-roll
fingerprint card is rejected, an applicant must go through the process again,
which can delay further an applicant's start date. In some cases, employers or
agencies find themselves with such a backlog of applicants awaiting
fingerprinting or results of the background check that they allow applicants to
start the job without the background check being complete, placing the employer
at risk if an applicant has a criminal record. The need for reliable and
convenient fingerprint capture in a non-law enforcement environment and the need
to streamline the background checking process have created a demand for Live
Scan products and fingerprinting services.

THE IDENTIX SOLUTION

     The Company has developed leading-edge security and imaging solutions to
protect proprietary information, prevent fraud and identity theft, identify
criminals, control physical access, protect patient records and screen job
applicants. Many of the Company's solutions employ industry leading optical
fingerprint capture technologies, proprietary algorithms and customizable
application software suites. Through the Company's itrust security solution, the
Company has broadened the use of its Security solutions technologies to offer
multi-authentication platforms coupled with access rights and administration
functions for secure and trusted data sharing and transaction management
services for Internet applications such as e-commerce over wired and wireless
networks.

  SECURITY SOLUTIONS

     In the Security market, the Company provides a comprehensive line of
integrated biometric fingerprint hardware and software solutions for a variety
of applications, providing the Company's customers with significant improvements
over traditional security and identification measures. The Company believes its

                                        4
<PAGE>   6

biometric Security solutions are the most widely used in the world. Identix has
sold biometric Security solutions to customers in over 40 countries through its
worldwide network of sales offices and distributorships to provide complete
biometric solutions for a wide variety of applications, including the following:

     Network security:  Identix has and continues to develop a wide range of
enterprise level security solutions for Personal Computers ("PC"), laptops,
servers, Personal Digital Assistants ("PDA") and other emerging computer user
needs. For example, Identix has developed a series of small, economical
fingerprint readers in conjunction with enterprise security software which
interfaces with Microsoft Windows 95/ 98/NT4/2000 as well as Novell networks.
These products are marketed with leading PC and peripheral manufacturers
including Compaq Computer Corp. ("Compaq"), Dell Computer Corp. ("Dell"),
Toshiba Corporation ("Toshiba"), Key Tronic Inc. ("Key Tronic"), Cherry
Corporation ("Cherry") and SCM Microsystems Inc. ("SCM Microsystems"). Identix
believes it remains the only biometric security network solution operating with
Windows 2000, which has received Microsoft certification, for both biometric
hardware and software solutions.

     The City of Oceanside, California has incorporated Identix' enterprise
level security solutions in 1,500 seats across its desktop Information
Technology ("IT") network that accommodates a complexity of city bureaus and
offices. Identix' enterprise level security solutions provide the City the
ability to access multiple applications with a single function -- a
fingerprint -- instead of several passwords. Using Identix' BioLogon(R) security
solution software, the City can also share workstations and permit logons from
anywhere on the network. Since the City of Oceanside implemented Identix'
network security solution, it has eliminated 85 percent of its help-desk calls.
Estimated savings produced from the reduction in help desk calls has more than
offset the investment.

     The Florida State Supreme Court has incorporated Identix' fingerprint
biometric security solutions to secure its 650 seat Wide Area Network ("WAN")
enterprise-wide, which encompasses five District Courts of Appeal and the State
Supreme Court. The State Supreme Court has deployed 650 Compaq Fingerprint
Information Technology ("FIT") readers, which incorporate the Identix DFR 200
optical fingerprint reader, along with BioLogon, to secure the State Court's IT
applications with fingerprint authentication data. The solution also integrates
Novell Modular Authentication Services ("NMAS"), Network services software from
Novell Inc. ("Novell") to deliver a single point of administration for managing,
accessing and grading password and fingerprint biometric authentication methods.

     Confidentiality of patient records:  Identix' Security solutions are being
employed to secure access to confidential patient records by companies in the
healthcare industry. Family Health Centers of San Diego ("FHCSD") has integrated
Identix' BioLogon into the FHCSD's network applications for authentication of
individual patient data transactions. Identix' biometric security solutions will
help ensure that the Center complies with the rigorous confidentiality
requirements of the Health Insurance Portability & Accountability Act ("HIPAA").
FHCSD is replacing password authentication across its WAN with Identix'
BioTouch(TM) USB biometric fingerprint readers and Identix' BioLogon software
for Windows 2000.

     Internet access:  Identix' Security solutions are being employed to secure
Internet access and usage. For example, CyberHouse Internet Cafe in Bergen,
Norway, installed the Company's security solutions throughout its network to
enroll cafe visitors with their credit information for easy, secure Internet
access without passwords. CyberHouse anticipates that Identix' solutions will
manage thousands of transactions monthly for authentication and secure credit
transactions for customers.

     Bank transaction authorization:  Three large international banks use the
Company's Security solutions for transaction authorization. Chile-based Banco
Falabella has adopted Identix' Security solutions to positively authenticate its
customers prior to conducting transactions at its branch offices throughout the
country. These solutions provide heightened security for its customers, while
eliminating the need to remember cumbersome passwords. Initially, Banco
Falabella has installed BioLogon software and fingerprint readers at teller
windows in many of its banks. Customers are required to verify their identity
via the fingerprint readers prior to performing a transaction. Additionally, the
bank has integrated Identix' fingerprint technology into five Diebold ATM
machines at select locations throughout Chile to replace PIN numbers for ATM
transactions.
                                        5
<PAGE>   7

     Building access:  Numerous organizations have installed the Company's
Security solutions to secure building access, including the Pentagon and various
other United States government agencies, banks and industrial plants. An unnamed
major Las Vegas-based Casino has installed Identix' V20 fingerscan readers to
secure the entrances to vital areas within its casinos. Depending on the
location, the casino is securing access to many of its offices with Identix V20
readers, including IT offices, the cold room where computers are located, the
PBX room and the cage and security offices. Access to these areas is
accomplished via the touch of a finger. In addition to providing access,
Identix' software applications have allowed the Casino to set up timers to let
security know if count teams emptying slot machines have not logged back within
the scheduled time and detect if a door has been propped open.

     Airport security:  Identix' Security solutions have been chosen for use in
pilot programs at Chicago International O'Hare Airport for general door access
throughout the airport as well as to develop a universal air cargo security
access system that is based on a combination of biometric identification and
smart cards. Additionally, in an effort to increase aviation security, the House
of Representatives passed legislation in October 2000 that would require
criminal background checks for all people who apply for a job as a baggage and
checkpoint security screener, or any job that will give them access to the
airfield. The House Transportation and Infrastructure Committee was prompted to
move legislation after hearing testimony last March citing that the turnover
rate among security screeners ranged from 100 to 400 percent per year, and that
many screeners did not have adequate security training. Seven national airports
have installed Identix Touch Print Live Scan systems for applicant
fingerprinting to assist the airports in meeting the compliance terms of the
recently passed Airport Security Improvement Act of 2000. The airports include
Baltimore/Washington International, Washington Dulles International, Ronald
Reagan National, JFK International, Boston Logan International, Chicago O'Hare
and Orlando International Airports.

     Time-and-attendance:  Woolworth's Limited, a major Australian supermarket
chain, uses the Company's Security solutions to maintain accurate
time-and-attendance records for in excess of 80,000 employees in over 500
stores.

     ATM service:  Armaguard, an Australian armored car and cash carrying
company, uses the Company's Security solutions to secure access for service
personnel to approximately several hundred ATMs across Australia.

     Corrections:  The California Department of Corrections and the California
Youth Authority ("CYA") have installed the Company's fingerprint readers and
networking software for physical access control in prisons and CYA facilities
statewide. The systems enable authorized staff members to enter and exit secure
areas, provide an exact record of each entry and exit and alert security staff
if authorized persons do not biometrically check out of the secured areas when
expected.

     The Company believes that success in the Security industry requires
addressing the customers' needs by providing the necessary software applications
and necessary interface to customers' legacy computer systems. The Company has
and continues to develop systems management software to facilitate the
deployment of our Security solution devices and to control and manage a
distributed network using our Security solutions. This management software
enables an authorized systems manager to limit, as desired, the scope of access
of individuals and can create an audit trail of entries, alarms, enrollments,
system changes and impostor attempts. The Company has also developed a number of
customizable software applications to address specific customer's identification
and verification requirements. These applications include:

     - BioLogon, a secure network-based solution for logging onto a Windows
       95/98/NT4/2000 network from a Windows 95/98/NT4/2000 workstation as well
       as Novell based networks;

     - BioCard(TM), providing smart card support to BioLogon enabled networks;
       and

     - Software developer kits, which allow Identix networking solutions and
       technology to be integrated into other applications.

     The Company has developed solutions to interface Identix' Security products
with smart card readers, Microsoft networks and Novell networks, and is working
on developing interfaces for other network platforms.

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In addition, the Company has also developed software to enable biometric
authentication across remote networks, including intranets and the Internet.

     itrust Services:  itrust, launched in July 2000, was established as a part
of the Company's Security solution offerings and provides Internet access
control platforms for wired and wireless transactions. Motorola and VeriSign
have invested in Identix specifically to fund the development and marketing of
the itrust Security solution. itrust is the Identix solution for safeguarding
information sharing and data transfer on open wired and wireless networks.
itrust integrates three of the most important aspects of
security -- authentication, access rights and administration -- as a managed
network security service. The Company believes itrust is ideal for financial
services companies, to protect financial and legal transactions; healthcare
organizations, to safeguard medical records and patient confidentiality;
government agencies for internal network security and to protect citizen privacy
and ensure the integrity of voting results; enterprises, to safeguard wired and
wireless web transactions. itrust is intended to protect both the integrity of
the network and the identity of the user, everywhere, anytime and from any
device. Desktop computers, laptops and mobile devices share the same level of
security.

     eWebIT Solutions Incorporated, the Systems Integration Division of Eclipsys
Corporation ("eWebIT"), is the first customer licensed to use and commercialize
Identix' itrust Access Server, a comprehensive access control security platform
designed to safeguard information sharing and data transfer on open wired and
wireless networks.

     eWebIT, a leading provider of solutions for enterprise application
integration, composite web application development, master person indexing, and
single sign-on will offer Identix' itrust Security solutions to its healthcare
and non-healthcare industry clients. Increasingly, healthcare providers and
payers are being required by standards bodies to meet new security requirements.
Identix' itrust solutions are designed to safeguard the integrity of this data
by providing an organization the tools to control and confirm who is on the
other end of a transaction, grant that user access rights to particular
resources on the network and keep a record of transactions as they occur.

  IMAGING SOLUTIONS

     In the Imaging market, the Company has established a leadership position by
providing systems for the efficient capture and management of digital
fingerprint images and demographic data for various applications including law
enforcement, immigration and civilian employment, screening and background
checks.

     Law enforcement:  Law enforcement and other government agencies in more
than 30 states and four foreign countries have installed the Company's Imaging
products. Identix Live Scan systems have been installed in state-wide law
enforcement networks in California, Arizona, Texas, Illinois, Ohio, New Jersey,
Maryland, Wisconsin and Georgia. Many large cities and counties also have
installed networks of Identix TouchPrint Live Scan systems for law enforcement,
including New York City Police Department, Cook County (Chicago) Sheriff's
Department, Boston Police Department, San Francisco Police Department, Texas
Department of Public Safety, King County, WA, Wayne County, MI, Detroit Police
Department and Police Constabularies in England and Wales.

     Fingerprinting services for civilian application:  Fingerprinting services
for a variety of civilian applications are provided by SIFC. The partnership
currently has over 100 locations nationwide and processes more than 300,000
applicants each year. The screening of applicants for various public programs
are performed for the State of Illinois, California Department of Social
Services, two major airlines, Chicago Public schools, Sears Roebuck and for
banking and securities personnel at the American Banking Association and the
National Association of Security Dealers.

     Immigration:  The INS uses Identix' Imaging products to perform background
checks on persons who enter the United States and persons seeking
naturalization.

     Social services:  Social service agencies in five states use Identix'
Imaging products to provide forensic quality images to identify welfare
recipients and prevent collection of benefits by the same person under different
names.
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     Motor vehicle licensing:  Five states use the Company's Imaging products to
check whether driver's license applicants have received and/or had revoked a
license under different names in that state.

     In order to meet the forensic quality standards required for identifying
individuals from within large AFIS systems, the Company has applied its optics
and image processing expertise to develop a system that it believes captures
higher resolution and more accurate images than other available systems. The
Identix TouchPrint Live Scan system produces rolled finger and "slap" (four
fingers at once) images at 600 dots per inch and 500 dots per inch,
respectively.

     The Company's Live Scan systems contain proprietary high-resolution
printing technology and a number of proprietary software features, including
data management software and software for digitizing and processing fingerprint
data in accordance with FBI standards. The Company's expertise in networking and
systems integration has allowed it to implement large scale systems in some of
the largest law enforcement agencies in the United States to automate and
improve the efficiency of the identification process. In addition, the Company
has developed proprietary quality assurance software that can tell the operator
if a smudged or otherwise unreadable fingerprint image was captured, allowing
the operator to recapture the image. The Company has developed capture sequence
control software that detects sequence errors resulting from the accidental
rolling of the wrong finger for placement on the fingerprint card.

     The Company introduced its newest Live Scan system, the TouchPrint 2000, in
August 2000. This is the first Live Scan to employ Identix' breakthrough
moisture-discriminating optical technology. The moisture-discrimination patented
imaging design technology eliminates a long-standing limitation in live digital
imaging of fingerprints that is caused by the presence of moisture on the
surface of the platen or adhering to the convoluted surfaces of the subject's
fingerprints. Conventional live scan optics cannot discriminate between moisture
and skin surface. This optical limitation results in the inability to
consistently and accurately image ridge and pore structure detail, reducing the
utility of digital fingerprints for forensic comparison with crime scene latent
"lifts". Moisture-discrimination optics effectively "ignore" residual moisture
consistently recording the structure of ridge edges and skin pore detail even
when the ridges are surrounded by moisture.

STRATEGY

     The Company's goal is to continue to develop high level Security and
Imaging solutions and increase penetration in the healthcare, finance,
government and other enterprise markets in the U.S. and internationally. The key
elements of the Company's strategy include:

     Deliver comprehensive solutions.  In both the Security and Imaging markets,
the Company strives to provide comprehensive product and service solutions for
its customers. Identix is able to deliver complete Security systems for a range
of different uses by integrating fingerprint image capture devices, fingerprint
analysis algorithms and authentication network management platforms. The Company
considers its fingerprint image capture devices and Security software and
algorithms to be critical in providing comprehensive customer solutions and
strives to maintain its leading edge in these areas, unlike certain other
companies, which are focusing solely on the development of image capture
devices. In the Imaging industry, the Company intends to offer expanded
capabilities to encompass all phases of the booking operation in a single,
integrated system, through modular expansion. In addition, the Company's field
service organization continues to expand the scope of its services to law
enforcement agencies, assisting in systems analysis and providing interfaces
between Identix and existing computer systems to improve the quality and
efficiency of records collection. In both the Security and Imaging market place,
the Company seeks to continue to provide superior technical services and
responsiveness and complete customer solutions.

     Deliver trusted authentication platforms and network security
solutions.  Through the Company's itrust Security solution offering, the Company
strives to enable secure and trusted data sharing and transaction management
services for open networks. itrust encompasses any wired or wireless network
that requires transaction security, such as banking, securities trading,
e-commerce, healthcare patient record management, music and entertainment
downloads, online games, legal and business document transactions and exchanges.
itrust integrates the three most important aspects of
security -- authentication, access rights and administration -- as a managed
network security service. itrust is intended to protect both the integrity of
the network
                                        8
<PAGE>   10

and the identity of the user, everywhere, anytime and from any device. Desktop
computers, laptops and mobile devices share the same level of security.

     Penetrate new markets through strategic relationships.  The Company has
established strategic relationships with a select group of market leaders to
provide Security solutions, including itrust services, for a variety of
applications. An extensive infrastructure already exists for many of the markets
in which the Company currently participates or intends to participate. In such
cases, the Company has and will pursue relationships with companies with strong
positions in these markets. For example, the Company has developed Security
products in cooperation with Compaq and Toshiba for low cost PC network
security, Microsoft Inc. ("Microsoft") and Novell for network support, and
Motorola for the next generation of low cost very small optical fingerprint
readers, which provide Original Equipment Manufactures ("OEM") the ability to
embed or integrate Identix' technology on nearly any device. In addition, the
Company has developed relationships with two of the leading AFIS suppliers in
the world, NEC Technologies, Inc. ("NEC"), and Sagem Morpho, Inc. ("Sagem
Morpho"), to provide forensic quality Imaging to government agencies. The
Company intends to continue to focus on developing strategic relationships with
OEMs, system integrators and resellers who serve as prime contractors for large,
integrated systems in the domestic and international markets.

     Continue to develop itrust through strategic partnerships and
relationships.  In forming itrust, the Company has entered into an alliance with
Motorola whereby Motorola has made an equity investment of $3.75 million in
Identix. The Company entered into a similar alliance with VeriSign whereby
VeriSign has made an equity investment of $2 million in Identix. The funds have
been used to support itrust during its initial development. Identix may expand
on this strategic foundation by developing strategic partnerships and
relationships with additional itrust partners, as well as additional deployers
of itrust services.

     Maintain and enhance leadership in biometric technology.  The Company's
success depends on providing technologically advanced, cost-effective solutions.
Accordingly, the Company intends to continue to invest in research and
development and, where necessary, or appropriate, consider acquiring companies
or technologies that are complementary to its business in order to maintain and
enhance its leadership position in biometric technology. These efforts include
development of low cost fingerprint capture devices, enhanced algorithms,
applications software, integration tools and software, highly integrated
hardware designs, and mechanical and electronic components designed for high
volume production.

     Maintain a global perspective.  The Company believes that there are many
opportunities to apply biometric technologies throughout the world and that
solutions provided in one area of the world can be used in other regions for
customers with similar requirements. Where fraud is prevalent and the
confidentiality of information is of concern, biometric solutions have the
potential of providing significant savings. The Company has established regional
sales or distribution capabilities and local support presence in North and South
America and Europe to address opportunities in these regions.

SECURITY PRODUCTS

     The Company's biometric Security products operate by comparing an
individual's fingerprint with a previously recorded mathematical
characterization, or template, of that fingerprint. The template can be stored
in a computer's memory, in a stand-alone Security product or a smart card. When
requesting access or authorization, the user identifies himself either by solely
presenting his fingertip, or a combination of a PIN or coded identification card
and a fingertip. The system compares the finger placed on the platen with the
stored template to confirm the user's identity. If the fingerprint and the
stored template match, the user is positively identified and access or
transaction processing is authorized. If the fingerprint and the stored template
do not match, access or transaction processing is denied.

     DFR-300.  The DFR-300 is a small optical fingerprint reader about the size
of a standard U.S. postage stamp and is 4.5 mm thick. This fingerprint reader is
used in the Company's proprietary BioTouch PC Card Fingerprint Reader and works
with BioLogon software to scan a person's finger image and match it against a
previously enrolled image for positive user authentication. The PC Card provides
a fully functional optical fingerprint reader inside a single type II PC card
thereby enabling biometric security in laptop and pocket PCs.

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<PAGE>   11

     DFR-200.  The DFR-200 is a small optical fingerprint reader about the size
of two matchbooks. This fingerprint reader is used primarily for desktop
peripheral devices in PC products shipped by Compaq, Dell, Toshiba, Key Tronic,
SCM Microsystems and others, and works with Biologon software to scan a person's
finger image and match it against a previously enrolled image for positive user
authentication.

     Algorithms.  Identix uses primarily its proprietary minutiae based
algorithms in its Security products. It also employs its patented pattern
recognition algorithms in certain of its Physical Access Control ("PAC")
products.

     BioLogon.  BioLogon is a family of software products for stand-alone and
networked PC security. BioLogon replaces hard-to-remember passwords with a touch
of a finger to gain access to PC's and networks. BioLogon has been developed to
work with Microsoft's Network Security Architecture and Novell's NMAS network
products. Other products in the family include BioCard, which integrates smart
cards for network access, BioShield(TM), which prevents access to applications
and holds passwords in a password-bank, and BioSafe(TM), which allows users to
create "safes" or groups of encrypted files and folders.

     Customized Software.  The Company has developed a variety of software
developer kits, including BioLogon, BioEngine, and FingerLan to allow
integrators and OEMs to incorporate Identix technology and products into their
applications and devices. This allows Identix to leverage the knowledge and
distribution of its partners to broaden the markets it serves.

     FingerScan V20.  The V20 is the Company's latest PAC product. FingerScan
V20 combines Identix' minutiae-based algorithm with embedded PC technology to
create a highly functional access control device. By utilizing the same
technology used in the BioLogon products, Identix will offer universal access
solutions for enterprises. Users can access a building, an office door and a PC
all with the placement of one of their fingers. FingerScan V20 provides
additional functionality by incorporating capability for ethernet and proximity
cards.

     BioTouch Embedded Controller.  The BioTouch Embedded Controller is a core
board that manages all aspects of biometric fingerprint authentication,
including sensor communication, enrollment, verification and communication of
pass/fail output. When combined with an Identix fingerprint sensor, the BioTouch
Embedded Controller is a completely self-contained fingerprint authentication
device that can be embedded into OEM hardware applications. The standard model
can maintain up to 30 templates, or files that contain information on a
fingerprint. With optional memory expansion, a hardware OEM can choose to store
more than 10,000 templates on the unit. Low power consumption, fast wake up time
and a programmable sleep mode make the BioTouch Embedded Controller ideally
suited for battery-powered applications.

     Applications for this product are potentially numerous and allow products
that currently require a password, PIN, card or key to benefit from the positive
identification that a biometric device can provide. It is now simple, secure,
fast and affordable to integrate Identix' fingerprint technology into any OEM
hardware application, including point of entry devices, automotive alarm remote
controls, POS terminals and time and attendance systems, as well as multifactor
security solutions for networks such as a combined smart card/fingerprint reader
or standalone authentication device.

IMAGING PRODUCTS

     The Company's Imaging products are used for the capture, storage and
management of high-resolution forensic quality fingerprint images and other
identifying information.

     TouchPrint Live Scan System.  The Company's TouchPrint products are
computer-based, inkless live scan systems that electronically scan and capture
forensic quality fingerprint images directly from an individual's finger. The
fingerprint images then can be printed using a laser printer or transmitted over
telephone lines or a wide area network to AFIS systems for identification
matching at local, state or federal agencies. TouchPrint was designed for use by
law enforcement agencies as a more accurate and efficient method of recording
fingerprint and demographic information than the conventional "ink-and-roll"
method. In addition to law enforcement applications, other applications for the
TouchPrint systems include background checks of prospective employees by public
and private sector employers.
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<PAGE>   12

     TouchPrint 2000 Live Scan System.  The TouchPrint 2000 is the latest Live
Scan system launched by the Company. The TouchPrint 2000, which was launched in
August 2000, and has FBI Appendix F Certification, the FBI's highest level of
Image Quality Specification ("IQS"). The TouchPrint 2000 is the first
fingerprint scanner to employ the Company's Moisture-Discriminating(TM) optical
technology. The moisture-discrimination patented imaging design technology
eliminates a long-standing limitation in live digital imaging of fingerprints
that is caused by the presence of moisture on the surface of the platen or
adhering to the convoluted surfaces of the subject's fingerprints. Conventional
live scan optics cannot discriminate between moisture and skin surface. This
optical limitation results in the inability to consistently and accurately image
ridge and pore structure detail, reducing the utility of digital fingerprints
for forensic comparison with crime scene latent "lifts". Identix
moisture-discriminating optics effectively "ignore" residual moisture
consistently recording the structure of ridge edges and skin pore detail even
when the ridges are surrounded by moisture. The TouchPrint 2000 system
integrates a high-resolution scanner with digital signal and video processing
boards, multi-processing application software, a multi-tasking computer, monitor
as well as a laser printer enclosed in a cabinet.

     TouchPrint 2600 Applicant Fingerprint System.  The TouchPrint 2600
Applicant Fingerprinting System (TP-2600 AFS) is designed to provide
high-quality fingerprint scanning for civil applications. The TP-2600 AFS is
based on the Company's, FBI Appendix F-Certified, TouchPrint 2000 fingerprint
scanner technology, and is the first Applicant fingerprint scanner to employ
Identix' Moisture-Discriminating optical technology. The TP-2600 AFS supports
direct connections to state and local AFIS systems and to the FBI IAFIS to
permit rapid screening of job applicants to help prevent the hiring of personnel
with past criminal records for industries such as airports, school systems,
banking/financial and securities firms and segments of the healthcare field.

     TouchPrint Card Scan System.  The TouchPrint Card Scan System provides
digitization of inked fingerprint images that were originally recorded on
10-print card stock. The TouchPrint Card Scan System is designed to be used
primarily by lower volume booking sites that want to participate in an
electronic fingerprint identification network. The TouchPrint Card Scan System
has a flat-bed scanner on which the user places the inked fingerprint card. The
system checks for lateral and angular misalignment of the card, digitizes the
complete card, applies automatic contrast equalization and extracts the digital
image of each individual fingerprint on the card. The digitized fingerprint
record can be forwarded by mail or electronically for identification processing
by the FBI, or a local or state AFIS or for archive at a records repository.

     TouchPrint Store & Forward System.  The TouchPrint Store & Forward System
located at central processing sites manage the flow of electronic fingerprint
records from a network of TouchPrint Live Scan systems. The high-performance,
multi-function Store & Forward platform simultaneously supports record
receiving, interactive record editing, selective record transmitting and record
printing on locally attached printers.

     TouchPrint Print Server.  TouchPrint Print Servers provide automated
receipt and printing of Live Scan fingerprint records at remote or central
facilities. High-capacity record storage options ensure uninterrupted record
flow during peak load periods.

     TouchPrint 600 Palm Scanner.  The TouchPrint 600 Palm Scanner is an inkless
Live Scan system that electronically captures high quality palm images for
forensic matching. The TouchPrint 600 Palm Scanner can be integrated with
existing TouchPrint 600 Live Scan networks. The palm images can be transmitted
to identification bureaus for examination using existing TouchPrint 600
communication software and printed using existing TouchPrint 600 printing
systems with upgrade.

     Single Fingerprint Imagers.  The DFR90 is specifically designed to capture
and display a high-resolution video fingerprint image on a customer-supplied
workstation. This product is designed to be used primarily by system integrators
as an optical fingerprint capture device which supplies fingerprint images to a
frame grabber that digitizes the image for computerized fingerprint database
systems for identification matching. The DFR90 is incorporated by OEMs into
turnkey systems and is used for civilian applications in welfare fraud
prevention, immigration and border control, and motor vehicle licensing.

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<PAGE>   13

IDENTIX PUBLIC SECTOR, INC.

     IPS, a wholly owned subsidiary of Identix, provides information technology,
engineering services and facilities engineering consulting services to private
and public sector clients. Services include the installation and integration of
Identix products primarily to public sector agencies through IPS, which is
headquartered in Fairfax, Virginia. IPS' services support the development,
installation, integration and operation of hardware and software technology
solutions, including Identix products, for a variety of client operating
environments. IPS provides these services through business units organized
around the following areas:

     Information Technology Security Services.  IPS' Information Technology
Group ("IT Security") provides an assortment of services to help companies
protect information by controlling external and internal access. Services
include: risk assessment, intrusion detection, security policy development and
management, etc.

     IT Security provides design, development and integration services for
biometric security and imaging systems for a variety of applications ranging
from law enforcement to office and business applications. For example, IT
Security served as the systems integrator for the Maryland Department of Public
Safety and Cook County Sheriff's Department integrating the Company's TouchPrint
Live Scan system and the customers' criminal justice information systems.

     IT Security was awarded a Federal Supply Schedule ("FSS") through the
General Services Administration ("GSA"), which provides computerized catalogs
for federal and state agencies to easily procure order equipment and services.
Through the GSA FSS program, IPS streamlines the acquisition process and allows
federal and state agencies to procure Identix equipment in an expedient manner.
Originally the IT organization implemented the GSA FSS program for internal use;
now however, the IT organization allows third parties for a fee to sell through
the Company's GSA contract. The current contract has a five year base period of
performance and a five year follow-on option.

     Complex Program Management and Engineering Services.  This group supplies
government and major commercial organizations with a staff of experts in
management and technical disciplines to address a variety of needs including:
program management, acquisition and financial management, logistics and
engineering/ technical services. For more than 20 years, IPS has served the
Department of Defense ("DOD"), primarily the U.S. Navy, managing programs that
play a critical role in our nation's defense, such as the Program Executive
Office for Expeditionary Warfare, Naval Special Warfare Program and the Office
of Naval Research.

     Facilities Engineering.  IPS' Facilities Engineering assist large property
owners with many complex technical issues in the areas of facilities design,
engineering, cost estimating, project management, tenant coordination, and move
services. Their staff of facilities professionals includes engineers, as well as
technicians skilled and experienced as owner representatives in all aspects of
facility management design, construction, renovation, and maintenance. They work
on behalf of clients to ensure that their projects are completed successfully,
on-time and within budget. An example contract includes functioning as the
construction manager for GSA's 10-year renovation of the White House and
Executive Office buildings, which began in 1998.

     Legislative Demographic Services, Inc.  IPS' wholly owned subsidiary
Legislative Demographic Services, Inc. ("LDS") provides demographic data
information and services principally to Fortune 500 companies, major
associations, and industries for use in lobbying Federal and state legislatures.
The product line matches customer data files and produces demographic data
information by politician to include, their committees' positions on issues and
individual voting records. This process allows customers to analyze politician's
views, and then mobilize employees, suppliers and/or members in an attempt to
influence political positions. Most recently, it's been used to analyze
potential political impacts on mergers, acquisitions, and industrial plant
closings.

     A substantial portion of IPS' business comes from government agencies,
which subjects the business to certain additional risks.

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<PAGE>   14

FINGERPRINTING SERVICES

     Certain employers, including federal or state government agencies, child
care, securities and gaming licensing agencies require a background check,
including a fingerprint check, as a condition of employment. Usually, an
applicant is required to go to a police station for ink fingerprinting and then
submit the fingerprint card to the employer for submission to the state
authorities or the FBI to perform a background investigation. If the fingerprint
card is rejected, an applicant then must go through the process again.

     The need for reliable and convenient fingerprint capture for diverse
applications has given rise to the fingerprinting services business. In
September 1997, the Company entered into a joint venture agreement with Sylvan
for the purpose of providing fingerprinting services for a variety of civilian
applications. The joint venture, SIFC, currently has over 100 fingerprinting
locations around the country and processes more than 300,000 applicants each
year. Its customers include state agencies and school districts in Illinois and
California, two major airlines, Sears Roebuck, the American Banking Association
and the National Association of Securities Dealers. Fingerprinting services are
provided on a contract basis using Identix Live Scan systems and the joint
venture earns fees for each user of the services.

     The fingerprint services business provides the applicant and employer with
the following advantages: fingerprinting takes place in a non-police
environment; background checks can be completed more quickly allowing the
applicant to begin work sooner; re-submissions can be done automatically; the
rejection of cards because of poor print quality is virtually eliminated; and
employers may not be subject to the unnecessary risk of discovering that an
employee who has begun work may have a criminal record.

PRODUCT DEVELOPMENT

     The Company continues to invest in research, development and engineering to
enhance the performance and functionality, and in certain cases to reduce the
costs, of its existing products as well as to increase the breadth of the
Company's product and services offerings. The Company's expenditures for
research, development and engineering totaled $9,649,000, $8,022,000 and
$6,011,000 in the fiscal years ended June 30, 2001, 2000 and 1999, respectively.

     The Company's development programs have recently focused on: the next
generation Security devices which are being developed to be smaller, faster,
more reliable and cost effective than currently available devices; Security end
user software applications; the next generation Imaging products; and
enhancement of the Company's current Live Scan products.

SALES, MARKETING AND SUPPORT

     The Company markets its enterprise Security and Imaging solutions directly
to end users through its internal sales force, and indirectly through channel
partners. The Security solutions partners include Toshiba, Dell, Compaq, Key
Tronic, Unisys Corporation, Cherry and SCM Microsystems. In addition, the
Company's products are sold throughout the world via authorized representatives,
dealers, distributors, Value Added Resellers ("VAR") and system integrators. The
Company's sales channels span North America, Asia Pacific, Latin America, and
Europe.

     Security solutions.  The Company's Security and itrust solutions are sold
through a worldwide network of direct sales personnel, distributors, systems
integrators, VARs and OEMs. Sales activity is concentrated in the markets of
enterprise network security, healthcare (protecting and recording access to
patient records), education, banking (financial transactions), embedded
solutions (time and attendance and access control) and government. The Company
has sales, service and product marketing in most regional sales offices to
provide customers with complete sales and support services.

     Sales activity varies widely from single identification devices sold by
internet fulfillment houses to complex, networked solutions sold by system
integrators, such as PC network security, financial transaction authorization,
time-and-attendance and building access. The success of these sales depends upon
the Company's ability to provide comprehensive integrated solutions.

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<PAGE>   15

     Imaging solutions.  The Company's Imaging solutions are marketed
domestically and internationally primarily through a direct sales force and
sales representatives. Identix also teams with two major AFIS vendors, NEC and
Sagem Morpho, to provide TouchPrint Live Scan systems or OEM versions of those
systems for law enforcement applications. In addition, the Company works closely
with skilled system integrators for civil and commercial applications of its
Imaging technology. The Company develops proposals, either directly or in
cooperation with its partners, and is often directly involved in negotiating the
contract terms.

     The Company's TouchPrint Live Scan system is generally sold through a
competitive bid process based on a competitive tender. Funding for these
projects often comes from federal, state and local agencies. The funding,
proposal, contract negotiation and implementation process can extend over
several months or years, although for existing customers that are adding to or
upgrading their systems, the sales cycle is considerably shorter and these sales
often are not required to go through the bid process.

     Identix Public Sector services.  IPS markets its services directly to
United States government agencies, including the DOD, and to commercial
entities.

PRODUCT AND CUSTOMER SUPPORT

     In July 2001, the Company formed a new Global Services group based in
Fairfax, Virginia. This new group provides all service and support for all
Company products including web-based, telephone and onsite support plus
training. Installation and maintenance support comes from the Company's 24
hour/7 days per week TouchCare support center, regional technical staffs as well
as the Company's engineering staff. This support generally includes travel to
the customer site to explain the technical operation of the system, clarify the
configurations, detail any necessary software customization and define the
integration issues. The systems are then installed and supported by the
TouchCare support center, regional staffs and the Identix trained system
integrators, VARs or partners.

     The Company's Imaging products generally carry a 90-day warranty and the
extended service is offered through a choice of maintenance contracts. Certain
of the Company's Security products generally carry a 90-day to one year warranty
and additional support is available for a fee after the expiration of the
warranty period. For equipment produced by other companies, the Company
generally passes on to its customers the standard warranties provided by those
manufacturers. Service centers are located in California, Michigan, Virginia,
and the United Kingdom.

BACKLOG

     Product sales are generally made pursuant to purchase orders, which are
subject to cancellation. The Company typically ships its products within sixty
days of receipt of an order. For its government services business, amounts in
backlog are often not funded and, even if they are funded, are subject to
cancellation by the contracting agency. Accordingly, the Company believes that
backlog at any given time cannot be considered a meaningful indicator of future
financial performance.

     Identix had product backlog of $1,336,000 on June 30, 2001, all of which is
scheduled to be shipped and recognized as revenue in fiscal 2002. Identix had
product backlog of $1,234,000 on June 30, 2000 and $3,354,000 on June 30, 1999.

     IPS had services backlog of $131,510,000 on June 30, 2001. IPS had services
backlog of $132,514,000 on June 30, 2000 and $121,684,000 on June 30, 1999.

PATENTS AND TRADE SECRETS

     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, trademark,
copyright, trade secret and contract law to establish and protect its
proprietary rights. The success of the Company's business will depend in part on
its proprietary technology and the Company's protection of that technology.
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<PAGE>   16

     The Company holds the following patents:

     - one U.S. patent expiring in 2004 and ten foreign patents on one version
       of the Company's optical fingerprint reading device;

     - one U.S. patent expiring in 2008 and seven foreign patents on a
       fingerprint analysis algorithm;

     - one U.S. patent expiring in 2013 covering an enhanced method of recording
       a fingerprint;

     - one U.S. patent expiring in 2014 and two foreign patents on the Company's
       curved platen design palm scanner;

     - one U.S. patent expiring in 2014 covering a system for electronically
       acquiring fingerprint images;

     - one U.S. patent expiring in 2015 covering a version of the Company's
       optical fingerprint reading device including a heated optical platen;

     - one U.S. patent expiring in 2015 covering a system for electronically
       acquiring fingerprint images;

     - one U.S. patent expiring in 2015 for obtaining a plain image of multiple
       fingerprints;

     - one U.S. patent expiring in 2016 covering a system for reducing smear in
       rolled fingerprint capture;

     - one U.S. patent expiring in 2016 covering a memory card having a
       biometric template; and

     - one U.S. patent expiring in 2018 covering an optical fingerprint reading
       device including a rotatable drum.

     Identix has an ongoing policy of filing patent and trademark applications
to seek protection for novel features of its products and currently has 12
patent applications pending in the United States and 18 in foreign countries.
Identix currently has 11 U.S. trademark applications pending and 13 U.S.
trademark registrations. Identix currently has nine foreign trademark
applications pending and three foreign trademark registrations.

     There is a risk that claims allowed on any patents held by the Company, or
that trademarks held by the Company, may not be broad enough to protect the
Company's technology or proprietary interests. In addition, the Company's
patents or trademarks may be challenged, invalidated or circumvented and Identix
cannot be certain that the rights granted thereunder will provide competitive
advantages to the Company. The loss of patent or trademark protection on the
Company's technology or the circumvention of its patent or trademark protection
by competitors could have a material adverse effect on the Company's business,
operating results, financial condition and stock price and on the Company's
ability to compete successfully. See "Risk Factors".

     The Company cannot be certain that any existing or future patent or
trademark applications by the Company will result in issued patents or
trademarks with the scope of the claims sought by the Company, or at all.
Moreover, any current or future issued or licensed patents may not afford
sufficient protection against competitors with similar technologies or
processes, and the possibility exists that already issued patents may infringe
upon or be designed around by others. In addition, there is a risk that others
will independently develop proprietary technologies and processes which are the
same as or substantially equivalent or superior to those of the Company. There
is a risk that the Company has infringed, or will in the future infringe,
patents or trademarks owned by others, that the Company will need to develop
non-infringing technology or acquire licenses under patents or trademarks
belonging to others for technology potentially useful or necessary to the
Company, and that such licenses will not be available to the Company on
acceptable terms, if at all. See "Risk Factors".

     The Company may have to litigate to enforce our patents or trademarks or to
determine the scope and validity of other parties' proprietary rights.
Litigation could be costly and divert management's attention. An adverse outcome
in any litigation may have a severe negative impact on the Company's business,
operating results, financial condition and stock price and on the Company's
ability to compete successfully. See "Risk Factors". To determine the priority
of inventions, we may have to participate in interference proceedings declared
by the United States Patent and Trademark Office or oppositions in foreign
patent and trademark

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<PAGE>   17

offices, which could result in substantial cost to us and could result in
limitations on the scope or validity of our patents or trademarks.

     The Company also relies on trade secrets and proprietary know-how, which it
seeks to protect by confidentiality agreements with its employees, consultants
and with third parties. There is a risk that these agreements may be breached,
and that remedies available to the Company will not be adequate. In addition,
the Company's trade secrets and proprietary know-how may otherwise become known
or be independently discovered by others. A failure by the Company to protect
its trade secrets, proprietary know-how and other intellectual property in a
meaningful manner could have a material adverse effect on the Company's
business, operating results, financial condition and stock price and on the
Company's ability to compete successfully. See "Risk Factors".

COMPETITION

     The markets for Security and Imaging products and solutions are extremely
competitive and are characterized by rapid technological change as a result of
technical developments exploited by competitors, the changing technical needs of
the customers and frequent introductions of new features. The Company expects
competition to increase as other companies introduce products that are
competitively priced, that may have increased performance or functionality or
that incorporate technological advances not yet developed or implemented by the
Company. Some of the Company's present and potential competitors have financial,
marketing and research resources substantially greater than those of the
Company. In order to compete effectively in this environment, the Company must
continually develop and market new and enhanced products at competitive prices,
and have the resources to invest in significant research and development
activities. There is a risk that the Company may not be able to make the
technological advances necessary to compete successfully. Existing and new
competitors may enter or expand their efforts in the Company's markets, or
develop new products to compete against the Company's. The Company's competitors
may develop new technologies or enhancements to existing products or introduce
new products that will offer superior price or performance features. New
products or technologies may render the Company's products obsolete.

     A significant number of established and startup companies are developing
and marketing software and hardware for fingerprint or other biometric security
applications that could compete directly with the Company's Security products.
Some of these companies are developing semiconductor or optically-based direct
contact fingerprint image capture devices. Other companies are developing and
marketing other methods of biometric identification such as retinal blood vessel
or iris pattern, signature recognition, hand geometry, voice and facial
structure. If one or more of these approaches were widely adopted, it would
significantly reduce the potential market for the Company's products. The
Company's Security products also compete with non-biometric technologies such as
traditional key, card and surveillance systems, tokens, PINs, and passwords.

     The Company believes that the most important competitive factors for
Security products are the degree of security provided, ease of use,
functionality, price, size and reliability. In applications such as controlled
access to computers, ATMs and Electronic Funds Transfer ("EFT"), the Company
faces competition from technologies relying on PIN numbers, smartcards, tokens
or passwords. In competing with these non-biometric products, the Company
believes that the most important competitive issue is the trade-off between the
additional security provided by positive personal identification and the higher
price. However, the replacement of computer passwords by the Company's Security
products is a very cost effective solution. In some instances, however, products
using non-biometric technologies may be complementary to, rather than
competitive with, the Company's Security products. For example, card key or
token systems can be integrated with Security systems to supply different levels
of security within a facility. A significant number of established and startup
companies have developed or are developing and marketing security and/or
authentication solutions that currently compete or will compete directly with
itrust's solutions. Some of these companies have significantly more cash and
resources than the Company, and may currently offer a broader or more robust
range of solutions than those currently available through the itrust offering.
The wired and wireless security and authentication marketplace is a rapidly
evolving and intensely competitive market and
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the Company believes that additional competitors may yet enter the market and
become significant long-term competitors.

     The Company believes that the most important competitive factors for the
Imaging products are the quality of fingerprint images, the capability to work
within large criminal history networks, ease of use, price and reliability.
Identix' Imaging products face competition from a number of competitors who are
actively engaged in developing and marketing live scan products, including
Visionics Inc., Heinemann Biometric Systems GmbH, CrossMatch GmbH and Printrak
International Inc., a wholly owned subsidiary of Motorola ("Printrak").

     In its Government Services business, the Company faces substantial
competition from professional service providers and systems integrators of all
sizes in the government marketplace. IPS is increasingly being required to bid
on firm fixed price and similar contracts that result in greater performance
risk to IPS. If IPS is not able to maintain a competitive cost structure,
support specialized market niches, retain its highly qualified personnel or
align with technology leaders, it may lose its ability to compete successfully
in the services business.

MANUFACTURING

     The Company limits its manufacturing activities to the assembly, repair and
testing of proprietary subassemblies. Printed circuit board and other mechanical
and optical assemblies are fabricated by highly automated, contract
manufacturing partners. The Company believes this will permit rapid expansion of
production capacity to meet any significant increase in product demand and
minimize the cost associated with the expansion of internal manufacturing. The
Company believes that the cost of material and fabricated subassemblies will
decline if manufacturing volumes increase. Quality control audits are performed
as part of the manufacturing process. The Company's Security products are fully
outsourced to contract partners.

     The Company currently uses certain components and sub-assemblies which come
from sole source suppliers, the most important of which are the charge coupled
and CMOS imaging devices, ASICs for the Security products and proprietary
optical assemblies and coatings for the Imaging products. The partial or
complete loss of supplies available from sole or limited sources of supply or
the delay in receiving supplies from these sources could result in delays in
manufacturing and shipping of products to customers and require the incurrence
of development and other costs to establish alternative sources of supply. While
the Company attempts to maintain inventory on sole sourced components, it may
take the Company several months to locate alternative supplies if required, or
redesign its products to accommodate components from different suppliers. If the
Company is required to seek alternative suppliers, the Company may not 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 on a timely basis in sufficient quantities or of sufficient quality or
any significant increase in the price from existing or alternative suppliers
could have a material adverse effect on the Company's business, financial
condition and results of operations.

EMPLOYEES

     As of September 1, 2001, Identix had 185 employees working in its products
business, of whom 28 were engaged in research, development and engineering, 23
in production and production support, 105 in sales, marketing and field service
and 29 in general administration, finance and legal. As of September 1, 2001,
IPS had 223 employees working in its services business, of whom 172 were service
providers, 17 were engaged in sales and marketing and 34 were engaged in general
administration and finance. None of Identix' employees is represented by a union
and Identix has never experienced a work stoppage. Management considers its
employee relations to be good.

FINANCIAL INFORMATION ABOUT SEGMENTS

     For the financial information about the Company's reportable segments, see
Note 10 to the Consolidated Financial Statements.

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<PAGE>   19

                                  RISK FACTORS

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

OUR PRODUCT REVENUES AND A PORTION OF OUR SERVICE REVENUES ARE DERIVED FROM THE
SALE OF BIOMETRIC PRODUCTS AND SERVICES AND OUR BUSINESS WILL NOT GROW UNLESS
THE MARKET FOR BIOMETRIC SOLUTIONS EXPANDS BOTH DOMESTICALLY AND INTERNATIONALLY

     Biometric solutions have not gained widespread commercial acceptance. We
cannot accurately predict the future growth rate, if any, or the ultimate size
of the biometric technology market. The expansion of the market for our products
and services depends on a number of factors including without limitation:

     - the cost, performance and reliability of our products and services and
       the products and services of competitors;

     - customers' perception of the perceived benefit of biometric solutions;

     - public perceptions of the intrusiveness of these solutions and the manner
       in which firms are using the fingerprint information collected;

     - public perceptions regarding the confidentiality of private information;

     - customers' satisfaction with our products and services; and

     - marketing efforts and publicity regarding these products and services.

     Certain groups have publicly objected to the use of biometric products for
some applications on civil liberties grounds and legislation has been proposed
to regulate the use of biometric security products. Even if biometric markets
develop, our products and services may not gain wide market acceptance. Even if
biometric solutions gain wide market acceptance, there can be no assurance that
the Company's products and services will adequately address the market
requirements.

WE FACE INTENSE COMPETITION FROM OTHER BIOMETRIC SOLUTION PROVIDERS AS WELL AS
IDENTIFICATION AND SECURITY SYSTEMS PROVIDERS

     A significant number of established and startup companies have developed or
are developing and marketing software and hardware for fingerprint biometric
security applications that currently compete or will compete directly with those
products designed, developed and sold under Security. Some of these companies
have developed or are developing and marketing semiconductor or optically based
direct contact fingerprint image capture devices. Other companies have developed
or are developing and marketing other methods of biometric identification such
as retinal blood vessel or iris pattern, hand geometry, voice and facial
structure. If one or more of these technologies or approaches were widely
adopted, it would significantly reduce the potential market for our products.
Our Security products also compete with non-biometric technologies such as
certificate authorities, and traditional key, card, surveillance systems and
passwords. Many competitors offering products that are competitive with our
Security products and services have significantly more cash and resources than
the Company. The biometric security market is a rapidly evolving and intensely
competitive market and the Company believes that additional competitors may yet
enter the market and become significant long-term competitors.

     The products designed, developed and sold under Imaging line of products
face intense competition from a number of competitors who are actively engaged
in developing and marketing livescan products, including Visionics, Inc.,
Heinemann Biometric Systems GmbH, CrossMatch GmbH and Printrak.

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<PAGE>   20

     We expect competition to increase and intensify in the near term in both
the Security and Imaging markets. Companies competing with us may introduce
products that are competitively priced, that have increased performance or
functionality or that incorporate technological advances not yet developed or
implemented by us. Some present and potential competitors have financial,
marketing, research, and manufacturing resources substantially greater than
ours.

     In order to compete effectively in this environment, we must continually
develop and market new and enhanced products at competitive prices and must have
the resources available to invest in significant research and development
activities. The failure to do so could have a material adverse effect on our
business operations, financial results and stock price.

WE MAY NEED TO RAISE ADDITIONAL EQUITY OR DEBT FINANCING IN THE NEXT TWELVE
MONTHS

     As of September 1, 2001, we had $24,561,000 in working capital, which
included $15,394,000 in cash and cash equivalents and restricted cash.
Additionally, the Company has a firm commitment from Silicon Valley Bank, dated
September 17, 2001, to loan the Company up to the lesser of $7,500,000 or 75% of
the Company's eligible accounts receivable. As of September 1, 2001, IPS also
had available up to $6,000,000 under IPS' line of credit with Suntrust. On June
13, 2001, the Company completed a private placement of common stock and received
cash proceeds of $15,019,000 from the State of Wisconsin Investment Board
("SWIB").

     While the Company believes that cash flows from operations, together with
existing working capital and available lines of credit, may be adequate to fund
the Company's cash requirements through fiscal 2002, we may need to raise
additional debt or equity financing in the next 12 months. We may not be able to
obtain additional debt or equity financing. If successful in raising additional
debt financing, we may not be able to do so on terms that are not excessively
dilutive to existing stockholders or less costly than existing sources of debt
financing. Failure to secure additional financing in a timely manner and on
favorable terms could have an adverse impact on our financial performance and
stock price and require us to implement certain cost reduction initiatives and
curtail certain of our operations.

FUTURE GROWTH DEPENDS IN PART ON THE SUCCESS OF ITRUST, A RELATIVELY NEW
BUSINESS ACTIVITY WITH LITTLE OPERATING HISTORY

     A portion of the Company's future growth will depend on the success of
itrust. itrust was formed in July 2000 and has a limited operating history.
itrust's success will depend on many factors, including, but not limited to:

     - our ability to form additional collaborative partnerships that will
       contribute technical and commercial value to itrust and contribute to the
       division's growth;

     - the demand for our Security products and itrust services;

     - our ability to successfully and rapidly manufacture, disseminate and
       deploy biometric enabled products and itrust services;

     - the ability and willingness of our collaborative partners such as
       Motorola and VeriSign to successfully and rapidly promote, manufacture,
       disseminate and deploy biometric enabled products and itrust services;

     - the levels of competition in the space for Internet and Wireless Web
       security services;

     - the perceived need for secure communications and commerce in such
       markets;

     - our ability to successfully introduce new products and services; and

     - our ability to expand its operations and attract integrate, retain and
       motivate qualified sales, marketing, and research and development
       personnel.

     A significant number of established and startup companies have developed or
are developing and marketing security and/or authentication solutions that
currently compete or will compete directly with

                                        19
<PAGE>   21

itrust's solutions. Some of these companies have significantly more cash and
resources than the Company, and may currently offer a broader or more robust
range of solutions than those currently available through the itrust offering.
The wired and wireless security and authentication marketplace is a rapidly
evolving and intensely competitive market and the Company believes that
additional competitors may yet enter the market and become significant long-term
competitors.

     We have experienced net losses in the last two fiscal years and expect
additional losses in the future. itrust is not expected to contribute
significant revenues to our results in the foreseeable future. At the same time,
however, we will incur significant costs in the design, development,
manufacture, sale and deployment of itrust products and services and in the
execution of itrust's business plan. In part because of the significant
investment we will make in itrust, we expect to incur substantial additional
losses in the foreseeable future.

IN OUR SERVICES BUSINESS, WE FACE SUBSTANTIAL COMPETITION FROM PROFESSIONAL
SERVICE PROVIDERS OF ALL SIZES IN THE GOVERNMENT MARKETPLACE

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

THE BIOMETRICS INDUSTRY IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGE AND
EVOLVING INDUSTRY STANDARDS, WHICH COULD RENDER EXISTING PRODUCTS OBSOLETE

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

OUR FINANCIAL AND OPERATING RESULTS OFTEN VARY SIGNIFICANTLY FROM QUARTER TO
QUARTER AND MAY BE NEGATIVELY AFFECTED BY A NUMBER OF FACTORS

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

     - downturns in the US, North American or international economies;

     - reduced demand for products and services caused by competitors;

     - price reductions, the introduction of new competitors, or the
       introduction of enhanced products or services from new or existing
       competitors;

     - reduced pricing and/or increased spending in response to competition or
       new market opportunities;

     - changes in the mix of products and services we or our distributors sell;

     - cancellations, delays or contract amendments by government agency
       customers;

     - the lack of availability of government funds;

     - litigation costs;

     - expenses related to acquisitions;

     - other one-time financial charges;

     - the lack of availability or increase in cost of key components; and

     - the inability to successfully manufacture in volume certain of our
       products that may contain complex designs and components

                                        20
<PAGE>   22

     Additionally, certain of our Imaging products often have a lengthy sales
cycle while the customer evaluates and receives approvals for purchase. If,
after expending significant funds and effort, we fail to receive an order, a
negative impact on our financial results and stock price could result.

     It is difficult to predict accurately the sales cycle of any large order
for any of our products. If we do not ship one or more large orders as forecast
for a fiscal quarter, our total revenues and operating results for that quarter
could be materially and adversely affected.

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

WE DERIVE A MAJORITY OF OUR SERVICES REVENUE FROM GOVERNMENT CONTRACTS, WHICH
ARE OFTEN NON-STANDARD, INVOLVE COMPETITIVE BIDDING AND MAY BE SUBJECT TO
CANCELLATION WITHOUT PENALTY

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

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

     For the year ended June 30, 2001, we derived approximately 89% of our
services revenue directly from contracts relating to the DOD and other U.S.
Government agencies. The loss of a material government contract due to budget
cuts or otherwise could have a severe negative impact on our financial results
and stock price.

     For the year ended June 30, 2001, we derived approximately 95% of our
services revenue from time-and-materials ("T&M") contracts and firm-fixed-price
("FFP") contracts. We assume certain performance risk on these contracts. If we
fail to estimate accurately ultimate costs or to control costs during
performance of the work, our profit margins may be reduced and we may suffer
losses. In addition, revenues generated from government contracts are subject to
audit and subsequent adjustment by negotiation with representatives of the
government agencies. The Defense Contract Audit Agency is currently auditing IPS
for the periods from July 1, 1997 to June 30, 2000. While the Company believes
that the results of such audit will have no material effect on the Company's
profits, there can be no assurance that no adjustments will be made and that, if
made, such adjustments will not have a material adverse effect on the Company's
business, financial condition and results of operations.

WE RELY IN PART UPON OEM AND DISTRIBUTION PARTNERS TO DISTRIBUTE OUR PRODUCTS,
AND WE MAY BE ADVERSELY AFFECTED IF THOSE PARTIES DO NOT ACTIVELY PROMOTE OUR
PRODUCTS OR PURSUE INSTALLATIONS THAT USE OUR EQUIPMENT

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

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<PAGE>   23

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

WE RELY HEAVILY ON PRODUCTS AND SERVICES PROVIDED BY INTERNATIONAL TECHNOLOGY
CONCEPTS, INC. ("IT CONCEPTS")

     Both Imaging and Security purchase certain complete biometric security and
imaging products, components of products and research, development and
engineering services related to the development of products from IT Concepts.
itrust is also working with IT Concepts for the development of certain of
itrust's solutions. In turn IT Concepts subcontracts portions of its development
work to an affiliate in Russia and imports a portion its engineering and
personnel resources from Russia under applicable immigration laws. In recent
years competition for a limited number of available visas for foreign
high-technology workers and/or consultants has intensified as more U.S.
companies have chosen to look abroad for supplemental research, development and
engineering resources. If we were to lose IT Concepts as a supplier of products
and engineering services, or if IT Concepts were prohibited or restricted from
importing a portion of its engineering requirements or resources, because of
lack of availability of applicable immigration visas or otherwise, we would be
required to find alternative suppliers of products and services or hire
additional engineering personnel to provide the services. This could require the
Company to incur significant additional research and development costs and delay
shipment of products to customers and the development of new technology and
products. There is a risk that we would not be able to find such personnel or
suppliers at a reasonable cost, or at all. Any delay in product development or
shipment could have a material adverse effect on our business, operations,
financial results and stock price.

LOSS OF SOLE OR LIMITED SOURCE SUPPLIERS MAY RESULT IN DELAYS OR ADDITIONAL
EXPENSES

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

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

THE SUCCESS OF OUR STRATEGIC PLAN TO PURSUE SALES IN AND SOURCE SIGNIFICANT
RESEARCH, DEVELOPMENT AND ENGINEERING SERVICES FROM INTERNATIONAL MARKETS MAY BE
LIMITED BY RISKS RELATED TO SOCIO-ECONOMIC AND POLITICAL CONDITIONS IN SUCH
MARKETS

     For the fiscal year ended June 30, 2001, we derived approximately 11% of
our product revenues from international sales. We currently have a local
presence in the United Kingdom. We rely on products and services provided by IT
Concepts, which in turn relies on research, development and personnel support
from Russia. There is a risk that we may not be able to successfully market,
sell and deliver our products in foreign countries, or successfully rely on
supplemental offshore research and development resources.

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

     - regional economic conditions;

     - delays in or prohibitions on exporting products resulting from export
       restrictions for certain products and technologies, including "crime
       control" products and encryption technology;

                                        22
<PAGE>   24

     - loss of, or delays in importing products, services and intellectual
       property developed abroad, resulting from unstable or fluctuating social,
       political or governmental conditions;

     - fluctuations in foreign currencies and the U.S. dollar;

     - loss of revenue, property (including intellectual property) and equipment
       from expropriation, nationalization, war, insurrection, terrorism,
       criminal acts and other political and social risks;

     - the overlap of different tax structures;

     - seasonal reductions in business activity;

     - risks of increases in taxes and other government fees; and

     - involuntary renegotiations of contracts with foreign governments;

     In addition, foreign laws treat the protection of proprietary rights
differently from laws in the United States and may not protect our proprietary
rights to the same extent as U.S. laws. The failure of foreign laws or judicial
systems to adequately protect our proprietary rights or intellectual property,
including intellectual property developed on our behalf by foreign contractors
or subcontractors may have a material adverse effect on our business,
operations, financial results and stock price.

ONE STOCKHOLDER OWNS A SIGNIFICANT PORTION OF OUR STOCK AND MAY DELAY OR PREVENT
A CHANGE IN CONTROL OR ADVERSELY AFFECT THE STOCK PRICE THROUGH SALES IN THE
OPEN MARKET

     As of July 10, 2001, SWIB owned approximately 16% of the Company's
outstanding common stock. The concentration of large percentages of ownership in
any single shareholder may delay or prevent change in control of the Company.
Additionally, the sale of a significant number of our shares in the open market
by a single shareholder or otherwise could adversely affect our stock price.

OUR PRODUCTS AND CERTAIN OF OUR SERVICES ARE COMPLEX, MAY CONTAIN UNDETECTED OR
UNRESOLVED DEFECTS WHEN SOLD OR MAY NOT MEET CUSTOMER'S PERFORMANCE CRITERIA,
AND MAY BE DIFFICULT TO SUCCESSFULLY MANUFACTURE IN VOLUME

     Performance failure in our products or certain of our services may cause
loss of market share, delay in or loss of market acceptance, additional warranty
expense or product recall, or other contractual liabilities. The complexity of
certain of our fingerprint readers may make the manufacturing and assembly
process of such products, especially in volume, complex. This may in turn lead
to delays or shortages in the availability of certain products. The negative
effects of any delay or failure could be exacerbated if the delay or failure
occurred in products or services (such as itrust services ) that provide
personal security, secure sensitive computer data, authorize significant
financial transactions or perform other functions where a security breach could
have significant consequences.

     If a product or service launch is delayed or is the subject of an
availability shortage because of problems with our ability to manufacture or
assemble the product or service successfully on a timely basis, or if a product
or service otherwise fails to meet performance criteria, we may lose revenue
opportunities entirely and/or experience delays in revenue recognition
associated with a product or service in addition to incurring higher operating
expenses during the period required to correct the defects. There is a risk that
for unforeseen reasons we may be required to repair or replace a substantial
number of products in use or to reimburse customers for products that fail to
work or meet strict performance criteria. We carry product liability insurance,
but existing coverage may not be adequate to cover potential claims.

FAILURE BY US TO MAINTAIN THE PROPRIETARY NATURE OF OUR TECHNOLOGY, PRODUCTS AND
MANUFACTURING PROCESSES COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS,
OPERATING RESULTS, FINANCIAL CONDITION AND STOCK PRICE AND ON OUR ABILITY TO
COMPETE EFFECTIVELY

     We principally rely upon patent, trademark, copyright, trade secret and
contract law to establish and protect our proprietary rights. There is a risk
that claims allowed on any patents or trademarks we hold may

                                        23
<PAGE>   25

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

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

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

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

IF WE FAIL TO ADEQUATELY MANAGE GROWTH OF OUR BUSINESS, IT COULD HAVE A SEVERE
NEGATIVE IMPACT ON OUR FINANCIAL RESULTS OR STOCK PRICE

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

WE MAY ENCOUNTER DIFFICULTIES IN ACQUIRING AND EFFECTIVELY INTEGRATING
COMPLEMENTARY ASSETS AND BUSINESSES

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

     - potential exposure to unknown liabilities of acquired companies;

     - higher than anticipated acquisition costs and expenses;

     - effects of costs and expenses of acquiring and integrating new businesses
       on our operating results and financial condition;

     - the difficulty and expense of assimilating the operations and personnel
       of the companies;

     - the potential disruption of our ongoing business;

     - diversion of management time and attention;

                                        24
<PAGE>   26

     - failure to maximize our financial and strategic position by the
       successful incorporation of acquired technology;

     - the maintenance of uniform standards, controls, procedures and policies;

     - loss of key employees and customers as a result of changes in management;

     - the incurrence of amortization expenses; and

     - possible dilution to our stockholders.

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

LOSS OF CURRENT SENIOR EXECUTIVES AND KEY TECHNICAL PERSONNEL WOULD ADVERSELY
AFFECT OUR BUSINESS

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

     Robert McCashin, Chairman of the Board and Chief Executive Officer, has
nearly 30 years of domestic and international leadership experience and plays a
key role in directing the Company, its Board of Directors and its Senior
Management team.

     James P. Scullion, President and Chief Operating Officer, and Daniel F.
Maase, Vice President and Chief Technical Officer, Imaging, have a combined
total of 24 years experience with Identix and have a substantial amount of
acquired knowledge regarding Identix and the biometrics industry generally. Mr.
Scullion plays a major role in the development and execution of the Company's
strategic plan.

     Grant Evans, Executive Vice President Strategy and Business Development,
has a central role in the Company's business development ventures and itrust.

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

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

OUR BUSINESS OPERATIONS MAY BE ADVERSELY AFFECTED IN THE EVENT OF AN EARTHQUAKE

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

OUR BUSINESS OPERATIONS MAY BE ADVERSELY AFFECTED BY THE CALIFORNIA ENERGY
CRISIS

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

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<PAGE>   27

the energy crisis continues and power interruptions or shortages occur in the
future, they may adversely affect our business. Any material increase in energy
costs may also adversely affect our financial results.

ITEM 2.  PROPERTIES

     Identix leases approximately 26,000 square feet of space in Los Gatos,
California for manufacturing and administration and approximately 31,000 square
feet of space in Dublin, California for engineering, research and customer
support. The monthly lease payment for the Los Gatos facility is $117,000 a
month plus taxes, insurance and maintenance costs and the lease expires December
31, 2007. The monthly lease payment for the Dublin facility is $43,000 a month
plus taxes, insurance, and maintenance and the lease expires October 31, 2005.
Sales and service offices were leased in Zurich, Rio de Janeiro and Singapore
with an aggregate net monthly lease payment of approximately $10,000. The
Zurich, Rio de Janeiro and Singapore leases were terminated in September 2001.
Identix also services customers from sales offices in Maryland and Michigan.

     IPS leases approximately 45,000 square feet in four locations in Virginia
with aggregate monthly lease payments of $242,000, which expire at various dates
through 2004. The Company has negotiated two new leases in Fairfax, Virginia and
Washington, DC, for a total of 93,000 sq. ft. These leases begin in July 2001
and August 2001 and expire at various dates through 2011. These leases will
replace expiring facility leases in Arlington, Va. (the Courthouse location and
two Crystal City locations). IPS also services customers from offices leased in
Mississippi and Maryland. The leases contain escalation provisions requiring
rental increases for increases in operating expense and real estate taxes.

ITEM 3.  LEGAL PROCEEDINGS

     The Company is not party to any material legal proceedings.

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

     No matters were submitted to a vote of security-holders during the fourth
quarter of the fiscal year ended June 30, 2001.

SUPPLEMENTAL ITEM.  Executive Officers of the Company

     The executive officers of the Company, and their ages as of September 1,
2001, are as follows:

<Table>
<Caption>
NAME                                     AGE                  POSITION
----                                     ---                  --------
<S>                                      <C>   <C>
Robert McCashin........................  54    Chairman and Chief Executive Officer
James P. Scullion......................  45    President, Chief Operating Officer and
                                               Director
Grant Evans............................  43    Executive Vice President, Strategy and
                                               Business Development
Linda Howard...........................  41    Executive Vice President, Chief
                                               Operating Officer, Global Service
                                               Operation
Sunday Lewis...........................  54    Executive Vice President, Chief
                                               Marketing Officer
Valerie J. Lyons.......................  46    Executive Vice President, Worldwide
                                               Sales
Mark S. Molina.........................  42    Executive Vice President, General
                                               Counsel and Secretary
Erik E. Prusch.........................  34    Executive Vice President, Chief
                                               Financial Officer
Paul J. Bulger.........................  40    Executive Vice President, Identix
                                               Public Sector, Inc.
</Table>

     Robert McCashin, Chairman of the Board of Directors and Chief Executive
Officer of the Company, joined the Company in October 2000 as a Director and the
Chief Executive Officer. He was appointed as

                                        26
<PAGE>   28

Chairman of the Board in January 2001. Prior to joining the Company, he held
various executive positions at Electronic Data Systems Corporation ("EDS"), a
leading global services company, which he joined in 1971. From 1997 to 1999, Mr.
McCashin served as Chief Executive Officer and President of Centrobe, a wholly
owned subsidiary of EDS, and one of the world's largest providers of enterprise
customer management solutions. Prior to that time, Mr. McCashin held the
position of Group Executive, Global Energy from 1995 to 1997, Group Executive,
Southern Europe from 1992 to 1995, Group Executive, Federal Government Group
from 1989 to 1992 and Division President, Federal Government Group from 1988 to
1989, each within EDS. Mr. McCashin began his career at EDS in systems
engineering.

     James P. Scullion, President and COO of the Company since April 1999, was
Interim Chief Executive Officer of the Company from March 2000 to October 2000.
He has also served on the Board of Directors since 1998. He was Chief Financial
Officer of the Company from 1990 through March 2001. From 1996 to 1999, he was
Executive Vice President of the Company, and he was the Company's Vice
President, Finance from 1990 to 1996. From 1986 to 1990, he was Vice President,
Finance and Chief Financial Officer at DataTrak, Inc., a manufacturer of
security access systems.

     Grant Evans, Executive Vice President, Strategy and Business Development.
Mr. Evans has 15 years of experience serving in various executive and management
sales and marketing positions in international and domestic markets. From 1997
to April 1999 he served as Vice President, Sales and Marketing of Identicator
Technology prior to becoming Vice President and General Manager of the Identix
Security Division (formerly Identicator). Prior to Identicator Technology, he
was Vice President of Business Development for Logistix, Inc., a software and
hardware manufacturer from 1994 to 1997.

     Linda Howard, was appointed Executive Vice President, Chief Operating
Officer of IPS in May 2001. She is responsible for managing IPS business and
Global Customer Services Operation. From August 1999 to April 2001, Mrs. Howard
served as Chief Operating Officer of DynCorp Management Resource, a $50 Million
Division of DynCorp. Previously, Mrs. Howard performed multiple assignments with
EDS from 1986 through 1998. Most recently she was Vice President of Operations
for EDS Military Systems.

     Sunday Lewis, Ms. Lewis has served as Executive Vice President, Chief
Marketing Officer since May 2001. She is responsible for formulating the
Company's marketing strategy for all lines of business, including product
marketing, branding and public relations. Prior to joining Identix, Ms. Lewis
founded Vantage in 1997, a strategic marketing and e-business consulting firm.
From 1987 to 1997, Ms. Lewis was CEO & CMO of New-York-based Techvantage
International. Previously, she served as general manager, Vice President Sales
of Software AG's Midwest region and CMO.

     Valerie J. Lyons, Ms. Lyons joined the Company as Executive Vice President,
Worldwide Sales, in April 2001. She is responsible for developing the growth
strategy for the worldwide sales organization and channel partners. From
December 1998 to January 2001, Ms. Lyons was President of Sytel, a privately
held e-business solutions firm. Prior to serving as President at Sytel, she
spent 18 years in various positions of sales management.

     Mark S. Molina, Executive Vice President, General Counsel and Secretary,
joined the Company in October 1999 as Vice President and General Counsel. He was
appointed Executive Vice President in July 2001 and Secretary in December 1999.
Prior to joining Identix, Mr. Molina was with Harris Corporation from February
1996 to October 1999, most recently as Senior Counsel, Microwave Communications
Division. Prior to joining Harris he practiced corporate, business and
securities law with firms in San Francisco, Sydney, Australia, and New York City
where he began his career with Shearman & Sterling in 1985.

     Erik E. Prusch, Mr. Prusch joined the Company in April 2001 as Executive
Vice President, Chief Financial Officer. He is responsible for Finance, Investor
Relations, Human Resources, Facilities and Administration. He most recently was
CFO for the $3.5 billion Gateway Business a division of Gateway Computers, Inc.,
and brings to Identix more than 13 years of experience in finance. During 1998,
Mr. Prusch was Vice President of Mergers and Acquisitions for Koch Industries.
From 1993 to 1997, Mr. Prusch held various positions for PepsiCo, Inc. Prior to
that, he served as a Senior Consultant for Deloitte & Touche.

                                        27
<PAGE>   29

     Paul J. Bulger, served as Executive Vice President of IPS from July 2001
until September 2001 when he separated from employment of the Company. He also
served as a Director of the Company from October 2000 until October 2001. Prior
to July 2001, he served as President and Chief Executive Officer of IPS from
January 1999. Prior to January 1999, Mr. Bulger served as IPS' Chief Operating
Officer from June 1998, and its Corporate Vice President for Business
Development from March 1994, when he first joined IPS. Prior to joining IPS, he
was a strategic planning and business development consultant with W. S. Thompson
Associates from March 1992 to February 1994. Mr. Bulger has also held various
marketing and line management positions with I-NET Corporation, PRC Inc., and
Advanced Technology Inc.

                                    PART II

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

     The Company's common stock is listed on the American Stock Exchange
("AMEX") under the symbol IDX.

     The following table sets forth the range of high and low closing prices as
reported on the AMEX for the fiscal periods indicated.

<Table>
<Caption>
                                                               HIGH     LOW
                                                              ------   ------
<S>                                                           <C>      <C>
FISCAL YEAR ENDED JUNE 30, 2001
Fourth Quarter..............................................  $ 8.60   $ 6.15
Third Quarter...............................................   12.60     7.00
Second Quarter..............................................   15.75     6.26
First Quarter...............................................   19.75    11.50
FISCAL YEAR ENDED JUNE 30, 2000
Fourth Quarter..............................................   28.63    11.75
Third Quarter...............................................   34.88     8.81
Second Quarter..............................................   10.69     6.88
First Quarter...............................................    9.13     7.63
</Table>

     The last reported sale price of the common stock on the AMEX on September
4, 2001 was $4.40. As of September 4, 2001, there were 1,115 stockholders of
record.

     The Company has not paid any cash dividends on its common stock during the
last five fiscal years. The Company currently intends to retain any earnings for
use in its business and does not anticipate paying any cash dividends in the
foreseeable future. In addition, the Company's bank lines of credit restrict the
Company's ability to pay dividends.

     In July 2000, the Company entered into a Securities Purchase Agreement with
Motorola, whereby the Company sold 234,558 shares of its Series A Preferred
Stock at $15.99 per share. The sale resulted in net cash proceeds to the Company
of $3,702,000. In addition, the Company issued to Motorola a warrant to purchase
187,647 shares of the Company's common stock at $17.11 per share. The warrant is
exercisable until July 7, 2005. The sale of the shares of Series A Preferred
Stock and the warrant was exempt from registration under applicable securities
laws because such shares and warrant were sold in a private placement to a
purchaser who is an "accredited investor" as that term is defined in Rule 501(a)
of Regulation D of the Securities Act of 1933, as amended. The shares of Series
A Preferred Stock are convertible into, and the warrant is exercisable for,
shares of the Company's common stock at the option of the holder of such shares
and warrant. The proceeds from the sale have been used solely for the research,
design, development, marketing and manufacturing of product and service
solutions designed by itrust.

     In December 2000, the Company entered into a Common Stock Purchase
Agreement with VeriSign pursuant to which the Company sold, in January 2001,
264,901 shares of its common stock at $7.55 per share. The sale resulted in net
cash proceeds to the Company of $1,983,000. The Company has registered the
shares

                                        28
<PAGE>   30

for resale. The proceeds from the sale of the common stock have been used solely
for the research, design, development, marketing and manufacturing of product
and service solutions related to the Company's itrust activities.

     In June 2001, the Company sold 2,225,000 shares of its common stock at
$6.75 per share in a private placement to SWIB. The sale resulted in net cash
proceeds to the Company of $14,979,000. The Company has registered the shares
for resale.

                                        29
<PAGE>   31

ITEM 6.  SELECTED FINANCIAL DATA

     The selected consolidated financial data set forth below with respect to
the Company's statements of operations data for the years ended June 30, 2001,
2000 and 1999 and with respect to the balance sheets at June 30, 2001 and 2000
are derived from the Company's audited consolidated financial statements
included elsewhere in this Annual Report on Form 10-K. Consolidated statement of
operations data for the years ended June 30, 1998 and 1997, and consolidated
balance sheet data at June 30, 1999, 1998 and 1997 have been derived from
audited consolidated financial statements of the Company not included in this
Annual Report on Form 10-K. The following selected consolidated financial data
should be read in conjunction with the consolidated financial statements for
Identix and the notes thereto appearing in Item 8 of this Annual Report on Form
10-K and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" appearing in Item 7 of this Annual Report on Form 10-K.
Historical operating results are not necessarily indicative of the results that
may be expected in any future period.

<Table>
<Caption>
                                                    FISCAL YEAR ENDED JUNE 30,
                                    ----------------------------------------------------------
                                      2001         2000         1999        1998       1997(5)
                                    --------     --------     --------     -------     -------
                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                 <C>          <C>          <C>          <C>         <C>
STATEMENT OF OPERATIONS DATA:
Revenues..........................  $ 81,828(1)  $ 72,695     $ 81,762     $79,374     $52,543
Income (loss) before cumulative
  effect of a change in accounting
  principle.......................   (27,600)(3)  (13,386)     (13,419)(4)     768         518
Cumulative effect of a change in
  accounting principle............    (1,998)(1)       --           --          --          --
Net income (loss).................   (29,598)     (13,386)     (13,419)        768         518
Basic and diluted net income
  (loss) per share:
  Loss before cumulative effect of
     a change in accounting
     principle....................     (0.82)       (0.43)       (0.52)       0.03        0.02
  Cumulative effect of a change in
     accounting principle.........     (0.06)          --           --          --          --
  Basic and diluted net income
     (loss) per share.............     (0.88)       (0.43)(2)    (0.52)(2)    0.03(2)     0.02(2)
BALANCE SHEET DATA:
Cash and cash equivalents.........  $ 20,777     $ 15,620     $  3,013     $   753     $ 2,510
Working capital...................    31,042       34,185       15,531      18,153      15,477
Total assets......................    85,908       83,518       71,446      42,012      32,440
Redeemable convertible preferred
  stock...........................     3,702           --           --          --          --
Shareholders' equity..............    58,950       67,273       51,589      22,910      20,898
</Table>

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

(1) The Company changed its method of accounting for revenue recognition to
    comply with Securities and Exchange Commission Staff Accounting Bulletin No.
    101, "Revenue Recognition in Financial Statements" ("SAB 101").

(2) Assuming that the Company's accounting change to comply with SAB 101 was
    made retroactive to periods prior to July 1, 1999, the pro forma basic and
    diluted net loss per share for fiscal 2000 is $0.41. Pro forma net income
    (loss) per share amounts for the periods prior to fiscal 2000 are not
    presented as the effect of the change in accounting principle could not be
    reasonably determined.

(3) Includes preferred stock and warrant expense of $1,259,000 and inventory
    write-offs and reserves and write-off of intangibles and other special
    charges of $4,517,000.

(4) Includes a $10,044,000 charge for the write-off of acquired in-process
    research and development and a reorganization charge of $1,648,000 related
    to the acquisition of Identicator Technology.

(5) Fiscal year 1997 has been restated for the acquisition of Biometric
    Applications and Technology, Inc., during fiscal year 1998, which was
    accounted for as a pooling of interests.

                                        30
<PAGE>   32

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

FORWARD-LOOKING STATEMENTS

     The statements in this Annual Report on Form 10-K 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" in Item 1 and the other
risks identified in this Annual Report on Form 10-K. The Company undertakes no
obligation to publicly update these forward-looking statements to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

OVERVIEW

     Identix Incorporated provides leading-edge authentication security
platforms and solutions for commercial and government marketplaces. The Company
offers hardware, software and consulting services to protect information,
control access, and maintain privacy and trust. A world leader in biometric
technology, Identix believes it has more fingerprint biometric installations
worldwide than any other company. Identix' products and services are classified
into three groups: (i) Security solutions that verify the identity of an
individual through the unique physical biological characteristics of a
fingerprint including itrust, Identix' Security software solution that
integrates authentication, access rights and administration as a managed network
security service to safeguard information sharing and data transfer on open
wired and wireless networks; (ii) Imaging solutions that electronically capture
forensic quality fingerprint images that can be transmitted to AFIS; and (iii)
information technology, engineering and consulting services, including the
installation and integration of Identix products primarily to public sector
agencies. The Company's solutions employ industry leading optical fingerprint
capture technologies, proprietary algorithms and customizable application
software suites. Identix' technologies and intellectual property enable it to
produce Security and Imaging solutions for commercial, federal, state and local
government customers worldwide. The Company provides public sector services
through IPS, a wholly owned subsidiary of the Company. Identix also formed a
joint venture, SIFC, in September 1997 with Sylvan for the purpose of providing
fingerprinting services for a variety of civilian applications. In June 2001,
Identix launched its first itrust Security solution offering, supported in part
by investments in Identix by Motorola and VeriSign.

     On April 26, 1999, the Company acquired Identicator Technology, a privately
held developer of biometric fingerprint identification technology for
information technology applications. The acquisition was accounted for as a
purchase. Identicator Technology has been fully integrated into the Company's
Security operations. The Company's fiscal 1999 consolidated financial statements
include the results of Identicator Technology from the date of acquisition. See
Note 2 of Notes to Consolidated Financial Statements.

     In December 1999, the Securities and Exchange Commission Staff issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). The Company implemented the provisions of SAB 101 in the fourth quarter
of fiscal 2001, retroactive to July 1, 2000. As a result of this change in
accounting principle, the Company recorded a charge of $1,998,000 to reflect the
cumulative effect of the change on prior years as of July 1, 2000. The Company's
results for the first three quarters of fiscal 2001 have been restated to
reflect the adoption of SAB 101 as of the July 1, 2000. For fiscal 2001, the
Company recognized $3,563,000 in product revenues that are included in the
cumulative effect adjustment.

     The portions of the Company's revenues impacted by SAB 101 are product
revenues derived from the sale of equipment that requires installation. Certain
of the Company's equipment sales require installation subsequent to shipment and
transfer of title. Previously, the Company had generally recognized revenue upon
shipment of equipment to customers, regardless of installation requirements,
provided final customer acceptance and collection of the related receivable were
probable. The Company's interpretation of the requirements of SAB 101 results in
changes to the Company's accounting method for revenue recognition related to
equipment sales that require installation, since the installation is not
considered perfunctory. Under the Company's new accounting method, product
revenue related to equipment sales that require installation will be deferred
until installation is complete and customer acceptance has been obtained.
Revenue related to product sales that require no installation will continue to
be recognized in accordance with the terms of the
                                        31
<PAGE>   33

sale, generally upon shipment by the Company, provided no significant vendor
obligations remain and collection of the receivable is deemed probable.

     In connection with the formation of itrust, in July 2000, the Company
entered into a Securities Purchase Agreement with Motorola, whereby the Company
sold 234,558 shares of its Series A Redeemable Convertible Preferred Stock (the
"Series A Preferred Stock") at $15.99 per share, resulting in cash proceeds to
the Company of $3,702,000, net of issuance costs. In connection with the
issuance of Series A Preferred Stock, the Company also issued Motorola a warrant
to purchase 187,647 shares of the Company's common stock at $17.11 per share.
The proceeds from the sale of the Series A Preferred Stock have been used solely
for the research, design, development, marketing and manufacturing of product
and service solutions related to the Company's itrust activities. See Note 6 of
Notes to Consolidated Financial Statements.

     In December 2000, the Company entered into a Common Stock Purchase
Agreement with VeriSign pursuant to which, the Company sold, in January 2001,
264,901 shares of its common stock at $7.55 per share. The sale resulted in net
cash proceeds to the Company of $1,983,000. The Company has registered the
shares for resale. The proceeds from the sale of the common stock have been used
solely for the research, design, development, marketing and manufacturing of
product and service solutions related to the Company's itrust activities.

     In June 2001, the Company sold 2,225,000 shares of its common stock at
$6.75 per share in a private placement to SWIB. The sale resulted in net cash
proceeds of $14,979,000. The Company has registered the shares for resale.

     In light of continued deteriorating general economic conditions, during the
third quarter of fiscal 2001, the Company initiated a review of its asset
carrying values, forecasted sales and the timing of introductions and end of
lives of certain products.

     As a continuation of this review, in June 2001, the Company initiated a
restructuring of its worldwide operations to reduce costs and increase
operational efficiencies. The Company consolidated and centralized all
functional areas, including sales, customer service, finance and marketing.
Beginning in fiscal 2002, a Global Services group based in Northern Virginia is
now managing all service and consulting operations, including worldwide customer
support and public sector customers. Also, in June 2001, the Company closed the
operations of its Virginia Beach-based LESD group, a business that is not
profitable and not central to the Company's revised business strategy. The
Company expects to complete this restructuring by the end of fiscal 2002.

     Charges recorded during fiscal 2001 in connection with the review and
restructuring activities, substantially all of which were non-cash in nature,
are summarized as follows:

<Table>
<S>                                                            <C>
Inventory write-offs and reserves...........................   $1,843,000
Write-off of intangibles and other assets...................    1,691,000
Allowance for doubtful accounts.............................      643,000
Contract accruals...........................................      185,000
Employee separation.........................................      155,000
                                                               ----------
          Total.............................................   $4,517,000
                                                               ==========
</Table>

     These charges were included in the Company's consolidated statement of
operations as follows:

<Table>
<S>                                                            <C>
Cost of product revenues....................................   $1,843,000
Cost of services revenues...................................      141,000
General and administrative..................................      643,000
Write-off of intangibles and other special charges..........    1,890,000
                                                               ----------
          Total.............................................   $4,517,000
                                                               ==========
</Table>

                                        32
<PAGE>   34

RESULTS OF OPERATIONS

     For fiscal 1999, the Company has reclassified certain costs related to its
Product Business Customer Support operation from marketing and selling expenses
to costs of product revenues.

FISCAL YEARS ENDED JUNE 30, 2001 AND 2000

     Revenues.  Total revenues for fiscal 2001 were $81,828,000 compared to
$72,695,000 for fiscal 2000. For fiscal 2001 the increase in total revenues of
13% is due to increases in both the Company's product and service revenue.

     The Company's product revenues were $35,061,000 for fiscal 2001, compared
to $30,925,000 in fiscal 2000. For fiscal 2001, the increase in product revenues
of 13% was due to increased shipments of the Company's Imaging product group,
mainly the TouchPrint product line. Security revenue for fiscal 2001 was
$8,051,000 compared to $8,612,000 for fiscal 2000. The decrease of 7% was due to
a decrease in IT spending by enterprises primarily driven by the economic
slowdown, which began in the fall of fiscal 2001. International sales accounted
for $3,705,000 or 11% of the Company's product revenues for fiscal 2001,
compared to $4,178,000 or 14% for fiscal 2000. The Company's international sales
are generally denominated in U.S. dollars. The Company monitors its foreign
currency exchange exposure and, if significant, will take action to reduce
foreign exchange risk. To date, the Company has not entered into any hedging
transactions. The Company's product business did not have any one customer
account for 10% or more of total revenues in either fiscal 2001 or fiscal 2000.

     The Company's Government Services revenues were $46,767,000 for fiscal 2001
compared to $41,770,000 for fiscal 2000, net of intersegment revenues. The
increase in Government Services revenues of 12% for fiscal 2001 was due
primarily to increased third party sales through the Company's GSA contract,
which is operated and maintained by IPS. 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 GSA
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 DOD. For fiscal 2001
and for fiscal 2000, revenues directly from the DOD and from other U.S.
government agencies accounted for 89% and 86% of the Company's total Government
Services revenues, respectively.

     During fiscal 2001, the Company derived approximately 94% of its Government
Services revenues from T&M contracts and from FFP contracts compared to 82% in
fiscal 2000. The increase in the percentage of services revenues generated by
T&M and FFP contracts is primarily due to the increase in sales through the
Company's 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. IPS is presently being
audited by the Defense Contract Audit Agency for the period from July 1, 1997 to
June 30, 2000.

     The Company's Government Services business also generates a portion of its
revenues from cost plus fixed fee ("CPFF") contracts, which accounted for
approximately 6% of its services revenues for fiscal 2001, compared to 18% for
fiscal 2000. The decrease in the percentage of services revenues generated by
CPFF contracts is primarily due to the increase in third party services
purchased through the Company's GSA contract, which are normally T&M or FFP.
CPFF contracts provide for the reimbursement of allowable costs, including
indirect costs plus a fee or profit.

                                        33
<PAGE>   35

     Gross Margin.  Gross margin on product revenues was 35% for fiscal 2001, as
compared to 41% in fiscal 2000. The decrease in gross margin was primarily due
to competitive pricing in the imaging market and the higher cost of sales
related to the introduction of the TouchPrint 2000 product line. Also, in
connection with the Company's review and restructuring activities discussed in
the Overview section above, the Company's gross margin for fiscal 2001 was
negatively impacted by charges for inventory write-off and reserves totaling
$1,843,000.

     Gross margin on Government Services revenues was 11% for fiscal 2001 and
12% for fiscal 2000. The decrease in gross margin for the year was minimal and
met expectations of the current revenue mix.

     Research, Development and Engineering.  Research, development and
engineering expenses were $9,649,000 or 28% of product revenues for fiscal 2001,
compared to $8,022,000 or 26% for fiscal 2000. 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 Security and Imaging products. The Company believes that investment in
research and development is critical to maintaining a strong technological
position in the industry.

     Marketing and Selling.  Marketing and selling expenses were $16,389,000 or
20% of total revenues for fiscal 2001, compared to $10,762,000 or 15% of total
revenues for fiscal 2000. The increase in marketing and selling expenses is due
to increased staffing and advertising to promote the Company's products and
services globally.

     General and Administrative.  General and administrative expenses were
$13,946,000 or 17% of total revenues for fiscal 2001, compared to $9,608,000 or
13% of total revenues for fiscal 2000. The increase in general and
administrative expenses was primarily due to increased staffing and related
administrative expenses to support future growth and development of supporting
infrastructure. The increase in general and administrative expenses is also due
to charges for accounts receivable write-offs and provisions totaling $1,168,000
during fiscal 2001, compared to $469,000 for fiscal 2000.

     Write-off of Intangibles and Other Special Charges.  As presented in the
Overview section above, in connection with the Company's restructuring
activities, the Company recorded a charge totaling $1,890,000 in fiscal 2001.
The charge primarily relates to the write-off of certain intangible assets
related to products that the Company no longer plans to market and other special
charges including employee separation.

     Preferred Stock and Warrant Expense.  In connection with the private sale
of shares of Series A Preferred Stock and warrant in July 2000 to Motorola, (see
Overview section above and Note 6 of Notes to Consolidated Financial
Statements), the Company recognized a one-time preferred stock and warrant
expense of $1,259,000 relating to the embedded beneficial conversion feature
within the Series A Preferred Stock.

     Interest and Other Income (Expense), net.  For fiscal 2001, interest and
other income was $1,436,000 compared to $915,000 for fiscal 2000. The increase
in interest and other income was primarily due to a significantly higher level
of cash and cash equivalents resulting from the proceeds of the sale of common
stock in fiscal 2001. Interest and other income for fiscal 2001 was primarily
composed of interest income of $969,000 and license fees from SIFC of $308,000.

     Interest Expense.  Interest expense was $113,000 for fiscal 2001, compared
to $141,000 for fiscal 2000. The decrease in interest expense was due to lower
levels of borrowings under the IPS line of credit and lower weighted average
interest rates.

     There were no material borrowings outstanding under the Company's line of
credit with Imperial Bank (the "Imperial Bank Line of Credit") for fiscal 2001
and 2000. The weighted average interest on borrowings outstanding under the IPS
bank line of credit (the "IPS Line of Credit") during fiscal 2001 and 2000 was
7.34% and 8.6%, respectively.

     Provision for Income Taxes.  The Company had no income tax expense in
fiscal 2001 and $55,000 for fiscal 2000 consisting of certain State franchise
taxes. In fiscal 2001, the Company's effective tax rate is below the statutory
rate due to the net loss incurred. As of June 30, 2001, the Company had federal
and state net
                                        34
<PAGE>   36

operating loss carryforwards of approximately $71,412,000 and $27,137,000,
respectively, which are available to offset future taxable income. The
carryforwards expire on various dates through fiscal 2021.

     Equity Interest in Income (Loss) of Joint Venture.  The equity interest in
joint venture was income of $281,000 for fiscal 2001 compared to a loss of
$84,000 in fiscal 2000 and represents the Company's 50% share of the results of
SIFC.

     Cumulative Effect of a Change in Accounting Principle.  As discussed in the
Overview section above, the Company implemented the provisions of SAB 101 in the
fourth quarter of fiscal 2001, retroactive to July 1, 2000. As a result of this
change in accounting principle, the Company recorded a charge of $1,998,000 in
fiscal 2001 to reflect the cumulative effect of the change on prior years as of
the beginning of the fiscal year.

FISCAL YEARS ENDED JUNE 30, 2000 AND 1999

     Revenues.  Total revenues for fiscal 2000 were $72,695,000 compared to
$81,762,000 for fiscal 1999. For fiscal 2000 the decrease in total revenues of
11% is due to decreases in both the Company's product and services revenues.

     The Company's product revenues were $30,925,000 for fiscal 2000, compared
to $34,228,000 in fiscal 1999. For fiscal 2000, the decrease in product revenues
of 10% was due to decreased shipments of the Company's Imaging product group,
mainly the TouchPrint 600 product line. Security revenue for fiscal 2000
increased to $8,612,000 from $7,058,000 for fiscal 1999 due to an increase in
revenue from Identicator Technology. In fiscal 1999, such revenue was only
included from April 26, 1999, being the date of acquisition of Identicator
Technology. International sales accounted for $4,178,000 or 14% of the Company's
product revenues for fiscal 2000, compared to $4,083,000 or 12% for fiscal 1999.
The Company's international sales are generally denominated in U.S. dollars. The
Company monitors its foreign currency exchange exposure and, if significant,
will take action to reduce foreign exchange risk. To date, the Company has not
entered into any hedging transactions. The Company's product business did not
have any one customer account for 10% or more of total revenues in either fiscal
2000 or fiscal 1999.

     The Company's Government Services revenues were $41,770,000 for fiscal 2000
compared to $47,534,000 for fiscal 1999, net of intersegment revenues. The
decrease in Government Services revenues of 12% for fiscal 2000 was due
primarily to reduced third party sales through the Company's GSA contract, which
is operated and maintained by IPS. 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 GSA 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 DOD. For fiscal 2000 and for
fiscal 1999, revenues directly from the DOD and from other U.S. government
agencies accounted for 86% of the Company's total Government Services revenues.

     During fiscal 2000, the Company derived approximately 82% of its Government
Services revenues from T&M contracts and from FFP contracts compared to 83% in
fiscal 1999. The decrease in the percentage of services revenues generated by
T&M and FFP contracts is primarily due to the decrease in sales through the
Company's 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. IPS is currently being
audited by the Defense Contract Audit Agency for the period from July 1, 1997 to
June 30, 2000.

                                        35
<PAGE>   37

     The Company's Government Services business generates a significant amount
of its revenues from CPFF contracts, which accounted for approximately 18% of
its services revenues for fiscal 2000, compared to 17% for fiscal 1999. The
increase in the percentage of services revenues generated by CPFF contracts is
primarily due to the decrease in third party services purchased through the
Company's GSA contract. CPFF contracts provide for the reimbursement of
allowable costs, including indirect costs plus a fee or profit.

     Gross Margin.  Gross margin on product revenues was 41% for fiscal 2000, as
compared to 43% in fiscal 1999. The decrease in gross margin was primarily due
to competitive pricing in the imaging market. 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 Government Services revenues was 12% for fiscal 2000 as
compared to 13% for fiscal 1999. The decrease in gross margin for the year was
primarily due to an increase in the percent of total Government Services revenue
that was generated by the GSA contract maintained by IPS, which often has a
lower profit margin.

     Research, Development and Engineering.  Research, development and
engineering expenses were $8,022,000 or 26% of product revenues for fiscal 2000,
compared to $6,011,000 or 18% for fiscal 1999. The increase in research,
development and engineering expenses is primarily due to the addition of
engineering staff and related expenses from Identicator Technology to further
develop and enhance the Company's Security products. In fiscal 1999, such
expenses were only included from April 26, 1999, being the date of acquisition
of Indenticator Technology. 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 fiscal 2001.

     Marketing and Selling.  Marketing and selling expenses were $10,762,000 or
15% of total revenues for fiscal 2000 compared to $8,112,000 or 10% of total
revenues for fiscal 1999. The increase in marketing and selling expenses in
absolute dollars is primarily due to the increased staffing and advertising from
Identicator Technology to promote the Company's products and services globally.
In fiscal 1999, such expenses were only included from April 26, 1999, being the
date of acquisition of Identicator Technology The Company expects marketing and
selling expenses to continue to increase in absolute dollars in fiscal 2001.

     General and Administrative.  General and administrative expenses were
$9,608,000 or 13% of total revenues for fiscal 2000, compared to $7,458,000 or
9% of total revenues for fiscal 1999. 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 development
of supporting infrastructure.

     Write-off of Intangibles and Other Special Charges.  The Company had
charges of $1,648,000 for fiscal 1999, primarily related to the rationalization
of redundant functions and products following the acquisition of Identicator
Technology, which resulted in severance costs, write-off of capitalized software
and an increase in the inventory obsolescence reserve.

     Interest and Other Income (Expense), net.  For fiscal 2000, interest and
other income was $915,000 compared to $383,000 for fiscal 1999. The increase in
interest and other income was primarily due to interest on a significantly
higher level of cash and cash equivalents resulting from the proceeds of the
sale of common stock in July 1999 and warrants in April 2000. Interest and other
income for fiscal 2000 is primarily composed of interest income of $648,000 and
license fees from SIFC of $225,000.

     Interest Expense.  Interest expense was $141,000 for fiscal 2000, compared
to $445,000 for fiscal 1999. The decrease in interest expense was due to lower
levels of borrowings under the lines of credit due to the proceeds from the sale
of the Company's common stock in July 1999 and the exercise of warrants in April
2000.

     There were no material borrowings outstanding under the Imperial Bank Line
of Credit for fiscal 2001. The weighted average interest rate on borrowings
outstanding under the Imperial Bank Line of Credit for fiscal 1999 was 8.25%.
The weighted average interest rate on borrowings outstanding under the IPS Line
of Credit during fiscal 2000 and 1999 was 8.6% and 8.0%, respectively.

                                        36
<PAGE>   38

     Provision for Income Taxes.  Income tax expense was $55,000 and $21,000 for
fiscal 2000 and fiscal 1999, respectively, and consisted of certain State
franchise taxes. In fiscal 2000, the Company's effective tax rate is below the
statutory rate due to the net loss incurred. As of June 30, 2000, the Company
has federal and state net operating loss carry forwards of approximately
$37,050,000 and $18,432,000, respectively, which are available to offset future
taxable income. The carry forwards expire on various dates through fiscal 2020.

     Equity Interest in Income (Loss) of Joint Venture.  The equity interest in
joint venture was a loss of $84,000 for fiscal 2000 compared to a loss of
$299,000 in fiscal 1999 and represents the Company's 50% share of the results of
SIFC.

LIQUIDITY AND CAPITAL RESOURCES

     The Company financed its operations during fiscal 2001 primarily from its
existing working capital at June 30, 2000, the net proceeds of stock sales to
Motorola, VeriSign and SWIB investments, and borrowings under the IPS Line of
Credit. As of June 30, 2001, the Company's principal sources of liquidity
consisted of $31,042,000 of working capital, including $20,777,000 in cash and
cash equivalents, and amounts available for future borrowings under the Imperial
Bank Line of Credit and the IPS Line of Credit.

     The Company has a firm commitment from Silicon Valley Bank, dated September
17, 2001, to loan the Company up to the lesser of $7,500,000 or 75% of the
Company's eligible accounts receivable. Loans will be secured by substantially
all of the assets of the Company and bear interest at the bank's prime rate of
interest plus two percent. The commitment from Silicon Valley Bank identifies
certain financial and operating covenants, including restrictions on the
Company's ability to pay dividends on the Company's common stock, that will be
set forth in definitive loan documentation expected to be executed by the bank
and the Company in due course. The Company's previous line of credit, the
Imperial Bank Line of Credit, which expired August 20, 2001, provided for
interest at Imperial Bank's prime rate of interest plus 0.5% (7.25% at June 30,
2001). At June 30, 2001, there was no amount outstanding under the Company's
Imperial Bank Line of Credit and $5,573,000 was available to borrow under such
line.

     The IPS Line of Credit is a $6,000,000 bank line of credit collateralized
by IPS' accounts receivable and certain other assets. Under the IPS Line of
Credit, IPS may borrow against qualified accounts receivable. Amounts drawn bear
interest at the bank's prime rate of interest (6.75% at June 30, 2001). The IPS
Line of Credit expires on June 30, 2002. At June 30, 2001, nil was outstanding
and $5,434,000 was available to borrow under the IPS Line of Credit. The IPS
Line of Credit agreement contains financial and operating covenants. IPS was in
compliance with all its bank covenants during fiscal 2001.

     Cash used for operating activities was $12,501,000 during fiscal 2001. Cash
used for operating activities primarily reflects a net loss of $29,598,000,
increased inventory of $2,749,000 and increased prepaid expenses and other
assets of $580,000. This was partially reduced by increased deferred revenues of
$4,111,000, increased accounts payable of $2,025,000 and decreased accounts
receivable of $1,576,000. In addition, cash used for operating activities in
fiscal 2001 was reduced by non-cash charges for amortization of intangibles of
$3,728,000, depreciation of $1,923,000, write-off of intangibles and other
special charges of $1,890,000, inventory reserve of $1,770,000, preferred stock
and warrant expense of $1,259,000, allowance for doubtful accounts of $1,168,000
and stock compensation expense of $1,069,000.

     The Company used cash of $5,631,000 in investing activities during fiscal
2001, consisting primarily of purchases of property and equipment of $3,954,000
and additions to intangible assets of $1,696,000 primarily related to
capitalized software.

     The Company's financing activities provided cash of $23,289,000 during
fiscal 2001. This was primarily due to proceeds from the sale of common stock of
$20,017,000 and $3,702,000 from the sale of its Series A Preferred Stock (see
Notes 6 and Note 7 of Notes to Consolidated Financial Statements); partially
offset by the net repayments of $430,000 against the IPS line of credit.

     The Company did not have any material capital expenditure commitments as of
June 30, 2001.

                                        37
<PAGE>   39

     While the Company believes that cash flows from operations, together with
existing working capital and available lines of credit, may be adequate to fund
the Company's cash requirements through fiscal 2002, we may need to raise
additional debt or equity financing in the next 12 months. We may not be able to
obtain additional debt or equity financing. If successful in raising additional
debt financing, we may not be able to do so on terms that are not excessively
dilutive to existing stockholders or less costly than existing sources of debt
financing. Failure to secure additional financing in a timely manner and on
favorable terms could have an adverse impact on our financial performance and
stock price and require us to implement certain cost reduction initiatives and
curtail certain of our operations.

RECENT ACCOUNTING PRONOUNCEMENTS

     In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 141 ("SFAS 141"), "Business Combinations". SFAS No. 141 requires the
purchase method of accounting for business combinations initiated after June 30,
2001 and eliminates the pooling-of-interests method.

     In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets", which is effective
for the fiscal years beginning after December 15, 2001. SFAS 142 requires, among
other things, the discontinuance of goodwill amortization. In addition, the
standard includes provisions upon adoption for the reclassification of certain
existing recognized intangibles as goodwill, reassessment of the useful lives of
existing recognized intangibles, reclassification of certain intangibles out of
previously reported goodwill and the testing for impairment of existing goodwill
and other intangibles. The potential impact of adopting SFAS 142 on the
Company's financial position and results of operations is still being assessed
by management.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Interest Rate Risk.  The Company's exposure to market risk for changes in
interest rates relates primarily to the Company's cash equivalents and lines of
credit. The Company does not use derivative financial instruments. The Company's
cash equivalents are invested in money market accounts with major financial
institutions. Due to the short duration and conservative nature of the Company's
cash equivalents, the carrying value approximates the fair value. The Company
has performed an analysis to assess the potential effect of reasonably possible
near-term changes in interest rates. The effect of such rate changes is not
expected to be material to our results of operations, cash flows or financial
condition.

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

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

                                        38
<PAGE>   40

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                        AND FINANCIAL STATEMENT SCHEDULE

<Table>
<Caption>
                                                               PAGE
                                                               ----
<S>                                                            <C>
Financial Statements:
  Report of Independent Accountants.........................    40
  Consolidated Balance Sheets as of June 30, 2001 and
     2000...................................................    41
  Consolidated Statements of Operations for the years ended
     June 30, 2001, 2000 and 1999...........................    42
  Consolidated Statements of Stockholders' Equity for the
     years ended June 30, 2001, 2000 and 1999...............    43
  Consolidated Statements of Cash Flows for the years ended
     June 30, 2001, 2000 and 1999...........................    44
  Notes to Consolidated Financial Statements................    45
Financial Statement Schedule:
  Schedule II -- Valuation and Qualifying Accounts and
     Reserves for the years ended June 30, 2001, 2000 and
     1999...................................................    67
</Table>

                                        39
<PAGE>   41

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Identix Incorporated:

     In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Identix Incorporated and its subsidiaries at June 30, 2001 and 2000,
and the results of their operations and their cash flows for each of the three
years in the period ended June 30, 2001 in conformity with accounting principles
generally accepted in the United States of America. In addition, in our opinion,
the financial statement schedule listed in the accompanying index presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

                                          PRICEWATERHOUSECOOPERS LLP

San Jose, California
August 1, 2001, except for Note 14
which is as of September 17, 2001

                                        40
<PAGE>   42

                              IDENTIX INCORPORATED

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                       JUNE 30,
                                                              ---------------------------
                                                                  2001           2000
                                                              ------------   ------------
<S>                                                           <C>            <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $ 20,777,000   $ 15,620,000
  Accounts receivable, net..................................    25,608,000     28,352,000
  Inventories...............................................     6,089,000      5,180,000
  Prepaid expenses and other assets.........................     1,768,000      1,188,000
                                                              ------------   ------------
     Total current assets...................................    54,242,000     50,340,000
Property and equipment, net.................................     4,587,000      2,632,000
Intangibles and other assets................................    27,079,000     30,546,000
                                                              ------------   ------------
       Total assets.........................................  $ 85,908,000   $ 83,518,000
                                                              ============   ============

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED
  STOCK AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $ 10,595,000   $  8,570,000
  Notes payable.............................................            --        430,000
  Accrued compensation......................................     4,658,000      3,255,000
  Other accrued liabilities.................................     1,275,000      1,339,000
  Deferred revenue..........................................     6,672,000      2,561,000
                                                              ------------   ------------
     Total current liabilities..............................    23,200,000     16,155,000
Other liabilities...........................................        56,000         90,000
                                                              ------------   ------------
     Total liabilities......................................    23,256,000     16,245,000
                                                              ------------   ------------
Commitments (Note 12)
Redeemable convertible preferred stock, $0.01 par value;
  2,000,000 shares authorized; 234,558 and no shares issued
  and outstanding...........................................     3,702,000             --
                                                              ------------   ------------
Shareholders' equity:
  Common stock, $0.01 par value; 100,000,000 and 50,000,000
     shares authorized; 36,601,242 and 33,026,964 shares
     issued and outstanding.................................       366,000        330,000
  Additional paid-in capital................................   144,604,000    123,365,000
  Accumulated deficit.......................................   (85,839,000)   (56,241,000)
  Accumulated other comprehensive loss......................      (181,000)      (181,000)
                                                              ------------   ------------
       Total shareholders' equity...........................    58,950,000     67,273,000
                                                              ------------   ------------
       Total liabilities, redeemable convertible preferred
          stock and shareholders' equity....................  $ 85,908,000   $ 83,518,000
                                                              ============   ============
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                        41
<PAGE>   43

                              IDENTIX INCORPORATED

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                             FISCAL YEAR ENDED JUNE 30,
                                                     ------------------------------------------
                                                         2001           2000           1999
                                                     ------------   ------------   ------------
<S>                                                  <C>            <C>            <C>
REVENUES:
  Product revenues.................................  $ 35,061,000   $ 30,925,000   $ 34,228,000
  Services revenues................................    46,767,000     41,770,000     47,534,000
                                                     ------------   ------------   ------------
     Total revenues................................    81,828,000     72,695,000     81,762,000
                                                     ------------   ------------   ------------
COST AND EXPENSES:
  Cost of product revenues.........................    22,787,000     18,261,000     19,388,000
  Cost of services revenues........................    41,783,000     36,634,000     41,399,000
  Research, development and engineering............     9,649,000      8,022,000      6,011,000
  Marketing and selling............................    16,389,000     10,762,000      8,112,000
  General and administrative.......................    13,946,000      9,608,000      7,458,000
  Amortization of acquired intangible assets.......     3,329,000      3,429,000        739,000
  Write-off of intangibles and other special
     charges.......................................     1,890,000             --      1,648,000
  Write-off of acquired in-process research and
     development...................................            --             --     10,044,000
  Preferred stock and warrant expense..............     1,259,000             --             --
                                                     ------------   ------------   ------------
     Total costs and expenses......................   111,032,000     86,716,000     94,799,000
                                                     ------------   ------------   ------------
Loss from operations...............................   (29,204,000)   (14,021,000)   (13,037,000)
Interest and other income (expense), net...........     1,436,000        915,000        383,000
Interest expense...................................      (113,000)      (141,000)      (445,000)
                                                     ------------   ------------   ------------
Loss before income taxes, equity interest in income
  (loss) of joint venture and cumulative effect of
  a change in accounting principle.................   (27,881,000)   (13,247,000)   (13,099,000)
Provision for income taxes.........................            --        (55,000)       (21,000)
                                                     ------------   ------------   ------------
Loss before equity interest in income (loss) of
  joint venture and cumulative effect of a change
  in accounting principle..........................   (27,881,000)   (13,302,000)   (13,120,000)
Equity interest in income (loss) of joint
  venture..........................................       281,000        (84,000)      (299,000)
                                                     ------------   ------------   ------------
Loss before cumulative effect of a change in
  accounting principle.............................   (27,600,000)   (13,386,000)   (13,419,000)
Cumulative effect of a change in accounting
  principle........................................    (1,998,000)            --             --
                                                     ------------   ------------   ------------
NET LOSS...........................................  $(29,598,000)  $(13,386,000)  $(13,419,000)
                                                     ============   ============   ============
BASIC AND DILUTED NET LOSS PER SHARE:
  Loss before cumulative effect of a change in
     accounting principle..........................  $      (0.82)  $      (0.43)  $      (0.52)
  Cumulative effect of a change in accounting
     principle.....................................         (0.06)            --             --
                                                     ------------   ------------   ------------
  Net loss per share...............................  $      (0.88)  $      (0.43)  $      (0.52)
                                                     ============   ============   ============
WEIGHTED AVERAGE COMMON SHARES USED IN BASIC AND
  DILUTED LOSS PER SHARE COMPUTATION...............    33,807,000     31,441,000     25,932,000
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                        42
<PAGE>   44

                              IDENTIX INCORPORATED

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<Table>
<Caption>
                                                                                           ACCUMULATED
                                     COMMON STOCK                                             OTHER
                                 ---------------------     ADDITIONAL      ACCUMULATED    COMPREHENSIVE
                                   SHARES      AMOUNT    PAID-IN CAPITAL     DEFICIT          LOSS           TOTAL
                                 ----------   --------   ---------------   ------------   -------------   ------------
<S>                              <C>          <C>        <C>               <C>            <C>             <C>
BALANCE JUNE 30, 1998..........  25,255,577   $253,000    $ 52,274,000     $(29,436,000)    $(181,000)    $ 22,910,000
Sale of common stock under
  stock option plans...........     320,708      3,000       1,753,000               --            --        1,756,000
Sale of common stock under
  employee stock purchase
  plan.........................      35,610         --         253,000               --            --          253,000
Sale of common stock under
  warrant exercise.............      40,000         --         127,000               --            --          127,000
Issuance of common stock
  related to acquisition of
  Identicator Technology.......   2,974,959     30,000      39,932,000               --            --       39,962,000
Retirement of common stock
  related to acquisition of
  Biometric Applications and
  Tracking.....................        (896)        --              --               --            --               --
Net loss.......................          --         --              --      (13,419,000)           --      (13,419,000)
                                 ----------   --------    ------------     ------------     ---------     ------------
BALANCE JUNE 30, 1999..........  28,625,958    286,000      94,339,000      (42,855,000)     (181,000)      51,589,000
Sale of common stock under
  stock option plans...........   1,650,893     17,000       4,558,000               --            --        4,575,000
Sale of common stock under
  employee stock purchase
  plan.........................      32,721         --         236,000               --            --          236,000
Sale of common stock under
  warrant exercise.............     905,798      9,000      10,254,000               --            --       10,263,000
Sale of common stock by private
  placement....................   1,811,594     18,000      13,978,000               --            --       13,996,000
Net loss.......................          --         --              --      (13,386,000)           --      (13,386,000)
                                 ----------   --------    ------------     ------------     ---------     ------------
BALANCE JUNE 30, 2000..........  33,026,964    330,000     123,365,000      (56,241,000)     (181,000)      67,273,000
Sale of common stock under
  stock option plans...........     919,367      9,000       2,036,000               --            --        2,045,000
Sale of common stock under
  employee stock purchase
  plan.........................     165,010      2,000       1,007,000               --            --        1,009,000
Sale of common stock by private
  placement in January 2001....     264,901      3,000       1,980,000               --            --        1,983,000
Sale of common stock by private
  placement in June 2001.......   2,225,000     22,000      14,957,000               --            --       14,979,000
Issuance of warrants in
  connection with sale of
  redeemable convertible
  preferred stock..............          --         --       1,259,000               --            --        1,259,000
Net loss.......................          --         --              --      (29,598,000)           --      (29,598,000)
                                 ----------   --------    ------------     ------------     ---------     ------------
BALANCE JUNE 30, 2001..........  36,601,242   $366,000    $144,604,000     $(85,839,000)    $(181,000)    $ 58,950,000
                                 ==========   ========    ============     ============     =========     ============
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                        43
<PAGE>   45

                              IDENTIX INCORPORATED

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                      FISCAL YEAR ENDED JUNE 30,
                                                              ------------------------------------------
                                                                  2001           2000           1999
                                                              ------------   ------------   ------------
<S>                                                           <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss..................................................  $(29,598,000)  $(13,386,000)  $(13,419,000)
  Adjustments to reconcile net loss to net cash (used for)
    provided by operating activities:
      Depreciation..........................................     1,923,000      1,651,000      1,444,000
      Loss on disposal of property and equipment............        11,000         73,000             --
      Amortization of intangible assets.....................     3,728,000      4,120,000      1,483,000
      Recognition of deferred revenue.......................    (7,510,000)    (5,745,000)    (3,512,000)
      Equity interest in income (loss) of joint venture.....      (281,000)        84,000        299,000
      Write-off of acquired in-process research and
        development.........................................            --             --     10,044,000
      Write-off of intangibles and other special charges....     1,890,000             --             --
      Write-off of capitalized software.....................            --        304,000             --
      Stock compensation expenses...........................     1,069,000        221,000        139,000
      Inventory reserves....................................     1,770,000      1,096,000      1,251,000
      Allowance for doubtful accounts.......................     1,168,000        469,000        584,000
      Preferred stock and warrant expense...................     1,259,000             --             --
  Changes in assets and liabilities, net of effects of
    acquisition:
      Accounts receivable...................................     1,576,000     (3,010,000)     2,711,000
      Inventories...........................................    (2,749,000)    (1,001,000)     1,094,000
      Prepaid expenses and other assets.....................      (580,000)      (145,000)      (457,000)
      Accounts payable......................................     2,025,000     (1,199,000)       306,000
      Accrued compensation..................................       333,000        954,000        (35,000)
      Other accrued liabilities.............................      (156,000)        73,000        (18,000)
      Deferred revenue......................................    11,621,000      6,366,000      3,894,000
                                                              ------------   ------------   ------------
  Net cash (used for) provided by operating activities......   (12,501,000)    (9,075,000)     5,808,000
                                                              ------------   ------------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures......................................    (3,954,000)    (2,235,000)    (1,344,000)
  Proceeds from the sale of property and equipment..........        19,000         20,000         98,000
  Investment in joint venture...............................            --             --       (100,000)
  Additions to intangibles and other assets.................    (1,696,000)      (807,000)            --
  Cash received in acquisitions.............................            --             --         92,000
  Transaction costs related to acquisitions.................            --             --       (869,000)
                                                              ------------   ------------   ------------
  Net cash used for investing activities....................    (5,631,000)    (3,022,000)    (2,123,000)
                                                              ------------   ------------   ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings under bank lines of credit.....................     4,914,000      4,915,000     20,626,000
  Payments under bank lines of credit.......................    (5,344,000)    (9,081,000)   (24,187,000)
  Principal payments on short-term note.....................            --       (200,000)            --
  Proceeds from sales of common and preferred stock.........    23,719,000     29,070,000      2,136,000
                                                              ------------   ------------   ------------
  Net cash provided by (used for) financing activities......    23,289,000     24,704,000     (1,425,000)
                                                              ------------   ------------   ------------
Net increase in cash and cash equivalents...................     5,157,000     12,607,000      2,260,000
Cash and cash equivalents at period beginning...............    15,620,000      3,013,000        753,000
                                                              ------------   ------------   ------------
Cash and cash equivalents at period end.....................  $ 20,777,000   $ 15,620,000   $  3,013,000
                                                              ============   ============   ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid during the year for interest....................  $    113,000   $    141,000   $    441,000
  Cash paid during the year for income taxes................  $         --   $     18,000   $     65,000
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                        44
<PAGE>   46

                              IDENTIX INCORPORATED

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            YEAR ENDED JUNE 30, 2001

NOTE 1 -- THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES

     Identix Incorporated (the "Company") designs, manufactures, develops and
markets two categories of products for security, anti-fraud, law enforcement and
other applications: (i) Security products ("Security") that verify the identity
of an individual through the unique biological characteristics of a fingerprint
including itrust, the Company's security software solution that integrates
authentication, access rights and administration as a managed network security
service and (ii) Imaging products ("Imaging") that electronically capture
forensic quality fingerprint images from an individual's fingers for law
enforcement and other applications. The Company provides information technology,
engineering and management consulting services to private and public sector
clients through Identix Public Sector, Inc. ("IPS"), a wholly owned subsidiary
of the Company (formerly ANADAC, Inc.). The principal markets for the Company's
products are the Americas, Asia, Australia, Europe and the Middle East. The
Company operates in four business segments: (i) imaging, (ii) security, (iii)
government services and (iv) fingerprinting services.

     The State of Wisconsin Investment Board ("SWIB") beneficially owned
approximately 16% of the Company's outstanding common stock at June 30, 2001.

  BASIS OF CONSOLIDATION

     The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant inter-company balances and
transactions have been eliminated on consolidation.

  MANAGEMENT ESTIMATES AND ASSUMPTIONS

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

  NEED FOR ADDITIONAL FINANCING

     While the Company believes that cash flows from operations, together with
existing working capital and available lines of credit, may be adequate to fund
the Company's cash requirements through fiscal 2002, the Company may need to
raise additional debt or equity financing in the next 12 months. If successful
in raising additional debt financing, we may not be able to do so on terms that
are not excessively dilutive to existing stockholders or less costly than
existing sources of debt financing. Failure to secure additional financing in a
timely manner and on favorable terms could have an adverse impact on our
financial performance and require us to implement certain cost reduction
initiatives and curtail certain of our operations.

  JOINT VENTURE

     In September 1997, the Company entered into a joint venture agreement with
Sylvan Learning Centers, Inc. ("Sylvan") to form Sylvan/Identix Fingerprinting
Centers, LLC ("SIFC") for the purpose of providing fingerprinting services. The
Company owns a 50% interest in the joint venture. In addition to the Company's
equity interest in the income (loss) from the joint venture, the Company also
derives license fees from SIFC, which are included within the interest and other
income (expense), net, line item of the consolidated statement of operations.

  REVENUE RECOGNITION

     In December 1999, the Securities and Exchange Commission Staff ("SEC
staff") issued Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101"). The Company
                                        45
<PAGE>   47
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

implemented the provisions of SAB 101 in the fourth quarter of fiscal 2001,
retroactive to July 1, 2000. As a result of this change in accounting principle,
the Company recorded a charge of $1,998,000 to reflect the cumulative effect of
the change on prior years as of July 1, 2000. As presented in Note 15, the
results for the first three quarters of fiscal 2001 have been restated to
reflect the adoption of SAB 101 as of July 1, 2000. For fiscal 2001, the Company
recognized $3,563,000 in product revenues that are included in the cumulative
effect adjustment. The pro forma basic and diluted loss per share for fiscal
2000 is $0.41, which has been calculated assuming the accounting change was made
retroactive to periods prior to July 1, 1999. Pro forma amounts for the periods
prior to fiscal 2000 have not been presented as the effect of the change in
accounting principle could not be reasonably determined.

     The portions of the Company's revenues impacted by SAB 101 are product
revenues derived from the sale of equipment that requires installation. Certain
of the Company's equipment sales require installation subsequent to shipment and
transfer of title. Previously, the Company had generally recognized revenue upon
shipment of equipment to customers, regardless of installation requirements,
provided final customer acceptance and collection of the related receivable were
probable. The Company's interpretation of the requirements of SAB 101 results in
changes to the Company's accounting method for revenue recognition related to
equipment sales that require installation, since the installation is not
considered perfunctory. Under the Company's new accounting method, product
revenue related to equipment sales that require installation is deferred until
installation is complete and customer acceptance has been obtained. Revenue
related to product sales that require no installation will continue to be
recognized in accordance with the terms of the sale, generally upon shipment by
the Company, provided no significant vendor obligations remain and collection of
the receivable is deemed probable.

     Extended service and maintenance contract revenue is deferred and
recognized ratably over the life of the service period of the related agreement.
The majority of the Company's services are performed for the U.S. Government
under various firm fixed-price ("FFP"), time-and-material ("T&M") and cost
reimbursement contracts. Revenues on FFP contracts are generally recognized on
the percentage-of-completion method based on costs incurred in relation to total
estimated costs. Revenues on T&M contracts are recognized to the extent of
billable rates times hours worked plus materials expense incurred. Revenues for
cost plus fixed fee ("CPFF") contracts are recognized as costs are incurred,
including a proportionate amount of the fee earned. Unbilled accounts receivable
at June 30, 2001 represent revenue accrued which becomes billable per the terms
of contract. Provisions for estimated contract losses are recorded in the period
such losses are determined.

     Services revenues directly from contracts with the U.S. Government,
principally with the Department of Defense ("DOD"), and from subcontracts with
other U.S. Government contractors, were approximately 95% of total services
revenue for fiscal year 2001 and 90% for fiscal 2000 and fiscal 1999. Contract
costs for services revenues to the U.S. Government, including indirect expenses,
are subject to audit and subsequent adjustment by negotiation between the
Company and U.S. Government representatives. Revenues are recorded in amounts
expected to be realized upon final settlement. IPS is currently being audited by
the Defense Contract Audit Agency for the period from July 1, 1997 to June 30,
2000. While the Company believes that the results of such audit will have no
material effect on the Company's financial position or results of the
operations, there can be no assurance that no adjustment will be made and that,
if made, such adjustments will not have a material effect the Company's
financial position or results of operations.

  MAJOR CUSTOMERS

     In fiscal 2001, 2000 and 1999, the Company had one customer, DOD, that
accounted for 40%, 43% and 38% respectively, of total revenue.

                                        46
<PAGE>   48
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  CASH AND CASH EQUIVALENTS

     Cash equivalents consist of highly liquid investments with maturity of
three months or less when purchased. These investments are readily convertible
to cash and are stated at cost, which approximates market.

  CONCENTRATION OF CREDIT RISK

     Financial instruments which, potentially subject the Company to credit
risk, consist principally of accounts receivable and investments. The Company
performs on-going credit evaluations of its customers' financial conditions and
limits the amount of credit extended when deemed necessary. The Company
maintains an allowance for potential credit losses, which are based upon the
expected collection of each accounts receivable. Management believes that any
risk of material loss is reduced due to the Company's substantial number of
government customers.

     Currently, the Company's policy is to limit its exposure in financial
instruments by investing its excess cash with major banks in money market
accounts. The Company, by policy, limits the amount of exposure to any one
financial institution.

  INVENTORIES

     Inventories are stated at the lower of standard cost (which approximates
actual cost on a first-in, first-out cost method) or market. The Company
provides for obsolete, slow moving or excess inventories in the period when
obsolescence or inventory in excess of expected demand is first identified.

  PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost. Depreciation is computed using
the straight-line method with the estimated useful lives of the assets ranging
from two to five years. Amortization of equipment held under capital leases and
leasehold improvements are computed using the straight-line method and the
shorter of the remaining lease term or the estimated useful life of the related
equipment or improvements. Repair and maintenance costs are expensed as
incurred.

  INTANGIBLES AND OTHER ASSETS

     Intangible assets include goodwill, purchased technology, capitalized
contract rights, capitalized software development costs and assembled workforce.
Goodwill is amortized over five to twelve years. Purchased core technology is
amortized over five years. Capitalized contract rights are amortized over the
terms of the related contracts, usually one to five years. Assembled workforce
is amortized over three years.

     Certain software development costs incurred are capitalized after
technological feasibility has been demonstrated. Technological feasibility is
determined when planning, designing, coding and testing have been completed
according to design specifications. Commencing with product introduction, such
capitalized amounts are amortized on a product-by-product basis at the greater
of the amount computed using (a) the ratio of current revenues for a product to
the total of current and anticipated future revenues or (b) the straight-line
method over the remaining estimated economic life of the product. Generally, the
Company assigns an estimated economic life of one to five years to capitalized
software costs. Amortization of capitalized software costs is charged to cost of
services revenues. Research and development expenditures are charged to research
and development in the period incurred.

     The Company evaluates asset recoverability at each balance sheet date or
when an event occurs that may impair recoverability of the asset. The Company
determines the recoverability of the carrying amount of each intangible asset by
reviewing the following factors: the undiscounted value of expected operating
cash flows in

                                        47
<PAGE>   49
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

relation to its net capital investments, the estimated useful or contractual
life of the intangible asset, the contract or product supporting the intangible
asset, and in the case of purchased technology and capitalized software
development costs, the Company periodically reviews the recoverability of the
asset value by evaluating its products with respect to technological advances,
competitive products and the needs of its customers.

  PRODUCT WARRANTY

     The Company provides a warranty for manufacturing and material defects on
all units sold. A reserve for warranty costs, based on estimates made by
management utilizing projected costs to repair units, is recorded and
periodically adjusted to reflect actual experience.

  INCOME TAXES

     Deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the income tax bases of assets and
liabilities and the amounts reported for financial reporting purposes for all
periods presented (see Note 9).

  STOCK-BASED COMPENSATION

     The Company accounts for its employee and director stock option plans and
employee stock purchase plans in accordance with provisions of the Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"). Additional pro forma disclosures as required under Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation"
("SFAS 123") are presented in Note 7. The Company accounts for stock options
issued to non-employees in accordance with the provisions of SFAS 123 and EITF
96-18 "Accounting for Equity Instruments that are Issued to Other Than Employees
for Acquiring or in Conjunction with Selling Goods or Services".

  COMPREHENSIVE INCOME

     Other comprehensive income (loss) includes charges or credits to equity
that are not the result of transactions with owners. For the Company,
comprehensive loss did not differ from the net loss for all periods presented.
Accumulated other comprehensive loss consists of foreign currency translation
adjustments which arose prior to fiscal 1999. As the Company substantially
liquidated its foreign operation in February 1998, there has been no other
comprehensive income (loss) from that date.

  EARNINGS PER SHARE

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

     Options and warrants to purchase 7,075,585, 5,501,084 and 5,007,464 shares
of common stock were outstanding at June 30, 2001, 2000 and 1999, respectively,
but were not included in the computation of diluted net loss per share as their
effect was anti-dilutive. Also 234,558 shares of redeemable convertible
preferred stock were outstanding at June 30, 2001 and are convertible into
235,553 shares of common stock, but were not included in the computation of
diluted net loss per share as their effect was anti-dilutive.

     Shares held under the Company's employee stock ownership plan are treated
as outstanding for purposes of computing earnings per share amounts.

                                        48
<PAGE>   50
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  RECLASSIFICATIONS

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

NOTE 2 -- ACQUISITION

  IDENTICATOR TECHNOLOGY, INC.

     On April 26, 1999, pursuant to an agreement and plan of reorganization and
merger, the Company acquired Identicator Technology, a privately-held company
headquartered in San Bruno, California. The acquisition was accounted for as a
purchase and, accordingly, the Company's results for fiscal 1999 include the
operations of Identicator Technology from the date of acquisition.

     In connection with the acquisition, the Company issued 2,908,112 shares of
common stock and assumed options and warrants to purchase 2,074,979 and 66,847
shares of its common stock respectively, with exercise prices of $0.26 and $8.07
per share. The market value of the Company's common stock of $8.08 was
determined using the average quoted market price for the two days preceding and
following the announcement of the acquisition in November 1998.

     The value of the Company's options and warrants that were to be exchanged
for vested and unvested Identicator Technology options and warrants was
determined in November 1998 using a Black-Scholes option pricing model with the
following assumptions:

<Table>
<S>                                                            <C>
Expected life...............................................     2-5 years
Volatility..................................................            52%
Risk free interest rate.....................................       5.8-6.2%
Dividend yield..............................................             0%
</Table>

     The following table summarizes the components of the purchase
consideration:

<Table>
<Caption>
                                                                          FAIR    TOTAL FAIR
                                                               SHARES     VALUE      VALUE
                                                              ---------   -----   -----------
<S>                                                           <C>         <C>     <C>
Common shares outstanding...................................  2,908,112   $8.08   $23,502,000
Common shares issuable on exercise of options...............  2,074,979   $7.80    16,176,000
Common shares issuable on exercise of warrants..............     66,847   $4.25       284,000
                                                              ---------           -----------
                                                              5,049,938           $39,962,000
                                                              =========           ===========
</Table>

     Immediately prior to consummation of the transaction, the warrants were
exercised and the proceeds from exercise were paid to Identicator Technology.

     In addition, the Company assumed liabilities of Identicator Technology
totaling $3,404,000 and incurred acquisition costs of $869,000, resulting in a
total purchase price of $44,235,000. The Company also issued options to purchase
400,000 shares of common stock to certain individuals upon the closing of the
merger. These options were issued in connection with employment agreements and
are subject to vesting requirements. These options have not been included in the
determination of the purchase price and are accounted for in accordance with APB
25.

                                        49
<PAGE>   51
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Allocation of Purchase Price.

     The total purchase price of $44,235,000 was allocated to the fair value of
the assets acquired as follows:

<Table>
<Caption>
                                                                            AMORTIZATION
                                                                                LIFE
                                                                            ------------
<S>                                                           <C>           <C>
Tangible assets.............................................  $ 1,502,000
In-process research and development.........................   10,044,000
Core technology.............................................    4,663,000      5 years
Assembled workforce.........................................      202,000      3 years
Goodwill....................................................   27,824,000     12 years
                                                              -----------
  Total.....................................................  $44,235,000
                                                              ===========
</Table>

  In-Process Research and Development.

     The fair value of the purchased in-process research and development was
determined using the stage of completion method based on the future cash flows
that are projected to be generated by the products under development over a
5-year period.

     In-process research and development activities consisted of hardware and
software product concept formulation, mechanical and optical design, engineering
prototyping, software code programming and testing procedure design and
development. The purchased in-process research and development was focused on
the next generation of fingerprint readers, which are expected to be of
significantly reduced size and cost. Also under development was software
required to integrate and support the next generation readers, to enhance the
existing functionality of current products and to add additional capabilities.

     The important elements of the in-process projects at the time of
acquisition included product concepts and designs, software code, test
specifications and processes and pre-prototype models. The fair value of the
in-process products was determined as a whole but the Company estimated that
approximately 80% of the value was attributable to the software related products
and 20% to hardware related products. The in-process products were projected to
be completed over the next 1-3 years. The Company expects to continue the
development of each project not yet completed. However, there is a risk
associated with completion of the in-process projects and there can be no
assurance that any project will meet with technological success. Failure to
successfully develop and commercialize these in-process projects would result in
the loss of the expected economic return inherent in the fair value allocation.
Additionally, the value of the other intangible assets acquired may become
impaired.

     As of the date the merger agreement was signed, the individual hardware
projects were between 8% and 69% complete. The projected cost to complete the
in-process hardware projects was approximately $3,200,000. As of the same date,
the individual software projects were between 4% and 73% complete. The projected
cost to complete the in-process software projects was approximately $1,700,000.

     In estimating the future cash flows, the Company used historical
information with regard to margins and expenses, and performed an assessment of
the products' acceptance in the emerging market for biometric security. The most
significant and uncertain assumption used in the valuation was the projected
revenue stream from the products under development.

     The developmental products acquired were evaluated in context of
Interpretation 4 of Statement of Financial Accounting Standards ("SFAS") No. 2
and SFAS No. 86 and the identified in-process research and development was
expensed in accordance with these provisions, as technological feasibility had
not yet been reached.

                                        50
<PAGE>   52
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company, Identicator Technology, as if
the acquisition had occurred prior to fiscal 1999 and does not include the
adjustment for the non-recurring write-off of acquired in-process research and
development. The net loss per share is based on the average number of shares of
common stock of the Company outstanding during the period plus the common shares
issued by the Company to acquire Identicator Technology. These proforma results
have been prepared for comparative purposes only and do not purport to be
indicative of what operating results would have been had the acquisition
actually taken place on the assumed dates or of operating results, which may
occur in the future.

<Table>
<Caption>
                                                             FISCAL YEAR ENDED JUNE 30, 1999
                                                             -------------------------------
                                                                       (UNAUDITED)
<S>                                                          <C>
Total revenues.............................................           $ 85,921,000
Net loss...................................................            (15,920,000)
Net loss per share:
  Basic and diluted........................................           $      (0.56)
</Table>

  BIOMETRIC APPLICATIONS AND TECHNOLOGY, INC.

     On July 31, 1999, in conjunction with the rationalization of product lines
following the acquisition of Identicator Technology, the Company closed the
Kansas City office of BA&T and terminated most of the staff. Development
work-in-process was transferred to other parts of the Company.

NOTE 3 -- INVENTORY WRITE-OFFS AND RESERVES AND WRITE-OFF OF INTANGIBLES AND
OTHER SPECIAL CHARGES

  FISCAL 2001

     In light of continued deteriorating general economic conditions, during the
third quarter of fiscal 2001, the Company initiated a review of its asset
carrying values, forecasted sales and the timing of introductions and end of
lives of products.

     As a continuation of this review, in June 2001, the Company initiated a
restructuring of its worldwide operations to reduce costs and increase
operational efficiencies. The Company consolidated and centralized all
functional areas, including sales, customer service, finance and marketing.
Beginning in fiscal 2002, a Global Services group based in Northern Virginia is
now managing all service and consulting operations, including worldwide customer
support and public sector customers. Also, in June 2001, the Company closed the
operations of its Virginia Beach-based LESD group, a business that is not
profitable and not central to the Company's revised business strategy. The
Company expects to complete this restructuring by the end of fiscal 2002.

     Charges recorded during fiscal 2001 in connection with the review and
restructuring activities, substantially all of which were non-cash in nature,
are summarized as follows:

<Table>
<S>                                                            <C>
Inventory write-offs and reserves...........................   $1,843,000
Write-off of intangibles and other assets...................    1,691,000
Allowance for doubtful accounts.............................      643,000
Contract accruals...........................................      185,000
Employee separation.........................................      155,000
                                                               ----------
          Total.............................................   $4,517,000
                                                               ==========
</Table>

                                        51
<PAGE>   53
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     These charges were included in the Company's consolidated statement of
operations as follows:

<Table>
<S>                                                            <C>
Cost of product revenues....................................   $1,843,000
Cost of services revenues...................................      141,000
General and administrative..................................      643,000
Write-off of intangibles and other special charges..........    1,890,000
                                                               ----------
          Total.............................................   $4,517,000
                                                               ==========
</Table>

  FISCAL 1999

     The Company recorded a charge of $1,648,000 during fiscal 1999 related to
reorganization and other costs. These costs arose from the rationalization of
product lines and redundant infrastructure following the acquisition of
Identicator Technology.

NOTE 4 -- BALANCE SHEET DETAIL

<Table>
<Caption>
                                                                      JUNE 30,
                                                              -------------------------
                                                                 2001          2000
                                                              -----------   -----------
<S>                                                           <C>           <C>
Accounts receivable:
  Commercial and other......................................  $12,091,000   $10,796,000
  United States Government:
     Billed.................................................   10,683,000    13,293,000
     Unbilled...............................................    3,597,000     4,936,000
  Other receivables.........................................      639,000       393,000
Less: allowance for doubtful accounts.......................   (1,402,000)   (1,066,000)
                                                              -----------   -----------
                                                              $25,608,000   $28,352,000
                                                              ===========   ===========
Inventories:
  Purchased parts and materials.............................  $ 1,603,000   $ 2,141,000
  Work-in-process...........................................    1,260,000       860,000
  Finished goods, including spares..........................    3,226,000     2,179,000
                                                              -----------   -----------
                                                              $ 6,089,000   $ 5,180,000
                                                              ===========   ===========
Property and equipment:
  Manufacturing, test and office equipment..................  $ 7,558,000   $ 7,703,000
  Furniture and fixtures....................................    1,928,000     1,500,000
  Leasehold improvements....................................    1,578,000       245,000
                                                              -----------   -----------
                                                               11,064,000     9,448,000
Less: accumulated depreciation and amortization.............   (6,291,000)   (6,744,000)
Less: accumulated depreciation of leased assets.............     (186,000)      (72,000)
                                                              -----------   -----------
                                                              $ 4,587,000   $ 2,632,000
                                                              ===========   ===========
</Table>

                                        52
<PAGE>   54
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                      JUNE 30,
                                                              -------------------------
                                                                 2001          2000
                                                              -----------   -----------
<S>                                                           <C>           <C>
<no_color>
Intangibles and other assets:
  Goodwill..................................................  $28,271,000   $28,271,000
  Purchased technology......................................    3,902,000     5,338,000
  Assembled workforce.......................................      202,000       202,000
  Patents and licenses......................................      204,000       204,000
  Capitalized software development costs....................    2,359,000     1,922,000
  Less: accumulated amortization............................   (9,520,000)   (6,125,000)
                                                              -----------   -----------
                                                               25,418,000    29,812,000
  Deposits..................................................      962,000       382,000
  Long-term receivables from related parties................      687,000       341,000
  Other assets..............................................       12,000        11,000
                                                              -----------   -----------
                                                              $27,079,000   $30,546,000
                                                              ===========   ===========
Accrued compensation:
  Salary and wages..........................................  $ 1,613,000   $ 1,549,000
  Deferred compensation.....................................    1,439,000       383,000
  Benefits..................................................    1,340,000     1,312,000
  Payroll taxes.............................................      266,000        11,000
                                                              -----------   -----------
                                                              $ 4,658,000   $ 3,255,000
                                                              ===========   ===========
</Table>

NOTE 5 -- LINES OF CREDIT

     At June 30, 2001, the Company had a $7,500,000 bank line of credit (the
"Imperial Bank Line of Credit") collateralized by substantially all of the
assets of the Company. Under the Imperial Bank Line of Credit, the Company may
borrow up to 80% of eligible accounts receivable. Amounts drawn bear interest at
the bank's prime rate of interest plus 0.50% (7.25% at June 30, 2001). The
Imperial Bank Line of Credit expires on August 20, 2001 (see Note 14). At June
30, 2001 there was no amount outstanding under the Imperial Bank Line of Credit.
At June 30, 2001, $5,573,000 was available for future borrowings. The Imperial
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. During fiscal 2001, the Company occasionally defaulted on one of its
covenants however, the Company obtained waivers of default from the bank.

     IPS has a $6,000,000 bank line of credit (the "IPS Line of Credit")
collateralized by IPS' accounts receivable and certain other assets. Outstanding
balances bear interest at the bank's prime lending rate (6.75% at June 30, 2001)
and are payable upon demand. Available borrowings under the line are based upon
qualifying accounts receivable balances. The IPS Line of Credit expires June 30,
2002. At June 30, 2001 and 2000, nil and $430,000, respectively, were
outstanding. At June 30, 2001, $5,434,000 was available to borrow under the IPS
Line of Credit. The IPS Line of Credit agreement includes, among other things,
certain financial covenants and maintenance of certain financial ratios. During
fiscal 2001, IPS was in compliance with such covenants.

     There were no material borrowings outstanding under the Imperial Bank Line
of Credit for fiscal 2001 and fiscal 2000. The weighted average interest rates
on borrowings outstanding under the IPS Line of Credit during fiscal 2001 and
2000 was 7.34% and 8.6%, respectively.

                                        53
<PAGE>   55
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6 -- REDEEMABLE CONVERTIBLE PREFERRED STOCK

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

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

     In connection with the issuance of the Series A Preferred Stock, the
Company also issued Motorola a warrant to purchase 187,647 shares of the
Company's common stock at $17.11 per share. The warrant is immediately
exercisable and expires on July 7, 2005. The Company determined the fair value
of the warrant using the Black-Scholes option pricing model and the following
assumptions: fair value of common stock of $15.99 per share, a contractual life
of five years, an annual risk free interest rate of 6%, volatility of 73.9%, and
no future dividends. Based on the net cash proceeds received from the sale of
Series A Preferred Stock of $3,702,000, the relative fair values of the Series A
Preferred Stock and the warrant totaled $2,443,000 and $1,259,000, respectively.
The relative fair market value of the warrant was credited to additional paid-in
capital within shareholders' equity. The Company recognized a one-time preferred
stock and warrant expense of $1,259,000 relating to the embedded beneficial
conversion feature within the Series A Preferred Stock.

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

NOTE 7 -- CAPITAL STOCK

  COMMON STOCK

     In December 2000, the Company entered into a Common Stock Purchase
Agreement with VeriSign Capital Management, Inc. ("VeriSign") pursuant to which,
the Company sold, in January 2001, 264,901 shares of its common stock at $7.55
per share. The sale resulted in net cash proceeds to the Company of $1,983,000.
The Company has registered the shares for resale. The proceeds from the sale of
the common stock were required to be used solely for the research, design,
development, marketing and manufacturing of product and service solutions
related to the Company's itrust activities.

     In June 2001, the Company sold 2,225,000 shares of its common stock at
$6.75 per share in a private placement to SWIB. The sale resulted in net cash
proceeds of $14,979,000. The Company has registered the shares for resale.

  EMPLOYEE STOCK OPTIONS

     In October 1992, the Company adopted the 1992 Incentive Stock Option Plan
("1992 Plan"). The 1992 Plan will expire in 2002. A total of 1,000,000 shares of
the Company's common stock have been reserved for

                                        54
<PAGE>   56
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

issuance under the 1992 Plan. As of September 17, 2001, no shares are available
for issuance under the 1992 plan.

     In July 1995, the Company adopted the Identix Incorporated Equity Incentive
Plan ("1995 Plan"). The 1995 Plan will expire in 2005. In October 1997, 1998 and
2000, the Company amended the 1995 Plan so that a total of 4,700,000 shares of
the Company's common stock are currently reserved for issuance under the 1995
Plan. The 1995 Plan provides for the discretionary award of options, restricted
stock, stock purchase rights, performance shares or any combination of these
awards to eligible employees and non-employee directors of and consultants to
the Company.

     Under the 1992 and 1995 Plans, the term of any incentive stock option
granted may not exceed 10 years and the term of any nonqualified stock option
may not exceed 15 years. The exercise price of incentive stock options must not
be less than the fair market value of the Company's common stock at the date of
grant. The exercise price of nonqualified stock options must be at least 85% of
the fair market value of the Company's common stock at the date of grant.
Options generally vest on a monthly basis over a period of four years.

     In August 1995, the Company adopted the Non-Employee Directors Stock Option
Plan ("Directors Plan"), under which nonqualified stock options are granted to
non-employee directors on a formula basis. In October 1998 and 2000, the Company
amended the Director's Plan so that a total of 860,000 shares of the Company's
common stock are currently reserved for issuance under the Directors Plan.

     The Directors Plan provides that when a person who is not, and has not been
in the preceding twelve months, an officer or an employee of the Company is
elected or appointed a member of the Board, the Company will grant that person
on the effective date of such election or appointment (i) a nonqualified stock
option to purchase 30,000 shares of Company common stock if less than six months
have elapsed since the last annual meeting of stockholders or (ii) a
nonqualified stock option to purchase 15,000 shares of common stock if at least
six months have elapsed since the last annual meeting of stockholders. The
Directors Plan, as currently in effect, further provides that on the first
meeting of the Board immediately following the annual meeting of stockholders of
the Company (even if held on the same day as the meeting of stockholders), the
Company will grant to each non-employee director then in office a nonqualified
stock option to purchase an additional 30,000 shares of Company common stock
("Annual Grant").

     Under the Directors Plan, options are granted for a period of 10 years at
an exercise price equal to the fair market value of the Company's common stock
on the date of the grant. Options vest quarterly over a one year period from the
date of grant.

     In April 2000, the Company adopted the Identix Incorporated New Employee
Stock Incentive Plan ("New Employee Plan"). The New Employee Plan will expire in
2010. In February 2001, the Company amended the New Employee Plan so that a
total of 2,500,000 shares of the Company's common stock are currently reserved
for issuance under the New Employee Plan. Under the New Employee Plan, awards
may be granted as a material inducement to any person accepting employment or
consultancy with the Company, provided such person is not employed by the
Company at the time of the award. The New Employee Plan provides for the
discretionary award of options, restricted stock, stock purchase rights,
performance shares or any combination of these awards to eligible persons;
provided, however, that only nonqualified stock options may be granted under the
plan. Under the New Employee Plan, the term of any nonqualified stock option
granted may not exceed 15 years, and the exercise price of any such option must
be at least 85% of the fair market value of the Company's common stock at the
date of grant. Options generally vest on a monthly basis over a period of four
years.

                                        55
<PAGE>   57
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table summarizes the Company's stock option activity and
related information for the past three years:

<Table>
<Caption>
                                                               SHARES                   WEIGHTED
                                                             AVAILABLE      OPTIONS     AVERAGE
                                                             FOR GRANT    OUTSTANDING    PRICE
                                                             ----------   -----------   --------
<S>                                                          <C>          <C>           <C>
BALANCE AS OF JUNE 30, 1998................................     168,104    2,291,261     $ 6.59
Shares reserved upon adoption of amendment to 1995 Plan....   1,250,000           --
Shares reserved upon adoption of amendment to Director's
  Plan.....................................................     160,000           --
Shares reserved and granted under the Identicator
  Technology acquisition...................................          --    2,074,979     $ 0.26
Options granted............................................  (1,217,000)   1,217,000     $ 7.86
Options exercised..........................................          --     (320,708)    $ 5.48
Options canceled...........................................     255,068     (255,068)    $ 7.97
                                                             ----------   ----------
BALANCE AS OF JUNE 30, 1999................................     616,172    5,007,464     $ 4.28
Shares reserved upon adoption of amendment to 1995 Plan....   1,700,000           --
Shares reserved upon adoption of New Employee Plan.........   1,500,000           --
Options granted............................................  (1,988,000)   1,988,000     $12.09
Options exercised..........................................          --   (1,650,893)    $ 2.70
Options canceled...........................................     227,855     (227,855)    $ 7.69
Options canceled and expired...............................          --         (254)    $ 0.26
                                                             ----------   ----------
BALANCE AS OF JUNE 30, 2000................................   2,056,027    5,116,462     $ 7.26
Shares reserved upon adoption of amendment to Director's
  Plan.....................................................     450,000           --
Shares reserved upon adoption of amendment to New Employee
  Plan.....................................................   1,000,000           --
Options granted............................................  (2,508,750)   2,508,750     $11.26
Options exercised..........................................          --     (919,367)    $ 2.13
Options canceled...........................................     437,813     (437,813)    $ 9.40
Options canceled and expired...............................          --      (11,152)    $ 0.26
                                                             ----------   ----------
BALANCE AS OF JUNE 30, 2001................................   1,435,090    6,256,880     $ 9.77
                                                             ==========   ==========
</Table>

     During fiscal 2001 and 2000, the Company recognized expense of $421,000 and
$93,000, respectively, for granting stock options to employees at exercise
prices below fair market value at the time of grant.

     The following table summarizes options outstanding at June 30, 2001:

<Table>
<Caption>
                               OPTIONS OUTSTANDING
                  ---------------------------------------------
                                 WEIGHTED                             OPTIONS EXERCISABLE
                                 AVERAGE                          ----------------------------
   RANGE OF                   REMAINING LIFE   WEIGHTED AVERAGE               WEIGHTED AVERAGE
EXERCISE PRICES    NUMBER       (IN YEARS)      EXERCISE PRICE     NUMBER      EXERCISE PRICE
---------------   ---------   --------------   ----------------   ---------   ----------------
<S>               <C>         <C>              <C>                <C>         <C>
$ 0.01 - $ 7.63   1,686,173        6.44             $ 4.77        1,413,538        $ 4.49
$ 7.70 - $10.20   2,285,159        8.86               9.16          683,433          9.21
$10.69 - $14.06   1,785,819        8.95              13.68          575,266         13.89
$14.97 - $16.38     499,729        9.28              15.07          172,664         15.05
                  ---------                                       ---------
                  6,256,880        8.28             $ 9.77        2,844,901        $ 8.17
                  =========                                       =========
</Table>

                                        56
<PAGE>   58
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  PRO FORMA DISCLOSURES

     The weighted average fair value at date of grant for options granted during
fiscal 2001, 2000 and 1999 was $8.78, $5.25 and $4.33 per option, respectively.
The fair value of options at date of grant was estimated using the Black-Scholes
option pricing model with the following assumptions:

<Table>
<Caption>
                                                               FISCAL YEAR ENDED
                                                                    JUNE 30,
                                                              --------------------
                                                              2001    2000    1999
                                                              ----    ----    ----
<S>                                                           <C>     <C>     <C>
Expected life (years).......................................     4       4       4
Risk free interest rate.....................................  5.31%   6.10%   4.80%
Volatility..................................................    81%     70%     68%
Dividend yield..............................................    --%     --%     --%
</Table>

     Had compensation expense for the Company's stock-based compensation plans
been determined based on the method prescribed by SFAS No. 123, the Company's
net loss and net loss per share would have been as follows:

<Table>
<Caption>
                                                             FISCAL YEAR ENDED JUNE 30,
                                                     ------------------------------------------
                                                         2001           2000           1999
                                                     ------------   ------------   ------------
<S>                                                  <C>            <C>            <C>
Net loss:
  As reported......................................  $(29,598,000)  $(13,386,000)  $(13,419,000)
  Pro forma........................................   (41,316,000)   (17,343,000)   (16,393,000)
Net loss per share:
  As reported basic and diluted....................  $      (0.88)  $      (0.43)  $      (0.52)
  Pro forma basic and diluted......................         (1.22)         (0.55)         (0.63)
</Table>

  EMPLOYEE STOCK OWNERSHIP PLAN

     The IPS Employee Stock Ownership Plan ("ESOP") enables eligible employees
of IPS to share in the growth of the Company through the acquisition of the
Company's common stock. The ESOP provides for the Company, at its discretion, to
make contributions of up to 10% of each participant's base salary. The amount of
compensation expense related to the ESOP is based upon the cash contributions to
the ESOP made by the Company. The Company's expense for the ESOP was $93,588 in
fiscal 2001, $77,000 in fiscal 2000 and $145,000 in fiscal 1999. A total of
194,610, 265,651 and 330,092 allocated shares of the Company's common stock were
held by the ESOP at June 30, 2001, 2000 and 1999, respectively.

  EMPLOYEE STOCK PURCHASE PLAN

     On October 30, 1998, the Company adopted an employee stock purchase plan
("ESPP"), through which qualified employees of the Company may participate in
stock ownership of the Company. At June 30, 2001 shares of common stock reserved
for the ESPP totaled 266,655. The cost of each share purchased is 85% of the
lower of the closing prices for common stock on: (i) the first trading day in
the enrollment period in which the purchase is made, and (ii) the six-monthly
purchase date. Pursuant to the ESPP, 165,011, 32,721 and 35,610 shares were
issued at a weighted average price of $6.12, $7.20 and $7.12 per share during
fiscal 2001, 2000 and 1999, respectively.

  WARRANTS

     In connection with the private placement of the Company's common stock in
July 1999, the Company issued to the investors warrants to purchase 905,798
shares of common stock for $11.33 per share until January 1, 2001 and an
additional 362,319 shares at $11.18 per share until July 1, 2004. A warrant to
purchase
                                        57
<PAGE>   59
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

33,186 shares of common stock for $10.85 per share was also issued to the broker
who arranged the private placement. Under the terms of the agreement, Identix
agreed to register for resale the shares and warrants. In April 2000, warrants
to purchase 905,798 of the Company's common shares at $11.33 per share were
exercised. The Company received net cash proceeds of $10,263,000.

     As further discussed in Note 6, in connection with the private placement of
the Company's Series A Preferred Stock, the Company issued to the investor a
warrant to purchase 187,647 shares of the Company's common stock at $17.11 per
share. The warrant is immediately exercisable and expires on July 7, 2005. The
Company determined the fair value of the warrant using the Black-Scholes option
pricing model and, based on the net cash proceeds received from the sales of
Series A Preferred Stock the relative fair value of the warrant totaled
$1,259,000.

NOTE 8 -- RELATED PARTY TRANSACTIONS

     A member of the Board of Directors presently owns 38% of Integrated
Manufacturing Solutions, Inc., ("IMS"), a manufacturer of integrated circuit
boards that provides manufacturing services to the Company. IMS billed the
Company approximately $1,620,000, $2,920,000, and $2,798,000 in fiscal 2001,
2000 and 1999, respectively. Amounts outstanding to IMS at June 30, 2001 and
2000 were approximately $33,000 and $200,000, respectively.

     The Company purchases certain complete biometric security products,
research and development, engineering and administrative services from
International Technology Concepts, Inc ("IT Concepts"). Two officers and
shareholders of the Company are directors, officers and principal shareholders
of IT Concepts. IT Concepts billed the Company approximately $3,672,000 in
fiscal 2001, $3,080,000 in fiscal 2000 and $360,000 fiscal 1999. The Company did
not purchase goods or services from IT Concepts prior to fiscal 1999. Amounts
outstanding to IT Concepts at June 30, 2001 and 2000 were approximately $287,000
and $5,000, respectively.

NOTE 9 -- INCOME TAXES

     The following is a reconciliation between the statutory federal income tax
rate and the provision for income taxes:

<Table>
<Caption>
                                                              FISCAL YEAR ENDED JUNE 30,
                                                       ----------------------------------------
                                                           2001          2000          1999
                                                       ------------   -----------   -----------
<S>                                                    <C>            <C>           <C>
Federal tax at statutory rate........................  $(10,037,000)  $(4,582,000)  $(4,562,000)
State tax, net of federal benefit....................    (1,181,000)     (542,000)     (782,000)
Non-deductible preferred stock and warrant expense...       428,000            --            --
Goodwill amortization................................     1,257,000     1,304,000       281,000
Change in valuation allowance........................     9,513,000     3,818,000     5,014,000
Other................................................        20,000        57,000        70,000
                                                       ------------   -----------   -----------
                                                       $         --   $    55,000   $    21,000
                                                       ============   ===========   ===========
</Table>

                                        58
<PAGE>   60
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Deferred tax assets (liabilities) comprise the following:

<Table>
<Caption>
                                                                    JUNE 30,
                                                           ---------------------------
                                                               2001           2000
                                                           ------------   ------------
<S>                                                        <C>            <C>
Net operating loss and tax credit carryforwards..........  $ 23,786,000   $ 14,134,000
Inventory reserve and basis difference...................       952,000      1,142,000
Depreciation and amortization............................       690,000        229,000
Compensation accruals....................................       543,000        329,000
Accounts receivable and sales reserve....................       533,000        397,000
Deferred revenue.........................................     1,964,000        570,000
Other....................................................       150,000         99,000
                                                           ------------   ------------
          Gross deferred tax assets......................    28,618,000     16,900,000
Unbilled accounts receivable.............................    (1,439,000)    (1,877,000)
                                                           ------------   ------------
Net deferred tax asset before valuation..................    27,179,000     15,023,000
Valuation allowance......................................   (27,179,000)   (15,023,000)
                                                           ------------   ------------
          Total net deferred tax asset...................  $         --   $         --
                                                           ============   ============
</Table>

     The deferred tax asset valuation allowance is attributed to U.S. Federal
and State deferred tax assets. Management believes sufficient uncertainty exists
regarding the realizability of these assets, such that a full valuation
allowance is required. As of June 30, 2001, the Company has federal and state
net operating loss carryforwards of approximately $71,412,000 and $27,137,000,
respectively, which are available to offset future taxable income. The
carryforwards expire on various dates through fiscal 2021. For federal and state
tax purposes, the Company's net operating loss carryforwards are subject to
certain limitations on annual utilization in the event of changes in ownership,
as defined by federal and state law.

NOTE 10 -- REPORTABLE SEGMENT DATA

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

                                        59
<PAGE>   61
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

assigned. The accounting policies of the segments are the same as those
described in Note 1 "The Company and its Significant Accounting Policies".
Segment information is as follows:

<Table>
<Caption>
                                                             FISCAL YEAR ENDED JUNE 30,
                                                     ------------------------------------------
                                                         2001           2000           1999
                                                     ------------   ------------   ------------
<S>                                                  <C>            <C>            <C>
Total revenues:
  Imaging..........................................  $ 27,010,000   $ 22,313,000   $ 27,170,000
  Security.........................................     8,051,000      8,612,000      7,058,000
  Government Services..............................    50,561,000     45,463,000     50,265,000
  Elimination of inter-segment revenues............    (3,794,000)    (3,693,000)    (2,731,000)
                                                     ------------   ------------   ------------
                                                     $ 81,828,000   $ 72,695,000   $ 81,762,000
                                                     ============   ============   ============
Depreciation and amortization:
  Imaging..........................................  $  1,162,000   $  1,080,000   $    855,000
  Security.........................................     3,751,000      3,773,000      1,150,000
  Government Services..............................       738,000        918,000        922,000
                                                     ------------   ------------   ------------
                                                     $  5,651,000   $  5,771,000   $  2,927,000
                                                     ============   ============   ============
Interest and other income (expense), net:
  Imaging..........................................  $    267,000   $    244,000   $    105,000
  Security.........................................       470,000        124,000         51,000
  Government Services..............................       391,000        322,000        111,000
  Fingerprinting Services..........................       308,000        225,000        116,000
                                                     ------------   ------------   ------------
                                                     $  1,436,000   $    915,000   $    383,000
                                                     ============   ============   ============
Interest expense:
  Imaging..........................................  $      1,000   $     19,000   $    217,000
  Security.........................................            --         14,000        141,000
  Government Services..............................       112,000        108,000         87,000
                                                     ------------   ------------   ------------
                                                     $    113,000   $    141,000   $    445,000
                                                     ============   ============   ============
Net income (loss):
  Imaging..........................................  $ (4,128,000)  $ (1,496,000)  $    801,000
  Security.........................................   (23,783,000)   (13,286,000)   (16,036,000)
  Government Services..............................    (2,276,000)     1,255,000      1,999,000
  Fingerprinting Services..........................       589,000        141,000       (183,000)
                                                     ------------   ------------   ------------
                                                     $(29,598,000)  $(13,386,000)  $(13,419,000)
                                                     ============   ============   ============
Capital expenditures:
  Imaging..........................................  $  1,964,000   $  1,376,000   $    797,000
  Security.........................................     1,229,000        449,000        298,000
  Government Services..............................       761,000        410,000        249,000
                                                     ------------   ------------   ------------
                                                     $  3,954,000   $  2,235,000   $  1,344,000
                                                     ============   ============   ============
</Table>

                                        60
<PAGE>   62
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                       JUNE 30,
                                                        ---------------------------------------
                                                           2001          2000          1999
                                                        -----------   -----------   -----------
<S>                                                     <C>           <C>           <C>
Identifiable assets:
  Imaging.............................................  $36,292,000   $31,042,000   $14,591,000
  Security............................................   30,579,000    32,987,000    37,556,000
  Government Services.................................   19,037,000    19,489,000    19,299,000
                                                        -----------   -----------   -----------
                                                        $85,908,000   $83,518,000   $71,446,000
                                                        ===========   ===========   ===========
</Table>

NOTE 11 -- FOREIGN OPERATIONS DATA

     In geographical reporting, revenues are attributed to the geographical
location of the sales and service organizations:

<Table>
<Caption>
                                                              FISCAL YEAR ENDED JUNE 30,
                                                        ---------------------------------------
                                                           2001          2000          1999
                                                        -----------   -----------   -----------
<S>                                                     <C>           <C>           <C>
Total revenues:
  North America.......................................  $78,123,000   $68,517,000   $77,679,000
  International.......................................    3,705,000     4,178,000     4,083,000
                                                        -----------   -----------   -----------
                                                        $81,828,000   $72,695,000   $81,762,000
                                                        ===========   ===========   ===========
</Table>

<Table>
<Caption>
                                                                       JUNE 30,
                                                        ---------------------------------------
                                                           2001          2000          1999
                                                        -----------   -----------   -----------
<S>                                                     <C>           <C>           <C>
Identifiable assets:
  North America.......................................  $84,874,000   $81,043,000   $70,489,000
  International.......................................    1,034,000     2,475,000       957,000
                                                        -----------   -----------   -----------
                                                        $85,908,000   $83,518,000   $71,446,000
                                                        ===========   ===========   ===========
</Table>

NOTE 12 -- COMMITMENTS

     The Company currently occupies its headquarters, Imaging and Security
facility under a lease, which expires December 31, 2007, and is required to pay
taxes, insurance, and maintenance as well as monthly rental payments. In
addition, the Company leases space for research, development and engineering,
which expires October 31, 2005. Further, the Company leases office space for its
sales force under operating leases, which expire at various dates through 2006.
The Company leases office space for its IPS business under operating leases
expiring at various dates through 2011. The leases contain escalation provisions
requiring rental increases for increases in operating expense and real estate
taxes.

     Future minimum lease payments for operating leases are as follows:

<Table>
<S>                                                            <C>
Fiscal year ending June 30:
  2002......................................................   $ 4,691,000
  2003......................................................     4,957,000
  2004......................................................     5,294,000
  2005......................................................     5,666,000
  2006......................................................     5,451,000
  Thereafter................................................    18,718,000
                                                               -----------
     Total..................................................   $44,777,000
                                                               ===========
</Table>

                                        61
<PAGE>   63
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Total rental expense under operating leases was $2,550,000, $1,654,000 and
$1,966,000 for the years ended June 30, 2001, 2000 and 1999, respectively.

NOTE 13 -- RECENT ACCOUNTING PRONOUNCEMENTS

     In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 141 ("SFAS 141"), "Business Combinations". SFAS No. 141 requires the
purchase method of accounting for business combinations initiated after June 30,
2001 and eliminates the pooling-of-interests method.

     In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets", which is effective
for the fiscal years beginning after December 15, 2001. SFAS 142 requires, among
other things, the discontinuance of goodwill amortization. In addition, the
standard includes provisions upon adoption for the reclassification of certain
existing recognized intangibles as goodwill, reassessment of the useful lives of
existing recognized intangibles, reclassification of certain intangibles out of
previously reported goodwill and the testing for impairment of existing goodwill
and other intangibles. The potential impact of adopting SFAS 142 on the
Company's financial position and results of operations is still being assessed
by management.

NOTE 14 -- SUBSEQUENT EVENTS

     In connection with the Company's restructuring of its worldwide operations
(see Note 3), in July 2001, the Company initiated a workforce reduction of
approximately 35 employees, or 8% of its worldwide workforce. The charge
anticipated in the first quarter of fiscal 2002 as a result of the workforce
reduction will be approximately $1,500,000.

     On September 17, 2001, the Company received a firm commitment from Silicon
Valley Bank to loan the Company up to the lesser of $7,500,000 or 75% of the
Company's eligible accounts receivable. Loans will be secured by substantially
all of the assets of the Company and bear interest at the bank's prime rate of
interest plus two percent. The commitment from Silicon Valley Bank identifies
certain financial and operating covenants, including restrictions on the
Company's ability to pay dividends on the Company's common stock, that will be
set forth in definitive loan documentation expected to be executed by the bank
and the Company in due course. The commitment from Silicon Valley Bank replaces
the Company's previous line of credit, the Imperial Bank Line of Credit, which
expired August 20, 2001.

NOTE 15 -- QUARTERLY CONSOLIDATED FINANCIAL DATA (UNAUDITED)

     The following tables present certain unaudited consolidated quarterly
financial information for each of the eight quarters ended June 30, 2001. In the
opinion of the Company's management, this quarterly information has been
prepared on the same basis as the consolidated financial statements and includes
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the unaudited quarterly results.

     As discussed in Note 1, the Company changed its accounting method for
revenue recognition in the fourth quarter of the year ended June 30, 2001,
retroactive to July 1, 2000. Accordingly, the following unaudited quarterly
consolidated financial data for the first three quarters of the year ended June
30, 2001 has been restated to reflect the impact of the change in accounting
method as if adopted on July 1, 2000.

                                        62
<PAGE>   64
                              IDENTIX INCORPORATED

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In thousands, except share and per share amounts:
<Table>
<Caption>
                                                                                                                     FOURTH
                                  FIRST QUARTER ENDED        SECOND QUARTER ENDED         THIRD QUARTER ENDED        QUARTER
                                  SEPTEMBER 30, 2000           DECEMBER 31, 2000            MARCH 31, 2001            ENDED
                               -------------------------   -------------------------   -------------------------    JUNE 30,
                                   AS                          AS                          AS                         2001
                               PREVIOUSLY                  PREVIOUSLY                  PREVIOUSLY                  -----------
                                REPORTED     AS RESTATED    REPORTED     AS RESTATED    REPORTED     AS RESTATED   AS REPORTED
                               -----------   -----------   -----------   -----------   -----------   -----------   -----------
<S>                            <C>           <C>           <C>           <C>           <C>           <C>           <C>
Revenues.....................  $    21,367   $    20,095   $    21,226   $    20,974   $    19,985   $    20,224   $    20,535
Gross profit.................        4,987         4,322         5,206         5,083         4,204         4,315         3,538
Loss before cumulative effect
 of a change in accounting
 principle...................       (4,711)       (5,376)       (5,057)       (5,180)       (8,480)       (8,369)       (8,675)
Cumulative effect of a change
 in accounting principle.....           --        (1,998)           --            --            --            --            --
Net loss.....................  $    (4,711)  $    (7,374)  $    (5,057)  $    (5,180)  $    (8,480)  $    (8,369)  $    (8,675)
Basic and diluted net loss
 per share:
 Loss before cumulative
   effect of a change in
   accounting principle......  $     (0.14)  $     (0.16)  $     (0.15)  $     (0.15)  $     (0.25)  $     (0.25)  $     (0.25)
 Cumulative effect of a
   change in accounting
   principle.................           --   $     (0.06)           --            --            --            --            --
 Basic and diluted net loss
   per share.................  $     (0.14)  $     (0.22)  $     (0.15)  $     (0.15)  $     (0.25)  $     (0.25)  $     (0.25)
 Weighted average common
   shares used in basic and
   diluted loss per share
   computation...............   33,208,000    33,208,000    33,439,000    33,439,000    33,954,000    33,954,000    34,638,000

<Caption>

                                  TOTAL
                               -----------
                               AS REPORTED
                               -----------
<S>                            <C>
Revenues.....................  $    81,828
Gross profit.................       17,258
Loss before cumulative effect
 of a change in accounting
 principle...................      (27,600)
Cumulative effect of a change
 in accounting principle.....       (1,998)
Net loss.....................      (29,598)
Basic and diluted net loss
 per share:
 Loss before cumulative
   effect of a change in
   accounting principle......  $     (0.82)
 Cumulative effect of a
   change in accounting
   principle.................  $     (0.06)
 Basic and diluted net loss
   per share.................  $     (0.88)
 Weighted average common
   shares used in basic and
   diluted loss per share
   computation...............   33,807,000
</Table>

<Table>
<Caption>
                                                          QUARTERS ENDED
                              ----------------------------------------------------------------------
                              SEPTEMBER 30,   DECEMBER 31,    MARCH 31,     JUNE 30,
                                  1999            1999          2000          2000          TOTAL
                              -------------   ------------   -----------   -----------   -----------
<S>                           <C>             <C>            <C>           <C>           <C>
Revenues....................   $    17,467    $    17,526    $    17,580   $    20,122   $    72,695
Gross profit................         4,365          4,268          3,942         5,225        17,800
Net loss....................   $    (3,472)   $    (3,057)   $    (4,121)  $    (2,736)  $   (13,386)
Basic and diluted net loss
  per share.................   $     (0.11)   $     (0.10)   $     (0.13)  $     (0.08)  $     (0.43)
  Weighted average common
     shares used in basic
     and diluted loss per
     share computation......    30,644,000     30,915,000     31,398,000    32,845,000    31,441,000
</Table>

                                        63
<PAGE>   65

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

     None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this Item with respect to executive officers is
set forth in Part I of this Annual Report on Form 10-K and the information with
respect to the directors is incorporated by reference to the information set
forth under the caption "Election of Directors" in the proxy statement to be
used in connection with the 2001 Annual Meeting of the Stockholders (the "Proxy
Statement").

ITEM 11.  EXECUTIVE COMPENSATION

     The information required by this Item is incorporated by reference to the
information set forth under the caption "Executive Compensation" in the Proxy
Statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this Item is incorporated by reference to the
information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item is incorporated by reference to the
information set forth under the caption "Certain Transactions" and "Employment
Agreements" in the Proxy Statement.

                                    PART IV

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

     (a)1  Financial Statements.

     The information required by this Item appears in Item 8 of this Annual
Report on Form 10-K.

     (a)2  Financial Statement Schedules

     Schedule II -- Valuation and Qualifying Accounts and Reserves

     (a)3  Exhibits.

<Table>
<Caption>
 EXHIBIT
 NUMBER                                 DESCRIPTION
 -------                                -----------
<C>        <C>  <S>
3.1(1)     --   Certificate of Incorporation
3.2(1)     --   Bylaws
4.1(2)     --   Registration Rights Agreement dated June 30, 1999
4.2(2)     --   Form of Series I Warrant
4.3(3)     --   Securities Purchase Agreement between Identix and Motorola,
                Inc., dated July 2000
4.4(3)     --   Certificate of Designation of Series A Preferred Stock of
                Identix
4.5(3)     --   Information and Registration Rights Agreement between
                Identix and Motorola, Inc., dated July 7, 2000
4.6(3)     --   Warrant to Purchase 187,647 Shares of Identix Common Stock,
                dated July 6, 2000
4.7(4)     --   Common Stock Purchase Agreement between Identix and VeriSign
                Capital Management, Inc., dated December 22, 2000
</Table>

                                        64
<PAGE>   66

<Table>
<Caption>
 EXHIBIT
 NUMBER                                 DESCRIPTION
 -------                                -----------
<C>        <C>  <S>
<no_color>
4.8(5)     --   Share Purchase Agreement between Identix and State of
                Wisconsin Investment Board, dated, June 11, 2001
10.1(6)    --   Identix' 1983 Incentive Stock Option Plan and form of
                Incentive Stock Option Agreement and Non-Statutory Stock
                Option Agreement
10.2(7)    --   ANADAC 1984 Incentive Stock Option Plan and forms of
                Incentive Stock Option Agreement and Non-Statutory Stock
                Option Agreement
10.3(8)    --   Identix' 1992 Employee Stock Option Plan, and forms of
                Incentive Stock Option Agreement and Non-Qualified Stock
                Option Agreement
10.4       --   Amendment to Identix' 1992 Employee Stock Option Plan dated
                June 18, 2001
10.5(8)    --   Identicator Corporation 1995 Stock Option Plan
10.6       --   Identix' 1995 Equity Incentive Plan, as amended June 18,
                2001
10.7       --   Identix' 1995 Non-employee Directors Stock Option Plan, as
                amended June 18, 2001
10.8(8)    --   IDT Holdings, Inc. 1998 Stock Option/Stock Issuance Plan
10.9       --   Identix' New Employee Stock Incentive Plan, as amended June
                18, 2001
10.10(9)   --   Employee Stock Purchase Plan
10.11(9)   --   Foreign Subsidiary Employee Stock Purchase Plan
10.12(7)   --   Loan and Security Agreement dated January 9, 1991 between
                ANADAC and Crestar Bank, as amended August 5, 1992 and
                October 23, 1992
10.13(10)  --   Amendment to Loan and Security Agreement between ANADAC and
                Crestar Bank, dated December 2, 1996
10.14(11)  --   Amended and Restated Revolving Note Agreement between ANADAC
                and Crestar Bank, dated December 2, 1996
10.15(12)  --   Amendment to Security and Loan Agreement between ANADAC and
                Crestar Bank, dated February 4, 1999
10.16      --   Amendment to Security and Loan Agreement between ANADAC and
                Suntrust Bank (Successor in Interest to Crestar Bank) dated
                May 1, 2000, April 10, 2001 and June 26, 2001
10.17(13)  --   AEGIS Combat Ship Building Program with ANADAC
10.18      --   Subcontract between ANADAC and Advanced Engineering and
                Research Associates, Inc., dated August 25, 2000
10.19(14)  --   Office Building Lease between ANADAC and Charles Smith
                Management, Inc., dated May 18, 1995
10.20(15)  --   Office Building Lease between ANADAC and U.S. AIR, Inc.,
                dated April 1, 1995
10.21      --   Office Lease between ANADAC and Federal Center Limited
                Partnership dated April 2, 1999, as amended December 1, 1999
                and April 11, 2001
10.22      --   Office Building Lease between Identix and Pacific Gulf
                Properties Inc., dated July 19, 2000, as amended December
                12, 2000
10.23(16)  --   Standard Industrial Commercial Multi-Tenant Lease between
                Identix and Vasona Business Park, dated December 8, 2000
10.24(17)  --   Compensation Continuation Agreement between Identix and
                James P. Scullion, dated January 5, 2000
10.25(18)  --   Employment Agreement between Identix and Oscar Pieper, dated
                April 26, 1999
10.26(18)  --   Employment Agreement between Identix and Grant Evans, dated
                April 26, 1999
10.27(18)  --   Employment Agreement between Identix and Yury Khidekel,
                dated April 26, 1999
10.28(18)  --   Employment Agreement between Identix and Yuri Shapiro, dated
                April 26, 1999
10.29      --   Compensation Agreement between ANADAC and Paul J. Bulger,
                dated May 11, 1999
10.30(18)  --   Consulting Agreement between Identix and John Major dated
                June 7, 2000
</Table>

                                        65
<PAGE>   67

<Table>
<Caption>
 EXHIBIT
 NUMBER                                 DESCRIPTION
 -------                                -----------
<C>        <C>  <S>
<no_color>
10.31      --   Employment Agreement between Identix and Daniel H.
                Dellegrotti, dated June 21, 2001
10.32(16)  --   Employment Agreement between Identix and Robert McCashin,
                dated October 19, 2000 and Option Agreement between Identix
                and Robert McCashin, dated October 19, 2000
10.33(19)  --   Employment Agreement between Identix and Erik E. Prusch,
                dated April 2, 2001
10.34(18)  --   Development, Support and Indemnification Agreement between
                Identix and International Technology Concepts, Inc., dated
                July 1, 2000
10.35(18)  --   Development Agreement between Identix and International
                Technology Concepts, Inc., dated January 14, 2000
10.36(18)  --   Form of Indemnification Agreement between Identix and
                certain of its officers
21.1       --   Subsidiaries of Identix
23.1       --   Consent of Independent Accountants
24.1       --   Power of Attorney
</Table>

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

 (1) Incorporated by reference to the December 16, 1998 Form 8-K.

 (2) Incorporated by reference to the registration statement on Form S-3 (no.
     333-82239), filed July 2, 1999.

 (3) Incorporated by reference to the September 26, 2000 Form 10-K.

 (4) Incorporated by reference to the February 14, 2001 Form 10-Q.

 (5) Incorporated by reference to the registration statement on Form S-3 (no.
     333-63306), filed June 19, 2001.

 (6) Incorporated by reference to Identix' registration statement 29-95551.

 (7) Incorporated by reference to Identix' registration statement 33-55074.

 (8) Incorporated by reference to the registration statement on Form S-8 (no.
     333-77803), filed May 5, 1999.

 (9) Incorporated by reference to the registration statement on Form S-8 (no.
     333-69141), filed December 17, 1998.

(10) Incorporated by reference to the December 31, 1996 Form 10-Q.

(11) Incorporated by reference to the December 13, 1996 Restated Form 10-Q.

(12) Incorporated by reference to the December 31, 1998 Form 10-Q.

(13) Incorporated by reference to the November 13, 1995 Form 10-Q.

(14) Incorporated by reference to the March 31, 1995 Form 10-Q.

(15) Incorporated by reference to the June 30, 1995 Form 10-K.

(16) Incorporated by reference to the February 14, 2001 Form 10-Q.

(17) Incorporated by reference to the March 31, 2000 Form 10-Q.

(18) Incorporated by reference to the November 26, 2000 Form 10-Q.

(19) Incorporated by reference to the March 5, 2001 Form 10-Q.

     (b) Reports on Form 8-K:

     During the fiscal year ended June 30, 2001, no reports were filed on Form
8-K.

                                        66
<PAGE>   68

                                  SCHEDULE II

                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<Table>
<Caption>
                                    BALANCE AT   CHARGED TO   CHARGED TO                BALANCE AT
                                    BEGINNING    COSTS AND      OTHER                      END
DESCRIPTION                         OF PERIOD     EXPENSES     ACCOUNTS    DEDUCTIONS   OF PERIOD
-----------                         ----------   ----------   ----------   ----------   ----------
<S>                                 <C>          <C>          <C>          <C>          <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
  Year ended June 30, 1999........  $  866,000   $  584,000    $125,000    $  766,000   $  809,000
  Year ended June 30, 2000........  $  809,000   $  469,000    $     --    $  212,000   $1,066,000
  Year ended June 30, 2001........  $1,066,000   $1,168,000    $     --    $  832,000   $1,402,000
INVENTORY RESERVE:
  Year ended June 30, 1999........  $  866,000   $1,251,000    $530,000    $  731,000   $1,916,000
  Year ended June 30, 2000........  $1,916,000   $1,096,000    $     --    $1,238,000   $1,774,000
  Year ended June 30, 2001........  $1,774,000   $1,770,000    $     --    $1,096,000   $2,448,000
</Table>

     On April 26, 1999, the Company acquired Identicator Technology. Its
inventory reserve and allowance for doubtful accounts balances as of that date
are shown above as "Charged to Other Accounts".

                                        67
<PAGE>   69

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant, Identix Incorporated, a corporation
organized and existing under the laws of the State of Delaware, has duly caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized, in the City of Los Gatos, State of California, on the 24th day of
September 2001.

                                          IDENTIX INCORPORATED

                                          By:      /s/ ROBERT MCCASHIN
                                            ------------------------------------
                                                      Robert McCashin
                                                 Chairman of the Board and
                                                  Chief Executive Officer

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert McCashin and Mark S. Molina,
jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to the
Annual Report for the fiscal year ended June 30, 2001 on Form 10-K and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
     Signature                                Title                                            Date
     ---------                                -----                                            -----
<S>                               <C>                                                     <C>
/s/ Robert McCashin               Chairman & Chief Executive Officer                      September 24, 2001
--------------------------        (Principal Executive Officer)
Robert McCashin

/s/ Erik E. Prusch                Executive Vice President & Chief Financial Officer      September 24, 2001
--------------------------        (Principal Financial and Accounting Officer)
Erik E. Prusch

/s/ James P. Scullion             President & Chief Operations Officer                    September 24, 2001
--------------------------
James P. Scullion

/s/ Paul D. Clark                 Director                                                September 24, 2001
--------------------------
Paul D. Clark

/s/ Milton E. Cooper              Director                                                September 24, 2001
--------------------------
Milton E. Cooper

/s/ Randall Hawks, Jr.            Director                                                September 24, 2001
--------------------------
Randall Hawks, Jr.

/s/ John E. Major                 Director                                                September 24, 2001
--------------------------
John E. Major

/s/ Patrick H. Morton             Director                                                September 24, 2001
--------------------------
Patrick H. Morton

/s/ Charles W. Richion            Director                                                September 24, 2001
--------------------------
Charles W. Richion

/s/ Fred U. Sutter                Director                                                September 24, 2001
--------------------------
Fred U. Sutter

/s/ Larry J. Wells                Director                                                September 24, 2001
--------------------------
Larry J. Wells

/s/ Paul J. Bulger                Director                                                September 24, 2001
--------------------------
Paul J. Bulger
</TABLE>


                                        68
<PAGE>   70

                                 EXHIBIT INDEX

<Table>
<Caption>
 EXHIBIT
 NUMBER                                 DESCRIPTION
 -------                                -----------
<C>        <S>  <C>
3.1(1)     --   Certificate of Incorporation
3.2(1)     --   Bylaws
4.1(2)     --   Registration Rights Agreement dated June 30, 1999
4.2(2)     --   Form of Series I Warrant
4.3(3)     --   Securities Purchase Agreement between Identix and Motorola,
                Inc., dated July 2000
4.4(3)     --   Certificate of Designation of Series A Preferred Stock of
                Identix
4.5(3)     --   Information and Registration Rights Agreement between
                Identix and Motorola, Inc., dated July 7, 2000
4.6(3)     --   Warrant to Purchase 187,647 Shares of Identix Common Stock,
                dated July 6, 2000
4.7(4)     --   Common Stock Purchase Agreement between Identix and VeriSign
                Capital Management, Inc., dated December 22, 2000
4.8(5)     --   Share Purchase Agreement between Identix and State of
                Wisconsin Investment Board, dated, June 11, 2001
10.1(6)    --   Identix' 1983 Incentive Stock Option Plan and form of
                Incentive Stock Option Agreement and Non-Statutory Stock
                Option Agreement
10.2(7)    --   ANADAC 1984 Incentive Stock Option Plan and forms of
                Incentive Stock Option Agreement and Non-Statutory Stock
                Option Agreement
10.3(8)    --   Identix' 1992 Employee Stock Option Plan, and forms of
                Incentive Stock Option Agreement and Non-Qualified Stock
                Option Agreement
10.4       --   Amendment to Identix' 1992 Employee Stock Option Plan dated
                June 18, 2001
10.5(8)    --   Identicator Corporation 1995 Stock Option Plan
10.6       --   Identix' 1995 Equity Incentive Plan, as amended June 18,
                2001
10.7       --   Identix' 1995 Non-employee Directors Stock Option Plan, as
                amended June 18, 2001
10.8(8)    --   IDT Holdings, Inc. 1998 Stock Option/Stock Issuance Plan
10.9       --   Identix' New Employee Stock Incentive Plan, as amended June
                18, 2001
10.10(9)   --   Employee Stock Purchase Plan
10.11(9)   --   Foreign Subsidiary Employee Stock Purchase Plan
10.12(7)   --   Loan and Security Agreement dated January 9, 1991 between
                ANADAC and Crestar Bank, as amended August 5, 1992 and
                October 23, 1992
10.13(10)  --   Amendment to Loan and Security Agreement between ANADAC and
                Crestar Bank, dated December 2, 1996
10.14(11)  --   Amended and Restated Revolving Note Agreement between ANADAC
                and Crestar Bank, dated December 2, 1996
10.15(12)  --   Amendment to Security and Loan Agreement between ANADAC and
                Crestar Bank, dated February 4, 1999
10.16      --   Amendment to Security and Loan Agreement between ANADAC and
                Suntrust Bank (Successor in Interest to Crestar Bank) dated
                May 1, 2000, April 10, 2001 and June 26, 2001
10.17(13)  --   AEGIS Combat Ship Building Program with ANADAC
10.18      --   Subcontract between ANADAC and Advanced Engineering and
                Research Associates, Inc., dated August 25, 2000
10.19(14)  --   Office Building Lease between ANADAC and Charles Smith
                Management, Inc., dated May 18, 1995
10.20(15)  --   Office Building Lease between ANADAC and U.S. AIR, Inc.,
                dated April 1, 1995
10.21      --   Office Lease between ANADAC and Federal Center Limited
                Partnership dated April 2, 1999, as amended December 1, 1999
                and April 11, 2001
</Table>

                                        69
<PAGE>   71

<Table>
<Caption>
 EXHIBIT
 NUMBER                                 DESCRIPTION
 -------                                -----------
<C>        <S>  <C>
10.22      --   Office Building Lease between Identix and Pacific Gulf
                Properties Inc., dated July 19, 2000, as amended December
                12, 2000
10.23(16)  --   Standard Industrial Commercial Multi-Tenant Lease between
                Identix and Vasona Business Park, dated December 8, 2000
10.24(17)  --   Compensation Continuation Agreement between Identix and
                James P. Scullion, dated January 5, 2000
10.25(18)  --   Employment Agreement between Identix and Oscar Pieper, dated
                April 26, 1999
10.26(18)  --   Employment Agreement between Identix and Grant Evans, dated
                April 26, 1999
10.27(18)  --   Employment Agreement between Identix and Yury Khidekel,
                dated April 26, 1999
10.28(18)  --   Employment Agreement between Identix and Yuri Shapiro, dated
                April 26, 1999
10.29      --   Compensation Agreement between ANADAC and Paul J. Bulger,
                dated May 11, 1999
10.30(18)  --   Consulting Agreement between Identix and John Major dated
                June 7, 2000
10.31      --   Employment Agreement between Identix and Daniel H.
                Dellegrotti, dated June 21, 2001
10.32(16)  --   Employment Agreement between Identix and Robert McCashin,
                dated October 19, 2000 and Option Agreement between Identix
                and Robert McCashin, dated October 19, 2000
10.33(19)  --   Employment Agreement between Identix and Erik E. Prusch,
                dated April 2, 2001
10.34(18)  --   Development, Support and Indemnification Agreement between
                Identix and International Technology Concepts, Inc., dated
                July 1, 2000
10.35(18)  --   Development Agreement between Identix and International
                Technology Concepts, Inc., dated January 14, 2000
10.36(18)  --   Form of Indemnification Agreement between Identix and
                certain of its officers
21.1       --   Subsidiaries of Identix
23.1       --   Consent of Independent Accountants
24.1       --   Power of Attorney
</Table>

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

 (1) Incorporated by reference to the December 16, 1998 Form 8-K.

 (2) Incorporated by reference to the registration statement on Form S-3 (no.
     333-82239), filed July 2, 1999.

 (3) Incorporated by reference to the September 26, 2000 Form 10-K.

 (4) Incorporated by reference to the February 14, 2001 Form 10-Q.

 (5) Incorporated by reference to the registration statement on Form S-3 (no.
     333-63306), filed June 19, 2001.

 (6) Incorporated by reference to Identix' registration statement 29-95551.

 (7) Incorporated by reference to Identix' registration statement 33-55074.

 (8) Incorporated by reference to the registration statement on Form S-8 (no.
     333-77803), filed May 5, 1999.

 (9) Incorporated by reference to the registration statement on Form S-8 (no.
     333-69141), filed December 17, 1998.

(10) Incorporated by reference to the December 31, 1996 Form 10-Q.

(11) Incorporated by reference to the December 13, 1996 Restated Form 10-Q.

(12) Incorporated by reference to the December 31, 1998 Form 10-Q.

(13) Incorporated by reference to the November 13, 1995 Form 10-Q.

(14) Incorporated by reference to the March 31, 1995 Form 10-Q.

(15) Incorporated by reference to the June 30, 1995 Form 10-K.

(16) Incorporated by reference to the February 14, 2001 Form 10-Q.

(17) Incorporated by reference to the March 31, 2000 Form 10-Q.
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<PAGE>   72

(18) Incorporated by reference to the November 26, 2000 Form 10-Q.

(19) Incorporated by reference to the March 5, 2001 Form 10-Q.

                                        71