the leader in digital imaging systems

T h e L e a d e r i n D i g i t a l I m a g i n g S y s t e m s

ANNUAL REPORT 2000

Brought to you by Global Reports

Hologic, Inc. is dedicated to developing and delivering

proprietary X-ray systems that incorporate direct-to-

digital radiographic imaging technology for both

women’s health and general radiographic applications.

Hologic’s business divisions include the Hologic

Systems division encompassing general and digital

radiography systems; Direct Radiography Corp., a wholly

owned subsidiary and manufacturer of DirectRay® state-

of-the-art, proprietary flat panel detectors; the Hologic

Bone Densitometry division; the LORAD® division, spe-

cializing in state-of-the-art breast imaging and minimally

invasive breast biopsy systems; and Fluoroscan

Imaging, a wholly owned subsidiary, manufacturing and

marketing state-of-the-art, low intensity, real time X-ray

imaging devices.

Company Overview


Dear Hologic Stockholder: Fiscal 2000 was a pivotal year for Hologic. The strate-

gic initiatives implemented in the last twelve months

have enabled Hologic to create a strong business

foundation on which the Company’s future growth

and operating results will be based. When we evaluated

Hologic’s performance for the year we asked ourselves

two questions. Are we in a stronger strategic position

than we were a year ago? Have we created a business,

and product offering, that address the many different

needs of the healthcare industry and our customers? We

strongly believe the answer to these questions is YES.

Hologic is a vastly different company today when compared to a

year ago. At the end of fiscal 1999, Hologic’s core businesses, bone

densitometry and mini C-arm imaging, had generated a slight loss due to

a softening in sales in both our domestic and international markets.

We also had completed the acquisition of Direct Radiography Corp.,

a subsidiary of Sterling Diagnostic Imaging. While this acquisition

provided Hologic with an immediate entry into the digital imaging

market, the Direct Radiography® operations were just emerging from

a research and development phase and would require a continued

investment to bring their products to commercialization. Our chal-

lenge for fiscal 2000 was three-fold: return our core business to

profitability, continue to invest in the commercialization of the

Direct Radiography products, and expand our product offerings in

order to create additional growth drivers.


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As we review fiscal 2000, we believe Hologic made considerable

progress in overcoming these challenges. The most significant

milestones of the year were:

♦ Hologic’s bone densitometry business was profitable in each

of the four quarters of fiscal 2000 due to the adoption of cost-

containment initiatives, the streamlining of operations, and the

introduction of the Delphi™ QDR® series bone densitometer. On

slightly decreased revenues, our bone densitometry business

generated pre-tax income of $3.3 million.

♦ During the year, we invested approximately $20 million in the devel-

opment and commercialization of products from Direct Radiography.

This investment resulted in the introduction of the EPEX™ and

RADEX™ direct-to-digital radiography systems, the introduction of

a non-tiled 14” x 17” digital detector, and the development of a

working prototype of an amorphous selenium digital mammography

detector built to optimize the DirectRay technology.

♦ On September 15, 2000, with the acquisition of the U.S. assets

of Trex Medical Corporation, Hologic completed the initial stage

of a growth initiative implemented over two years ago. The assets

acquired from Trex Medical include the LORAD mammography

and breast biopsy division and the general radiography division.

LORAD was particularly attractive to Hologic as it is recognized in

the market as a technology leader in both mammography and min-

imally invasive breast biopsy systems. These additional product

lines complement and strengthen Hologic’s position in diagnostic

imaging and women’s health, and provide additional opportunities

for growth through the development of digital products.

Financial Overview

Hologic’s operating results for fiscal 2000 reflect our investment in

the development and commercialization of Direct Radiography

digital products, as well as acquisition-related expenses related to

the purchase of the Trex Medical U.S. assets. For the year ended

September 30, 2000, Hologic reported a net loss $18,619,000, or

$1.22 per share, compared to a net loss of $3,747,000, or $.27 per

share, for fiscal 1999. Included in the net loss for fiscal 2000 are

acquisition-related, pre-tax charges of $13,322,000 which were

incurred in connection with Hologic’s purchase of the U.S. assets

of Trex Medical.

The acquisition-related pre-tax charges included the following:

♦ $5,000,000 for purchased in-process research and development

♦ $6,848,000 to increase reserves and assumed liabilities to their

fair value

♦ $974,000 related to the impact of the fair value write-up of acquired

inventory on equipment sold

♦ $500,000 for employee compensation

Excluding these acquisition-related charges, the current year net

loss was approximately $10,000,000, or $.66 per share. If we also

exclude Direct Radiography’s net losses of approximately $13,000,000,

or $.85 per share, Hologic’s core business would have reported net

income of approximately $3,000,000, or $.19 per share, for the fiscal

year ended September 30, 2000.

Revenues for the combined Hologic businesses increased to

$93,746,000 for the fiscal year ended September 30, 2000,

compared to revenues of $84,140,000 for fiscal 1999. The 11%

increase primarily relates to higher sales from Direct

Radiography and the addition of sales revenue from the new

mammography and general radiography businesses. Sales gener-

ated from our core business of bone densitometry and mini

C-arm imaging totaled $82,681,000 for the year, representing 88%

of our product revenue. Sales of our digital products contributed


$5,979,000 to total revenues, and sales from our mammography

and general radiography businesses contributed $5,086,000.

At September 30, 2000, Hologic’s total cash reserves were $22.8

million, a substantial decrease from our balance of $65.6 million at

the close of fiscal 1999. This change in our cash position reflects our

ongoing investment in the commercialization of our Direct Radiography

products and the acquisition of the U.S. assets of Trex Medical.

Although the acquisitions of Direct Radiography and Trex

Medical’s mammography and general purpose X-ray divisions have

initially been dilutive, we believe that the long-term growth potential

for the Company and its stockholders is significant. As we begin

fiscal 2001, we have created a base business that includes bone

densitometry, mammography and general X-ray imaging. We expect

these segments to generate approximately $200 million in revenues

in the current fiscal year and to experience growth at a rate of

approximately 5-10% annually. We remain committed to returning

our business to profitability, and have set a goal to achieve prof-

itability by the fourth quarter of fiscal 2001. The most significant

opportunity for growth will be driven by the sale of our direct-to-digital

flat panel detectors and digital imaging products. Our longer-term

goal is to position Hologic to generate sales of approximately $500

million within five years, with digital X-ray sales accounting for 50% of

revenue. Industry experts estimate the market for digital imaging

systems will reach $1 billion annually in the next several years.

Trex Medical Acquisition

The healthcare industry has changed dramatically since Hologic

entered the market in 1987. Hospitals, imaging centers, and

physicians are under considerable scrutiny to improve the quality

of patient care, while reducing costs and streamlining services. To

maintain a leadership position in this challenging and competitive

market, it is crucial for companies to offer customers a broad spec-

trum of technically advanced products that provide high quality and

efficient imaging, and that are designed to improve health outcomes

for patients worldwide.

Our continued investment in research and development has

enabled Hologic to offer its customers an extensive line of state-of-

the-art bone densitometers. While we have long been recognized as

a technology and market leader in the field of osteoporosis detec-

tion, our reputation in the medical imaging industry was of a single

modality company that competed in a niche market. In 1999, we

undertook a strategy that would transform Hologic from solely a

bone densitometry company to an advanced medical X-ray imaging

company. Our first milestone in this initiative was the 1999 acqui-

sition of Direct Radiography Corp., which provided Hologic with

an immediate entry into the rapidly growing digital imaging market.

The announcement of original equipment manufacturer (OEM)

agreements for the DirectRay direct-to-digital detector followed,

as did the introduction of two new, integrated, direct-to-digital

systems, the EPEX and RADEX. Commercial shipments of these

systems began in April and July 2000, respectively.

On September 15, 2000, we completed the initial stage of our

growth strategy with the acquisition of the U.S. assets of Trex

Medical Corporation. The transaction was valued at approximately

$56 million, comprised of $30 million in cash, a $25 million

secured note, and $1 million of acquisition-related fees and

expenses. The assets acquired include the LORAD mammography

and minimally invasive digital breast biopsy systems used to detect

breast cancer, and the general radiography division.


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The LORAD brand of mammography and breast biopsy systems

has long been recognized as a technology leader. LORAD’s mam-

mography systems incorporate the High Transmission Cellular

(HTC™) Imaging System, one of the most effective contrast

improvements in 20 years of breast imaging. The patented HTC

technology reduces X-ray scatter in both the x and y dimensions,

delivering superior contrast and resolution without an increase in

dose. The LORAD minimally invasive breast biopsy systems offer

women a less traumatic option to open surgical breast biopsy.

Minimally invasive breast biopsies are typically done on an out-

patient basis with less expense than open surgery.

Since the acquisition, we have focused on streamlining the Trex

Medical operations and integrating their business with Hologic’s.

We have taken steps to eliminate unprofitable product lines, and

have recommitted to enhancing and strengthening distribution

channels for these products. Recently, the LORAD mammography

division was awarded a two-year imaging contract with Consorta,

Catholic Resource Partners. This contract covers the purchase of

Hologic’s radiographic and LORAD’s mammographic product

lines. Consorta currently represents over 280 acute care hospitals in

the United States.

The mammography and general radiography operations of Trex

Medical complement and strengthen Hologic’s position in the X-ray

imaging market. Through the acquisition of Direct Radiography’s

digital detector capability and Trex Medical’s product lines, espe-

cially the mammography systems, we have established a technology

platform to serve as a foundation for our future research and devel-

opment efforts. There is a significant opportunity for growth

through the development of new X-ray systems that incorporate

our direct-to-digital radiographic imaging technology for both

women’s health and general radiography applications. We believe

that the future of imaging is digital, and we remain committed to

bringing a comprehensive line of direct-to-digital X-ray imaging

systems to our customers.

Distribution

Our ability to achieve a position of leadership in the highly com-

petitive imaging market relies not only on product quality, but

also on our distribution strategy. The dynamics of selling to hos-

pitals, imaging clinics and private practices has changed in recent

years. Large purchasing entities, such as managed care organiza-

tions, are becoming more commonplace, and customers are seeking

to consolidate supply partners in an effort to minimize time spent

on purchasing equipment.

Hologic currently offers its comprehensive line of imaging

systems through the combination of a direct sales force and an

extensive domestic and international distributor network. The

Hologic direct sales force is comprised of over 30 individuals,

each with considerable sales expertise in the radiology market.

Another important component of our sales infrastructure are

our national account representatives, who focus on securing

purchasing contracts with large group purchasing organiza-

tions. Recent contract awards include a two-year contract with

Consorta, Catholic Resource Partners; a purchasing contract

from the U.S. Department of Veterans Affairs; a sole source,

multi-year agreement with Novation, the supply company of

VHA Inc. and the University Health System Consortium;

and renewal of our purchasing agreement with AmeriNet.

The Consorta agreement covers the purchase of Hologic’s

radiographic and LORAD’s mammographic product lines. The


award from the U.S. Department of Veterans Affairs relates

to Hologic’s direct-to-digital radiographic systems and related

equipment for VA medical centers and other government

healthcare facilities. The Novation and AmeriNet agreements

relate to the purchase of Hologic’s bone densitometry systems.

Hologic also maintains an extensive network of distributors both

domestically and abroad. In the U.S., this network is primarily

responsible for our mammography and general radiography

system sales. These distributors have built a strong reputation by

providing quality customer service and support. We will continue

to leverage this distribution channel to expand the placement of all

our products into new hospital and radiology sites. We believe our

sales infrastructure will be instrumental in our ability to emerge as

a leading provider of X-ray imaging systems.

Annual Meeting of the Radiological Society of

North America

From November 26 – November 30, 2000, Hologic attended the

annual meeting of the Radiological Society of North America. The

conference’s theme, “Welcome to the New Millennium”, and

Hologic’s new theme, “Picturing Life™” , provided the perfect

opportunity for us to launch our expanded product line and high-

light our new positioning in the imaging marketplace. We used

over 14,000 square feet of exhibit space to highlight new products

and technologies as well as existing products from each of our

business segments.

We believe our participation in, and success at this tradeshow was

one of our most notable achievements. Each of the new product

lines showcased received considerable praise from attendees.

Traffic in the Hologic booths was at an all-time high, as customers

and competitors sought to learn more about our transition from

solely a bone densitometry manufacturer to a leading provider of

comprehensive radiographic solutions. If the feedback received at

this show is a barometer for the upcoming year, we are excited

about our prospects for fiscal 2001.

Outlook

In each of our business segments we maintain a position of tech-

nological leadership. Direct Radiography’s amorphous selenium flat

panel detector is the only true direct-to-digital technology avail-

able in the market. Hologic’s QDR technology is unmatched in

bone densitometry. LORAD’s HTC technology provides superior

image contrast and quality in breast cancer detection. Fluoroscan’s

Premier™ Mini C-arm Imaging System, with the smallest focal spot

in the industry, is recognized as a premium imager. We face a

challenging year ahead. However, our key business assets remain

technological leadership and the ability to pioneer new markets.

These strengths should enable Hologic to be a significant partici-

pant in the rapidly growing digital market.

Thank you for your continued confidence and support.

Sincerely,

S. David Ellenbogen Steve L. Nakashige

Chairman and CEO President and COO


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FAQ: Sales of your bone densitometry products

have slowed in the past two years. What are the

drivers that will positively influence this segment of

your business going forward?

Although we have experienced a softening in sales

for bone densitometers in the past two years, we

still see opportunity for growth in this market,

which we are estimating at approximately 5% per

year. We believe that the demand for our bone

densitometry systems will continue to be driven

by an increase in the number of available therapies

to treat osteoporosis, the increase in the at-risk

population, and broader reimbursement coverage

for bone density testing.

The demographics supporting the need for bone

density examinations are staggering. Osteoporosis

and bone-related disorders affect approximately 28

million Americans, the majority of whom are

women. Of the women at risk, approximately 75%

remain undiagnosed and untreated. We believe

there has been a rise in demand for bone density

examinations due to heightened awareness among

physicians and patients that osteoporosis is a

preventable and treatable condition. This greater

understanding of the disease is attributable, in large

part, to the marketing programs implemented by

the pharmaceutical companies to create a demand

for their osteoporosis drug therapies. It is estimated

that the sale of osteoporosis related therapies in

1999 exceeded $2.5 billion and is expected to

exceed $9 billion annually by 2009. Hologic’s family

of bone densitometers are an integral component of

determining a patient’s risk of fracture, evaluating a

patient’s need for therapy and helping a physician

monitor a patient’s responsiveness to therapy.

Hologic has remained at the forefront of technical

innovation with a broad array of bone densitometers.

Our extensive offering of bone densitometry systems

addresses the various needs of the research, clinical

and primary care market segments. Our systems are

used to measure bone density to assist physicians in

the diagnosis and monitoring of osteoporosis and

other metabolic bone disorders.

In November 1999, we introduced our latest

technical innovation, the Delphi QDR series

bone densitometer, and began commercial shipments in March

2000. The Delphi series of bone densitometers offers physicians

the ability to simultaneously assess two of the strongest risk factors

for osteoporotic fracture: existing vertebral fractures and low bone

density. Utilizing high-resolution fan-beam X-ray imaging technology,

Delphi provides Instant Vertebral Assessment™ (IVA). IVA permits

rapid visual interpretation of vertebral status in a clinical setting,

and subsequent improvement in fracture risk assessment. The

combination of a pre-exisiting vertebral fracture and low bone

mass is far more predictive of risk of a future fracture than low

bone mineral density (BMD) alone. The combination of BMD

assessment and vertebral deformity assessment significantly

improves the clinician’s ability to accurately identify those that can

benefit most from therapy.

TM


At the 2000 annual meeting of the Radiological Society of North

America, we introduced a supine lateral capability for the Delphi

QDR series. For operator convenience and patient comfort, the

Delphi detector C-arm automatically rotates into position for

supine lateral scanning at the push of a button. With this new

capability, physicians are now able to perform all bone mineral

density and IVA examinations without patient repositioning.

The Delphi series complements our QDR 4500™ series of bone

densitometers. The QDR 4500 series is comprised of four modular

systems that incorporate our fan-beam technology. The product

series is comprised of the QDR 4500C™ clinical bone densitometer,

the QDR 4500SL™, the QDR 4500W™ and the QDR 4500A™. We

also offer customers the QDR 4000™ pencil-beam densitometer

for the price sensitive segment of the clinical market.

Rounding out our bone densitometry product

offering is the Sahara® Clinical Bone Sonometer.

Sahara is a portable, low-cost ultrasound system that provides

physicians with an easy and economical way to assess a patient’s

bone status based on an ultrasound measurement of the heel.

The office-based Sahara exam requires a patient to rest her foot

comfortably in the device for a non-invasive, ultrasound measure-

ment of the heel that is performed at the touch of a single button.

We believe Sahara’s user-friendly, ultrasound technology (no

ionizing radiation) and economical price will make this a desirable

system for the primary care physician who is limited on space

and capital.

With supine lateral BMD, Delphi offers more clinical options for vertebral assessment thanany other bone densitometer.


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FAQ: What is the estimated size of the

digital imaging market?

The market for digital image capture technology is

considerable. There are approximately 100,000

X-ray units installed in hospital radiology depart-

ments worldwide and an additional 100,000 units

installed in alternate care sites (i.e. clinics, imaging

centers, and private practices). Currently, the world-

wide replacement market is estimated to be

approximately 13,000 new radiographic systems

per year. We believe that as the benefits of digital

imaging become more widely known, the demand

for digital imaging products, such as our EPEX,

RADEX, and digital upgrade systems, should

increase dramatically. Industry analysts are project-

ing that by 2005, the market for digital radiography

products will be over $1 billion annually. Hologic

expects to be a significant participant in this rapidly

expanding market.

In the past decade, the use of digital technology has

become a standard component of business and com-

merce. The use of Picture, Archive and Communication

Systems (PACS) is continuing to accelerate, driving the

need for digital technologies like Direct Radiography

direct-to-digital systems. For hospitals to remain

competitive and meet the needs of their patients, they

will need to embrace this digital conversion in order to

achieve their goal of being all-informational and

all-sharing. Until digital imaging is more widely

embraced, hospitals will be unable to fully realize the

potential cost savings and improvements in both patient

care and productivity possible through digital technology.

Hologic acquired Direct Radiography

Corp. in June 1999. Direct Radiography

manufactures digital X-ray systems for medical imaging and

non-destructive testing applications. The Direct Radiography

proprietary flat panel technology, DirectRay, converts X-ray energy

directly into electrical signals, thereby producing radiographic

images in seconds that can be electronically displayed, transferred

and stored. The unique signal profile produced by DirectRay

technology results in high quality digital images across a wide range

of general radiographic applications. Hologic offers the DirectRay

digital technology in several forms: as fully integrated radiographic

systems, as an image capture upgrade for certain X-ray equipment,

and as a digital component for OEMs to incorporate into their

own equipment.

The Hologic RADEX system is an entry-level generalradiography system with a C-arm design thatallows considerable flexibility to meet the variety of needs of an outpatient department.


In the digital imaging field, it is generally recognized that Direct

Radiography offers superior image quality compared to computed

radiography. However, it was also thought that digital radiography

was more expensive than computed radiography, thereby limiting

its adoption. A recent study completed at Mount Auburn Hospital,

Cambridge, MA, has shown that the conventional cost perception

is wrong. Using time motion studies, Mount Auburn found that

Hologic’s Direct Radiography systems were three to four times

faster than computed radiography systems for conventional

projection radiography, thereby significantly reducing the cost of

ownership. This information is now being widely distributed to the

trade press and we are developing on-line total cost of ownership

programs to show that Direct Radiography can be a more cost-

effective digital imaging alternative.

Hologic’s offering of direct-to-digital fully integrated radiographic

systems is currently comprised of the EPEX and RADEX general

radiographic systems and the DR 1000C dedicated chest radiography

system. The EPEX and RADEX systems were introduced in

November 1999, four short months after our acquisition of Direct

Radiography Corp. EPEX is designed specifically for a full range of

general radiography examinations. The RADEX system is designed

for ambulatory and outpatient general radiography examinations.

We began commercial shipments of the RADEX and EPEX systems

in April and July 2000, respectively. The DR 1000C is a dedicated

chest radiography system configured to provide a wide range of

vertical motion, allowing upright chest radiography of patients

ranging from a small child to a large adult.

Hologic also offers its customers a cost effective way to convert

existing conventional film based X-ray equipment to incorporate

our DirectRay technology. Hologic’s digital upgrade system provides

a replacement “Bucky” assembly specifically designed for the

DirectRay detector and related control equipment. It is installed in

place of the existing “Bucky” mechanism in the examination table,

enabling the conversion to a direct-to-digital system.

At the November 2000 annual meeting of the Radiological Society

of North America, we introduced Inverse Topography™, a new soft-

ware option for our digital radiography systems. Inverse Topography

capitalizes on the dynamic range of the DirectRay detector and

enables our digital radiography systems to optimize the appearance

of both soft tissue and bone in the same hard or soft copy image.

This software was well received by customers at the tradeshow.

We believe that our new digital radiography systems, which offer

enhanced productivity capabilities, ease-of-use, electronic image

format and wide dynamic range, represent a new industry

standard for image capture.

The heart of the DirectRay system is the detector array. This cutawayview shows the amorphous selenium coating placed over the thin-filmtransistor matrix and the associated readout electronics that producetrue direct-to-digital images.

EPEX is a fully integrated imaging system for general-purpose radiology utilizing our propri-etary DirectRay technology. EPEX offers highthroughput, superior image quality and long-term reliability.


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FAQ: Why was Hologic interested in entering the

mammography market?

Our key business assets remain technological leader-

ship and the ability to pioneer new markets. The

addition of the LORAD mammography business

reinforces our strong focus on women’s health

issues, which initially began with osteoporosis and

has now expanded to breast cancer assessment.

According to the American Cancer Society, breast

cancer is the most common cancer among women.

Breast cancer is the second leading cause of death

in women, exceeded only by lung cancer. In recent

years, the death rates from breast cancer have

declined, particularly among young women, due to

earlier detection and better treatments. We are

committed to expanding our contributions to this

field through continued research and development

activities which are currently focused on introducing

a digital mammography system.

For more than a decade, the LORAD brand of

mammography and breast biopsy systems has been

synonymous with the best in breast imaging. The

LORAD brand has set a standard for performance and

image quality in this highly competitive field. LORAD

offers a comprehensive portfolio of mammography

and breast biopsy systems providing breast imaging

solutions for mammography suites, breast care centers,

women’s health centers and imaging clinics worldwide.

As breast imaging continues to expand, particularly in

the area of digital technology, we are poised to capitalize

on our leadership position.

LORAD’s mammography systems incorporate

the High Transmission Cellular Imaging System,

one of the most effective contrast improvements in 20 years of

breast imaging. The patented HTC technology reduces X-ray scatter

in both the x and y dimensions, delivering superior contrast and

resolution without an increase in dose. The minimally invasive

breast biopsy systems offer women a less traumatic option to open

surgical breast biopsy.

Our portfolio of mammography systems is currently comprised of

the LORAD M-IV and the LORAD Elite. These systems offer a flex-

ible upgrade path for customers who may want to later include

stereotactic biopsy and digital imaging. The LORAD M-IV is the

R

The LO RAD M-IV provides superior imagequality while offering a flexible upgradepath for customers to later include stereo-tactic biopsy and digital imaging.


world’s premier breast imaging system. Customized tube technology,

featuring bi-angular anode and high-speed rotation, give the M-IV

its superb image quality. The benefits of this technology include

reduced exposure time for the patient, and improved imaging on large

and small focal points. The M-IV’s automation and connectivity

also efficiently deliver high throughput with limited hands-on time.

Dependable and simple to operate, the LORAD Elite offers a mix

of precision and value. The Elite system offers customershigh image

quality, reliability, high throughput, and cost-effective ownership.

The LORAD Elite’s flexible upgrade path allows the system to

continue to meet our customers changing needs.

The minimally invasive breast biopsy systems from LORAD offer an

alternative to open surgical biopsy, which is generally performed

under general anesthesia. Minimally invasive biopsies are typically

done on an outpatient basis under local anesthesia and are less

expensive than open surgery.

Early on LORAD focused its research and development activities in

the area of digitally guided breast biopsy systems. These systems have

become an industry standard for minimally invasive breast biopsy.

We currently offer two upright biopsy systems, which are used in

conjunction with our mammography systems. In addition, for

physicians that perform a significant number of biopsies, we offer

a dedicated, prone biopsy system called the LORAD MultiCare™

Breast Biopsy System. This system is used with LORAD’s digital

“spot” mammography system, which enables a doctor to position

the sampling device at the site of the suspi-

cious lesion. When performing a biopsy with

any LORAD biopsy system, a doctor has a

choice of tissue-sampling devices, which may

not be manufactured by us. Our biopsy sys-

tems offer customers fast, accurate, lesion

imaging while ensuring patient comfort.

We will continue to invest in the development of new systems and

applications to reaffirm our position of leadership in this impor-

tant market. Recent introductions include software and hardware

upgrades for our M-IV mammography systems and MultiCare

biopsy table. We are also investing considerable time and resources

on the development of a selenium-based mammography digital

detector incorporating our DirectRay technology as well as a fully

integrated digital mammography system.

One of LO RAD’s most significant developments,the HTC technology delivers superior contrastand resolution without an increase in X-ray dose– particularly with denser breast tissue.

Found in over 2,000 installations worldwide,the LO RAD MultiCare Breast Biopsy System isdesigned to combine maximum patient comfortwith real-world utility.


12

FAQ: What benefit do you expect to receive from

the Profile™ C-arm Imaging System that you

recently introduced?

The addition of the Profile standard C-arm system

to the Fluoroscan product line should help strengthen

our presence in the orthopedic market, enable us

to leverage our existing sales channels, and

enhance our ability to pursue larger national

accounts as a single source C-arm and mini C-arm

provider. We also believe there is opportunity for

marketshare growth for Fluoroscan since the stan-

dard C-arm market is several times larger than the

mini C-arm market.

Fluoroscan pioneered the

digital mini C-arm imaging

market with its introduction of a small, real-time imaging

system that enables physicians to perform minimally

invasive surgery on patient extremities (i.e. hand,

wrist, knee, foot, ankle, etc.). By utilizing a real-time

imaging system, physicians are able to make smaller

incisions, which significantly help reduce patient

trauma and result in quicker recovery times. Our

flagship mini C-arm product is the

Premier™system, which offers physi-

cians superior image resolution, ease-of-use, and

Ethernet and DICOM compatibility. This system

complements the OfficeMate™ Mini C-arm (designed

specifically for physician offices), which was introduced

in 1997.

In November 2000, we introduced the Profile nine-inch field-of-

view C-arm system. We are selling this system in the U.S. as the

exclusive distributor for Technix SpA of Italy. The Profile features

a simplified user interface, expanded image storage and easy

mobility for general orthopedic applications, pain management

and general surgery. The Profile system builds on our mini C-arm

offerings and provides Fluoroscan with immediate entry into the

standard C-arm market.

Premier’s unique .045 mm focal spot X-ray tube, the smallest in the mini C-arm industry, provides clear resolution and detailed imagesvia a dual mode six/four inch image intensifier.


FAQ: How will Hologic utilize the general radiog-

raphy division acquired from Trex Medical?

The general radiography division strengthens

our position in imaging by enabling us to offer a

wide breadth of imaging solutions to private

practices, hospitals and imaging centers. Looking

ahead, we are excited about the application of

our digital research and development projects

for these radiographic systems.

Hologic has expanded its product line through the addi-

tion of conventional X-ray systems acquired as part of

the Trex Medical Corporation transaction. The general

radiographic systems are rich with features and

ergonomically designed to meet the different needs of

our customers. The scope of these products encom-

passes basic X-ray systems that are generally used in

outpatient facilities as well as more sophisticated and

expensive X-ray systems typically used in hospitals and

clinics. For example, the ER system is designed to meet

the heavy-duty demands of a hospital emergency room,

while the General Radiographic System is appropriate

for any setting.

We have also added digital radiographic/fluoroscopic (R/F) systems,

which provide real-time image capture. R/F systems are often used

for diagnostic gastrointestinal procedures to image the progress of

a radiopaque solution (typically barium) as it travels through the

digestive tract.

At the November 2000 annual meeting of the Radiological Society

of North America, we highlighted the Precision Movement

Tomography (PMT) fully integrated radiographic system. The system

is designed for the busy radiology department, functioning as a

general-purpose radiographic system with tomography procedure

capabilities. From high patient caseload situations to emergency

room use, technologists have the ability to switch procedures

quickly and easily. This system was well received at the tradeshow

due to its high quality images and flexibility.

Designed for the busy radiology department,the Precision Movement Tomography system isa general-purpose radiographic system withtomography procedure capabilities.


14

Our historical selected financial data has been retroactively restated to reflect the merger with Fluoroscan in a pooling-of-interests

transaction in August 1996. In June 1999, we acquired Direct Radiography Corp. and in September 2000 we acquired the U.S. assets

of Trex Medical. The purchase accounting method under APB No. 16 was used for both of these transactions. Included in the 2000

financial data are acquisition-related pre-tax charges of $13.3 million related to the Trex Medical acquisition.

Fiscal Years Ended September 28, September 27, September 26, September 25, September 30,(In thousands, except per share data) 1996 1997 1998 1999 2000

CONSOLIDATED STATEMENT OF OPERATIONS DATA:

Revenues:

Product sales $ 88,201 $102,781 $111,498 $ 81,737 $ 90,864

Other revenue 3,390 3,908 4,066 2,403 2,882

91,591 106,689 115,564 84,140 93,746

Costs and Expenses:

Cost of product sales 41,253 47,492 55,891 50,333 63,604

Research and development 7,283 8,527 9,778 12,664 22,178

Selling and marketing 16,504 19,448 28,589 19,658 23,882

General and administrative 9,879 8,827 10,452 10,963 16,441

Acquisition expenses 1,949 — — — —

76,868 84,294 104,710 93,618 126,105

Income (loss) from operations 14,723 22,395 10,854 (9,478) (32,359)

Interest income 2,583 5,346 5,998 4,204 3,567

Other expense (249) (172) (664) (548) (227)

Income (loss) before income taxes 17,057 27,569 16,188 (5,822) (29,019)

Provision (benefit) for income taxes 5,700 9,840 5,800 (2,075) (10,400)

Net income (loss) $ 11,357 $ 17,729 $ 10,388 $ (3,747) $(18,619)

Net income (loss) per share:

Basic $ .97 $ 1.37 $ .78 $ (.27) $ (1.22)

Diluted $ .91 $ 1.30 $ .75 $ (.27) $ (1.22)

Weighted average number of

shares outstanding:

Basic 11,698 12,986 13,259 13,950 15,320

Diluted 12,524 13,672 13,766 13,950 15,320

CONSOLIDATED BALANCE SHEET DATA:

Working capital $ 97,199 $112,869 $ 99,633 $ 89,823 $ 53,022

Total assets 123,107 144,667 172,597 175,770 219,655

Long-term debt — — — — 25,000

Total Stockholders’ equity 107,272 126,767 140,382 150,422 131,572


Board of Directors

S. David EllenbogenChairman and Chief Executive OfficerHologic, Inc.

Steve L. NakashigePresident and Chief Operating OfficerHologic, Inc.

Jay A. SteinExecutive Vice President and Chief Technical OfficerHologic, Inc.

Irwin JacobsRetired President, Dataviews, Inc.

Dr. William A. PeckExecutive Vice Chancellor forMedical Affairs and Dean Washington University School of Medicine

Gerald SegelRetired Chairman of the BoardTucker Anthony Incorporated

Elaine UllianPresident and Chief Executive OfficerBoston Medical Center

Executive Officers

S. David EllenbogenChairman and Chief Executive Officer

Steve L. NakashigePresident and Chief Operating Officer

Jay A. SteinExecutive Vice President andChief Technical Officer

Glenn P. MuirExecutive Vice President and Chief Financial Officer

John W. CummingSenior Vice President and President, LORAD

Mark A. DuerstSenior Vice President and General Manager, International Sales

Thomas J. UmbelSenior Vice President, North American Sales

Corporate Officers

David J. BradyVice President, Human Resources

Jean ChaintreuilVice President, European Operations

David A. DavisVice President, Marketing

Roman JanerVice President, LORAD Business Development

Robert H. LavalleeVice President, Corporate Controller andChief Accounting Officer

John MacLennanVice President and General Manager, Fluoroscan

David RudzinskyVice President, Information Systems and Chief Information Officer

Peter SoltaniVice President and General Manager, Direct Radiography Corp.

Eric von StettenVice President and General Manager, Osteoporosis Assessment

Robert B. YoungVice President, Operations

Irving ZuckerVice President, North American Sales

Common Stock Listing

The Company’s Common Stock is listed on theNasdaq National Market under the trading symbol “HOLX”.

Visit us on the Web

www.hologic.com

Form 10-K

A copy of the Company’s Form 10-K, as filed with the Securities and ExchangeCommission, is included with this report.

Annual Meeting of Stockholders

The Annual Meeting of Stockholders is scheduled to be held at Hologic, Inc., 35 Crosby Drive, Bedford, Massachusetts at 10:00 AM on March 6, 2001.

Legal Counsel

Brown, Rudnick, Freed & Gesmer, LLP

One Financial CenterBoston, Massachusetts 02111

Registrar and Transfer Agent

American Stock Transfer & Trust Company

59 Maiden LaneNew York, New York 10007

Independent Public Accountants

Arthur Andersen LLP

225 Franklin StreetBoston, Massachusetts 02110

The Hologic logo is one of our service marks. ACCLAIM,Delphi, Direct Radiography, DirectRay, Elite, EPEX, Fluoroscan,HTC, IVA, Inverse Topography, LORAD, MultiCare, Officemate,Premier, Picturing Life, Profile, QDR, RADEX and Saharaare trademarks or registered trademarks of Hologic orHologic subsidiaries in the United States and other countries.

We have made forward-looking statements in this document that are subject to risks and uncertainties.Forward-looking statements include statements of our plans, objectives, expectations and intentions. Also,when we use words such as “may,” “will,” “should,” “could,” “would,” “expects,” “anticipates,” “believes,”“plans,” “intends,” “estimates,” “is being” or “goal” or other variations of these terms or comparable ter-minology, we are making forward-looking statements. These statements, which include statements relatingto our projections or expectations of future financial results of each of our product lines and our businessas a whole, the timing and availability of products under development, our ability to market such productsonce developed, the anticipated growth or expansion of the markets for our products, and other mattersare subject to known and unknown risks and uncertainties that could cause actual results to differ materi-ally from those anticipated. You should note that many factors could affect our future financial results andcould cause these results to differ materially from those expressed in our forward-looking statements. Thesefactors include without limitation those discussed in the risk factors set forth in Item 7 of our Form 10-K filedwith the Securities and Exchange Commission and included in this Report. The forward-looking statementscontained in this report speak only as of the date of this report. We expressly disclaim any obligation orundertaking to release publicly any updates or revisions to any forward-looking statement contained in thisreport to reflect any change in our expectations or any change in events, conditions or circumstances onwhich any of our forward-looking statements are based.


Corporate Headquarters: Hologic, Inc.

35 Crosby Drive

Bedford, MA 01730

Tel: 781-999-7300

www.hologic.com

Benelux: Hologic Europe N.V.

Horizon Park

Leuvensesteenweg

510, Bus 31

1930 Zaventem

Belgium

Tel: 32-2-711-4680

France: Hologic France S.A.

Parc du Moulin de Massy

35 Rue du Saule Trapu

F-91882 Massy Cedex

France

Tel: 33-1-60-13-39-38

United States: Fluoroscan Imaging Systems, Inc.

650B Anthony Trail

Northbrook, IL 60062

Tel: 847-564-5400

www.fluoroscan.com

Direct Radiography Corp.

600 Technology Drive

Newark, DE 19702

Tel: 302-631-2700

www.directradiography.com

LORAD

36 Apple Ridge Road

Danbury, CT 06810

Tel: 203-207-4500

www.loradmedical.com

Hologic Systems Division

300 Foster Street

Littleton, MA 01460

Tel: 978-486-9681

16Design: MediaConcepts Corporation, Assonet, MA

www.mediaconceptscorp.com


Hologic, Inc.

35 Crosby Drive

Bedford, Massachusetts 01730®


<TYPE>EX-13<SEQUENCE>2<FILENAME>0002.txt<DESCRIPTION>REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AND CONSOLIDATED FINANCIAL STATEMENTS.<TEXT>

<PAGE>

Report of Independent Public Accountants

To Hologic, Inc.:

We have audited the accompanying consolidated balance sheets of Hologic, Inc. (aDelaware corporation) and subsidiaries as of September 25, 1999 and September30, 2000, and the related consolidated statements of operations, stockholders'equity and cash flows for each of the three years in the period ended September30, 2000. These financial statements are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on these financialstatements based on our audits.

We conducted our audits in accordance with auditing standards generally acceptedin the United States. Those standards require that we plan and perform the auditto obtain reasonable assurance about whether the financial statements are freeof material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for ouropinion.

In our opinion, the consolidated financial statements referred to above presentfairly, in all material respects, the consolidated financial position ofHologic, Inc. and subsidiaries as of September 25, 1999 and September 30, 2000,and the results of their operations and their cash flows for each of the threeyears in the period ended September 30, 2000, in conformity with accountingprinciples generally accepted in the United States.

Boston, MassachusettsNovember 15, 2000 /s/ Arthur Andersen LLP

F-1

<PAGE>

HOLOGIC, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In Thousands)

<TABLE><CAPTION>ASSETS September 25, September 30,

<S> <C> <C>Current Assets: Cash and cash equivalents $ 36,508 $ 22,778 Short-term investments 26,170 - Accounts receivable, less reserves of $3,480 and $7,923, respectively 28,056 50,580 Inventories 17,596 39,706 Prepaid expenses and other current assets 6,841 3,041 -------- -------- Total current assets 115,171 116,105 -------- --------Property and Equipment, at cost: Land 10,002 12,203 Buildings and improvements 28,812 35,919 Equipment 15,981 21,568 Furniture and fixtures 3,224 3,918 Leasehold improvements 605 636 -------- -------- 58,624 74,244 Less--Accumulated depreciation and amortization 8,154 11,450 -------- -------- 50,470 62,794 -------- --------Intangible Assets: Developed technology and know-how - 11,800 Assembled workforce - 3,000 Goodwill and other intangible assets, net - 4,337 -------- -------- - 19,137 -------- --------Deferred Income Taxes, net 6,225 16,809Other Assets, net 3,904 4,810

Total assets $175,770 $219,655 ======== ========Current Liabilities: Line of credit $ 1,103 $ 388 Accounts payable 6,063 16,414 Accrued expenses 10,103 32,639 Deferred revenue 8,079 13,642 -------- -------- Total current liabilities 25,348 63,083 -------- --------Note Payable (Note 3b) - 25,000

Commitments and Contingencies (Notes 9 and 14)

Stockholders' Equity: Preferred stock, $0.01 par value- Authorized--1,623 shares Issued--0 shares - - Common stock, $0.01 par value- Authorized--30,000 shares Issued--15,303 and 15,419 shares, respectively 153 154 Capital in excess of par value 109,624 110,233 Retained earnings 42,440 23,821 Accumulated other comprehensive loss (1,331) (2,172) Treasury stock, at cost--45 shares in 1999 and 2000 (464) (464) -------- -------- Total stockholders' equity 150,422 131,572 -------- -------- Total liabilities and stockholders' equity $175,770 $219,655 ======== ========</TABLE>

The accompanying notes are an integral part of these consolidated financialstatements.

F-2<PAGE>


Consolidated Balance Sheets

(In Thousands)

<TABLE><CAPTION> Years Ended -------------------------------------------- September 26, September 25, September 30, 1998 1999 2000<S> <C> <C> <C>Revenues: Product sales $111,498 $81,737 $ 90,864 Other revenue 4,066 2,403 2,882 -------- ------- --------

115,564 84,140 93,746 -------- ------- --------Costs and Expenses: Cost of product sales 55,891 50,333 63,604 Research and development 9,778 12,664 17,178 In-process research and development - - 5,000 Selling and marketing 28,589 19,658 23,882 General and administrative 10,452 10,963 16,441 -------- ------- --------

104,710 93,618 126,105 -------- ------- --------

Income (loss) from operations 10,854 (9,478) (32,359)

Interest Income 5,998 4,204 3,567

Other Expense (664) (548) (227) -------- ------- --------

Income (loss) before provision (benefit) for income taxes 16,188

( , ) ( , )

Provision (Benefit) for Income Taxes 5,800 (2,075) (10,400) -------- ------- --------

Net income (loss) $ 10,388 $(3,747) $(18,619) ======== ======= ========Net Income (Loss) per Share: Basic $ 0.78 $ (0.27) $ (1.22) ======== ======= ======== Diluted $ 0.75 $ (0.27) $ (1.22) ======== ======= ========

Weighted Average Number of Shares Outstanding: Basic 13,259 13,950 15,320 ======== ======= ======== Diluted 13,766 13,950 15,320 ======== ======= ========</TABLE>


F-3<PAGE>


Consolidated Statements of Stockholders' Equity

(In Thousands)

<TABLE><CAPTION>

Common Stock Capitalin Number of $0.01 Excessof Retained Shares Par Value ParValue Earnings<S> <C> <C> <C> <C>Balance, September 27, 1997 13,111 $ 131 $91,668 $ 35,799 Exercise of stock options 229 2 1,307 - Stock issued for employee compensation 9 -

Issuance of common stock under employee stock purchase plan 17 - 278 - Issuance of common stock under 401(k) plan 12 1 291 - Purchase of treasury stock - - - - Compensation for grants of stock options to nonemployees - - 133 - Tax benefit from stock options exercised - - 1,196 - Net income - - - 10,388 Translation adjustments - - - - ------ ----- -------- --------

Comprehensive income

Balance, September 26, 1998 13,378 134 95,100 46,187 Exercise of stock options 30 - 131 - Stock issued for employee compensation 11 - 144 - Issuance of common stock under employee stock purchase plan 27 - 163 - Issuance of shares related to acquisition 1,857 19 13,910 - Compensation for grants of stock options to nonemployees - - 133 - Tax benefit from stock options exercised - - 43 - Net loss - - - (3,747) Translation adjustments - - - - ------ ----- -------- --------

Comprehensive loss

Balance, September 25, 1999 15,303 153 109,624 42,440 Exercise of stock options 13 - 49 - Stock issued for employee compensation 12 - 61 - Issuance of common stock under employee stock purchase plan 91 1 499 - Net loss - - - (18,619) Translation adjustments - -

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

Comprehensive loss

Balance, September 30, 2000 15,419 $ 154 $110,233 $ 23,821 ====== ===== ======== ========

Accumulated Treasury Stock Other Total Number of ComprehensiveStockholders' Comprehensive Shares Amount Income (Loss)Equity Income (Loss)

Balance, September 27, 1997 - $ - $ (831) $126,767 - Exercise of stock options - - - 1,309 - Stock issued for employee compensation - - - 227 - Issuance of common stock under employee stock purchase plan - - - 278 - Issuance of common stock under 401(k) plan - - - 292 - Purchase of treasury stock 45 (464) (464) Compensation for grants of stock options to nonemployees - - - 133 - Tax benefit from stock options exercised - - - 1,196 - Net income - - - 10,388 10,388 Translation adjustments - - 256 256 256 ------ ----- ------- -------- --------

Comprehensive income $ 10,644 ========

Balance, September 26, 1998 45 (464) (575) 140,382 - Exercise of stock options - - - 131 - Stock issued for employee compensation - - - 144 - Issuance of common stock under employee stock purchase plan - - - 163 -

q13,929 - Compensation for grants of stock options to nonemployees - - - 133 - Tax benefit from stock options exercised - - - 43 - Net loss - - - (3,747) (3,747) Translation adjustments - - (756) (756) (756) ------ ----- ------- -------- --------

Comprehensive loss $ (4,503) ========

Balance, September 25, 1999 45 (464) (1,331) 150,422 - Exercise of stock options - - - 49 - Stock issued for employee compensation - - - 61 - Issuance of common stock under employee stock purchase plan - - - 500 - Net loss - - - (18,619) (18,619) Translation adjustments - - (841) (841) (841) ------ ----- ------- -------- --------

Comprehensive loss $(19,460) ========

Balance, September 30, 2000 45 $(464) $(2,172) $131,572 ====== ===== ======= ========</TABLE>


F-4<PAGE>


Consolidated Statements of Cash Flows

(In Thousands)

<TABLE><CAPTION>

--------------------------------------------- September 26, September 25, September 30, 19981999 2000<S> <C> <C> <C>Cash Flows from Operating Activities: Net income (loss) $10,388 $ (3,747) $(18,619) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities- Depreciation and amortization 1,851 3,474 4,420 Deferred income taxes (2,500) (2,128) (10,546) Acquired in-process research and development - - 5,000 Compensation expense related to issuance of common stock and stock options 302 243 105 Changes in assets and liabilities, net of impact of businesses acquired in 1999 and 2000, respectively Accounts receivable 526 4,010 2,190 Inventories (7,234) 6,130 836 Prepaid expenses and other current assets 405 (81) 4,605 Accounts payable 265 (200) 3,104 Accrued expenses 3,447 (3,006) 6,189 Deferred revenue 7,179 (2,388) 2,039 -------- -------- -------- Net cash provided by (used in) operating activities 14,629 2,307 (677) -------- -------- --------Cash Flows from Investing Activities: Purchases of held-to-maturity investments (69,282) (40,848) (20,938) Sales of held-to-maturity investments 95,020 46,675 50,074 Purchase of businesses, net of cash acquired - (7,972) (30,198) Purchase of property and equipment (22,597) (8,879) (5,821) Increase in other assets (3,714) (107) (5,218) -------- -------- -------- Net cash used in investing activities (573) (11,131) (12,101) -------- -------- --------Cash Flows from Financing Activities:

g ( p y )3,716 (2,695) (715) Net proceeds from sale of common stock 1,587 294 549 Purchase of treasury stock (464) - - Tax benefit from stock options exercised 1,196 43 - -------- -------- -------- Net cash provided by (used in) financing activities 6,035 (2,358) (166) -------- -------- --------Effect of Exchange Rate Changes on Cash 240 (733) (786) -------- -------- --------Net Increase (Decrease) in Cash and Cash Equivalents 20,331 (11,915) (13,730)

Cash and Cash Equivalents, beginning of year 28,092 48,423 36,508 -------- -------- --------Cash and Cash Equivalents, end of year $48,423 $ 36,508 $ 22,778 ======== ======== ========Supplemental Disclosure of Cash Flow Information: Cash paid during the year for income taxes $ 5,993 $ 2,592 $ 199 ======== ======== ======== Cash paid during the year for interest $ 324 $ 229 $ 38 ======== ======== ========

Supplemental Disclosure of Noncash Financing Activities: Issuance of common stock under 401(k) plan $ 292 $ - $ - ======== ======== ======== Stock issued for employee compensation $ 227 $ 144 $ 61 ======== ======== ========

Purchase of Business, net of cash acquired: Fair value of assets acquired $ - $ 23,423 $ 57,050 Liabilities assumed - (1,522) (25,270) Cost in excess of net assets acquired - - 19,220 In-process research and development cost acquired - - 5,000 Cash paid - (7,216) (30,000) Acquisition costs incurred

( ) ( , ) -------- -------- --------

Fair value of stock/note payable issued $ - $ 13,929 $ 25,000 ======== ======== ========</TABLE>


F-5<PAGE>


Notes to Consolidated Fianancial Statements

(In Thousands, except per share data)

(1) OPERATIONS

Hologic, Inc. and subsidiaries (the Company or Hologic) is engaged in the development, manufacture and distribution of proprietary X-ray, digital X- ray and other medical systems.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements reflect the application of certain accounting policies as described in this note and elsewhere in the accompanying consolidated financial statements.

(a) Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and all of its wholly owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.

(b) Fiscal Year

The Company's fiscal year ends on the last Saturday in September. Fiscal 1998, 1999 and 2000 ended on September 26, 1998, September 25, 1999 and September 30, 2000, respectively.

(c) Management's Estimates and Uncertainties

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

The Company is subject to a number of risks similar to those of other companies of similar size in its industry, including rapid technological changes, competition, customer concentration, government

g p y

(d) Cash and Cash Equivalents and Investments

The Company considers all highly liquid investments with maturities of three months or less at the time of acquisition to be cash equivalents. Included in cash equivalents at September 25, 1999 and September 30, 2000 are approximately $5,824 and $2,500, respectively, of securities purchased under agreements to resell. The securities purchased under agreements to resell are collateralized by U.S. government securities. Short-term investments have maturities of greater than three months and consist of commercial paper, corporate bonds and securities issued by the U.S. government and its agencies. Investments with maturities of greater than one year have been

F-6<PAGE>




classified as long-term. The Company had long-term investments of approximately $2,966, with an average maturity period of 51 months as of September 25, 1999, which are included in other assets in the accompanying consolidated balance sheets. There were no long-term investments as of September 30, 2000.

The Company accounts for investments in accordance with Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities. In accordance with SFAS No. 115, investments that the Company has the positive intent and ability to hold to maturity are reported at amortized cost, which approximates fair market value, and are classified as held-to-maturity. The investments that the Company has deemed to be held-to-maturity include securities issued by U.S. government agencies, which total approximately $29,136 at September 25, 1999. There were no such investments at September 30, 2000.

(e) Concentration of Credit Risk

SFAS No. 105, Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk, requires disclosure of any significant off-balance-sheet and credit risk concentrations. Financial instruments that subject the Company to credit risk consists primarily of cash, short-term investments, trade accounts receivable and long- term receivables. The Company's credit risk is managed by investing its cash in high-quality money market instruments, securities of the U.S. government and its agencies, and high-quality corporate issuers. The Company has not experienced any material losses related to receivables from individual customers, geographic regions or groups of customers in the X-ray and medical devices industry. Due to these factors, no additional credit risk beyond amounts provided for, is believed by management to be inherent in the Company's accounts receivable.

The Company utilizes distributors in certain countries with various credit terms, depending on the individual circumstances. One

p y pp y $ $794 as of September 25, 1999 and September 30, 2000, respectively. This distributor accounted for 2%, 3.5% and 3.2% of product sales for fiscal 1998, 1999 and 2000, respectively.

The Company finances certain sales to Latin American customers over two to three years. At September 25, 1999 and September 30, 2000, the Company had long-term accounts receivable outstanding of approximately $1,020 and $492, respectively, relating to these sales, which are included in other assets. The economic and currency related uncertainties in these countries may increase the likelihood of nonpayment. As a result, the Company increased its bad debt reserve during fiscal 2000.

F-7<PAGE>




The Company has sold its systems to a leasing company, which in turn leased the systems to third parties. The leasing company accounted for 33%, 5% and 0% of product sales for fiscal 1998, 1999 and 2000, respectively (see Notes 11 and 14).

(f) Disclosure of Fair Value of Financial Instruments

The Company's financial instruments consist mainly of cash and cash equivalents, short-term investments, accounts receivable, line of credit, accounts payable and note payable to Trex Medical Corporation. The carrying amounts of the Company's cash and cash equivalents, short-term investments, accounts receivable, line of credit and accounts payable approximate fair value due to the short-term nature of these instruments. The note payable to Trex Medical Corporation has a fixed rate of interest and will be subject to fluctuations in fair value during its term. As of September 30, 2000, the fair value of the note approximates its carrying amount due to the short lapse of time from its issuance.

(g) Inventories

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

September 25, September 30, 1999 2000

Raw materials and work-in-process $ 7,918 $ 24,742 Finished goods 9,678 14,964 ------------ ------------

$ 17,596 $ 39,706 ============ ============

Work-in-process and finished goods inventories consist of materials, labor and manufacturing overhead.

(h) Depreciation and Amortization

The Company provides for depreciation and amortization by charges to operations, using the straight-line and declining-balance methods, which allocate the cost of property and equipment over the following estimated useful lives:

Estimated Asset Classification Useful Life

Building and improvements 40 years Equipment 3-5 years Furniture and fixtures 5-7 years Leasehold improvements Life of lease

F-8<PAGE>




(i) Long-Lived Assets

The Company assesses the realizability of its long-lived assets, including intangible assets, in accordance with SFAS No. 121, Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. To date, the Company has not identified any impairments requiring adjustment.

(j) Foreign Currency Translation

The Company translates the financial statements of its foreign subsidiaries in accordance with SFAS No. 52, Foreign Currency Translation. In translating the accounts of the foreign subsidiaries into U.S. dollars, assets and liabilities are translated at the rate of exchange in effect at year-end, while stockholders' equity is translated at historical rates. Revenue and expense accounts are translated using the weighted average exchange rate in effect during the year. Gains and losses from foreign currency translation are credited or charged to cumulative translation adjustment, included in stockholders' equity, in the accompanying consolidated balance sheets.

Transaction gains and losses in fiscal 1998, 1999 and 2000 were not significant.

(k) Revenue Recognition

The Company recognizes product revenue upon shipment. A provision is made at that time for estimated warranty costs to be incurred. Other revenues, which includes primarily replacement parts and services, are recorded at the time of shipment or as the service is rendered. In connection with a fee-per-scan arrangement with a leasing Company for certain products, the Company has entered into a remarketing agreement whereby the Company has agreed to perform certain remarketing activities on a best efforts basis to help recover any losses incurred by the leasing Company up to 10% of the total fee-per-scan contracts

g p y p p these contracts from the Company. The Company has reserved for potential losses under these contracts by deferring revenue in an amount equal to 10% of the contracts funded (see Notes 11 and 14).

Maintenance revenues are recognized over the term of the contract.

(l) Research and Development and Software Development Costs

Research and development costs have been charged to operations as incurred. SFAS No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased or Otherwise Marketed, requires the capitalization of certain computer software development costs incurred after technological feasibility is established. The Company believes that once technological feasibility of a software product has been established, the additional development costs incurred to bring the product to a commercially acceptable level are not significant.

F-9<PAGE>




(m) Net Income (Loss) Per Share

Basic and diluted net income (loss) per share are presented in conformity with SFAS No. 128, Earnings per Share. Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted net loss per share in 1999 and 2000 is computed in the same way as basic, as all common equivalent shares are considered antidilutive. Diluted net income per share in 1998 was computed by dividing net income by the diluted weighted average number of common and common-equivalent shares outstanding during the period. The weighted average number of common-equivalent shares has been determined in accordance with the treasury stock method. Common stock equivalents include options to purchase common stock.

The reconciliation of basic and diluted shares outstanding is as follows:

1998 1999 2000

Weighted average common shares outstanding 13,259 13,950 15,320

Effect of dilutive securities stock options 507 - -

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

Weighted average common shares outstanding, assuming dilution 13,766 13,950 15,320 ====== ====== ======

Dilutive weighted average shares outstanding do not include 831, 2,130

, q y , 1999 and 2000, respectively, as their effect would have been antidilutive.

(n) Derivative Financial Instruments

At September 25, 1999 and September 30, 2000, the Company had no instruments requiring disclosure under SFAS No. 119, Disclosure About Derivative Financial Instruments and Fair Value of Financial Instruments.

F-10<PAGE>


Notes to Consolidated Financial Statements


(o) Recently Issued Accounting Standards

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at fair value. The statement requires that changes in the derivative's fair value be recognized in earnings currently, unless specific hedge accounting criteria are met. Special accounting or qualifying hedges allows derivative gains and losses to offset related results on the hedged item in the income statement, and require that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting. SFAS No. 133, as amended by SFAS No. 137 and No. 138, is effective for all fiscal quarters of fiscal years after June 15, 2000. The Company is still in the process of evaluating the impact, but has not yet quantified the impact, this bulletin will have on its results of operations, financial position or cash flows upon the adoption of SFAS No. 133.

In March, 2000, the FASB issued Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation - An Interpretation of APB Opinion No. 25. Interpretation 44 clarifies the application of Opinion 25 in certain situations, as defined. Interpretation 44 is effective July 1, 2000 but covers certain events having occurred after December 15, 1998. Accordingly, upon initial application of the Interpretation, (a) no adjustments would be made to financial statements for periods before the effective date and (b) no expense would be recognized for any additional compensation cost measured that is attributable to periods before the effective date. The adoption of this Interpretation did not have any effect on the accompanying financial statements.

Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition, was issued in December 1999. On March 24, 2000, the SEC deferred implementation of SAB 101 until the second calendar quarter of 2000, and on June 26, 2000, implementation was further deferred until the fourth quarter of calendar 2000. The Company is required to adopt this new accounting principle through a cumulative charge to the statement of operations, in accordance with Accounting Principles Board Opinion No. 20, Accounting Changes, no later than the fourth quarter of fiscal

p y p g p , but has not yet quantified the impact, this bulletin will have on the consolidated financial statements.

(3) ACQUISITIONS

(a) Direct Radiography Corporation

On June 3, 1999, pursuant to a securities purchase agreement dated April 28, 1999, as amended (the Securities Purchase Agreement), between Hologic, Sterling Diagnostic Imaging, Inc., a Delaware corporation (SDI) and SDI Investments, LLC, a Delaware limited liability company (SDI Investments), Hologic purchased 100% of the

F-11<PAGE>




issued and outstanding shares of capital stock of Direct Radiography Corporation Holding Corp., the parent company of Direct Radiography Corp. (DRC), a manufacturer of digital X-ray systems for medical imaging and non-destructive testing applications. On June 3, 1999, pursuant to a contract of sale (the Contract of Sale) with Glasgow Land Company, a Delaware limited liability company and a wholly-owned subsidiary of SDI Investments, Hologic also purchased the land and building in Glasgow, Delaware, at which DRC conducted its business. Hologic paid approximately $21,145 for DRC and the real estate, of which approximately $7,216 was paid in cash and of which approximately $13,929 was paid by delivery of 1,857 shares of Hologic's common stock, par value $.01 per share (the Purchase Price). In connection with the acquisition, Hologic incurred $756 of acquisition costs. The Acquisition was accounted for as a purchase in accordance with Accounting Principles Board Opinion No. 16. Accordingly, the results of the operations of DRC have been included in the accompanying consolidated financial statements from the date of acquisition. In accordance with APB Opinion No. 16, the Company allocated the purchase price of the Acquisition based on the fair value of the assets acquired and liabilities assumed.

The aggregate purchase price of $21,901 including acquisition costs was allocated as follows:

Current assets $ 4,788 Property, plant and equipment 18,635 Liabilities assumed (1,522) ------- $21,901 =======

Unaudited pro forma operating results for the Company, assuming the acquisition of DRC occurred on September 28, 1997 and September 27, 1998 are as follows:

1998 1999

Net sales $116,565 $86,466

( ) ( , ) Net income (loss) per share- Basic .03 (.60) Diluted .02 (.60)

(b) Trex Medical Systems Corporation

On September 15, 2000, pursuant to an Asset Purchase and Sale Agreement between Hologic, Inc. (Hologic) and Trex Medical Systems Corporation (Trex Medical) (the Purchase Agreement), dated August 13, 2000, Hologic acquired the U.S. business assets of Trex Medical in exchange for $30,000 in cash and a note in the amount of $25,000. The note has a term of three years, bears interest at a rate of 11.5% per annum and requires the full amount of principal be repaid on September 13, 2003. The note is secured by a mortgage on Hologic's principal office in Bedford, Massachusetts as well as the facility in Danbury, Connecticut, which was acquired from Trex Medical.

F-12<PAGE>




The aggregate purchase price for Trex Medical was approximately $56,000, which includes approximately $1,000 related to acquisition fees and expenses. The purchase price is subject to an adjustment based upon the working capital position of the business as of September 15, 2000. The Trex Medical acquisition has been accounted for as a purchase in accordance with Accounting Principles Board (APB) Opinion No. 16 and accordingly, the results of the operations of Trex Medical have been included in the accompanying consolidated financial statements from the date of acquisition. In accordance with APB Opinion No. 16, the purchase price has been allocated to the acquired assets and assumed liabilities of Trex Medical based on their fair value.

As part of the purchase price allocation, all intangible assets that are a part of the acquisition were identified and valued. It was determined that technology assets and assembled workforce had separately identifiable values. As a result of this identification and valuation process, the Company allocated approximately $5,000 of the purchase price to in-process research and development projects. This allocation represented the estimated fair value based on risk-adjusted cash flows related to the incomplete research and development projects. At the date of acquisition, the development of these projects had not yet reached technological feasibility, and the research and development in progress had no alternative future uses. Accordingly, these costs were expensed as of the acquisition date.

In addition, the Company allocated approximately $11,800 and $3,000 to developed technology and assembled workforce, respectively. Developed technology represents patented and unpatented technology and know-how related to the Trex X-ray mammography, breast biopsy and radiography systems. Developed technology is expected to be amortized over a period of 10 years. Assembled workforce is the presence of a skilled workforce that is knowledgeable about company procedures and possesses expertise in certain fields that are important to profitability and

g p y p over a period of five years.

The excess of the purchase price over the fair value of identifiable intangible and tangible net assets of approximately $4,337 will be allocated to goodwill, which is expected to be amortized over a period of 15 years.

In connection with the allocation of the purchase price to the acquired assets and assumed liabilities of Trex Medical based on their estimated fair value. Management determined that the balance of certain reserves and accruals at the closing date were not sufficient to cover the estimated economic exposure. Therefore, the Company has increased the balance of the applicable reserves and accruals to reflect Management's estimated economic exposure through charges to earnings in the period after acquisition in accordance with the guidance provided under Staff Accounting Bulletin No. 100 (SAB 100), Restructuring and Impairment. As a result, in the period the acquisition occurred, the Company recorded pre-tax charges totaling $6,800 to increase the reserve for bad debts, warranty accruals and other liabilities.

Also, in conjunction with the acquisition, the Company committed to dispose of the acquired Trexnet product line. Trex Medical had existing obligations under

F-13<PAGE>




contractual agreements with customers related to this product line which were assumed by the Company in the acquisition. The Company has begun to solicit offers on this product line from likely buyers. Based on the current level of interest and interaction with potential buyers, the Company has estimated that it will likely be required to pay a buyer approximately $2,000 in order to transfer these obligations, along with the assets and other liabilities associated with that product line. Such amount has been accrued as part of the purchase price allocation.

Based on the timing of the closing of the transaction, the finalization of the integration plans, resolution of the pending purchase price adjustment with Trex Medical and other factors, the final purchase adjustments may differ materially from those presented in the pro forma financial information. The effect of the adjustments on the results of operations will depend on the nature and amount of assets or liabilities adjusted.

The aggregate purchase price of $56,000 including acquisition costs was allocated as follows:

Current assets $ 48,077 Property, plant and equipment 8,973 In-process research and development 5,000 Cost in excess of net assets acquired 19,220

( , ) -------- $ 56,000 ========

Unaudited pro forma operating results for the Company, assuming the Acquisition of Trex Medical occurred on September 27, 1998 and September 26, 1999 are as follows:

1999 2000

Net sales $257,877 $ 196,655 Net loss (38,167) (121,485)

Net loss per share- Basic and diluted $ (2.74) $ (7.93)

F-14<PAGE>




(4) LINE OF CREDIT

The Company maintains a line of credit with a bank for the equivalent of $3,000, which bears interest at the Europe Interbank Offered Rate (4.8% at September 30, 2000) plus 1.50%. As of September 30, 2000, $388 was outstanding. The borrowings under this line are primarily used by the Company's European subsidiaries to settle intercompany sales and are denominated in the respective local currencies of its European subsidiaries. The line of credit may be canceled by the bank with 30 days notice. The average outstanding balance during fiscal 2000 was approximately $444 and the weighted average interest rate for fiscal 2000 was 5.0%. Interest expense on this line of credit of approximately $60, $82 and $23 has been included in other expenses in the accompanying consolidated statements of operations for 1998, 1999 and 2000, respectively.

(5) INCOME TAXES

The Company provides for income taxes under the liability method in accordance with SFAS No. 109, Accounting for Income Taxes.

The provision (benefit) for income taxes in the accompanying consolidated statements of operations consists of the following:

Years Ended --------------------------------------------------- September 26, September 25, September 30, 1998 1999 2000Federal- Current $ 7,327 $ - $ - Deferred (2,207) (1,953) (9,963) ------- ------- --------

, ( , ) ( , )State- Current 973 53 134 Deferred (293) (175) (583) ------- ------- --------

680 (122) (449)Foreign- Current - - 12 ------- ------- --------

$ 5,800 $(2,075) $(10,400) ======= ======= ========

F-15<PAGE>




A reconciliation of the federal statutory rate to the Company's effective tax rate is as follows:

<TABLE> Years Ended ----------------------------------------------------------- September 26, September 25, September 30, 1998 1999 2000<S> <C> <C> <C>Income tax provision at federal statutory rate 35.0% (35.0)% (35.0)%Increase (decrease) in tax resulting from- Net effect of losses of foreign subsidiaries not provided 0.1 2.7 1.3 State tax provision(benefit), net of federal benefit 2.7 (0.9) (1.3) Research and development tax credit (0.9) - - Effect of not providing U.S. taxes on exempt FSC (1.2) - (0.1) income Other 0.1 (2.4) (0.7) ---- ------ ------

35.8% (35.6)% (35.8)% ==== ====== ======</TABLE>

The components of domestic and foreign income (loss) before the provision (benefit) for income taxes are as follows:

Years Ended ----------------------------------------------------------- September 26, September 25, September 30, 1998 1999 2000

Domestic $16,266 $(5,368) $(27,942) Foreign (78) (454) (1,077) ------- ------- --------

$16,188 $(5,822) $(29,019) ======= ======= ========

During fiscal 1998, 1999 and 2000, the Company realized tax benefits of approximately $1,196, $43 and $0, respectively, relating to the exercise of certain stock options. These benefits are reflected as a component of capital in excess of par value.

The components of the net deferred tax asset recognized in the accompanying consolidated balance sheets are as follows:


Deferred tax assets $6,898 $ 17,400 Valuation allowance (673) (591) ------ --------

$6,225 $ 16,809 ====== ========

The Company generated significant tax loss carryforwards during fiscal 1999 and2000, which can be carried forward for 19 and 20 years, respectively. Under SFASNo. 109, the Company can only recognize a deferred tax asset for future benefitof its tax loss carryforward to the extent that it is "more likely than not"that these assets will be realized. In determining the realizability of theseassets, the Company considered numerous factors, including historicalprofitability, estimated future taxable income and the industry in which itoperates.

F-16<PAGE>




The Company has recorded a valuation allowance against a portion of its deferred tax assets. The valuation allowance relates primarily to certain deferred tax assets in foreign jurisdictions, for which realization is uncertain.

The approximate income tax effect of each type of temporary difference and

y pp y as follows:


Net operating loss carryforwards $2,458 $ 8,792 Nondeductible accruals 486 1,191 Nondeductible reserves 2,096 4,005 Other temporary differences 571 (396) Deferred revenue 1,287 3,808 ------ -------

$6,898 $17,400 ====== =======

(6) COMMON STOCK

(a) Stock Option Plans

The Company's 1986 Combination Stock Option Plan (the 1986 Plan) is administered by the Board of Directors. Under the terms of the 1986 Plan, the Company granted employees either incentive stock options or nonqualified stock options to purchase shares of the Company's common stock at a price not less than fair market value at the date of grant. In addition, the Company may grant nonqualified options to other participants. During fiscal 1996, the 1986 Plan was terminated. Options granted under the 1986 Plan vest over a five-year period and are exercisable at varying dates.

The Company's 1994 Stock Option Plan (the 1994 Plan) and the 1995 Stock Option Plan (the 1995 Plan), both of which were originally adopted by FluoroScan, are administered by the Board of Directors and the Company has issued options to purchase 276 shares of the Company's common stock, as of September 30, 2000. Under the terms of the 1994 Plan and the 1995 Plan, the Company may grant employees either incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and deferred stock awards at a price not less than the fair market value on the date of grant. The Company does not intend to grant any additional options under these plans.

In June 1995, the Board of Directors adopted the 1995 Combination Stock Option Plan (the 1995 Combination Plan), pursuant to which the Company is authorized to issue 1,100 options to purchase shares of common stock. Under the terms of the 1995 Combination Plan, the Company may grant employees either incentive stock options or nonqualified stock options to purchase shares of the Company's common stock at a price not less than the fair market value at the date of grant. In addition, the Company may grant nonqualified options

F-17<PAGE>




p p p , , p y shares available for future grant under this plan.

The Company's 1990 Nonemployee Director Stock Option Plan (the Directors' Plan) allows for eligible directors to receive options to purchase 10 shares of common stock upon election as a director. The options vest ratably over a five-year period. In addition, eligible directors are entitled to annual option grants to purchase eight shares of common stock, which vest after six months. Option grants under the Directors' Plan are at not less than fair market value on the date of grant. The Company has reserved 200 shares of common stock for issuance under the Directors' Plan. As of September 30, 2000, the Company had no shares available for future grant.

In May 1997, the Board of Directors adopted the 1997 Employee Equity Incentive Plan (the 1997 Plan), pursuant to which the Company is authorized to issue 1,100 shares of common stock. Under the terms of the 1997 Plan, the Company may grant employees either nonqualified stock options, stock appreciation rights, performance shares, restricted stock, or stock units. As of September 30, 2000 the Company had 328 shares available for future grant under this plan.

In March 1999, the Board of Directors adopted the 1999 Equity Incentive Plan (the 1999 Plan), pursuant to which the Company is authorized to issue 300 shares, plus an annual increase, as defined. Under the terms of the 1999 Plan, the Company may grant employees either incentive stock options, non-qualified stock options, stock appreciation rights, performance shares, restricted stock, or stock units. As of September 30, 2000 the Company had 12 shares available for future grant under this plan.

F-18<PAGE>




The following table summarizes all stock option activity under all of the plans for the three years ended September 30, 2000.

<TABLE><CAPTION> Number Exercise Weighted of Shares Price per Average Share Exercise Price<S> <C> <C> <C> <C> Outstanding, September 27, 1997 1,492 $ 0.50-49.00 $12.08 Granted 399 10.25-29.50 24.24 Terminated (93) 2.63-45.25 21.97 Exercised (229) 0.50-25.38 5.72 ----- ------------ ------

Outstanding, September 26, 1998 1,569 1.81-49.00 15.52 Granted 1,396 4.13-15.88 9.86 Terminated (805) 1.94-49.00 21.62 Exercised (30) 1.94-11.00 4.41 ----- ------------ ------

g, p , , $ Granted 754 3.19-9.81 5.46 Terminated (159) 2.81-15.88 7.77 Exercised (13) 1.94-6.81 3.77 ----- ------------ ------

Outstanding, September 30, 2000 2,712 $1.81-$44.25 $ 8.63 ===== ============ ======

Exercisable, September 30, 2000 1,262 $1.81-$44.25 $ 9.75 ===== ============ ======

Exercisable, September 25, 1999 1,009 $1.81-$44.25 $ 9.61 ===== ============ ======

Exercisable, September 26, 1998 818 $1.81-$49.00 $10.46 ===== ============ ======</TABLE>

F-19<PAGE>




The range of exercise prices for options outstanding and options exercisable at September 30, 2000 are as follows:

<TABLE><CAPTION> Options Outstanding Options Exercisable ------------------------------------------------------------------------------ Range of Options Weighted Average Exercise Price Outstanding Remaining Weighted Average Options Weighted Average Contractual Life Exercise Price Exercisable Exercise Price (Years)<S> <C> <C> <C> <C> <C> $ 1.81 - $3.69 218 3.30 $ 2.77 215 $ 2.76 $ 3.75 - $3.94 273 8.88 3.93 4 3.94 $ 4.13 - $6.00 334 8.87 5.59 72 5.37 $ 6.06 - $6.63 56 6.31 6.25 29 6.19 $ 6.75 - $6.81 315 8.72 6.81 69 6.81 $ 6.88 - $7.69 166 9.16 7.51 19 7.04 $ 7.75 - $8.25 362 4.98 8.24 308 8.25 $ 8.44 - $8.88 136 8.45 8.85 28 8.85 $ 9.00 - $11.00 404 6.87 10.97

$ 11.38 - $44.25 448 7.23 16.73 277 18.41 ----- ---- ------ ----- ------

$ 1.81 - $44.25 2,712 7.26 $ 8.63 1,262 $ 9.75 ===== ==== ====== ===== ======</TABLE>

The weighted average grant date fair value under the Black-Scholes option pricing model of options granted during the years ended September 26, 1998, September 25, 1999 and September 30, 2000 under the various plans is $14.81, $6.59 and $3.37 per share, respectively. As of September 26, 1998, September 25, 1999 and September 30, 2000, the weighted average remaining contractual life of outstanding options under these plans is 7.49, 7.58 and 7.26 years, respectively.

The Company accounts for its stock-based compensation plans under Accounting Principle Board Opinion No. 25, Accounting for Stock Issued to Employees. In October 1995 the Financial Accounting Standards Board (FASB) issued SFAS No. 123, Accounting for Stock-Based Compensation, which established a fair-value-based method of accounting for stock- based compensation plans. The Company has adopted the disclosure-only alternative under SFAS No. 123 that requires disclosure of the pro forma effects on net income (loss) and earnings (loss) per share as if SFAS No. 123 had been adopted, as well as certain other information.

F-20<PAGE>




The Company has computed the pro forma disclosures required under SFAS No. 123 for all stock options, stock issuances under the employee stock purchase plan and warrants granted to employees of the Company in fiscal years ended September 25, 1999 and September 30, 2000, using the Black-Scholes option pricing model prescribed by SFAS No. 123. The assumptions used to calculate the SFAS No. 123 pro forma disclosure and the weighted average information for the fiscal years ended September 26, 1998, September 25, 1999 and September 30, 1999 are as follows:

1998 1999 2000

Risk-free interest rate 5.96% 6.12% 6.00% Expected dividend yield - - - Expected lives 6 years 6 years 6 years Expected volatility 70% 70% 72%

The pro forma effect of applying SFAS No. 123 for all options granted, stock issuances under the employee stock purchase plan and warrants granted to employees of the Company in fiscal years ended September 26, 1998, September 25, 1999 and September 30, 2000 would be as

1998 1999 2000

Net income (loss) as reported $ 10,388 $ (3,747) $ (18,619) Pro forma net income (loss) 8,761 (5,388) (21,052)

Diluted net income (loss) per share, as reported $ 0.75 $ (0.27) $ (1.22) Pro forma diluted net income (loss) per share $ 0.64 $ (0.39) $ (1.37)

(b) Employee Stock Purchase Plan

In December 1994, the Company adopted the 1995 Employee Stock Purchase Plan (the ESP Plan) in compliance with Section 423 of the Internal Revenue Code. Employees who have completed three consecutive months or 1,000 hours, whether or not consecutive, of employment with the Company are eligible to participate in the ESP Plan. The ESP Plan allows participants to purchase common stock of the Company at 85% of the fair market value, as defined. The Company may issue up to 200 shares under the ESP Plan. During fiscal 1998, 1999 and 2000, the Company issued 17, 27 and 91 shares, respectively, under the ESP Plan. At September 30, 2000, the Company has 29 shares available for purchase under the ESP Plan.

F-21<PAGE>




(c) Rights Agreement

In December 1992, the Company adopted a shareholder rights plan. The plan is intended to protect shareholders from unfair or coercive takeover practices. In accordance with the plan, the Board of Directors declared a dividend distribution of one common stock purchase right for each share of common stock outstanding until the rights become detachable. Each right entitles the registered holder to purchase from the Company one share of common stock for $90, adjusted for certain events. In the event that the Company is acquired in a merger or other business combination transaction or more than 50% of its assets or earning power is sold, each holder shall thereafter have the right to receive, upon exercise of each right, that number of shares of common stock of the acquiring company that, at the time of such transaction, would have a market value of two times the $90 per share exercise price. The rights will not be detachable or exercisable until certain events occur. The Board of Directors may elect to terminate the rights under certain circumstances.

(d) Treasury Stock

In 1998, the Board of Directors authorized the purchase of up to 1,000 shares of the Company's common stock. As of September 30, 2000, the Company has purchased 45 shares under this authorization.

( ) ( )

The Company has a qualified profit sharing plan covering substantially all of its employees. Contributions to the plan are at the discretion of the Company's Board of Directors. The Company has recorded approximately $360, $440 and $301 as a provision for the profit sharing contribution for fiscal 1998, 1999 and 2000, respectively.

(8) RELATED PARTY TRANSACTIONS

(a) Management Services Agreement

The Company had an agreement with Vivid Technologies, Inc. (Vivid), an affiliated company, whereby the Company provided management, administrative and support services. The Company charged Vivid approximately $140 and $151 under the agreement during fiscal 1998 and 1999, respectively, which have been offset against operating expenses of the Company. No amounts were charged in fiscal 2000. Of these amounts, approximately $66 was unpaid as of September 25, 1999. There were no amounts outstanding at September 30, 2000.

F-22<PAGE>




(b) License and Technology Agreement

The Company had an agreement with Vivid whereby Vivid obtained a perpetual, exclusive worldwide license to utilize certain of the Company's technology and patents for the sole purpose of developing baggage and inspection security systems (the Exclusive License). In September 1996, this license was amended to grant Vivid a nonexclusive license to utilize these patents and technology for certain new product development for other applications (the Nonexclusive License). Royalty payments to the Company under the Exclusive License are 5% of product revenue on Vivid's first $50 million in sales; thereafter, payments are 3% of Vivid's sales up to $200 million. Royalty payments under the Nonexclusive License are 3% on sales up to $200 million. In the first quarter of fiscal 2000, Vivid and PerkinElmer entered into a merger agreement (the Merger) and Hologic and Vivid entered into a termination agreement dated October 4, 1999. Under this termination agreement, the license fee terminated upon the effective date of the Merger. As part of the termination agreement, Vivid paid Hologic $2,000 in January 2000. The Company recognized approximately $1,070 and $378 of royalty revenue under the Exclusive License for fiscal 1998 and 1999, respectively and recognized $2,000 under the termination agreement in 2000. Approximately $246 was outstanding at September 25, 1999. No amounts were outstanding at September 30, 2000.

(9) COMMITMENTS

(a) Operating Leases

Certain subsidiaries of the Company conduct their operations in leased facilities under operating lease agreements that expire through fiscal 2013. The Company and its subsidiaries lease certain equipment under

p g g p g minimum lease payments under the operating leases are approximately as follows:

Fiscal Years Ending Amount

September 29, 2001 $ 2,371 September 28, 2002 2,126 September 27, 2003 1,990 September 25, 2004 1,777 September 24, 2005 1,777 Thereafter 8,463 -------

$18,504 =======

Rental expense was approximately $1,937, $297 and $724 for fiscal 1998, 1999 and 2000, respectively.

F-23<PAGE>




(b) Patent Acquisition

In fiscal 1992, the Company acquired certain patents pertaining to technology incorporated into certain of the Company's products. The Company paid approximately $245 for these patents and related expenses upon entering into the agreement. In May 1993, this agreement was amended such that the Company paid approximately $344 for additional patent rights and related expenses, of which $50 was paid through the issuance of 21 shares of common stock. In January 1998, the Company made the final payment of $1,086 with respect to the acquisition of these patent rights. The cost of these patents is being amortized over their expected life of 10 years.

(10) COLLABORATION AGREEMENT

In June 1995, the Company acquired a 5% minority interest in a collaborating company. To acquire this minority interest, the Company issued 56 shares of common stock and paid $76 in cash in return for all of the outstanding convertible preferred stock of the collaborating company. The Company also entered into a development agreement with the collaborating company related to a certain product. As part of the development agreement, the Company reimbursed the collaborating company for expenses incurred in the development of this product. The Company incurred $344 and $689 of expense, net of related royalty revenue, in connection with this agreement in 1998 and 1999, respectively. No expense was incurred in 2000 related to this agreement. The Company and the collaborating company have suspended this project.

( )

The Company had a fee per scan program with a leasing company whereby the Company sold its systems to the leasing company, which, in turn, leased the systems to third parties. Under the terms of the agreement, the Company is contingently liable for a certain amount per system, up to a maximum of the greater of (i) the sale price of four systems or (ii) 10% of the aggregate value of systems sold under the program. The Company recorded the amount for which it is contingently liable as deferred revenue. The Company and the leasing Company have commenced claims against each other regarding this program (see Note 14).

(12) BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION

Effective for the fiscal year ended September 25, 1999, the Company has adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders. SFAS No. 131 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions how to allocate resources and assess performance. The Company's chief decision-maker, as defined under SFAS

F-24<PAGE>




No. 131, is the chief operating officer. To date, the Company has viewed its operations and manages its business as principally four operating segments: the manufacture and sale of Bone Assessment products, Mini-C Arm Imaging products, Digital Imaging products and Mammography/General Radiography products. The Company evaluates the performance of its operating segments based on income before income taxes, accounting changes, and nonrecurring items. Intersegment sales and transfers are not significant.

F-25<PAGE>




The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates performance based on the sales, operating costs, net income and total assets. Segment information for fiscal years ended 1998, 1999 and 2000 is as follows.

<TABLE>

<C> 1998 1999 2000 Total revenues- Bone Assessment $105,465 $ 67,949 $69,516 Mini C-Arm Imaging 10,099 15,075 13,165 Digital Imaging - 1,116 5,979 Mammography/General Radiography - - 5,086 -------- -------- -------- $115,564 $ 84,140 $93,746 ======== ======== ======== Operating income (loss)- Bone Assessment $ 13,205 $ (4,725) $(553) Mini C-Arm Imaging (2,351) 1,076 271 Digital Imaging - (5,829) (19,794) Mammography/General Radiography - - (12,283) -------- -------- -------- $ 10,854 $ (9,478) $(32,359) ======== ======== ======== Net income (loss)- Bone Assessment $ 12,108 $ (647) $2,539 Mini C-Arm Imaging (1,720) 576 115 Digital Imaging - (3,676) (13,415) Mammography/General Radiography - - (7,858) -------- -------- -------- $ 10,388 $ (3,747) $(18,619) ======== ======== ======== Identifiable assets- Bone Assessment $155,654 $137,835 $110,425 Mini C-Arm Imaging 16,943 17,280 17,539 Digital Imaging - 20,655 10,038 Mammography/General Radiography - - 81,653 -------- -------- -------- $172,597 $175,770

$ , ======== ======== ======== Depreciation and amortization- Bone Assessment $ 1,637 $ 2,458 $2,959 Mini C-Arm Imaging 214 239 233 Digital Imaging - 777 1,085 Mammography/General Radiography - - 143 -------- -------- -------- $ 1,851 $ 3,474 $4,420 ======== ======== ======== Capital expenditures- Bone Assessment $ 22,543 $ 7,747 $2,890 Mini C-Arm Imaging 54 741 318 Digital Imaging - 391 2,593 Mammography/General Radiography 20 -------- -------- -------- $ 22,597 $ 8,879 $5,821 ======== ======== ========</TABLE>

F-26<PAGE>




Export sales from the United States to unaffiliated customers primarily in Europe, Asia and Latin America during fiscal 1998, 1999 and 2000 totaled approximately $14,496, $13,378 and $10,912, respectively.

Transfers between the Company and its European subsidiaries are generally recorded at amounts similar to the prices paid by unaffiliated foreign dealers. All intercompany profit is eliminated in consolidation.

Export product sales, including sales to European subsidiaries, as a percentage of total product sales are as follows:

Years Ended ------------------------------------------------------- September 26, September 25, September 30, 1998 1999 2000

p Asia 4 7 7 All others 6 6 5 ---- ---- ---- 28% 37% 33% ==== ==== ====

(13) ACCRUED EXPENSES

Accrued expenses consist of the following:


Accrued payroll and employee benefits $ 2,114 $ 5,961 Accrued commissions 2,644 5,913 Accrued income taxes 689 112 Accrued warranty 1,172 9,670 Accrued tradeshow - 1,142 Accrued acquisition reserve - 2,000 Other accrued expenses 3,484 7,841 ------- ------- $10,103 $32,639 ======= =======

(14) LITIGATION

Hologic has commenced a claim against Fleet Bank Credit Corp. (FBCC), in which Hologic seeks a declaratory judgment with respect to the parties' respective rights and obligations under a Master Product Financing Agreement (the Agreement) dated September 25, 1996, as supplemented and amended. FBCC subsequently commenced a separate action against Hologic in state court in Illinois to recover damages allegedly arising out of or relating to the Agreement. Neither Hologic nor FBCC has precisely quantified the alleged potential liability of Hologic to FBCC and Hologic is vigorously defending against the claims asserted by FBCC.

In connection with the Trex Medical acquisition, Hologic assumed liability for a lawsuit filed by Fisher Imaging against Trex Medical alleging that the Lorad prone biopsy system infringes upon two Fischer Imaging patents, subject to indemnification from Trex Medical and its parent, Thermo Electron, for any damages up to our adjusted purchase price for the Trex Medical assets. In connection with this arrangement, Trex Medical is continuing to defend this lawsuit and has advised the Company that it believes that it has meritorious defenses to Fischer's claims. If Trex Medical is unsuccessful in defending this lawsuit, the Company may be prohibited from manufacturing and selling the prone-breast biopsy system without a license from Fischer and Fischer could be awarded significant damages. If a licence were required, Hologic cannot assure that it would be able to obtain one on commercially reasonably terms, if at all. Moreover, if Fischer were awarded damages, Hologic cannot assure that its indemnification from Trex Medical and Thermo Electron would be sufficient to cover the amount of the award.

In the ordinary course of business, the Company is party to various types of litigation. The Company believes it has meritorious defenses to all claims, and, in its opinion,

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all litigation currently pending or threatened will not have a material effect on the Company's financial position or results of operations.

(15) QUARTERLY STATEMENT OF OPERATIONS INFORMATION (UNAUDITED)

The following table presents a summary of quarterly results of operations for 1999 and 2000:

<TABLE><CAPTION> 1999 -------------------------------------------------------------------------------- First Quarter Second Quarter Third Quarter Fourth Quarter<S> <C> <C> <C><C>Total revenue $24,632 $19,362 $20,008 $ 20,138Net income (loss) 2,037 (1,088) (1,533) (3,163)Diluted net income per common and common equivalent share 0.15 (0.08) (0.11) (0.23)

2000 -------------------------------------------------------------------------------- First Quarter Second Quarter Third Quarter Fourth Quarter

Total revenue $21,295 $23,252 $22,083 $ 27,117Net loss (2,870) (2,184) (2,643) (10,922)Diluted net loss per common and common equivalent share (0.19) (0.14) (0.17) (0.71)</TABLE>

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