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FORM 10-K



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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


(Mark One)

|   |  |                                                                                          
|-- |  | -----------------------------------------------------------------------------------------
|x  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934    
|   |  | For the fiscal year ended December 31,
	2001                                             
|OR
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
	15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|   |  | For the transition period
	from                to                                        

Commission File No. 000-30549

GENOMIC SOLUTIONS INC.

(Exact name of registrant as specified in its
charter)


|                       |  |                         
|---------------------- |  | ------------------------
|State of Delaware      |  | 38-3383038              
|State of Incorporation |  | I.R.S. Employer I.D. No.

4355 Varsity Drive

Ann Arbor, Michigan 48108


(734) 975-4800


(Address of principal executive offices and
telephone number)


Securities Registered Pursuant to
Section 12(b) of the Act:

None


Securities Registered Pursuant to
Section 12(g) of the Act:

Common Stock, Par Value $.001 Per
Share


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

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

As of
March 12, 2002, the aggregate market value of the
Registrants common stock held by non-affiliates of the
Registrant was approximately $37,291,881, determined in
accordance with the highest price at which the stock was sold on
such date as reported by the Nasdaq National Market.

As of
March 12, 2002, there were 32,865,745 shares of the
Registrants common stock issued and outstanding.



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TABLE OF CONTENTS



|                                                          |  |  |  |  |  |  |  | 
|--------------------------------------------------------- |  |  |  |  |  |  |  | 
|PART I                                                   
|RISK FACTORS                                             
|PART III                                                 
|PART IV                                                  
|SIGNATURES                                               
|REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                 
|CONSOLIDATED BALANCE SHEETS                              
|CONSOLIDATED STATEMENTS OF OPERATIONS                    
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
|CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
|CONSOLIDATED STATEMENTS OF CASH FLOWS                    
|EXHIBIT INDEX                                            
|Certificate of Merger                                    
|2nd Amendment to Sales, Marketing & Distribution         
|Fifth Addendum to Lease                                  
|First Amendment to the License Agreement                 
|Employment Agreement - Thomas C. Tisone, PhD             
|Employment Agreement - David Lorenz                      
|Lease B/W Cartesian Tech., Inc. & Airport Indust.        
|Sublease B/W Cartesian Tech. & Digital Recorders         
|List of Subsidiaries                                     
|Cosent of Arthur Andersen LLP                            
|Letter from the Company Re: Arthur Andersen LLP          



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Cautionary Statement

This Form 10-K contains forward-looking
statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as amended. Such
statements are based on managements current expectations
and are subject to a number of factors and uncertainties that
could cause actual results or outcomes to differ materially from
those described in such forward-looking statements. When used in
this report or elsewhere by management from time to time, the
words believe, anticipates,
intends, plans, estimates,
and similar expressions are forward looking statements. These
statements address or may address the following subjects:
results of operations, customer growth and retention;
development of technology; losses or earnings; operating
expenses, including, without limitation, marketing expense and
technology and development expense; and revenue growth. Any such
forward- looking statements are not guarantees of future
performance and involve risks and uncertainties. Actual events
or results may differ materially from those discussed in the
forward-looking statements as a result of various factors, many
of which are described in the Risk Factors section
of this Form 10-K. You should carefully consider those
risks, in addition to the other information in this report and
in our other filings with the Securities and Exchange
Commission. Except as required by law, we undertake no
obligations to update any forward looking statements.






PART I


ITEM 1. BUSINESS

General

Genomic Solutions develops, manufactures and
sells instruments, consumables and software for the life
sciences research and drug discovery markets. Our market focus
is based on three key high growth areas: genomics, proteomics
and high throughput screening and dispensing systems. These
areas comprise three of the major technologies used by
researchers in studying disease and developing new drugs. Our
products allow researchers to perform high volume experiments,
and analyze the resultant data, at lower costs and in less time
than with traditional techniques. Our products are distributed
and sold to pharmaceutical and biotechnology companies,
government agencies, academic institutions and private research
organizations throughout the world.

Our executive office is located at 4355 Varsity
Drive, Ann Arbor, Michigan 48108 and our telephone number is
(734) 975-4800. Genomic Solutions, which is a Delaware
corporation, had 156 full time employees as of December 31,
2001.

Significant Developments

Acquisition

In December 2001, we acquired Cartesian
Technologies, Inc. through one of our wholly owned subsidiaries.
This acquisition extends our capabilities into high-throughput
screening and dispensing and strengthens our position as a
global provider of comprehensive DNA analysis and drug discovery
solutions. As consideration for the transaction, we issued
approximately 6,814,561 shares of our common stock and cash to
Cartesians stockholders. The cash consideration was
$2.5 million less certain non-trade payable debts and
transaction expenses of Cartesian, or approximately
$1.8 million. As a result of the transaction, former
Cartesian stockholders hold common stock or options to acquire
common stock equal to approximately 23% of our outstanding
common stock.

Restructuring

In September 2001, we announced a restructuring
of our operations to implement significant cost savings and to
accelerate our plan to achieve profitability. As part of the
restructuring, we have closed our Lansing, Michigan
manufacturing facility and relocated those operations to our
headquarters in Ann Arbor. The restructuring reduced our
workforce in the United States and the United Kingdom by
approximately 25%. In

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connection with the Cartesian acquisition, we
have closed our San Diego, California sales office and
consolidated these activities with Cartesians Irvine,
California operations and Cartesian has closed its United
Kingdom office and moved its operations to our Huntingdon
facility.


As part of our restructuring, we also sold
certain assets used in connection with our proteomic contract
research services business to Proteomic Research Services, Inc.,
a newly formed company owned and controlled by former employees
of our company who were actively involved in providing
proteomic-related services. We own 19.9% of Proteomic Research
Services and have agreed to contract with it for assistance with
certain proteomic projects. In return, Proteomic Research
Services has agreed to purchase our instruments and consumables
to the extent such items are required in connection with its
operations.

Our Strategy

The past decade has witnessed tremendous
scientific and technological breakthroughs in the study of genes
and proteins and their role in determining the biological
pathways of disease. Genomic and DNA microarray technology has
allowed for large-scale studies of genes and their function.
With the sequencing of human genome and other organisms,
attention is also focusing on proteomic technologies that allow
researchers to identify, quantify and characterize proteins as
well as study their role as potential drug targets or
therapeutic agents. Finally, advances in automation have allowed
for screening of potential drug candidates and micro-scale
dispensing of biological compounds on a high throughput basis.
Our strategy is to participate in life science research and the
drug discovery process by providing the systems, instruments,
software and consumables used by researchers without assuming
the inherent risks of drug development. Key elements of our
strategy include:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Lead genomic, proteomic and high speed
	screening and dispensing instrumentation
	markets.We intend to continue to
	strengthen our global position as a leading provider of tools
	for the DNA microarray, proteomics and high speed screening and
	micro-scale dispensing markets. Our product portfolio emphasizes
	instruments, software and consumables which are sold as part of
	our fully integrated systems, but have the capability to be used
	individually or in conjunction with components produced by other
	manufacturers.                                                                                                                                                                                             
|
| |  | Emphasize consumables complimentary with our
	instruments to generate recurring
	revenue.We view consumable products
	that may be used in connection with our instruments as a source
	of valuable recurring revenue. We intend to capitalize on our
	licensing relationship with Affymetrix, Inc. and in-house
	expertise to aggressively expand our position in the growing
	market for preprinted and custom DNA microarrays, with a
	broadened portfolio of cDNA and oligonuecleotide based
	microarray offerings. We will also continue to develop and
	supply reagents, gels and other consumables for proteomics and
	are exploring consumable opportunities that complement our high
	speed screening and dispensing business.
|
| |  | Provide bioinformatic software solutions to
	analyze data generated by high throughput
	instruments.High throughput research
	generates significant amounts of data. We believe the life
	science marketplace is demanding software solutions that enable
	instruments to communicate directly with one another and with
	the labs informatics infrastructure. We will continue to
	develop new sophisticated software that integrates with and
	enhances the value of our instruments by managing the data flow
	and assisting in data analysis.                                                                                                                                                                                    
|
| |  | Enhance product offerings through internal
	development and technology
	acquisitions.In order to stay on the
	cutting edge of technology, we will continue to pursue strategic
	acquisitions, licensing and alliances that enhance our product
	offerings, build on our internal capabilities, and add to and
	support our growing intellectual property portfolio.                                                                                                                                                                                                                                                                                                                                                                   

Our Products

Our products are aimed at three key areas in the
life sciences market: genomics, proteomics, and high throughput
screening and dispensing of biological compounds.

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Genomic Product Offerings

Our products in the genomics and functional
genomics area are based principally on DNA microarray
technology. Microarraying involves the depositing of small
volumes of a sampled solution, such as DNA or mRNA, onto a glass
slide or other substrate. Microarrays are used to compare gene
expression profiles of particular cell or tissue samples (e.g.
compare diseased to normal cells) and to study the effects of
different chemical and biological environments on gene function
and expression.

Our genomic system offering includes a complete
line of instruments, consumables and software which create,
process and analyze microarrays in a high throughput
environment. Our genomic and functional genomic offerings,
marketed as part of the integrated GeneTAC Biochip System,
include the following products which are sold on both an
integrated and individual basis:

GeneTAC G3 Library Management
System:The G3 is a high end
instrument designed for DNA colony picking, library management,
gridding and microarray production. This versatile instrument
allows users to substitute different tool heads to undertake
multiple tasks. We have sold 130 G3s or its predecessor
system since 1998.

GeneTAC
Microarrayers.The acquisition of
Cartesian Technologies has allowed us to expand our microarray
product line to include new smaller footprint and tabletop
arrayers. Our microarrayers include the MicroSys,
PixSys, ProSys and MegaSys microarraying
instruments. These high precision robots offer different
capacity and configurations depending on the needs of the
particular researcher.

Pre-Printed
Arrays.Our GeneMAP
pre-printed microarrays shorten the time for researchers to
perform gene expression analysis. Our pre-printed microarrays
offer researchers the choice of human, mouse and rat cDNA or
oligonuecleotides for conducting gene expression experiments and
analysis. We also offer custom arraying services.

Hybridization.Our
patented GeneTac HybStation is the first automated system
for hybridizing microarrays. The HybStation and the versatile
Hyb4 (launching mid-2002) provide increased reproducibility of
hybridization and precision control, resulting in better
hybridization specificity and more reliable data.

Scanning.Our
recently introduced GeneTAC UC-4 Microarray Scanner is a
compact, easy to use microarray scanner that combines simplicity
with performance. Our GeneTAC LS IV MicroarrayScanner
is a walkaway system for high throughput scanning of
microarrays. Both of our microarray scanners are shipped with a
computer and software to provide seamless workflow between
scanning and analysis.

Software.Our
GeneTAC Integrator Software automates the identification
and quantification of microarray spots and fully integrates data
from our GeneTAC Biochip System instrument line. Our
GeneTAC Array IQ Microanalysis Software is an interactive
software package for the visualization, analysis, and mining of
DNA expression data.

Proteomic Product Offerings

Our product offerings in the proteomic area are
designed for large scale protein identification and
characterization. Proteomics involves the use of various
technologies to characterize the identity, quantity,
localization, function and structure of proteins present in a
given biological sample. The most common approach used in
proteomics is to prepare a sample for separation by 2D gel
electrophoresis and to identify the proteins using mass
spectrometry. Our strategy is to be the premier supplier of
systems for automating all steps in the protein isolation and
identification process with the exception of the mass
spectrometer. Rather than compete with major mass spectrometer
manufacturers, our instrumentation, consumables and software are
designed to work with mass spectrometer instruments from any
major supplier to form a seamless system.

Newer but increasingly popular techniques involve
the use of protein chips to identify protein interactions and
the use of complex instruments to determine the physical
structure of proteins. We are increasing our emphasis on the use
and applications of protein chips and have validated our
GeneTAC Biochip Systems ability to produce, process,
image and analyze protein chips. Another research area with
increased market attention is protein crystallography. This
technique allows researchers to use small volume dispensing to
form

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protein crystals and ultimately determine protein
structure. Our high throughput dispensing products acquired from
Cartesian are being increasingly used for protein
crystallization applications.


Our core proteomic applications are marketed and
sold as part of the Investigator Proteomic System which
includes the following offerings sold on an integrated and
individual basis:

2-D Electrophoresis
System.Our Investigator
2-D Electrophoresis System is a laboratory system for creating
2-D gels. It includes a gel apparatus, second dimension running
tank, power supply, chiller and a starter kit of consumables.

2-D Gel Imaging and
Analysis.Our ProImage
product is a complete gel imaging system featuring visible and
UV light capability through a 12-bit cooled CCD camera. The
accompanying HT Analyzer software allows users to analyze gels,
select protein spots and create a pick list for spot excision.

Protein
Picking.Our Investigator
ProPic Robotic Workstation is an automated system for dependable
spot excision from 2-D gels. System features include the ability
to generate a pick list automatically or by point and click
methods.

Protein
Digestion.Our Investigator
ProGest completely automates protein digestion in gel plugs,
from washing steps to enzyme addition and thermal incubation.
The system offers high throughput processing capabilities and
built in timers allowing for over night digestion.

MALDI Target
Preparation.Our
Investigator ProMS is an automated system for desalting,
concentrating and spotting samples onto MALDI targets.

Digestion and
Spotting.The Investigator
ProPrep is a fully integrated proteomic system used for
automated digestion and spotting. The system uses patented
technology to free researchers from tedious, error-prone manual
processes and enables more efficient use of expensive labor in
pharmaceutical and private labs.

Software.Our
Investigator Protein Warehouse software integrates
data from our instruments in a database that allows users to
search for changes in protein abundance and expression. In
addition, with our recent exclusive license of Proteometrics,
LLCs proteomic software offerings, we now offer a suite of
programs enabling automated analysis, storage and mining of mass
spectral data, either as individual standalone components or
integrated into an overall software solution. The software
allows the user to interpret mass spectra, peak lists and
database search results produced by any hardware manufacturer,
search engine or database provider. When coupled with Protein
Warehouse, the software package enables complete data
storage and tracking from sample ID data to mass spectra
database search results.

High Throughput Screening and Microscale
Liquid Handling Offerings

Our product offerings for microscale dispensing
allow for the high-speed screening of potential drug candidates
for biological activity. Our high throughput screening and
dispensing instrumentation is based on our patented
SynQuad and patent pending Hummingbird technologies.
SynQuad combines the high-precision displacement
capabilities of syringe pumps with the high-speed actuation of
micro-solenoid valves. The Hummingbird technology is based
on the use of small capillaries to aspirate a fixed volume and
then using a pressure pulse to eject the fluid from the
capillaries to provide a non-contact dispensing action. The
result is the ability to perform high-volume non-contact
dispensing of small biological materials with exceptional
accuracy. Our high throughput screening and micro-scale
dispensing offerings include the following:

Hummingbird. Hummingbird
is a dispensing system that provides simultaneous 96 and 384
channel non-contact dispensing of reagents used for assembling
assays with a proprietary patent-pending capillary technology.
This technology was developed by and acquired from
GlaxoSmithKline. The Hummingbird unit can be mounted on
different models of motion systems that include our
MicroSys, PreSys and ProSys platforms. The
MicroSys is a small bench type unit that can accommodate
up to three microtiter plate positions. The PreSys is a
small profile motion system that is used for integration in
robotic systems, typically located in major pharmaceutical
companies. The ProSys provides a larger deck area that will

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accommodate up to 20 microtiter plates and can be
integrated with robotic plate handlers. These systems are used
for reformatting reagent libraries from 96 or 384 microtiter
plates to 96, 384 or 1536 assay plates. The reagent libraries
can be small molecules, genomic materials, proteins, and other
biological materials.


SynQuad. SynQuad
is a programmable, non-contact dispensing system that provides
high speed dispensing of reagents onto a wide range of
substrates including microtiter plates, glass slides, and
membranes. SynQuad is often used for non-contact high
speed dispensing of common reagents, such as cells and buffers,
into assay microtiter plates. It is particularly effective in
low volume formats where the assay volume is less than 20
microliters. Another important SynQuad application is for
arraying various types of library reagents including small
molecules, genomic materials and proteins. The SynQuad can
be incorporated onto the different motion systems such as
MicroSys, PreSys and ProSys. In the case of
the ProSys, both the Hummingbird and SynQuad
can both be installed to dispense both common and library
reagents.

Marketing, Sales and Support

Marketing

We market our products to pharmaceutical and
biotechnology companies, government agencies, universities and
private research institutions. Our marketing strategy emphasizes
our integrated systems approach, sophisticated instrumentation,
proprietary consumables and product support. We market our
products through direct sales calls, advertising, marketing
materials, participation in international, national and regional
trade shows, and on our website at www.genomicsolutions.com. We
emphasize complete system sales and plan to increasingly target
the growing aftermarket for DNA microarrays, precast gels,
reagents, other consumables and support services.

In January 2002, we modified our strategic
sales and marketing alliance with PerkinElmer, Inc. PerkinElmer
previously had full responsibility for marketing and
distribution of our products internationally, excluding Japan.
Under our modified arrangement, PerkinElmer has the
non-exclusive right to market and sell most of our products
outside of the United States and Japan and non-exclusive rights
to distribute limited products in the United States and Japan.
We are currently enhancing our direct distribution efforts and
undertaking negotiations with other distributors to supplement
the efforts of PerkinElmer in select foreign markets.

Sales

We consider the United States, Japan and Europe
to be our core markets. We maintain company facilities and
direct sales forces in these markets. We will continue to invest
in expanding our sales presence in these markets. Product sales
in these markets generated approximately 70% of our revenues
during 2001.

PerkinElmer was the exclusive distributor of our
products outside of the United States and Japan from
December 1999 until January 2002, except for the
United Kingdom, where they were our exclusive distributor from
December 1999 to January 2001. For the year 2001, sales
generated by PerkinElmer accounted for approximately 30% of our
revenue.

Support

We consider product service and support to be a
critical component of our growth strategy. We believe our
existing customers provide opportunities for additional revenue
through the purchase of service contracts, software maintenance
and support, product upgrades, training, consumables and
additional instrument purchases and positive referrals. Service
and support activities are conducted by our in-house and field
service personnel in the United States, certain European
countries and Japan, and by PerkinElmer and other distributors
in other markets.

Research and Development

Research and development is an essential
component of our strategy to maintain and strengthen our global
position in DNA microarray, proteomic and high throughput
screening systems. As of December 31,

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2001, we had 35 employees working in
research and development, ten of whom hold Ph.D. or other
advanced degrees. In 2001, our research and development
expenditures were $6.8 million, representing 21.3% of total
operating expenditures. We anticipate that research and
development expenditures in 2002 will decrease when measured as
a percentage of sales.


Our research and development activities are
focused on new technology and product development, including
improvements to existing products and development of new
products or applications that capitalize on our expertise.
Particular areas of focus with respect to genomic products
include improvements in resolution and sensitivity for the
creation and analysis of DNA microarrays, additions to the
existing GeneMAP standard DNA microarray offerings, and
further integration and automation of our GeneTAC Biochip
System. In proteomics, addressing the needs for higher
throughput are being emphasized in both new product development
and general research and development. In the areas of high-speed
screening and microscale dispensing, we are focusing on
proprietary non-contact liquid handling systems and emerging
applications, such as protein crystallization. Instrumentation
and consumables are actively being developed to augment the
current product line.

Competition

The markets for our products are competitive and
we expect the intensity of competition to increase. Many of our
existing competitors, alone or in conjunction with strategic
partners, have greater financial, operational, sales, marketing
and research and development experience than we do. These
competitors and others may have developed products or
technologies of which we are unaware or may in the future
develop technologies or products that render our products
obsolete or non-competitive.

Our GeneTAC system consists primarily of
microarraying instruments, automated hybridization instruments
and scanners. Our primary competitors in the microarraying
instrument market are GeneMachines, Genetix, Ltd., and
BioRobotics, Ltd. (now owned by Apogent Technologies Inc.). Our
primary competitor in the automated hybridization area is
Amersham Biosciences. Finally, our primary competitors in the
scanner business are Axon Instruments, Inc., and PerkinElmer,
Inc. through its acquisition of Packard Biosciences.

Our Investigator Proteomic System consists
primarily of instruments for creating 2-D gels, imaging and
analyzing gels, picking proteins from gels, digesting proteins
and preparing protein samples for mass spectrometry. Our primary
competitors in the proteomic market are Bio-Rad Laboratories,
Inc. and Amersham Biosciences.

Finally, our primary competitors in the high
throughput screening and material dispensing business are CyBio,
Tecan AG, Robbins Scientific (now owned by Apogent
Technologies), PerkinElmer, Inc. (Packard Bioscience Division),
and Gilson, Inc.

Our competitors may succeed in producing products
that employ superior technologies or processes, obtain patents
for these products or market their products more effectively
than we market our products. We believe our ability to compete
effectively is dependent, in part, on our ability to continue to
improve the technologies underlying our products and systems to
enable researchers to conduct gene expression and proteomic
research with greater throughput and reproducibility at lower
cost.

Manufacturing

We currently have three production facilities.
Most of our proteomic instrumentation and our automated
hybridization systems manufacturing occurs in our Huntingdon,
England facility, high throughput screening and material
handling equipment production occurs in our Irvine, California
facility and imaging systems, application software, DNA
microarray, and consumable production occurs in our Ann Arbor,
Michigan facility.

For our instrumentation products, we focus on
manufacturing proprietary sub-assemblies, including electronic
modules, mechanical fixtures, and optical assemblies, as well as
final instrument assembly and testing. We contract labor
intensive sub-assemblies of a non-proprietary nature to third
party suppliers. This

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strategy minimizes labor overhead and maximizes
quality control and space utilization. We either manufacture
critical components or obtain them from a limited number of
third-party manufacturers with which we have developed strong
relationships. For non-critical components, we use multiple
redundant third-party suppliers to guard against part shortages
and component cost increases. We manage purchasing and inventory
using a computerized material resource planning system that is
linked via software to our accounting system.


Intellectual Property

To establish and protect our proprietary
technologies and products, we rely on a combination of patents,
copyrights, trademarks and trade secret laws, as well as
confidentiality provisions in our contracts.

We currently hold six U.S. patents and one
foreign patent. These patents generally relate to
electrophoretic, imaging, proteomic processing, high throughput
screening and hybridization technologies. In addition, we
currently have on file twenty U.S. patent applications, four
U.S. provisional patent applications, four Patent Cooperation
Treaty patent applications, and twenty foreign patent
applications. These applications generally relate to robotic,
imaging, bioinformatic and microfluidic technologies
incorporated into our products and may not result in issued
patents. Further, issued patents may not provide us with
significant protections.

Generally, United States patents have a term of
17 years from the date of issue for patents issued from
applications filed with the U.S. Patent Office prior to
June 8, 1995, and 20 years from the application filing
date or earlier claimed priority date in the case of patents
issued from applications filed on or after June 8, 1995.
Patents in most other countries have a term of 20 years
from the date of filing the patent application. Our issued
United States Patents will expire between 2007 and 2020. Our
success depends to a significant degree upon our ability to
develop proprietary product technologies. We intend to continue
to file patent applications as we develop new products and
technologies.

Patents may provide a certain level of protection
for intellectual property. However, the assertion of patent
protection involves complex legal and factual determinations and
is uncertain. In addition, the laws governing patentability and
the scope of patent coverage continue to evolve, particularly in
the areas of genomics. As a result, there can be no assurance
that patents will issue from any patent applications. The scope
of any of our issued patents may not be sufficiently broad to
offer meaningful protection. In addition, our patents or patents
licensed to us may be successfully challenged, invalidated,
circumvented or unenforceable so that our patent rights would
not create an effective competitive barrier. Moreover, the laws
of foreign countries may not protect our proprietary rights to
the same extent as do the laws of the United States and Canada.
In light of these factors, our intellectual property positions
bear some degree of uncertainty.

We also rely in part on trade secret protection
of our intellectual property. We attempt to protect our trade
secrets by entering into confidentiality agreements with third
parties, employees and consultants. Employees and consultants
also sign agreements requiring that they assign to us their
interests in patents and copyrights arising from their work for
us. However, it is possible that these agreements may be
breached or invalidated and if so, there may not be an adequate
corrective remedy available. Despite the measures taken to
protect intellectual property, there can be no assurance that
third parties will not breach the confidentiality provisions in
contracts or infringe or misappropriate patents, copyrights,
trademarks, trade secrets and other proprietary rights. In
addition, there can be no assurance that third parties will not
independently discover or invent competing technologies or
reverse engineer our trade secrets, or other technology.
Therefore, the measures taken to protect our proprietary rights
may not be adequate.

We copyright our software, software source code,
applications protocols, operator and service manuals and other
documents.

Although we are not a party to any legal
proceedings with regard to intellectual property rights, in the
future, third parties may file claims asserting that our
technologies or products infringe on or misappropriate their
intellectual property. We cannot predict whether third parties
will assert these claims against us or against the licensors of
technology licensed to us, or whether those claims will harm our
business. If we are forced to defend against such claims,
whether they are with or without merit, whether they are
resolved in favor of or against us or our licensors, we may face
costly litigation and diversion of managements attention

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and resources. As a result of these disputes, we
may have to develop costly non-infringing technology, or enter
into licensing agreements. These agreements, if necessary, may
be unavailable on acceptable terms, or not at all, which could
seriously harm our business or financial condition.


Recent Developments

PerkinElmer

In January 2002, we restructured our
distribution relationship with PerkinElmer. Under the
restructured relationship, PerkinElmer has the non-exclusive
right to market and sell most of our products outside of the
United States and Japan and non-exclusive rights to distribute
limited products in the United States and Japan.

Proteometrics

In February 2002, we entered into an
exclusive worldwide software license with Proteometrics, LLC.
Under this relationship, we obtained the exclusive right to
develop, support, and license the Proteometrics bioinformatic
software product line. Eleven of Proteometrics North
American-based employees have joined the Genomic Solutions
organization. In a related transaction, we acquired certain
assets of a Canadian affiliate of Proteometrics, LLC and will
operate out of its Winnipeg, Canada facility.

Government Regulation

We are not presently subject to direct
governmental regulation other than the laws and regulations
generally applicable to businesses in the jurisdictions in which
we operate.

Employees

As of December, 31, 2001, we had 156 full-time
employees, 28 of whom hold Ph.D. or other advanced degrees.
Approximately 35 employees are engaged in research and
development, 41 in marketing, sales and support, 49 in
manufacturing and 31 in intellectual property, finance and
other administrative functions. We believe our relationship with
our employees is good.

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RISK FACTORS


Risks Related to our Business

We have a history of losses and anticipate
future losses and negative cash flow.

We incurred net losses of $26.1 million for
the fiscal year ended December 31, 2001, $8.9 million
for the fiscal year ended December 31, 2000 and
$11.1 million for the fiscal year ended December 31,
1999. As of December 31, 2001, we had an accumulated
deficit of $68.1 million. During the course of the last
year, we instituted a restructuring plan designed to reduce our
operating expenses. However, even with such restructuring, we
need to generate significant revenues to achieve and maintain
profitability. Our continued revenue growth is dependent on many
factors beyond our control, including factors discussed in this
risk factors section, and we may not sustain our revenue growth
and we may become profitable at a different time or we may never
become profitable. Even if we do achieve profitability, we may
not sustain or increase profitability on a quarterly or annual
basis.

We may need additional capital to support our
operations, which may be unavailable or costly.

Based on our current plans, we believe that our
existing cash and cash equivalents will be sufficient to fund
our operating expenses, debt obligations and capital
requirements for the reporting period ending December 31,
2002. However, we may need to raise additional capital to fund
our research and development programs, to scale up manufacturing
activities, to commercialize our products and services, to
expand our sales and marketing capabilities and to fund
unforeseen expenses. Many factors, some of which are beyond our
control, will determine when and how much funds we will need,
and we may need funds sooner than currently anticipated. Even if
we have sufficient funds for our operating plans, we may choose
to raise additional capital due to market conditions or
strategic considerations.

Our systems and products may fail to maintain
or achieve sufficient market acceptance, which would impair our
ability to generate sales revenue

The commercial success of our systems and
products will depend upon continued and expanding market
acceptance of our new and existing DNA microarray, proteomic,
and high speed dispensing products by pharmaceutical and
biotechnology companies, academic research centers and
government research laboratories. Market acceptance depends on
many factors, including researchers belief that our
systems are an attractive alternative to current technologies
for the generation, acquisition, analysis and management of
genomic, proteomic and other drug discovery information. These
potential customers may be reluctant to accept newer
technologies which may require learning new techniques and
procedures and abandoning or modifying current methodologies
with which they are comfortable and familiar.

The relatively high price of our products and
services may deter potential customers from buying our
systems

The costs of our products may deter potential
customers from buying our products. We may be required by
competitive forces or for other reasons to discount the price of
our products to generate sales. Furthermore, our failure to
place sufficient quantities of our systems will have a material
adverse effect on our ability to sell consumables. Market
acceptance of our products could be adversely affected by
limited funding available for capital acquisitions by our
customers, as well as internal obstacles to customer approvals
for purchases of our products. Because of these and other
factors, we may not be able to maintain or achieve sufficient
market acceptance to become profitable.

Our products will require additional
development to remain competitive, which we may be unable to
achieve in a timely and cost-effective manner

While our products have been sold commercially,
our currently available microarray, proteomic and high speed
dispensing products may require design and functional
modifications as scientific procedures and methods change. As
scientific knowledge advances, we anticipate a need for new
instrumentation, software

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and consumable products. Any future products will
require significant development, investment and testing. We may
need to undertake costly and time-consuming efforts to achieve
these objectives. We cannot assure you that we will successfully
design, develop, manufacture, market or sell any future products
in a timely and cost-effective manner, if at all, or that we
will be able to sustain or increase sales revenue from our
current systems and products.


Concentration of customers may limit our
market and our ability to achieve sales growth

We expect that our customers will be concentrated
in a limited number of pharmaceutical and biotechnology
companies, academic research centers and government-funded
research laboratories that can afford our systems. As a result,
our financial performance may depend on large orders from a
limited number of customers, and the loss of, or reduction in,
purchase orders from our customers will impair our sales. If
consolidation trends in the pharmaceutical and biotechnology
industries continue, the number of our current and potential
customers could decrease. If this occurs, our large customers
may seek reductions in the prices of our products and services
based on volume purchases.

If we fail to achieve and maintain the high
manufacturing standards that our products require, or if we are
unable to develop additional manufacturing capacity, our
commercial opportunity will be reduced or eliminated

Our microarray and proteomic systems and high
speed dispensing products require careful calibration and
precise, high-quality manufacturing. If we fail to achieve and
maintain these high manufacturing standards, including the
incidence of manufacturing errors, design defects or component
failures, we could experience product recalls or withdrawals,
delays or failures in product testing or delivery, cost overruns
or other problems that will impair our sales. Despite our high
manufacturing standards, we cannot completely eliminate the risk
of errors, defects or failures. If we are unable to manufacture
our products on a timely basis at acceptable quality and cost
and in commercial quantities, or if we experience unanticipated
technological problems or delays in production, our commercial
opportunity will be reduced or eliminated.

The sales cycle for our products is lengthy
and we may spend significant time on sales opportunities with no
assurance of success

Our ability to obtain customers for our products
depends in significant part upon the perception that our
products can help accelerate drug discovery and development
efforts. The sales cycle for our systems is typically between
three and six months due to the education effort that is
required. Our sales efforts often require sales presentations to
various departments within a single customer, including research
and development personnel and key management. In addition, we
may be required to negotiate agreements containing terms unique
to each customer. We may expend substantial funds and management
effort with no assurance that we will successfully sell our
systems or products to the customer.

We depend on third-party suppliers, and any
failure to obtain product components from these suppliers in a
timely manner will interfere with our ability to produce our
products

The lasers, filters and optics used in our
GeneTAC Biochip Analyzers, the fluid transport mechanism
used in our GeneTAC Hybridization Station, and the valves
used in our highspeed dispensing products are supplied by a
limited group of suppliers. These products accounted for
approximately 50% of our revenue in 2001. If we are unable to
obtain these parts from our suppliers, we may be unable to
secure an alternative supplier within a reasonable time period,
or on commercially reasonable terms, if at all. Our reliance on
outside vendors generally, and a sole or a limited group of
suppliers in particular, could also result in reduced control
over quality, pricing and time of receipt of materials and
components.

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Any reduction, delay or termination of
government research funding could reduce, or cause timing
fluctuations in, our sales

We are dependent on revenue derived from sales to
researchers, universities, government laboratories and private
foundations whose funding may be partially dependent upon grants
from government agencies like the U.S. National Institutes
of Health and similar domestic and international agencies.
Although the level of research funding has increased during the
past several years, these increases may not continue or research
funding may be reduced. Government funding of research and
development is subject to the political process, which is
inherently fluid and unpredictable. Also, government proposals
aiming to reduce or eliminate budget deficits have sometimes
included reduced allocations or delays or terminations of
funding to the National Institutes of Health and other
government agencies that fund research and development
activities. A reduction in government funding for the National
Institutes of Health or other government research agencies could
result in lower sales or cause fluctuations in our sales and
operating results.

As a result of converting our distribution
arrangement with PerkinElmer, Inc. to non-exclusive, our
revenues could be adversely affected

In 2001 we relied on PerkinElmer, Inc. to
exclusively market and sell our products in every country except
the United States and Japan. For the year 2001, sales by
PerkinElmer accounted for approximately 30% of our revenue. In
November 2001, PerkinElmer completed its acquisition of Packard
Biosciences, giving it the opportunity to manufacture and
distribute products which are competitive with our microarray
scanning and high throughput screening products. In January
2002, we modified our arrangement so that PerkinElmer has the
non-exclusive right to market and sell most of our products
outside of the United States and Japan and non-exclusive rights
to distribute limited products in the United States and Japan.
If PerkinElmer does not successfully market and sell our
products in its capacity as a non-exclusive distributor, our
revenues will be adversely affected.

If we are unable to find additional
distributors to supplement PerkinElmers efforts, our
revenues could be adversely affected.

As a result of the modification of our
arrangement with PerkinElmer to make it a non-exclusive
distributor of our products, we have more flexibility and
control over the distribution of our products in foreign markets
while retaining the benefit of having PerkinElmer as a
distributor. We intend to supplement the efforts of PerkinElmer
by expanding our direct sales activities in Europe and
appointing new distributors in other foreign markets. Because
the PerkinElmer relationship was only recently revised, we have
not yet had adequate time to locate, hire and train the
appropriate number of new salespersons and distributors and we
cannot assure you that we will be able to do so. If we are not
successful in supplementing PerkinElmers sales efforts
with direct sales efforts and new distributors, our revenues
will be adversely affected.

The risks associated with maintaining
international operations could adversely affect our
business

The sale and manufacture of our products
internationally involve a number of risks, including:



| |   |                                                                                   
| | - | ----------------------------------------------------------------------------------
| |  | difficulties in staffing and managing foreign
	operations;                        
|
| |  | costs and risks of deploying systems in foreign
	countries;                       
|
| |  | changes in regulatory requirements;                                               
|
| |  | licenses, tariffs and other trade barriers;                                       
|
| |  | limited protection of intellectual property
	rights;                              
|
| |  | the burden of complying with a wide variety of
	complex foreign laws and treaties;
|
| |  | potentially adverse tax consequences; and                                         
|
| |  | political and economic instability.                                               

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Our international operations also will be subject
to the risks associated with the imposition of legislation and
regulations relating to the import or export of high-technology
products. Tariffs or restrictions upon the importation or
exportation of our products may be implemented by the United
States or other countries which will adversely affect our
ability to sustain or increase our international sales.

We are subject to foreign currency
fluctuations which may affect our operating results

A significant portion of our business
historically has been conducted in currencies other than the
U.S. dollar, which is our reporting currency. Our agreement
with PerkinElmer requires payment in U.S. currency.
Currently, only our business in Japan is conducted in foreign
currencies. Japan represented 18.2% of our total revenue in
fiscal 2001 and may continue to represent a large portion of our
total sales. As we establish direct sales forces in foreign
markets, some of our business may be conducted in foreign
currencies. Currency fluctuations among the U.S. dollar and
the currencies in which we will do business will cause foreign
currency transaction gains and losses in the period incurred. We
cannot predict the effects of exchange rate fluctuations upon
our future operating results because of the variability of
currency exposures and the potential volatility of currency
exchange rates. We may choose to engage in foreign exchange
hedging transactions to manage our foreign currency exposure,
but our strategies may not adequately protect our operating
results from the effects of exchange rate fluctuations and may
expose our business to additional risk and loss.

Our failure to attract and retain skilled
scientists, technicians and other key personnel could affect our
ability to develop and manufacture our products and provide our
services

As of December 31, 2001 Genomic Solutions
employed 156 people. Our ability to adequately service our
customers will depend, in large part, on our ability to hire and
retain scientists and technicians with the skills necessary to
keep pace with continuing changes in genomic and proteomic
research. We believe that there is a shortage of, and
significant competition for, scientists and technicians with the
skills and experience in biochemistry, chemistry and engineering
necessary to perform the services we require. We will compete
with the research departments of pharmaceutical companies,
biotechnology companies, contract research companies and
research and academic institutions for new personnel. We cannot
assure you that we will be successful in attracting, retaining
or motivating our scientific and technical personnel.
Additionally, we face risks associated with employee attrition
based on our recent restructuring and the general downturn in
the economy. Moreover, the hiring of additional personnel in
product development, manufacturing and sales and marketing will
increase burdens on our management, operational and financial
resources. We generally will not enter into employment
agreements requiring these employees to continue in our
employment for any period of time. Any failure on our part to
hire, train and retain sufficient qualified personnel would
seriously damage our business.

We face risks associated with acquisitions
that will harm our business if we do not adequately address
them

We have acquired complementary technologies,
product lines and personnel from several companies. Our ability
to manage our growth effectively will depend on our ability to
continue to implement and improve our operational, management
information and financial control systems and to expand, train
and manage our workforce.

We expect to from time to time review potential
acquisitions in the ordinary course of our business. These
potential acquisitions will involve numerous risks, including:



| |   |                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------
| |  | difficulties and expenses incurred in connection
	with the completion of these acquisitions;                 
|
| |  | the subsequent assimilation of the operations,
	personnel and services or products of the acquired companies;
|
| |  | the loss of momentum in research and product
	development activities;                                        
|
| |  | the difficulty of operating new businesses;                                                                  

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| |   |                                                                           
| | - | --------------------------------------------------------------------------
| |  | the diversion of managements attention from
	other business concerns; and
|
| |  | the potential loss of key employees of the
	acquired company.             

Acquisitions of foreign companies may also
involve the additional risks of assimilating differences in
business practices and overcoming language and cultural barriers.

Risks Related to Our Common Stock

Our stock price may be volatile and may lead
to losses by investors and result in securities
litigation

The trading price of our common stock may be
subject to wide fluctuation. Between our initial public offering
on May 5, 2000 and the conversion of all of our callable
common stock to common stock on April 18, 2001, the per
share sales price of our callable common stock on the Nasdaq
National Market fluctuated from a low of $1.906 to a high of
$30.125. Since April 19, 2001, the per share sales price of
our common stock on the Nasdaq National Market fluctuated from a
low of $1.30 to a high of $5.42.

Factors that might cause the market price of our
common stock to fluctuate include:



| |   |                                                                                          
| | - | -----------------------------------------------------------------------------------------
| |  | changes in our business or results of operation;                                         
|
| |  | quarterly variations in operating results or
	growth rates;                              
|
| |  | changes in estimates or recommendations by
	securities analysts;                         
|
| |  | market conditions related to investor interest in
	life science and biotechnology stocks;
|
| |  | general conditions in the industry;                                                      
|
| |  | announcements of mergers and acquisitions and
	other actions by competitors;             
|
| |  | regulatory and judicial actions;                                                         
|
| |  | general economic conditions; and                                                         
|
| |  | announcements of product developments and other
	events.                                 

If we are unable to address these risks or any
other problems that we encounter in combining our businesses,
our business may be disrupted, we could incur costs that are
higher than expected and we may suffer increased losses.

The recent economic downturn may adversely
affect our business

Our ability to sell our products is dependent
upon the general economic environment in which our customers
operate. The recent economic downturn could cause longer sales
cycles and slower growth. In addition, our business depends upon
personal interactions of our sales force and our customers.
Typically before a sale is consummated, the customer visits our
facilities to receive a demonstration of the products. As a
result of both the economic downturn and the terrorist attacks
in New York City and Washington, D.C., many customers have
curtailed travel. If our customers are unwilling to travel by
air, our sales could be adversely effected.

We do not expect to pay any dividends in the
foreseeable future

We have never paid dividends on our common stock
and we do not anticipate paying cash dividends in the
foreseeable future. We intend to retain any earnings to finance
the development of our business and, consequently, may never pay
cash dividends.

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Risks Related to Our Industry

We and our customers are subject to
significant technological uncertainty which could result in
reduced acceptance and demand for our products

Our products, and the research for which they are
predominately used, involve several new and complex
technologies. The instrumentation and software that comprise our
systems have only recently been used in commercial applications.
Scientists and technicians using our products require new
technical skills and training and may experience difficulties
with our products. As our products continue to be used, it is
possible that previously unrecognized defects will emerge.
Further, in order for us to address new applications for our
products, we may have to add features and design new software.
If we are unable to validate or achieve the improvements in our
products necessary for their continued successful
commercialization, the demand for our products will suffer.

The outcomes of research based on technologies
using our products will be subject to the risks of failure
inherent in the development of new technologies. These risks
include the possibility that:



| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | any products based on these technologies are
	ineffective, unreliable or unsafe, or otherwise fail;        
|
| |  | producers will be unable to manufacture the
	products on a large scale or market the products economically;
|
| |  | proprietary rights of third parties will preclude
	the marketing of the products; and                      
|
| |  | third parties will market equivalent or superior
	products.                                                

The failure of research and development
activities using our products to result in commercially viable
products could reduce the demand for our products.

We face intense competition which could result
in reduced acceptance and demand for our products

The genomic, proteomic and high throughput
screening markets are intensely competitive, highly fragmented
and rapidly changing. We will compete with many companies in the
United States and abroad that are engaged in the development and
production of products that analyze genomic and proteomic
information and equipment used for high speed dispensing.
Currently, our principal competition comes from established
companies and organizations providing products that use existing
technologies which perform many of the same functions for which
we will market our systems. These products include a variety of
established assays and tests, including gel-based technologies.
Future competition in the genomic, proteomic and high throughput
screening fields will likely come from existing competitors as
well as other companies seeking to develop new technologies for
such markets. In addition, pharmaceutical and biotechnology
companies have significant needs for genomic and proteomic
information and high speed dispensing equipment and may choose
to develop or acquire competing technologies to meet these
needs. If we are unable to compete effectively, there will be
reduced acceptance of and demand for our products.

Many of our competitors have greater financial,
technical, research, marketing, sales, distribution, service and
other resources than we will. Moreover, our competitors may have
greater name recognition and more extensive customer bases than
we will, and they may offer discounts as a competitive tactic.
In addition, several development-stage companies are currently
producing or developing products that compete with or will
compete with our products. Our competitors may develop or market
technologies or products that are more effective or commercially
attractive than our current or future products, or that may
render our technologies and products obsolete.

We may be involved in lawsuits to protect or
enforce our patents, which would be expensive and, if we lose,
may cause us to lose some of our intellectual property rights,
which would reduce our ability to compete in the
market

Our success will depend on our ability to obtain
and protect patents on our technology and to protect our trade
secrets. Our issued and future patents may not afford meaningful
protection for our technology and

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products. Others may challenge our patents and,
as a result, our patents could be narrowed, invalidated or
unenforceable. In addition, our current and future patent
applications may not result in the issuance of patents in the
United States or foreign countries. Competitors may develop
products similar to ours that do not conflict with our patents.
They may have filed applications or obtained patents or
proprietary rights competitive with or similar to ours. In order
to protect or enforce our patent rights, we may initiate patent
litigation which would be expensive, take significant time and
divert managements attention from other business concerns.


The patent position of biotechnology firms
generally is highly uncertain, involves complex legal and
factual questions, and has recently been the subject of much
litigation. No consistent policy has emerged from the U.S.
Patent and Trademark Office or the courts regarding the breadth
of claims allowed or the degree of protection afforded under
biotechnology patents. In addition, there is a substantial
backlog of biotechnology patent applications at the U.S. Patent
and Trademark Office, and the approval or rejection of patent
applications may take several years.

The rights we will rely upon to protect the
intellectual property underlying our products may not be
adequate, which could enable third parties to use our
technology, reducing our ability to compete in the
market

We will rely on trade secret protection for some
of our confidential and proprietary information for which we
have not sought patent protection. We believe that we have
developed proprietary technology and processes relating to
numerous aspects of our micro-array, proteomic and high
throughput systems. We have taken measures to protect our
proprietary technologies and processes and continue to explore
ways to enhance these protections. We require our employees,
consultants and advisors to execute confidentiality agreements.
However, we cannot guarantee that these agreements will provide
us with adequate protection against improper use or disclosure
of confidential information. Further, others may independently
develop substantially equivalent proprietary information and
techniques, or otherwise gain access to our trade secrets.

Our success will depend on our ability to
operate without infringing or misappropriating the proprietary
rights of others

We cannot be certain that U.S. or foreign patents
or patent applications of other companies do not exist or will
not be issued that would materially and adversely affect our
ability to commercialize our products. We may be sued for
infringing or misappropriating the patent or other intellectual
property rights of others. Intellectual property litigation is
costly, even if we prevail. In addition, litigation is time
consuming and could divert management attention and resources
away from our business. If we do not prevail in any litigation,
in addition to any damages we might have to pay, we could be
required to stop the infringing activity or obtain a license
requiring royalty payments. Any required license may not be
available to us on acceptable terms, or at all. In addition,
some licenses may be non-exclusive, and therefore, our
competitors may have access to the same technology licensed to
us. If we fail to obtain a required license or are unable to
design around a patent which we infringe, we may be unable to
sell some of our products.

Ethical concerns surrounding the use of
genomic information and misunderstanding of the nature of our
business could frustrate our ability to develop and sell our
existing products and new products

Genetic screening of humans is used to determine
individual predisposition to medical conditions. Genetic
screening has raised ethical issues regarding the
confidentiality and appropriate uses of the resulting
information. Government authorities may regulate or prohibit the
use of genetic screening to determine genetic predispositions to
medical conditions. Additionally, the public may disfavor and
reject the use of genetic screening.

Genomic and proteomic research is used to
determine the role of genes and proteins in living organisms.
Our products are designed and used for genomic and proteomic
research and drug discovery and cannot be used for genetic
screening without significant modification. However, it is
possible that government authorities and the public may fail to
distinguish between the genetic screening of humans and genomic
and proteomic

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research. If this occurs, our products and the
processes for which our products are used may be subjected to
government regulations intended to affect genetic screening.
Further, if the public fails to distinguish between the two
fields, it may pressure our customers to discontinue the
research and development initiatives for which our products are
used.


We may not have adequate insurance, and if we
are subject to product liability claims, we may experience
reduced demand for our products or be required to pay damages
that exceed our insurance limitations

Product liability claims asserted against us,
regardless of their merit or potential outcome, may adversely
effect our reputation, result in reduced demand for our products
and make it more difficult for us to expand our business. Also,
we cannot assure you that our current insurance policies will
adequately protect us or that we can or will maintain our
insurance policies on commercially acceptable terms, or at all.

ITEM 2. PROPERTIES

Facilities

Our principal executive offices are located in
27,665 square feet of leased space in Ann Arbor, Michigan. Our
imaging system manufacturing and engineering operations that
were previously performed in Lansing, Michigan have been
relocated to our Ann Arbor office. Our wholly-owned subsidiary
in the United Kingdom, Genomic Solutions Ltd., leases
approximately 18,000 square feet of space in Huntingdon, England
for robot and fluid handling systems development and manufacture
as well as marketing, sales, and support for the United Kingdom.
Additionally, our wholly-owned subsidiary in Japan, Genomic
Solutions KK, leases approximately 4,520 square feet of space in
Tokyo for domestic marketing, sales, and technical support. We
also lease approximately 12,000 square feet for our high
throughput screening operations in Irvine, California,
approximately 6,000 square feet for our North Carolina
operations and approximately 1,400 square feet for our Winnipeg,
Canada operations.

ITEM 3. LEGAL PROCEEDINGS

In December 2001, we filed suit against
Photonic Sensor Systems, Inc., a Georgia corporation, in the
federal district court for the Eastern District of Michigan
alleging three counts of breach of contract in connection with a
certain License and Development Agreement entered into with
Photonic and seeking monetary relief in the amount of our
original preferred stock investment of $500,000. Pursuant to the
License and Development Agreement, Photonic was obligated to
develop and create optical interferometer based chips and
related instrumentation for genomic and proteomic research. Our
claims against Photonic arise from Photonics failure to
perform its obligations under the License and Development
Agreement. In January 2002, Photonic filed a counter-claim
requesting monetary relief against us alleging breach of
contract, indemnification and tortious interference based on our
alleged failure to purchase stock upon the achievement of
certain milestones. We filed our answer denying the allegations
in the counter-claim in early February 2002. Management
believes that the counter-claim is without merit and intends to
defend it vigorously.

On March 21, 2002, we received a letter from
Photonic requesting permission to sell certain of its assets,
including computer equipment, and noting that Photonic had found
it necessary to cease operations and close its offices. We have
a liquidation preference with respect to any distribution to
shareholders of Photonics assets. We have not been able to
obtain any financial information from Photonic or otherwise
verify the value, if any, of our interest in Photonic. If
Photonic does not raise capital to reopen its operations, we may
lose the value of our investment in Photonics preferred
stock and in the License and Development Agreement.

From time to time, we are involved in routine
legal matters that arise in the ordinary course of our business.
We currently are not a party to any such matters that we believe
will have, individually or in the aggregate, a material adverse
effect on our business, financial condition, or results of
operations.

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

We held a special meeting of shareholders on
December 18, 2001. At the meeting, our shareholders were
asked to approve an Amended and Restated Plan of Merger (the
Merger) between the Company, Cartesian Technologies,
Inc. certain shareholders of Cartesian and Cartesian Acquiring
Corporation. Votes for the Merger were 13,117,606 and votes
against and withheld were 100,370.

Our shareholders were also asked to approve our
Fourth Amended and Restated Certificate of Incorporation (the
Fourth Certificate). There were 13,118,906 votes for
the Fourth Certificate and 99,070 votes against and withheld.



|        |                                                                        
|------- | -----------------------------------------------------------------------
|ITEM 5. | MARKET FOR THE COMPANYS COMMON EQUITY
	AND RELATED STOCKHOLDER MATTERS

Our common stock is traded and quoted on the
Nasdaq National Market (NNM) under the symbol
GNSL. The following table sets forth the high and
low sale prices for our common stock as reported on the NNM for
the periods indicated commencing on May 5, 2000, the date
of our initial public offering.

|                                       |  |      |      |  |     |  |      | 
|-------------------------------------- |  | ---- | ---- |  | --- |  | ---- | 
|                                       |  | High |      |  | Low | 
|                                       |  |      |      |  |     | 
|Fiscal Year Ended December 31,
	2001   |  |      |      |  |     |  |      | 
|First Quarter ended March 31, 2001     |  |      | 9.00 |  |     |  | 2.50 | 
|Second Quarter ended June 30, 2001     |  |      | 5.89 |  |     |  | 1.75 | 
|Third Quarter ended September 30, 2001 |  |      | 4.44 |  |     |  | 1.50 | 
|Fourth Quarter ended December 31, 2001 |  |      | 2.93 |  |     |  | 1.54 | 

|                                                                   |  |      |        |  |     |  |        | 
|------------------------------------------------------------------ |  | ---- | ------ |  | --- |  | ------ | 
|                                                                   |  | High |        |  | Low | 
|                                                                   |  |      |        |  |     | 
|Fiscal Year Ended December 31,
	2000                               |  |      |        |  |     |  |        | 
|Second Quarter, commencing on May 5, 2000
	and ended June 30, 2000 |  |      | 17.375 |  |     |  | 7.875  | 
|Third Quarter ended September 30, 2000                             |  |      | 30.125 |  |     |  | 11.813 | 
|Fourth Quarter ended December 31, 2000                             |  |      | 18.813 |  |     |  | 4.938  | 

On March 21, 2002, the last reported sales
price for our common stock as reported by the NNM was $1.52. As
of such date there were approximately 146 holders of record of
common stock. We believe there are a significant number of
beneficial owners of our common stock whose shares are held in
street name. We have never paid cash dividends on our common
stock. We currently intend to retain any earnings for use in our
operations and do not anticipate paying cash dividends in the
foreseeable future.

Recent Sales Of Unregistered
Securities

Within the period covered by this report, we have
issued and sold unregistered securities in the amounts, at the
times and for the aggregate consideration listed as follows:



| |   |                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------
| |  | In September 2001, we issued 29,240 shares
	of common stock to Molecular Dynamics, Inc. in settlement of all
	litigation between the companies.

The above shares of common stock were issued in a
private placement in reliance on Section 4(2) of the
Securities Act of 1933, as amended. No underwriters were used in
connection with the issuance.

Use of Proceeds From Our Initial Public
Offering

On May 10, 2000 we completed an initial
public offering of 7,000,000 shares of callable common stock at
$8.00 per share. The managing underwriters in the offering were
UBS Warburg LLC, Lehman Brothers and Dain Rauscher Wessels. The
shares of callable common stock sold in the offering were
registered under the Securities Act of 1933 on a Registration
Statement on Form S-1 (Registration No. 333-30246) that was
declared effective by the Securities and Exchange Commission on
May 4, 2000. The purchase price to the

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public was $8.00 per share and, after deducting
underwriter discounts and commissions, we received proceeds per
share of $7.44. The aggregate-offering price was approximately
$57.0 million. We incurred expenses of approximately
$6.1 million, of which approximately $4.3 million
represented underwriting discounts and commissions and
approximately $1.8 million represented other expenses
related to the offering. The proceeds to us from the offering,
including the over-allotment option, after deducting
underwriting discounts and commissions and other offering
expenses, were approximately $55.1 million. Of the net
offering proceeds, through December 31, 2001, approximately
$9.8 million has been used to payoff long-term and other
debt, approximately $5.5 million to repurchase our stock
from PerkinElmer, Inc., approximately $3.5 million to
purchase equipment and improve leaseholds, approximately
$3.5 million for capitalized license fees, approximately
$2.5 million to acquire Cartesian Technologies, Inc.,
approximately $500,000 for equity investment in a third party
and approximately $20.9 million for general corporate
purposes, including hiring additional personnel, development and
manufacturing of products and expansion of facilities. The
balance is invested in short-term investment-grade securities.


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ITEM 6. SELECTED FINANCIAL DATA

The selected financial data for the five years
ended December 31, 2001 are derived from the audited
Consolidated Financial Statements of the Company. The financial
data set forth below contains only a portion of our financial
statements, and should be read in conjunction with, the
Consolidated Financial Statements and related Notes and
Managements Discussion and Analysis of Financial
Condition and Results of Operations included elsewhere in
this Annual Report on Form 10-K.

|                                                                                               |                                                         |                                           |                          |        |         |         |         |        |        |        |         |       |         |        |        |       |        |        |        |       |        |        |  
|---------------------------------------------------------------------------------------------- | ------------------------------------------------------- | ----------------------------------------- | ------------------------ | ------ | ------- | ------- | ------- | ------ | ------ | ------ | ------- | ----- | ------- | ------ | ------ | ----- | ------ | ------ | ------ | ----- | ------ | ------ | -
|                                                                                               |                                                         |                                          
|                                                                                               |                                                         | Years ended December 31,                  |                         
|                                                                                               |                                                         |                                           |                         
|                                                                                               |                                                         | 2001                                      |                          |        | 2000    |         |         | 1999   |        |        | 1998    |       |         | 1997   |       
|                                                                                               |                                                         |                                           |                          |        |         |         |         |        |        |        |         |       |         |        |       
|                                                                                               |                                                         |                                          
|                                                                                               |                                                         | (In thousands, except per share data)     |                         
|Consolidated statement of operations
	data:                                                    |                                                         |                                           |                          |        |         |         |         |        |        |        |         |       |         |        |        |       |        |        |        |      
|Revenue                                                                                        |                                                         | $                                         | 16,840                   |        |         | $       | 19,077  |        |        | $      | 12,092  |       |         | $      | 5,507  |       |        | $      | 2,164  |      
|Cost of revenue(1)                                                                             |                                                         |                                           | 11,792                   |        |         |         | 9,374   |        |        |        | 6,990   |       |         |        | 3,266  |       |        |        | 1,063  |      
|                                                                                               |                                                         |                                           |                          |        |         |         |         |        |        |        |         |       |         |        |       
|                                                                                               | Gross profit                                            |                                           |                          | 5,048  |         |         |         | 9,703  |        |        |         | 5,102 |         |        |        | 2,241 |        |        |        | 1,101 |       
|                                                                                               |                                                         |                                           |                          |        |         |         |         |        |        |        |         |       |         |        |       
|Operating Expenses:                                                                            |                                                         |                                           |                          |        |         |         |         |        |        |        |         |       |         |        |        |       |        |        |        |      
|                                                                                               | Selling, general and administrative                     |                                           |                          | 14,136 |         |         |         | 11,919 |        |        |         | 8,652 |         |        |        | 6,372 |        |        |        | 2,198 |       
|                                                                                               | Research and development                                |                                           |                          | 6,797  |         |         |         | 5,596  |        |        |         | 4,830 |         |        |        | 3,354 |        |        |        | 942   |       
|                                                                                               | Restructuring and other unusual charges(2)              |                                           |                          | 10,936 |         |         |         | 600    |        |        |         | 438   |         |        |        | 340   |        |        |        | 1,578 |       
|                                                                                               |                                                         |                                           |                          |        |         |         |         |        |        |        |         |       |         |        |       
|                                                                                               |                                                         |                                           | Total operating expenses |        |         | 31,869  |         |        |        | 18,115 |         |       |         | 13,920 |        |       |        | 10,066 |        |       |        | 4,718  |  
|                                                                                               |                                                         |                                           |                          |        |         |         |         |        |        |        |         |       |         |        |       
|                                                                                               |                                                         |                                           | Loss from operations     |        |         | (26,821 | )       |        |        | (8,412 | )       |       |         | (8,818 | )      |       |        | (7,825 | )      |       |        | (3,617 | )
|Total other income (expense)                                                                   |                                                         |                                           | 721                      |        |         |         | 558     |        |        |        | (2,324  | )     |         |        | 39     |       |        |        | (261   | )    
|                                                                                               |                                                         |                                           |                          |        |         |         |         |        |        |        |         |       |         |        |       
|                                                                                               |                                                         | Loss before taxes and extraordinary items |                          |        | (26,100 | )       |         |        | (7,854 | )      |         |       | (11,142 | )      |        |       | (7,786 | )      |        |       | (3,878 | )     
|Benefit from income taxes                                                                      |                                                         |                                           |                         |        |         |         |        |        |        |        |        |       |         |        |       |       |        |        | 642    |      
|                                                                                               |                                                         |                                           |                          |        |         |         |         |        |        |        |         |       |         |        |       
|                                                                                               |                                                         | Loss before extraordinary items           |                          |        | (26,100 | )       |         |        | (7,854 | )      |         |       | (11,142 | )      |        |       | (7,786 | )      |        |       | (3,236 | )     
|Extraordinary items(3)                                                                         |                                                         |                                           |                         |        |         |         | (1,050  | )      |        |        |        |       |         |        |       |       |        |        | 1,245  |      
|                                                                                               |                                                         |                                           |                          |        |         |         |         |        |        |        |         |       |         |        |       
|Net Loss                                                                                       |                                                         |                                           | (26,100                  | )      |         |         | (8,904  | )      |        |        | (11,142 | )     |         |        | (7,786 | )     |        |        | (1,991 | )    
|Non-cash common stock warrant benefit (charge)(4)                                              |                                                         |                                           |                         |        |         |         | 1,059   |        |        |        | (3,861  | )     |         |        |       |       |        |        |       |      
|Deemed dividend upon issuance to and subsequent
	repurchase of stock from PerkinElmer, Inc.(5) |                                                         |                                           | (2,811                   | )      |         |         | (8,000  | )      |        |        |        |       |         |        |       |       |        |        |       |      
|                                                                                               |                                                         |                                           |                          |        |         |         |         |        |        |        |         |       |         |        |       
|Net loss attributable to common stockholders                                                   |                                                         | $                                         | (28,911                  | )      |         | $       | (15,845 | )      |        | $      | (15,003 | )     |         | $      | (7,786 | )     |        | $      | (1,991 | )    
|                                                                                               |                                                         |                                           |                          |        |         |         |         |        |        |        |         |       |         |        |       
|Net loss per share, basic and
	diluted:                                                        |                                                         |                                           |                          |        |         |         |         |        |        |        |         |       |         |        |        |       |        |        |        |      
|                                                                                               | Loss per share before extraordinary items               |                                           | $                        | (1.05  | )       |         | $       | (0.45  | )      |        | $       | (3.75 | )       |        | $      | (2.71 | )      |        | $      | (6.93 | )     
|                                                                                               | Net loss per share                                      |                                           | $                        | (1.05  | )       |         | $       | (0.51  | )      |        | $       | (3.75 | )       |        | $      | (2.71 | )      |        | $      | (4.27 | )     
|                                                                                               | Net loss per share attributable to common
	stockholders |                                           | $                        | (1.17  | )       |         | $       | (0.90  | )      |        | $       | (5.04 | )       |        | $      | (2.71 | )      |        | $      | (4.27 | )     
|                                                                                               | Weighted average common shares                          |                                           |                          | 24,791 |         |         |         | 17,526 |        |        |         | 2,974 |         |        |        | 2,876 |        |        |        | 467   |       




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In 2001, we recorded an inventory impairment
	charge of approximately $1,180,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(2) | In 2001, we recorded a restructuring charge of
	approximately $2,731,000 to close our Lansing, Michigan
	engineering and production facility; to reduce our workforce by
	25%; to record the impairment of goodwill originating from the
	acquisition of PBA Technologies, Ltd. and the electrophoresis
	and gel services business of ESA, Inc.; and to record the
	impairment of long lived assets and the loss on sale and
	disposal of assets. In 2001 we also recorded unusual charges of
	$4,200,000 for the write-off of in-process research and
	development acquired from Cartesian Technologies, Inc. and of
	$4,005,000 for the impairment of certain long lived assets. In
	2000 we recorded a restructuring charge of $600,000 to close the
	Chelmsford, Massachusetts proteomic facility. In 1999 we
	recorded an unusual charge of approximately $438,000 for the
	write-off of goodwill originating from the acquisition of
	certain assets of Insight Biomedical Imaging. In 1998 we
	recorded an unusual charge of approximately $340,000 for the
	write-off of in-process research and development acquired from
	ESA, Inc. In 1997 we recorded an unusual charge of approximately
	$1,578,000, consisting of approximately $861,000 for the write
	down of goodwill and intangible assets and approximately
	$328,000 write-off of unamortized capitalized software
	development costs related to the merger with B.I. System
	Corporation and approximately $389,000 write-off of in-process
	research and development acquired from PBA Technologies, Ltd.

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|    |                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | In 2000 we accounted for the amendment to the
	subordinated notes as an extinguishment of debt and recorded an
	extraordinary loss of $1,050,000. In 1997 we recorded an
	extraordinary gain of approximately $1,245,000 on the
	forgiveness of debt.                                                                               
|   
|(4) | In 2000 we recorded decretion of approximately
	$1,059,000 on the common stock warrants. In 1999 we recorded
	accretion of approximately $3,861,000 on the common stock
	warrants.                                                                                                                                                  
|   
|(5) | In 2000 we recorded a charge of $8,000,000
	related to the beneficial conversion feature associated with the
	issuance of Series P preferred stock to PerkinElmer, Inc.
	In 2001 we recorded a deemed dividend charge of approximately
	$2,811,000 related to the repurchase of a portion of these
	shares held by PerkinElmer, Inc.

|                                     |  |                    |        |  |      |   |        |      |  |   |        |   |  |      |        |  |  |   |       | 
|------------------------------------ |  | ------------------ | ------ |  | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ |  |  | - | ----- | 
|                                     |  |                   
|                                     |  | As of December 31, |       
|                                     |  |                    |       
|                                     |  | 2001               |        |  | 2000 |   |        | 1999 |  |   | 1998   |   |  | 1997 |       
|                                     |  |                    |        |  |      |   |        |      |  |   |        |   |  |      |       
|                                     |  |                   
|                                     |  | (In thousands)     |       
|Consolidated balance sheet data:     |  |                    |        |  |      |   |        |      |  |   |        |   |  |      |        |  |  |   |       | 
|Cash and cash equivalents            |  | $                  | 13,097 |  |      | $ | 40,159 |      |  | $ | 1,328  |   |  | $    | 2,880  |  |  | $ | 5,089 | 
|Total assets                         |  |                    | 47,924 |  |      |   | 65,224 |      |  |   | 13,858 |   |  |      | 11,694 |  |  |   | 8,579 | 
|Total debt                           |  |                    | 2,623  |  |      |   | 1,956  |      |  |   | 11,190 |   |  |      | 2,819  |  |  |   | 901   | 
|Total stockholders equity (deficit) |  | $                  | 34,439 |  |      | $ | 51,989 |      |  | $ | (9,381 | ) |  | $    | 5,485  |  |  | $ | 5,912 | 



|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF
	FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial
condition and results of operations should be read in
conjunction with the financial statements and the notes to those
statements included elsewhere in this Form 10-K.

Overview

Genomic Solutions develops, manufactures and
sells instruments, consumables and software for the life
sciences research and drug discovery markets. Our market focus
is based on three key high growth areas: genomics, proteomics
and high-throughput screening and dispensing systems. These
areas comprise three of the major technologies used by
researchers in studying disease and developing new drugs. Our
products allow researchers to perform high volume experiments,
and analyze the resultant data, at lower costs and in less time
than with traditional techniques. Our products are distributed
and sold to pharmaceutical and biotechnology companies,
government agencies, academic institutions and private research
organizations throughout the world.

We have a limited history of operations, and we
anticipate that our quarterly results will fluctuate for the
foreseeable future due to several factors, including market
acceptance of current and new products, the introduction of new
products by our competitors, the success of our research and
development projects and the timing of significant orders. Our
limited operating history makes it difficult or impossible to
accurately predict future operations.

Critical Accounting Policies

Managements Discussion and Analysis of
Financial Condition and Results of Operations discusses Genomic
Solutions consolidated financial statements, which have been
prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these
financial statements requires management to make estimates and
assumptions (see Note 2 to the consolidated financial
statements) that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. On an on-going basis, management evaluates its estimates
and judgments, including those related to bad debts,
inventories, investments, intangible assets, financing
operations, warranty obligations, restructuring costs,
contingencies and litigation. Management bases its estimates and
judgments on historical experience,

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our observance of trends in the industry,
information provided by our customers and information available
from other outside sources and on various other factors that are
believed to be reasonable under the circumstances. These sources
form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under
different assumptions and conditions.


Management believes the following critical
accounting policies, among others, affect its more significant
judgments and estimates used in the preparation of its
consolidated financial statements. Our critical accounting
policies include:

Inventories

Inventories consist primarily of purchased parts
and components used to make instrumentation and are stated at
the lower of cost, as determined on a first-in, first-out basis,
or market. Reserves for slow moving and obsolete inventories are
provided based on historical experience and current product
demand. If actual future demand or market conditions are less
favorable than those projected by management, additional
inventory write-downs may be required. We evaluate the adequacy
of these reserves quarterly. In 2001, in connection with the
restructuring of our operations, we recorded a write-down of
inventory of approximately $1.2 million related to
discontinuing the manufacture of certain products. This charge
is included as a separate component of cost of revenue in the
Companys consolidated statements of operations.

Impairment of long-lived assets

At each balance sheet date, we evaluate the
carrying value of goodwill and other long-lived assets for
impairment whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. If evidence of a
possible impairment exists, we estimate the undiscounted future
cash flows from the use of the asset and its eventual
disposition and then compare this amount to the carrying value
of the asset. If an impairment exists, we estimate the present
value of expected future cash flows and record an adjustment to
reduce the asset to its estimated fair value.

We record an investment impairment charge when we
believe an investment has experienced a decline in value that is
other than temporary. Future adverse changes in market
conditions or poor operating results of underlying investments
could result in losses or an inability to recover the carrying
value of the investments that may not be reflected in an
investments current carrying value, thereby possibly
requiring an impairment charge in the future.

In December 2001, we instituted litigation
against Photonic Sensors, Inc., a Georgia corporation, alleging
breach of contract in connection with a certain License and
Development Agreement entered into with Photonic. Concurrently
with the execution of the License and Development Agreement, we
entered into an agreement whereby we invested $500,000 in
Photonic in exchange for preferred shares of Photonic. The
preferred shares carry a liquidation preference giving us
priority over distributions to Photonic shareholders. On
March 21, 2002, we received a letter from Photonic
requesting permission to sell certain of its assets, including
computer equipment subject to discovery in the litigation. The
letter further noted that Photonic had found it necessary to
cease operations and close its offices. Other than the foregoing
letter, we have no notice of Photonics current or
impending insolvency and have not been able to obtain any
financial information to verify the value, if any, of our
interest in Photonic. If we are able to obtain information that
shows the value of our investment in Photonic has been impaired,
we will be required to write down part or all of the Photonic
investment on our financial statements.

In 2001, as a result of our restructuring
initiatives, we determined that goodwill related to certain past
acquisitions was impaired and recorded an adjustment of
approximately $266,000 to reduce these assets to their estimated
fair value. We also determined that one of our key license
agreements was substantially impaired due to certain U.S.
District Court summary judgment rulings determining that key
patents or claims subject to the agreement were invalid and
substantial changes in market conditions with respect to the
revenue and profit expectations of certain products produced
under the agreement. As a result of the impairments, we have
taken a write-down on certain unamortized license fees of
approximately $4.0 million to reduce this asset

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to its estimated fair value. These write-downs
are included in restructuring and other unusual charges in the
accompanying consolidated statements of operations.


In August 2001, the FASB issued Statement of
Financial Accounting Standards No. 144
(SFAS 144), Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS 144 supercedes
SFAS 121, although it retains the fundamental principles of
how to measure the impairment of assets held for use and assets
to be disposed of by sale. It requires that long-lived assets to
be disposed of other than by sale be considered held and used
until disposed of. It also provides new guidance for using a
probability-weighted approach for measuring future cash flows
when there are alternative courses of action. This statement is
effective for financial statements issued for years beginning
after December 15, 2001. Genomic Solutions has not yet assessed
the impact of this standard on its financial statements, but
does not expect the impact to be material.

Results of Operations

Years ended December 31, 2001 and
2000

Revenue decreased $2.2 million, or 12%, to
$16.8 million in 2001 from $19.1 million in 2000. The
decrease in total revenue was due to a $3.2 million decline
in instrumentation sales to $14.5 million in 2001 from
$17.7 million in 2000. Revenue increased $1.3 million,
or 19% in the United States, and decreased $3.5 million, or
29%, in international markets. During 2001, PerkinElmer was our
exclusive distributor in international markets with the
exception of Japan, where revenues decreased $1.6 million,
or 34%. Management believes that on an aggregate level this
international revenue decrease is attributable to
(1) market shifts in the genomic area discussed below;
(2) differences, including litigation, with our
distribution partner, PerkinElmer, all of which have been
satisfactorily resolved; (3) a shortfall in expected
PerkinElmer revenue because of PerkinElmers internal
reorganization; and (4) general global economic conditions
which have resulted in a slowdown or postponement of large
capital equipment purchases. With respect to PerkinElmer,
management believes that PerkinElmer will remain an important
and productive distribution partner and that the revised
distribution relationship with PerkinElmer that converts
PerkinElmer to a non-exclusive distributor is beneficial for
both companies. Our revised distribution relationship with
PerkinElmer allows us to retain the benefits of
PerkinElmers world-wide distribution force in 2002 while
pursing alternative distribution channels to supplement
PerkinElmers efforts in various foreign markets.

The largest area of our revenue decline was in
sales of our genomic instrumentation. Sales of our genomic
instruments decreased by $3.4 million in 2001 to
$7.6 million in 2001 from $11 million in 2000. The
revenue decline is attributable primarily to a 31% decrease in
sales of our GeneTacTM G3 Library Management
System to 31 units sold in 2001 from 45 units sold in
2000. We believe the decrease in G3 sales is the result of two
factors: (i) a significant reduction in demand for
instrumentation to feed high throughput DNA
sequencers with the completion of the Human Genome Project; and
(ii) a shift from using self-manufactured cDNA libraries
for DNA microarray production to printing arrays using purchased
cDNA libraries or oligonucleotides. We expect G3 sales to remain
flat or decrease in 2002, particularly in the United States.
However, we believe the genomic market, including DNA microarray
system sales, will continue to grow and represent a significant
portion of our sales. We intend to pursue these market
opportunities by increasing our emphasis on pre-printed
microarrays, focusing on sales of smaller benchtop arrayers,
including the microarray product line obtained in the Cartesian
Technologies acquisition, and through new and improved products,
such as the Hyb4TM hybridization station and
UC-4TM scanner.

Revenue from sales of our proteomic
instrumentation was down $197,000 in 2001 to $5.9 million
compared to $6.1 million in 2000. Despite this decline, we
believe that the proteteomics market will continue to grow, and
that our new products, like the ProPrepTM automated
digestion and spotting system, and our exclusive license of
Proteometrics, LLC software will allow us to expand our market
share in the proteomics area. The balance of our instrumentation
revenue was from sales of our products for documenting and
analyzing one-dimensional separations of DNA, which were
discontinued in 2000 in all markets except Japan, and which were
flat in 2001 compared to 2000. The revenue decreases described
above were partially offset by an increase in our consumables
and services revenue. Revenue from consumables and services
increased

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approximately $944,000, or 69%, to
$2.3 million in 2001 from $1.4 million in 2000. Our
2001 revenue also included $384,000 in instrumentation sales of
our high throughput screening products acquired from Cartesian
Technologies. Cartesians revenue represented less than one
months revenue and we expect that sales of products
acquired through our Cartesian acquisition will represent a
material portion of our 2002 sales.


Cost of revenue

Cost of revenue increased $2.4 million, or
26%, to $11.8 million in 2001 from $9.4 million in
2000. Cost of revenue in 2001 included a charge for
$1.2 million due to the disposal and markdown of inventory
in connection with our restructuring plan initiated in
September 2001. The increase in our cost of revenue was
also due to increased spending on product support and
technicians which included employing an average of
46 production and assembly personnel in 2001 as compared to
an average of 35 employees in 2000. Additionally, cost of
revenue increased due to increased facilities costs as a result
of operating for a full year in 2001 within our expanded robotic
and fluidic handling production facility in Huntingdon, England.
The number of employees involved in our manufacturing operations
following both our restructuring initiative announced in
September 2001 and the employees that joined us in connection
with the acquisition of Cartesian Technologies in December 2001
was 49 at December 31, 2001.

Selling, general and administrative
expenses

Selling, general and administrative expenses
increased $2.2 million, or 19%, to $14.1 million in
2001 from $11.9 million in 2000. Of this increase,
approximately $740,000 was attributable to increased
professional, legal and litigation expenses incurred primarily
as a result of business development activities including the
acquisition of Cartesian Technologies Inc. and settlement of the
PerkinElmer, Inc. lawsuit, approximately $297,000 was due to
salaries and other employee-related costs as a result of
employing an average of 76 sales, marketing and
administrative personnel during 2001 compared to an average of
69 employees in 2000, approximately $280,000 was
attributable to increased advertising and promotional
activities, approximately $149,000 was due to director and
officer insurance premiums for the period from May 2001 to
December 2001, approximately $229,000 was attributable to an
increase in our reserve for bad debts, approximately $64,000 was
due to an increase in outside consulting services and the
remaining approximately $458,000 was attributable to increased
office and communication expenses and depreciation expense
associated primarily with the additional personnel. At
December 31, 2001, following our restructuring plan and the
acquisition of Cartesian Technologies, we had 72 employees
engaged in sales, marketing and administration.

Research and development expenses

Research and development expenses increased
$1.2 million, or 21%, to $6.8 million in 2001 compared to
$5.6 million in 2000. The majority of this increase,
approximately $889,000 was due to an increase in outside
consulting services, patent costs, and license and development
fees associated with various agreements entered into by the
Company in the most recent twelve months. The increase in
development spending was also due to approximately $252,000 in
salaries and other employee related costs as a result of
employing an average of 44 research and development
personnel during 2001 compared to an average of 37 in 2000.
The remaining approximately $59,000 was attributable to
increased office expenses associated with the additional
personnel. At December 31, 2001, following our
restructuring and the acquisition of Cartesian Technologies, we
had 35 employees engaged in research and development.

Restructuring and other unusual
charges

In September 2001, we announced a
restructuring of our operations to implement significant cost
savings and to accelerate our plan to achieve profitability. As
part of the restructuring, we have closed our Lansing, Michigan
manufacturing facility and relocated those operations to our
headquarters in Ann Arbor. The restructuring reduced our
workforce in the United States and the United Kingdom by
approximately 25%. Also as part of our restructuring, we sold
certain assets used in connection with our proteomic contract
research services business to Proteomic Research Services, Inc.,
a newly formed company owned and controlled by former employees
of our company who were actively involved in providing
proteomic-related

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services. We own 19.9% of Proteomic Research
Services and have agreed to contract with it for assistance with
certain proteomic projects. In return, Proteomic Research
Services has agreed to purchase our instruments and consumables
to the extent such items are required in connection with its
operations.


In September 2001, we recorded
$2.7 million in restructuring charges and $1.2 million in
inventory impairment charges related to these initiatives. The
restructuring charge of $2.7 million consists of $637,000
for the impairment of certain long-lived assets, $917,000 for
the loss on disposal and sale of certain fixed assets, $688,000
for employee termination benefits for 50 employees, and $488,000
for exit costs associated with closing our Lansing, Michigan and
San Diego, California facilities. As of December 31, 2001,
we have terminated 45 employees and paid out $312,000 in
termination benefits. There have been no lease cancellation
costs paid out to date. All restructuring activities were
completed by January 31, 2002. At December 31, 2001,
the remaining balance of the restructuring reserve totaled
$860,000 and is included in accrued liabilities in our
consolidated balance sheet.

The inventory impairment charge of
$1.2 million relates to the write-down of inventories
related to discontinuing the manufacture of certain products.
This charge is included as a separate component of cost of
revenue in our consolidated statements of operations.

In December 2001, we also recorded certain
non-cash unusual charges of $4.2 million for the write-off of
in-process research and development acquired from Cartesian
Technologies, Inc. In addition, as a result of the impairment of
certain long-lived assets, we have taken a write-down on certain
unamortized license fees of approximately $4.0 million to
reduce this asset to its estimated fair value as more fully
disclosed under Critical Accounting Policies.

In May 2000, we recorded a restructuring
charge to operations of $600,000 in connection with the closing
of our proteomic services and chemical production facility
located in Chelmsford, Massachusetts. The charge consisted
primarily of $400,000 for employee termination benefits for
fifteen employees and $200,000 for exit costs associated with
closing the facility. The restructuring reserve was fully
utilized in 2000 and there was no remaining balance at December
31, 2000.

Interest expense

Interest expense decreased $2.4 million in
2001 to $207,000 from $2.6 million in 2000. This decrease
was primarily due to the repayment on June 9, 2000 of $6.0
million of subordinated notes with warrants issued in
April 1999 and $3.5 million of subordinated notes with
warrants issued in October 1999 as well as the reduction in
our average borrowings under our commercial bank borrowing
facility. The $207,000 of interest in 2001 represents interest
incurred on borrowings under our commercial bank borrowing
facility and under capital leases of fixed assets.

Interest expense in 2000 includes amortization
expense of approximately $965,000 related to the discount
recorded on the subordinated notes. The discount was being
amortized over the period from the date of issuance to
April 2000. In March and April 2000, we amended the
note agreements with the subordinated debt holders to change the
acceleration of the maturity date from the closing date of the
initial public offering to the earlier to occur of a date one
year from the closing of an initial public offering or the date
on which our cash and cash equivalents fall below
$50 million. We retained the right to prepay these notes at
any time. We accounted for the amendment to the subordinated
notes as an extinguishment of debt and recorded an extraordinary
loss of approximately $1.1 million in March 2000. The
extraordinary loss represents the difference between the
carrying value of the original subordinated notes less the
related unamortized debt issuance costs at March 24, 2000
and the estimated fair value of the new subordinated notes. The
effective interest rate was 53.0% and 154.1% for the
subordinated notes issued in April 1999 and
October 1999, respectively, calculated based on an expected
maturity date of April 2000. The effective interest rate on
the new subordinated notes was 8.75%.

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Interest income

Interest income decreased $1.6 million to
$1.1 million in 2001 from $2.7 million in 2000. The
decrease is due to lower average cash and cash equivalent
balances and lower interest rates in 2001.

Other income

Other income, net of other expense, decreased
$720,000 to net expense of $220,000 in 2001 from net income of
approximately $500,000 in 2000. This decrease is primarily due
to certain nonrecurring transactions incurred in 2000 which
included the $382,000 gain on sale of all our product and
intellectual property rights to the mass spectrometer developed
by us in collaboration with HD Technologies and the $282,000
gain on the sale of our 30% ownership interest in HD
Technologies recognized in January 2000.

Benefit from income taxes

We incurred net operating losses in 2001 and
2000, and consequently, we did not pay any federal income taxes.
At December 31, 2001, we have available net operating loss
carryforwards of approximately $42.9 million, which can be
utilized to offset future taxable income. These net operating
loss carryforwards expire between 2010 and 2021. Additionally,
utilization of net operating loss carryforwards are limited
under Section 382 of the Internal Revenue Code due to
ownership changes, as defined by Section 382, that occurred
in 1997 and as a result of our initial public offering completed
in May 2000. These and other deferred income tax assets are
fully reserved by a valuation allowance due to historical
operating losses. Realization of deferred tax assets is
dependent on future earnings, if any, the timing and amount of
which are uncertain. Accordingly, valuation allowances in
amounts equal to the deferred tax assets have been established
to reflect these uncertainties. See Note 10 of Notes to
Consolidated Financial Statements.

Years ended December 31, 2000 and
1999

Revenue

Revenue increased $7.0 million, or 58%, to
$19.1 million in 2000 from $12.1 million in 1999. This
increase in revenue was due primarily to $6.9 million from
sales of DNA microarray and proteomic systems. New product sales
consisted of $3.8 million from our GeneTAC Biochip
System, which includes the G3 Library Management Tool,
GeneTAC Hybridization Station and GeneTAC LS4
Biochip Analyzer, and $3.1 million from our
Investigator Proteomic System, which was first shipped in
June 1999. Increased sales of these products offset the
$245,000 revenue decline associated with our products for
documenting and analyzing one-dimensional separations of DNA and
proteins, which were discontinued in all markets except Japan.
The remainder of our 2000 revenues was attributable to services
and consumables.

Cost of revenue

Cost of revenue increased $2.4 million, or
34%, to $9.4 million in 2000 from $7.0 million in
1999. This increase was due primarily to $1.9 million in
increased cost of materials attributable to increased
instrumentation sales. The remainder of the increase in cost of
revenue was attributable to increased spending on product
support, employees and facilities.

Selling, general and administrative
expenses

Selling, general and administrative expenses
increased $3.2 million, or 38%, to $11.9 million in
2000 from $8.7 million in 1999. Of this increase,
$2.1 million was attributable to salaries, sales
commissions and other employee-related costs due primarily to
the addition of approximately 13 sales, marketing and
administrative personnel and increased sales commissions. The
remaining increase consisted of approximately $653,000 from
promotional activities and approximately $379,000 from increased
office expenses and depreciation expense associated with the
hiring of additional personnel.

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Research and development expenses

Research and development expenses increased
$766,000, or 16%, to $5.6 million in 2000 compared to
$4.8 million in 1999. Research and development spending
increased due primarily to an increase in salaries of
approximately $909,000 and other employee related costs.

Restructuring charge

In May 2000, we recorded a restructuring
charge to operations of $600,000 in connection with the closing
of our proteomic services and chemical production facility
located in Chelmsford, Massachusetts. The charge consisted
primarily of $400,000 for employee termination benefits for
fifteen employees and $200,000 for exit costs associated with
closing the facility. The restructuring reserve was fully
utilized in 2000 and there was no remaining balance at
December 31, 2000.

Interest expense

Interest expense increased $123,000 in 2000 to
$2.6 million from $2.5 million in 1999. This increase
was due primarily to $6 million of subordinated notes with
warrants issued in April 1999 and $3.5 million of
subordinated notes with warrants issued in October 1999 and the
increase in borrowings under our fixed asset lease line
agreement and our commercial bank borrowing facilities.

Interest expense in 2000 includes amortization
expense of approximately $965,000 related to the discount
recorded on the subordinated notes. The discount was being
amortized over the period from the date of issuance to April
2000. In March and April 2000, we amended the note agreements
with the subordinated debt holders to change the acceleration of
the maturity date from the closing date of the initial public
offering to the earlier to occur of a date one year from the
closing of an initial public offering or the date on which our
cash and cash equivalents fall below $50 million. We
retained the right to prepay these notes at any time. We
accounted for the amendment to the subordinated notes as an
extinguishment of debt and recorded an extraordinary loss of
approximately $1.1 million in March 2000. The extraordinary
loss represents the difference between the carrying value of the
original subordinated notes less the related unamortized debt
issuance costs at March 24, 2000 and the estimated fair
value of the new subordinated notes. The effective interest rate
was 53.0% and 154.1% for the subordinated notes issued in April
1999 and October 1999, respectively, calculated based on an
expected maturity date of April 2000. The effective
interest rate on the new subordinated notes was 8.75%.

We repaid the $6 million of subordinated
notes issued in April 1999 and $3.5 million of subordinated
notes issued in October 1999 in their entirety on
June 9, 2000.

Interest income

Interest income increased $2.6 million in
2000 to $2.7 million from $111,000 in 1999. Interest income
increased due to higher average cash and cash equivalent
balances in 2000, resulting primarily from the investment of the
net proceeds from our initial public offering which closed on
May 10, 2000, and $8 million in gross proceeds from
the sale of preferred stock to PerkinElmer in January 2000.

Benefit from income taxes

We incurred net operating losses in 2000 and
1999, and consequently, we did not pay any federal income taxes.
At December 31, 2000, we have available net operating loss
carryforwards of approximately $27.4 million, which can be
utilized to offset future taxable income. These net operating
loss carryforwards expire between 2010 and 2020. Additionally,
utilization of net operating loss carryforwards are limited
under Section 382 of the Internal Revenue Code due to
ownership changes, as defined by Section 382, that occurred
in 1997 and as a result of our initial public offering completed
in May 2000. These and other deferred income tax assets are
fully reserved by a valuation allowance due to historical
operating losses. Realization of deferred tax assets is
dependent on future earnings, if any, the timing and amount of
which are uncertain.

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Accordingly, valuation allowances in amounts
equal to the deferred tax assets have been established to
reflect these uncertainties. See Note 10 of Notes to
Consolidated Financial Statements.

Recent accounting pronouncements

Statements of Financial Accounting Standards
(SFAS) No. 141, Business
Combinations and SFAS No. 142 Goodwill and
Other Intangible Assets, was recently approved by the
Financial Accounting Standards Board. These pronouncements amend
the accounting for business combinations, goodwill, and
intangible assets. SFAS No. 141 eliminates the
pooling-of-interests method of accounting for business
combinations and further clarifies the criteria to recognize
intangible assets separately from goodwill. The requirements of
SFAS No. 141 are effective for any business combination
that is completed after September 30, 2001. SFAS
No. 142 no longer permits amortization of goodwill and
indefinite lived intangible assets. Separable intangible assets
that are not deemed to have an indefinite life will continue to
be amortized over their useful lives. In addition, SFAS
No. 142 establishes a new method of testing goodwill for
impairment by using a fair-value approach. The amortization
provisions of SFAS No. 142 apply to goodwill and intangible
assets acquired after June 30, 2001. With respect to
goodwill and intangible assets acquired prior to July 1,
2001, companies are required to adopt the pronouncement in their
fiscal year beginning after December 15, 2001.

The effect of adopting SFAS No. 142 in our
fiscal year beginning January 1, 2002 on the related
goodwill and intangible assets acquired in connection with our
acquisition of Cartesian Technologies Inc. in December 2001
will be to reduce operating expenses by approximately $284,000
per quarter in 2002 or approximately $1.2 million for the
year.

In June 2001, the FASB issued Statement of
Financial Accounting Standards No. 143
(SFAS 143), Accounting for Asset
Retirement Obligations. SFAS 143 establishes
standards associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. This statement
is effective for financial statements issued for fiscal years
beginning after June 15, 2002. We have not yet assessed the
impact of this standard on its financial statements, but does
not expect the impact to be material.

In August 2001, the FASB issued Statement of
Financial Accounting Standards No. 144
(SFAS 144), Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS 144 supercedes
SFAS 121, although it retains the fundamental principles of
how to measure the impairment of assets held for use and assets
to be disposed of by sale. It requires that long-lived assets to
be disposed of other than by sale be considered held and used
until disposed of. It also provides new guidance for using a
probability-weighted approach for measuring future cash flows
when there are alternative courses of action. This statement is
effective for financial statements issued for years beginning
after December 15, 2001.

Liquidity and Capital Resources

At December 31, 2001 our cash and cash
equivalents totaled $13.1 million compared to
$40.2 million at December 31, 2000. As detailed below,
the $27.1 million decrease in cash and cash equivalents in
2001 is principally due to $14 million net cash used in
operating activities during the current year, $5.5 million
used to repurchase our stock from PerkinElmer, Inc. which
resulted in the relinquishment of its call right on our stock,
$3.5 million in license fee payments for certain genomic
technologies, $2.6 million in connection with the
acquisition of Cartesian Technologies, Inc., $2 million in
fixed asset equipment additions primarily for the purchase of
laboratory equipment, $550,000 investment in various development
projects including agreements with NuTec Sciences, Inc.,
Proteometrics, Inc., University of Louisville Research
Foundation and Photonic Sensors, and $1.9 million cash used
in repayment of capital lease obligations of fixed assets. We
borrowed $2.5 million under our bank line of credit
borrowing facility and received $108,000 in proceeds from the
sale of our common stock upon the exercise of vested stock
options by employees during 2001. The remaining approximately
$300,000 increase in cash is due to changes in exchange rates.

We believe our existing cash and cash equivalents
will be sufficient to fund our operating expenses, debt
obligations and capital requirements for the reporting period
ending December 31, 2002. Our primary sources of liquidity
include our cash balances and our future operating cash flows.
Managements goal is to achieve

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positive operating cash flows sometime during
2002. Our ability to achieve this goal depends upon several
factors including the following: (i) the cost savings from
our restructuring initiatives put in place in late 2001;
(ii) our success in expanding our direct sales force and
building our distributor base to supplement PerkinElmers
sales efforts; (iii) our ability to efficiently manage our
working capital; and (iv) achieving our anticipated growth
in revenue derived not only from the sales of the Companys
genomic and proteomic product offerings but also from sales of
our high throughput screening and dispensing instrumentation
acquired in December 2001 with the acquisition of Cartesian
Technologies, Inc. and sales of our protein analysis software
subject to our exclusive license with Proteometrics, LLC.


Our expected revenue growth is dependent on many
factors beyond our control, including factors discussed in the
risk factors section of this Form 10-K, and we may not
realize our revenue growth and we may become profitable at a
different time or we may never become profitable. Given the
recent economic downturn, customers may delay or rethink large
capital equipment purchases and budgets, making forecasting more
difficult. Even if we do achieve profitability, we may not
sustain or increase profitability on a quarterly or annual
basis. These and other factors, some of which are beyond our
control, will determine when and how much funds we will need,
and we may need funds sooner than currently anticipated. We may
need to raise additional capital to fund our research and
development programs, to scale up manufacturing activities, to
expand our sales and marketing capabilities or to fund
unanticipated expenses. Even if we have sufficient funds for our
operating plans, we may choose to raise additional capital due
to market conditions or strategic considerations. We may seek
funding through public or private equity offerings, debt
financing or additional collaborations. We cannot assure you
that additional financing will be available on favorable terms,
if at all.

Cash used in operating activities, which includes
changes in working capital, during 2001 was $14 million
compared with $11.1 million for the same period in 2000.
Cash used in operations during 2001 consisted primarily of our
net loss of $26.1 million which included $14.4 million
in total non-cash charges. These non-cash charges consisted of
$4.2 million for the write-off of in-process research and
development acquired from Cartesian Technologies, Inc.,
$4 million for the impairment of certain long lived assets,
$2.7 million in restructuring charges, $1.2 million in
inventory impairment charges related to the restructuring
initiatives, $1.8 million for depreciation and amortization
expense, $463,000 for amortization of capitalized license fees,
and $80,000 in other non-cash charges. The use of cash in
operating activities in 2001 was also due to an increase of
$3.1 million in inventory, consisting primarily of
increases in raw material and finished goods stock of our
genomic and proteomic instrumentation. The use of cash in
operating activities in 2001 was impacted by a decrease of
$2.1 million in accounts payable and accrued liabilities.
The decrease in accounts payable was due to a decrease in
inventory receipts during the last two months of 2001 compared
to the same period in 2000. The decline in inventory receipts
was a result of the decline in revenue in the fourth quarter of
2001 as compared to the same period in 2000. The decrease in
accrued liabilities is due to decreases in accrued bonus and
accrued commissions also caused by the decline in revenue in
2001 as compared to 2000 and to a decrease in accrued taxes. In
2000 taxes were accrued on the $282,000 gain on sale of
investment in HD Technologies and the $382,000 gain on sale of
assets. Cash used in operating activities in 2001 was partially
offset by a $2.6 million decrease in accounts receivable
due to improved collections and lower sales during the last six
months of 2001 compared to the same period in 2000, and a
$211,000 decrease in prepaid expenses and other current assets.

Cash used in operations during 2000 totaled
$11.1 million primarily due to our net loss of
$8.9 million which included total non-cash charges of
$3.6 million. These non-cash charges consisted of
$1.3 million for depreciation and amortization expense,
$1.1 million for extraordinary loss on extinguishment of
debt, $965,000 for amortization of discount on subordinated
notes with warrants, $600,000 for restructuring charges,
$208,000 for stock issued in lieu of interest, $77,000 in other
non-cash charges, and non-cash gains of $282,000 for gain on
sale of investment in HD Technologies and $382,000 for gain on
sale of assets. The use of cash in operating activities in 2000
was also due cash used to fund $5.8 million in additional
working capital which included increases of $4.2 million in
accounts receivable, $2.4 million in inventories to
accommodate increased sales and $817,000 in prepaid expenses and
other, partially offset by $1.6 million increase in
accounts payable and accrued liabilities due primarily to
increases in cost of revenue and total operating expenses.

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Our investing activities for 2001 used cash of
$8.6 million compared with $1.0 million used in 2000.
Cash used in investing activities during 2001 was attributable
to $3.5 million in license fee payments for certain genomic
technologies, $2.6 million used to acquire Cartesian
Technologies, Inc., $2 million in fixed asset equipment
additions primarily for the purchase of laboratory equipment,
$550,000 investment in various development projects including
agreements with NuTec Sciences, Inc., Proteometrics, Inc.,
University of Louisville Research Foundation and Photonic
Sensors.

In 2000 cash used in investing activities was
attributable to $1.7 million in fixed asset expenditures
primarily for laboratory equipment and $103,000 for other
assets, partially offset by receiving approximately $575,000 in
cash from the sale of our 30% ownership interest in HD
Technologies and $168,000 from the sale of assets.

Net cash used in financing activities in 2001 was
$4.8 million compared with net cash provided by financing
activities of $50.9 million in 2000. Cash used in financing
activities in 2001 was primarily due to repurchase our stock
from PerkinElmer, Inc., which resulted in the relinquishment of
its call right on our stock, and the repayment of long-term debt
related to our capital fixed assets leased lines of credit of
$1.9 million. The cash used in financing activities in 2001
was partially offset by the receipt of $2.5 million in
borrowings under our primary bank line of credit and receipt of
$108,000 in proceeds from the sale of our common stock upon the
exercise of vested stock options by our employees.

In 2000 cash provided by financing activities
included the receipt of $55.1 million in net proceeds,
after deducting underwriters discounts and commissions and other
offering expenses, from the sale of callable common stock in our
initial public offering, receipt of $7.4 million in net
proceeds from the sale of preferred stock in January 2000,
receipt of $266,000 from the issuance of callable common stock
to employees under the employee stock purchase plan and upon the
exercise of vested stock options, and from the receipt of
$113,000 from the sale of assets under a sale-leaseback
transaction. Financing activities for 2000 also included the
repayment on June 9, 2000 of $6.0 million subordinated
notes with warrants issued in April 1999 and
$3.5 million of subordinated notes with warrants issued in
October 1999, the repayment of other debt of
$2.5 million.

In June 2001, we amended our primary bank
line-of-credit agreement to provide for borrowings up to
$2.5 million through June 2002. As of
December 31, 2001, there were outstanding borrowings of
$2.5 million under this line of credit, which were
subsequently repaid. The average borrowings outstanding under
this line of credit during the fourth quarter ended
December 31, 2001 was approximately $30,000. The Company
from time to time draws on this line of credit to fund its short
term working capital needs. Management believes it has the
ability to extend this line of credit and has the working
capital capacity to support the current borrowing level.

Working capital decreased $28.2 million to
$15.8 million at December 31, 2001 from
$44.0 million at December 31, 2000. The decrease in
working capital is primarily due to the $27.1 million
decrease in cash. Also contributing to the decline in working
capital are decreases of $2.3 million in accounts
receivable and $166,000 in prepaid expenses and other current
assets, and increases of $1.8 million in borrowings under
our primary bank line of credit, and $739,000 in accounts
payable and other current liabilities. The decrease in working
capital was partially offset by a $3.9 million increase in
inventory.

As of December 31, 2001, we had an aggregate
$123,000 in future contractual obligations of principle payments
under certain capital fixed asset leases and other long-term
debt, of which $57,000 is to be paid within the next twelve
months. In addition to our short-term borrowings and capital
leases, we have fixed

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contractual obligations under various lease
agreements. Our contractual obligations were comprised of the
following as of December 31, 2001:


|                                   |  |                |       |                         |          |   |       |       |  |     |       |  |         |       |    |  |  |   |   | 
|---------------------------------- |  | -------------- | ----- | ----------------------- | -------- | - | ----- | ----- |  | --- | ----- |  | ------- | ----- | -- |  |  | - | - | 
|                                   |  |                |       |                        
|                                   |  |                |       | Payments Due By Period,
|                                   |  |                |       |                        
|                                   |  |                |       | Less Than               |          |   | 1-3   |       |  | 4-5 |       |  | After 5
|                                   |  | Total          |       |                         | One Year |   |       | Years |  |     | Years |  |         | Years
|                                   |  |                |       |                         |          |   |       |       |  |     |       |  |         |      
|                                   |  |               
|                                   |  | (In thousands)
|Contractual Obligations:           |  |                |       |                         |          |   |       |       |  |     |       |  |         |       |    |  |  |   |   | 
|Short-term borrowings              |  | $              | 2,500 |                         |          | $ | 2,500 |       |  | $   |      |  |         | $     |   |  |  | $ |  | 
|Capital lease obligations          |  |                | 153   |                         |          |   | 85    |       |  |     | 68    |  |         |       |   |  |  |   |  | 
|Operating leases                   |  |                | 1,719 |                         |          |   | 822   |       |  |     | 833   |  |         |       | 64 |  |  |   |  | 
|                                   |  |                |       |                         |          |   |       |       |  |     |       |  |         |       |   
|Total contractual cash obligations |  | $              | 4,372 |                         |          | $ | 3,407 |       |  | $   | 901   |  |         | $     | 64 |  |  | $ |  | 
|                                   |  |                |       |                         |          |   |       |       |  |     |       |  |         |       |   



|         |                                                            
|-------- | -----------------------------------------------------------
|ITEM 7A. | QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT
	MARKET RISK

Interest Rates

The primary objective of our investment
activities is to preserve capital until it is required to fund
operations while at the same time maximizing the income we
receive from our investments without significantly increasing
risk. To minimize this risk, we maintain our cash and cash
equivalents in money market funds. The average duration of all
our investments in 2001 was less than 90 days. Due to the
short-term nature of these investments, a 10% movement in market
interest rates would not have a significant impact on the total
value of our portfolio as of December 31, 2001.

Foreign currency rate fluctuations

The local currency for our subsidiary in the
United Kingdom is the British pound sterling and the local
currency for our subsidiary in Japan is the Japanese yen. We
have converted the British pound sterling and the Japanese yen
to the U.S. dollar using the exchange rate in effect at the
balance sheet date and have used the average exchange rate for
the period for income statement items. The effects of conversion
are recorded as a separate component of stockholders
equity. Our agreement with PerkinElmer requires payment in U.S.
currency. As a result, only business in the United Kingdom and
Japan by our subsidiaries is conducted in foreign currencies.
Exchange gains and losses are recorded using the actual exchange
differences on the date of the transaction. We have not taken
any action to reduce our exposure to changes in foreign currency
exchange rates, such as options or futures contracts, with
respect to transactions with our foreign subsidiaries or
customers. The net tangible assets of our British subsidiary,
were approximately $7.8 million at December 31, 2001.
A hypothetical 10% decrease in the value of the British pound
sterling relative to the U.S. dollar would result in an
unrealized foreign exchange translation loss of approximately
$781,000. The net tangible liabilities of our Japanese
subsidiary were approximately $213,000 at December 31,
2001. A hypothetical 10% increase in the value of the Japanese
yen relative to the U.S. dollar would result in an unrealized
foreign exchange translation loss of approximately $21,000.

Foreign currency transaction gain
(loss) resulting from product and service sales in foreign
denominated currencies total approximately $(257,000),
$(82,000), and $113,000 in fiscal 2001, 2000 and 1999.

Inflation

We do not believe that inflation has had a
material impact on our business or operating results during the
periods presented.

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|        |                                             
|------- | --------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY
	DATA

Refer to the Index on Page F-1 of the
Financial Report included herein.



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

None.






PART III


The information required by Items 10, 11, 12
and 13 will be included in our proxy statement for our Annual
Meeting of Shareholders to be held in 2002, and is incorporated
herein by reference.






PART IV




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

(a) The following documents are filed
herewith as part of this Form 10-K:



| |                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) A list of the financial statements
	required to be filed as a part of this Form 10-K is shown
	in the Index to the Financial Statements included in
	Part II, Item 8 of this report.                                                                                                                                     
|
| | (2) Schedules other than those listed in the
	Index to the Financial Statements contained in
	Part II, Item 8 of this report are omitted because of
	the absence of the conditions under which they are required or
	because the information required is included in the consolidated
	financial statements or notes thereto.
|
| | (3) A list of the exhibits required by
	Item 601 of Regulation S-K to be filed as a part of
	this Form 10-K is shown on the
	Exhibit Index filed herewith.                                                                                                                                                                   

(b) Reports on Form 8-K

We filed reports on Form 8-K during the
fourth quarter December 31, 2001 dated October 2, 2001
and December 21, 2001.

32



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##### Table of Contents








SIGNATURES


Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Date: March 28, 2002



| |                       
| | ----------------------
| | GENOMIC SOLUTIONS INC.



| |     |                        
| | --- | -----------------------
| | By: | /s/ JEFFREY S. WILLIAMS

| |                                   
| | ----------------------------------
| |                                   
| | Jeffrey S. Williams, President and
| | Chief Executive Officer           



| |     |                         
| | --- | ------------------------
| | By: | /s/ STEVEN J. RICHVALSKY

| |                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                       
| | Steven J. Richvalsky, Chief Financial Officer,
	Executive Vice President and Treasurer (Principal Financial
	Officer and Principal Accounting Officer)

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

|                                                 |  |                                                 |  |      |                | 
|------------------------------------------------ |  | ----------------------------------------------- |  | ---- | -------------- | 
|Name                                             |  | Title                                           |  | Date |               
|                                                 |  |                                                 |  |      |               
|                                                
|/s/ JEFFREY S. WILLIAMSJeffrey S. Williams       |  | President, Chief Executive Officer and Director |  |      | March 28, 2002 | 
|                                                
|/s/ ROBERT G. SHEPLERRobert G. Shepler           |  | Chairman of the Board of Directors              |  |      | March 28, 2002 | 
|                                                
|/s/ J. MATTHEW MACKOWSKIJ. Matthew Mackowski     |  | Director                                        |  |      | March 28, 2002 | 
|                                                
|/s/ DANIEL J. MITCHELLDaniel J. Mitchell         |  | Director                                        |  |      | March 28, 2002 | 
|                                                
|/s/ DAMION E. WICKER, M.D.Damion E. Wicker, M.D. |  | Director                                        |  |      | March 28, 2002 | 
|                                                
|/s/ THOMAS C. TISONEThomas C. Tisone, Ph.D.      |  | Director                                        |  |      | March 28, 2002 | 

33



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##### Table of Contents



GENOMIC SOLUTIONS INC.

ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA

Index to Consolidated Financial
Statements

|                                                           |  |      |     | 
|---------------------------------------------------------- |  | ---- | --- | 
|                                                           |  | Page |    
|                                                           |  |      |    
|Report of Independent Public Accountants                   |  |      | F-2 | 
|Consolidated Balance Sheets                                |  |      | F-3 | 
|Consolidated Statements of Operations                      |  |      | F-4 | 
|Consolidated Statements of Stockholders
	Equity (Deficit) |  |      | F-5 | 
|Consolidated Statements of Cash Flows                      |  |      | F-7 | 
|Notes to Consolidated Financial Statements                 |  |      | F-8 | 

F-1



---



##### Table of Contents



GENOMIC SOLUTIONS INC.







REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS


To the Board of Directors and Stockholders of 
 Genomic Solutions Inc.:

We have audited the accompanying consolidated
balance sheets of GENOMIC SOLUTIONS INC. (a Delaware
corporation) AND SUBSIDIARIES as of December 31, 2001 and
2000, and the related consolidated statements of operations,
stockholders equity (deficit) and cash flows for each
of the three years in the period ended December 31, 2001.
These financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of Genomic Solutions Inc. and subsidiaries as of
December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States.

Arthur Andersen LLP

Detroit, Michigan,

February 13, 2002 (except with respect


to the matter discussed in Note 16,


as to which the date is March 21, 2002)


F-2



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##### Table of Contents



GENOMIC SOLUTIONS INC.







CONSOLIDATED BALANCE SHEETS


|                                             |                                                                                                                                                                |                                            |   |         |              |  |   |         |        | 
|-------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | - | ------- | ------------ |  | - | ------- | ------ | 
|                                             |                                                                                                                                                                | December 31,                               |   |         | December 31, | 
|                                             |                                                                                                                                                                | 2001                                       |   |         | 2000         | 
|                                             |                                                                                                                                                                |                                            |   |         |              | 
|                                             |                                                                                                                                                                |                                           
|                                             |                                                                                                                                                                | (In thousands, except                      |  
|                                             |                                                                                                                                                                | per share data)                            |  
|ASSETS                                       |                                                                                                                                                                |                                            |   |         |              |  |   |        
|Current Assets:                              |                                                                                                                                                                |                                            |   |         |              |  |   |        
|                                             | Cash and cash equivalents                                                                                                                                      |                                            | $ | 13,097  |              |  | $ | 40,159  |       
|                                             | Accounts receivable, net                                                                                                                                       |                                            |   | 5,466   |              |  |   | 7,788   |       
|                                             | Inventories                                                                                                                                                    |                                            |   | 9,622   |              |  |   | 5,734   |       
|                                             | Prepaid expenses and other                                                                                                                                     |                                            |   | 948     |              |  |   | 1,114   |       
|                                             |                                                                                                                                                                |                                            |   |         |              | 
|                                             |                                                                                                                                                                | Total current assets                       |   |         | 29,133       |  |   |         | 54,795 | 
|                                             | Property and equipment, net                                                                                                                                    |                                            |   | 3,261   |              |  |   | 4,735   |       
|                                             | Goodwill, net                                                                                                                                                  |                                            |   | 9,578   |              |  |   | 954     |       
|                                             | Intangible assets, net                                                                                                                                         |                                            |   | 4,217   |              |  |   | 4,524   |       
|                                             | Other assets                                                                                                                                                   |                                            |   | 1,735   |              |  |   | 216     |       
|                                             |                                                                                                                                                                |                                            |   |         |              | 
|                                             |                                                                                                                                                                | Total assets                               |   | $       | 47,924       |  |   | $       | 65,224 | 
|                                             |                                                                                                                                                                |                                            |   |         |              | 
|LIABILITIES AND STOCKHOLDERS
	EQUITY        |                                                                                                                                                                |                                            |   |         |              |  |   |        
|Current Liabilities:                         |                                                                                                                                                                |                                            |   |         |              |  |   |        
|                                             | Lines of credit                                                                                                                                                |                                            | $ | 2,500   |              |  | $ |        |       
|                                             | Current portion of long-term debt                                                                                                                              |                                            |   | 57      |              |  |   | 754     |       
|                                             | Accounts payable                                                                                                                                               |                                            |   | 5,213   |              |  |   | 3,711   |       
|                                             | Accrued liabilities                                                                                                                                            |                                            |   | 4,755   |              |  |   | 6,067   |       
|                                             | Deferred revenue                                                                                                                                               |                                            |   | 842     |              |  |   | 293     |       
|                                             |                                                                                                                                                                |                                            |   |         |              | 
|                                             |                                                                                                                                                                | Total current liabilities                  |   |         | 13,367       |  |   |         | 10,825 | 
|                                             |                                                                                                                                                                |                                            |   |         |              | 
|Long-Term Liabilities:                       |                                                                                                                                                                |                                            |   |         |              |  |   |        
|                                             | Long-term debt, less current portion                                                                                                                           |                                            |   | 66      |              |  |   | 1,202   |       
|                                             | Other long-term liabilities                                                                                                                                    |                                            |   | 52      |              |  |   | 1,208   |       
|                                             |                                                                                                                                                                |                                            |   |         |              | 
|                                             |                                                                                                                                                                | Total long-term liabilities                |   |         | 118          |  |   |         | 2,410  | 
|                                             |                                                                                                                                                                |                                            |   |         |              | 
|Commitments and Contingencies (see
	Note 16) |                                                                                                                                                                |                                            |   |         |              |  |   |        
|Stockholders Equity:                        |                                                                                                                                                                |                                            |   |         |              |  |   |        
|                                             | Preferred stock, $0.001 par value; 15,000 shares
	authorized; zero shares issued and outstanding                                                               |                                            |   |        |              |  |   |        |       
|                                             | Callable common stock, $0.001 par value; 40,000
	shares authorized; zero and 23,758 shares issued and outstanding
	at December 31, 2001 and 2000, respectively |                                            |   |        |              |  |   | 24      |       
|                                             | Common stock, $0.001 par value; 40,000 shares
	authorized; 31,154 and 1,270 shares issued and outstanding at
	December 31, 2001 and 2000, respectively         |                                            |   | 31      |              |  |   | 1       |       
|                                             | Additional paid-in capital                                                                                                                                     |                                            |   | 103,045 |              |  |   | 94,317  |       
|                                             | Notes receivable                                                                                                                                               |                                            |   | (137    | )            |  |   | (129    | )     
|                                             | Deferred compensation related to stock options                                                                                                                 |                                            |   | (72     | )            |  |   | (98     | )     
|                                             | Retained deficit                                                                                                                                               |                                            |   | (68,055 | )            |  |   | (41,955 | )     
|                                             | Accumulated other comprehensive loss                                                                                                                           |                                            |   | (373    | )            |  |   | (171    | )     
|                                             |                                                                                                                                                                |                                            |   |         |              | 
|                                             |                                                                                                                                                                | Total stockholders equity                 |   |         | 34,439       |  |   |         | 51,989 | 
|                                             |                                                                                                                                                                |                                            |   |         |              | 
|                                             |                                                                                                                                                                | Total liabilities and stockholders equity |   | $       | 47,924       |  |   | $       | 65,224 | 
|                                             |                                                                                                                                                                |                                            |   |         |              | 

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

F-3



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##### Table of Contents



GENOMIC SOLUTIONS INC.







CONSOLIDATED STATEMENTS OF
OPERATIONS


|                                           |                                                                                             |                                           |         |         |         |   |        |         |        |   |         |         |         |  
|------------------------------------------ | ------------------------------------------------------------------------------------------- | ----------------------------------------- | ------- | ------- | ------- | - | ------ | ------- | ------ | - | ------- | ------- | ------- | -
|                                           |                                                                                             |                                          
|                                           |                                                                                             | Years ended December 31,                  |        
|                                           |                                                                                             |                                           |        
|                                           |                                                                                             | 2001                                      |         |         | 2000    |   |        | 1999    |       
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|                                           |                                                                                             |                                          
|                                           |                                                                                             | (In thousands, except per share data)     |        
|Revenue:                                   |                                                                                             |                                           |         |         |         |   |        |         |        |   |         |        
|                                           | Product revenue                                                                             |                                           | $       | 15,523  |         |   | $      | 18,215  |        |   | $       | 11,282  |        
|                                           | Service revenue                                                                             |                                           |         | 1,317   |         |   |        | 862     |        |   |         | 810     |        
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|                                           |                                                                                             | Total revenue                             |         |         | 16,840  |   |        |         | 19,077 |   |         |         | 12,092  |  
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|Cost of Revenue:                           |                                                                                             |                                           |         |         |         |   |        |         |        |   |         |        
|                                           | Cost of product revenue                                                                     |                                           |         | 10,186  |         |   |        | 8,972   |        |   |         | 6,570   |        
|                                           | Cost of service revenue                                                                     |                                           |         | 426     |         |   |        | 402     |        |   |         | 420     |        
|                                           | Impairment of inventory                                                                     |                                           |         | 1,180   |         |   |        |        |        |   |         |        |        
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|                                           |                                                                                             | Total cost of revenue                     |         |         | 11,792  |   |        |         | 9,374  |   |         |         | 6,990   |  
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|                                           |                                                                                             | Gross profit                              |         |         | 5,048   |   |        |         | 9,703  |   |         |         | 5,102   |  
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|Operating Expenses:                        |                                                                                             |                                           |         |         |         |   |        |         |        |   |         |        
|                                           | Selling, general and administrative                                                         |                                           |         | 14,136  |         |   |        | 11,919  |        |   |         | 8,652   |        
|                                           | Research and development                                                                    |                                           |         | 6,797   |         |   |        | 5,596   |        |   |         | 4,830   |        
|                                           | Restructuring and other unusual charges                                                     |                                           |         | 10,936  |         |   |        | 600     |        |   |         | 438     |        
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|                                           |                                                                                             | Total operating expenses                  |         |         | 31,869  |   |        |         | 18,115 |   |         |         | 13,920  |  
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|                                           |                                                                                             | Loss from operations                      |         |         | (26,821 | ) |        |         | (8,412 | ) |         |         | (8,818  | )
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|Other Income (Expense):                    |                                                                                             |                                           |         |         |         |   |        |         |        |   |         |        
|                                           | Interest expense                                                                            |                                           |         | (207    | )       |   |        | (2,599  | )      |   |         | (2,476  | )      
|                                           | Interest income                                                                             |                                           |         | 1,148   |         |   |        | 2,657   |        |   |         | 111     |        
|                                           | Gain on sale of investment                                                                  |                                           |         |        |         |   |        | 282     |        |   |         |        |        
|                                           | Gain on sale of assets                                                                      |                                           |         |        |         |   |        | 382     |        |   |         |        |        
|                                           | Other expense, net                                                                          |                                           |         | (220    | )       |   |        | (164    | )      |   |         | 41      |        
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|                                           |                                                                                             | Total other income (expense)              |         |         | 721     |   |        |         | 558    |   |         |         | (2,324  | )
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|                                           |                                                                                             | Loss before taxes and extraordinary items |         |         | (26,100 | ) |        |         | (7,854 | ) |         |         | (11,142 | )
|Benefit for Income Taxes                   |                                                                                             |                                           |        |         |         |   |       |         |        |   |        |        
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|                                           | Loss before extraordinary items                                                             |                                           |         | (26,100 | )       |   |        | (7,854  | )      |   |         | (11,142 | )      
|Extraordinary Loss,
	net of $0 tax expense |                                                                                             |                                           |        |         |         |   | (1,050 | )       |        |   |        |        
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|Net Loss                                   |                                                                                             |                                           | (26,100 | )       |         |   | (8,904 | )       |        |   | (11,142 | )      
|                                           | Non-cash common stock warrant benefit (charge)                                              |                                           |         |        |         |   |        | 1,059   |        |   |         | (3,861  | )      
|                                           | Deemed dividend upon issuance to and subsequent
	repurchase of stock from PerkinElmer, Inc. |                                           |         | (2,811  | )       |   |        | (8,000  | )      |   |         |        |        
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|                                           | Net loss attributable to common stockholders                                                |                                           | $       | (28,911 | )       |   | $      | (15,845 | )      |   | $       | (15,003 | )      
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|Net Loss Per Share, Basic and
	Diluted:    |                                                                                             |                                           |         |         |         |   |        |         |        |   |         |        
|                                           | Loss per share before extraordinary items                                                   |                                           | $       | (1.05   | )       |   | $      | (0.45   | )      |   | $       | (3.75   | )      
|                                           | Loss per share from extraordinary items                                                     |                                           |         |        |         |   |        | (0.06   | )      |   |         |        |        
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|                                           | Net loss per share                                                                          |                                           |         | (1.05   | )       |   |        | (0.51   | )      |   |         | (3.75   | )      
|                                           | Income (loss) per share from non-cash common
	stock warrant benefit (charge)                |                                           |         |        |         |   |        | 0.06    |        |   |         | (1.30   | )      
|                                           | Loss per share from deemed dividend                                                         |                                           |         | (0.12   | )       |   |        | (0.45   | )      |   |         |        |        
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|                                           | Loss per share attributable to common stockholders                                          |                                           | $       | (1.17   | )       |   | $      | (0.90   | )      |   | $       | (5.04   | )      
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       
|                                           | Weighted average common shares                                                              |                                           |         | 24,791  |         |   |        | 17,526  |        |   |         | 2,974   |        
|                                           |                                                                                             |                                           |         |         |         |   |        |         |       

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

F-4



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##### Table of Contents








CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY (DEFICIT)


|                             |                                                                                       |                                     |          |        |                 |   |   |              |   |   |            |        |   |        |   |    |        |   |   |         |   |   |            |   |   |   |        |        |   |   |     |     |    |   | 
|---------------------------- | ------------------------------------------------------------------------------------- | ----------------------------------- | -------- | ------ | --------------- | - | - | ------------ | - | - | ---------- | ------ | - | ------ | - | -- | ------ | - | - | ------- | - | - | ---------- | - | - | - | ------ | ------ | - | - | --- | --- | -- | - | 
|                             |                                                                                       |                                     |          |        |                 |   |   |              |   |   |            |       
|                             |                                                                                       | Convertible                         |          |        | Callable Common |   |   |              |   |   |            |       
|                             |                                                                                       | Preferred Stock                     |          |        | Stock           |   |   | Common Stock |   |   | Additional |        |   |       
|                             |                                                                                       |                                     |          |        |                 |   |   |              |   |   | Paid-In    |        |   | Notes  |  
|                             |                                                                                       | Shares                              |          |        | Amount          |   |   | Shares       |   |   | Amount     |        |   | Shares |   |    | Amount |   |   | Capital |   |   | Receivable |  
|                             |                                                                                       |                                     |          |        |                 |   |   |              |   |   |            |        |   |        |   |    |        |   |   |         |   |   |            |  
|                             |                                                                                       |                                    
|                             |                                                                                       | (in thousands)                      |         
|Balance  December 31,
	1998 |                                                                                       |                                     | 6,901    |        |                 | $ | 7 |              |   |   | 2,919      |        |   | $      | 3 |    |        |   |  |         |   | $ |           |   |   | $ | 16,524 |        |   | $ | (47 | )  
|                             | Callable common stock issued in exchange for
	services                                |                                     |          |       |                 |   |   |             |   |   |            | 1      |   |        |   |   |        |   |   |        |   |   |            |  |   |   |        | 1      |   |   |     |    |   
|                             | Interest income on notes receivable                                                   |                                     |          |       |                 |   |   |             |   |   |            |       |   |        |   |   |        |   |   |        |   |   |            |  |   |   |        |       |   |   |     | (6  | ) 
|                             | Callable common stock issued upon exercise of
	stock options                          |                                     |          |       |                 |   |   |             |   |   |            | 87     |   |        |   |   |        |   |   |        |   |   |            |  |   |   |        | 9      |   |   |     |    |   
|                             | Callable common stock issued as payment for
	interest on subordinated debt            |                                     |          |       |                 |   |   |             |   |   |            | 48     |   |        |   |   |        |   |   |        |   |   |            |  |   |   |        | 238    |   |   |     |    |   
|                             | Deferred compensation on stock options granted                                        |                                     |          |       |                 |   |   |             |   |   |            |       |   |        |   |   |        |   |   |        |   |   |            |  |   |   |        | 129    |   |   |     |    |   
|                             | Amortization of deferred compensation                                                 |                                     |          |       |                 |   |   |             |   |   |            |       |   |        |   |   |        |   |   |        |   |   |            |  |   |   |        |       |   |   |     |    |   
|                             | Prepaid stock issuance expenses                                                       |                                     |          |       |                 |   |   |             |   |   |            |       |   |        |   |   |        |   |   |         |   |   |            |  |   |   |        | (69    | ) |   |     |    |   
|                             | Accretion of redemption price of common stock
	warrants                               |                                     |          |       |                 |   |   |             |   |   |            |       |   |        |   |   |        |   |   |        |   |   |            |  |   |   |        |       |   |   |     |    |   
|                             |                                                                                       |                                     | Net loss |        |                 |  |   |              |   |  |            |        |   |       |   |    |        |  |   |         |   |  |            |   |   |  |        |        |   |  |     |     |    |  | 
|                             | Foreign currency translation adjustment                                               |                                     |          |       |                 |   |   |             |   |   |            |       |   |        |   |   |        |   |   |        |   |   |            |  |   |   |        |       |   |   |     |    |   
|                             |                                                                                       |                                     |          |        |                 |   |   |              |   |   |            |        |   |        |   |    |        |   |   |         |   |   |            |  
|                             | Comprehensive loss                                                                    |                                     |          |        |                 |   |   |              |   |   |            |        |   |        |   |    |        |   |   |         |   |   |            |   |   |   |        |        |   |   |     |     |   
|Balance  December 31,
	1999 |                                                                                       |                                     | 6,901    |        |                 |   | 7 |              |   |   | 3,055      |        |   |        | 3 |    |        |   |   |         |   |   |           |   |   |   | 16,832 |        |   |   | (53 | )  
|                             | Series P preferred stock issued for cash                                              |                                     |          | 1,270  |                 |   |   | 1            |   |   |            |       |   |        |   |   |        |   |   |        |   |   |            |  |   |   |        | 7,441  |   |   |     |    |   
|                             | Deemed dividend related to beneficial conversion
	feature on Series P preferred stock |                                     |          |       |                 |   |   |             |   |   |            |       |   |        |   |   |        |   |   |        |   |   |            |  |   |   |        | 8,000  |   |   |     |    |   
|                             |                                                                                       | Interest income on notes receivable |          |        |                |   |   |              |  |   |            |        |  |        |   |    |       |   |   |         |  |   |            |   |  |   |        |        |  |   |     |     | (7 | )
|                             | Callable common stock issued in employee stock
	purchase plan                         |                                     |          |       |                 |   |   |             |   |   |            | 5      |   |        |   |   |        |   |   |        |   |   |            |  |   |   |        | 32     |   |   |     |    |   
|                             | Callable common stock issued upon exercise of
	stock options                          |                                     |          |       |                 |   |   |             |   |   |            | 907    |   |        |   | 1  |        |   |   |        |   |   |            |  |   |   |        | 302    |   |   |     | (69 | ) 
|                             | Callable common stock issued as payment for
	interest on subordinated debt            |                                     |          |       |                 |   |   |             |   |   |            | 43     |   |        |   |   |        |   |   |        |   |   |            |  |   |   |        | 208    |   |   |     |    |   
|                             | Callable common stock issued in initial public
	offering                              |                                     |          |       |                 |   |   |             |   |   |            | 7,660  |   |        |   | 8  |        |   |   |        |   |   |            |  |   |   |        | 55,125 |   |   |     |    |   
|                             | Automatic conversion of preferred stock and
	warrants into callable common stock      |                                     |          | (6,901 | )               |   |   | (7           | ) |   |            | 12,088 |   |        |   | 12 |        |   |   |        |   |   |            |  |   |   |        | 6,377  |   |   |     |    |   
|                             | Automatic conversion of series P preferred stock
	into common stock                   |                                     |          | (1,270 | )               |   |   | (1           | ) |   |            |       |   |        |   |   |        |   |   | 1,270   |   |   |            | 1 |   |   |        |       |   |   |     |    |   
|                             | Amortization of deferred compensation                                                 |                                     |          |       |                 |   |   |             |   |   |            |       |   |        |   |   |        |   |   |        |   |   |            |  |   |   |        |       |   |   |     |    |   
|                             | Decretion of redemption price of common stock
	warrants                               |                                     |          |       |                 |   |   |             |   |   |            |       |   |        |   |   |        |   |   |        |   |   |            |  |   |   |        |       |   |   |     |    |   
|                             | Net loss                                                                              |                                     |          |       |                 |   |   |             |   |   |            |       |   |        |   |   |        |   |   |        |   |   |            |  |   |   |        |       |   |   |     |    |   
|                             | Foreign currency translation adjustment                                               |                                     |          |       |                 |   |   |             |   |   |            |       |   |        |   |   |        |   |   |        |   |   |            |  |   |   |        |       |   |   |     |    |   
|                             |                                                                                       |                                     |          |        |                 |   |   |              |   |   |            |        |   |        |   |    |        |   |   |         |   |   |            |  
|                             | Comprehensive loss                                                                    |                                     |          |        |                 |   |   |              |   |   |            |        |   |        |   |    |        |   |   |         |   |   |            |   |   |   |        |        |   |   |     |     |   

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                             |                                                                                       |                                     |          |      |          |   |               |        |   |         |       |      |               |      |        |        |    |         |   |         |   |         |  
|---------------------------- | ------------------------------------------------------------------------------------- | ----------------------------------- | -------- | ---- | -------- | - | ------------- | ------ | - | ------- | ----- | ---- | ------------- | ---- | ------ | ------ | -- | ------- | - | ------- | - | ------- | -
|                             |                                                                                       | Deferred                            |          |      |          |   | Accumulated   |        |   |         |       |     
|                             |                                                                                       | Compensation                        |          |      |          |   | Other         |        |   |         |       |     
|                             |                                                                                       | Related To                          |          |      |          |   | Comprehensive |        |   |         |       |     
|                             |                                                                                       | Stock                               |          |      | Retained |   |               | Income |   |         |       |      | Comprehensive |     
|                             |                                                                                       | Options                             |          |      | Deficit  |   |               | (Loss) |   |         | Total |      |               | Loss |       
|                             |                                                                                       |                                     |          |      |          |   |               |        |   |         |       |      |               |      |       
|                             |                                                                                       |                                    
|                             |                                                                                       | (in thousands)                      |         
|Balance  December 31,
	1998 |                                                                                       | $                                   |         |      |          | $ | (11,107       | )      |   | $       | 105   |      |               | $    | 5,485  |        |    |         |   |        
|                             | Callable common stock issued in exchange for
	services                                |                                     |          |     |          |   |               |       |   |         |       |     |               |      |        | 1      |    |         |   |         |  
|                             | Interest income on notes receivable                                                   |                                     |          |     |          |   |               |       |   |         |       |     |               |      |        | (6     | )  |         |   |         |  
|                             | Callable common stock issued upon exercise of
	stock options                          |                                     |          |     |          |   |               |       |   |         |       |     |               |      |        | 9      |    |         |   |         |  
|                             | Callable common stock issued as payment for
	interest on subordinated debt            |                                     |          |     |          |   |               |       |   |         |       |     |               |      |        | 238    |    |         |   |         |  
|                             | Deferred compensation on stock options granted                                        |                                     |          | (129 | )        |   |               |       |   |         |       |     |               |      |        |       |    |         |   |         |  
|                             | Amortization of deferred compensation                                                 |                                     |          | 5    |          |   |               |       |   |         |       |     |               |      |        | 5      |    |         |   |         |  
|                             | Prepaid stock issuance expenses                                                       |                                     |          |     |          |   |               |       |   |         |       |     |               |      |        | (69    | )  |         |   |         |  
|                             | Accretion of redemption price of common stock
	warrants                               |                                     |          |     |          |   |               | (3,861 | ) |         |       |     |               |      |        | (3,861 | )  |         |   |         |  
|                             |                                                                                       |                                     | Net loss |      |          |  |               |        |   | (11,142 | )     |      |               |     |        |        |    | (11,142 | ) |         | $ | (11,142 | )
|                             | Foreign currency translation adjustment                                               |                                     |          |     |          |   |               |       |   |         |       | (41  | )             |      |        | (41    | )  |         |   | (41     | )
|                             |                                                                                       |                                     |          |      |          |   |               |        |   |         |       |      |               |      |       
|                             | Comprehensive loss                                                                    |                                     |          |      |          |   |               |        |   |         |       |      |               |      |        |        |    |         | $ | (11,183 | )
|                             |                                                                                       |                                     |          |      |          |   |               |        |   |         |       |      |               |      |       
|Balance  December 31,
	1999 |                                                                                       |                                     | (124     | )    |          |   | (26,110       | )      |   |         | 64    |      |               |      | (9,381 | )      |    |         |   |        
|                             | Series P preferred stock issued for cash                                              |                                     |          |     |          |   |               |       |   |         |       |     |               |      |        | 7,442  |    |         |   |         |  
|                             | Deemed dividend related to beneficial conversion
	feature on Series P preferred stock |                                     |          |     |          |   |               | (8,000 | ) |         |       |     |               |      |        |       |    |         |   |         |  
|                             |                                                                                       | Interest income on notes receivable |          |      |         |   |               |        |  |         |       |      |              |      |        |        | (7 | )       |   |         |   |        
|                             | Callable common stock issued in employee stock
	purchase plan                         |                                     |          |     |          |   |               |       |   |         |       |     |               |      |        | 32     |    |         |   |         |  
|                             | Callable common stock issued upon exercise of
	stock options                          |                                     |          |     |          |   |               |       |   |         |       |     |               |      |        | 234    |    |         |   |         |  
|                             | Callable common stock issued as payment for
	interest on subordinated debt            |                                     |          |     |          |   |               |       |   |         |       |     |               |      |        | 208    |    |         |   |         |  
|                             | Callable common stock issued in initial public
	offering                              |                                     |          |     |          |   |               |       |   |         |       |     |               |      |        | 55,133 |    |         |   |         |  
|                             | Automatic conversion of preferred stock and
	warrants into callable common stock      |                                     |          |     |          |   |               |       |   |         |       |     |               |      |        | 6,382  |    |         |   |         |  
|                             | Automatic conversion of series P preferred stock
	into common stock                   |                                     |          |     |          |   |               |       |   |         |       |     |               |      |        |       |    |         |   |         |  
|                             | Amortization of deferred compensation                                                 |                                     |          | 26   |          |   |               |       |   |         |       |     |               |      |        | 26     |    |         |   |         |  
|                             | Decretion of redemption price of common stock
	warrants                               |                                     |          |     |          |   |               | 1,059  |   |         |       |     |               |      |        | 1,059  |    |         |   |         |  
|                             | Net loss                                                                              |                                     |          |     |          |   |               | (8,904 | ) |         |       |     |               |      |        | (8,904 | )  |         | $ | (8,904  | )
|                             | Foreign currency translation adjustment                                               |                                     |          |     |          |   |               |       |   |         |       | (235 | )             |      |        | (235   | )  |         |   | (235    | )
|                             |                                                                                       |                                     |          |      |          |   |               |        |   |         |       |      |               |      |       
|                             | Comprehensive loss                                                                    |                                     |          |      |          |   |               |        |   |         |       |      |               |      |        |        |    |         | $ | (9,139  | )
|                             |                                                                                       |                                     |          |      |          |   |               |        |   |         |       |      |               |      |       

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

F-5



---



##### Table of Contents








CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY (DEFICIT)


|                             |                                                                                          |                 |   |                 |        |   |              |   |  |            |        |         |        |   |    |        |   |  |         |        |   |            |    |    |   |   |         |        |   |   |      |    |  
|---------------------------- | ---------------------------------------------------------------------------------------- | --------------- | - | --------------- | ------ | - | ------------ | - |  | ---------- | ------ | ------- | ------ | - | -- | ------ | - |  | ------- | ------ | - | ---------- | -- | -- | - | - | ------- | ------ | - | - | ---- | -- | -
|                             |                                                                                          |                 |   |                 |        |   |              |   |  |            |        |        
|                             |                                                                                          | Convertible     |   | Callable Common |        |   |              |   |  |            |       
|                             |                                                                                          | Preferred Stock |   | Stock           |        |   | Common Stock |   |  | Additional |        |         |       
|                             |                                                                                          |                 |   |                 |        |   |              |   |  | Paid-In    |        |         | Notes  |  
|                             |                                                                                          | Shares          |   |                 | Amount |   | Shares       |   |  | Amount     |        |         | Shares |   |    | Amount |   |  | Capital |        |   | Receivable |   
|                             |                                                                                          |                 |   |                 |        |   |              |   |  |            |        |         |        |   |    |        |   |  |         |        |   |            |   
|                             |                                                                                          |                
|                             |                                                                                          | (in thousands)  |  
|Balance  December 31,
	2000 |                                                                                          |                 |  |                 |        |   |             |   |  |            | 23,758 |         |        |   | 24 |        |   |  | 1,270   |        |   |            | 1  |    |   |   | 94,317  |        |   |   | (129 | ) 
|                             | Interest income on notes receivable                                                      |                 |   |                |        |   |              |  |  |            |        |        |        |   |    |       |   |  |         |       |   |            |    |   |   |   |         |       |   |   |      | (8 | )
|                             | Common stock issued in employee stock purchase
	plan                                     |                 |   |                |        |   |              |  |  |            |        |        |        |   |    |       |   |  |         | 16     |   |            |    |   |   |   |         | 49     |   |   |      |   |  
|                             | Callable common stock issued upon exercise of
	stock options                             |                 |   |                |        |   |              |  |  |            |        | 123     |        |   |    |       |   |  |         |       |   |            |    |   |   |   |         | 33     |   |   |      |   |  
|                             | Common stock issued upon exercise of stock options                                       |                 |   |                |        |   |              |  |  |            |        |        |        |   |    |       |   |  |         | 38     |   |            |    |   |   |   |         | 26     |   |   |      |   |  
|                             | Adjustment of callable common stock issued as
	payment for interest on subordinated debt |                 |   |                |        |   |              |  |  |            |        | (8      | )      |   |    |       |   |  |         |       |   |            |    |   |   |   |         | (36    | ) |   |      |   |  
|                             | Repurchase of stock from PerkinElmer,
	Inc.                                              |                 |   |                |        |   |              |  |  |            |        |        |        |   |    |       |   |  |         | (873   | ) |            |    | (1 | ) |   |         | (5,499 | ) |   |      |   |  
|                             | Automatic conversion of callable common stock to
	common stock                           |                 |   |                |        |   |              |  |  |            |        | (23,873 | )      |   |    | (24    | ) |  |         | 23,873 |   |            |    | 24 |   |   |         |       |   |   |      |   |  
|                             | Common stock issued in settlement of lawsuit                                             |                 |   |                |        |   |              |  |  |            |        |        |        |   |    |       |   |  |         | 29     |   |            |    |   |   |   |         | 55     |   |   |      |   |  
|                             | Common stock issued in connection with acquisition                                       |                 |   |                |        |   |              |  |  |            |        |        |        |   |    |       |   |  |         | 6,801  |   |            |    | 7  |   |   |         | 14,100 |   |   |      |   |  
|                             | Amortization of deferred compensation                                                    |                 |   |                |        |   |              |  |  |            |        |        |        |   |    |       |   |  |         |       |   |            |    |   |   |   |         |       |   |   |      |   |  
|                             | Net loss                                                                                 |                 |   |                |        |   |              |  |  |            |        |        |        |   |    |       |   |  |         |       |   |            |    |   |   |   |         |       |   |   |      |   |  
|                             | Foreign currency translation adjustment                                                  |                 |   |                |        |   |              |  |  |            |        |        |        |   |    |       |   |  |         |       |   |            |    |   |   |   |         |       |   |   |      |   |  
|                             |                                                                                          |                 |   |                 |        |   |              |   |  |            |        |         |        |   |    |        |   |  |         |        |   |            |    |   
|                             | Comprehensive loss                                                                       |                 |   |                 |        |   |              |   |  |            |        |         |        |   |    |        |   |  |         |        |   |            |    |    |   |   |         |        |   |   |      |    |  
|Balance  December 31,
	2001 |                                                                                          |                 |  |                 |        | $ |             |   |  |            |        |         |        | $ |   |        |   |  | 31,154  |        |   |            | 31 |    |   | $ | 103,045 |        |   | $ | (137 | ) 
|                             |                                                                                          |                 |   |                 |        |   |              |   |  |            |        |         |        |   |    |        |   |  |         |        |   |            |    |   

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                             |                                                                                          |                |     |    |          |   |               |         |   |   |       |      |               |      |        |         |   |  |   |         |  
|---------------------------- | ---------------------------------------------------------------------------------------- | -------------- | --- | -- | -------- | - | ------------- | ------- | - | - | ----- | ---- | ------------- | ---- | ------ | ------- | - |  | - | ------- | -
|                             |                                                                                          | Deferred       |     |    |          |   | Accumulated   |         |   |   |       |     
|                             |                                                                                          | Compensation   |     |    |          |   | Other         |         |   |   |       |     
|                             |                                                                                          | Related To     |     |    |          |   | Comprehensive |         |   |   |       |     
|                             |                                                                                          | Stock          |     |    | Retained |   |               | Income  |   |   |       |      | Comprehensive |     
|                             |                                                                                          | Options        |     |    | Deficit  |   |               | (Loss)  |   |   | Total |      |               | Loss |       
|                             |                                                                                          |                |     |    |          |   |               |         |   |   |       |      |               |      |       
|                             |                                                                                          |               
|                             |                                                                                          | (in thousands) |    
|Balance  December 31,
	2000 |                                                                                          |                | (98 | )  |          |   | (41,955       | )       |   |   | (171  | )    |               |      | 51,989 |         |   |  |   |        
|                             | Interest income on notes receivable                                                      |                |     |   |          |   |               |        |   |   |       |     |               |      |        | (8      | ) |  |   |         |  
|                             | Common stock issued in employee stock purchase
	plan                                     |                |     |   |          |   |               |        |   |   |       |     |               |      |        | 49      |   |  |   |         |  
|                             | Callable common stock issued upon exercise of
	stock options                             |                |     |   |          |   |               |        |   |   |       |     |               |      |        | 33      |   |  |   |         |  
|                             | Common stock issued upon exercise of stock options                                       |                |     |   |          |   |               |        |   |   |       |     |               |      |        | 26      |   |  |   |         |  
|                             | Adjustment of callable common stock issued as
	payment for interest on subordinated debt |                |     |   |          |   |               |        |   |   |       |     |               |      |        | (36     | ) |  |   |         |  
|                             | Repurchase of stock from PerkinElmer,
	Inc.                                              |                |     |   |          |   |               |        |   |   |       |     |               |      |        | (5,500  | ) |  |   |         |  
|                             | Automatic conversion of callable common stock to
	common stock                           |                |     |   |          |   |               |        |   |   |       |     |               |      |        |        |   |  |   |         |  
|                             | Common stock issued in settlement of lawsuit                                             |                |     |   |          |   |               |        |   |   |       |     |               |      |        | 55      |   |  |   |         |  
|                             | Common stock issued in connection with acquisition                                       |                |     |   |          |   |               |        |   |   |       |     |               |      |        | 14,107  |   |  |   |         |  
|                             | Amortization of deferred compensation                                                    |                |     | 26 |          |   |               |        |   |   |       |     |               |      |        | 26      |   |  |   |         |  
|                             | Net loss                                                                                 |                |     |   |          |   |               | (26,100 | ) |   |       |     |               |      |        | (26,100 | ) |  | $ | (26,100 | )
|                             | Foreign currency translation adjustment                                                  |                |     |   |          |   |               |        |   |   |       | (202 | )             |      |        | (202    | ) |  |   | (202    | )
|                             |                                                                                          |                |     |    |          |   |               |         |   |   |       |      |               |      |       
|                             | Comprehensive loss                                                                       |                |     |    |          |   |               |         |   |   |       |      |               |      |        |         |   |  | $ | (26,302 | )
|                             |                                                                                          |                |     |    |          |   |               |         |   |   |       |      |               |      |       
|Balance  December 31,
	2001 |                                                                                          | $              | (72 | )  |          | $ | (68,055       | )       |   | $ | (373  | )    |               | $    | 34,439 |         |   |  |   |        
|                             |                                                                                          |                |     |    |          |   |               |         |   |   |       |      |               |      |       

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

F-6



---



##### Table of Contents



GENOMIC SOLUTIONS INC.







CONSOLIDATED STATEMENTS OF CASH
FLOWS


|                                                      |                                                                                                       |                                                  |                                                      |         |        |         |        |        |        |         |        |         |        |        |  
|----------------------------------------------------- | ----------------------------------------------------------------------------------------------------- | ------------------------------------------------ | ---------------------------------------------------- | ------- | ------ | ------- | ------ | ------ | ------ | ------- | ------ | ------- | ------ | ------ | -
|                                                      |                                                                                                       |                                                 
|                                                      |                                                                                                       | Years ended December 31,                         |                                                     
|                                                      |                                                                                                       |                                                  |                                                     
|                                                      |                                                                                                       | 2001                                             |                                                      |         | 2000   |         |        | 1999   |       
|                                                      |                                                                                                       |                                                  |                                                      |         |        |         |        |        |       
|                                                      |                                                                                                       |                                                 
|                                                      |                                                                                                       | (In thousands)                                   |                                                     
|Cash Flows from Operating
	Activities:                |                                                                                                       |                                                  |                                                      |         |        |         |        |        |        |         |        |        
|                                                      | Net loss                                                                                              |                                                  | $                                                    | (26,100 | )      |         | $      | (8,904 | )      |         | $      | (11,142 | )     
|                                                      | Adjustments to reconcile net loss to net cash
	used in operating activities-                          |                                                  |                                                      |         |        |         |        |        |        |         |        |         |       
|                                                      |                                                                                                       | Depreciation and amortization                    |                                                      |         | 2,325  |         |        |        | 1,351  |         |        |         | 1,239  |       
|                                                      |                                                                                                       | Amortization of discount on subordinated debt    |                                                      |         |       |         |        |        | 965    |         |        |         | 1,606  |       
|                                                      |                                                                                                       | Restructuring and other unusual charges          |                                                      |         | 12,116 |         |        |        | 600    |         |        |         | 438    |       
|                                                      |                                                                                                       | Callable common stock issued in lieu of interest |                                                      |         |       |         |        |        | 208    |         |        |         | 238    |       
|                                                      |                                                                                                       | Extraordinary loss                               |                                                      |         |       |         |        |        | 1,050  |         |        |         |       |       
|                                                      |                                                                                                       | Gain on sale of investment                       |                                                      |         |       |         |        |        | (282   | )       |        |         |       |       
|                                                      |                                                                                                       | Gain on sale of assets                           |                                                      |         |       |         |        |        | (382   | )       |        |         |       |       
|                                                      |                                                                                                       | Other                                            |                                                      |         | 54     |         |        |        | 51     |         |        |         | (2     | )     
|                                                      | Increase (decrease) in cash resulting from
	changes in assets and liabilities, net of
	acquisitions  |                                                  |                                                      |         |        |         |        |        |        |         |        |         |       
|                                                      |                                                                                                       | Accounts receivable, net                         |                                                      |         | 2,649  |         |        |        | (4,157 | )       |        |         | (2,376 | )     
|                                                      |                                                                                                       | Inventories                                      |                                                      |         | (3,143 | )       |        |        | (2,409 | )       |        |         | (787   | )     
|                                                      |                                                                                                       | Prepaid expenses and other                       |                                                      |         | 211    |         |        |        | (817   | )       |        |         | 371    |       
|                                                      |                                                                                                       | Accounts payable                                 |                                                      |         | (1,263 | )       |        |        | 1,565  |         |        |         | 309    |       
|                                                      |                                                                                                       | Accrued liabilities                              |                                                      |         | (804   | )       |        |        | (81    | )       |        |         | 524    |       
|                                                      |                                                                                                       | Deferred revenue                                 |                                                      |         | (5     | )       |        |        | 106    |         |        |         | 58     |       
|                                                      |                                                                                                       |                                                  |                                                      |         |        |         |        |        |       
|                                                      |                                                                                                       |                                                  | Net cash used in operating activities                |         |        | (13,960 | )      |        |        | (11,136 | )      |         |        | (9,524 | )
|                                                      |                                                                                                       |                                                  |                                                      |         |        |         |        |        |       
|Cash Flows from Investing
	Activities:                |                                                                                                       |                                                  |                                                      |         |        |         |        |        |        |         |        |        
|                                                      | Purchase of property and equipment                                                                    |                                                  |                                                      | (2,043  | )      |         |        | (1,669 | )      |         |        | (1,449  | )     
|                                                      | Capitalized license fees                                                                              |                                                  |                                                      | (3,465  | )      |         |        |       |        |         |        |        |       
|                                                      | Acquisitions of stock of various companies                                                            |                                                  |                                                      | (3,086  | )      |         |        |       |        |         |        |        |       
|                                                      | Increase in other assets                                                                              |                                                  |                                                      | (40     | )      |         |        | (103   | )      |         |        | (340    | )     
|                                                      | Proceeds from sale of investment                                                                      |                                                  |                                                      |        |        |         |        | 575    |        |         |        |        |       
|                                                      | Proceeds from sale of property and equipment                                                          |                                                  |                                                      | 37      |        |         |        | 168    |        |         |        |        |       
|                                                      |                                                                                                       |                                                  |                                                      |         |        |         |        |        |       
|                                                      |                                                                                                       |                                                  | Net cash used in investing activities                |         |        | (8,597  | )      |        |        | (1,029  | )      |         |        | (1,789 | )
|                                                      |                                                                                                       |                                                  |                                                      |         |        |         |        |        |       
|Cash Flows from Financing
	Activities:                |                                                                                                       |                                                  |                                                      |         |        |         |        |        |        |         |        |        
|                                                      | Net borrowings (repayments) under lines of
	credit                                                    |                                                  |                                                      | 2,500   |        |         |        | (1,768 | )      |         |        | (170    | )     
|                                                      | Proceeds from issuance of common stock and
	callable common stock                                     |                                                  |                                                      | 108     |        |         |        | 55,399 |        |         |        | 8       |       
|                                                      | Repayment of long-term debt                                                                           |                                                  |                                                      | (1,888  | )      |         |        | (758   | )      |         |        | (538    | )     
|                                                      | Repurchase of stock from PerkinElmer,
	Inc.                                                           |                                                  |                                                      | (5,500  | )      |         |        |       |        |         |        |        |       
|                                                      | Proceeds from issuance of preferred stock                                                             |                                                  |                                                      |        |        |         |        | 7,442  |        |         |        |        |       
|                                                      | Borrowings under sale-leaseback transactions                                                          |                                                  |                                                      |        |        |         |        | 113    |        |         |        | 1,140   |       
|                                                      | Repayment of subordinated debt                                                                        |                                                  |                                                      |        |        |         |        | (9,500 | )      |         |        |        |       
|                                                      | Proceeds from issuance of subordinated debt and
	common stock warrants                                |                                                  |                                                      |        |        |         |        |       |        |         |        | 9,500   |       
|                                                      | Other financing activities                                                                            |                                                  |                                                      | (8      | )      |         |        | (7     | )      |         |        | (75     | )     
|                                                      |                                                                                                       |                                                  |                                                      |         |        |         |        |        |       
|                                                      |                                                                                                       |                                                  | Net cash provided by (used in) financing
	activities |         |        | (4,788  | )      |        |        | 50,921  |        |         |        | 9,865  |  
|                                                      |                                                                                                       |                                                  |                                                      |         |        |         |        |        |       
|Effect of Exchange Rate Changes on
	Cash              |                                                                                                       |                                                  | 283                                                  |         |        |         | 75     |        |        |         | (104   | )      
|                                                      |                                                                                                       |                                                  |                                                      |         |        |         |        |        |       
|Net Increase (Decrease) in Cash and Cash
	Equivalents |                                                                                                       |                                                  | (27,062                                              | )       |        |         | 38,831 |        |        |         | (1,552 | )      
|Cash and Cash Equivalents 
	Beginning of Year        |                                                                                                       |                                                  | 40,159                                               |         |        |         | 1,328  |        |        |         | 2,880  |        
|                                                      |                                                                                                       |                                                  |                                                      |         |        |         |        |        |       
|Cash and Cash Equivalents  End of
	Year              |                                                                                                       | $                                                | 13,097                                               |         |        | $       | 40,159 |        |        | $       | 1,328  |        
|                                                      |                                                                                                       |                                                  |                                                      |         |        |         |        |        |       
|Supplemental Disclosure of Cash Flow
	Activity:       |                                                                                                       |                                                  |                                                      |         |        |         |        |        |        |         |        |        
|                                                      | Cash paid for interest                                                                                |                                                  | $                                                    | 226     |        |         | $      | 1,419  |        |         | $      | 631     |       
|                                                      | Cash paid for income taxes                                                                            |                                                  | $                                                    | 71      |        |         | $      |       |        |         | $      |        |       
|                                                      |                                                                                                       |                                                  |                                                      |         |        |         |        |        |       
|Supplemental Disclosure of Non-Cash
	Activity:        |                                                                                                       |                                                  |                                                      |         |        |         |        |        |        |         |        |        
|                                                      | Equipment purchased under capital lease
	obligations (see Note 16)                                    |                                                  | $                                                    |        |        |         | $      | 959    |        |         | $      | 1,561   |       
|                                                      |                                                                                                       |                                                  |                                                      |         |        |         |        |        |       
|                                                      | Capitalized license fees not yet paid                                                                 |                                                  | $                                                    |        |        |         | $      | 4,525  |        |         | $      |        |       
|                                                      |                                                                                                       |                                                  |                                                      |         |        |         |        |        |       
|                                                      | Issuance of common stock and options in
	connection with acquisition                                  |                                                  | $                                                    | 14,501  |        |         | $      |       |        |         | $      |        |       
|                                                      |                                                                                                       |                                                  |                                                      |         |        |         |        |        |       

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

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1. DESCRIPTION OF BUSINESS

Genomic Solutions Inc. (Genomic
Solutions) and its subsidiaries (collectively referred to
as the Company) develop, manufacture and sell
instruments, consumables and software for the life sciences
research and drug discovery markets. The Companys market
focus is based on three key high growth areas: genomics,
proteomics and high-throughput screening and dispensing systems.
These areas comprise three of the major technologies used by
researchers in studying disease and developing new drugs. The
Companys products are distributed and sold to
pharmaceutical and biotechnology companies, government agencies,
academic institutions and private research organizations
throughout the world.

As of December 31, 2001, the Company has
operations in the United States, Japan and the United Kingdom.
Genomic Solutions KK, a wholly-owned subsidiary of Genomic
Solutions located in Tokyo, Japan, provides sales and technical
support functions for the Japanese market. Genomic Solutions
Ltd., a wholly-owned subsidiary of Genomic Solutions located in
Huntingdon, England provides robot and fluid handling systems
development and manufacturing as well as marketing, sales and
support for the United Kingdom market. Cartesian Technologies,
Inc. located in Irvine, California, provides genomic and
high-throughput screening and dispensing systems development and
manufacturing as well as marketing and sales support for the
United States and United Kingdom markets.

On May 10, 2000, the Company completed its
initial public offering, raising net proceeds, after deducting
underwriting discounts and commissions and other offering
expenses, of approximately $55.1 million. All of the
Companys preferred stock was automatically converted to
callable common stock or common stock (see Note 11) and all of
the warrants issued in connection with the subordinated note
agreements in April and October 1999 were either exercised
or cancelled upon the completion of the initial public offering
(see Note 9).

As a result of the Companys efforts in
recent years to build its infrastructure and internal staffing,
develop its systems and expand into new markets, the Company has
experienced significant operating losses. As more fully
discussed in Note 19, on September 7, 2001, the Company
announced restructuring initiatives designed to lower its cost
structure and achieve profitability in 2002. There can be no
assurance that the Companys revenues or customer base will
grow, or that the Company will be able to achieve or sustain
profitability or positive cash flow. The failure of the Company
to achieve or sustain profitability or positive cash flow may
result in the Company reducing the scope of its operations or
anticipated expansion, which could adversely affect the
Companys business and results of operations.

2. SIGNIFICANT ACCOUNTING
POLICIES

Principles of Consolidation

The consolidated financial statements include the
accounts of Genomic Solutions and its subsidiaries, Genomic
Solutions KK, Genomic Solutions Ltd. and Cartesian Technologies,
Inc. All significant intercompany balances and transactions have
been eliminated in consolidation.

Revenue

Product revenue is derived from sales of genomic,
proteomic and high-throughput screening and dispensing systems
and consumables. Revenue from systems and consumable product
sales, including revenues generated through distributors, is
recognized when a customer contract is fully executed and the
product is shipped. Title to the system passes to the customer
and acceptance occurs upon shipment. There are no significant
installation efforts required. Service revenue includes revenue
from contract research services and service maintenance
agreements. Revenue from contract research services is
recognized as the services are performed on a time and materials
basis. Revenue from service maintenance agreements is recognized
on a straight-line basis over the period in which the services
are provided.

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Research and Development Expenses

Research and development expenses include all
employee payroll and related costs attributable to research and
development activities and are expensed when incurred.

The Company incurs software development costs for
software to be imbedded in the Companys instrumentation
products. The Company accounts for these software development
costs in accordance with Statement of Financial Accounting
Standards (SFAS) No. 86. Under SFAS
No. 86, capitalization of software development costs begins
upon the establishment of technological feasibility of the
software component (defined as a working program model) and
completing research and development activities for the
instrumentation component of the product. In 2001, 2000 and
1999, amounts that would have been capitalized under this
statement were immaterial, and therefore no software development
costs have been capitalized. The Company does not expect to
capitalize any software development costs in future periods.

Foreign Currency Translation

The financial position and results of operations
of Genomic Solutions foreign subsidiaries are measured
using local currency as the functional currency. Assets and
liabilities of each subsidiary are translated at the rate of
exchange in effect at the end of the period. Revenues and
expenses are translated at the average exchange rate for the
period. Foreign currency translation gains and losses not
impacting cash flows are credited to or charged against a
separate component of stockholders equity. Foreign
currency translation gains and losses arising from cash
transactions are credited or charged against current earnings.
Foreign currency transaction gain (loss) totaled
approximately $(257,000), $(82,000) and $113,000 in 2001, 2000
and 1999, respectively, and are included in other expense in the
accompanying consolidated statements of operations.

Management Estimates

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 statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid
investments with a maturity of ninety days or less to be cash
equivalents.

Accounts Receivable

At December 31, 2001 and 2000, accounts
receivable are stated net of an allowance for uncollectible
accounts of approximately $455,000 and $226,000, respectively.

Inventories

Inventories consist primarily of purchased parts
and components and are stated at the lower of cost, as
determined on a first-in, first-out basis, or market. Reserves
for slow moving and obsolete inventories are provided based on
historical experience and current product demand. We evaluate
the adequacy of these reserves quarterly.

Property and Equipment

Property and equipment are recorded at cost.
Depreciation is provided on a straight-line basis over the
estimated useful lives of the related assets, which generally
range from three to five years.

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Goodwill

Goodwill is being amortized on a straight-line
basis over periods ranging from five to ten years. At
December 31, 2001 and 2000, accumulated amortization
totaled $536,000 and $809,000, respectively. Amortization
expense totaled approximately $318,000, $298,000 and $385,000 in
2001, 2000 and 1999, respectively, exclusive of write-downs.

License Fees

From time to time, the Company enters into
license agreements with third parties whereby the Company
obtains the right to use certain technologies for certain
periods of time. Under agreements entered into during 2000, the
Company was required to pay initial, non-refundable fees of
$4,525,000 and then pay royalties on certain product sales
during the terms of the agreements (see Note 16). The initial,
non-refundable fees have been capitalized as intangible assets
and are amortized over the effective term of the agreements of
between five and ten years. At December 31, 2001,
accumulated amortization totaled approximately $4.5 million
including the effect of the write-down of certain initial
non-refundable fees as discussed below. Amortization expense
totaled approximately $463,000 in 2001, exclusive of
write-downs. At December 31, 2000, no amortized expense had
been recognized. The initial, non-refundable fees are accrued in
the accompanying consolidated balance sheets within current and
long-term liabilities.

Impairment of Goodwill and Long-Lived
Assets

At each balance sheet date, the Company evaluates
the carrying value of goodwill and other long-lived assets for
impairment whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. If evidence of a
possible impairment exists as a result of this evaluation, the
Company estimates the undiscounted future cash flows from the
use of the asset and its eventual disposition and then compares
this amount to the carrying value of the asset. If an impairment
exists, the Company measures the impairment by estimating the
present value of expected future cash flows and recording an
adjustment to reduce the asset to its estimated fair value.

In September 2001 as a result of the
Companys restructuring initiatives, the Company determined
that goodwill related to certain past acquisitions was impaired
and recorded an adjustment of approximately $266,000 to reduce
these assets to their estimated fair value. In
September 1999, the Company determined that goodwill
related to a past acquisition was impaired and recorded an
adjustment of approximately $438,000 to reduce this asset to its
estimated fair value. These write-downs are included in
restructuring and other unusual charges in the accompanying
consolidated statements of operations.

In December 2001, the Company determined
that one of its key license agreements was substantially
impaired due to certain U.S. District Court summary judgment
rulings determining that key patents or claims subject to the
agreement were invalid and substantial changes in market
conditions with respect to the revenue and profit expectations
of certain products produced under the agreement. As a result of
the impairments, the Company has taken a write-down on certain
unamortized license fees of approximately $4.0 million to
reduce this asset to its estimated fair value. This write-down
is included in restructuring and other unusual charges in the
accompanying consolidated statements of operations.

Accrued Warranty

The Company provides a one-year warranty on the
majority of its instrumentation sales. The warranty primarily
consists of two preventative maintenance visits by the Company.
The Company has recorded a liability for estimated warranty
costs to be incurred on sales made prior to the end of each
period, which is included in accrued liabilities in the
accompanying consolidated balance sheets.

Stock-Based Compensation

The Company accounts for stock-based compensation
to employees using the intrinsic value method prescribed under
Accounting Principles Board Opinion (APB)
No. 25, Accounting for Stock Issued to

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##### Table of Contents



Employees, and related interpretations.
Accordingly, compensation cost for stock options is measured as
the excess, if any, of the fair value of the Companys
common stock at the date of the option grant over the amount the
employee must pay to acquire the stock. In 1999, the Company
recognized deferred compensation related to stock option grants
(see Note 13). As supplemental information, the Company has
provided pro forma disclosure of stock option activity in
Note 13, in accordance with the requirements of SFAS
No. 123, Accounting for Stock-Based
Compensation.


The Company accounts for stock-based compensation
to non-employees under SFAS No. 123 and Emerging Issues
Task Force (EITF) No. 96-18. Stock-based
compensation related to options issued to non-employees is not
material for any period presented.

Net Loss Per Share

Basic and diluted net loss per share is computed
by dividing the net loss allocable to common shareholders by the
weighted average number of shares of common stock outstanding.
For the years 2001, 2000 and 1999, the effect of convertible
preferred stock, stock options and warrants outstanding for the
purchase of shares of common stock have not been used in the
calculation of diluted net loss per share because to do so would
be anti-dilutive. As such, the numerator and the denominator
used in computing both basic and diluted net loss per share
allocable to common stockholders for each period are equal. The
total number of shares excluded from the calculations of diluted
net loss per share, prior to application of the treasury stock
method, was 2,412,292, 1,840,866 and 4,776,371 in 2001, 2000 and
1999, respectively.

The calculation of basic and diluted net loss per
share is as follows (in thousands, except per share data):

|                                                                |  |                          |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                |  |                         
|                                                                |  | Years ended December 31, |        
|                                                                |  |                          |        
|                                                                |  | 2001                     |         |   | 2000 |   |         | 1999 | 
|                                                                |  |                          |         |   |      |   |         |      | 
|Net loss attributable to common stockholders                    |  | $                        | (28,911 | ) |      | $ | (15,845 | )    |  | $ | (15,003 | )
|                                                                |  |                          |         |   |      |   |         |      | 
|Basic and diluted  weighted average
	common shares outstanding |  |                          | 24,791  |   |      |   | 17,526  |      |  |   | 2,974   |  
|                                                                |  |                          |         |   |      |   |         |      | 
|Net loss per share attributable to common
	stockholders         |  | $                        | (1.17   | ) |      | $ | (0.90   | )    |  | $ | (5.04   | )
|                                                                |  |                          |         |   |      |   |         |      | 

Fair Value of Financial Instruments

The carrying values of the Companys
accounts receivable, lines of credit, and accounts payable
approximate fair value due to the short maturities of these
instruments. Managements estimate of the fair value of
notes payable and the note receivable is determined by reference
to various market data for comparable financial instruments,
requires considerable judgment by management, and are not
necessarily indicative of the amounts that could be realized in
a current market exchange. The fair value of these financial
instruments approximate their recorded values for all periods
presented. It is not practicable to estimate the fair value of
the Companys capital lease obligations.

Comprehensive Loss

Comprehensive loss is the total of net loss and
all other non-owner changes in equity. The difference between
net loss, as reported in the accompanying consolidated
statements of operations, and comprehensive loss is the foreign
currency translation adjustment for the respective periods.
Accumulated other comprehensive loss consists solely of the
cumulative translation adjustment as presented in the
accompanying consolidated balance sheets.

Recent Accounting Pronouncements

SFAS No. 141, Business
Combinations and SFAS No. 142 Goodwill and
Other Intangible Assets, were recently approved by the
Financial Accounting Standards Board (FASB). These
pronouncements amend the accounting for business combinations,
goodwill, and intangible assets. SFAS No. 141 eliminates
the pooling-of-interests method of accounting for business
combinations and further clarifies the criteria to recognize
intangible assets separately from goodwill. The requirements of
SFAS No. 141 are effective for any

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business combination that is completed after
June 30, 2001. SFAS No. 142 no longer permits
amortization of goodwill and intangible assets with indefinite
lives. Separable intangible assets that are not deemed to have
an indefinite life will continue to be amortized over their
useful lives. In addition, SFAS No. 142 establishes a new
method of testing goodwill for impairment by using a fair-value
approach. The amortization provisions of SFAS No. 142 apply
to goodwill and intangible assets acquired after June 30,
2001. With respect to goodwill and intangible assets acquired
prior to July 1, 2001, companies are required to adopt the
pronouncement in their fiscal year beginning after
December 15, 2001. Total goodwill included in the
Companys financial statements was $9.6 million at
December 31, 2001 and $954,000 at December 31, 2000.
Goodwill amortization expense was $318,000 during 2001 and
$298,000 during 2000. The Company is currently assessing the
effect of the new standards related to the impairment testing of
goodwill and other intangible assets.


In June 2001, the FASB issued SFAS
No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 establishes standards
associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. This statement is
effective for financial statements issued for fiscal years
beginning after June 15, 2002. Genomic Solutions has not
yet assessed the impact of this standard on its financial
statements, but does not expect the impact to be material.

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. SFAS No. 144 supercedes SFAS
No. 121, although it retains the fundamental principles of
how to measure the impairment of assets held for use and assets
to be disposed of by sale. It requires that long-lived assets to
be disposed of other than by sale be considered held and used
until disposed of. It also provides new guidance for using a
probability-weighted approach for measuring future cash flows
when there are alternative courses of action. This statement is
effective for financial statements issued for years beginning
after December 15, 2001. Genomic Solutions has not yet
assessed the impact of this standard on its financial
statements, but does not expect the impact to be material.

3. INVENTORIES

Inventories consist primarily of purchased parts
and components used to make instrumentation. Finished goods and
work-in-process inventories include material, labor and
manufacturing overhead costs. Inventories consisted of the
following (in thousands):

|                |  |                 |       |  |      |   |       | 
|--------------- |  | --------------- | ----- |  | ---- | - | ----- | 
|                |  |                
|                |  | At December 31, |      
|                |  |                 |      
|                |  | 2001            |       |  | 2000 |  
|                |  |                 |       |  |      |  
|Raw materials   |  | $               | 3,908 |  |      | $ | 2,673 | 
|Work-in-process |  |                 | 2,077 |  |      |   | 764   | 
|Finished goods  |  |                 | 3,637 |  |      |   | 2,297 | 
|                |  |                 |       |  |      |  
|                |  | $               | 9,622 |  |      | $ | 5,734 | 
|                |  |                 |       |  |      |  

4. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following
(in thousands):

|                                |  |                 |       |  |      |   |       | 
|------------------------------- |  | --------------- | ----- |  | ---- | - | ----- | 
|                                |  |                
|                                |  | At December 31, |      
|                                |  |                 |      
|                                |  | 2001            |       |  | 2000 |  
|                                |  |                 |       |  |      |  
|Furniture and office equipment  |  | $               | 4,341 |  |      | $ | 5,761 | 
|Computer equipment              |  |                 | 1,532 |  |      |   | 1,150 | 
|                                |  |                 |       |  |      |  
|                                |  |                 | 5,873 |  |      |   | 6,911 | 
|Less  Accumulated depreciation |  |                 | 2,612 |  |      |   | 2,176 | 
|                                |  |                 |       |  |      |  
|                                |  | $               | 3,261 |  |      | $ | 4,735 | 
|                                |  |                 |       |  |      |  

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Property and equipment held under capital lease
obligations totaled approximately $143,000 and $2.8 million
at December 31, 2001 and 2000, respectively. The related
accumulated depreciation totaled approximately $21,000 and
$1.0 million at December 31, 2001 and 2000,
respectively.

5. INVESTMENTS

In May 2001, the Company purchased 463,500
shares of Series A Convertible Preferred Stock of Photonic
Sensor Systems, Inc. for an aggregate purchase price of
$500,000, representing a 3.4% interest in the company. The
Company accounts for this investment under the cost method. As
more particularly described in Footnote 16, the Company is
in litigation with Photonic Sensor Systems, Inc. and no further
investments by the Company will be made.

In January 2000, Genomic Solutions Ltd. sold
its investment in HD Technologies for approximately $575,000 in
cash, which resulted in a gain of approximately $282,000. In
September 2000, the Company sold all of its product and
intellectual property rights to the mass spectrometer developed
by the Company in collaboration with HD Technologies for
approximately $648,000, consisting of $150,000 in cash and
equipment valued at approximately $498,000, which resulted in a
gain of approximately $382,000.

6. ACCRUED LIABILITIES

Accrued liabilities consisted of the following
(in thousands):

|                               |  |                 |       |  |      |   |       | 
|------------------------------ |  | --------------- | ----- |  | ---- | - | ----- | 
|                               |  |                
|                               |  | At December 31, |      
|                               |  |                 |      
|                               |  | 2001            |       |  | 2000 |  
|                               |  |                 |       |  |      |  
|License fees                   |  | $               | 1,125 |  |      | $ | 3,400 | 
|Restructuring                  |  |                 | 860   |  |      |   |      | 
|Compensation and related taxes |  |                 | 473   |  |      |   | 811   | 
|Other                          |  |                 | 2,297 |  |      |   | 1,856 | 
|                               |  |                 |       |  |      |  
|                               |  | $               | 4,755 |  |      | $ | 6,067 | 
|                               |  |                 |       |  |      |  

7. LINES OF CREDIT

At December 31, 2001, the Company has a
$2.5 million line-of-credit agreement (the Primary
Line of Credit) with a bank, which provides for borrowings
through June 2002. At December 31, 2001 and 2000,
outstanding borrowings under this agreement totaled
$2.5 million and $0, respectively. Outstanding borrowings
bear interest at the banks prime interest rate
(weighted-average rate of 6.5% and 9.5% in 2001 and 2000,
respectively) and are payable on demand. The agreement contains
various covenants which, among other requirements, establish
minimum levels of working capital and tangible net worth that
must be maintained by the Company.

At December 31, 2001 and 2000, Genomic
Solutions Ltd. has a line-of-credit agreement with a bank
whereby it may borrow up to approximately $109,000. Outstanding
borrowings are collateralized by a letter of credit issued by
the Company and eligible accounts receivable, as defined and
bear interest at 2.75% above the banks base rate. The
interest rate at December 31, 2001 is 6.75%. At
December 31, 2001 and 2000, no amounts were outstanding
under this agreement. The current agreement expires May 27,
2002.

At December 31, 2001, Cartesian
Technologies, Inc. has a line-of-credit agreement with a bank
whereby Cartesian Technologies, Inc. may borrow up to
approximately $291,000. Outstanding borrowings are
collateralized by eligible accounts receivable and inventories,
as defined and bear interest at 2.5% above the banks base
rate. The interest rate at December 31, 2001 is 6.5%. At
December 31, 2001, no amounts were outstanding under this
agreement. The current agreement expires April 2002.

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8. LONG-TERM DEBT

Long-term debt consists of the following (in
thousands):

|                                                                                                                                 |  |                 |     |  |      |   |       | 
|-------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | --- |  | ---- | - | ----- | 
|                                                                                                                                 |  |                
|                                                                                                                                 |  | At December 31, |    
|                                                                                                                                 |  |                 |    
|                                                                                                                                 |  | 2001            |     |  | 2000 |  
|                                                                                                                                 |  |                 |     |  |      |  
|Capital lease obligations, due in varying amounts
	with interest rates ranging from 18% to 36%, through
	July 2004 (see Note 16) |  | $               | 123 |  |      | $ |      | 
|Capital lease obligations repaid in 2001                                                                                         |  |                 |    |  |      |   | 1,952 | 
|Notes payable by Genomic Solutions Ltd., repaid
	in 2001                                                                         |  |                 |    |  |      |   | 4     | 
|                                                                                                                                 |  |                 |     |  |      |  
|                                                                                                                                 |  |                 | 123 |  |      |   | 1,956 | 
|Less  Current portion                                                                                                           |  |                 | 57  |  |      |   | 754   | 
|                                                                                                                                 |  |                 |     |  |      |  
|                                                                                                                                 |  | $               | 66  |  |      | $ | 1,202 | 
|                                                                                                                                 |  |                 |     |  |      |  

See Note 16 for future scheduled maturities
of capital lease obligations.

9. SUBORDINATED DEBT AND COMMON STOCK
WARRANTS

In April 1999 and October 1999, the Company
received $6.0 million and $3.5 million, respectively,
from the issuance of subordinated notes with detachable warrants
(Sub Note 1 and Sub Note 2,
respectively). Accordingly, the proceeds were allocated to the
debt and warrants based on their relative fair values. Proceeds
of $5.9 million were recorded as the initial carrying value
of the subordinated notes with the resulting discount amortized
using the effective interest method through April 2000. On
March 24, 2000 and April 28, 2000, the Company and the
subordinated debt holders amended the note agreements to change
the acceleration of the maturity date from the closing date of
an initial public offering to one year from the closing date of
an initial public offering. Aggregate amortization expense
related to the discount was $1.3 million and
$1.6 million in 2000 and 1999 respectively, and is included
in interest expense in the accompanying consolidated statements
of operations. Both subordinated notes bore interest at a stated
rate of 12%. The effective interest rate was 53.0% and 154.1%
for Sub Note 1 and Sub Note 2, respectively, calculated
based on an expected maturity date of April 2000.

The Company accounted for the amendment to the
subordinated notes as an extinguishment of debt and recorded an
extraordinary loss of approximately $1.1 million in 2000.
The extraordinary loss represents the difference between the
carrying value of the original subordinated notes less the
related unamortized debt issuance costs at March 24, 2000,
aggregating to approximately $8.7 million, and the
estimated fair value of the new subordinated notes of
approximately $9.8 million. Managements estimate of
the fair value of the new subordinated notes was based on an
effective interest rate of 8.75%. Management determined this
rate by reference to market data for comparable financial
instruments available to the Company at March 24, 2000. The
resulting premium on the amended subordinated notes was being
amortized using the effective interest method through
April 2001. Since the subordinated notes were fully repaid
in 2000, the premium of $313,000 was fully amortized in 2000 and
is netted against interest expense in the accompanying
consolidated statements of operations.

Concurrent with completion of the Companys
initial public offering, 1,553,500 warrants were exercised and
1,071,500 warrants were cancelled. Prior to completion of the
public offering, the warrants were redeemable by the holders
after April 23, 2004 at either fair market value, as
determined between the holder and the Company or by appraisal,
or seven times EBITDA, as defined. The difference between the
estimated redemption price and the initial carrying value of the
warrants was being accreted to retained deficit on a
straight-line basis through April 2004. In 1999, the Company
recorded accretion of $3.9 million, based on the
anticipated offering price at December 31, 1999 of its
common stock in connection with its initial public offering. In
2000, the Company recorded decretion of approximately
$1.1 million as a result of the decline in the actual
offering price at May 5, 2000 of the Companys common
stock in its initial public offering.

On June 9, 2000, the Company repaid in their
entirety the $9.5 million of subordinated notes issued in
1999.

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10. INCOME TAXES

The components of the provision
(benefit) for income taxes are as follows (in thousands):

|                       |                                 |                          |   |        |      |   |   |        |   |   |   |        |  
|---------------------- | ------------------------------- | ------------------------ | - | ------ | ---- | - | - | ------ | - | - | - | ------ | -
|                       |                                 |                         
|                       |                                 | Years ended December 31, |  
|                       |                                 |                          |  
|                       |                                 | 2001                     |   |        | 2000 |   |   | 1999   |  
|                       |                                 |                          |   |        |      |   |   |        |  
|Continuing operations: |                                 |                          |   |        |      |   |   |        |   |   |   |       
|                       | Currently payable               |                          | $ |       |      |   | $ |       |   |   | $ |       |  
|                       | Deferred tax benefit            |                          |   | (7,028 | )    |   |   | (2,447 | ) |   |   | (3,682 | )
|                       | Increase in valuation allowance |                          |   | 7,028  |      |   |   | 2,447  |   |   |   | 3,682  |  
|                       |                                 |                          |   |        |      |   |   |        |  
|                       |                                 | $                        |  |        |      | $ |  |        |   | $ |  |       
|                       |                                 |                          |   |        |      |   |   |        |  
|Extraordinary item:    |                                 |                          |   |        |      |   |   |        |   |   |   |       
|                       | Currently payable               |                          | $ |       |      |   | $ |       |   |   | $ |       |  
|                       | Deferred tax benefit            |                          |   |       |      |   |   | (357   | ) |   |   |       |  
|                       | Increase in valuation allowance |                          |   |       |      |   |   | 357    |   |   |   |       |  
|                       |                                 |                          |   |        |      |   |   |        |  
|                       |                                 | $                        |  |        |      | $ |  |        |   | $ |  |       
|                       |                                 |                          |   |        |      |   |   |        |  

The differences between the income tax provision
calculated at the United States Federal statutory rate and the
consolidated income tax provision (benefit) from operations
are summarized as follows (in thousands):

|                                                           |  |                          |        |   |      |   |        |      |  |   |        |  
|---------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                           |  |                         
|                                                           |  | Years ended December 31, |       
|                                                           |  |                          |       
|                                                           |  | 2001                     |        |   | 2000 |   |        | 1999 | 
|                                                           |  |                          |        |   |      |   |        |      | 
|Federal statutory provision (benefit)                      |  | $                        | (8,874 | ) |      | $ | (2,670 | )    |  | $ | (3,788 | )
|Other nondeductible items                                  |  |                          | 174    |   |      |   | 90     |      |  |   | 79     |  
|Increase in valuation allowance                            |  |                          | 7,028  |   |      |   | 2,447  |      |  |   | 3,682  |  
|Write-off of acquired in-process research and
	development |  |                          | 1,428  |   |      |   |       |      |  |   |       |  
|Other                                                      |  |                          | 244    |   |      |   | 133    |      |  |   | 27     |  
|                                                           |  |                          |        |   |      |   |        |      | 
|                                                           |  | $                        |       |   |      | $ |       |      |  | $ |       |  
|                                                           |  |                          |        |   |      |   |        |      | 

The components of deferred income taxes consisted
of the following (in thousands):

|                                 |  |                 |         |   |      |   |        |  
|-------------------------------- |  | --------------- | ------- | - | ---- | - | ------ | -
|                                 |  |                
|                                 |  | At December 31, |        
|                                 |  |                 |        
|                                 |  | 2001            |         |   | 2000 |  
|                                 |  |                 |         |   |      |  
|Net operating loss carryforwards |  | $               | 14,583  |   |      | $ | 9,314  |  
|Impairment of long-lived assets  |  |                 | 1,209   |   |      |   |       |  
|Accruals and reserves            |  |                 | 673     |   |      |   | 148    |  
|Goodwill                         |  |                 | 422     |   |      |   | 430    |  
|Other                            |  |                 | (6      | ) |      |   | (39    | )
|                                 |  |                 |         |   |      |  
|                                 |  |                 | 16,881  |   |      |   | 9,853  |  
|Less  Valuation allowance       |  |                 | (16,881 | ) |      |   | (9,853 | )
|                                 |  |                 |         |   |      |  
|                                 |  | $               |        |   |      | $ |       |  
|                                 |  |                 |         |   |      |  

Deferred national income taxes have not been
provided on the undistributed earnings of the Companys
foreign subsidiaries as such amounts are either considered to be
permanently reinvested or would not create any additional U.S.
tax upon repatriation.

At December 31, 2001 and 2000 the Company
has available pre-tax net operating loss carryforwards of
approximately $42.9 and $27.4 million, respectively, which
can be utilized to offset future taxable income. These net
operating loss carryforwards expire between 2010 and 2021.
Annual utilization of the net operating loss carryforwards are
limited under Section 382 of the Internal Revenue Code due
to ownership changes, as

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defined by Section 382, that occurred in
2000 and 1997. These and other deferred income tax assets are
fully reserved by a valuation allowance due to historical
operating losses.


11. PREFERRED STOCK

The Board of Directors is authorized to issue up
to 15,000,000 shares of preferred stock in one or more series.
Under each issuance of a series of preferred stock, the Board of
Directors is permitted to fix the designations, preferences,
powers, and relative rights and restrictions thereof, including
without limitation, the dividend rate, conversion rights, voting
rights, redemption price, and liquidation preference. At
December 31, 2001, the Company has not authorized any
series of preferred stock for issuance and there are no shares
of preferred stock outstanding.

On January 26, 2000, the Company closed an
investment agreement (the Agreement) with
PerkinElmer, Inc. (PerkinElmer) for
$8.0 million through the purchase of 1,269,841 shares of
the Companys Series P preferred stock at
$6.30 per share. Since the Series P preferred stock
was convertible into common stock at a rate less than fair
value, there was a beneficial conversion feature associated with
the Series P preferred stock. The Company recorded a charge
of $8.0 million related to the beneficial conversion
feature in the first quarter of fiscal 2000. The beneficial
conversion feature was recorded through equal and offsetting
amounts to additional paid-in capital and retained deficit as a
deemed dividend and did not affect total stockholders
equity nor the results of operations. However, the beneficial
conversion charge increased the net loss attributable to common
stockholders in the computation of net loss per share.

The Agreement provided an option for PerkinElmer
to acquire additional shares of the Companys common stock
thereby increasing its ownership interest to approximately 20%
of the Company. As part of the agreement, PerkinElmer entered
into purchase agreements with holders of more than 95% of the
Companys then outstanding capital stock, options and
warrants, which gave PerkinElmer the option to purchase all of
the Companys equity securities held by these holders for a
period of two years. Upon completion of the Companys
initial public offering, each outstanding share of capital
stock, other than the shares held by PerkinElmer, were converted
to callable common stock and each right to receive capital stock
was converted to the right to receive callable common stock.
Upon completion of the initial public offering, the purchase
agreements entered into between the Companys stockholders
and PerkinElmer terminated and pursuant to the Companys
certificate of incorporation, as amended, PerkinElmer had the
right to cause the Company to redeem its callable securities for
a period of two years after October 23, 2000, at a price
that was generally 120% of fair market value, as set forth in
the Companys certificate. PerkinElmer was required to fund
the proceeds necessary to repurchase the shares through a
capital contribution to the Company.

In April 2001, the Company repurchased 873,016
shares of its stock owned by PerkinElmer at PerkinElmers
original purchase price. As a result of the sale by PerkinElmer
of more than half of its holdings of Genomic Solutions stock,
PerkinElmers right to cause the Company to redeem its
callable common stock terminated and each outstanding share of
callable common stock automatically converted into one share of
common stock. Net loss per share available to common
stockholders for the year ended December 31, 2001 includes
the $0.11 per share effect of the fair value of the
repurchase of the Companys stock held by PerkinElmer, in
excess of the fair value of the stock held by PerkinElmer.

12. COMMON STOCK

The Company has reserved for issuance that number
of shares of its authorized but unissued common stock necessary
to exercise all of its outstanding stock options.

13. STOCK OPTION PLANS

The Company has three stock option plans: the
1994 Stock Option Plan (the 1994 Plan); the 1998
Employee Stock Option Plan (the 1998 Plan); and the
1998 Non-Employee Director and Consultant Stock Option Plan (the
Non-Employee Plan). Options granted under these
plans are either incentive stock options, which are granted at
the fair market value of the common stock on the date of grant,
or non-qualified stock options, which are generally granted at
the fair market value of the common stock on the date of grant.

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Options are granted at the discretion of the
Board of Directors upon recommendation by the Compensation
Committee and expire ten years after the date of grant.


1994 Stock Option Plan

The 1994 Plan provided for the grant of options
to employees, consultants and directors. The maximum number of
shares that may be granted under the 1994 Plan is 1,590,000,
provided that no new options may be granted under the plan.
Options granted generally become exercisable at a rate of
33% per year over three years from the date of grant except
that 540,000 options vested immediately upon issuance and 14,600
options vest over a five-year period.

1998 Employee Stock Option Plan

In January 1998, the Company established the 1998
Plan to increase its ability to attract and retain key
employees. The maximum number of shares that may be granted
under the Plan is limited to ten percent of the Companys
issued and outstanding common stock. Options granted prior to
January 1, 2000 become exercisable at a rate of 20% per
year over five years from the date of grant. Options granted in
2000 generally become exercisable monthly over three years from
the date of grant except that 30,000 options vested immediately
upon issuance and 150,000 options vest annually over a five-year
period. Options granted in 2001 become exercisable as follows:
239,084 options vest monthly over three years, 215,000 options
vest annually over three years, 220,000 options vest annually
over four years, and 296,664 vest at various dates depending on
the vesting dates of the original Cartesian grants. As of
December 31, 2001, there are 890,429 options available to
grant.

1998 Non-Employee Director and Consultant
Stock Option Plan

In January 1998, the Company established the
Non-Employee Plan to increase its ability to retain directors
and consultants. The maximum number of shares that may be
granted under the Plan is 750,000. Options granted generally
become exercisable one year from date of grant. As of
December 31, 2001, there are 236,252 options available to
grant.

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Summary of Stock Option Plans

Stock option activity under the above plans is
summarized below:

|                                                           |                   |           |           |           |                |   |      |       | 
|---------------------------------------------------------- | ----------------- | --------- | --------- | --------- | -------------- | - | ---- | ----- | 
|                                                           |                   |           |           | Weighted  |               
|                                                           |                   | Number of |           |           | Average        |  
|                                                           |                   | Shares    |           |           | Exercise Price |  
|                                                           |                   |           |           |           |                |  
|Outstanding at December 31, 1998                           |                   |           | 1,938,936 |           |                | $ | 0.70 |      
|                                                           | Options granted   |           |           | 310,750   |                |   | $    | 2.00  | 
|                                                           | Options cancelled |           |           | (136,485  | )              |   | $    | 1.15  | 
|                                                           | Options exercised |           |           | (86,830   | )              |   | $    | 0.10  | 
|                                                           |                   |           |           |           |                |  
|Outstanding at December 31, 1999                           |                   |           | 2,026,371 |           |                | $ | 0.89 |      
|                                                           | Options granted   |           |           | 910,000   |                |   | $    | 10.55 | 
|                                                           | Options cancelled |           |           | (188,185  | )              |   | $    | 2.22  | 
|                                                           | Options exercised |           |           | (907,320  | )              |   | $    | 0.34  | 
|                                                           |                   |           |           |           |                |  
|Outstanding at December 31, 2000                           |                   |           | 1,840,866 |           |                | $ | 5.81 |      
|                                                           | Options granted   |           |           | 1,189,496 |                |   | $    | 2.72  | 
|                                                           | Options cancelled |           |           | (456,153  | )              |   | $    | 6.99  | 
|                                                           | Options exercised |           |           | (161,917  | )              |   | $    | 0.36  | 
|                                                           |                   |           |           |           |                |  
|Outstanding at December 31, 2001                           |                   |           | 2,412,292 |           |                | $ | 4.43 |      
|                                                           |                   |           |           |           |                |  
|Weighted average fair value of stock options
	granted 2001 |                   |           | $2.52     |           |                |   |      |      
|                                                           |                   |           |           |           |                |  
|Weighted average fair value of stock options
	granted 2000 |                   |           | $7.99     |           |                |   |      |      
|                                                           |                   |           |           |           |                |  
|Weighted average fair value of stock options
	granted 1999 |                   |           | $1.41     |           |                |   |      |      
|                                                           |                   |           |           |           |                |  

Options outstanding and exercisable at
December 31, 2001 are as follows:

|          |           |  |           |                  |       |                |  |  |             |  |  |  |           | 
|--------- | --------- |  | --------- | ---------------- | ----- | -------------- |  |  | ----------- |  |  |  | --------- | 
|          |           |  |           | Weighted Average |       |                | 
|Number of |           |  | Price     |                  |       | Contractual    |  |  |            
|Shares    |           |  | Per Share |                  |       | Remaining Life |  |  | Exercisable | 
|          |           |  |           |                  |       |                |  |  |             | 
|          | 145,596   |  |           | $                | 0.07  |                |  |  | 1.8 Years   |  |  |  | 145,596   | 
|          | 192,650   |  |           | $                | 0.37  |                |  |  | 5.6 Years   |  |  |  | 135,050   | 
|          | 310,416   |  |           | $                | 0.96  |                |  |  | 3.3 Years   |  |  |  | 310,416   | 
|          | 694,400   |  |           | $                | 2.03  |                |  |  | 7.4 Years   |  |  |  | 348,850   | 
|          | 195,000   |  |           | $                | 3.63  |                |  |  | 9.3 Years   |  |  |  | 0         | 
|          | 480,524   |  |           | $                | 7.19  |                |  |  | 8.5 Years   |  |  |  | 206,671   | 
|          | 393,706   |  |           | $                | 12.05 |                |  |  | 7.8 Years   |  |  |  | 184,353   | 
|          |           |  |           |                  |       |                |  |  |             | 
|          | 2,412,292 |  |           |                  |       |                |  |  |             |  |  |  | 1,330,936 | 
|          |           |  |           |                  |       |                |  |  |             | 

Stock-Based Compensation

Using the intrinsic value method under APB 25, no
compensation expense has been recognized in the accompanying
consolidated statements of operations for options granted to
employees at fair value. In 1999, the Company granted 200,250
stock options with a deemed fair value in excess of the amount
the employee must pay to acquire the stock. Accordingly, the
Company recorded deferred compensation totaling approximately
$129,000, which is included as an offset to stockholders
equity in the accompanying consolidated balance sheets. The
deferred compensation is being amortized on a straight-line
basis over the vesting period of the options which is generally
five years. The Company recorded amortization expense on
deferred compensation totaling approximately $26,000, $26,000
and $5,000 in 2001, 2000 and 1999, respectively.

Had compensation expense been determined based on
the fair value at the date of grant consistent with SFAS
No. 123, the reported net loss and loss per share
attributable to common stockholders from operations

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would have been increased to the following pro
forma amounts, which may not be representative of that to be
expected in future years (in thousands, except per share data):


|                 |  |             |  |                          |         |   |      |   |         |      |  |   |         |  
|---------------- |  | ----------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                 |  |             |  |                         
|                 |  |             |  | Years ended December 31, |        
|                 |  |             |  |                          |        
|                 |  |             |  | 2001                     |         |   | 2000 |   |         | 1999 | 
|                 |  |             |  |                          |         |   |      |   |         |      | 
|Net loss        |  | As Reported |  | $                        | (28,911 | ) |      | $ | (15,845 | )    |  | $ | (15,003 | )
|                 |  | Pro Forma   |  | $                        | (29,465 | ) |      | $ | (17,121 | )    |  | $ | (15,103 | )
|Loss per share  |  | As Reported |  | $                        | (1.17   | ) |      | $ | (0.90   | )    |  | $ | (5.04   | )
|                 |  | Pro Forma   |  | $                        | (1.19   | ) |      | $ | (0.98   | )    |  | $ | (5.08   | )

The fair value of these options was estimated at
the date of grant using the Black-Scholes option valuation
method in 2001 and 2000 with the following assumptions: weighted
average risk free interest rate of 4.15% and 6.13%, dividend
yield of 0%, expected life of options of 4 years, and a
volatility factor of 105% and 100% in 2001 and 2000,
respectively. The fair value of these options was estimated
using the minimum value option valuation method under SFAS 123
in 1999 with the following assumptions: weighted average risk
free interest rate of 5.86%, dividend yield of 0%, and expected
life of options of 5.3 years. Option valuation models
require the input of highly subjective assumptions. Because
changes in subjective input assumptions can materially affect
the fair value estimate, in managements opinion, the
existing model does not necessarily provide a reliable single
measure of the fair value of the Companys stock options.

14. EMPLOYEE STOCK PURCHASE
PLAN

In February 2000, the Company established
the Employee Stock Purchase Plan (ESPP). All
employees are eligible to participate in the ESPP. The plan
provides that participants may authorize Genomic Solutions to
withhold a portion of earnings to be used to purchase the
Companys common stock. A total of 1,000,000 shares of
common stock have been reserved for issuance under the Purchase
Plan. The Purchase Plan provides that the Company will sell
shares to employees who elect to participate in the Purchase
Plan at a price equal to 85% of the lesser of the fair market
value of the common stock on the first trading day of an
offering period or the last trading day of such offering period.

Under the Purchase Plan, the Company issued
15,758 and 4,909 shares of common stock to various employees in
2001 and 2000, respectively. These shares were issued with a
weighted average price per share of $3.12 in 2001 and $6.48 in
2000. At December 31, 2001, there were 979,333 shares of
common stock available to be issued under this plan.

15. EMPLOYEE BENEFIT PLAN

Genomic Solutions Inc. has a 401(k) plan covering
all eligible United States employees. Participants may elect to
defer a percentage of qualified compensation through voluntary
contributions to the plan and Genomic Solutions Inc. may make
discretionary contributions to the plan based on the gross
compensation of qualified participants. Genomic Solutions Inc.
made contributions of approximately $145,000 and $98,000 in 2001
and 2000, respectively. Genomic Solutions Inc. made no
contributions to the plan in 1999.

In October 2000, Genomic Solutions Ltd.
established a pension plan covering all eligible United Kingdom
employees. Participants may elect to defer a percentage of
qualified compensation through voluntary contributions to the
plan and Genomic Solutions Ltd. will make matching contributions
to the plan up to 3% of the base salary of qualified
participants. Genomic Solutions Ltd. made contributions of
approximately $43,000 and $15,000 in 2001 and 2000, respectively.

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16. COMMITMENTS AND
CONTINGENCIES

Leases

The Company leases most of its office space,
transportation, and laboratory and office equipment under
various capital and operating lease agreements. Initial leases
vary in length and several of the leases contain renewal
options. Capital leases terminate at various dates through
fiscal 2004. Total rental expense was approximately
$1.0 million, $850,000 and $454,000 in 2001, 2000 and 1999,
respectively.

Future minimum payments required under all
noncancelable capital and operating leases at December 31,
2001 are as follows (in thousands):

|                                           |  |       |       |           |        |   |         |        |  |   |     | 
|------------------------------------------ |  | ----- | ----- | --------- | ------ | - | ------- | ------ |  | - | --- | 
|                                           |  |       |       | Operating |        |   | Capital |       
|                                           |  | Total |       |           | Leases |   |         | Leases | 
|                                           |  |       |       |           |        |   |         |        | 
|2002                                       |  | $     | 1,060 |           |        | $ | 975     |        |  | $ | 85  | 
|2003                                       |  |       | 767   |           |        |   | 714     |        |  |   | 53  | 
|2004                                       |  |       | 344   |           |        |   | 329     |        |  |   | 15  | 
|2005                                       |  |       | 115   |           |        |   | 115     |        |  |   |    | 
|2006                                       |  |       | 50    |           |        |   | 50      |        |  |   |    | 
|                                           |  |       |       |           |        |   |         |        | 
|                                           |  | $     | 2,336 |           |        | $ | 2,183   |        |  | $ | 153 | 
|                                           |  |       |       |           |        |   |         |        | 
|Less  Amount representing interest        |  |       |       |           |        |   |         |        |  |   | 30  | 
|                                           |  |       |       |           |        |   |         |        | 
|Present value of capital lease obligations |  |       |       |           |        |   |         |        |  |   | 123 | 
|Less  Current portion                     |  |       |       |           |        |   |         |        |  |   | 57  | 
|                                           |  |       |       |           |        |   |         |        | 
|                                           |  |       |       |           |        |   |         |        |  | $ | 66  | 
|                                           |  |       |       |           |        |   |         |        | 

Litigation

On February 12, 2001, PerkinElmer filed a
lawsuit in Delaware Chancery Court requesting that the Delaware
court interpret the terms of PerkinElmers right, under the
Companys Certificate of Incorporation, to require the
Company to call and redeem its callable common stock. The
lawsuit named the Company as well as each of its directors and
alleged, among other things, that the Company sought to
improperly impede or terminate PerkinElmers right to cause
the Company to redeem its callable stock, and to impose an
improper financial penalty upon an exercise by PerkinElmer of
that right. PerkinElmers complaint was in the context of a
proposed transaction that the Company was pursuing with an
unnamed third party, which if completed without PerkinElmer
exercising its right, would have had the effect of terminating
the right. On February 15, 2001, the Company filed a motion
for summary judgment seeking dismissal of the lawsuit. On
April 18, 2001, the Company reached an agreement with
PerkinElmer that ended all litigation between the companies and
settled all disputes between the parties. The Company filed a
Form 8-K on April 23, 2001, reporting the settlement,
together with copies of the settlement documents.

On November 27, 2000, Molecular Dynamics,
Inc. filed a lawsuit against the Company in Santa Clara County
Superior Court, San Jose, California. The lawsuit related to the
Companys refusal to purchase shares of capital stock of
Meridian Instruments, Inc. owned by Molecular Dynamics. The
complaint sought payment of approximately $650,000, which would
increase by $8,333 each month until payment was made, as a
result of a put right in favor of Molecular Dynamics
which the Company is allegedly obligated to honor.

In September 2001, the Company entered into
a settlement agreement with Molecular Dynamics that ended all
litigation between the companies and settled all disputes
between the parties. The settlement of this matter did not have
a material impact on the Companys financial position or
results of operations.

In December 2001, the Company filed suit
against Photonic Sensor Systems, Inc., a Georgia corporation, in
the federal district court for the Eastern District of Michigan
alleging three counts of breach of contract in connection with a
certain License and Development Agreement entered into with
Photonic and seeking monetary relief in the amount of the
Companys original preferred stock investment of $500,000.
Pursuant to the License and Development Agreement, Photonic was
obligated to develop and create optical interferometer

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based chips and related instrumentation for
genomic and proteomic research. The Companys claims
against Photonic arise from its failure to perform
Photonics obligations under the License and Development
Agreement. In January 2002, Photonic filed a counter-claim
requesting monetary relief against the Company alleging breach
of contract, indemnification and tortious interference based on
the alleged failure of the Company to purchase stock upon the
achievement of certain milestones. The Company filed its answer
denying the allegations in the counter-claim in early
February 2002. Management believes that the counter-claim
is without merit and intends to defend it vigorously.


On March 21, 2002, the Company received a
letter from Photonic requesting permission to sell certain of
its assets, including computer equipment, and noting that
Photonic had found it necessary to cease operations and close
its offices. The Company has a liquidation preference with
respect to any distribution to shareholders of Photonicss
assets. The Company has not been able to obtain any financial
information from Photonic or otherwise verify the value, if any,
of the Companys interest in Photonic. If Photonic does not
raise capital to reopen its operations, the Company may lose the
value of its $500,000 investment in Photonics preferred
stock and in the License and Development Agreement.

From time to time, the Company is a defendant in
various lawsuits that have arisen in the normal course of
business. Management believes that the ultimate resolution of
these matters will not have a material adverse effect on the
Companys financial position or results of operations. The
Companys settlement of various matters in 2001 did not
have a material impact on the Companys financial position
or results of operations.

Royalty Payments

Under the terms of various license agreements,
the Company is required to pay royalties on certain product
sales during the terms of the respective agreements. Under the
most significant agreement, royalties are generally equal to the
greater of pre-determined minimums, a percentage of product
revenue, or a set amount per product.

17. ACQUISITIONS

Cartesian Technologies, Inc.

In December 2001, the Company acquired 100% of
the outstanding capital stock of Cartesian Technologies, Inc.
(Cartesian) in exchange for approximately
6.8 million shares of common stock (with a fair value of
approximately $13.3 million, net of issuance expenses), the
assumption of outstanding stock options with a fair value of
approximately $832,000, $2.5 million in cash, and
transaction costs of approximately $1.2 million for an
aggregate purchase price of $17.8 million. The acquisition
has been accounted for under the purchase method of accounting.
In connection with the acquisition, the Company recorded a
charge to operations in 2001 of $4.2 million associated
with the write-off of in-process research and development
acquired in the transaction that had not reached technological
feasibility. The remaining excess of the aggregate purchase
price over the fair value of the net assets acquired of
approximately $9.2 million has been recognized as goodwill.
According to SFAS No. 142, goodwill arising from
acquisitions initiated after June 30, 2001, is not subject
to amortization (See Note 2). The Company will review
goodwill each quarter for impairment according to SFAS
No. 142, which also establishes a new method of testing
goodwill for impairment by using a fair-value approach. The
operating results of Cartesian have been included in the

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##### Table of Contents



Companys consolidated results of operations
from the date of acquisition. The purchase price consists of the
following (in thousands):


|                                                  |               |   |         |       | 
|------------------------------------------------- | ------------- | - | ------- | ----- | 
|Net assets                                        |               | $ | 253     |      
|Purchase price in excess of net assets acquired   |               |   | 9,208   |      
|Purchased developed technology and know-how       |               |   | 4,100   |      
|Purchased in-process research and development     |               |   | 4,200   |      
|Common stock issued                               |               |   | (13,275 | )    
|Options to purchase shares of common stock issued |               |   | (832    | )    
|Acquisition related liabilities                   |               |   | (1,154  | )    
|                                                  |               |   |        
|                                                  | Net cash paid |   | $       | 2,500 | 
|                                                  |               |   |        

Cartesians in-process research and
development projects consisted of new and improved components to
existing products, vertical expansion of existing products, and
new products aimed at the high-throughput screening, microarray
and proteomics markets. In general, the existing research and
development efforts target higher degrees of automation and
increased throughput. The various projects ranged from 10% to
90% complete at the date of acquisition. The fair value of the
projects were determined by estimating the contribution of the
purchased in-process technology to developing commercially
viable products and estimating the resulting cash flows from the
expected product sales of such product. In determining the
discounted cash flows, material net cash in-flows were expected
to occur from 2003 to 2006 and the risk-adjusted discount rate
was between 30%  35%. The acquired in-process
research and development had no alternative future use.
Management is primarily responsible for the valuation of the
acquired in-process research and development.

The following pro forma unaudited financial data
is presented to illustrate the estimated effects of the
Cartesian acquisition as if this transaction had occurred as of
the beginning of 2001 and 2000. For the year ended
December 31, 2001, pro forma revenue, net loss and net loss
per share would have been $25.5 million,
$(23.2) million and $(0.74), respectively. For the year
ended December 31, 2000, pro forma revenue, loss
before extraordinary items and net loss would have been
$26.8 million, $(8.4) million and $(9.5) million,
respectively. Pro forma loss per share before extraordinary
items and net loss per share would have been $(0.35) and
$(0.39), respectively.

18. SEGMENT INFORMATION

The Company operates in one segment: the
development, manufacture and marketing of integrated, genomic,
proteomic and high-throughput screening and dispensing systems
and services for analyzing and quantifying biomolecules. The
Companys three product lines, genomic, proteomic and
high-throughput screening and dispensing systems and services,
have similar economic characteristics and attributes, including
similar marketing and distribution patterns, similar production
processes and similar, if not the same, customers. As a result,
the Company aggregates its product lines into a single segment
of genomic, proteomic and high-throughput screening and
dispensing systems and services. The Company operates primarily
in three geographic regions: the United States, United Kingdom
and Japan.

The Company distributes products to customers on
a worldwide basis. Sales and marketing operations outside the
United States are conducted principally through the
Companys foreign subsidiaries, and PerkinElmer, Inc.
Intercompany sales and transfers between geographic areas are
accounted for at prices, which are designed to be,
representative of third party transactions. Revenue is
attributed to each geographic location based on which office
makes the sale, which includes intercompany sales.

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##### Table of Contents



The following tables summarize selected financial
information of the Companys operations by geographic
location (in thousands):

|         |                             |                          |   |         |        |  |   |         |        |  |   |        |        | 
|-------- | --------------------------- | ------------------------ | - | ------- | ------ |  | - | ------- | ------ |  | - | ------ | ------ | 
|         |                             |                         
|         |                             | Years ended December 31, |  
|         |                             |                          |  
|         |                             | 2001                     |   |         | 2000   |  |   | 1999    |       
|         |                             |                          |   |         |        |  |   |         |       
|Revenue: |                             |                          |   |         |        |  |   |         |        |  |   |       
|         | United States               |                          | $ | 14,718  |        |  | $ | 11,494  |        |  | $ | 8,897  |       
|         | United Kingdom              |                          |   | 10,423  |        |  |   | 13,287  |        |  |   | 6,867  |       
|         | Japan                       |                          |   | 3,069   |        |  |   | 4,675   |        |  |   | 2,296  |       
|         | Less  Intercompany revenue |                          |   | (11,370 | )      |  |   | (10,379 | )      |  |   | (5,968 | )     
|         |                             |                          |   |         |        |  |   |         |       
|         |                             | Total revenue            |   | $       | 16,840 |  |   | $       | 19,077 |  |   | $      | 12,092 | 
|         |                             |                          |   |         |        |  |   |         |       

|                   |                     |                         |   |        |        |  |   |        |        |  |   |       |       | 
|------------------ | ------------------- | ----------------------- | - | ------ | ------ |  | - | ------ | ------ |  | - | ----- | ----- | 
|                   |                     |                        
|                   |                     | At December 31,         |  
|                   |                     |                         |  
|                   |                     | 2001                    |   |        | 2000   |  |   | 1999   |       
|                   |                     |                         |   |        |        |  |   |        |       
|Long-lived assets: |                     |                         |   |        |        |  |   |        |        |  |   |      
|                   | United States       |                         | $ | 17,093 |        |  | $ | 17,334 |        |  | $ | 2,885 |      
|                   | United Kingdom      |                         |   | 921    |        |  |   | 916    |        |  |   | 1,265 |      
|                   | Japan               |                         |   | 142    |        |  |   | 168    |        |  |   | 59    |      
|                   | Goodwill            |                         |   | 9,579  |        |  |   | 954    |        |  |   | 1,253 |      
|                   | Less  Eliminations |                         |   | (8,944 | )      |  |   | (8,943 | )      |  |   | (778  | )    
|                   |                     |                         |   |        |        |  |   |        |       
|                   |                     | Total long-lived assets |   | $      | 18,791 |  |   | $      | 10,429 |  |   | $     | 4,684 | 
|                   |                     |                         |   |        |        |  |   |        |       

In 2001 and 2000, PerkinElmer accounted for 30%
and 14% of the Companys total revenue. No customer
accounted for greater than 10% of total revenue in 1999.

19. RESTRUCTURING AND INVENTORY
IMPAIRMENT CHARGES

On September 7, 2001, the Company announced
restructuring initiatives designed to lower its cost structure
and achieve profitability in 2002. The restructuring plan
included closing certain facilities, divesting its proteomic
contract research services business, reducing its employee
headcount by approximately 25% and discontinuing certain
products. As a result of this restructuring plan, the Company
recorded restructuring and inventory impairment charges of
approximately $2.7 million and $1.2 million,
respectively, during 2001.

The restructuring charge of $2.7 million
consisted of the impairment of certain long-lived assets, the
loss on disposal and sale of certain fixed assets, employee
termination benefits for 50 employees, and exit costs associated
with closing certain facilities. In connection with the
restructuring initiatives, the Company estimated the discounted
future cash flows related to goodwill and certain fixed assets
and reduced these assets to their estimated fair value. As of
December 31, 2001, the Company had terminated
45 employees and paid out $312,000 in termination benefits.
There have been no lease cancellation costs paid out to date.
All restructuring activities were completed by January 31,
2002. At December 31, 2001, the remaining balance of the
restructuring reserve totaled $860,000 and is included in
accrued liabilities in the Companys consolidated balance
sheet.

The inventory impairment charge of
$1.2 million relates to the write-down of inventories
related to discontinuing the manufacture of certain products.
This charge is included as a separate component of cost of
revenue in the Companys consolidated statements of
operations.

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The following table summarizes the restructuring
charges (in thousands):

|                                    |       |           |     |          |      |   |            |              |  |   |      |     |  |   |     |     | 
|----------------------------------- | ----- | --------- | --- | -------- | ---- | - | ---------- | ------------ |  | - | ---- | --- |  | - | --- | --- | 
|                                    |       |           |     |          |      |  
|                                    |       |           |     | Utilized |      |   | Accrual at |             
|                                    |       | Original  |     |          |      |   |            | December 31, | 
|                                    |       | Provision |     |          | Cash |   |            | Noncash      |  |   | 2001 |    
|                                    |       |           |     |          |      |   |            |              |  |   |      |    
|Impairment of long-lived assets     |       | $         | 0.6 |          |      | $ |           |              |  | $ | 0.6  |     |  | $ |    |    
|Loss on disposal and sale of assets |       |           | 0.9 |          |      |   |           |              |  |   | 0.9  |     |  |   |    |    
|Employee termination benefits       |       |           | 0.7 |          |      |   | 0.3        |              |  |   |     |     |  |   | 0.4 |    
|Lease cancellation costs            |       |           | 0.5 |          |      |   |           |              |  |   |     |     |  |   | 0.5 |    
|                                    |       |           |     |          |      |   |            |              |  |   |      |    
|                                    | Total |           | $   | 2.7      |      |   | $          | 0.3          |  |   | $    | 1.5 |  |   | $   | 0.9 | 
|                                    |       |           |     |          |      |   |            |              |  |   |      |    

On May 16, 2000, the Company incurred a
one-time restructuring charge of $600,000 to close our
Chelmsford, Massachusetts proteomics facility. A new Center for
Proteomics has been constructed at our Ann Arbor, Michigan
headquarters. The charge consisted primarily of $400,000 for
employee termination benefits for fifteen employees and $200,000
for exit costs associated with closing the facility. The
restructuring reserve was fully utilized in 2000 and there was
no remaining balance at December 31, 2000.

20. QUARTERLY FINANCIAL DATA
(UNAUDITED)

Summarized quarterly financial data is as follows
(in thousands, except per share data):

|                                          |  |             |        |   |             |   |        |             |  |   |             |   |  |              |         |   |  |   |         |  
|----------------------------------------- |  | ----------- | ------ | - | ----------- | - | ------ | ----------- |  | - | ----------- | - |  | ------------ | ------- | - |  | - | ------- | -
|                                          |  | 1st Quarter |        |   | 2nd Quarter |   |        | 3rd Quarter |  |   | 4th Quarter |   |  | Year to Date |        
|                                          |  |             |        |   |             |   |        |             |  |   |             |   |  |              |        
|2001                                      |  |             |        |   |             |   |        |             |  |   |             |   |  |              |         |   |  |   |         |  
|Revenue                                   |  | $           | 4,379  |   |             | $ | 4,463  |             |  | $ | 3,629       |   |  | $            | 4,369   |   |  | $ | 16,840  |  
|Gross profit                              |  |             | 1,954  |   |             |   | 1,922  |             |  |   | (82         | ) |  |              | 1,254   |   |  |   | 5,048   |  
|Loss before extraordinary items           |  |             | (2,908 | ) |             |   | (2,937 | )           |  |   | (7,924      | ) |  |              | (12,331 | ) |  |   | (26,100 | )
|Loss per share before extraordinary items |  |             | (0.12  | ) |             |   | (0.12  | )           |  |   | (0.32       | ) |  |              | (0.49   | ) |  |   | (1.05   | )
|Net loss                                  |  |             | (2,987 | ) |             |   | (2,931 | )           |  |   | (7,853      | ) |  |              | (12,329 | ) |  |   | (26,100 | )
|Net loss per share                        |  | $           | (0.12  | ) |             | $ | (0.12  | )           |  | $ | (0.32       | ) |  | $            | (0.49   | ) |  | $ | (1.05   | )
|2000                                      |  |             |        |   |             |   |        |             |  |   |             |   |  |              |         |   |  |   |         |  
|Revenue                                   |  | $           | 3,995  |   |             | $ | 4,500  |             |  | $ | 5,038       |   |  | $            | 5,544   |   |  | $ | 19,077  |  
|Gross profit                              |  |             | 1,991  |   |             |   | 2,169  |             |  |   | 2,503       |   |  |              | 3,040   |   |  |   | 9,703   |  
|Loss before extraordinary items           |  |             | (2,844 | ) |             |   | (2,867 | )           |  |   | (869        | ) |  |              | (1,274  | ) |  |   | (7,854  | )
|Loss per share before extraordinary items |  |             | (0.83  | ) |             |   | (0.17  | )           |  |   | (0.03       | ) |  |              | (0.05   | ) |  |   | (0.45   | )
|Net loss                                  |  |             | (3,894 | ) |             |   | (2,867 | )           |  |   | (869        | ) |  |              | (1,274  | ) |  |   | (8,904  | )
|Net loss per share                        |  | $           | (1.14  | ) |             | $ | (0.17  | )           |  | $ | (0.03       | ) |  | $            | (0.05   | ) |  | $ | (0.51   | )

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EXHIBIT INDEX


|            |             |  |             |                                                                                                                                                                                                                                           
|----------- | ----------- |  | ----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |             |  | Description
|            |             |  |            
|            | (1)2.1      |  |             | Agreement and Plan of Merger between Genomic
	Solutions Inc. and B.I. Systems Corporation dated
	December 24, 1997                                                                                                                        
|            | (1)2.3      |  |             | Investor Agreement between Genomic Solutions Inc.
	and the former shareholders of PBA Technology Limited, dated
	December 19, 1997                                                                                                        
|            | (1)2.4      |  |             | Investment Agreement between Genomic Solutions
	and PerkinElmer, Inc. dated December 14, 1999                                                                                                                                             
|            | (1)2.4(a)   |  |             | First Amendment to the Investment Agreement
	between Genomic Solutions and PerkinElmer, Inc.                                                                                                                                              
|            | (1)2.5      |  |             | Agreement for the Sale and Purchase of the Entire
	Issued Share Capital of PBA Technology Limited, dated December,
	1997                                                                                                                  
|            | (1)2.6      |  |             | Asset Purchase Agreement between Genomic
	Solutions Inc. and ESA, Inc., dated October 13, 1998                                                                                                                                            
|            | (7)2.7      |  |             | Amended and Restated Stock Purchase Agreement
	between Genomic Solutions Inc. and Photonic Sensors Systems,
	Inc., dated May 31, 2001                                                                                                     
|            | (7)2.8      |  |             | Amended and Restated Agreement and Plan of Merger
	dated September 28, 2001 by and among Genomic Solutions
	Inc., Cartesian Acquiring Corporation, Cartesian Technologies,
	Inc., and certain stockholders of Cartesian Technologies, Inc.
|            | 2.9        |  |             | Certificate of Merger dated December 18, 2001
	between Cartesian Acquiring Corporation and Cartesian
	Technologies, Inc.                                                                                                                  
|            | (1)3.1      |  |             | Bylaws                                                                                                                                                                                                                                    
|            | (1)3.2      |  |             | Audit Committee Charter                                                                                                                                                                                                                   
|            | (1)3.3      |  |             | Amended and Restated Stockholders Agreement dated
	as of January 25, 2000, among Genomic Solutions Inc. and
	certain of its stockholders                                                                                                  
|            | (7)3.4      |  |             | Fourth Amended and Restated Certificate of
	Incorporation                                                                                                                                                                                 
|            | (1)4.1      |  |             | Registration Rights Agreement among Genomic
	Solutions Inc. and certain of its warrantholders, dated
	April 23, 1999, as amended on October 28, 1999                                                                                      
|            | (1)4.2      |  |             | Warrant between Genomic Solutions Inc. and ESA,
	Inc., dated October 13, 1998                                                                                                                                                             
|            | (1)4.3      |  |             | Form of Amended and Restated Callable Warrant
	between Genomic Solutions Inc. and ESA, Inc.                                                                                                                                               
|            | (1)4.4      |  |             | Registration of Rights Agreement among Genomic
	Solutions Inc. and Jeffrey S. Williams                                                                                                                                                    
|            | *(1)10.1    |  |             | Sales, Marketing and Distribution Agreement
	between Genomic Solutions Inc. and PerkinElmer, Inc., dated
	December 14, 1999                                                                                                               
|            | *(4)10.1(a) |  |             | First Amendment to Sales, Marketing &
	Distribution Agreement between Genomic Solutions Inc. and
	PerkinElmer, Inc., dated April 18, 2001                                                                                                 
|            | **10.1(b)  |  |             | Second Amendment to Sales, Marketing &
	Distribution Agreement between Genomic Solutions Inc. and
	PerkinElmer, Inc., dated January 1, 2002                                                                                               
|            | (1)10.2     |  |             | Form of Indemnification Agreement                                                                                                                                                                                                         
|            | (1)10.3     |  |             | B.I. Systems Corporation 1994 Omnibus Equity
	Incentive Plan, as amended                                                                                                                                                                  
|            | (1)10.4     |  |             | 1998 Stock Option Plan, as amended                                                                                                                                                                                                        
|            | (2)10.4(a)  |  |             | Second Amendment to 1998 Stock Option Plan                                                                                                                                                                                                
|            | (1)10.5     |  |             | 1998 Non-Employee Director and Consultant Stock
	Option Plan, as amended                                                                                                                                                                  
|            | (1)10.6     |  |             | 2000 Employee Stock Purchase Plan                                                                                                                                                                                                         
|            | (1)10.7     |  |             | Executive Employment Agreement between Genomic
	Solutions Inc. and Jeffrey Williams, dated January 1, 2000                                                                                                                                



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##### Table of Contents



|            |             |  |             |                                                                                                                                                      
|----------- | ----------- |  | ----------- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |             |  | Description
|            |             |  |            
|            | (2)10.7(a)  |  |             | Addendum to Employment Agreement between Genomic
	Solutions Inc. and Jeffrey Williams, effective January 1,
	2001                                    
|            | (1)10.8     |  |             | Promissory Note between Jeffrey S. Williams
	and Genomic Solutions Inc., dated January 1, 1998                                                       
|            | (1)10.9     |  |             | Promissory Note between Jeffrey S. Williams
	and Genomic Solutions Inc., dated February 1, 2000                                                      
|            | (1)10.10    |  |             | Line of Credit between Genomic Solutions Inc. and
	Comerica Bank, dated August 10, 1998, as amended                                                  
|            | (1)10.11    |  |             | Variable Rate Master Revolving Note between
	Genomic Solutions Inc. and Comerica, dated March 24, 2000                                               
|            | (1)10.12    |  |             | Security Agreement between Genomic Solutions Inc.
	and Comerica Bank, dated March 24, 2000                                                           
|            | (1)10.13    |  |             | Variable Rate Master Revolving Note between
	Genomic Solutions Inc. and Comerica, dated April 28, 2000                                               
|            | (7)10.14    |  |             | Amendment 5, effective as of June 1,
	2001 to the Line of Credit between Genomic Solutions Inc. and
	Comerica Bank, dated August 10, 1998, as amended
|            | (1)10.15    |  |             | Lease between Genomic Solutions Inc. and Dart
	Container Corporation of Michigan, dated July 22, 1998                                                
|            | (2)10.15(a) |  |             | Second Amendment to Lease Agreement between
	Genomic Solutions Inc. and Dart Container Corporation of
	Michigan, dated June 1, 2000                  
|            | (1)10.16    |  |             | Lease between Genomic Solutions Inc. and Highland
	Industrial Properties, L.L.C., dated August 7, 1997                                               
|            | (2)10.16(a) |  |             | Fourth Addendum to Lease between Genomic
	Solutions Inc. and Highland Industrial Properties, L.L.C., dated
	May 17, 2000                             
|            | 10.16(b)   |  |             | Fifth Addendum to Lease between Genomic Solutions
	Inc. and Highland Industrial Properties, L.L.C., dated
	September 10, 2001                        
|            | (2)10.17    |  |             | Sublease and Service Agreement between Genomic
	Solutions Inc. and Advanced Modular Power Systems, Inc., dated
	January 1, 2001                      
|            | (1)10.18    |  |             | Lease between Genomic Solutions Ltd and Winterhur
	Life UK Limited, dated April 16, 1999                                                             
|            | (1)10.19    |  |             | Lease Agreement between Motonori Akahori (on
	behalf of Genomic Solutions KK) and Chuo Tochi K.K., dated
	April 21, 1998                             
|            | (2)10.19(a) |  |             | Memorandum of Renewal of Lease Agreement between
	Motonori Akahori (on behalf of Genomic Solutions KK) and Chuo
	Tochi K.K., dated April 21, 1998    
|            | (2)10.19(b) |  |             | Lease between Genomic Solutions KK and Office
	Kitawaki Y.K. dated March 1, 2000                                                                     
|            | (1)10.20    |  |             | Master Lease Agreement with TransAmerica Business
	Credit Corporation, dated June 24, 1998, as amended                                               
|            | (1)10.21    |  |             | Genomic Solutions Limited Sale of Shares in HD
	Technologies Limited, dated January 25, 2000                                                         
|            | (1)10.22    |  |             | Business Loan Agreement among Genomic Solutions
	Inc. and certain lenders, dated April 23, 1999, as amended                                          
|            | (1)10.23    |  |             | Business Loan Agreement among Genomic Solutions
	Inc. and certain lenders, dated October 28, 1999, as amended                                        
|            | (2)10.24    |  |             | Employment Agreement between Genomic Solutions
	Inc. and Steven J. Richvalsky, dated as of November 1,
	2000.                                        
|            | (2)10.25    |  |             | Employment Agreement between Genomic Solutions
	Inc. and Andrew A. Jakimcius, dated as of November 1,
	2000.                                         



---



##### Table of Contents



|            |             |  |             |                                                                                                                                                                          
|----------- | ----------- |  | ----------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |             |  | Description
|            |             |  |            
|            | *(2)10.26   |  |             | License Agreement between Affymetrix, Inc. and
	Genomic Solutions Inc., dated December 28, 2000.                                                                         
|            | **10.26(a) |  |             | First Amendment to the License Agreement between
	Affymetrix, Inc. and Genomic Solutions Inc., dated
	January 1, 2002.                                                   
|            | (5)10.27    |  |             | Stock Pledge Agreement between Jeffrey S.
	Williams and Genomic Solutions Inc., dated April 15, 2001                                                                     
|            | (5)10.28    |  |             | Promissory Note between Jeffrey S. Williams
	as borrower and Genomic Solutions Inc. as lender, dated
	April 15, 2001                                                     
|            | (4)10.29    |  |             | Settlement, Release and Stock Purchase Agreement
	between Genomic Solutions Inc. and PerkinElmer, Inc., dated
	April 18, 2001                                            
|            | (4)10.30    |  |             | Settlement and Release Agreement between
	PerkinElmer, Inc. and the Members of the Board of Directors of
	Genomic Solutions Inc. dated April 18, 2001                    
|            | (7)10.30    |  |             | Employment Agreement between Genomic Solutions
	Inc. and Gary Kendra, dated March 8, 2001                                                                                
|            | 10.31      |  |             | Employment Agreement between Genomic Solutions
	Inc. and Thomas C. Tisone, PhD, dated December 18, 2001                                                                  
|            | 10.32      |  |             | Employment Agreement between Genomic Solutions
	Inc. and David Lorenz, dated, 2001                                                                                       
|            | (8)10.33    |  |             | Voting Agreement between Genomic Solutions Inc.,
	Cartesian Acquiring Corporation, Cartesian Technologies, Inc.
	and certain of its shareholders dated September 6, 2001.
|            | 10.34      |  |             | Lease between Cartesian Technologies, Inc. and
	Airport Industrial Complex, dated February 5, 2002                                                                       
|            | 10.35      |  |             | Sublease between Cartesian Technologies, Inc. and
	Digital Recorders, Inc., dated July 30, 1999                                                                          
|            | 21.1       |  |             | List of Subsidiaries                                                                                                                                                     
|            | 23.1       |  |             | Consent of Arthur Andersen LLP, Independent
	Public Accountants                                                                                                          
|            | 24.1       |  |             | Power of Attorney (included on signature page)                                                                                                                           
|            | 99.1       |  |             | Letter from the Company dated March 28, 2002
	regarding Arthur Andersen LLP                                                                                              






|    |                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to Genomic Solutions
	Inc.s registration statement on Form S-1, as amended
	(File No. 333-30246).                                   
|   
|(2) | Incorporated by reference to Genomic Solutions
	Inc.s Annual Report on Form 10-K filed April 2,
	2001.                                                        
|   
|(3) | Incorporated by reference to Genomic Solutions
	Inc.s Annual Report on Form 10-K/ A filed
	April 30, 2001.                                                    
|   
|(4) | Incorporated by reference to Genomic Solutions
	Inc.s Current Report on Form 8-K filed April 23,
	2001.                                                       
|   
|(5) | Incorporated by reference to Genomic Solutions
	Inc.s Quarterly Report on Form 10-Q filed
	May 14, 2001.                                                      
|   
|(6) | Incorporated by reference to Genomic Solutions
	Inc.s Current Report on Form 8-K filed
	October 2, 2001.                                                      
|   
|(7) | Incorporated by reference to Genomic Solutions
	Inc.s registration statement on Form S-4, as amended
	(File No. 333-71140).                                   
|   
|(8) | Incorporated by reference to Genomic Solutions
	Inc.s Current Report on Form 8-K filed
	December 21, 2001.                                                    
|   
|*   | Confidential treatment granted with respect to
	portions of this Exhibit.                                                                                      
|   
|**  | Certain information has been omitted and filed
	separately with the Commission. Confidential treatment has been
	requested with respect to the omitted portion.



|  |                
|- | ---------------
| | Filed herewith.