<Page>

                             SELECTED FINANCIAL DATA

CONSOLIDATED/COMBINED STATEMENT OF OPERATIONS DATA

<Table>
<Caption>
                                                                                                          The Predecessor
                                                                  Three Months                             (Siemens AG)
                                                Year Ended           Ended                 Year Ended       Year Ended
                                               December 31,       December 31,            September 30,    September 30,
                                          --------------------------------------------------------------------------------
                                               2001(1)     2000      1999(2)             1999(3)   1998(3)      1997(4)
--------------------------------------------------------------------------------------------------------------------------
                                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                          <C>        <C>        <C>                 <C>       <C>         <C>
Net sales                                    $82,588    $68,105    $12,792             $61,894   $57,261     $49,391

Cost of sales                                 51,063     43,252      7,873              39,462    35,047           -
                                          --------------------------------------------------------------------------------

 Gross profit                                 31,525     24,853      4,919              22,432    22,214           -
                                          --------------------------------------------------------------------------------
Operating expenses:
 Research and development                      7,744      5,916      1,364               6,837     5,625           -
 In-process research and development           3,590          -          -                   -         -           -
 General and administrative                    5,298      2,723        464               3,009     3,190           -
 Marketing and selling                        16,792     14,111      2,877              12,664    13,598           -
                                          --------------------------------------------------------------------------------
  Total operating expenses                    33,424     22,750      4,705              22,510    22,413           -

 Operating (loss) income                      (1,899)     2,103        214                 (78)     (199)          -

Other expense (income)                           314        (58)       (67)               (331)      192           -
Interest expenses, net                           133        916        219                 531       937           -
                                          --------------------------------------------------------------------------------

(Loss) income before income taxes             (2,346)     1,245         62                (278)   (1,328)          -

Income tax (benefit) expense                    (969)       516        191                (302)     (610)          -
                                          --------------------------------------------------------------------------------

Net (loss) income                             (1,377)       729       (129)                 24      (718)       (660)

Convertible preferred stock accretion            833          -          -                   -         -           -
Beneficial conversion feature                  5,192          -          -                   -         -           -
                                          --------------------------------------------------------------------------------
Net (loss) income available
 to common shareholders                      $(7,402)   $   729    $  (129)            $    24   $  (718)          -
                                          ================================================================================
Earnings (loss) per
 share - basic and diluted                   $ (0.19)   $  0.02    $  0.00             $  0.00   $ (0.57)          -
Weighted average shares
 outstanding - basic                          39,613     38,753     38,753              32,503     1,253           -
Weighted average shares
 outstanding - diluted                        39,613     38,814     38,753              32,503     1,253           -
</Table>

CONSOLIDATED/COMBINED BALANCE SHEET DATA

<Table>
<Caption>
                                                                                                           The Predecessor
                                                                                                            (Siemens AG)
                                                          As of                              As of          Year Ended
                                                      December 31,                       September 30,     September 30,
                                          -----------------------------------      -----------------------
                                              2001(1)      2000     1999(2)             1999(3)   1998(3)       1997(4)
---------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>          <C>        <C>                 <C>       <C>          <C>
Cash and cash equivalents                 $   48,787   $  2,460   $  1,842            $  2,765  $   2,068    $      -
Working capital                               66,527     11,716     12,648              15,371     13,980           -
Total assets                                 112,091     42,972     39,969              39,676     35,764      25,218
Long-term debt                                 2,200     14,233     14,246              14,811     11,334       5,284
Shareholders' equity                          77,571      3,001      2,483               2,780      1,459           -
</Table>

(1) THE INFORMATION INCLUDES THE OPERATIONS OF NONIUS GROUP SINCE APRIL 1, 2001,
    THE DATE OF ACQUISITION AND REFLECTS THE INITIAL PUBLIC OFFERING WHICH
    OCCURRED ON DECEMBER 14, 2001.

(2) REFLECTS A THREE-MONTH FISCAL PERIOD RESULTING FROM A CHANGE IN FISCAL YEAR
    FROM SEPTEMBER 30 TO DECEMBER 31 IN 1999.

(3) THE FINANCIAL STATEMENTS FOR 1999 AND 1998 ARE PRESENTED ON A COMBINED BASIS
    DUE TO THE COMMON OWNERSHIP OF BRUKER AXS AND BRUKER AXS GMBH, THE LATTER OF
    WHICH WAS FORMALLY ACQUIRED BY THE FORMER IN JUNE 1999.

(4) THE INFORMATION INCLUDED FOR 1997 REFLECTS THE MINIMUM INFORMATION REQUIRED
    TO BE PRESENTED BY S-K ITEM 301. EARNINGS PER SHARE INFORMATION IS NOT
    REQUIRED BECAUSE THE OPERATING BUSINESS UNIT ACQUIRED FROM SIEMENS AG WAS
    NOT A PUBLIC COMPANY; THUS, THE INFORMATION IS NOT PRESENTED. THE ADDITIONAL
    SELECTED FINANCIAL DATA PRESENTED IN SUBSEQUENT YEARS WAS NOT AVAILABLE FOR
    1997.

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16
<Page>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION
AND RESULTS OF OPERATIONS TOGETHER WITH "SELECTED FINANCIAL DATA" AND OUR
FINANCIAL STATEMENTS AND RELATED NOTES APPEARING ELSEWHERE IN THIS ANNUAL
REPORT. THIS DISCUSSION AND ANALYSIS CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS, UNCERTAINTIES AND ASSUMPTIONS. OUR ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A
RESULT OF MANY FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH UNDER
"FACTORS AFFECTING OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION" AND
ELSEWHERE IN THIS ANNUAL REPORT.

OVERVIEW

We are a leading worldwide developer and provider of advanced integrated X-ray
systems which provide solutions for molecular and elemental analysis by X-ray
diffraction and X-ray fluorescence. Our products, which have particular
application in the drug discovery and materials science fields, provide our
customers with the ability to determine the structure of specific molecules,
such as proteins, and to characterize and determine the composition of
materials. Our customers include biotechnology and pharmaceutical companies,
semiconductor companies, raw material manufacturers, chemical companies,
academic institutions and other businesses involved in materials analysis.

Prior to September 1997, we did not engage in any significant business
operations. In October 1997, we and Bruker Physik, one of our affiliates,
purchased the analytical X-ray business of Siemens AG. We purchased the assets
and assumed the liabilities of Siemens' U.S. business, and Bruker Physik
purchased the stock of Siemens' German business, which business then became
Bruker AXS GmbH. In connection with this acquisition, we entered into an
agreement with Siemens pursuant to which Siemens continues to provide
administrative services, principally related to supply of inventory parts,
facility maintenance, purchasing, sales and marketing, human resources and
accounting. We are transitioning away from using Siemens' services and towards
using our own services when it is more cost effective to do so.

In June 1999, we acquired all of the shares of Bruker AXS GmbH from Bruker
Physik. The transaction represented an exchange between entities under common
control and, accordingly, the assets acquired and liabilities assumed have been
accounted for at historical cost in a manner similar to that of
pooling-of-interests accounting. As a result of this acquisition, for periods
prior to June 1999, our financial statements reflect the combined accounts of us
and Bruker AXS GmbH. All significant inter-company transactions have been
eliminated in the combined statements.

In December 2001, we completed an initial public offering of 9,000,000 shares of
our common stock to the public, at a price per share of $6.50. We received net
proceeds of $52.6 million. Upon the closing of the initial public offering,
5,625,000 shares of redeemable preferred stock converted into 6,923,077 shares
of common stock (See "Notes to Financial Statements"). In January 2002, the
underwriters of the initial public offering exercised an over-allotment option
to purchase an additional 1,350,000 shares at $6.50 per share. We received net
proceeds of $8.1 million.

In April 2001, we acquired Nonius B.V. and four of its affiliates ("Nonius")
from Delft Instruments N.V., a Dutch company, for approximately $6.2 million,
net of cash acquired, plus the assumption of approximately $1.8 million of debt
and additional liabilities of $4.3 million. Nonius and its affiliates specialize
in the development, production and marketing of products and services for single
crystal X-ray diffraction. Accordingly, the Nonius operations were consolidated
in the results since the date of the acquisition and had a substantial impact on
our results for the year ended December 31, 2001. As part of the acquisition, we
entered into a services agreement for Delft Instruments to continue to provide
various services to the acquired business.

In conjunction with the acquisition of Nonius, we acquired certain in-process
research and development ("IPR&D") projects. The first project relates to next
generation high brilliancy optics and micro sources. This project is focused on
the development of low-power (low energy consumption) X-ray tubes with
closely-coupled X-ray optics, which are directed at increasing the performance
of expensive and high-maintenance rotating anode generators. The primary goal of
this project is to develop the right combination of currently existing
technologies in X-ray tube and X-ray optics. At the date of acquisition, this
project was approximately 70% complete. We estimated this project would be
completed in 2002 and require an additional investment of $231,000. We believed
this project had a value of approximately $1,257,000.

The second project relates to high power high brilliance rotating anode
generators for biological crystallography. This project is focused on increasing
the performance of anode generators by a factor of two to enable biochemists to
solve structures of biological molecules without using expensive synchrotron
beam lines. Improved electronics, electron optics and heat dissipation and
higher speed rotation are the key objectives for this project. At the date of
acquisition, this project was approximately 50% complete. We estimated this
project would be completed in 2002 and require an additional investment of
$154,000. We believed this project had a value of approximately $1,077,000.

The third project relates to high sensitivity large area detector systems. The
goal of this project is to enlarge the size of CCD-based detectors while
improving their sensitivity. The research and development work is focused on
improving CCD chips and X-ray converting phosphors and increasing the
effectiveness of magnifying systems such as fiber tapers or lenses. At the date
of acquisition, this project was approximately 70% complete. We estimated this
project would be

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                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

completed in 2002 and require an additional investment of $154,000. We believed
this project had a value of approximately $539,000.

The fourth project relates to a next generation software platform for data
acquisition and processing. The goal of the project is to develop new and modern
software architecture to allow easy customization and performance improvements
(mainly algorithms) of the data collection and structure solution software. Our
final goal will be to provide a turnkey, push button crystallography tool for
the non-crystallographers. At the date of acquisition, this project was
approximately 70% complete. We estimated this project would be completed in
2002 and require an additional investment of $77,000. We believed this project
had a value of approximately $718,000.

There is minimal risk to us that these projects will not be completed in the
timeframes noted above, as the most complex aspects of the projects had already
been completed. Since each project will result in technologies that can be
individually integrated into our system platforms, we will have great
flexibility in bringing each projects technology to the market.

Although we believe these IPR&D projects, when completed, will provide value, we
determined there was an absence of technological feasibility and alternative
future use for this IPR&D at the time of acquisition. As such, we utilized a
discounted probable future cash flows analysis to prepare a valuation of the
fair value of IPR&D. We performed this cash flow analysis on a project by
project basis and applied adjusted discount rates of 40%-45% to the projects'
cash flow. We used financial assumptions based on pricing, margins and expense
levels from those historically realized by Nonius and consistent with industry
standards. Material net cash inflows from these projects are expected to begin
in 2003. We were primarily responsible for estimating the fair value of the
purchased in-process research and development. This valuation resulted in an
estimate of the fair value of $3,590,000 ($2,118,100, net of tax), which was
charged to research and development expense immediately following the close of
the transaction in the second quarter of 2001.

Our new product introduction goal is to focus on the overall needs of our
customers, providing them with complete solutions. Our plan includes providing
turnkey systems with open architecture that permits our systems to interface
with other hardware and software components in the customer's lab. A major
strategy to accomplish this goal is to offer our customers a modular technology
approach. Our modular approach permits us to provide individual customers with a
customized application through varied combinations of already existing product
modules. By taking advantage of the modular capabilities of our technology, we
can respond quickly to the changing technological needs of the market and of
our customers without having to incur significant development expenses or
delays. As we bring on systems with these new modular technologies they
typically replace systems with old technologies. Accordingly, this modular
approach to introducing new systems helps sustain our revenue growth rates.

We have experienced substantial fluctuations in our quarterly and annual results
of operations, and we expect these fluctuations to continue. The amount and
timing of our revenues and operating expenses may fluctuate significantly in the
future as a result of a variety of factors. We face a number of risks and
uncertainties encountered by early stage companies, particularly those in
rapidly evolving markets such as the life science industry. We may not be able
to successfully address these risks and difficulties. In addition, we are
subject to foreign currency fluctuations.

We changed our year-end from a fiscal year ending on September 30 to a calendar
year ending on December 31, effective for the three months ended December 31,
1999. We do not believe there are any factors that affect comparability of the
fiscal year ended September 30, 1999 and the fiscal year ended December 31, 2000
in any material respect. We are not affected by seasonal factors. Our systems
sales are high-cost capital expenditures for customers, and the selling cycle
may take up to one year. The order fulfillment cycle is also long term; it may
take up to six months to design and build a system.

RESULTS OF OPERATIONS

FISCAL YEAR ENDED DECEMBER 31, 2001 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
2000

NET SALES

Net sales for the year ended December 31, 2001 increased $14.5 million, or
21.3%, to $82.6 million compared to $68.1 million for the year ended December
31, 2000. Approximately $6.5 million of this increase related to the acquisition
of Nonius. Approximately $1.6 million of this increase related to the
introduction of our new APEX and D4 products which were favorably received by
the market. The remainder of the net sales increase was attributable to
increased market acceptance of existing products. Furthermore, the addition of
new sales distribution subsidiaries and increased marketing efforts in newer
regions also favorably impacted net sales. The increase in net sales was
mitigated by currency fluctuations experienced in 2001, which effectively
reduced our U.S. reporting revenues by approximately $2.6 million. Although
third quarter net sales were negatively affected from general business
interruption immediately following the September 11, 2001 terrorist attacks, all
sales which had been delayed were recognized by December 31, 2001.

COST OF SALES

Cost of sales for the year ended December 31, 2001 increased $7.8 million, or
18.1%, to $51.1 million compared to $43.3 million for the year ended December
31, 2000. Approximately $5.0 million of this increase was due to the addition of
Nonius' operations in 2001. The increase

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                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

in cost of sales also includes approximately $0.6 million of additional costs.
The introduction of new automation products accounted for approximately $0.2
million of additional cost and scrap accounted for approximately $0.1 million.
We also incurred $0.3 million of unfavorable variances for labor underabsorption
due to travel restrictions subsequent to the September 11, 2001 terrorist
attacks; some of our labor force was not fully utilized because they were unable
to travel to customers to install systems and service our products. The
remainder of the cost of sales increase was due primarily to the overall growth
of the number of system sales. The gross margin on sales was 38.2% in 2001
compared to 36.5% in 2000. The increase in gross margin was primarily driven by
product mix changes and cost reductions. Specifically, we sold more single
crystal diffraction and material science systems, which have higher margins. The
cost reductions were the result of standardizing production processes at all
manufacturing locations.

RESEARCH AND DEVELOPMENT

Research and development expenses for the year ended December 31, 2001 increased
$5.4 million, or 91.6%, to $11.3 million (including in-process research and
development costs) compared to $5.9 million for the year ended December 31,
2000. Approximately $3.6 million of this increase was due to the write-off of
in-process research and development costs related to the acquisition of Nonius.
As a percentage of net sales, research and development expenses increased to
13.7% in the year ended December 31, 2001 from 8.7% in the year ended December
31, 2000. If we eliminate the effect of the Nonius acquisition, the research and
development expenses as a percentage of net sales in the year ended December 31,
2001 would have been 9.0%. This increase in research and development expenses as
a percentage of net sales was due to an expansion of research and development
projects, which included increases in personnel, materials and supplies.

GENERAL AND ADMINISTRATIVE

General and administrative expenses for the year ended December 31, 2001
increased $2.6 million, or 94.6%, to $5.3 million compared to $2.7 million for
the year ended December 31, 2000. Approximately $0.5 million of this increase
related to the Nonius acquisition. Approximately $0.3 million related to the
addition of new sales distribution subsidiaries. As a percentage of net sales,
general and administrative expenses were 6.4% in the year ended December 31,
2001 compared to 4.0% in 2000. This increase in general and administrative
expenses as a percentage of net sales was due to an expansion of
administrative functions, additional systems consulting costs and increased
executive management expense.

MARKETING AND SELLING

Marketing and selling expenses for the year ended December 31, 2001 increased
$2.7 million, or 19.0%, to $16.8 million compared to $14.1 million for the year
ended December 31, 2000. Approximately $0.1 million of this increase was due to
the addition of new sales distribution subsidiaries. Approximately $1.3 million
was due to the addition of Nonius' operations. The remainder of the increase was
due primarily to additional advertising and trade show expense related to
product promotions. As a percentage of net sales, marketing and selling expenses
were 20.3% in the year ended December 31, 2001 compared to 20.7% in the year
ended December 31, 2000.

INTEREST EXPENSE (INCOME)

Interest expense decreased $783,000, or 85.5%, to $133,000 for the year ended
December 31, 2001 compared to $916,000 for the year ended December 31, 2000. The
decrease was due to our reduction of $16.9 million of debt using the proceeds
from our sale of preferred stock and common stock. Additionally, we recognized
interest income of $504,000 and $71,000 in the year ended December 31, 2001 and
2000, respectively. The increase in interest income was primarily the result of
cash received from our preferred stock and common stock offerings.

OTHER EXPENSE (INCOME)

We recognized $314,000 of other expense for the year ended December 31, 2001 and
$58,000 of other income for the year ended December 31, 2000. The decrease in
2001 of $372,000 was primarily due to the effect of foreign currency
fluctuations.

FISCAL YEAR ENDED DECEMBER 31, 2000 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30,
1999

NET SALES

Net sales increased $6.2 million, or 10.0%, to $68.1 million in 2000 compared
to $61.9 million in 1999. This increase was due to further market penetration of
existing products, new product introductions and increased after market sales.
Approximately $1.0 million of this increase related to the APEX product
introduction. Approximately $2.7 million of this increase related to the after
market sales increase due principally to the addition of a new distribution
subsidiary. The increase in net sales was mitigated by currency fluctuations
experienced in 2000, which effectively reduced our U.S. reporting revenues by
$7.5 million.

COST OF SALES

Cost of sales increased $3.8 million, or 9.6%, to $43.3 million in 2000 compared
to $39.5 million in 1999. The gross margin on sales was 36.5% in 2000 compared
to 36.2% in 1999. The increase was due to corresponding increase in net sales.

RESEARCH AND DEVELOPMENT

Research and development expenses decreased $920,000, or 13.5% to $5.9 million
in 2000 compared to $6.8 million in 1999. Approximately $900,000 of the decrease
was

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                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

attributed to a nonrecurring engineering charge paid to Fairchild Imaging, Inc.,
formerly Lockheed Martin Fairchild Systems, in 1999 for the development of our
detector technology. The impact of changes in foreign currencies on research
and development was a benefit of $480,000 in fiscal 2000. As a percentage of net
sales, research and development expenses decreased from 11.0% in 1999 to 8.7% in
2000.

GENERAL AND ADMINISTRATIVE

General and administrative expenses decreased $286,000, or 9.5%, to $2.7 million
in 2000 compared to $3.0 million in 1999. During 2000, we determined it was more
cost-effective for us to provide some of the administrative services provided by
Siemens ourselves and, as a result, we recognized savings of approximately
$150,000. The remainder of this decrease was due to foreign currency
fluctuations. As a percentage of net sales, general and administrative expenses
decreased from 4.9% in 1999 to 4.0% in 2000.

MARKETING AND SELLING

Marketing and selling expenses increased $1.4 million, or 11.4%, to $14.1
million in 2000 compared to $12.7 million in 1999. The increase was due to
several factors. An overall increase in sales volume resulted in an increase in
marketing and selling expenses. We incurred approximately $500,000 for an
overall increase in sales personnel and the associated recruiting, training,
travel, commissions and office space costs necessary to support a larger sales
organization. We also incurred approximately $500,000 of nonrecurring cost
related to incorporating new sales and service subsidiaries in Japan and France.
Furthermore, we upgraded our application lab equipment in 1999. This upgrade
resulted in increased amortization of $437,000 attributable to marketing and
selling expenses. Off-setting these increases was a benefit from currency
fluctuations of $1.3 million. As a percentage of net sales, marketing and
selling expenses increased from 20.5% in 1999 to 20.7% in 2000.

INTEREST EXPENSE

Interest expense increased $385,000, or 72.5%, to $916,000 in 2000 compared to
$531,000 in 1999. The increase in 2000 was due to additional debt incurred in
the second half of 1999, and higher interest rates in 2000.

OTHER EXPENSE (INCOME)

Other income decreased $273,000, or 82.4%, to $58,000 in 2000 compared to
$331,000 in 1999. The decrease was due to interest rate fluctuations on
derivative instruments.

THREE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1998

NET SALES

Net sales decreased $1.7 million, or 11.9%, to $12.8 million for the three
months ended December 31, 1999 compared to $14.5 million for the same period in
1998. The decrease was due primarily to the relocation of our U.S. production
facility which resulted in a temporary limitation of our production capacity.

COST OF SALES

Cost of sales decreased $2.1 million, or 21.4%, to $7.9 million for the three
months ended December 31, 1999 compared to $10.0 million for the same period in
1998. The decrease in cost of sales related to U.S. production capacity
limitations in 1999 due to the relocation of our U.S. production facility. The
gross margin on sales was 38.5% for the three months ended December 31, 1999 as
compared to 31.0% for the same period in 1998. This increase resulted from
higher after market sales, which have higher margins than system sales.

RESEARCH AND DEVELOPMENT

Research and development expenses decreased $298,000, or 17.9%, to $1.4 million
for the three months ended December 31, 1999 compared to $1.7 million for the
same period in 1998. As a percentage of net sales, research and development
expenses decreased from 11.4% for the three month period ended December 31, 1998
to 10.7% for the three months ended December 31, 1999. The decrease was due to
foreign currency fluctuations.

GENERAL AND ADMINISTRATIVE

General and administrative expenses decreased $238,000, or 33.9%, to $464,000
for the three months ended December 31, 1999 compared to $702,000 for the same
period in 1998. In the three month period ended December 31, 1999, we determined
it was more cost-effective for us to assume some of the administrative services
previously provided by Siemens and, as a result, we recognized savings of
approximately $100,000. The remainder of this decrease was due to foreign
currency fluctuations. As a percentage of net sales, general and administrative
expenses decreased from 4.8% for the three months ended December 31, 1998 to
3.6% for the same period in 1999.

MARKETING AND SELLING

Marketing and selling expenses decreased $274,000, or 8.7%, to $2.9 million for
the three months ended December 31, 1999 compared to $3.2 million for the same
period in 1998. The decrease was consistent with reduced commissions associated
with lower sales. As a percentage of net sales, marketing and selling expenses
increased from 21.7% for the three months ended December 31, 1998 to 22.5% for
the same period in 1999.

INTEREST EXPENSE

Interest expense increased $38,000, or 20.5%, to $219,000 for the three months
ended December 31, 1999 compared to $181,000 for the same period in 1998. The
increase in interest expense was due to the issuance of Industrial Revenue
Bonds, the proceeds from which were used to finance our U.S. production
facility.

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                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OTHER EXPENSE (INCOME)

Other income decreased $15,000, or 17.9%, to $67,000 for the three months ended
December 31, 1999 compared to $82,000 for the same period in 1998. The decrease
was due to foreign currency fluctuations.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2001, we had cash and cash equivalents of $48.8 million and
working capital was $66.5 million. Historically, we have financed our growth
through a combination of debt financing and the issuance of our common and
preferred stock.

During the year ended December 31, 2001, we used $2.1 million of cash in
operating activities. Our use of cash was primarily due to increases in accounts
receivable and inventories related to sales growth. These increases were
partially offset by increases in current liabilities, primarily comprised of
customer advances. During the year ended December 31, 2000, we generated $1.2
million in cash flow from operations. This was due to increased current
liabilities and the elimination of restricted cash. Specifically, accrued
warranty increased due to an increased number of systems in the field and
compensation liabilities increased due to the growth of our business. Restricted
cash decreased due to a reduction in the number of customers requiring bank
guarantees. These increased current liabilities and the elimination of
restricted cash were partially offset by increased accounts receivable and
decreased accounts payable. During the three month period ended December 31,
1999, we generated $1.5 million in cash flow from operations. This was
primarily due to a reduction in accounts receivable and increased customer
advances due to timing of cash payments from customers. This was partially
offset by an increase in inventory due to timing of shipments and an increase in
restricted cash to cover customer advances. During the fiscal year ended
September 30, 1999, we used approximately $201,000 of cash in operating
activities. Working capital changes, primarily changes in current liabilities
and inventory, accounted for the majority of cash used in the period. Our cash
use was partially offset by cash provided by changes in accounts payable and
accounts receivable.

Cash flows used for investing activities totaled $9.7 million for the year ended
December 31, 2001, $2.0 million for the year ended December 31, 2000, $1.9
million for the three month period ended December 31, 1999 and $3.3 million for
the year ended September 30, 1999. Investing activities include acquisitions,
investments in other companies and capital expenditures.

Cash used for capital expenditures was $2.4 million in the year ended December
31, 2001, $2.0 million in the year ended December 31, 2000, $1.9 million in the
three month period ended December 31, 1999 and $3.1 million in the fiscal year
ended September 30, 1999. We made these capital expenditures to improve
productivity and expand manufacturing capacity. In addition to capital
expenditures during 2001, we acquired Nonius for $6.2 million, net of cash
acquired, and made cash investments totaling $1.0 million in connection with two
strategic alliances. No material capital expenditure commitments were
outstanding as of December 31, 2001 except for the purchase of the building and
land in Karlsruhe, Germany. In October 2001, we entered into an agreement to
purchase our Karlsruhe, Germany facility, land and adjacent lot for
approximately $6.6 million. We financed this acquisition with proceeds from our
initial public offering, as discussed below, and a $4.4 million mortgage. The
closing of this purchase occurred on February 28, 2002. We expect to continue to
make capital investments focused on enhancing the efficiency of our operations
and to support our growth.

Cash flows provided by financing activities totaled $58.2 million for the year
ended December 31, 2001 and included primarily net proceeds from the issuance of
preferred stock and common stock of $22.3 million and $52.6 million,
respectively, as discussed below. These cash inflows from financing activities
were partially offset by net debt repayments of $16.7 million. On January 16,
2001, we authorized and sold 5,625,000 shares of Series A convertible preferred
stock generating gross proceeds of $22.5 million. We used these proceeds for
working capital needs, retirement of approximately $5.8 million of debt and the
purchase of Nonius. On December 14, 2001, we issued and sold 9,000,000 shares of
our common stock for $58.5 million (or $6.50 per share) in conjunction with our
initial public offering. We incurred $5.9 million in offering costs as a result
of this transaction. Upon the closing of the offering, all 5,625,000 shares of
our redeemable preferred stock converted into 6,923,077 shares of common stock.
On January 7, 2002, the underwriters of the initial public offering exercised
an over-allotment option. As a result, we issued and sold 1,350,000 shares of
our common stock for $8.8 million (or $6.50 per share). We incurred $0.6 million
in costs as a result of this transaction.

Currently, we have both long-term and short-term debt outstanding. As of
December 31, 2001, our long-term debt from a bank in the U.S. was $2.2 million.
The interest rate on our long-term debt is variable based on the Bond Market
Association Municipal Swap Index (1.95% at December 31, 2001). The long-term
debt matures in December 2013. As of December 31, 2001, we also had short-term
borrowings of $0.2 million from a bank in Germany and $0.2 million from a
related party. We had unused borrowings under our lines of credit of
approximately $5.0 million. The interest rate on our short-term borrowings
ranged from 1.75% to 4.28%. In connection with some of our outstanding debt, we
are required to maintain various financial ratios and other financial criteria.
Additionally, we are subject to some restrictive covenants that require bank
consent. As of

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                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

December 31, 2001, the latest measurement date, we were in violation with
certain covenants and, accordingly, we obtained a waiver from the financial
institution. The financial covenants have been waived through March 31, 2002 and
we are in negotiations to obtain an amendment with modified covenants.

Presently, we anticipate that our existing capital resources will meet our
operating and investing needs through at least the end of 2003. Our future
capital uses and requirements depend on numerous factors, including our success
in selling our existing products, our progress in research and development, our
ability to introduce and sell new products, our sales and marketing expenses,
our need to expand production capacity, costs associated with possible
acquisitions, expenses associated with unforeseen litigation, regulatory changes
and competition and technological developments in the market.

DISCLOSURE ABOUT CRITICAL ACCOUNTING POLICIES

On December 12, 2001, the SEC issued FR-60, "Cautionary Advice Regarding
Disclosure About Critical Accounting Policies." FR-60 is an intermediate step to
alert companies to the need for greater investor awareness of the sensitivity of
financial statements to the methods, assumptions, and estimates underlying their
preparation including the judgments and uncertainties affecting the application
of those policies, and the likelihood that materially different amounts would be
reported under different conditions or using different assumptions.

Our accounting policies are disclosed in our Notes to Financial Statements in
this Annual Report. There have been no material changes to these policies during
fiscal year 2001. The more critical of these policies involve revenue
recognition, customer advances, cash and cash equivalents and the use of
estimates in valuing inventory and accounts receivable.

Revenue Recognition -- We continued to recognize revenues primarily when
products are accepted by our customers, except when sold through a
non-consolidated Bruker affiliate that assumes responsibility for installation,
in which case the system sale is recognized upon shipment. Revenue from
accessories and parts is recognized upon shipment, and revenue from services is
recognized when performed. Our revenue recognition policies are in accordance
with Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in
Financial Statements." In addition, warranty costs are estimated and accrued at
the time of sale, as appropriate.

Customer Advances -- Under the terms and conditions of contracts with certain
customers, we require an advance deposit. These deposits are recorded as a
liability until revenue is recognized on the specific contract. We continued to
apply the same policy at December 31, 2001 as we have in the past. However, the
realization of revenue is dependent on our ability to satisfy customer needs and
our ability to continue manufacturing operations.

Cash and Cash equivalents -- We consider all highly liquid investments with
original maturities of 90 days or less to be cash equivalents. Cash and cash
equivalents primarily include cash on hand, money market funds, municipal notes
and time deposits. Time deposits represent amounts on deposit in banks and
temporarily invested in instruments with maturities of 90 days or less at time
of purchase. Certain of these investments represent off-shore deposits which are
not insured by the FDIC or any other United States government agency. Cash and
cash equivalents are carried at cost, which approximates fair market value. Our
portfolio of investment grade, liquid debt securities limits the amount of
credit exposure to any one issue or issuer.

Inventories -- We value inventories primarily at standard cost which
approximates the lower of cost or market. Cost is determined by the first-in,
first-out (FIFO) method. Valuing inventories at the lower of cost or market
requires the use of estimates and judgment. As discussed later under "Factors
Affecting Our Business, Operating Results and Financial Condition," our
inventories are subject to rapid technological change. This, or certain
additional actions, could impact the valuation of our inventory. We continued to
use the same techniques to value our inventory as we have in the past. Any
technological changes potentially impacting the value of our inventory are
considered when determining the lower of cost or market valuations.

Accounts Receivable -- We value accounts receivable net of an allowance for
doubtful accounts. This allowance is based on our estimate of the portion of the
receivables that will not be collected in the future. We continued to apply the
same techniques to compute this allowance at December 31, 2001 as we have in the
past. However, the ultimate collectibility of a receivable is dependent upon
the financial condition of an individual customer which could change rapidly and
without advance warning.

ADDITIONAL DISCLOSURES CONCERNING LIQUIDITY AND CAPITAL RESOURCES, INCLUDING
"OFF-BALANCE SHEET" ARRANGEMENTS

On January 22, 2002, the SEC issued FR-61, "Commission Statement about
Management's Discussion and Analysis of Financial Condition and Results of
Operations." While the SEC intends to consider rulemaking regarding the topics
addressed in this statement and other topics covered by Management's Discussion
and Analysis, the purpose of this statement is to suggest steps that issuers
should consider in meeting their current disclosure obligations with respect to
the topics described.

We are currently evaluating FR-61 and the effects it may have, if any, on this,
and future, filings. Below are our responses to each of the areas addressed by
FR-61. Any statements in this section which discuss or are related to future
dates or periods are "forward-looking statements."

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                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

1. Liquidity Disclosures

We include a discussion of liquidity and capital resources in Management's
Discussion and Analysis. More specifically, FR-61 requires management to
consider the following to identify trends, demands, commitments, events and
uncertainties that require disclosure:

a. Provisions in financial guarantees or commitments, debt or lease agreements
or other arrangements that could trigger a requirement for an early payment,
additional collateral support, changes in terms, acceleration of maturity, or
the creation of an additional financial obligation, such as adverse changes in
the registrant's credit rating, financial ratios, earnings, cash flows, or
stock price, or changes in the value of underlying, linked or indexed assets.
Our lines of credit and other debt instrument require us to maintain certain
financial ratios to comply with the terms of the agreement. As of December 31,
2001, the latest measurement date, we were in violation with certain covenants
and, accordingly, we obtained a waiver from the financial institution. The
financial covenants have been waived through March 31, 2002 and we are in
negotiations to obtain an amendment with modified covenants. If we fail to
obtain waivers on any of these provisions, it could require the repayment of
the amounts outstanding (approximately $2.2 million as of December 31, 2001).
We also have bank guarantees on our customer advances which impact the
availability on our lines of credit.

b. Circumstances could impair the registrant's ability to continue to engage in
transactions that have been integral to historical operations or are financially
or operationally essential, or that could render that activity commercially
impracticable, such as the inability to maintain a specified investment grade
credit rating, level of earnings, earnings per share, financial ratios, or
collateral. Our material risk factors are disclosed in this Annual Report.
However, we are not aware of anything that could reasonably be expected to
impair our ability to continue to engage in our historical operations at this
time.

c. Factors specific to the registrant and its markets that the registrant
expects to be given significant weight in the determination of the registrant's
credit rating or will otherwise affect the registrant's ability to raise
short-term and long-term financing. Our material risk factors are disclosed in
this Annual Report. However, we are not aware of anything that could reasonably
be given significant weight in the determination of our credit rating or will
otherwise affect our ability to raise short-term and long-term financing.

d. Guarantees of debt or other commitments to third parties. We do not have any
significant guarantees of debt or other commitments to third parties.

e. Written options on non-financial assets (for example, real estate puts). We
do not have any written options on non-financial assets.

2. Off-Balance Sheet Arrangements

FR-61 indicates that registrants should consider the need to provide disclosures
concerning transactions, arrangements and other relationships with
unconsolidated entities or other persons that are reasonably likely to affect
materially liquidity or the availability of, or requirements for, capital
resources. We have no such arrangements that exist as of December 31, 2001.
Moreover, we do lease various assets under operating leases. The aggregate
payments under operating leases are disclosed in Notes to Financial Statements.
Significant changes to lease commitments occurring in 2001 relate to the
acquisition of Nonius. Such leases primarily include a production facility in
The Netherlands. In addition, a significant lease was terminated during 2002 as
our Karlsruhe, Germany facility was purchased from our current lessor.

3. Disclosures about Contractual Obligations and Commercial Commitments

In FR-61, the SEC notes that current accounting standards require disclosure
concerning a registrant's obligations and commitments to make future payments
under contracts, such as debt and lease agreements, and under contingent
commitments, such as debt guarantees. They also indicate that the disclosures
responsive to these requirements usually are located in various parts of a
registrant's filings. The SEC believes that investors would find it beneficial
if aggregated information about contractual obligations and commercial
commitments were provided in a single location so that a total picture of
obligations would be readily available. They further suggested that one useful
aid to presenting the total picture of a registrant's liquidity and capital
resources and the integral role of on- and off-balance sheet arrangements may be
schedules of contractual obligations and commercial commitments as of the latest
balance sheet date.

We are no different than most other registrants in that our disclosures are
located in various parts of this Annual Report, including Notes 10, 11, 12, 14,
15, 20 and 24 to our financial statements in our 2001 Annual Report. Information
in the following table is in thousands as of December 31, 2001.

<Table>
<Caption>
----------------------------------------------------------------------------------------
                                         Less than                             After 5
 Contractual obligations        Total      1 year      1-3 years   4-5 years    years
----------------------------------------------------------------------------------------
<S>                            <C>        <C>           <C>        <C>        <C>
Operating lease obligations    $ 3,501    $ 1,259       $ 1,832    $ 410      $      -
Long-term debt                   2,200          -           350      190         1,660
Purchase of Karlsruhe building   6,800      6,800             -        -             -
Other commitment                 2,300      2,300             -        -             -
                               ---------------------------------------------------------
Total                          $14,801    $10,359       $ 2,182    $ 600      $  1,660
                               =========================================================
</Table>

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                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DISCLOSURES ABOUT CERTAIN TRADING ACTIVITIES THAT INCLUDE NON-EXCHANGE TRADED
CONTRACTS ACCOUNTED FOR AT FAIR VALUE

We do not have any trading activities that include non-exchange traded contracts
accounted for at fair value.

DISCLOSURES ABOUT EFFECTS OF TRANSACTIONS WITH RELATED AND CERTAIN OTHER PARTIES

We disclosed the effects of transactions with related parties in Note 14 to our
financial statements in our Annual Report. There were no other significant
transactions with related and certain other parties.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are potentially exposed to market risk associated with changes in foreign
exchange and interest rates for which we selectively use financial instruments
to reduce related market risks. An instrument will be treated as a hedge if it
is effective in offsetting the impact of volatility in our underlying exposure.
We have also entered into instruments which are not effective derivatives and
therefore such instruments are considered speculative. All transactions are
authorized and executed pursuant to policies and procedures. Analytical
techniques used to manage and monitor foreign exchange and interest rate risk
include market valuation.

IMPACT OF FOREIGN CURRENCIES

We sell products in many countries, and a substantial portion of sales, costs
and expenses are denominated in foreign currencies, principally in the euro. In
2001, the U.S. dollar was moderately strong against the euro and thus had
minimal impact on the consolidated revenue growth rate. In 2000, the U.S.
dollar strengthened against the euro. This reduced our consolidated revenue
growth rate, as expressed in U.S. dollars. In addition, the currency
fluctuations resulted in accumulated foreign currency translation losses of
approximately $496,000 and $349,000 at December 31, 2001 and 2000,
respectively. These losses are included as a component of accumulated other
comprehensive loss.

While we may, from time to time, hedge specifically identified cash flows in
foreign currencies using forward contracts, this foreign currency activity
historically has not been material. The maturities of the forward exchange
contracts generally coincide with the settlement dates of the related
transactions. Realized and unrealized gains and losses on these contracts are
recognized in the same period as gains and losses on the hedged items. At
December 31, 2001 and 2000, there were no foreign currency forward contracts
outstanding. There also were no material non-functional currency denominated
financial instruments, which would expose us to foreign exchange risk,
outstanding at December 31, 2001 or 2000.

Historically, realized foreign exchange gains and losses have been material.
Realized foreign exchange losses (gains) were approximately $150,000,
($205,000), ($49,000) and ($189,000), for the years ended December 31, 2001 and
2000, for the three month period ended December 31, 1999 and for the year ended
September 30, 1999, respectively. As we expand internationally, we will evaluate
currency risks and may continue to enter into foreign exchange contracts from
time to time to mitigate foreign currency exposure.

We have entered into foreign-denominated debt obligations. The currency effects
of the debt obligations are reflected in the accumulated other comprehensive
income (loss) account within shareholders' equity. A 10% increase or decrease of
the respective foreign exchange rate would result in a change in accumulated
other comprehensive income (loss) of approximately $43,000 or ($53,000),
respectively.

IMPACT OF INTEREST RATES

Our exposure related to adverse movements in interest rates is primarily derived
from outstanding floating rate debt instruments that are indexed to short-term
market rates and from our cash equivalents. Our objective in managing our
exposure to interest rates is to decrease volatility that changes in interest
rates might have on earnings and cash flows. To achieve this objective, we use a
fixed rate agreement to adjust a portion of our debt, as determined by
management, that is subject to variable interest rates.

In the U.S., we entered into an interest rate swap arrangement which is
designated as a cash flow hedge. The effect of this agreement was to limit the
interest rate exposure on our $2.2 million industrial revenue bond to a fixed
rate of 4.6%. We pay a 4.6% fixed rate of interest and receive a variable rate
of interest based on the Bond Market Association Municipal Swap Index on a $2.2
million notional amount. Net interest payments or receipts are recorded as
adjustments to interest expense. In addition, the instrument is recorded at fair
market value as an adjustment to accumulated other comprehensive loss. The fair
value of the instrument was approximately ($42,000) and ($20,000), net of tax at
December 31, 2001 and 2000, respectively.

In Germany, we have entered into an interest rate cap and swaps which are
currently not designated as hedges. We have entered into these interest rate
options to minimize our future effective borrowing rates. We have an interest
rate cap for 4 million deutschemark ("DM") which expires January 4, 2006. The
interest cap is fixed at 4.90% per annum. We also have an interest rate swap of
6 million DM which expires on January 4, 2007. The interest rate swap secures a
fixed interest rate of 4.83% per annum for the period January 4, 2002 to January
4, 2007. Finally, we entered into a cross currency interest rate swap of 6
million DM for the period January 4, 2002 to January 4, 2007.

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                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

If we were to enter into additional debt with the counterparty, our fixed
interest rate would be reduced from 4.83% per annum to 3.55% per annum. We also
had an additional financial instrument, which terminated in the fourth quarter
of 2001, that we acquired from the acquisition of Nonius. These instruments are
considered speculative and are marked-to-market. The fair value of the
instruments (depreciated) appreciated approximately ($163,000), ($147,000),
$18,000, and $142,000 for the years ended December 31, 2001 and 2000, for the
three month period ended December 31, 1999, and for the year ended September 30,
1999, respectively. The fair value of the instruments was approximately $1,000
and $69,000 as of December 31, 2001 and 2000, respectively.

A ten percent increase or decrease in the average cost of our variable rate debt
would not result in a material change in pre-tax interest expense.

INFLATION

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

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard ("SFAS") No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets." The statements eliminate
the pooling-of-interests method of accounting for business combinations and
require that goodwill and intangible assets with indefinite useful lives not be
amortized. Instead, in accordance with the provisions of SFAS No. 142, these
assets will be reviewed for impairment annually, or on an interim basis when
events or changes in circumstances warrant. The impairment test shall consist of
a comparison of the fair value of goodwill or an intangible asset with its
carrying amount with any related impairment losses recognized in earnings when
incurred. SFAS No. 142 also requires intangible assets with finite useful lives
be amortized over their estimated useful lives to their estimated residual
values, and reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be recoverable, in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of." The statements will be
effective January 1, 2002 for existing goodwill and intangible assets and July
1, 2001 for business combinations completed after June 30, 2001. The adoption
of these statements is expected to reduce annual goodwill and trademark and
tradename amortization expense related to the acquisition of Nonius by
approximately $165,000.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes a
cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement. The standard is
effective for fiscal years beginning after June 15, 2002. We are evaluating the
impact of SFAS No. 143 on our results of operations and financial position.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. The accounting
model for long-lived assets to be disposed of by sale applies to all long-lived
assets, including discontinued operations. SFAS No. 144 requires that those
long-lived assets be measured at the lower of carrying amount or fair value less
cost to sell, whether reported in continuing operations or in discontinued
operations. Therefore, discontinued operations will no longer be measured at net
realizable value or include amounts for operating losses that have not yet
occurred. SFAS No. 144 also broadens the reporting of discontinued operations to
include all components of an entity with operations that can be distinguished
from the rest of the entity and that will be eliminated from the ongoing
operations of the entity in a disposal transaction. The provisions of this
Statement are effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years, with early application encouraged. We are evaluating the impact of SFAS
No. 144 on our results of operations and financial position.

EURO CONVERSION

On January 1, 1999, member countries of the European Monetary Union began a
three-year transition from their national currencies to a new common currency,
the euro. In the first phase, the permanent rates of exchange between the
members' national currency and the euro were established and monetary, capital,
foreign exchange and interbank markets were converted to the euro. National
currencies will continue to exist as legal tender and may continue to be used in
commercial transactions. In January 2002, euro currency was issued, and by July
2002, the respective national currencies will be withdrawn. We have significant
operations in member countries. During February 2002, we converted our systems
to be euro compliant. Costs of the euro conversion to date were not material
and management believes that future conversion costs will not have a material
impact on our operations, cash flows or financial condition.

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                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FACTORS AFFECTING OUR BUSINESS, OPERATING RESULTS AND FINANCIAL CONDITION

THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED IN CONJUNCTION WITH THE OTHER
INFORMATION INCLUDED IN THIS REPORT. THIS REPORT MAY INCLUDE FORWARD-LOOKING
STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. IN ADDITION TO THOSE RISK
FACTORS DISCUSSED ELSEWHERE IN THIS REPORT, WE IDENTIFY THE FOLLOWING RISK
FACTORS WHICH COULD AFFECT OUR ACTUAL RESULTS AND CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE IN THE FORWARD-LOOKING STATEMENTS.

IF OUR PRODUCTS FAIL TO ACHIEVE AND SUSTAIN SUFFICIENT MARKET ACCEPTANCE, OUR
BUSINESS MAY BE SIGNIFICANTLY HARMED.

The commercial success of our products depends on market acceptance of our
products by biotechnology and pharmaceutical companies and research
laboratories. We have only recently commercially launched many of our current
products, and many of these products have achieved only limited sales. We may
fail to achieve market acceptance of our newer products or sustain substantial
market acceptance of our already established products. Any failure of this
nature could materially harm our business. In order to expand, we must convince
substantial numbers of pharmaceutical and biotechnology companies and other
laboratories to replace their existing X-ray or other techniques with the X-ray
technologies employed by our systems. Our systems utilize sophisticated
instruments, and many have significant purchase prices. Limited funding
available for capital acquisitions by our customers, as well as our customers'
own internal purchasing approval policies, could hinder market acceptance of our
products. Our intended customers may be reluctant to make the substantial
capital investment generally needed to acquire our products or to incur the
training and other costs associated with replacing their existing systems with
our products. We also may not be able to convince our customers that our systems
are an attractive and cost-effective alternative to other technologies and
systems. Because of these and other factors, our products may fail to gain or
sustain market acceptance.

IF WE ARE NOT ABLE TO RESPOND TO THE RAPID TECHNOLOGICAL CHANGE CHARACTERISTIC
OF OUR INDUSTRY, WE MAY FAIL TO MAINTAIN MARKET SHARE AND OUR BUSINESS MAY
SUFFER.

Rapid technological change and frequent new product introductions characterize
the market for life science and related discovery tools. Rapidly changing
technology could make some or all of our product lines obsolete. Because
substantially all of our products are based on X-ray technologies, we are
particularly vulnerable to any technological advances that would make X-ray
technologies obsolete in any of our markets. In addition, we may have difficulty
in keeping abreast of the rapid changes affecting each of the different markets
we serve or intend to serve. If we fail to develop and introduce products in a
timely manner in response to changing technology, market demands or the
requirements of our customers, our business, results of operation and financial
condition could be materially harmed.

IF WE ARE UNABLE TO RECOVER SIGNIFICANT DEVELOPMENT COSTS OF ONE OR MORE OF OUR
PRODUCTS OR PRODUCT LINES, OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL
CONDITION MAY SUFFER.

We offer and plan to offer a broad product line and incur and expect to incur
substantial expenses for the development of new products and enhanced versions
of our existing products. To meet the evolving needs of our customers, we must
rapidly and continually enhance our products and services and develop new
products and services. Our business model calls for us to derive a significant
portion of our revenues each year from products that did not exist in the
previous two years. However, we may experience difficulties which may delay or
prevent the successful development, introduction and marketing of new products
or product enhancements. The speed of technological change in life science and
other related markets we serve may prevent us from successfully marketing some
or all of our products for the length of time required to recover their often
significant development costs. If we fail to recover the development costs of
one or more products or product lines, our business, results of operations and
financial condition could be harmed.

IF THE PROTEOMICS MARKET DOES NOT GROW AS EXPECTED, WE MAY NOT MEET OUR GROWTH
EXPECTATIONS.

We expect the proteomics market to fuel the growth of a significant portion of
our business. We have invested and expect to continue to invest significant time
and resources in the development of new products for this market. If this new
and still evolving market does not grow and become established, we may not
realize the expected profit from these research and development expenditures. If
this market for our products does not grow, our expected growth rate could
decline substantially, which could have a material adverse impact on our
business, results of operations or financial condition. If we do not address
our substantial competitive pressures, our revenues and profitability may
suffer. In each market, for each of our products, we face substantial
competition from competitors who offer products based on X-ray technology as
well as from those employing alternative technologies. We expect that
competition in our markets will increase significantly, especially as more
biotechnology and pharmaceutical companies adopt automated high throughput
instruments as tools for drug discovery, drug development and related areas.
Our competitors may develop or market products that are more effective or more
commercially attractive than our current or future products or that may render
our products obsolete. Many of our competitors have substantially greater
financial, operational, marketing and technical resources than we do. If we are
unable to compete effectively with these companies, our market share may
decline and our business could be harmed.

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                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OUR SUCCESS DEPENDS ON OUR ABILITY TO OPERATE WITHOUT INFRINGING OR
MISAPPROPRIATING THE PROPRIETARY RIGHTS OF OTHERs.

Our commercial success depends on avoiding the infringement of other parties'
patents and proprietary rights as well as avoiding the breach of any licenses
relating to our technologies and products. Given that there may be patents of
which we are unaware, particularly in the U.S. where patent applications are
confidential, avoidance of patent infringement may be difficult. Various
third-parties hold patents which may relate to our technology, and we may be
found in the future to infringe these or other patents or proprietary rights of
third parties, either with products we are currently marketing or developing or
with new products which we may develop in the future. If a third party holding
rights under a patent successfully asserts an infringement claim with respect to
any of our current or future products, we may be prevented from manufacturing or
marketing our infringing product in the country or countries covered by the
patent we infringe, unless we can obtain a license from the patent holder. We
may not be able to obtain the license on commercially reasonable terms, if at
all, especially if the patent holder is a competitor. In addition, even if we
can obtain the license, it may be non-exclusive, which will permit others to
practice the same technology licensed to us. We also may be required to pay
substantial damages to the patent holder in the event of an infringement. Under
some circumstances in the U.S., these damages could include damages equal to
triple the actual damages the patent holder incurs. If we have supplied
infringing products to third parties for marketing by them or licensed third
parties to manufacture, use or market infringing products, we may be obligated
to indemnify these third parties for any damages they may be required to pay to
the patent holder and for any losses the third parties may sustain themselves
as the result of lost sales or license payments they are required to make to the
patent holder. Any successful infringement action brought against us may also
adversely affect marketing of the infringing product in other markets not
covered by the infringement action, as well as our marketing of other products
based on similar technology. Furthermore, we will suffer adverse consequences
from a successful infringement action against us even if the action is
subsequently reversed on appeal, nullified through another action or resolved
by settlement with the patent holder. The damages or other remedies awarded, if
any, may be significant. As a result, any successful infringement action
against us may harm our business.

WE MAY BE INVOLVED IN LAWSUITS TO PROTECT OR ENFORCE OUR PATENTS THAT ARE
BROUGHT BY US WHICH COULD BE EXPENSIVE AND TIME CONSUMING.

In order to protect or enforce our patent rights, we may initiate patent
litigation against third parties; and we may be similarly sued by others. We may
also become subject to interference proceedings conducted in the patent and
trademark offices of various countries to determine the priority of inventions.
The defense and prosecution, if necessary, of intellectual property suits,
interference proceedings and related legal and administrative proceedings is
costly and diverts our technical and management personnel from their normal
responsibilities. We may not prevail in any of these suits. An adverse
determination of any litigation or defense proceedings could put our patents at
risk of being invalidated or interpreted narrowly and could put our patent
applications at risk of not issuing.

Furthermore, because of the substantial amount of discovery required in
connection with intellectual property litigation, there is a risk that some of
our confidential information could be compromised by disclosure during this type
of litigation. In addition, during the course of this kind of litigation, there
could be public announcements of the results of hearings, motions or other
interim proceedings or developments in the litigation. If securities analysts or
investors perceive these results to be negative, it could have a substantial
negative effect on the trading price of our common stock.

IF WE ARE UNABLE TO EFFECTIVELY PROTECT OUR INTELLECTUAL PROPERTY, THIRD
PARTIES MAY USE OUR TECHNOLOGY, WHICH COULD IMPAIR OUR ABILITY TO COMPETE IN OUR
MARKETS.

Our success will depend in part on our ability to obtain and maintain meaningful
patent protection for our products throughout the world. We seek patents to
protect our intellectual property and to enhance our competitive position.
However, our presently pending or future patent applications may not issue as
patents, and any patent issued to us may be challenged, invalidated, held
unenforceable or circumvented. Furthermore, the claims in patents which have
been issued, or which may be issued to us in the future, may not be sufficiently
broad to prevent third parties from producing competing products. In addition,
the laws of various foreign countries in which we compete may not protect our
intellectual property to the same extent as do the laws of the U.S. If we fail
to obtain adequate patent protection for our proprietary technology, our ability
to compete would be impaired.

In addition to patent protection, we also rely on protection of trade secrets,
know-how and confidential and proprietary information. To maintain the
confidentiality of trade secrets and proprietary information, we generally seek
to enter into confidentiality agreements with our employees, consultants and
strategic partners upon the commencement of a relationship with us. However, we
may not obtain these agreements in all circumstances. In the event of
unauthorized use or disclosure of this information, these agreements, even if
obtained, may not provide meaningful protection for our trade secrets or other
confidential information. In addition, adequate remedies may not exist in the
event of unauthorized use or disclosure of this information. The loss or
exposure of our trade secrets and other proprietary information

                                                               [BRUKER AXS LOGO]

                                                                              27
<Page>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

would impair our competitive advantages and could have a material adverse effect
on our operating results, financial condition and future growth prospects.
Furthermore, others may have developed, or may develop in the future,
substantially similar or superior know-how and technology.

WE HAVE AGREED TO SHARE OUR NAME AND DISTRIBUTION CHANNELS WITH OTHER ENTITIES
UNDER COMMON CONTROL; IF WE LOSE THE RIGHT TO USE OUR NAME OR IF OUR
DISTRIBUTION CHANNELS ARE DISRUPTED, OUR BUSINESS COULD BE MATERIALLY HARMED.

We maintain a sharing agreement with 13 affiliated entities that allows us to
share the Bruker name with these affiliated companies and their subsidiaries. We
could lose the right to use the Bruker name if:

     -  we declare bankruptcy;

     -  we interfere with another party's use of the name;

     -  we take a material action which materially detracts from the goodwill
        associated with the name; or

     -  we suffer a major loss of our reputation in our industry or marketplace.

The loss of the Bruker name could result in a loss of good-will, brand loyalty
and sales of our products. We also share some distribution channels with many of
these affiliates, primarily in secondary markets. Although we have dedicated
X-ray sales and service staff in each of the distribution channels we share
with affiliates, if we lose this dedicated service staff and if our affiliates'
products receive distribution priority over our products, our distribution
process could be impaired, resulting in lost sales which could harm our
business.

WE MAY BE SUBJECT TO SUBSTANTIAL LIABILITY IF OUR PRODUCTS MALFUNCTION OR ARE
MISUSED.

Due to the high-power, complex nature of our machines, malfunction or misuse of
the machines could result in serious damage to property or injury to people. For
example, our products utilize X-ray beams which could cause serious damage to
biological tissue. While our systems contain protective devices designed to
prevent harmful exposure to X-rays, our service personnel often override these
protective devices to service and maintain the systems. In addition, some of our
customers require the ability to avoid these protective devices. As a result,
our personnel or our customers' personnel could be injured by exposure to X-ray
beams and could sue us. Additionally, some of our products operate at very high
electrical voltage. Misuse of these products could lead to damaging accidents
such as fires. Lawsuits filed against us for personal or property damage could
result in substantial liability which could harm our financial results.

IF WE FAIL TO ENTER INTO AND MAINTAIN EFFECTIVE COLLABORATIONS, OUR PRODUCT
DEVELOPMENT MAY BE STUNTED AND OUR BUSINESS MAY SUFFER.

We collaborate with other companies and academic institutions on new technology
and product development. Demand for our products will depend in part upon the
extent to which these collaborations are successful in developing, or helping us
to develop, new products and new applications for our existing products. We have
limited or no control over the resources that any collaborator may devote to our
products. Any of our present or future collaborators may not perform their
obligations as expected. If we fail to enter into or maintain appropriate
collaboration agreements, or if any of these events occur, we may not be able to
develop new products as planned, which could harm our business.

ANY REDUCTION IN THE CAPITAL RESOURCES OR GOVERNMENT FUNDING OF OUR CUSTOMERS
COULD REDUCE OUR SALES AND HARM OUR BUSINESS.

A significant portion of our sales are capital purchases by our customers. The
spending policies of our customers could have a significant effect on the demand
for our products. These policies are based on a wide variety of factors,
including the resources available to make purchases, the spending priorities
among various types of equipment, unfavorable economic conditions and changes
in the political climate. Any changes in capital spending or changes in the
capital budgets of our customers could significantly reduce demand for our
products. The capital resources of our biotechnology and other corporate
customers may be limited by the availability of equity or debt financing. Any
significant decline in capital expenditures by our customers could harm our
business.

We are dependent, both directly and indirectly, on the research and development
spending patterns of the pharmaceutical, biotechnology, chemical and other
industries, as well as upon the funding policies of various governments and
government agencies. In addition, we make a substantial portion of our sales to
non-profit entities, which are dependent on continued high levels of government
support for scientific research. Any decline in this support could harm our
business.

WE MAY NOT BE ABLE TO EXPAND OUR SALES AND SERVICE STAFF TO MEET DEMAND FOR OUR
PRODUCTS AND SERVICES.

Our future revenue and profitability will depend on our ability to expand our
marketing and sales force as well as our service and support team. Because our
products are technical in nature, we believe that it is important in many cases
for our marketing, sales and support staff to have scientific or technical
expertise and experience. Competition for employees with these skills is
intense. We may not be able to continue to attract and retain sufficient
qualified sales and service people, and we may not be able to grow and maintain
an efficient and effective sales, marketing and support department. If we fail
to continue to attract or retain qualified people, our business could suffer.

                                                               [BRUKER AXS LOGO]

28
<Page>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

WE PLAN  SIGNIFICANT  GROWTH,  AND  THERE IS A RISK  THAT WE WILL NOT BE ABLE TO
MANAGE THIS GROWTH.

Our success will depend on the expansion of our operations. Effective growth
management will place increased demands on our management, operational and
financial resources. To manage our growth, we must expand our facilities,
augment our operational, financial and management systems and hire and train
additional qualified personnel. Any new systems which we implement to facilitate
our growth may have problems which could result in disruptions in our
operations, financial or management systems. If we fail to manage our growth
effectively, our business, results of operations and financial condition will be
harmed.

WE ARE  DEPENDENT  UPON  VARIOUS  KEY  PERSONNEL  AND  MUST  RECRUIT  ADDITIONAL
QUALIFIED PERSONNEL FOR A NUMBER OF MANAGEMENT POSITIONS.

Our success is highly dependent on the continued services of key management,
technical and scientific personnel. Our management and other employees may
voluntarily terminate their employment with us at any time upon short notice.
The loss of the services of any member of our senior management, technical or
scientific staff may significantly delay or prevent the achievement of product
development and other business objectives. In November 2001, our chief financial
officer informed us that he would be leaving Bruker AXS for personal reasons,
but would continue to serve as our chief financial officer until May 2002. We
recently hired a new chief financial officer who will join the company in April
2002. The chairman of our board of directors also is and has been chief
executive officer and chairman of the board of directors of an affiliated,
publicly traded company and a management officer of several affiliates, which
reduces the time and attention he can devote to our management. Our future
success will also depend on our ability to identify, recruit and retain
additional qualified scientific, technical and managerial personnel. Competition
for qualified personnel is intense, particularly in the areas of information
technology, engineering and science, and the process of hiring suitably
qualified personnel is often lengthy. If we are unable to hire and retain a
sufficient number of qualified employees, our ability to conduct and expand our
business could be seriously reduced.

WE ARE DEPENDENT IN OUR OPERATIONS UPON A LIMITED NUMBER OF SUPPLIERS.

We currently purchase key components used in our X-ray systems from several
preferred suppliers. Although we maintain secondary suppliers, our reliance on
the preferred suppliers could result in delays associated with redesigning a
product due to an inability to obtain an adequate supply of required components
and reduced control over pricing, quality and timely delivery. In particular, we
obtain a very sophisticated chip for use in our CCD detectors from Fairchild
Imaging, which to our knowledge is the only source of a chip of this size and
quality. See "Business--Strategic Collaborations." Although we have secondary
chip sources, we do not believe that any of these sources would currently be
able to provide us with a similar chip of comparable quality. Any interruption
in the supply of components could have an adverse effect on our business,
results of operations and financial condition.

IF WE FAIL TO EXPAND OUR INTERNATIONAL PRESENCE, OUR REVENUE MAY NOT GROW AS
EXPECTED.

International sales account for, and are expected to continue to account for, a
significant portion of our total revenues. International expansion will require
that we hire additional personnel. If we fail to hire additional personnel or to
develop and maintain relationships with foreign customers and partners, we may
not be able to expand our international sales and could suffer decreased
profits.

International sales and operations are and will remain subject to a number of
additional risks not typically present in domestic operations, including:

     -  changes in regulatory requirements;

     -  the imposition of government controls;

     -  political and economic instability or conflicts;

     -  the costs and risks of deploying systems in foreign countries;

     -  limited intellectual property rights; and

     -  the burden of complying with a wide variety complex foreign laws and
        treaties.

Our international operations are and will remain subject to the risks associated
with the imposition of legislation and regulation relating to the import or
export of high technology products or other similar areas. We cannot predict
whether tariffs or restrictions upon the importation or exportation of our
products will be implemented by the U.S. or other countries. If these tariffs
or restrictions are imposed, our revenues or profits could suffer. We are also
subject to the risks inherent in managing geographically distributed operations
and personnel with disparate cultures.

OUR RESULTS OF INCOME MAY BE ADVERSELY AFFECTED WHEN WE EXCHANGE FOREIGN
CURRENCY RECEIVED FROM INTERNATIONAL SALES INTO U.S. DOLLARS.

A significant portion of our business is conducted in currencies other than the
U.S. dollar, our reporting currency. As a result, currency fluctuations among
the U.S. dollar and the foreign currencies in which we do business have caused
and will continue to cause foreign currency transaction gains and losses. We
recognize foreign currency gains or losses arising from our operations in the
period incurred. Due to the number of currencies involved, the variability of
currency exposures and the potential volatility of currency exchange

                                                               [BRUKER AXS LOGO]

                                                                              29
<Page>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

rates, we cannot predict the effects of exchange rate fluctuations upon our
future operating results. To date, we have engaged in only limited hedging
activities to reduce this risk.


BECAUSE WE HAVE SUBSIDIARIES AND OPERATIONS IN COUNTRIES OUTSIDE THE U.S., WE
ARE SUBJECT TO VARIOUS INTERNATIONAL TAX RISKS WHICH COULD ADVERSELY AFFECT OUR
EARNINGS.

We have numerous subsidiaries and operations outside the U.S., and we are
subject to international tax risks. Distributions of earnings and other payments
received from our subsidiaries may be subject to withholding taxes imposed by
the countries where they are operating or are formed. If these foreign countries
do not have income tax treaties with the United States or the countries where
our subsidiaries are incorporated, we could be subject to high rates of
withholding taxes on these distributions and payments. We could also be subject
to being taxed twice on income related to operations in these non-treaty
countries. Because we are unable to reduce the taxable income of one operating
company by losses incurred by another operating company located in another
country, we may have a higher foreign effective income tax rate than that of
other companies in our industry. The amount of the credit that we may claim
against our U.S. federal income tax for foreign income taxes is subject to many
limitations which may significantly restrict our ability to claim a credit for
all of the foreign taxes we pay.

IF WE MAKE ACQUISITIONS, WE MAY FAIL TO SUCCESSFULLY INTEGRATE TECHNOLOGIES,
PERSONNEL AND OPERATIONS, WHICH COULD IMPEDE REVENUE GROWTH AND HARM OUR
BUSINESS.

If appropriate opportunities become available, we may acquire additional
technologies, products or businesses to expand our existing and planned product
lines and technologies. These acquisitions would expose us to risks including:

     -  the assimilation of new technologies, operations, sites and personnel;

     -  the diversion of resources from our existing business and technologies;
        and

     -  the inability to generate revenues to offset associated acquisition
        costs.

Acquisitions may also result in the issuance of dilutive equity securities, the
incurrence or assumption of debt or additional expenses associated with the
amortization of acquired intangible assets or potential business.

DAMAGES TO OUR MANUFACTURING FACILITIES COULD ADVERSELY AFFECT OUR ABILITY TO
EFFECTIVELY OPERATE OUR BUSINESS.

We maintain manufacturing facilities in Madison, Wisconsin, Delft, the
Netherlands and Karlsruhe, Germany. Damage to any of these facilities due to
fire, weather, earthquake or other natural disaster, power loss, unauthorized
entry or other events could cause an interruption in the production of our
products. A prolonged interruption in our manufacturing operations could have a
material adverse impact on our ability to effectively operate our business. The
insurance we have purchased may not be sufficient to cover any losses incurred.

OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, AND ANY FAILURE TO MEET
FINANCIAL EXPECTATIONS MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND
RESULT IN A DECLINE IN OUR COMMON STOCK PRICE.

Our operating results have fluctuated in the past, and we expect that they will
fluctuate in the future. Factors that could cause our operating results to
fluctuate include, among other things, the timing of release and competitiveness
of our products, disputes regarding patents or other intellectual property
rights and currency fluctuations.

If revenue declines in a period our earnings may decline because many of our
expenses are relatively fixed in the short term. In particular, research and
development and selling, general and administrative expenses are not directly
affected by variations in revenue in a period.

Due to volatile and unpredictable revenues and operating expenses, we believe
that period-to-period comparisons of our results of operations may not be a good
indication of our future performance. It is possible that, in some future
periods, our operating results may be below the expectations of securities
analysts or investors. In such event, the market price of our common stock could
fluctuate significantly or decline.

CLAIMS RELATING TO IMPROPER HANDLING, STORAGE OR DISPOSAL OF HAZARDOUS OR
RADIOACTIVE MATERIALS PRESENT AT OUR FACILITIES OR PROPERTIES COULD RESULT IN
LIABILITIES AND BE TIME CONSUMING AND COSTLY TO DEFEND.

We handle hazardous and radioactive materials in our business which are subject
to federal, state, local and foreign environmental, health and safety laws and
regulations. In addition, hazardous materials may have been released in the past
at properties which we own or lease or may be released at properties to which we
send waste for disposal. If we fail to comply with applicable laws and
regulations, regulatory authorities could impose on us sanctions and penalties,
which could be substantial. Moreover, we could be held strictly liable for
damages relating to releases of hazardous or radioactive material, including the
cost of cleanup and personal injury or property damages, and we may incur delays
and increased costs in manufacturing our products and otherwise conducting our
business.

                                                               [BRUKER AXS LOGO]

30
<Page>

                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of Bruker AXS Inc.:

In our opinion, the statements appearing on pages 32 through 50 of this report
present fairly, in all material respects, the financial position of Bruker AXS
Inc. and its subsidiaries at December 31, 2001 and 2000, and the results of
their operations and their cash flows for the years ended December 31, 2001 and
2000, for the three month period ended December 31, 1999 and for the year ended
September 30, 1999, in conformity with accounting principles generally accepted
in the United States of America. 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 of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Milwaukee, Wisconsin
March 15, 2002, except for Note 11, as to which the date is March 25, 2002

                                                               [BRUKER AXS LOGO]

                                                                              31
<Page>

                                 BRUKER AXS INC.
                           CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
Year Ended December 31,                                                                    2001            2000
---------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>               <C>
ASSETS
Current assets:
 Cash and cash equivalents                                                      $    48,787,026   $   2,460,457
 Accounts receivable, net                                                            17,206,783      12,007,061
 Inventories                                                                         26,768,962      20,141,275
 Prepaid expenses                                                                       809,303         345,943
 Other assets                                                                           951,625         496,243
 Deferred income taxes                                                                  886,365         318,612
                                                                                -------------------------------
  Total current assets                                                               95,410,064      35,769,591

Property and equipment, net                                                           8,150,910       6,715,761
Restricted cash                                                                         108,074               -
Other                                                                                 1,053,620         121,304
Intangible assets - trademarks and tradenames, net                                      250,250               -
Goodwill, net                                                                         3,099,314               -
Investments in other companies                                                        2,000,000               -
Deferred income taxes                                                                 2,018,314         365,592
                                                                                -------------------------------
  Total assets                                                                  $   112,090,546   $  42,972,248
                                                                                ===============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
 Short-term borrowings                                                          $       241,957   $   2,983,438
 Related party debt - current                                                           229,180       1,794,743
 Accounts payable                                                                     7,415,956       5,327,842
 Other current liabilities                                                           20,995,538      13,947,918
                                                                                -------------------------------
  Total current liabilities                                                          28,882,631      24,053,941
                                                                                -------------------------------

Long-term debt                                                                        2,200,000       5,054,543
Related party debt - non current                                                              -       7,792,330
Accrued pension                                                                       3,437,058       3,070,774

Commitments and contingencies (Note 20)

Shareholders' equity:
 Preferred stock, $.01 par value, 5,000,000 authorized,
 0 shares issued and outstanding at December 31, 2001 and 2000                                -               -
 Common stock, $.01 par value, 100,000,000 shares authorized,
 54,830,338 and 38,752,500 shares issued and outstanding at
 December 31, 2001 and 2000, respectively                                               548,304         387,525
 Additional paid-in capital                                                          79,135,021       3,160,071
 Accumulated deficit                                                                 (1,574,502)       (198,059)
 Accumulated other comprehensive loss                                                  (537,966)       (348,877)
                                                                                -------------------------------
  Total shareholders' equity                                                         77,570,857       3,000,660
                                                                                -------------------------------
  Total liabilities and shareholders' equity                                    $   112,090,546   $  42,972,248
                                                                                ===============================
</Table>

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

                                                               [BRUKER AXS LOGO]

32
<Page>

                                 BRUKER AXS INC
                 CONSOLIDATED/COMBINED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                                                         Three Months
                                                            Year Ended     Year Ended       Ended        Year Ended
                                                           December 31,   December 31,   December 31,  September 30,
                                                               2001          2000            1999          1999
---------------------------------------------------------------------------------------------------------------------
                                                           Consolidated   Consolidated   Consolidated     Combined
<S>                                                        <C>            <C>            <C>            <C>
Net sales                                                  $ 82,587,569   $ 68,104,607   $ 12,792,155   $ 61,893,929
Cost of sales                                                51,062,780     43,251,673      7,872,969     39,461,799
                                                           ---------------------------------------------------------
 Gross profit                                                31,524,789     24,852,934      4,919,186     22,432,130
                                                           ---------------------------------------------------------
Operating expenses:
 Research and development                                     7,743,836      5,916,256      1,364,537      6,836,515
 In-process research and development                          3,590,000              -              -              -
 General and administrative                                   5,298,356      2,722,805        463,773      3,009,141
 Marketing and selling                                       16,792,047     14,110,512      2,877,024     12,664,403
                                                           ---------------------------------------------------------
 Total operating expenses                                    33,424,239     22,749,573      4,705,334     22,510,059

  Operating (loss) income                                    (1,899,450)     2,103,361        213,852        (77,929)

Other expense (income):
 Interest income                                               (503,904)       (71,487)             -              -
 Interest expense - third party                                 378,070        583,087        151,309        197,420
 Interest expense - related party                               258,580        404,648         67,310        333,639
 Other expense (income)                                         313,739        (58,167)       (67,000)      (330,814)
                                                           ---------------------------------------------------------

(Loss) income before income taxes                            (2,345,935)     1,245,280         62,233       (278,174)
Income tax (benefit) expense                                   (969,492)       515,747        191,387       (302,166)
                                                           ---------------------------------------------------------
 Net (loss) income                                           (1,376,443)       729,533       (129,154)        23,992

Convertible preferred stock accretion                           833,129              -              -              -
Beneficial conversion feature                                 5,192,308              -              -              -
                                                           ---------------------------------------------------------

 Net (loss) income available to common shareholders        $ (7,401,880)  $    729,533   $   (129,154)  $     23,992
                                                           =========================================================
Earnings (loss) per share:
 Basic                                                     $      (0.19)  $       0.02   $       0.00   $       0.00
 Diluted                                                   $      (0.19)  $       0.02   $       0.00   $       0.00
</Table>

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

                                                               [BRUKER AXS LOGO]

                                                                              33
<Page>

                                 BRUKER AXS INC.
                CONSOLIDATED/COMBINED STATEMENTS OF SHAREHOLDERS'
                         EQUITY AND COMPREHENSIVE INCOME

<Table>
<Caption>
                                        Common Stock
                                     Bruker AXS Bruker AXS                 Additional                    Accumulated      Total
                                        GmbH        Inc.                    Paid-In       Accumulated   Comprehensive  Shareholders'
                                       Shares      Shares       Amount      Capital         Deficit     (Loss) Income    Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                                     <C>      <C>          <C>         <C>            <C>            <C>           <C>
Balance at October 1, 1998               1        1,252,500   $ 125,807   $ 2,073,528    $   (822,430)  $    82,195   $  1,459,100
 Issuance of common stock                -       37,500,000     375,000     1,125,000               -             -      1,500,000
 Reorganization                         (1)               -    (113,282)      (55,605)              -             -       (168,887)
 Comprehensive (Loss) Income:
  Net income                             -                -           -             -          23,992             -         23,992
  Foreign currency
   translation adjustments               -                -           -             -               -       (34,499)       (34,499)
                                                                                                                      --------------
 Net comprehensive loss                                                                                                    (10,507)
                                     -----------------------------------------------------------------------------------------------
Balance at September 30, 1999            -       38,752,500     387,525     3,142,923        (798,438)       47,696      2,779,706
 Comprehensive (Loss) Income:
  Net loss                               -                -           -             -        (129,154)            -       (129,154)
  Foreign currency
   translation adjustments               -                -           -             -               -      (167,418)      (167,418)
                                                                                                                      --------------
 Net comprehensive loss                                                                                                   (296,572)
                                     -----------------------------------------------------------------------------------------------
Balance at December 31, 1999             -       38,752,500     387,525     3,142,923        (927,592)     (119,722)     2,483,134
 Stock compensation related
  to stock options issued
  to non-employees                       -                -           -        17,148               -             -         17,148
 Comprehensive (Loss) Income:
  Net income                             -                -           -             -         729,533             -        729,533
  Foreign currency
   translation adjustments               -                -           -             -               -      (229,155)      (229,155)
                                                                                                                      --------------
 Net comprehensive income                                                                                                  500,378
                                     -----------------------------------------------------------------------------------------------
Balance at December 31, 2000             -       38,752,500     387,525     3,160,071        (198,059)     (348,877)     3,000,660
 Stock compensation related
  to stock options issued
  to non-employees                       -                -           -       228,985               -             -        228,985
 Stock compensation related to
  modification of stock option           -                -           -        28,572               -             -         28,572
 Preferred stock accretion               -                -           -      (833,129)              -             -       (833,129)
 Issuance of common stock in
  initial public offering,
  net of issuance costs                  -        9,000,000      90,000    52,515,041               -             -     52,605,041
 Issuance of common stock for
  investments in other companies         -          154,761       1,548       998,447               -             -        999,995
 Conversion of redeemable
  preferred stock to common stock        -        6,923,077      69,231    23,037,034               -             -     23,106,265
 Comprehensive (Loss) Income:
  Net loss                               -                -           -             -      (1,376,443)            -     (1,376,443)
  Foreign currency
   translation adjustments               -                -           -             -               -      (147,345)      (147,345)
  Transition adjustment related to
   the adoption of SFAS No.133,
   net of tax benefit of $14,004         -                -           -             -               -       (20,153)       (20,153)
  Changes in fair value of financial
   instrument designated as a
   hedge of interest rate exposure,
   net of tax benefit of $15,005         -                -           -             -               -       (21,591)       (21,591)
                                                                                                                      ------------
 Net comprehensive loss                                                                                                 (1,565,532)
                                     -----------------------------------------------------------------------------------------------
Balance at December 31, 2001             -       54,830,338   $ 548,304   $79,135,021    $(1,574,502)   $  (537,966)  $ 77,570,857
                                     ===============================================================================================
</Table>

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

                                                               [BRUKER AXS LOGO]

34
<Page>

                                 BRUKER AXS INC
                  CONSOLIDATED/COMBINED STATEMENT OF CASH FLOWS

<Table>
<Caption>
                                                                                                     Three Months
                                                                      Year Ended      Year Ended         Ended         Year Ended
                                                                     December 31,    December 31,     December 31,   September 30,
                                                                         2001           2000             1999            1999
------------------------------------------------------------------------------------------------------------------------------------
                                                                     Consolidated    Consolidated     Consolidated     Combined
<S>                                                                <C>               <C>             <C>              <C>
Cash flows from operating activities:
 Net (loss) income                                                 $   (1,376,443)   $    729,533    $    (129,154)   $     23,992
 Adjustments to reconcile net (loss) income
   to cash flows from operating activities:
  Depreciation and amortization                                         2,881,328       1,726,145          431,839       1,057,636
  Deferred income taxes                                                (1,735,475)        240,603          161,049        (286,779)
  Provision for doubtful accounts                                         (91,583)        146,336                -          77,431
  Stock compensation                                                      257,557          17,148                -               -
  Write off of acquired in-process research and development             3,590,000               -                -               -
 Changes in operating assets and liabilities:
  Restricted cash                                                        (108,074)      1,257,043       (1,257,043)              -
  Accounts receivable                                                  (5,314,689)     (3,571,121)       2,637,989         861,525
  Inventories                                                          (4,389,605)     (1,268,019)      (2,407,806)     (1,344,485)
  Other assets and prepaid expenses                                    (1,809,161)       (179,016)        (162,657)       (336,772)
  Accounts payable                                                      1,955,182      (2,230,045)         179,565       1,032,697
  Accrued pension                                                         505,339         253,385           89,270        (236,815)
  Other current liabilities                                             3,509,458       4,122,316        1,959,502      (1,049,314)
                                                                   -----------------------------------------------------------------
Net cash (used in) provided by operating activities                    (2,126,166)      1,244,308        1,502,554        (200,884)
                                                                   -----------------------------------------------------------------
 Cash flows from investing activities:
  Cash paid to affiliate for reorganization                                     -               -                -        (168,887)
  Purchase of property and equipment                                   (2,433,924)     (2,003,268)      (1,913,728)     (3,105,873)
  Investment in other companies                                        (1,000,000)              -                -               -
  Acquisition of Nonius Group, net of cash acquired                    (6,235,547)              -                -               -
                                                                   -----------------------------------------------------------------
Net cash used in investing activities                                  (9,669,471)     (2,003,268)      (1,913,728)     (3,274,760)
                                                                   -----------------------------------------------------------------
Cash flows from financing activities:
 (Repayment of)/proceeds from line of credit                           (5,108,261)        633,678         (309,561)       (355,336)
 Repayment of related party debt                                       (9,022,019)       (451,815)         (66,062)     (1,387,617)
 Issuance of related party debt                                           179,720       1,408,900                -       2,250,000
 Repayment of long-term debt                                           (2,746,937)              -                -               -
 Issuance of long-term debt                                                     -               -                -       2,200,000
 Proceeds from issuance of common stock, net of issuance costs         52,605,041               -                -       1,500,000
 Proceeds from issuance of preferred stock, net of issuance costs      22,273,136               -                -               -
                                                                   -----------------------------------------------------------------
Net cash provided by (used in) financing activities                    58,180,680       1,590,763         (375,623)      4,207,047
                                                                   -----------------------------------------------------------------
 Effect of exchange rate changes on cash                                  (58,474)       (212,989)        (136,550)        (34,503)
                                                                   -----------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                   46,326,569         618,814         (923,347)        696,900

Cash and cash equivalents at beginning of year                          2,460,457       1,841,643        2,764,990       2,068,090
                                                                   -----------------------------------------------------------------
Cash and cash equivalents at end of year                           $   48,787,026    $  2,460,457    $   1,841,643    $  2,764,990
                                                                   -----------------------------------------------------------------
Supplemental disclosure of cash flow information:
 Cash paid for interest                                            $      790,505    $    750,248    $     204,277    $    582,744
 Cash paid for taxes                                                      481,025         236,753                -         139,659

Noncash investing and financing activities:
 Issuance of common stock for investments in other companies              999,995               -                -               -
 Conversion of preferred stock to common stock                         23,106,265               -                -               -
 Convertible preferred stock accretion                                    833,129               -                -               -
</Table>

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

                                                               [BRUKER AXS LOGO]

                                                                              35
<Page>

                          NOTES TO FINANCIAL STATEMENTS

1 DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Bruker AXS Inc. (the "Company") designs, manufactures, distributes and services
systems and complete solutions in X-ray instrumentation used in non-destructive
molecular and elemental analysis in academic, research and industrial
applications.

Prior to September 1997, the Company did not engage in any significant business
operations. In October 1997, Bruker BioSpin Corporation, formerly Bruker
Instruments, Inc, of Billerica, Massachusetts (USA) and Bruker Physik, of
Karlsruhe (Germany), both affiliates of the Company, purchased the analytical
X-ray business of Siemens AG. Bruker BioSpin Corporation purchased the assets
and assumed net liabilities of Siemens' U.S. business for $3.9 million, which
then became Bruker AXS Inc. Bruker Physik purchased the stock of Siemens' German
business for $7.2 million, which then became Bruker AXS GmbH. The acquisition
was accounted for as a purchase of which the fair value of the net tangible and
identifiable intangible assets acquired approximated the purchase price of both
acquisitions. These acquisitions were financed by third party loans.

Prior to June of 1999, the financial statements reflect the combined accounts of
Bruker AXS Inc., a wholly-owned subsidiary of Bruker BioSpin Corporation and
Bruker AXS GmbH, a wholly-owned subsidiary of Bruker Physik AG.

Effective June 8, 1999 all of the shares of Bruker AXS Inc. were transferred
from Bruker BioSpin Corporation to the five shareholders of Bruker AXS Inc. who
were members of the controlling family of all of the Bruker companies. Effective
June 23, 1999, Bruker AXS Inc. acquired all of the shares of Bruker AXS GmbH
from Bruker Physik AG for $168,887. Bruker Physik AG and Bruker BioSpin
Corporation are considered commonly controlled entities. Therefore, the
transactions represented an exchange between entities under common control and,
accordingly, the assets acquired and liabilities assumed in both transactions
have been accounted for at historical cost in a manner similar to a
pooling-of-interests. Subsequent to these transactions, the financial statements
include the consolidated accounts of Bruker AXS Inc. and its wholly owned
subsidiaries. All significant inter-company transactions and balances have been
eliminated.

In December 2001, the Company completed an initial public offering (Note 17).

The Company changed its year-end from a fiscal year ending on September 30 to a
calendar year ending on December 31, effective for the three months ended
December 31, 1999.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF 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 reported amounts of revenues and expenses during the reporting
period. Actual results could differ from such estimates.

REVENUE RECOGNITION

Revenue is recognized from system sales when a product is accepted by the
customer, except when sold through a non-consolidated Bruker affiliate that
assumes responsibility for installation, in which case the system sale is
recognized upon shipment. Revenue from accessories and parts is recognized upon
shipment, and revenue from services is recognized when performed. The Securities
and Exchange Commission ( "SEC ") staff issued Staff Accounting Bulletin ( "SAB
") 101, "Revenue Recognition," which became effective during the fourth quarter
of fiscal 2000 for the Company. There was no material effect on the financial
statements as the Company's revenue recognition policy complied with the
provisions of SAB 101.

Revenue from software package sales represents less than 2% of total revenue and
is recognized in accordance with the American Institute of Certified Public
Accountants Statement of Position ( "SOP ") 97-2, "Software Revenue
Recognition."

SHIPPING AND HANDLING FEES AND COSTS

During the fourth quarter of fiscal 2000, the Company adopted the provisions of
the Emerging Issues Task Force ( "EITF ") Issue No. 00-10 "Accounting for
Shipping and Handling Fees and Costs." In accordance with the provisions of EITF
00-10, shipping and handling fees are to be reflected in net sales and shipping
and handling costs are to be reflected in cost of goods sold. The adoption of
this statement did not have a material effect on the financial statements.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with original maturities of
90 days or less to be cash equivalents. Cash and cash equivalents primarily
include cash on hand, money market funds, municipal notes and time deposits.
Time deposits represent amounts on deposit in banks and temporarily invested in
instruments with maturities of 90 days or less at time of purchase. Certain of
these investments represent off-shore deposits which are not insured by the FDIC
or any other United States government agency. Cash and cash equivalents are
carried at cost, which approximates fair market value.

                                                               [BRUKER AXS LOGO]

36
<Page>

                          NOTES TO FINANCIAL STATEMENTS

RESTRICTED CASH

Certain customers require the Company to provide a bank guarantee on customer
advances. Generally, the lines of credit facilitate this requirement, however,
to the extent the required guarantee exceeds the local line of credit
availability, the Company maintains current restricted cash balances.

The Company is also required to maintain a restricted cash balance, which has
been classified as noncurrent, as a guarantee for the lessor of the building
located in Delft, The Netherlands throughout the lease term.

INVENTORIES

Inventories are valued at standard costs which approximate the lower of cost,
determined on a first-in, first-out basis, or market.

Inventories include demonstration equipment which the Company provides to
current and potential customers and is considered available for sale. As of
December 31, 2001 and 2000, demonstration equipment in inventory was $2,591,291
and $1,824,147, respectively. The Company amortizes its demonstration equipment
over a three year period. Amortization expense for demonstration equipment was
$1,463,123, $783,013, $218,051 and $309,091 for the years ended December 31,
2001 and 2000, for the three month period ended December 31, 1999 and for the
year ended September 30, 1999, respectively.

Inventories also include engineering inventory used in pre-production prototype
units for which an alternative future use is available. As of December 31, 2001
and 2000, engineering inventory was $404,461 and $294,952, respectively. The
Company amortizes its engineering inventory over a three year period.
Amortization expense for engineering inventory was $217,708, $143,919, $35,128
and $181,802 for the years ended December 31, 2001 and 2000, for the three month
period ended December 31, 1999 and for the year ended September 1999,
respectively. Engineering inventory used in research and development activities
or for which no alternative future use is available is expensed as incurred.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are calculated on a straight-line
basis over the estimated useful lives of the assets as follows:

<Table>
<S>                                           <C>
Building................................................39 years
Machinery and equipment ............... ............. 5-10 years
Computer equipment.......................................3 years
Furniture and fixtures ...............................5-10 years
Leasehold improvements .......................Lesser of 15 years
                                                or the remaining
                                                      lease term
</Table>

Expenditures which substantially extend the useful lives of assets are
capitalized. Expenditures for maintenance and repairs are charged against income
as incurred. Gains and losses recognized on disposals are included in other
expense (income) in the Consolidated/Combined Statements of Operations.
Depreciation and amortization expense was $1,076,618, $799,213, $176,566 and
$561,130 for the years ended December 31, 2001 and 2000, for the three month
period ended December 31, 1999 and for the year ended September 30, 1999,
respectively.

INTANGIBLES AND GOODWILL

Trademarks and tradenames and goodwill are amortized using the straight-line
basis over 20 years. Accumulated amortization of trademarks and tradenames was
$9,750 and $0 at December 31, 2001 and 2000, respectively. Accumulated
amortization of goodwill was $114,129 and $0 at December 31, 2001 and 2000,
respectively.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews long-lived assets for impairment, in accordance with
Statement of Financial Accounting Standards ( "SFAS ") No. 121, "Accounting for
the Impairment of Long-Lived Assets to Be Disposed Of," whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. Assets are written-down to fair value when the carrying costs
exceed this amount. Any impairment losses are determined based upon estimated
future cash flows and fair values. To date, no such indicators of impairment
have been identified.

INVESTMENTS IN OTHER COMPANIES

Investments in other companies consist of two preferred equity security
interests. The securities do not have readily determinable fair values and the
Company's ownership interest in each of these individual companies is less than
20%. Accordingly, these investments are accounted for under the cost method of
accounting. This method requires the Company to periodically evaluate whether a
non-temporary decrease in value of the investment has occurred, and if so, to
write the investment down to its net realizable value.

CUSTOMER ADVANCES

Under the terms and conditions of contracts with certain customers, the Company
requires an advance deposit. These deposits are recorded as a liability until
revenue is recognized on the specific contract.

WARRANTY COSTS AND DEFERRED REVENUE

The Company provides a one year parts and labor warranty with the purchase of
equipment. The anticipated cost for this one year warranty is accrued upon
recognition of the sale and is included as a current liability. The Company also
offers to its customers extended warranty and service

                                                               [BRUKER AXS LOGO]

                                                                              37
<Page>

                          NOTES TO FINANCIAL STATEMENTS

agreements extending beyond the initial year of warranty for a fee. These fees
are recorded as deferred revenue and amortized into income over the life of the
extended warranty contract.

INCOME TAXES

The Company provides for income taxes under the liability method prescribed by
SFAS No. 109, "Accounting for Income Taxes". Under this method, deferred tax
assets and liabilities are determined based on the difference between the
financial statements and tax basis of assets and liabilities using enacted tax
rates in effect for the year in which the difference is expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized.

COMPREHENSIVE INCOME

Total comprehensive income includes net income, a transition adjustment for the
adoption of SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," changes in fair market value of financial instruments designated as
hedges and foreign currency translation adjustments.

FOREIGN CURRENCY TRANSLATION

Assets and liabilities of foreign subsidiaries are translated into United States
dollars at year-end exchange rates. Revenues, costs and expenses of foreign
subsidiaries are translated at average exchange rates for each year. The effects
of these translation adjustments are reported as a component of accumulated
other comprehensive income.

ADVERTISING

The Company expenses advertising costs as incurred. Advertising expenses were
$901,106, $387,201, $77,473 and $570,154 for the years ended December 31, 2001
and 2000, for the three month period ended December 31, 1999 and for the year
ended September 30, 1999, respectively.

RESEARCH AND DEVELOPMENT

Research and development costs are expensed as incurred. The Company recognized
expense of $900,000 during the year ended September 30, 1999 related to a
contract for research and development activities.

SOFTWARE DEVELOPMENT COSTS

The Company has developed proprietary software that is a component of its
products. It is the Company's policy to charge all software development costs to
research and development expense until the establishment of technological
feasibility of a particular application, which the Company defines as completion
of a working model of one of its products. Upon such establishment of
technological feasibility, all further software development costs on the same
application would be capitalized. Software development costs eligible for
capitalization have been insignificant and therefore have been charged to
research and development expense as incurred.

FINANCIAL INSTRUMENTS

The Company has from time to time engaged in derivative instruments (See Note
12). Certain derivative instruments are not effective hedges and are therefore
considered speculative and are marked-to-market. The appreciation/depreciation
of such instruments is included in other expense (income) in the
Consolidated/Combined Statements of Operations.

ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." The statements eliminate the pooling-of-interests method of accounting
for business combinations and require that goodwill and intangible assets with
indefinite useful lives not be amortized. Instead, in accordance with the
provisions of SFAS No. 142, these assets will be reviewed for impairment
annually, or on an interim basis when events or changes in circumstances
warrant. The impairment test shall consist of a comparison of the fair value of
goodwill or an intangible asset with its carrying amount with any related
impairment losses recognized in earnings when incurred. SFAS No. 142 also
requires intangible assets with finite useful lives be amortized over their
estimated useful lives to their estimated residual values, and reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable, in accordance with SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of." The statements will be effective January 1, 2002 for
existing goodwill and intangible assets and July 1, 2001 for business
combinations completed after June 30, 2001. The adoption of these statements is
expected to reduce annual goodwill and trademark and tradename amortization
expense related to the acquisition of Nonius Group (Note 9) by approximately
$165,000.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes a
cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement. The standard is
effective for fiscal years beginning after June 15, 2002. The Company is
evaluating the impact of SFAS No. 143 on its results of operations and financial
position.

In August 2001, the FASB No. 144, "Accounting for the Impairment or Disposal of
long-lived Assets. "SFAS No. 144 addresses financial accounting and reporting
for the impairment of disposal of long-lived assets.

                                                               [BRUKER AXS LOGO]

38
<Page>

                          NOTES TO FINANCIAL STATEMENTS

The accounting model for long-lived assets to be disposed of by sale applies to
all long-lived assets, including discontinued operations. SFAS No. 144 requires
that those long-lived assets be measured at the lower of carrying amount or fair
value less cost to sell, whether reported in continuing operations or in
discontinued operations. Therefore, discontinued operations will no longer be
measured at net realizable value or include amounts for operating losses that
have not yet occurred. SFAS No. 144 also broadens the reporting of discontinued
operations to include all components of an entity with operations that can be
distinguished from the rest of the entity and that will be eliminated from the
ongoing operations of the entity in a disposal transaction. The provisions of
this Statement are effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years, with early application encouraged. The Company is evaluating the impact
of SFAS No. 144 on its results of operations and financial position.

RECLASSIFICATIONS

Certain reclassifications have been made to the financial statements of the
prior periods to conform to the current year presentation.

3 ACCOUNTS RECEIVABLE

Accounts receivable were comprised as follows:

<Table>
<Caption>

Year Ended December 31,                 2001            2000
-------------------------------------------------------------
<S>                              <C>             <C>
Accounts receivable              $17,660,003     $12,617,449
Less allowance for doubtful
 accounts                           (453,220)       (610,388)
                                 ----------------------------
Accounts receivable, net         $17,206,783     $12,007,061
                                 ============================
</Table>

4 INVENTORIES

Inventories were comprised of the following:

<Table>
<Caption>
Year Ended December 31,                    2001           2000
--------------------------------------------------------------
<S>                                 <C>            <C>
Raw materials                       $ 9,783,562    $ 7,091,292
Work-in-process                       6,262,864      5,908,136
Finished goods                        7,483,259      4,314,839
Service parts                         3,239,277      2,827,008
                                    --------------------------
Total inventories                   $26,768,962    $20,141,275
                                    ==========================
</Table>

5 PROPERTY AND EQUIPMENT

Property and equipment were comprised of the following:

<Table>
<Caption>
Year Ended December 31,                    2001           2000
--------------------------------------------------------------
<S>                                 <C>             <C>
Land                                $   980,090     $  980,090
Building and leasehold
 improvements                         3,030,409      3,012,874
Machinery and equipment               2,994,595      2,099,120
Computer equipment                    2,275,284      1,872,170
Furniture and fixtures                2,753,541      1,728,763
                                    --------------------------
                                     12,033,919      9,693,017
                                    --------------------------
Less accumulated depreciation
 and amortization                    (3,883,009)    (2,977,256)
                                    --------------------------
Property and equipment, net         $ 8,150,910     $6,715,761
                                    ==========================
</Table>

6 OTHER CURRENT LIABILITIES

Other current liabilities were comprised of the following:

<Table>
<Caption>
Year Ended December 31,                    2001           2000
--------------------------------------------------------------
<S>                                 <C>            <C>
Customer advances                   $ 9,101,764    $ 4,808,452
Accrued compensation                  4,234,599      3,070,341
Accrued warranty                      2,440,409      1,877,618
Deferred revenue                      2,938,470      2,563,597
Other                                 2,280,296      1,627,910
                                    --------------------------
Total other current liabilities     $20,995,538    $13,947,918
                                    ==========================
</Table>

7 OTHER EXPENSE (INCOME)

Other expense (income) was comprised of the following:

<Table>
<Caption>
                                                                                Three Months
                                              Year Ended       Year Ended          Ended        Year Ended
                                              December 31,     December 31,     December 31,   September 30,
                                                 2001             2000              1999            1999
--------------------------------------------------------------------------------------------------------------
<S>                                             <C>             <C>              <C>             <C>
Exchange losses (gains) on foreign
 currency transactions                          $150,289        $(205,136)       $(48,764)       $(188,914)
Depreciation (appreciation) of the fair
 value of financial instruments                  163,450          146,969         (18,236)        (141,900)
                                            ------------------------------------------------------------------
Total other expense (income)                    $313,739        $ (58,167)       $(67,000)       $(330,814)
                                            ==================================================================
</Table>

                                                               [BRUKER AXS LOGO]

                                                                              39
<Page>

                          NOTES TO FINANCIAL STATEMENTS

8 ACCUMULATED OTHER COMPREHENSIVE LOSS

Accumulated other comprehensive loss was comprised of
the following:

<Table>
<Caption>
Year Ended December 31,                                   2001          2000
------------------------------------------------------------------------------
<S>                                                  <C>           <C>
Foreign currency translation adjustments             $(496,222)    $(348,877)
Transition adjustment relating to the
 adoption of SFAS No. 133,
 net of taxes                                          (20,153)            -
Changes in fair market value of
 financial instrument designated
 as a hedge of interest rate
 exposure, net of taxes                                (21,591)            -
                                                ------------------------------
Total accumulated other
 comprehensive loss                                  $(537,966)    $(348,877)
                                                ==============================
</Table>

9 ACQUISITION

On April 10, 2001, the Company completed the acquisition of Nonius Group
("Nonius") in a transaction whereby the Company acquired the Nonius B.V.
subsidiary, and four affiliates, of Delft Instruments N.V., a Dutch company.
Nonius is a developer and manufacturer of single crystal X-ray diffraction
equipment. The Company paid cash of approximately $6.2 million, net of cash
acquired, plus the assumption of approximately $1.8 million of debt plus
additional liabilities of $4.3 million. The acquisition has been accounted for
as a purchase in the second quarter of fiscal 2001, and accordingly, the results
of operations of Nonius for the period subsequent to the consummation of the
acquisition through December 31, 2001 are included in the accompanying financial
statements. The excess of the purchase price over the fair value of the assets
acquired of $3.2 million has been recorded as goodwill, which is being amortized
on a straight-line basis over 20 years.

In conjunction with the acquisition of Nonius, the Company acquired certain
in-process research and development ("IPR&D") projects. The first project
relates to next generation high brilliancy optics and micro sources. This
project is focused on the development of low-power (low energy consumption)
X-ray tubes with closely-coupled X-ray optics, which are directed at increasing
the performance of expensive and high-maintenance rotating anode generators. The
primary goal of this project is to develop the right combination of currently
existing technologies in X-ray tube and X-ray optics. At the date of
acquisition, this project was approximately 70% complete. The Company estimated
this project would be completed in 2002 and require an additional investment of
$231,000. The Company believed this project had a value of approximately
$1,257,000.

The second project relates to high power high brilliance rotating anode
generators for biological crystallography. This project is focused on increasing
the performance of anode generators by a factor of two to enable biochemists to
solve structures of biological molecules without using expensive synchrotron
beam lines. Improved electronics, electron optics and heat dissipation and
higher speed rotation are the key objectives for this project. At the date of
acquisition, this project was approximately 50% complete. The Company estimated
this project would be completed in 2002 and require an additional investment of
$154,000. The Company believed this project had a value of approximately
$1,077,000.

The third project relates to high sensitivity large area detector systems. The
goal of this project is to enlarge the size of CCD-based detectors while
improving their sensitivity. The research and development work is focused on
improving CCD chips and X-ray converting phosphors and increasing the
effectiveness of magnifying systems such as fiber tapers or lenses. At the date
of acquisition, this project was approximately 70% complete. The Company
estimated this project would be completed in 2002 and require an additional
investment of $154,000. The Company believed this project had a value of
approximately $539,000.

The fourth project relates to a next generation software platform for data
acquisition and processing. The goal of the project is to develop new and modern
software architecture to allow easy customization and performance improvements
(mainly algorithms) of the data collection and structure solution software. Our
final goal will be to provide a turnkey, push button crystallography tool for
the non-crystallographers. At the date of acquisition, this project was
approximately 70% complete. The Company estimated this project would be
completed in 2002 and require an additional investment of $77,000. The Company
believed this project had a value of approximately $718,000.

There is minimal risk to the Company that these projects will not be completed
in the timeframes noted above, as the most complex aspects of the projects had
already been completed. Since each project will result in technologies that can
be individually integrated into our system platforms, the Company will have
great flexibility in bringing each projects technology to the market.

Although the Company believes these IPR&D projects, when completed, will provide
value, the Company determined there was an absence of technological feasibility
and alternative future use for this IPR&D at the time of acquisition. As such,
the Company utilized a discounted probable future cash flows analysis to prepare
a valuation of the fair value of IPR&D at the time of acquisition. The Company
performed this cash flow analysis on a project by project basis and applied
adjusted discount rates of 40%-45% to the projects' cash flow. The Company used
financial assumptions based on pricing, margins and expense levels from those
historically realized by Nonius and consistent with industry standards. Material
net cash inflows from these projects are expected to begin in 2003. Management
was primarily responsible for estimating the fair value of the purchased
in-process research and development. This valuation resulted in an estimate
of the fair value of $3,590,000 ($2,118,100, net of tax), which was charged to
research and development expense immediately following the close of the
transaction in the second quarter of 2001.

                                                               [BRUKER AXS LOGO]

40
<Page>

                          NOTES TO FINANCIAL STATEMENTS

The following unaudited pro forma income statement information assumes that
the acquisition had taken place as of the beginning of each of the periods
presented, in accordance with Accounting Principle Bulletin 16, "Business
Combinations."

<Table>
<Caption>
Year Ended December 31,                     2001            2000
------------------------------------------------------------------
<S>                                  <C>             <C>
Net sales                            $84,583,043     $77,916,564
Net loss                             $(1,668,575)    $(1,435,142)
Basic earnings (loss) per share      $     (0.19)    $     (0.04)
Diluted earnings (loss) per share    $     (0.19)    $     (0.04)
</Table>

The unaudited pro forma combined income statement information has been prepared
for informational purposes only and may not be indicative of the operating
results that actually would have resulted had the acquisition been made at the
beginning of the periods presented, or of the operating results that may occur
subsequent to the acquisition.

The Nonius operations are located in Delft, The Netherlands. Nonius rents space
from Delft Instruments. As part of the purchase agreement with Delft
Instruments, Nonius entered into rental and service agreements for 20 months.
The services provided by Delft Instruments include facility maintenance,
telephone and systems networks, payroll and other handling. The Company entered
into a lease agreement for a new facility in Delft, The Netherlands to replace
the rental agreement with Delft Instruments. The Company's current operations
in Delft will be transferred to this new facility in May 2002. As of December
31, 2001, the rental and service fee recognized since the acquisition was
$269,753.

10 LEASES

Certain vehicles, office equipment and buildings are leased under agreements
that are accounted for as operating leases. Total rental expense under operating
leases was $1,542,952, $1,085,894, $387,975 and $1,443,951 for the years ended
December 31, 2001 and 2000, for the three month period ended December 31, 1999
and for the year ended September 30, 1999, respectively.

Future minimum lease payments under non-cancelable operating leases at December
31, 2001 were as follows:

<Table>
<S>                                         <C>
2002........................................$1,258,807
2003........................................   753,913
2004........................................   616,747
2005........................................   461,443
2006........................................   409,943
                                            ----------
Total minimum lease payments................$3,500,853
                                            ==========
</Table>

11 DEBT

The Company's non-related party debt obligations consisted of the following:

<Table>
<Caption>
Year Ended December 31,                        2001        2000
---------------------------------------------------------------
<S>                                      <C>         <C>
Landeskreditbank Baden Wurttemberg
 Forderungsanstalt (LAKRA) note payable  $        -  $2,854,543
State of Wisconsin industrial
 revenue bonds                            2,200,000   2,200,000
                                         ----------------------
Long-term non-related party debt         $2,200,000  $5,054,543
                                         ======================
</Table>

The note payable to Landeskreditbank Baden Wurttemberg Forderungsanstalt (LAKRA)
in connection with Deutsche Bank AG and Dresdner Bank AG was paid in full in
December 2001 with proceeds from the initial public offering. The interest rate
was 5.13% and required quarterly payments until paid in full.

The industrial revenue bonds ("IRB") were entered into with the State of
Wisconsin in 1999 and are collateralized by the related building in Madison,
Wisconsin. The bonds require payments of varying amounts commencing in 2004. The
interest rate is variable based on the Bond Market Association Municipal Swap
Index (1.95% at December 31, 2001) and is paid monthly. The Company has an
interest rate swap which has been designated as a hedge. The Company pays a 4.6%
fixed rate of interest and receives a variable rate of interest based on the
Bond Market Association Municipal Swap Index. The contract has a $2.2 million
notional value which decreases in conjunction with the IRB payment schedule
until the swap and IRB agreements terminate in December 2013. The fair value of
the swap, obtained from dealer quotes, is an unrealized loss of $70,753 and
$34,157 at December 31, 2001 and 2000, respectively. Interest payments
(receivable and payable) under the terms of the swap are accrued over the period
and are treated as an adjustment to interest expense.

Annual maturities of long-term non-related party debt are as follows:

<Table>
<S>                                              <C>
2002.............................................$        --
2003.............................................         --
2004.............................................    170,000
2005.............................................    180,000
2006.............................................    190,000
Thereafter.......................................  1,660,000
                                                 ------------
                                                 $ 2,200,000
                                                 ============
</Table>

The IRB contains various financial and other covenants. The most restrictive
covenants are a maximum debt to equity ratio and a maximum interest coverage
ratio. As of December 31, 2001, the Company was in violation with certain
covenants and, accordingly, the Company obtained a waiver from the financial
institution. The financial covenants have been waived through March 31, 2002 and
the Company is in negotiations to obtain an amendment with modified covenants.

                                                               [BRUKER AXS LOGO]

                                                                              41
<Page>

                          NOTES TO FINANCIAL STATEMENTS

The Company maintained a line of credit at a financial institution in the United
States with a maximum credit amount of $3.5 million at December 31, 2000. At
December 31, 2000, the Company had borrowings under this facility of
approximately $2.8 million and unused borrowings of approximately $0.7 million.
Interest was paid monthly on outstanding borrowings based on the prime rate
which was 9.50% at December 31, 2000. The weighted average interest rate on
amounts outstanding at December 31, 2000 was 9.29%. The line of credit expired
on May 17, 2001.

The Company maintains lines of credit at financial institutions in Germany with
an aggregate maximum credit amount of approximately $7.2 million and $3.9
million at December 31, 2001 and 2000, respectively. At December 31, 2001 and
2000, the Company had borrowings of approximately $0 and $0.2 million,
respectively, and availability of approximately $5.0 million and $3.7 million,
respectively. At December 31, 2001, the Company had bank guarantees of $2.2
million for its customer advances. These guarantees affect the availability of
its lines of credit. Interest is paid monthly on outstanding borrowings based on
the London Interbank Offered Rate for three month deposits (LIBOR) plus 1% which
was 7.40% at December 31, 2000. The weighted average interest rate on amounts
outstanding at December 31, 2000 was 7.25%. The lines of credit have no
expiration date.

The lines of credit are collateralized by accounts receivable, inventories and
equipment of the Company. Additionally, the agreements contain various financial
and other covenants. The most restrictive covenants are a maximum debt to equity
ratio and a maximum interest coverage ratio.

At December 31, 2001, the Company had a short-term loan with a financial
institution for $241,957. The loan had an interest rate of 4.28% and was paid in
full in February 2002.

12 FINANCIAL INSTRUMENTS

CASH AND CASH EQUIVALENTS

The fair values of cash and cash equivalents approximate their carrying values.

SHORT-TERM AND LONG-TERM DEBT

The fair values of short-term debt approximate their carrying values. The fair
value of long-term and related party debt, which was approximately $2,200,000
and $13,828,000 at December 31, 2001 and 2000, respectively, was determined
using market interest rates and discounted future cash flows.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Effective January 1, 2001, the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended and interpreted. SFAS
No. 133 requires that all derivative instruments, such as interest rate swap
contracts, be recognized in the financial statements and measured at their fair
market value. Changes in the fair market value of derivative instruments are
recognized each period in current earnings or shareholders' equity (as a
component of other comprehensive income), depending on whether a derivative is
designated as a part of a hedge transaction and, if it is, the type of hedge
transaction. The adoption of SFAS No. 133 did not have a material impact on the
Company's financial statements.

The Company's objective in managing its exposure to interest rates is to
decrease the volatility that changes in interest rates might have on earnings
and cash flows. To achieve this objective, the Company uses a fixed rate
agreement to adjust a portion of its debt, as determined by management, that is
subject to variable interest rates. The Company designates this instrument as a
cash flow hedge.

At January 1, 2001, the Company had an interest rate swap arrangement to pay a
4.6% fixed rate of interest and receive a variable rate of interest based on the
Bond Market Association Municipal Swap Index (ranging from 1.37% to 4.27% for
the year ending December 31, 2001) on a $2.2 million notional amount.

This contract is considered to be a hedge against changes in the amount of
future cash flows associated with the Company's interest payments related to its
variable rate debt obligations.

Accordingly, the fixed rate agreement is reflected at fair value in the
Company's balance sheet and related gains or losses on this contract are
deferred in shareholders' equity as a component of comprehensive income.
However, to the extent that this contract is ineffective in offsetting the
change in interest cash flows being hedged, the ineffective portion would be
immediately recognized in earnings. The amount recognized in earnings within the
next twelve months is not expected to be significant. The fair value of the
instrument was ($41,744) and ($20,153), net of tax at December 31, 2001 and
December 31, 2000, respectively. The fair values were obtained from dealer
quotes. In accordance with SFAS No. 133, the Company recorded a transition
adjustment which resulted in an unrealized accumulated comprehensive loss of
$20,153, net of tax, as of January 1, 2001.

The Company entered into three financial instruments during the fiscal year
ending September 30, 1999, an interest rate cap, an interest rate swap and a
cross currency interest rate swap, which are currently not designated as hedges.
In addition, the Company acquired a financial instrument, which terminated in
the fourth quarter of 2001, with its acquisition of Nonius. The notional amount
of the instruments were approximately $7,277,000 and $7,620,000 at December 31,
2001 and 2000, respectively. Until the instruments become an effective hedge,
the instruments are considered speculative and are marked-to-market. The fair
value of the instruments (depreciated) appreciated ($163,450), ($146,969),
$18,236 and $141,900 for the years ended December 31, 2001 and 2000, for the
three month period ended December 31, 1999 and for the year ended September 30,
1999, respectively. The fair value of the instruments was $885 and $68,779 as of
December 31, 2001 and 2000, respectively. By entering into these speculative
contracts the Company obtained the right to borrow money at low rates of
interest. The Company continues to hold these speculative contracts until it
elects to exercise the options to borrow the money.

                                                               [BRUKER AXS LOGO]

42
<Page>

                          NOTES TO FINANCIAL STATEMENTS

13 INCOME TAXES

Significant components of the provision for income taxes were as follows:

<Table>
<Caption>
                                                                    Three Months
                                Year Ended         Year Ended          Ended          Year Ended
                               December 31,       December 31,      December 31,    September 30,
                                   2001               2000             1999              1999
---------------------------------------------------------------------------------------------------
<S>                             <C>                  <C>                <C>             <C>
Current:
 Federal                        $    11,997          $ 112,698          $ 75,439        $ (11,800)
 State                               27,316              9,656             6,686          (10,576)
 Foreign                            726,670            152,790           (51,787)           6,989
                                -------------------------------------------------------------------
                                    765,983            275,144            30,338          (15,387)
                                -------------------------------------------------------------------
Deferred:
 Federal                         (1,649,157)            13,984          (101,901)         (41,623)
 State                             (203,525)           (23,944)          (16,135)         (15,734)
 Foreign                            117,207            250,563           279,085         (229,422)
                                 (1,735,475)           240,603           161,049         (286,779)
                                -------------------------------------------------------------------
Income tax (benefit) expense    $  (969,492)         $ 515,747          $191,387        $(302,166)
                                ===================================================================
</Table>

Temporary differences and carryforwards which gave rise to deferred tax assets
and liabilities consisted of the following:

<Table>
<Caption>
Year Ended December 31,                                                     2001                 2000
---------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                   <C>
Current deferred income taxes:
 Accounts receivable                                                  $   23,191            $  15,116
 Inventories                                                             573,409              103,425
 Warranty reserve                                                        276,597              190,000
 Other current liabilities                                              (217,846)                   -
 Compensation                                                            186,701               21,240
 Other                                                                   (71,419)             (11,169)
 Revenue recognition                                                     115,732                    -
                                                                    -------------------------------------
  Total current deferred income tax asset                                886,365              318,612
                                                                    -------------------------------------
Long - term deferred income taxes:
 Property and equipment                                                 (201,095)            (127,217)
 Intangible assets                                                     1,236,642                    -
 Accrued pension                                                         267,943              256,346
 Other                                                                         -               32,882
Tax credits                                                              610,503              203,581
 Net operating loss carryforwards                                        104,321                    -
                                                                    -------------------------------------
  Total long - term deferred income tax asset                          2,018,314              365,592
                                                                    -------------------------------------
Total deferred income tax asset                                       $2,904,679            $ 684,204
                                                                    =====================================
</Table>

The net deferred tax asset represents management's best estimate of the tax
benefits that will more likely than not be realized in future years.

A reconciliation between the reported income tax (benefit) expense and the
federal statutory rate follows:

<Table>
<Caption>
                                                                                                 Three Months
                                                                     Year Ended     Year Ended       Ended          Year Ended
                                                                    December 31,   December 31,   December 31,    September 30,
                                                                        2001          2000          1999             1999
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>            <C>            <C>             <C>
Federal statutory rate                                               $(797,620)     $409,635       $ 21,782        $ (97,361)
State income taxes, net of federal benefits                           (221,302)        2,970          2,967          (10,300)
Foreign tax expense, at different rates and foreign losses without     112,651       191,110        203,609          (43,189)
 tax benefits
Research and development tax credits                                  (110,000)     (132,300)       (83,271)        (194,913)
Meals and entertainment                                                 96,316        40,629         13,387           39,616
Other                                                                  (49,537)        3,703         32,913            3,981
                                                                    ----------------------------------------------------------
                                                                     $(969,492)     $515,747       $191,387        $(302,166)
                                                                    ==========================================================
</Table>

                                                               [BRUKER AXS LOGO]

                                                                              43
<Page>

                          NOTES TO FINANCIAL STATEMENTS

There was a statutory rate reduction in Germany which was enacted in October
2000. As a result, the Company reduced its deferred taxes in the fourth quarter
of 2000 by $71,303.

As a result of a German regulatory audit the Company reduced its deferred tax
asset by $122,375 related to its net operating loss carryforwards for the three
month period ended December 31, 1999.

Consolidated domestic pre-tax (loss) income was ($303,304), $567,371, ($92,993)
and $277,189 for the years ended December 31, 2001 and 2000, for the three month
period December 31, 1999 and for the year ended September 30, 1999,
respectively. The pre-tax (loss) income for foreign operations was ($2,042,631),
$677,909, $155,226 and ($555,363) for the years ended December 31, 2001 and
2000, for the three month period ended December 31, 1999 and for the year ended
September 30, 1999, respectively.

As of December 31, 2001, the Company had approximately $401,000 of research and
development tax credits available to reduce future federal and state tax
liabilities. These credits expire at various dates through the year 2021. The
Company also has approximately $81,000 of federal operating loss carryforwards
and $75,000 of state operating loss carryforwards available to reduce future
taxable income. These carry-forwards expire at various dates through the year
2021. Furthermore, the Company has foreign tax credit carryforwards of
approximately $210, 000. These carryforwards expire at various dates through the
year 2006.

Undistributed losses of foreign subsidiaries aggregated approximately $2.1
million at December 31, 2001 which, under existing law, will not be subject to
United States tax until distributed as dividends. Any earnings are intended to
be indefinitely reinvested in foreign operations and, as such, no provision or
benefit has been made for United States income taxes that may be applicable
thereto.

14 RELATED PARTIES

The Company is affiliated, through common shareholders, with several other
entities which use the Bruker name. The Company and its affiliates have entered
into a sharing agreement which provides for the sharing of specified
intellectual property rights, services, facilities and other related items.

Related party debt consisted of the following:

<Table>
<Caption>
Year Ended December 31,                              2001                   2000
----------------------------------------------------------------------------------
<S>                                             <C>                  <C>
Bruker BioSpin Corporation                      $       -            $ 5,035,756
Bruker Physik AG                                        -              4,142,417
Bruker BioSpin KK                                 229,180                408,900
                                                ----------------------------------
                                                  229,180              9,587,073
Less current                                     (229,180)            (1,794,743)
                                                ----------------------------------
Long-term related party debt                    $       -            $ 7,792,330
                                                ==================================
</Table>

All long-term related party debt was paid in full in December 2001 with proceeds
from the Company's initial public offering. Loans outstanding with Bruker
BioSpin Corporation ("BBC") had required quarterly interest payments beginning
January 1, 2000 at a rate equal to the three month LIBOR rate (6.4% at December
31, 2000). Principal payments of $107,994 were also required quarterly. The loan
was to mature in 2010. As of December 31, 2000, the Company had not made
principal payments to BBC of $715,988. The amounts due in fiscal 2000 and not
paid as of December 31, 2000, were paid in full during the first quarter of
fiscal 2001.

Loans outstanding with Bruker Physik AG required quarterly interest payments at
a rate of 2.25% through June 30, 2002. After June 30, 2002, the interest rate on
the loan was to increase to 4.5%. Principal payments of $59,470 were also
required quarterly. The loan was to mature in 2017.

The loans were subordinate to any bank debt.

The Company has a line of credit with Bruker BioSpin KK with a maximum credit
amount of $229,180 and $408,900 at December 31, 2001 and 2000, respectively. The
line of credit has an interest rate of 1.75% and expires on August 31, 2002.

For the years ended December 31, 2001 and 2000, for the three month period ended
December 31, 1999 and for the year ended September 30, 1999, the Company had
related party interest expense of $258,580, $404,648, $67,310 and $333,639,
respectively.

As of December 31, 2001 and 2000, the Company has payables to related parties
included within its accounts payable balance of $16,920 and $505,998,
respectively. The Company has receivables from related parties included within
its accounts receivable balance of $2,531,865 and $3,900,273, as of December 31,
2001 and 2000, respectively. Payment terms of accounts receivable balances with
related parties are the same as those with third party customers.

Sales to related parties which are not subsidiaries of Bruker AXS Inc. are
included in the consolidated/combined financial statements. Such related parties
are affiliated sales offices in countries in which the Company does not have its
own distribution network. As such, these sales were primarily for resale of our
products only. These sales amounted to $5,187,788, $14,946,976, $2,471,153 and
$7,667,823 for the years ended December 31, 2001 and 2000, for the three month
period ended December 31, 1999 and for the year ended September 30, 1999,
respectively.

BBC charged Bruker AXS Inc. a management fee of $20,000 for the year ended
September 30, 1999.

15 EMPLOYEE BENEFIT PLANS

Substantially all of the Bruker AXS GmbH employees, who were employed by the
Company on September 30, 1997, participate in a defined benefit pension plan.
The plan provides pension benefits based upon final average salary and years of
service. Benefits to other employees are based on a fixed amount for each year
of service. The Company

                                                               [BRUKER AXS LOGO]

44
<Page>

has elected to recognize the impact on the projected benefit obligation when
actual experience differs from actuarial assumptions on an immediate basis. The
Company recognized actuarial gains of approximately $53,000, $75,000, $0 and
$332,000 for the years ended December 31, 2001 and 2000, for the three month
period ended December 31, 1999 and for the year ended September 30, 1999,
respectively.

The following provides a reconciliation of the funded status of the plan:

<Table>
<Caption>
Year Ended December 31,                                       2001                        2000
------------------------------------------------------------------------------------------------

<S>                                                     <C>                         <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year                 $2,962,179                  $2,915,490
Service cost                                               386,160                     169,925
Interest cost                                              173,497                     164,025
Benefits paid                                               (2,375)                     (3,258)
Recognized actuarial gain                                  (53,039)                    (74,957)
Currency translation adjustment                           (130,440)                   (209,046)
                                                        ----------------------------------------
Benefit obligation at end of year                       $3,335,982                  $2,962,179
                                                        ========================================
</Table>

<Table>
<Caption>
Year Ended December 31,                                       2001                        2000
------------------------------------------------------------------------------------------------
<S>                                                    <C>                         <C>
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year         $         -                 $         -
Employer contributions                                       2,375                       3,258
Benefits paid                                               (2,375)                     (3,258)
                                                       -----------------------------------------
Fair value of plan assets at end of year               $         -                 $         -
                                                       =========================================

Funded status                                          $(3,335,982)                $(2,962,179)
Unrecognized amendment gain                               (101,076)                   (108,595)
                                                       -----------------------------------------
Accrued benefit cost                                   $(3,437,058)                $(3,070,774)
                                                       =========================================
</Table>

<Table>
<Caption>
                                                                                Three Months
                                                 Year Ended      Year Ended         Ended        Year Ended
                                                December 31,    December 31,     December 31,   September 30,
                                                    2001            2000            1999            1999
---------------------------------------------------------------------------------------------------------------
<S>                                              <C>             <C>                <C>           <C>
COMPONENTS OF NET PERIOD BENEFIT COST
Service cost                                     $386,160        $169,925           $47,985       $ 180,712
Interest cost                                     173,497         164,025            45,518         193,326
Recognized actuarial gain                         (53,039)        (74,957)                -        (331,899)
Amortization                                       (2,732)         (2,854)           (3,175)              -
                                              -----------------------------------------------------------------
Net period benefit cost                          $503,886        $256,139           $90,328       $  42,139
                                              =================================================================
</Table>

<Table>
<Caption>
                                                                                Three Months
                                                 Year Ended      Year Ended         Ended        Year Ended
                                                December 31,    December 31,     December 31,   September 30,
                                                    2001            2000            1999            1999
---------------------------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>              <C>              <C>
ASSUMPTIONS
Discount rate                                        6.25%          6.25%            6.25%            6.25%
Expected return on assets                               0%             0%               0%               0%
Rate of compensation increase                        3.00%          3.00%            3.00%            1.50%
</Table>

The Company maintains or sponsors various defined contribution retirement plans
that cover domestic and foreign employees. The Company may make contributions to
these plans at its discretion. Retirement benefits earned are generally based on
years of service and compensation during active employment. Eligibility is
generally determined in accordance with local statutory requirements. However,
the level of benefits and terms of vesting may vary among plans. The Company
contributed $336,827, $379,615, $57,085 and $190,533 for the years ended
December 31, 2001 and 2000, for the three month period ended December 31, 1999
and for the year ended September 30, 1999, respectively.

                                                               [BRUKER AXS LOGO]

                                                                              45
<Page>

16 REDEEMABLE PREFERRED STOCK

On January 16, 2001, the Company authorized and sold 5,625,000 shares of Series
A Convertible Preferred Stock, $0.01 par value per share, at a price of $4.00
per share. Gross proceeds received totaled $22,500,000. The Company utilized
these proceeds to pay down its related party debt in accordance with its payment
schedules and to pay down its third party lines of credit in full. Also, in
conjunction with the preferred stock offering, the Company incurred investment
fees related to the offering which totaled approximately $227,000. Such fees
were included as a reduction of the preferred stock. The terms of the Series A
preferred shares also provide for cumulative cash dividends at an 8% annual
rate, to be paid when and as they may be declared from time to time by the Board
of Directors of the Corporation.

A beneficial conversion feature existed upon the closing of a qualified public
offering ("IPO") if the closing price was between $6.00-$8.00 per share. With a
closing price between $6.00-$8.00 per share, the preferred shareholders would
receive additional shares of common stock upon the conversion. The additional
number of shares was determined by multiplying one by a fraction, the numerator
which was equal to eight and the denominator which was equal to the actual price
per share at the closing of the IPO. Since this beneficial conversion feature
was contingent and the number of shares issued upon conversion could not be
computed until the IPO occurred, the beneficial conversion feature was not
recognized until the closing of the IPO.

While outstanding, the carrying amount of the Series A preferred shares was
being accreted, using the interest method, to the fair market value through
January 16, 2009, the earliest redemption date. During 2001, the Company
recorded approximately $833,129 of accretion. The accretion was recorded through
charges against additional paid-in capital. The redemption amount of the
mandatorily redeemable Series A Convertible Preferred Stock also included
accrued dividends but only when dividends were declared by the Company's Board
of Directors. Accrued dividends of $369,862 had been included in the carrying
value of the Series A Convertible Preferred Stock for the three months ended
March 31, 2001. However, as the Board of Directors had not declared any
dividends and had no intention of doing so in the future, the accrual was
reversed in the three months ended June 30, 2001. The reversal of the dividends
would have increased basic and diluted earnings per share by $0.01 for the three
months ended March 31, 2001.

Upon closing of the Company's initial public offering (Note 17) in December
2001, all the preferred stock was converted into common stock. As the offerings
closing price was $6.50 per share, a beneficial conversion feature existed. An
additional 1,298,077 shares were issued upon the conversion resulting in total
conversion shares of 6,923,077. The intrinsic value of the beneficial conversion
feature was $5,192,308 which was recognized as a reduction to net income
available to common shareholders through a reduction to additional paid-in
capital in December 2001.

17 SHAREHOLDERS' EQUITY

STOCK OPTIONS

During April 2000, the 2000 Stock Option Plan was adopted by the Company as
approved by the Board of Directors (the "2000 Plan"). The 2000 Plan authorizes
the granting of options to employees, consultants, officers and directors to
purchase, receive awards or make direct purchases of up to 1,937,625 shares of
the Company's common stock. Options outstanding under the 2000 Plan generally
vest over a period of three to five years and expire after 10 years from the
date of grant.

Options granted under the Plan may be "Incentive Stock Options" or "Nonqualified
Options" under the applicable provisions of the Internal Revenue Code. Incentive
Stock Options are granted at the fair market value of the Company's common stock
at the date of the grant. Incentive Stock Options granted to employees who own
more than 10% of the voting power of all classes of stock will be granted at
110% of the fair market value of the Company's common stock at the date of the
grant. Nonqualified options may be granted at amounts not less than 50% of the
fair market value of the Company's common stock on the date of the grant.

Following is a summary of activity in the stock option plan for the years ended
December 31, 2001 and 2000:

<Table>
<Caption>
                                       Shares          Weighted
                                      Subject          Average
                                     to Option      Option Price
------------------------------------------------------------------
<S>                                  <C>                <C>

Outstanding, January 1, 2000                 -          $   -
 Granted                               739,500           1.92
 Exercised                                   -              -
 Forfeited                             (35,500)         (1.76)
Outstanding, December 31, 2000         704,000           1.94
 Granted                               992,500           4.62
 Exercised                                   -              -
 Forfeited                             (23,250)         (2.24)
                                     -----------------------------
Outstanding, December 31, 2001       1,673,250           3.52
                                     =============================
Exercisable, December 31, 2001          14,790          $4.50
                                     =============================
</Table>

The Company accounts for stock-based compensation to non-employees using the
fair value method prescribed by SFAS No. 123, "Accounting for Stock-Based
Compensation," and EITF Issue No. 96-18, "Accounting for Equity Instruments that
are Issued to Other than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services." Accordingly, compensation cost for the stock
options granted to non-employees is measured at the fair value of the option at
the date of grant and re-measured as the underlying options vest. The Company
has recorded compensation cost of $228,985 and $17,148 for the years ended
December 31, 2001 and 2000, respectively.

                                                               [BRUKER AXS LOGO]

46
<Page>

                          NOTES TO FINANCIAL STATEMENTS

<Table>
<Caption>
                     Options Outstanding                                              Options  Exercisable
----------------------------------------------------------------------------  ---------------------------------
                                    Weighted Average
  Range of           Number            Remaining         Weighted Average        Number      Weighted Average
Exercise Prices   Outstanding       Contractual Life      Exercise Price      Exercisable     Exercise Price
----------------------------------------------------------------------------  ---------------------------------
<S>                <C>                   <C>                  <C>                <C>            <C>
   $1.76             642,250             8.33                 $ 1.76                 -          $        -
4.00 - 5.00          886,000             9.23                   4.33             14,790               4.50
6.00 - 7.00          145,000             9.84                   6.36                 -                   -
                   ---------
                   1,673,250
</Table>

The Company accounts for stock-based compensation to employees, including
outside directors, using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and
related interpretations. The Company has adopted the disclosure only provisions
of SFAS No. 123 for stock-based compensation to employees. Accordingly, no
compensation cost has been recognized for options granted to employees under the
2000 stock option plan. Had compensation cost been determined based on the fair
value at the grant date for all awards in 2000 consistent with the provisions of
SFAS No. 123, the Company's pro forma net income and earnings per share would
have been as presented below:

<Table>
<Caption>
Year Ended December 31,                     2001            2000
------------------------------------------------------------------
<S>                                  <C>                <C>
Net (loss) income                    $ 1,861,728)       $695,118
Basic earnings (loss) per share      $     (0.20)       $   0.02
Diluted earnings (loss) per share    $     (0.20)       $   0.02
</Table>

The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions:

<Table>
<Caption>
Year Ended December 31,                     2001            2000
------------------------------------------------------------------
<S>                                  <C>               <C>
Dividend yield                                 -               -
Expected stock price volatility               65%             15%
Risk-free interest rate              3.06 - 4.98%           5.11%
Expected life of option-years          3.0 - 5.0       3.0 - 5.0
</Table>

The weighted average grant date fair value of options granted during 2001 and
2000 were $2.18 and $0.65, respectively.

On August 6, 2001, the Company accelerated the vesting schedule of stock options
to purchase 100,000 shares of common stock. No compensation cost has been
recognized for this modification.

On November 7, 2001, the Company accelerated the vesting schedule of a stock
option to purchase 50,000 shares of common stock. Compensation cost of $28,572
was recognized for the year ended December 31, 2001 for this modification since
the stock option would have been forfeited otherwise.

INITIAL PUBLIC OFFERING

On December 14, 2001, the Company issued and sold 9,000,000 shares of its common
stock for $58,500,000 (or $6.50 per share) in conjunction with its initial
public offering. The Company incurred $5,894,959 in offering costs as a result
of this transaction. Upon the closing of the offering, all 5,625,000 shares of
redeemable preferred stock converted into 6,923,077 shares of common stock (Note
16).

On January 7, 2002, the underwriters of the initial public offering exercised an
over-allotment option. As a result, the Company issued and sold 1,350,000 shares
of its common stock for $8,775,000 (or $6.50 per share). The Company incurred
$638,919 in costs as a result of this transaction.

STOCK ISSUANCE AND STOCK SPLIT

In November 1998, the Company issued and sold 1,500,000 shares of common stock
at a price of $1.00 per share resulting in gross proceeds of $1,500,000.

On March 31, 2000, the Board of Directors of the Company authorized a
twenty-five-for-one stock split in the form of a stock dividend. Shareholders of
record received twenty-four additional shares of common stock for every share
they owned. All common shares and per share data in the accompanying financial
statements have been restated to reflect the stock split. As such, subsequent to
the stock split, the stock issuance was adjusted to 37,500,000 shares of common
stock.

PREFERRED STOCK

The Company's Second Amended and Restated Certificate of Incorporation
authorizes the Board of Directors to issue up to 5,000,000 shares of Blank Check
Preferred Stock with a par value of $0.01 per share in one or more series
without shareholder approval. The Board of Directors also has discretion to
determine the dividend rights and terms, conversion rights, voting rights,
redemption rights and terms, liquidation preferences and any other rights,
preferences, privileges and restrictions applicable to each series of the
preferred stock. There were no preferred shares issued or outstanding at
December 31, 2001 and 2000.

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<Page>

                         NOTES TO FINANCIAL STATEMENTS

18 EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing net (loss) income
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings (loss) per share is computed by
dividing net (loss) income by the weighted average number of common shares and,
if applicable, common stock equivalents which would arise from the exercise of
stock options and conversion of preferred shares. The following table reconciles
the numerators and denominators used to calculate basic and diluted earnings
(loss) per share:

<Table>
<Caption>
                                                                             Three Months
                                              Year Ended      Year Ended         Ended        Year Ended
                                             December 31,    December 31,     December 31,   September 30,
                                                 2001            2000            1999            1999
------------------------------------------------------------------------------------------------------------
<S>                                         <C>               <C>              <C>            <C>
INCOME AVAILABLE TO
 COMMON SHAREHOLDERS:
 Net (loss) income                          $  (1,376,443)    $   729,533      $  (129,154)   $     23,992
  Preferred stock accretion                       833,129               -                -               -
  Beneficial conversion feature                 5,192,308               -                -               -
                                            ----------------------------------------------------------------
 Net (loss) income available
  to common shareholders-
  basic and diluted                         $  (7,401,880)    $   729,533      $  (129,154)   $     23,992
                                            ================================================================
WEIGHTED AVERAGE SHARES
 OUTSTANDING:
 Weighted average shares
  outstanding-basic                            39,612,644      38,752,500       38,752,500      32,502,501
 Effect of dilutive securities:
  Stock options                                         -          61,560                -               -
  Convertible preferred stock                           -               -                -               -
                                            ----------------------------------------------------------------
Weighted average shares
 outstanding-diluted                           39,612,644      38,814,060       38,752,500      32,502,501
                                            ================================================================
</Table>

For the year ended December 31, 2001, potential common shares from the
convertible preferred stock and stock options were anti-dilutive and excluded
from the calculation of diluted earnings (loss) per share. The number of common
shares excluded for stock option and convertible preferred stock were 400,025
and 5,176,291, respectively.

For the year ended December 31, 2001, net loss available to common shareholders
- diluted is equal to net loss available to common shareholders - basic because
of the anti-dilutive effect of the preferred stock accretion and beneficial
conversion feature due to net losses for the year.

19 STRATEGIC ALLIANCES

In June 2001, the Company entered into a strategic alliance with Affinium
Pharmaceuticals, formerly Integrative Proteomics, Inc. Affinium Pharmaceuticals
is a leader in high throughput structural proteomics. During the three-year term
of the strategic alliance, the Company will provide Affinium Pharmaceuticals
with the X-ray protein crystallography tools required by Affinium
Pharmaceuticals for its proteomics facilities and collaborate in the development
of higher-throughput proteomics tools. The Company invested $500,000 in cash and
$500,000 in common stock (83,333 shares) in the Series IIA financing of Affinium
Pharmaceuticals. The fair value of the shares issued was determined by
negotiations between the parties. The investment is recorded on a cost basis.

In October 2001, the Company entered into a strategic alliance with
Geneformatics, Inc., ("GFI"), a structural proteomics company. During the
three-year term of its strategic alliance, the Company will provide GFI with
the X-ray crystallography systems and support needed to incorporate X-ray
crystallography into its business. As part of this alliance the Company agreed
to invest $500,000 in cash and $500,000 in common stock (71,428 shares) in the
Series C financing of this structural proteomics company. The investment is
recorded on a cost basis.

20 COMMITMENTS AND CONTINGENCIES

The Company and its subsidiaries are subject to lawsuits, claims and proceedings
of a nature considered normal to its businesses. During 2001, the Company
recorded a reserve for approximately $200,000 for an issue related to a dispute
with a supplier. The Company believes, based on discussions with legal counsel,
that the outcome of these proceedings will not have a material impact on the
Company's financial position or results of operations.

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<Page>

                          NOTES TO FINANCIAL STATEMENTS

21 SEGMENT INFORMATION

The Company operates in one industry segment as a producer of service systems
and complete solutions in X-ray instrumentation. The Company operates primarily
from three plants, Madison, Wisconsin, Karlsruhe, Germany, and Delft, The
Netherlands. The Company supplies product to a broad range of end user markets,
including academics, government, and scientific research.

Net sales are attributed to geographic segments based on the location of the
customer.

The following represents the Company's geographic segments:

<Table>
<Caption>
                                                                            Three Months
                                             Year Ended      Year Ended         Ended         Year Ended
                                            December 31,    December 31,     December 31,    September 30,
                                                2001            2000            1999             1999
-----------------------------------------------------------------------------------------------------------
<S>                                          <C>             <C>             <C>              <C>
Net sales:
 North America                               $25,203,223     $20,579,941     $  3,675,555     $19,835,152
 Germany                                      13,204,000      12,069,566        3,091,981      12,797,470
 Other Europe                                 27,362,402      20,000,299        3,458,408      19,331,736
 Other Foreign                                16,817,944      15,454,801        2,566,211       9,929,571
                                          -----------------------------------------------------------------
  Total                                      $82,587,569     $68,104,607     $ 12,792,155     $61,893,929
                                          =================================================================
Long-lived assets (year-end):
 North America                               $ 5,272,517     $ 5,181,563     $  4,496,671     $ 2,957,599
 Germany                                       2,131,335       1,235,603        1,011,603         900,364
 Other Europe                                  4,011,887         274,313          192,156         167,885
 Other Foreign                                    84,735          24,282                -               -
                                          -----------------------------------------------------------------
 Total                                       $11,500,474     $ 6,715,761     $  5,700,430     $ 4,025,848
                                          =================================================================
</Table>

Other Europe primarily includes the United Kingdom, France, Italy, Spain,
Belgium, The Netherlands, Scandinavia, Poland, Russia, Hungary, Slovenia,
Switzerland and Austria. Other Foreign includes all other countries not included
within North America, Germany or Other Europe.

22 TRANSITION PERIOD COMPARATIVE DATA

The following table presents certain financial information for the three months
ended December 31, 1999 and 1998, respectively:

<Table>
<Caption>
Three Months Ended December 31,            1999              1998
-----------------------------------------------------------------
                                                      (Unaudited)
                                   ------------------------------
<S>                                 <C>               <C>
Net Sales                           $12,792,155       $14,526,422
                                   ==============================
Gross Profit                        $ 4,919,186       $ 4,508,913
                                   ==============================
Income (loss) before income taxes   $    62,233       $(1,105,391)
                                   ==============================
Income tax expense (benefit)            191,387          (437,073)
                                   ------------------------------
Net loss                               (129,154)         (668,318)
                                   ==============================
Earnings (loss) per common share
 (basic and diluted)                $      0.00       $     (0.05)
                                   ==============================
Weighted average common
 shares outstanding                  38,752,500        13,752,501
                                   ==============================
</Table>

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<Page>

                          NOTES TO FINANCIAL STATEMENTS

23 QUARTERLY FINANCIAL DATA (UNAUDITED)

The summation of quarterly earnings (loss) per share does not equate to the
calculation for the full fiscal year, as quarterly calculations are performed on
a discrete basis.

<Table>
<Caption>
                                                                            Quarter Ended
--------------------------------------------------------------------------------------------------------------------
                                               March 31        June 30   September 30    December 31         Total
--------------------------------------------------------------------------------------------------------------------
<S>                                         <C>            <C>            <C>            <C>          <C>
2001
Net sales                                   $18,845,484    $20,208,053    $21,192,047    $22,341,985  $ 82,587,569
Gross profit                                  7,132,370      7,758,784      7,708,397      8,925,238    31,524,789
Net income (loss)                               264,439     (1,836,990)        40,073        156,035    (1,376,443)
Net loss available to common shareholders      (105,423)    (1,634,009)      (266,328)    (5,396,120)   (7,401,880)
Basic earnings (loss) per share                    0.00          (0.04)         (0.01)         (0.13)        (0.19)
Diluted earnings (loss) per share                  0.00          (0.04)         (0.01)         (0.13)        (0.19)

2000
Net sales                                   $18,112,305    $16,595,245    $16,409,084    $16,987,973  $ 68,104,607
Gross profit                                  6,458,331      5,297,320      5,621,865      7,475,418    24,852,934
Net income (loss)                               296,357        (10,013)        20,096        423,093       729,533
Net income (loss) available to
 common shareholders                            296,357        (10,013)        20,096        423,093       729,533
Basic earnings per share                           0.01           0.00           0.00           0.01          0.02
Diluted earnings per share                         0.01           0.00           0.00           0.01          0.02
--------------------------------------------------------------------------------------------------------------------
</Table>

24 SUBSEQUENT EVENTS

INCOATEC GMBH

In February 2002, the Company contributed approximately $22,000 and received
fifty-one percent (51%) ownership in a new company, Incoatec GmbH, a German
company that was spun-off from GKSS, a material research center located in
Geesthact, Germany. Incoatec will provide research, development and production
of X-ray optics based on innovative coating technologies. The investment will
be consolidated in the financial statements of the Company.

PLANT ACQUISITION

In October 2001, the Company entered into an agreement to purchase its
Karlsruhe, Germany facility, land and adjacent lot for approximately $6.6
million. The Company financed this acquisition with proceeds from the initial
public offering and a $4.4 million mortgage. The closing of this purchase
occurred on February 28, 2002.

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