Document:

<PAGE>
                                                                    EXHIBIT 10.4

                                ESCROW AGREEMENT

         THIS ESCROW AGREEMENT is made and entered into as of the ____ day of
________, 2004, by and between Desert Capital REIT, Inc., a Maryland corporation
(the "Company"), and Premier Trust of Nevada, Inc. (the "Escrow Agent").

         WHEREAS, the Company intends to raise cash funds from investors (the
"Investors") pursuant to subscription agreements for the purpose of capitalizing
the Company;

         WHEREAS, pending the capitalization of the Company, it desires to
deposit funds contributed by the Investors with a bank serving as Escrow Agent
for the Investors and the Company;

         WHEREAS, the Company intends to offer not less than $2.5 million of
shares of common stock, par value $0.01 per share (each, a "Share" and
collectively, the "Shares"), for which each Investor will pay $10.00 per Share;

         WHEREAS, it has been determined that the proceeds to be received from
the offering should be placed in escrow until such time as subscriptions for
250,000 Shares (the "Minimum Amount") has been deposited into escrow; and

         WHEREAS, the Escrow Agent is willing to accept appointment as Escrow
Agent for only the expressed duties, terms and conditions outlined herein.

         NOW, THEREFORE, in consideration of the premises and agreements set
forth herein, the parties hereto agree as follows:

         1. PROCEEDS TO BE ESCROWED. All funds received from Investors
("Investors Funds") pursuant to their subscription agreements for the purchase
of Shares will be forwarded to the Escrow Agent by noon of the second day after
receipt of the subscription in accordance with the instructions contained in
section 9 hereof and shall be retained in an escrow account by the Escrow Agent
and invested as stated herein. During the term of this Agreement, the Company
shall cause all checks received by and made payable to it in payment for such
Shares to be endorsed in favor of Desert Capital REIT, Inc., Escrow Account.

         If any checks deposited in the escrow account prove uncollectible after
the funds represented thereby have been released by the Escrow Agent to the
Company, then the Company shall promptly reimburse the Escrow Agent for any and
all cost incurred for such, upon request, and the Escrow Agent shall deliver the
returned checks to the Company.

         2. IDENTITY OF INVESTORS. Company shall furnish to the Escrow Agent
with each delivery of funds, as provided in section 1 hereof, a list of the
persons who have paid money for the purchase of Shares showing the name,
address, amount of Shares subscribed for and the amount of money paid. All
proceeds so deposited shall remain the property of the Investors and shall not
be subject to any liens or charges by the Company, or the Escrow Agent, or
judgments or creditors' claims against the Company, until released to the
Company as hereinafter provided.

<PAGE>

Escrow Agent will not use the information provided to it by the Company for any
purpose other than to fulfill its obligations as Escrow Agent. Regardless,
Escrow Agent will treat this information as confidential.

         3. DISBURSEMENT OF FUNDS. From time to time, and at the end of the
third business day following the Termination Date (as defined in section 4
hereof), the Escrow Agent shall notify the Company of the amount of Investors
Funds received hereunder. If Investors Funds totaling the Minimum Amount or more
are obtained at any time prior to the Termination Date and the Company has
delivered a written notice (the "Notice") attached as Exhibit A, signed by two
of the officers of the Company, stating that the Company has received and
accepted subscription agreements for the Minimum Amount of Shares, then the
Escrow Agent shall pay out the escrowed funds and all earnings thereon when and
as directed by such officers. If the Minimum Amount of proceeds has not been
delivered prior to the Termination Date, the Escrow Agent shall, within a
reasonable time following the Termination Date, but in no event more than 30
days after the Termination Date, refund to each of the Investors at the address
appearing on the list of Investors, or at such other address as shall be
furnished to the Escrow Agent by the Investors in writing, all sums paid by the
Investors pursuant to their subscription agreements for Shares, together with
the interest earned on such funds in the escrow account, and shall then notify
the Company in writing of such refunds. The Company may extend the offering once
the Minimum Amount has been received by the Escrow Agent until such time as the
Company has sold the maximum amount of Shares, as provided in the Form S-11 (as
defined below) by giving written notice to the Escrow Agent.

         4. TERM OF ESCROW. The "Termination Date" shall be the earlier of (i) 1
year from the effectiveness of the Company's Registration Statement on Form S-11
(the "Form S-11") or (ii) the date the Escrow Agent received written notice from
the Company that it is abandoning the sale of the Shares, subject to section 3
hereof. The Company may extend the termination date 60 days upon written notice
to the Escrow Agent. In all events, this escrow shall terminate upon the second
year anniversary from the date of this Agreement.

         5. DUTY AND LIABILITY OF THE ESCROW AGENT

         (a) Any written authorization or instructions by the Issuer to the
Escrow Agent may be given in separate instruments.

         (b) The Escrow Agent is not a party to, and is not bound by, or charged
with notice of, any of the underlying agreements, arrangements or understandings
between outside parties, and the Escrow Agent has not assumed any obligation or
liability under any of such agreements, arrangements or understandings.

         (c) The Escrow Agent is acting only as a depository for the subject
matter of the Escrow Agreement.

         (d) If the subject matter of the escrow includes any check, draft, or
other order for the payment of money, or if in the performance of the Escrow
Agreement the Escrow Agent receives a check, draft or other order for the
payment of money, the Escrow Agent shall deposit any such

                                       2
<PAGE>

item for collection and the Escrow Agent shall not be responsible or accountable
for the proceeds of any such item until they are received by the Escrow Agent.

         (e) The Escrow Agent, in the performance of this Escrow Agreement, and
in its dealings with the Company, shall be entitled to assume and rely upon the
genuineness of any written notice, request, waiver, consent, receipt,
authorization, power of attorney or other document furnished to the Escrow
Agent, and the Escrow Agent shall have no liability to the Company, and shall be
fully protected and indemnified, when acting or relying in good faith upon any
such document which Escrow Agent believes to be genuine.

         (f) In the performance of its duties under the Escrow Agreement, the
Escrow Agent and its agents, employees, representatives and attorneys: (i) shall
have no liability of any kind to the Company except for the Escrow Agent's own
gross negligence or intentional misconduct; and (ii) may seek the advice of
legal counsel from time to time, and shall incur no liability and shall be fully
protected in acting in accordance with the opinion or instructions of such
counsel.

         (g) The Company, shall save, indemnify, defend and hold the Escrow
Agent and its agents, employees, representatives and attorneys harmless from and
against all claims, causes of action and liabilities pertaining to, or arising
from, the performance by the Escrow Agent of his duties under and in accordance
with this Escrow Agreement, including without limitation: (i) all attorney fees,
costs of court and cost of investigation incurred by the Escrow Agent; (ii) all
damages of every type and nature, whether actual, direct, incidental,
consequential, punitive or exemplary; and (iii) all claims and causes of action
arising from the negligence or alleged negligence of the Escrow Agent or its
agents employees, representatives and attorneys; provided however that this
indemnity shall not extend to the Escrow Agent's own gross negligence or
intentional misconduct.

As a condition to making or bringing a claim for indemnification against the
Company, the Escrow Agent shall not be required to have made any payment or
incurred any expense in conjunction with the claim, and if sued may immediately
join the Company as third-party defendants to such suit for the purpose of
asserting its indemnification rights.

         (h) If (i) there is any disagreement or dispute in connection with the
Escrow Agreement or the subject matter thereof including any dispute of the
Company; (ii) there is any disagreement or dispute between the Escrow Agent and
Issuer; (iii) there is any disagreement or dispute between the Company and any
person not a party to the Escrow Agreement; (iv) there are any adverse or
inconsistent claims or demands upon, or inconsistent instructions, to the Escrow
Agent; or (v) the Escrow Agent in good faith is in doubt as to what action to
take pursuant to the Escrow Agreement, then, in the case of (i) through (v) of
this section (h), the Escrow Agent may at its election refuse to comply any of
such claims, demands or instructions, or refuse to take any other action
pursuant to this Escrow Agreement, until: (i) the rights of all persons involved
in the dispute have been fully and finally adjudicated by a court of competent
jurisdiction, or the Escrow Agent has resolved any such doubts to its good faith
satisfaction; or (ii) all disputes have been resolved between the persons
involved, and the Escrow Agent has received written notice thereof satisfactory
to it from all such persons. Without limiting the generality of the foregoing,
the Escrow Agent may at its election interplead the subject matter of this
Escrow Agreement with a court of competent jurisdiction, or commence judicial
proceedings

                                       3
<PAGE>

for a declaratory judgment, and the Escrow Agent shall be entitled to recover
from the Company its attorney's fees and costs in connection with any such
interpleader or declaratory judgment action.

         (i) The obligations by the Issuer to the Escrow Agent, including the
payment of compensation and the Issuer's indemnity obligations pursuant hereto,
shall be performable or payable at the Escrow Agent's offices in Las Vegas,
Nevada.

         6. ESCROW AGENT'S FEE. The Escrow Agent shall be entitled to
compensation for its services as stated in the fee schedule attached hereto as
Exhibit B, which compensation shall be paid by the Company. The fee agreed upon
for the services rendered hereunder is intended as full compensation for the
Escrow Agent's services as contemplated by this Agreement; provided, however,
that in the event that the conditions for the disbursement of funds under this
Agreement are not fulfilled, or the Escrow Agent renders any material service
not contemplated in this Agreement, or there is any assignment of interest in
the subject matter of this Agreement, or any material modification hereof, or if
any material controversy arises hereunder, or the Escrow Agent is made a party
to any litigation pertaining to this Agreement, or the subject matter hereof,
then the Escrow Agent shall be reasonably compensated for such extraordinary
services and reimbursed for all costs and expenses, including reasonable
attorney's fees, occasioned by any delay, controversy, litigation or event, and
the same shall be recoverable from the Company.

         6. INVESTMENT OF PROCEEDS. All funds held by the Escrow Agent pursuant
to this Agreement shall constitute trust property for the purposes for which
they are held. The Escrow Agent shall invest all funds received from Investors
in bank accounts, including interest-bearing savings accounts and bank money
market accounts, in short-term certificates of deposit issued by a bank, or in
short-term securities directly or indirectly issued or guaranteed by the United
States government.

         7. ISSUANCE OF CERTIFICATES. Until the terms of this Agreement with
respect to Shares have been met and the funds hereunder received from
subscriptions for Shares have been released to the Company, the Company may not
issue any certificates or other evidence of Shares, except subscription
agreements.

         8. NOTICES. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given (a) on the date of service if served personally on the party to whom
notice is to be given, (b) on the day of transmission if sent by facsimile
transmission to the facsimile number given below, and telephonic confirmation of
receipt is obtained promptly after completion of transmission, (c) on the day
after delivery to Federal Express or similar overnight courier or the Express
Mail service maintained by the United States Postal Service, or (d) on the fifth
day after mailing, if mailed to the party to whom notice is to be given, by
first class mail, registered or certified, postage prepaid, and properly
addressed, return receipt requested, to the party as follows:

If to Company:

         Desert Capital REIT, Inc.
         2357 Renaissance Drive, Suite A
         Las Vegas, Nevada 89119

                                       4
<PAGE>

If to Escrow Agent:

         Premier Trust of Nevada, Inc.
         411 Bonneville Avenue, Suite 1
         Las Vegas, NV  89101

Wires to Escrow Agent should be directed to the following:

         [Wiring Instructions]

Any party may change its address for purposes of this paragraph by giving the
other party written notice of the new address in the manner set forth above.

         9. SUCCESSORS AND ASSIGNS. Except as otherwise provided in this
Agreement, no party hereto shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party
hereto and any such attempted assignment without such prior written consent
shall be void and of no force and effect. This Agreement shall inure to the
benefit of and shall be binding upon the successors and permitted assigns of the
parties hereto.

         10. GOVERNING LAW; JURISDICTION. This Agreement shall be construed,
performed, and enforced in accordance with, and governed by, the internal laws
of the State of Nevada, without giving effect to the principles of conflicts of
laws thereof. Each party hereby consents to the personal jurisdiction and venue
of any court of competent jurisdiction in the State of Nevada.

         11. SEVERABILITY. In the event that any part of this Agreement is
declared by any court or other judicial or administrative body to be null, void,
or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in full
force and effect.

         12. AMENDMENTS; WAIVERS. This Agreement may be amended or modified, and
any of the terms, covenants, representations, warranties, or conditions hereof
may be waived, only by a written instrument executed by the parties hereto or,
in the case of a waiver, by the party waiving compliance. Any waiver by any
party of any condition, or of the breach of any provision, term, covenant,
representation, or warranty contained in this Agreement, in any one or more
instances, shall not be deemed to be nor construed as further or continuing
waiver of any such condition, or of the breach of any other provision, term,
covenant, representation, or warranty of this Agreement.

         13. ENTIRE AGREEMENT. This Agreement contains the entire understanding
among the parties hereto with respect to the escrow contemplated hereby and
supersedes and replaces all prior and contemporaneous agreements and
understandings, oral or written, with regard to such escrow.

         14. SECTION HEADINGS. The section headings in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.

         15. COUNTERPARTS. This agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which shall constitute the same
instrument.

                                       5
<PAGE>

         16. TIME OF ESSENCE. Time is of the essence in the performance of the
obligations under this Agreement.

         17. RESIGNATION. Escrow Agent may resign upon 30 days advance written
notice to the Company. If a successor Escrow Agent is not appointed within the
30-day period following such notice, Escrow Agent may petition any court of
competent jurisdiction to name a successor Escrow Agent.

         18. COMPLIANCE. No funds will be released except in compliance with
Rule 15c2-4 under the Security Exchange Act of 1934, as amended.

                  [Remainder of Page Intentionally Left Blank]

                                       6
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first set forth above.

                                    DESERT CAPITAL REIT, INC.

                                    By:
                                       -----------------------------------------
                                    Its:
                                        ----------------------------------------

                                    PREMIER TRUST OF NEVADA, INC.

                                    By:
                                       -----------------------------------------
                                    Its:
                                        ----------------------------------------

                                       7<PAGE>
                                                                   EXHIBIT 4.3
AXON INSTRUMENTS, INC.

PROSPECTUS

ISSUE PARTIALLY
UNDERWRITTEN BY
D&D TOLHURST LTD
SAW JAMES CAPEL LTD

This is an important document which should be read in its entirety. You may
wish to consult your professional advisor about its contents.

<PAGE>

                               CORPORATE DIRECTORY

<TABLE>
<S>                                     <C>
DIRECTORS                               Alan Stockdale (Chairman)
                                        Alan Finkel (Chief Executive Officer )
                                        Geoffrey Powell (Executive President)
                                        Henry Lester (Non-Executive Director)
                                        Stanley Crooke (Non-Executive Director)

COMPANY SECRETARIES                     Geoffrey Powell (USA)
                                        David Kenley (Australia)

REGISTERED OFFICES                      1101 Chess Drive
                                        Foster City, CA 94404, USA
                                        Telephone 00111 (650) 571 9400
                                        Email InvestorInfo@axon.com
                                        www.axon.com

                                        6 Wallace Avenue
                                        Toorak, Victoria 3142, Australia
                                        Telephone (03) 9826 0399
                                        Email InvestorInfo@axon.com

INDEPENDENT ACCOUNTANTS                 Ernst & Young (Australia)
                                        120 Collins Street
                                        Melbourne, Victoria 3000
                                        Telephone (03) 9288 8000

AUDITORS                                Ernst & Young LLP (US)
                                        1451 California Avenue
                                        Palo Alto, CA 94304, USA
                                        Telephone (650) 496 1600

UNDERWRITERS                            D&D-Tolhurst Limited
                                        Level 30
                                        459 Collins Street
                                        Melbourne, Victoria 3000
                                        Telephone (03) 9242 4000

                                        Saw James Capel Limited
                                        152-158 St. George's Terrace
                                        Perth, Western Australia 6000
                                        Telephone:  (08) 9288 9288

AUSTRALIAN SOLICITORS TO THE ISSUE      Minter Ellison
                                        Level 23
                                        Rialto Towers
                                        525 Collins Street
                                        Melbourne, Victoria 3000
                                        Telephone (03) 9229 2000

SHARE REGISTRY                          Computershare Registry Services Pty Ltd
                                        Level 12
                                        565 Bourke Street
                                        Melbourne, Victoria 3000
                                        Telephone (03) 9611 5711
</TABLE>

                                       1.
<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                         PAGE
<S>               <C>                                                                                                    <C>
SECTION 1.        MESSAGE FROM THE CHAIRMAN....................................................................            2

SECTION 2.        SUMMARY OF THE OFFER.........................................................................            3

         2.1      Description of the Offer.....................................................................            3

         2.2      Key Dates....................................................................................            3

         2.3      How to Apply for Securities..................................................................            3

         2.4      Allocation of Securities.....................................................................            3

         2.5      How to Apply for Entitlement Options (Circadian securities holders only).....................            3

         2.6      Australian Stock Exchange Listing............................................................            4

         2.7      Minimum Subscription.........................................................................            4

         2.8      Oversubscription.............................................................................            4

         2.9      CHESS Depositary Interests...................................................................            4

         2.10     Underwriters.................................................................................            5

         2.11     Dividend Policy and Future Income............................................................            6

         2.12     Important Notice.............................................................................            6

         2.13     Date of Prospectus...........................................................................            6

SECTION 3.        INVESTMENT OVERVIEW..........................................................................            7

         3.1      Company Background...........................................................................            7

         3.2      Purpose of the Offer.........................................................................            8

         3.3      Capital Structure............................................................................            8

         3.4      Risk Factors.................................................................................            8

         3.5      Business Objectives..........................................................................            8

         3.6      Working Capital..............................................................................            8

SECTION 4.        BUSINESS OF AXON.............................................................................            9

         4.1      Facilities...................................................................................            9

         4.2      Past Growth..................................................................................            9

         4.3      Axon's Established Market - Neuroscience Products............................................            9

         4.4      Axon's Next Market - Genomics and Bioinformatics............................................            10

         4.5      Axon's First Genomics and Bioinformatics Products...........................................            11

         4.6      Future Products for Drug Discovery and Diagnostics..........................................            12

         4.7      Corporate Goals.............................................................................            13

         4.8      Intellectual Property.......................................................................            13

         4.9      Scientific and Technical Advisors...........................................................            13

SECTION 5.        THE DIRECTORS...............................................................................            14

SECTION 6.        DETAILS OF THE PUBLIC ISSUE.................................................................            15

         6.1      Description of the Offer....................................................................            15
</TABLE>

                                       -i-
<PAGE>
                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                                         PAGE
<S>               <C>                                                                                                    <C>
         6.2      Applications for Securities.................................................................            15

         6.3      Taxation....................................................................................            16

         6.4      Registers...................................................................................            16

         6.5      Brokerage and Commissions...................................................................            16

         6.6      Stock Exchange Listing......................................................................            16

         6.7      SEC Requirements............................................................................            17

SECTION 7.        OFFER OF ENTITLEMENT OPTIONS TO CIRCADIAN SHAREHOLDERS......................................            19

         7.1      Axon Instruments, Inc. Description of the Proposed Offer....................................            19

         7.2      Applications for Entitlement Options (Circadian shareholders only)..........................            19

         7.3      Circadian Shareholders Resident Outside Australia and New Zealand...........................            19

         7.4      Payment for Entitlement Options.............................................................            20

         7.5      Stock Exchange Quotation....................................................................            20

SECTION 8.        INDEPENDENT ACCOUNTANT'S REPORT.............................................................            21

SECTION 9.        VALUATION BY INDEPENDENT EXPERT.............................................................            44

SECTION 10.       RISK FACTORS................................................................................            49

SECTION 11.       ADDITIONAL INFORMATION......................................................................            53

         11.1     Incorporation...............................................................................            53

         11.2     Company Tax Status..........................................................................            53

         11.3     Audit Committee.............................................................................            53

         11.4     Corporate Governance........................................................................            53

         11.5     Legal Proceedings...........................................................................            53

         11.6     Material Contract...........................................................................            53

         11.7     Share Capital...............................................................................            56

         11.8     Rights Attaching to Securities..............................................................            56

         11.9     Rights under Axon Constitution and By-Laws ie: Rights Attaching to the Underlying Shares....            58

         11.10    Rights Attaching to Entitlement Options.....................................................            59

         11.11    Rights Attaching to Individual Options......................................................            61

         11.12    Rights Attaching to Original Options........................................................            61

         11.13    Directors' Interests........................................................................            63

         11.14    Other Interests of Directors................................................................            63

         11.15    Interests and Consents of Experts...........................................................            64

         11.16    Consents to be Named........................................................................            64

         11.17    Responsibility Statements...................................................................            64

         11.18    Costs of the Issue..........................................................................            65

         11.19    Documents for Inspection....................................................................            65
</TABLE>

                                      -ii-
<PAGE>
                                TABLE OF CONTENTS
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                                                                         PAGE
<S>               <C>                                                                                                    <C>
SECTION 12.       GLOSSARY....................................................................................            66

SECTION 13.       DIRECTORS' SIGNATURES.......................................................................            69

APPLICATION FORM .............................................................................................            70
</TABLE>

Certain words and expressions are used in this Prospectus and have defined
meanings. A glossary of these terms is set out at the back of this Prospectus.

This Prospectus is dated 28 January 2000 and was lodged with the Australian
Securities and Investments Commission ("ASIC") on 28 January 2000. Neither ASIC
nor Australian Stock Exchange Limited ("ASX") takes any responsibility for the
contents of the Prospectus. No securities will be allotted or issued on the
basis of this Prospectus later than twelve months after the date of its issue.

The offer of Securities under this Prospectus does not constitute a public offer
in any jurisdiction other than Australia. This Prospectus is not an offer to any
person or an offer in any place to which or in which it is unlawful to make such
an offer.

THE SECURITIES AND ENTITLEMENT OPTIONS HAVE NOT BEEN, AND WILL NOT BE,
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 (THE "U.S. SECURITIES
ACT") AND, UNTIL ONE YEAR AFTER THE COMPLETION OF THEIR INITIAL DISTRIBUTION,
MAY NOT BE OFFERED, SOLD OR DELIVERED WITHIN THE UNITED STATES OR TO OR FOR THE
ACCOUNT OR BENEFIT OF U.S. PERSONS. IN ADDITION, HEDGING TRANSACTIONS WITH
REGARD TO THE SECURITIES AND ENTITLEMENT OPTIONS MAY NOT BE CONDUCTED UNLESS IN
ACCORDANCE WITH THE U.S. SECURITIES ACT. SEE SECTION 6.7 "SEC REQUIREMENTS."

                                      -iii-
<PAGE>

                      SECTION 1. MESSAGE FROM THE CHAIRMAN

28 January 2000

Dear Investor,

As Chairman of Axon Instruments, Inc ("Axon") I have great pleasure in
presenting this Prospectus.

Axon was formed in the U.S. in 1984 by its Australian Chief Executive Officer,
Alan Finkel, to develop instruments for use by neuroscientists studying
electrical activity in brain cells.

It has grown into a company which we believe is currently regarded as the world
market leader in the design and manufacture of instrumentation and software for
cellular electrophysiology. This market caters primarily to scientific and
medical researchers in universities, hospitals and pharmaceutical companies.

Axon is now embarking on a market expansion to apply its established
technological know-how and reputation to rapidly growing pharmaceutical research
markets requiring instrumentation and software for automated high throughput
biological analysis.

Axon's first products in this sector deal with genomics and bioinformatics. The
`genomic age' is expected to transform the pace of drug discovery and patient
diagnostics within a few years. A new device in the midst of this revolution is
the `DNA chip'. This disposable item is not an electronic chip but a miniature
genetic chemistry tool that enables the simultaneous and rapid analysis of
thousands of genes on a chip the size of a postage stamp. The potential impact
of DNA chips in medicine and bioscience has been likened to the impact of the
computer chip in electronics.

Axon's first involvement in this new field is to design and produce laser
scanning devices that optically scan the chips to record the result of the
genetic analysis. Axon's first genomics product, the GenePix 4000 gene scanner,
began production in July 1999. In the coming years the Directors expect to
introduce the next generation of GenePix scanners to the market as well as new
products for high throughput screening in drug discovery and diagnostics.

This Prospectus explains the operations and financial position of Axon. You
should read it carefully (including the risk factors set out in sections 3.4 and
10) before making a decision whether to invest in Axon.

The Directors join me in offering you the opportunity to participate in the
ownership of Axon and we look forward to welcoming you as a shareholder in Axon.

Yours faithfully,
/s/ Alan Stockdale
Alan Stockdale
Chairman

                                       2.
<PAGE>

                        SECTION 2. SUMMARY OF THE OFFER

2.1      DESCRIPTION OF THE OFFER

Axon Instruments Inc ("Axon") is incorporated in California, USA. This
Prospectus provides information on two distinct offers by Axon.

         (a)      an offer to the public to subscribe for a total of 70,000,000
                  Securities in Axon at an issue price of 20 cents per Security
                  for a total of A$14 million (`Offer'). Of the A$14 million
                  proposed to be raised in the Offer, Consolidated Press
                  Holdings Limited (`CPH') ACN 008 394 509 has committed to Axon
                  to subscribe for not less than A$4.2 million of the
                  Securities; and

         (b)      an offer to be made shortly to shareholders of Circadian
                  Technologies Limited (`Circadian') of one option, at one cent,
                  to take up one unissued security in Axon at 20 cents at any
                  time before 5 years from the date of issue for every 2.5
                  Circadian shares held as at the Record Date, being the date 10
                  business days after ASX quotation of the Axon Shares (each
                  such option `Entitlement Option'). The maximum number of
                  Entitlement Options that may be issued under this offer is
                  12,997,845.

Circadian is a company listed on the ASX and owns an interest in Axon as set out
in section 11.7. The entitlement of Circadian shareholders to Entitlement
Options will be non-renounceable.

2.2      KEY DATES

Application List opens                                          14 February 2000

Application List closes*                                        29 February 2000

Expected date of quotation of Axon Securities                       9 March 2000

Record Date to determine entitlement of Circadian     10 business days after ASX
Shareholders to Entitlement Options                 quotation of Axon Securities

*The Directors reserve the right to close the Application List for the offer of
the Securities at any time or to extend the closing date for applications
without prior notice.

2.3      HOW TO APPLY FOR SECURITIES

To participate in the Offer of Securities, the Application Form attached to this
Prospectus must be completed in accordance with the instructions on its reverse
side. Applications must be for at least 10,000 Securities at 20 cents per
Security or greater numbers in multiples of 5,000.

Duly completed applications must be received by D&D-Tolhurst Limited, Saw James
Capel Limited or Computershare Registry Services Pty Ltd by no later than 5:00
pm Melbourne Time on 29 February 2000. However Axon reserves the right to close
the Offer at any time after the Application List opens. Investors are urged,
therefore, to lodge their applications as soon as possible. Axon also reserves
the right to extend the period of the Offer.

2.4      ALLOCATION OF SECURITIES

Axon reserves the right to reject any applications or, if an application is for
more than 10,000 Securities, to authorise the issue of a lesser number of
Securities than those for which an application has been made. Where the number
of Securities issued is less than the number applied for, surplus application
money for the Securities will be refunded without interest.

2.5      HOW TO APPLY FOR ENTITLEMENT OPTIONS (CIRCADIAN SECURITIES HOLDERS
         ONLY)

Shareholders of Circadian (other than shareholders with registered addresses in
the United States of America, Canada or Japan) will be offered by Axon by way of
rights one Entitlement Option for every 2.5 shares in Circadian held at 5:00 pm
Melbourne time on the Record Date for entitlements (being 10 business days after
ASX quotation of the Underlying Shares) at 1 cent per Entitlement Option. This
offer will be forwarded separately to Circadian shareholders immediately
following the

                                       3.
<PAGE>

Record Date. Special arrangements for shareholders of Circadian with registered
addresses in the United States of America, Canada or Japan are set out in
section 7.3.

The cost of 1 cent per Entitlement Option will be payable in full on
application. The number of Entitlement Options to which a shareholder of
Circadian will be entitled will be set out in the prospectus sent to Circadian
shareholders. Rights to Entitlement Options will be non-renounceable.

Details of how Circadian shareholders can take up entitlements to Entitlement
Options are set out in section 7.2.

The offer of Entitlement Options will only proceed if the Axon Securities are
quoted on the ASX following the successful completion of this Offer.

2.6      AUSTRALIAN STOCK EXCHANGE LISTING

Application will be made by Axon to the ASX, within 3 days after the issue of
this Prospectus, for Axon to be admitted to the Official List of the ASX and for
existing Shares in Axon (other than those, if any, which are, under the ASX
Listing Rules and those which are designated by the ASX as, restricted
securities) and the Shares which underlie the Securities actually issued under
this Prospectus to be granted Official Quotation.

2.7      MINIMUM SUBSCRIPTION

The minimum subscription to be raised pursuant to this Prospectus is
A$8,800,000.

No Securities will be allotted until the minimum subscription has been received.
Subject to the requirements of the Corporations Law, if Axon does not receive
the minimum subscription within four months of the issue of the Prospectus, all
applications will be refunded in full without interest.

2.8      OVERSUBSCRIPTION

The Directors have made no provision for oversubscription.

2.9      CHESS DEPOSITARY INTERESTS

In order to facilitate CHESS transfer of Axon Securities, it is necessary for
Axon to issue a type of CHESS Depositary Interest (`CDIs') under this
Prospectus. The type of CDIs to be issued are termed CHESS Units of Foreign
Securities (`CUFS').

CUFS are issued in respect of foreign equity securities of a corporation where
the home jurisdiction of the corporation (in the case of Axon, the state of
California, USA) does not permit CHESS approval of the security, and therefore
does not permit holdings in uncertificated form and electronic transfer of legal
title to these securities.

The following is a summary of the operation of CUFS:

-        The legal title in each underlying security (in this case, the physical
         shares in Axon, each such share, `Underlying Share') is vested in a
         Depositary Nominee, CHESS Depositary Nominees Pty Ltd (`CDN'), a wholly
         owned subsidiary of ASX Settlement and Transfer Corporation Pty Ltd.
         CDN is entered on the Principal Register for the Underlying Shares.

-        CDN will hold the Underlying Shares on trust, and on behalf of, and for
         the benefit of, the holders of CUFS.

-        Investors will be issued CUFS in respect of the Underlying Shares which
         will reflect investors' respective beneficial interests in the
         Underlying Shares. CUFS are structured so that each CUFS represents one
         Underlying Share.

-        Each Underlying Share will be quoted on the ASX, but trades in the
         Underlying Shares will settle in CHESS by the delivery of CUFS.

                                       4.
<PAGE>

-        Axon will operate a certificated register of shares, an uncertificated
         issuer sponsored subregister of CUFS and an uncertificated CHESS
         subregister of CUFS. The certificated register will be the register of
         legal title and the two uncertificated CUFS subregisters combined will
         make up the register of beneficial title.

-        All investors will receive CUFS on the issuer sponsored subregister or
         CHESS subregister unless they specifically advise Axon in writing that
         they wish to receive shares in certificated form. Applicants who are
         currently sponsored on CHESS should provide the relevant CHESS HIN in
         the space provided on the Application Form. For applicants who elect to
         hold on the CHESS subregister, the Company will, on allotment, issue an
         allotment advice that sets out the number of CUFS allotted and at the
         end of the month of allotment, the ASX Securities Clearing House
         (`SCH') (acting on behalf of the Company) will provide a CUFS holding
         statement (similar to a bank account statement) that confirms the
         number of CUFS held on the CHESS subregister. Where an applicant does
         not elect to hold on the CHESS subregister, the Company will, upon
         allotment, issue a CUFS holding statement which sets out the number of
         CUFS held on the issuer sponsored subregister.

-        A holding statement (whether issued by SCH or the Company) will provide
         details of a Holders Identification Number (HIN) (in the case of a
         holding on the CHESS subregister) or Shareholder Reference Number (SRN)
         (in the case of a holding on the issuer sponsored subregister).
         Following distribution of these initial holding statements to all CUFS
         holders, a holding statement will only be provided to a CUFS holder at
         the end of any subsequent month during which the balance of the
         holder's holding changes. Holders may also request statements at any
         other time (although the Company or SCH may charge a fee for such
         statements). If a holder of CUFS wishes to convert to holding
         certificated shares they may at any time do so by, in the case of
         issuer sponsored CUFS, notifying the Company's share register or in the
         case of CHESS sponsored CUFS, notifying the CHESS sponsoring
         participant (in most cases, a stockbroker). A holder of certificated
         shares may also convert to holding CUFS by contacting Computershare
         Registry Services Pty Ltd.

-        Holders of CUFS will be entitled to full dividend payments as though
         they were holders of the legal title.

-        CUFS holders are not entitled to attend and personally vote on a show
         of hands at Axon share holder meetings. However, Axon is required to
         provide notice of meetings to all CUFS holders which includes a proxy
         form permitting the CUFS holder to direct CDN to cast proxy votes in
         the manner directed. Axon will permit CUFS holders to attend
         shareholder meetings but they will be permitted to vote only by
         direction to CDN. The notice of meeting will include a form permitting
         CUFS holders to direct CDN to cast proxy votes according to the wishes
         of the CUFS holder.

-        CDN as a shareholder of record of Axon's stock will receive notice of
         all shareholder meetings and be entitled to attend and vote at Axon
         shareholder meetings. Except for shareholders' votes regarding the
         election of directors, shareholders are entitled to one vote per share
         on all matters to be voted upon by the shareholders. When a share
         holder vote regards the election of directors, shareholders are
         entitled to Cumulative Voting if the candidates' names have been placed
         in nomination prior to the voting and any shareholder has given notice
         prior to the voting of the shareholder's intention to cumulate the
         shareholder's votes.

-        Holders of CUFS will be entitled to the full benefits of all corporate
         actions (including bonus issues, rights issues, dividend reinvestment
         plans and bonus share plans).

-        Investors will be able to freely trade their Shares on the ASX.
         However, only the beneficial title in the Securities will be
         transferred electronically in CHESS and changes in beneficial ownership
         will be entered in the register of CUFS holders. Legal title to each
         Underlying Share will remain with CDN, unless a CUFS holder requires a
         transfer of the Underlying Share from CDN to the holder, in which case
         a paper transfer will be effected in accordance with the Company's
         constitution and Californian Law.

         Further information on the nature of CDIs and CUFS is set out in
section 11.8.

2.10     UNDERWRITERS

The Offer is partially underwritten by D&D-Tolhurst Limited and Saw James Capel
Limited (`Underwriters') to an amount of A$8.8 million. Details of the
Underwriting Agreement, including events permitting the Underwriters to
terminate their obligations under the Underwriting Agreement, are set out in
section 11.6.

                                       5.
<PAGE>

2.11     DIVIDEND POLICY AND FUTURE INCOME

The ability of Axon to pay any dividend in the future is dependent on many
factors, including the outcome of its research and development and its ability
to commercialise any resultant product and additional risk factors outlined in
section 10. The amount, timing and payment of any future dividend will depend on
a range of factors including future capital and research and development
requirements and the financial position generally of Axon at the time. There
will also be factors that affect the ability of Axon to pay dividends and the
timing of those dividends that will be outside the control of Axon and its
Directors. The Directors are therefore unable to give any assurance regarding
the payment of dividends in the future, if at all.

Further, given the stage of development of Axon's potential products, it is
difficult to forecast with any degree of certainty the likely financial result
of Axon for the 2000 financial year or any year thereafter. To provide such a
forecast would in the view of the Directors be potentially more likely to
mislead than to inform potential investors in Axon. The Directors do not
therefore intend at this stage to make any forecast of the future profitability
(or otherwise) of Axon.

2.12     IMPORTANT NOTICE

Prospective investors should read the full text of this Prospectus (including
the risk factors in sections 3.4 and 10), as the information contained in
individual sections is not intended to and does not provide a comprehensive
review of the business and financial affairs of Axon or the Securities offered
under this Prospectus.

2.13     DATE OF PROSPECTUS

This Prospectus is dated 28 January 2000.

                                       6.
<PAGE>

                         SECTION 3. INVESTMENT OVERVIEW

AXON'S MISSION

TO DESIGN AND MANUFACTURE NOVEL HIGH TECHNOLOGY INSTRUMENTS AND SOFTWARE FOR
MEDICAL RESEARCH, DRUG DISCOVERY AND DIAGNOSTICS.

3.1      COMPANY BACKGROUND

HISTORY

Axon Instruments, Inc., is a majority Australian-owned US corporation based in
the Silicon Valley area of California that endevours to develop and market novel
high technology instruments and software for medical research and drug
discovery. Axon was incorporated in the US in 1984.

Directors believe that Axon is currently regarded as the world market leader in
the design and manufacture of instrumentation and software for cellular
neurosciences. This market caters primarily to scientific and medical
researchers in universities and pharmaceutical companies.

Axon also owns 9,647,280 ordinary shares in Optiscan Imaging Limited which
listed on the ASX in 1997 (ASX Code: OIL).

A NEW HIGH GROWTH MARKET OPPORTUNITY

Axon has now expanded its horizons to apply its technological know-how to larger
and rapidly growing markets for high-throughput drug discovery and diagnostics.
The drug discovery market is currently driven by a requirement for increased
efficiency through parallel testing and miniaturisation.

Axon's first new offerings in this field are devices and software for analysing
DNA chips.

DNA chips are disposable miniature genetic analysis tools that are
revolutionising biotechnology. A single DNA chip enables the simultaneous and
rapid analysis of thousands of genes in a biological sample through their
adhesion to a huge array of microscopic gene probes arranged on a chip the size
of a postage stamp.

The potential impact of DNA chips in medicine and bio-science has been likened
to the impact of the computer chip on data processing. DNA chips are now being
used by pharmaceutical companies to scan patient populations to identify which
genetic changes underlie diseases, and what genetic differences make some people
prone to contract certain diseases or react abnormally to certain drugs. DNA
chips are also being used to identify viruses, to define the function of
newly-discovered genes, to find new genes and to screen drug candidates.

This information is being used to develop new drug therapies and to develop
diagnostic tests. It has been projected that one day patients will be able to
have their genetic profile assessed, perhaps even in the doctor's office, with
the aid of DNA chips. If possible this will provide a more reliable diagnosis, a
more trustworthy prognosis, and a clearer choice of the most effective therapy
for the individual patient.

Axon's first involvement in this new field is to design and produce:

-        DNA chip scanners - devices that scan the DNA chips optically and
         record the result of the genetic analysis; and

-        bioinformatics software to analyse the data from the DNA chip scanners.

The current market for DNA chip scanners has been estimated at about US$30
million and has been projected to grow to about US$500 million in the next 5 to
8 years. The market for DNA chips, which appear set to become the biotechnology
tool of the next decade, is also projected to grow 10-fold over the next few
years.

Axon's first genomics product, the GenePix 4000 DNA chip scanner, commenced
design in 1998 and has recently been launched on the world market. The GenePix
4000 currently sells for US$50,000.

                                       7.
<PAGE>

Other software and hardware products to be used in high-throughput drug
discovery are also in Axon's pipeline. Whereas the GenePix is used in the first
stages of the drug discovery process, the other proposed products in Axon's
pipeline will be used in subsequent stages.

3.2      PURPOSE OF THE OFFER

The key purposes of the offer are:

-        to enable the public to participate in the ownership and growth
         potential of Axon;

-        to accelerate Axon's development of new products; and

-        to provide working capital to the Company.

Following the successful development of the GenePix 4000, Axon intends to
leverage its technical expertise to design other instruments and software for
high-throughput drug discovery and diagnostics, and thus to endeavour to
position itself as a leader in the large markets that lie ahead for these
technologies.

3.3      CAPITAL STRUCTURE

<TABLE>
<S>                                                                                                                <C>
Issued ordinary shares prior to the Offer (see section 11.7)                                                       281,657,491

New shares offered under this Prospectus (see section 6)                                                            70,000,000

Original Options issued and unexercised prior to the Offer (see section 11.12)                                     105,010,175

Entitlement Options to be offered to Circadian shareholders (see section 7 and 11.10)                               12,997,845
                                                                                                                (approximately)

Individual Options granted to key individuals (see section 11.11)                                                    4,100,000

Total issued ordinary shares on close of offer (assuming no exercise of options)                                   351,657,491

Total issued ordinary shares (assuming all Original, Entitlement and Individual Options are                        473,765,511
exercised)
</TABLE>

3.4      RISK FACTORS

Prospective investors in Axon should be aware that subscribing for Securities
and options to take up unissued shares in Axon involves a number of risks. These
are set out in detail throughout this Prospectus, including in section 10 of
this Prospectus. Tax considerations to investors are also identified in sections
6.3, 10 and 11.2. Investors are urged to consider these Risk Factors carefully
before deciding whether to invest in Axon.

3.5      BUSINESS OBJECTIVES

As set out in this prospectus the major immediate objective of Axon is the
development of a series of sophisticated instruments and software for genomics
and cell-based drug discovery. Most of the funds resulting from the offer in
this Prospectus will be directly applied to expanding the research and
development program in pursuit of this objective.

3.6      WORKING CAPITAL

The Directors believe that Axon has enough working capital to carry out its
business objectives as stated in section 3.5. It is intended that funds raised
will be used as follows:

<TABLE>
<S>                                                              <C>
Research and development                                         $7 million
Marketing, rent, patents, other overheads                        $2.5 million
Reserves (acquisitions, legal, R&D)                              $3 million
Listing expenses                                                 $1.5 million
</TABLE>

                                       8.
<PAGE>

                          SECTION 4. BUSINESS OF AXON

4.1      FACILITIES

Axon is majority Australian-owned and incorporated in California. Currently it
rents 3,902 sq. metres at its headquarters in Silicon Valley, California,
employing about 80 staff, and an office employing 8 software and engineering
specialists in Melbourne, Australia. Axon uses contractors for most of its
product assembly so the Axon staff are predominantly involved with R&D, quality
control, product support and sales.

4.2      PAST GROWTH

Axon was formed in 1984 by its Australian CEO, Alan Finkel, to develop
instruments for use by neuroscientists studying electrical activity in brain
cells. The company has been profitable in every calendar year since its
inception and sales have grown steadily to a level of US$14 million in calendar
year 1998. Whilst Axon has incurred a loss for the half year ended 30 June 1999,
this has largely resulted from investment in its new genomics product line.
Directors believe that, for the full year ended 31 December 1999, it will
continue to be profitable. To date Axon has used its internally generated cash
flow to fund almost all of its innovation-led steady growth.

4.3      AXON'S ESTABLISHED MARKET - NEUROSCIENCE PRODUCTS

Axon believes it is currently regarded as the world market leader in the design
and manufacture of instrumentation and software for cellular electrophysiology.
This market caters primarily to scientific and medical researchers in
universities, hospitals and pharmaceutical companies.

Axon makes a range of specialised, high margin instruments catering to the
neuroscience research market. Over 480 universities, research institutions and
hospitals worldwide are Axon customers. In Australia, which represents only
about 2% of Axon's worldwide sales, 42 academic and medical research centres are
Axon customers, including most of Australia's major universities. Axon's
neurosciences activities include the following key products:

MICROELECTRODE AMPLIFIERS. These devices measure the exquisitely small currents
and voltages responsible for electrical and chemical signalling within
biological cells, such as those of the brain, heart, pancreas and muscle. The
Axon microelectrode amplifiers are recognised to be the finest available. When
Axon introduced its first microelectrode amplifier in 1984 there were already
several commercially available competitive products on the world market.
Nevertheless, the company established itself as the dominant market player. The
microelectrode amplifiers currently sell for around US$10,000 each.

DATA ACQUISITION AND ANALYSIS SYSTEMS. These systems are used with personal
computers to control equipment such as the Axon microelectrode amplifiers. The
combined hardware and software data acquisition systems currently sell for
around US$6,000 each.

CELLULAR IMAGING SYSTEMS. Axon markets and is developing a range of products
that enable the researcher to capture and analyse images of living cells. These
include specialist PC boards, which sell for around US$4,000 and specialized
ultra high sensitivity cameras which will sell for around US$20,000 when
released in early 2000.

NEUROSURGICAL EQUIPMENT. When Axon recognised that the cellular neurosciences
market was maturing, it sought to leverage its success in the scientific
products markets additional products in different and broader markets by
applying its core competencies to additional products in different and broader
markets. Surgeons began using microelectrode amplifiers on an experimental basis
to assist in an operation called a pallidotomy. In this operation, the symptoms
of Parkinson's disease can be markedly improved by destroying a small area of
the brain called the globus pallidus using a lesioning probe. Locating the
globus pallidus accurately is one of the challenges of the operation. Using a
microelectrode amplifier to detect the unique electrical signal of brain cells
in the globus pallidus, neurosurgeons are able to locate the globus pallidus
precisely before using the lesioning probe.

In 1997 Axon, in response to this new surgical use for this equipment, developed
and in 1998 released an FDA approved microelectrode guidance system, the
Guideline System 3000, specifically for use in neurosurgery. Each unit sells for
approximately US$90,000. Axon sold ten units in 1999 and expects sales to
increase gradually as the pallidotomy technique gains wider acceptance.

                                       9.
<PAGE>

4.4      AXON'S NEXT MARKET - GENOMICS AND BIOINFORMATICS

'Microprocessors have reshaped our economy, spawned vast fortunes, and changed
the way we live. DNA chips could be even bigger.'

Fortune Magazine, March 1997.

Axon is now embarking on a market expansion to apply its technological know-how
and reputation to rapidly growing markets servicing the need for automated
high-throughput biological analysis.

Axon's first products in this sector deal with genomics and bioinformatics. This
new technology is presently transforming the pace of drug discovery and is
projected to transform patient diagnostics within a few years.

The new device in the midst of this revolution is the DNA chip. This disposable
item is not an electronic chip but a miniature genetic chemistry tool that
enables the simultaneous and rapid analysis of thousands of genes on a chip the
size of a postage stamp. Each of the thousands of microscopic `gene spots' on
the chip contains different genetic molecules that react only with a particular
known gene. The result of the thousands of genetic analyses on a single
biological sample, which may be taken from suspect diseased tissue or blood, can
be determined by measuring the fluorescent colour of each gene spot. When DNA
chips are used to determine gene expression (the level of activity of a gene),
the colours indicate whether the genes are more, less or similarly active to the
normal state of gene activity.

The potential impact of DNA chips in medicine and bio-science has been likened
to the impact of the computer chip in electronics, and the resemblance of the
DNA chip to computer chips is not just coincidental. Just as computers get their
instructions from a code made up of 0s and 1s, the human body gets its
instructions from a DNA code made up of four nucleotide `letters' (A,C,G,T) that
dictate growth, decay and disease.

The Human Genome Project - a publicly-funded multi-national effort aimed at
obtaining the structure of every one of the estimated 140,000 human genes - is
providing an explosion of information that is being incorporated into DNA chips
and other genetic technologies.

GLOSSARY

Genes are the determinants of heredity and are found inside every cell, in
molecules of a type called DNA. As well as being the units of heredity, genes
are biological instructions for making specific chemicals, usually proteins in
an organism. Just as computers get their data processing instructions from a
code made up of strings of 0s and 1s, the biological instructions in the DNA are
coded by strings of the 4 different nucleotide sub-units A,C,G and T. These
subunits act like letters in an alphabet and determine the design of the
particular protein which the gene encodes. The manufacture inside cells of
proteins from the genetic code is called gene expression. When a gene is
expressed, its corresponding protein is being produced and that protein
typically has some functional role. If genes are changed (`mutated'), or are
caused to over-express or under-express, diseases such as cancer can result. The
genome of an organism is the sum of all its genetic material. In the Human
Genome Project, scientists are making a library of the codes of the estimated
140,000 different genes in the human genome. Genomics is the science of
identifying genes and characterising their function in both normal and
physiological disease processes. Bioinformatics refers to the study,
organisation and analysis of large amounts of biological information.

Pharmaceutical and biotech companies are currently using DNA chips as a research
tool to generate information about the connections between genes, diseases and
patient responses to drugs. It has been projected that, in a few years time, DNA
chips will progress to diagnostic markets. It is envisaged that patients will
have a genetic analysis performed with the aid of DNA chips, enabling a doctor
to determine:

-        which one of a range of possible drugs is most likely to be effective
         to treat the patient;

-        whether the patient is likely to have a rare adverse reaction to a
         prescribed drug; and

-        whether the patient has a known genetic susceptibility to any disease.

DNA chips appear set to become the biotechnology tool of the next decade, and
the DNA chip market is projected to grow 10 fold over the next few years.

                                      10.
<PAGE>
Axon understands the top 20 pharmaceutical companies spend US$24 billion per
year on R&D. This spending is expected to rise to between US$38 billion and
US$50 billion per year by the year 2005. The percentage they spend on genomics
is 10 to 20%. In addition, the approximately 1400 privately owned and quoted
biotech companies were estimated to spend US$9 billion on genetic research in
1998.

4.5      AXON'S FIRST GENOMICS AND BIOINFORMATICS PRODUCTS

GENEPIX(TM) 4000 DNA CHIP SCANNER

Axon's first involvement in this new field is to design and produce laser
scanning devices that optically scan the chips to record the result of the
genetic analysis. This result is indicated by the colour of each of the
thousands of microscopic `gene spots'. The Directors estimate that the market
for DNA chip scanners in 1998 was about US$30 million and believe that the
market should grow to about US$500 million in the next 5 to 8 years.

Several new techniques are now being developed to manufacture and use DNA chips.
Irrespective of these advances, the Directors believe that optical scanning will
remain for the foreseeable future the only efficient method of collecting the
information from DNA chips.

Axon's first genomics product, the GenePix 4000 DNA chip scanner, was conceived
in March 1998 and the company resolved that its development was to be a top
priority. By December 1998 Axon had a working prototype and in July 1999 Axon
began production and sales.

Customers who ordered one or more GenePix scanners on the basis of testing of
the prototypes include:

INCYTE PHARMACEUTICALS, INC:

A developer and marketer of DNA chips and related services, market
capitalisation of approximately US$4 billion as at 20 January 2000.

HYSEQ, INC:

A US based genomics company.

US NATIONAL INSTITUTE OF HEALTH, NATIONAL CANCER INSTITUTE:

A division of the US NIH, the US government's primary biomedical research body.

AMGEN, INC:

A US based pharmaceutical company, market capitalisation of approximately US$73
billion as at 20 January 2000.

AFFYMAX, INC:

A drug discovery company, owned by Glaxo-Wellcome.

DIADEXUS LLC:

A joint venture between Incyte Pharmaceuticals and SmithKline Beecham to develop
new molecular diagnostics.

PROTOGENE LABORATORIES, INC:

A DNA chip manufacturer.

Distributors in Germany, France, UK, Japan and Australia have been appointed.
Axon sells the GenePix directly into the US market and other countries, as it
does with its existing products.

An advertising campaign started in July 1999. Based on the level of interest and
the forward orders received to date, the Directors believe that the GenePix 4000
should attain a significant market share in the year 2000.

In addition to direct sales and sales through its distributors, Axon is also
pursuing original equipment manufacture (`OEM') alliances with other players in
the market, either for rebadging or packaging by the OEM customer with related
products, such as the DNA chips themselves. The first such alliance was
announced in March 1999 with Protogene Laboratories, Inc., which will resell the
GenePix scanner to its customers in customised form for reading Protogene's DNA
chips. A second alliance was entered into in December 1999 with Amersham
Pharmacia Biotech, Inc., which will resell the GenePix scanner to its customers
bundled with its proprietary microarray technology.

                                      11.
<PAGE>

Axon is already designing the next generation of enhanced GenePix scanners which
are expected to reach the market this year. Because the market requirements are
evolving so rapidly, the Directors believe that there are opportunities for
providing enhanced upgraded models to customers at least every 3 years.

SPOTLIGHT(TM) BIOINFORMATICS SOFTWARE

`DNA arrays appear set to become the biotechnology tool of the next decade.
Resequencing, gene expression, comparative genome analysis- they seem to do it
all, but the data volume they are capable of generating is overwhelming. Soon
enough the expression levels of thousands of genes - as well as many mutant
variants - will be documented under numerous growth and disease states. It seems
inevitable that DNA arrays will drive bioinformatics software to new levels.'

                               Extract from The Scientist Magazine, May 24, 1999

`Bioformatics' refers to the study, organisation and analysis of large amounts
of biological information. Bioinformatics is reaching new levels of complexity
with the flood of new biological data being generated.

In January 1999, Axon commenced the design of its Spotlight bioinformatics
software as a companion for the GenePix to manage the massive amounts of data
extracted from Genepix images. Using Spotlight, the technician can use a variety
of visualisation and analysis techniques to identify gene expression patterns or
genes that express in tandem with known important genes.

Spotlight will be sold separately from the GenePix 4000. The price of Spotlight
will initially be about US$8,000. Axon has designed the first version in
consultation with scientists to exceed the functionality of the currently
available free software from Stanford University and the National Institutes of
Health and to provide seamless integration with the GenePix.

The target release date for Spotlight is May 2000.

4.6      FUTURE PRODUCTS FOR DRUG DISCOVERY AND DIAGNOSTICS

Axon intends to leverage its existing technologies from the GenePix and other
products into new products for high-throughput screening in drug discovery and
diagnostics. High-throughput screening is the high speed automated performance
of large numbers of biological tests and is being increasingly used to
accelerate the process of drug discovery. One of the factors driving the
increased use of high throughput screening is the Human Genome Program and the
bioinformatics revolution in which the GenePix participates. This revolution is
accelerating the discovery of therapeutic targets against which candidate drugs
can be tested in high throughput screening systems.

The current US market for high-throughput screening instrumentation is estimated
by the Directors to be at least US$100 million per year.

The two products described below are planned for future release and Axon will
explore further new product opportunities to exploit the market for
high-throughput screening instrumentation and software.

CELLPIX 5000(TM) MULTI-WELL PLATE SCANNER

Multi-well plates are typically arrays of 96 or more miniature reaction vessels
and are common in biochemistry labs. Multi-well plate scanners can be used to
optically scan multi-well plates to simultaneously measure the effects of
thousands of different drug candidates on biological material such as cell
lines, membrane fractions, or pure proteins. Most existing multi-well plate
scanners on the market provide only a single optical measurement on each well
plate. Such limited measurements are well suited to simple chemistry but not to
experiments on living cells, where the microscopic details of the cell's changes
are informative. The CellPix is being designed with the intention of providing
microscope-quality images of each well so that the cells in each well can be
analysed in detail.

To ensure the suitability of its design for biotechnology and pharmaceutical
company requirements, Axon has put together a small consortium of companies that
will guide the CellPix development. The members of the consortium meet regularly
with Axon's engineering and planning staff, evaluate prototypes and provide cell
samples. The first members of this consortium are Cytokinetics, Geron
Corporation (both located in California, USA) and Astra Arcus USA, Inc a member
of the AstraZeneca, PLC group of companies. Cytokinetics is endeavouring to
harness the untapped potential of the cytoskeleton, crucial to many aspects of
cell function, for both drug discovery and cellular bioinformatics. Geron is a
NASDAQ listed

                                      12.
<PAGE>

biopharmaceutical company exclusively focused on discovering, developing and
commercialising therapeutic and diagnostic products to treat cancer and other
age-related diseases. AstraZeneca, PLC is the third largest pharmaceutical
company in the world based on sales and is a therapeutic leader in
gastrointestinal, oncology, anesthesia, including pain management,
cardiovascular, central nervous systems (CNS) and respiratory products.

It is anticipated that the CellPix will initially be sold to pharmaceutical
companies to be used for assay development and high-throughput drug screening,
but the Directors believe that in the future derivatives of the CellPix could be
sold to pathology laboratories for high-throughput diagnostic tests.

The CellPix is expected to make substantial use of Axon's existing software and
high sensitivity camera technology and is expected to be released in late 2000.

ELECTROPHYSIOLOGY HIGH THROUGHPUT SCREENING SYSTEM

Axon understands that 11 out of the 20 biggest selling drugs in the world act on
electrically active proteins (ion channels, receptors, transporters) in cell
membranes. Electrophysiological techniques have traditionally been used to
characterise the mode of action of these drugs. The characterisation experiments
typically involve an experienced electrophysiologist (Ph.D. level scientist)
conducting one experiment at a time, using equipment such as Axon's
microelectrode amplifiers. The skills required to fabricate electrodes, identify
cells and successfully attach the electrode to the cell are demanding. The
Directors believe that an automated system to perform such measurements would be
an excellent way to screen drug candidates.

Axon is planning to develop a robotic system - the RoboClamp 6000(TM) - based on
Axon's existing microelectrode amplifier and data acquisition technology. It is
intended that the RoboClamp 6000 will allow electrophysiological measurements to
be performed simultaneously on many cells, thereby dramatically increasing the
efficiency of the individual investigator.

4.7      CORPORATE GOALS

Five years from now the Directors intend Axon to be a major international
manufacturer and developer of instruments and bioinformatics software for
genomics, drug discovery and molecular diagnostics.

Axon's product line will be targeted at satisfying the increasing demand from
pharmaceutical companies, diagnostic companies and genomics research labs for
faster throughput by providing automated simultaneous operation.

Axon also intends to maintain its commitment to cellular neurosciences products
and to maintain its prominent market position in this area, which to date has
funded all of Axon's operations.

4.8      INTELLECTUAL PROPERTY

Axon's policy is to aggressively protect its new inventions with patents and to
conduct searches with the intention of ensuring that its new products will not
infringe the patents of other parties.

The Company has already concluded such searches on the GenePix scanner and has
filed patent applications covering key aspects to date of the GenePix, CellPix
and related technologies.

4.9      SCIENTIFIC AND TECHNICAL ADVISORS

Axon has access to a number of advisors and consultants in neurosciences,
neurosurgery, genomics and laser technologies, drawn from institutions such as
Stanford University, Mayo Clinic, University of California at San Francisco,
California Institute of Technology, Emory University, University of Miami, and
Toronto Hospital.

                                      13.
<PAGE>

                            SECTION 5. THE DIRECTORS

ALAN STOCKDALE, 54, Chairman, was previously Treasurer (1992-1999) and Minister
for Information Technology and Multimedia (1996-1999) in the Government of
Victoria, Australia. He holds degrees in law and arts. Prior to his election to
the Victorian Parliament in 1985 he had wide experience in Australian business
specialising in industrial relations and personnel management. He worked for a
decade in private industry, including five years as National Industrial
Relations and Personnel Manager for Leighton Contractors Ltd. For a further ten
years he then practised as a self-employed barrister specialising in industrial
relations and industrial law. These positions gave him extensive experience with
a wide range of sizes and types of Australian businesses. Mr. Stockdale retired
from Government at the recent Victorian election.

ALAN FINKEL, 47, Chief Executive Officer, received his Ph.D. in Electrical
Engineering at Monash University, Australia, in 1981. Aspects of his doctorate
covered electrical transmission and synaptic activity in brain tissue. For two
years he conducted postdoctoral research at the John Curtin School of Medical
Research at the Australian National University. In 1983, he moved to the San
Francisco Bay area to establish Axon Instruments, Inc. Dr. Finkel has been
instrumental in the development of all aspects of Axon's products. In 1987, Dr.
Finkel returned to Australia, where he continues in his roles of full-time Chief
Executive Officer and Vice President of Research and Development of Axon. Dr
Finkel spends at least 20% of his time at Axon's headquarters in Foster City,
California, and the balance of his time at Axon's Melbourne office. He is also a
non-executive Director of Optiscan Imaging Ltd and is a member of the Academic
Advisory Committee of the Monash University Electrical and Computer Systems
Engineering Department.

GEOFFREY POWELL, 57, Executive Director, is a graduate of Stanford University
and holds graduate business degrees from the Wharton Graduate School of Business
and from the University of Washington. He has over 25 years of corporate
business experience in companies ranging in size from startups to Fortune 500,
and his range of experience includes the fields of strategic and tactical
planning, finance, marketing and production planning. For the eleven years prior
to joining Axon, Mr. Powell's experience was at high tech corporations such as
Zoecon and Protein Design Labs. He also served for five years on the corporate
staff of Ford Motor Company. Mr. Powell joined Axon in 1988.

HENRY LESTER, 54, Non-executive Director, is Professor of Biology and Director
of the Silvio Conte Centre for Neuroscience Research at the California lnstitute
of Technology. Professor Lester has been associated with Axon since 1984. His
research interests include molecular neuroscience, advanced instrumentation,
physiology, and pharmacology. His laboratory group at Caltech has collaborated
and patented actively in these fields. His other industrial activities focus on
pharmaceutical research, especially for ion channels and receptors. He holds a
B.A. from Harvard, a Ph.D. from Rockefeller, and has done research at the
Pasteur Institute and the Hebrew University.

STANLEY CROOKE, PhD. M.D., 55, Non-executive Director, is founder, Chairman and
Chief Executive Officer of Isis Pharmaceuticals, Inc, a San Diego based
biopharmaceutical development company. Isis is a leader in the development of
antisense therapy, a new class of gene-based pharmaceuticals. Prior to founding
Isis, Dr Crooke was President of Research and Development for SmithKline Beecham
Corporation (SKB). Prior to joining SKB, Dr Crooke helped establish the anti
cancer drug discovery and development program at Bristol Myers which succeeded
in bringing to market a significant number of drugs. Dr Crooke is currently also
a member of the Board of Directors of biotechnology companies SIBIA, EPIX
Medical, Idun Pharmaceuticals and Valentis. He is a former member of the Board
of Directors of the US Biotechnology Industry Organization, section editor for
biologicals and immunologicals for Expert Opinion on Investigational Drugs and a
member of the Editorial Advisory Board of The Journal of Drug Targeting, Gene
Therapy and Molecular Biology and Antisense Research and Development. He is
currently also an adjunct professor at the University of California, San Diego
and San Diego State University and previously held faculty positions at several
universities for which he has earned a number of teaching awards. Dr Crooke has
authored more than 400 publications and more than 250 abstracts and has edited
18 books.

                                      14.
<PAGE>

                     SECTION 6. DETAILS OF THE PUBLIC ISSUE

6.1      DESCRIPTION OF THE OFFER

This Prospectus provides information on two distinct offers by Axon:

         (a)      an offer to the public to subscribe for a total of 70,000,000
                  Securities in Axon at an issue price of 20 cents per Security
                  for a total of A$14 million (`Offer'). Of the A$14 million
                  proposed to be raised in the Offer, Consolidated Press
                  Holdings Limited (`CPH') ACN 008 394 509 has committed to Axon
                  to subscribe for not less than A$4.2 million of the
                  Securities; and

         (b)      an offer to be made shortly to shareholders of Circadian
                  Technologies Limited (`Circadian') of one option, at one cent,
                  to take up one unissued security in Axon at 20 cents at any
                  time before 5 years from the date of issue for every 2.5
                  Circadian shares held as at the Record Date, being the date 10
                  business days after ASX quotation of the Axon Shares (each
                  such option `Entitlement Option'). The maximum number of
                  Entitlement Options that may be issued under this offer is
                  12,997,845.

This section 6 provides details in respect of the public issue of Securities.
For details in relation to the offer of Entitlement Options to be made shortly
to Circadian shareholders, you should refer to section 7 of this Prospectus. The
rights attaching to the Securities and Entitlement Options are summarised in
sections 11.8 and 11.10 respectively.

6.2      APPLICATIONS FOR SECURITIES

To participate in the Issue of Securities, the Application Form attached to this
Prospectus must be completed in accordance with the instructions on the reverse
side of the form and delivered to any of the following:

Computershare Registry Services Pty Ltd
Level 12,565 Bourke Street
Melbourne, Victoria 3000
Telephone: (03) 9611 5711

D&D-Tolhurst Limited
Level 30,459 Collins Street
Melbourne, Victoria 3000
Telephone: (03) 9242 4000

Saw James Capel Limited
152-158 St George's Terrace
Perth, Western Australia 6000
Telephone: (08) 9288 9288

The Application List will open at 9:00 am Melbourne time on 14 February 2000 and
will remain open until 5:00 pm Melbourne time on 29 February 2000, subject to
the right of the Directors to close the Application List at any time or to
extend the closing date for applications without prior notice. Axon will accept
lodgement of applications prior to the Applications Opening Date.

Axon reserves the right to allot to an Applicant a lesser number of Securities
than the number for which the Applicant applies or to reject an application.

If the number of Securities allotted is fewer than the number applied for,
surplus application money will be refunded without interest. The acceptance of
applications and the allocation of Securities is at the discretion of Axon.

The minimum subscription to be raised pursuant to this Prospectus is
A$8,000,000. No Securities will be allotted until the minimum subscription has
been received. Subject to the requirements of the Corporations Law, if Axon does
not receive the minimum subscription within four months of the issue of the
Prospectus, all applications will be refunded in full without interest.

                                      15.
<PAGE>

No brokerage or stamp duty is payable by Applicants in respect of their
applications for Securities under this Prospectus. The amount payable on
application will not vary during the period of the Issue and no further amount
is payable on allotment.

Application money will be held in trust in a subscription account until
allotment. The subscription account will be established and kept by Axon on
behalf of the Applicants.

If allotments of Securities are made, all interest earned on all application
monies (including those which do not result in allotments of Securities) will be
retained by Axon. If the Issue of Securities does not proceed, all application
monies will be refunded in full without interest (subject to the requirements of
the Corporations Law).

Applicants may apply for a minimum of 10,000 Securities or a higher number of
Securities in multiples of 5,000 Securities. This represents a minimum
investment of A$2,000 and multiples of A$1,000 after that. Applicants are
encouraged to submit their applications as early as possible, as Axon reserves
the right to close the Offer at any time after the Application List opens. Axon
also reserves the right to extend the period of the Offer.

Applications must be accompanied by payment in full in Australian currency of
A$0.20 for each Security applied for. Payment must be by way of cheque or bank
draft drawn on and payable at an Australian bank. Cheques should be made payable
to `Axon Instruments Inc - Float Account' and crossed `Not Negotiable'.
Application Forms must not be circulated to prospective investors unless
attached to a copy of this Prospectus.

A duly completed and lodged Application Form will constitute an offer by the
Applicant to subscribe for the number of Securities applied for pursuant to the
Application Form.

6.3      TAXATION

Australia has entered into a special tax treaty (double taxation agreement) with
the US Government to seek to prevent double taxation and allow co-operation
between Australian and US tax authorities in enforcing their respective tax
laws. The Australian tax implications under the double taxation agreement of
investing in Securities may vary depending on the circumstances of particular
investors. In general terms, the double taxation agreement will, in its current
form, limit US tax on dividends paid by Axon to Australian residents to 15% on
unfranked dividends. Its operation on capital or revenue gains or losses may
vary depending on the circumstances of particular investors. Prospective
investors are urged to consult their tax advisers regarding Australian and US
federal, state, local and other tax consequences (including those under the
double taxation agreement) attendant upon the acquisition, ownership and
disposition of Securities. Tax laws in the US and Australia are subject to
change, possibly with retroactive effect. Certain US tax issues relevant to Axon
itself are described in section 11.2.

6.4      REGISTERS

Axon will establish and maintain a Principal Register (of holders of the legal
interest) and a CDI Register (of the holders of the beneficial interest) of its
Securities. The Registers will be maintained by Computershare Registry Services
Pty Ltd and, subject to the Corporations Law, will be available for inspection
between the hours of 9:00 am and 5:00 pm Melbourne time each business day.

6.5      BROKERAGE AND COMMISSIONS

The Offer is partially underwritten by the Underwriters to the amount of A$8.8
million.

The Underwriters are to receive an underwriting fee of A$200,000 each.

No brokerage or stamp duty will be payable by Applicants subscribing for
Securities and Options. No brokerage commission or other such fees will be
payable unless Axon is listed on the ASX.

6.6      STOCK EXCHANGE LISTING

Application will be made by Axon to the ASX, within 3 days after the issue of
this Prospectus, for Axon to be admitted to the Official List of the ASX and for
existing Shares in Axon (other than those which are, under the ASX Listing Rules
and those which are designated by the ASX as, restricted securities, if any) and
the Shares which underlie the Securities actually issued under this Prospectus
to be granted Official Quotation.

                                      16.
<PAGE>

The fact that the ASX may agree to grant Official Quotation to the shares and
options is not to be taken in any way as an indication of the merits of Axon or
the Securities now offered.

The ASX takes no responsibility for the contents of this Prospectus, including
the experts' reports which it contains.

Axon will apply for CHESS approval for its Securities by way of CUFS. Further
information on the operation of CUFS is set out in sections 2.9 and 11.8.

It is the responsibility of Applicants to determine their allocation prior to
trading in Securities. Applicants who sell Securities before they receive their
notice do so at their own risk.

6.7      SEC REQUIREMENTS

The Securities and Entitlement Options have not been and will not be registered
under the United States Securities Act of 1933 (the `U.S. Securities Act') and
may not be offered or sold in the United States or to, or for the account or
benefit of, U.S. Persons as part of their distribution at any time or until the
date that is one year after the completion of the distribution of the
Securities. Following such one-year restricted period, the Securities and
Entitlement Options may be sold in the United States or to, or for the account
of benefit of, U.S. Persons only in transactions that are exempt from the
registration requirements of the U.S. Securities Act. In addition, hedging
transactions with regard to the Securities and Entitlement Options may not be
conducted unless in accordance with the U.S. Securities Act. Terms used in this
paragraph have the meaning given to them by Regulation S under the U.S.
Securities Act.

Each subscriber/purchaser of Securities or Entitlement Options will be deemed to
have represented and agreed as follows:

                  (1)      It is not a U.S. Person and is not acquiring the
                           Securities or Entitlement Options for the account or
                           benefit of a U.S. Person.

                  (2)      It understands that the Securities or Entitlement
                           Options, as the case may be have not been registered
                           under the U.S. Securities Act and that, if in the
                           future it decides to offer, resell, pledge or
                           otherwise transfer such Securities or Entitlement
                           Options, the Securities may be offered, sold, pledged
                           or otherwise transferred only (a) in an offshore
                           transaction in accordance with Rule 903 or 904 of
                           Regulation S under the U.S. Securities Act or (b)
                           pursuant to an exemption from registration under the
                           U.S. Securities Act, in each case in accordance with
                           any applicable securities laws of any state of the
                           United States.

                  (3)      It agrees not to engage in hedging transactions with
                           regard to the Securities or Entitlement Options
                           unless in compliance with the U.S. Securities Act.

                  (4)      It understands that the Securities or Entitlement
                           Options will bear a legend to the following effect
                           unless Axon determines otherwise consistent with
                           applicable law:

                           "THE [SECURITIES/ENTITLEMENT OPTIONS] OF AXON
                           INSTRUMENTS INC HAVE NOT BEEN AND WILL NOT BE
                           REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
                           1933, AS AMENDED (THE `U.S. SECURITIES ACT'). THE
                           [SECURITIES/ENTITLEMENT OPTIONS] MAY NOT BE OFFERED,
                           SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) IN
                           AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903
                           OR 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT
                           OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION
                           UNDER THE U.S. SECURITIES ACT, IN EACH CASE IN
                           ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
                           STATE OF THE UNITED STATES. IN ADDITION, HEDGING
                           TRANSACTIONS WITH REGARD TO THE
                           [SECURITIES/ENTITLEMENT OPTIONS] MAY NOT BE CONDUCTED
                           UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT."

                                      17.
<PAGE>

On 7 January 2000, the US Securities and Exchange Commission (`SEC') issued a no
action letter to ASX in respect of the ASX market in connection with the
registration requirements of the US Securities Act. The letter provides that the
Division of Corporation Finance will not recommend enforcement action to the SEC
if equity securities of non-reporting US companies are offered and sold in
initial public offerings offshore pursuant to Regulation S in connection with a
listing on ASX in accordance with the specified procedures and restrictions.

In order that Axon may monitor compliance with SEC requirements and the
conditions of the no action letter, Axon will apply for the Securities and
Entitlement Options to be included as Foreign Owned Restriction (`FOR')
Securities under the SCH Business Rules. The level of ownership by US Persons
that will be advised to the Securities Clearing House (`SCH') is zero. If
applicants are in doubt as to whether they classify as a US Person they are
advised to consult their broker. Neither ASX nor the SCH is responsible for
monitoring compliance with SEC requirements or US law in respect of Axon.

The Underwriters have agreed that they are not acquiring any Securities for the
account or benefit of any US Person and that they have not and will not offer,
sell, resell or deliver, directly or indirectly any Securities acquired by them
as part of the distribution of Securities in the United States or to or for the
account or benefit of US Persons, and they will not, as principal or agent, make
any offers, sales, resales or deliveries of Securities in the United States or
to or for the account or benefit of US Persons except as aforesaid prior to the
date falling one year after the completion of the distribution of the Securities
under this Prospectus.

                                      18.
<PAGE>

       SECTION 7. OFFER OF ENTITLEMENT OPTIONS TO CIRCADIAN SHAREHOLDERS

7.1      DESCRIPTION OF THE PROPOSED OFFER

This Prospectus provides information on two distinct offers by Axon:

         (a)      an offer to the public to subscribe for a total of 70,000,000
                  Securities in Axon at an issue price of 20 cents per security
                  for a total of A$14 million (`Offer'). Of the A$14 million
                  proposed to be raised in the Offer, Consolidated PressHoldings
                  Limited (`CPH') ACN 008 394 509 has committed to Axon to
                  subscribe for not less than A$4.2 million of the Securities;
                  and

         (b)      an offer to be made shortly to shareholders of Circadian
                  Technologies Limited (`Circadian') of one option, at one cent,
                  to take up one unissued Security in Axon at 20 cents at any
                  time before 5 years from the date of issue for every 2.5
                  Circadian shares held as at the Record Date, being the date 10
                  business days after ASX quotation of the Axon Shares (each
                  such option `Entitlement Option'). The maximum number of
                  Entitlement Options which may be issued under the entitlement
                  offer is 12,997,845.

This section provides details in respect of the offer of Entitlement Options to
be made to Circadian shareholders. Circadian is listed on the ASX. For details
in relation to the offer of Securities to the public, you should refer to
section 6 of this Prospectus. Any Circadian shareholders who wish to make an
application for Securities more particularly described in paragraph (a) above
must do so in accordance with section 6 of this Prospectus. This section 7 only
provides details to Circadian shareholders in respect of the offer of
Entitlement Options.

The rights attaching to the Securities and Entitlement Options are summarised in
sections 11.8 and 11.10 respectively.

7.2      APPLICATIONS FOR ENTITLEMENT OPTIONS (CIRCADIAN SHAREHOLDERS ONLY)

Shareholders of Circadian (other than shareholders with registered addresses in
the United States of America, Canada or Japan) will be offered by way of rights
one Entitlement Option for every 2.5 shares held in Circadian held at 5:00 pm
Melbourne time on the Record Date for entitlements, being 10 business days after
ASX quotation of the Axon Securities, at 1 cent per Entitlement Option. The
offer will be forwarded separately to Circadian shareholders immediately
following the Record Date. Special arrangements for shareholders of Circadian
with registered addresses in the United States of America, Canada or Japan are
set out in section 7.3.

The cost of 1 cent per Entitlement Option will be payable in full on
application. The number of Entitlement Options to which a shareholder of
Circadian will be entitled will be set out in the prospectus sent to Circadian
shareholders. Rights to Entitlement Options will be non-renounceable.

The offer of Entitlement Options will only proceed if the Axon Shares are quoted
on the ASX, following the successful completion of the offer. No Entitlement
Options will be granted if this condition is not satisfied.

Please note that the right of Circadian shareholders to Entitlement Options will
be non-renounceable, so the rights may not be sold or otherwise renounced or
disposed of.

7.3      CIRCADIAN SHAREHOLDERS RESIDENT OUTSIDE AUSTRALIA AND NEW ZEALAND

Circadian shareholders resident outside Australia and New Zealand and
shareholders who are nominees of persons resident outside Australia and New
Zealand should consult their professional advisers as to whether any
governmental or other consents are required, or whether formalities need to be
observed, to enable them to accept their entitlements.

The prospectus to be sent to Circadian shareholders following the Record Date
and any accompanying documents will not constitute an offer in any place in
which, or to any person to whom, it would not be lawful to make such an offer.

Neither the rights to the Entitlement Options nor the Entitlement Options
themselves nor the Securities in Axon underlying the Entitlement Options will
have been registered under the securities laws of the United States of America,
Canada or Japan.

                                      19.
<PAGE>

Accordingly, the prospectus to be sent to Circadian shareholders following the
Record Date and any Entitlement Offer Acceptance Form will not be sent to
holders of securities registered with addresses in the United States of America,
Canada or Japan, or any of their respective territories or possessions or other
areas subject to their respective control.

Arrangements will be made whereby the rights to Entitlement Options of holders
of Circadian shares registered with addresses in the United States of America,
Canada or Japan or any of their respective territories or possessions or other
areas subject to their respective control will be granted to a nominee appointed
by the directors of Circadian, and the Entitlement Options sold if there is a
viable market in the rights to those Entitlement Options and a premium over the
expenses of sale can be obtained. Any such sale will be at such prices and
otherwise in such manner as the nominee may in its sole discretion determine.
The ability to sell the Entitlement Options granted to the nominee and the price
obtained for them are dependent on market conditions. None of Axon, Circadian or
the nominee will be subject to any liability for failure to sell Entitlement
Options at any particular price. The net proceeds of the sale (if any) after
deducting all costs involved in the sale and the subsequent distribution of
cash, will be distributed pro rata to each of the Circadian shareholders for
whose benefit the rights have been sold. The net proceeds of sale or any other
monies will be paid to the Circadian shareholders concerned.

If there is not a viable market for Entitlement Options or the nominee believes
the premium over the expenses of sale cannot be obtained, the nominee will not
be granted the Entitlement Options, and no proceeds of sale or any other monies
will be paid to the Circadian shareholders concerned.

7.4      PAYMENT FOR ENTITLEMENT OPTIONS

The cost of A$0.01 per Entitlement Option will be payable in full on acceptance
of the offer to be made shortly.

7.5      STOCK EXCHANGE QUOTATION

Axon will apply to the ASX not later than 8 business days prior to the Record
Date for official quotation of the Entitlement Options. No guarantee can be
given that quotation will be granted.

The fact that the ASX may agree to grant official quotation to the Entitlement
Options is not to be taken in any way as an indication of the merits of Axon. It
is the responsibility of Circadian shareholders to determine their allocation
prior to trading in Entitlement Options. Applicants who sell Entitlement Options
before they receive their notice do so at their own risk.

                                      20.
<PAGE>

                   SECTION 8. INDEPENDENT ACCOUNTANT'S REPORT

27 January 2000

The Directors
Axon Instruments, Inc.
6 Wallace Avenue                                  1101 Chess Drive
Toorak VIC 3142                                   Foster City, CA 94404
AUSTRALIA                                         UNITED STATES OF AMERICA

Dear Sirs,

INDEPENDENT ACCOUNTANT'S REPORT

1.       INTRODUCTION

This report in respect of Axon Instruments, Inc. ("Axon") has been prepared at
the request of the Directors, for inclusion in a Prospectus to be dated on or
about 27 January 2000 relating to the Public Offer of 70,000,000 fully paid
Shares at A$0.20 in Axon. Upon listing, Axon is expected to have 351,657,491
issued Shares.

The Prospectus also refers to the offer of 12,997,845 options to acquire fully
paid shares at A$0.01 in Axon to the shareholders of Circadian Technologies
Limited. The Options have a 5 year term from the date of issue. The exercise
price of the Options is effectively A$0.20 each. A further 4,100,000 Individual
Options to acquire shares in Axon have been granted to key individuals
pre-listing. Upon listing, Axon is expected to have 122,108,020 issued Share
Options.

References to Axon and other terminology used in this report have the same
meaning as set out in the Glossary to the Prospectus.

2.       BACKGROUND

Axon was incorporated on 15 October 1984 in the United States of America. Since
that time, Axon has grown into a leading designer and manufacturer of
instrumentation and software for cellular neurosciences. This market caters
primarily to scientific and medical researchers in universities and
pharmaceutical companies. Axon has also expanded into the development of devices
and software for analysing gene chips.

Axon is based in the Silicon Valley area of California. Axon Research Pty Ltd,
an Australian company based in Melbourne, has conducted research and development
activities for Axon since 1988. Axon acquired Axon Research Pty Ltd on 1 January
2000. Until that time, Axon Research Pty Ltd had been owned by the same
shareholders as Axon.

It is the intention of the Directors of Axon to use the funds raised through
this Offer to enable the public to participate in the ownership and growth
potential of Axon; to accelerate Axon's development of new products; and to
provide working capital to the company.

Axon has a financial year end of 31 December. This report covers the six month
period ended 30 June 1999 and the financial years ended 31 December 1998 and
1997.

3.       FINANCIAL INFORMATION

SCOPE OF OUR REVIEW

Historical financial information

The historical financial information comprises a combined balance sheet, a
combined statement of operations, a combined statement of shareholders' equity,
a combined statement of cash flows, a combined statement of comprehensive income
and notes to the combined financial statements for the six month period ended 30
June 1999 and for the financial years ended 31 December 1998 and 1997.

                                      21.
<PAGE>

The historical financial information is presented in accordance with Generally
Accepted Accounting Principles of the United States of America ("US GAAP") and
in US dollars ("US$").

There are no significant differences between US GAAP and Australian GAAP which
would have a material impact on the historic financial information of Axon as
detailed in the Annexure to this report.

Axon acquired Axon Research Pty Ltd on 1 January 2000. Axon therefore did not
exist in its current form during the financial periods under review. The
financial information of Axon (as a single entity) and Axon Research Pty Ltd
have been combined for the purposes of the historical financial information
contained in the Annexure.

We have audited the historical financial information of Axon for the six month
period ended 30 June 1999 and for the financial years 31 December 1998 and 1997
as set out in the Annexure to this report. Axon's directors are responsible for
the historic financial information. We have conducted an independent audit of
their historic financial information in order to express an opinion on it to the
members of Axon.

Our audits were conducted in accordance with generally accepted auditing
standards of the United States of America and Australia respectively to obtain
reasonable assurance about whether the historical financial information is free
of material misstatement. Our procedures included examination, on a test basis,
of evidence supporting the amounts and other disclosures in the financial
statements, and the evaluation of accounting policies and significant accounting
estimates. These procedures have been undertaken to form an opinion whether, in
all material respects, the historic financial information is presented fairly in
accordance with generally accepted accounting principles and mandatory
professional reporting requirements, so as to present a view which is consistent
with our understanding of Axon's financial position, the results of their
operations and their cash flows.

The audit opinion expressed in this report has been formed on the above basis.

Proforma financial information

The proforma financial information comprises a proforma consolidated balance
sheet as at 30 June 1999. The purpose of the proforma consolidated balance sheet
is to reflect the financial position of Axon as if the following transactions
relating to the Public Offer, as disclosed in Note 2 of the Annexure, had
occurred on that date:

-        Acquisition of Axon Research Pty Ltd by Axon for US$155,179

-        Receipt of proceeds from Public Offer of US$8,890,000

-        Payment of costs of listing of US$952,500

-        Receipt of proceeds from offer of share options to shareholders of
         Circadian Technologies Limited of US$82,536

-        Sale of part of Axon's investment in Optiscan Imaging Limited for
         US$562,165

-        Issue of share options to the Directors and key individuals

The proforma financial information is presented in accordance with US GAAP and
US$. There are no significant differences between US GAAP and Australian GAAP
which would have a material impact on the proforma consolidated balance sheet of
Axon as detailed in the Annexure to this report.

In addition to having audited the historical financial information as at 30 June
1999, we have performed a review of the proforma transactions of Axon as
detailed above in order to state whether, on the basis of the procedures
described, anything has come to our attention that would indicate that the
proforma financial information as detailed in the Annexure to this report is not
presented fairly in accordance with US GAAP.

Our review has been conducted in accordance with Australian generally accepted
auditing standards applicable to review engagements and has been limited
primarily to inquiries of Axon's personnel and analytical procedures applied to
the financial data. Our review has also included a reading of contracts and
other relevant documents, a reading of the minutes of directors' meetings, a
reading of relevant audit working papers, ensuring consistency in application of
accounting standards and policies, and certain verifications supporting the
amounts and other disclosures in the financial information. These procedures do
not provide all the evidence that would be required in an audit, thus the level
of assurance provided on the proforma financial information is less than given
in an audit. We have not performed an audit and, accordingly, we do not express
an audit opinion on the proforma financial information.

                                      22.
<PAGE>

STATEMENTS

Historical financial information

In our opinion, the historical financial information of Axon presents fairly in
accordance with US GAAP the financial position as at 30 June 1999, 31 December
1998 and 1997 and the results of its operations and its cash flows for the
financial periods ended on those dates.

Proforma financial information

Based on our review of the proforma financial information nothing has come to
our attention which would require any further modification to the proforma
consolidated balance sheet in order for it to present fairly the financial
position as at 30 June 1999 on the basis described in Notes 1 and 2 and in
accordance with US GAAP.

Subsequent Events

To the best of our knowledge, there have been no material transactions or events
subsequent to 30 June 1999, which would require a comment on or an adjustment
to, the content of this report, or which would cause the information included in
this report to be misleading.

The sale of part of Axon's investment in Optiscan Imaging Limited in September
1999 has been included as a proforma adjustment in the proforma consolidated
balance sheet as at 30 June 1999.

Without qualification to the above statements, attention is drawn to the
following matter:

The impact of the Year 2000 issue on Axon's business, and any costs entailed in
identifying and rectifying the problem, could affect any reliance which it might
otherwise have been reasonable to place on the financial and other prospects of
Axon. Elsewhere in this Prospectus the risks to the Company arising from any
impact of the Year 2000 issue are set out. We can give no assurance that the
plans adopted by Axon will ensure no adverse impact of the Year 2000 problem
will occur to the Company's financial results.

4.       DISCLOSURE

Ernst & Young provides taxation and other services to Axon, has been appointed
auditor of Axon and will receive a professional fee for the preparation of this
report.

Yours faithfully,
/s/ Ernst & Young
Ernst & Young
/s/ Don Brumley
Don Brumley
Partner

                                      23.
<PAGE>

Annexure

                             AXON INSTRUMENTS, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                               COMBINED
                                                                    PROFORMA                                  DECEMBER 31,
                                                                  CONSOLIDATED        COMBINED        ---------------------------
                                                                    JUNE 30,          JUNE 30,
                                                                      1999              1999
                                                                                                         1998              1997
                                                                   ----------         ---------        ---------        ---------
<S>                                                                <C>               <C>               <C>              <C>
ASSETS                                                                 US$              US$               US$              US$
Current assets:

   Cash and cash equivalents                                        8,980,132          553,110         1,395,956        1,653,389
   Accounts receivable, net of allowance of $51,165 at June
     30, 1999 and $48,322 & $49,500 in December 31, 1998 &
     1997, respectively                                             2,169,935        2,169,935         2,707,393        1,853,802
   Accounts receivable - employee                                       7,752            7,752            10,405            3,600
   Income taxes receivable                                             73,304           73,304            61,073          183,200
   Inventories                                                      2,796,409        2,796,409         1,611,819        1,736,162
   Deferred income taxes                                              273,425          273,425           258,287          190,151
   Other current assets                                               190,373          190,373           128,350           90,947
                                                                   ----------        ---------         ---------        ---------
Total current assets                                               14,491,330        6,064,308         6,173,283        5,711,251

Long-term receivable - employee                                        57,962           57,962            61,262           13,246
Advances to Optiscan Imaging Limited                                   79,968           79,968            75,689           77,212
Investment to Optiscan Imaging Limited                                738,609          814,786           814,786          814,786
Equipment and leaseholder improvements, net                           523,191          523,191           534,825          494,926
Restricted cash                                                        30,400           30,400            30,400           30,400
Deferred income taxes                                                 184,436          184,436           166,417          146,073
Deposits and other taxes                                               43,894           43,894            42,506           37,474
                                                                   ----------        ---------         ---------        ---------
Total assets                                                       16,149,790        7,798,945         7,899,168        7,325,368
                                                                   ==========        =========         =========        =========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

   Accounts payable                                                   851,301          851,301           569,289          425,715
   Accrued compensation                                               335,620          335,620           289,300          239,069
   Accrued royalties                                                  103,714          103,714           107,636          103,808
   Other accrued liabilities                                          251,709          251,709           169,570           91,469
   Advances from customers                                            184,813          184,813            50,420           58,975
                                                                   ----------        ---------         ---------        ---------
Total current liabilities                                           1,727,157        1,727,157         1,186,215          919,036

Long term liabilities

   Employee entitlement provisions                                     42,734           42,734            31,728           27,153

Shareholders' equity:

   Axon Instruments, Inc. Common Stock US$0.0000375 par value;
     26,666,000,000 shares authorised, 281,272,968 shares
     issued and outstanding at June 30, 1999 and December 31,
     1998 and 1997                                                     10,548           10,548            10,548           10,548
   Axon Instruments, Inc. Common Stock A$0.20 issue price,
     70,000,000 shares issued and outstanding at June 30, 1999      7,937,500                -                 -                -
   Stock options                                                      825,360
   Axon Research Pty. Limited Common Stock; A$0.01 par value;
     1,000,000 shares issued and outstanding at June 30, 1999
     and December 31, 1998 and 1997                                         0            7,943             7,943            7,943
   Additional capital                                                 237,708          237,708           237,708          237,708
   Accumulated other comprehensive income                             (19,859)         (19,859)          (30,798)         (23,904)
   Retained earnings                                                5,388,642        5,792,714         6,455,824        6,146,884
                                                                   ----------        ---------         ---------        ---------
Total shareholders' equity                                         14,379,899        6,029,054         6,681,225        6,379,179
                                                                   ----------        ---------         ---------        ---------
                                                                   16,149,790        7,798,945         7,899,168        7,325,368
                                                                   ==========        =========         =========        =========
</TABLE>

            The proforma balance sheet should be read in conjunction
             with the accompanying notes, with particular reference
                      to the assumptions set out in Note 2.

                                      24.
<PAGE>

                             AXON INSTRUMENTS, INC.

                        COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                      SIX MONTHS
                                                                         ENDED              YEARS ENDED DECEMBER 31,
                                                                        JUNE 30,          --------------------------
                                                                          1999             1998             1997
                                                                      -----------       -----------      -----------
                                                                           US$              US$              US$
<S>                                                                   <C>               <C>              <C>
Net sales                                                               6,551,079        13,917,742       11,683,339

Cost of sales                                                           2,919,621         5,869,648        4,862,751
                                                                      -----------       -----------      -----------
Gross profit                                                            3,631,458         8,048,094        6,820,588

Operating expenses:
Research and development                                                1,924,016         3,359,472        2,864,661
Selling, general and administrative                                     2,435,135         4,386,823        3,604,146
                                                                      -----------       -----------      -----------
Total operating expenses                                                4,359,151         7,746,295        6,468,807
                                                                      -----------       -----------      -----------

(Loss) income from operations                                            (727,693)          301,799          351,781

Other income and expenses:
Interest income, net                                                       20,968            49,471           95,692
                                                                      -----------       -----------      -----------

(Loss) income before provision for income taxes                          (706,725)          351,270          447,473

(Benefit from) provision for income taxes                                 (43,615)           42,330          108,585
                                                                      -----------       -----------      -----------
Net (loss) income                                                        (663,110)          308,940          338,888
                                                                      ===========       ===========      ===========

Axon Instruments, Inc.

   Basic net (loss) income per share                                        (0.00)             0.00             0.00
                                                                      ===========       ===========      ===========
   Diluted net (loss) income per share                                      (0.00)             0.00             0.00
                                                                      ===========       ===========      ===========
   Shares used in computing basic net income (loss) per share         281,272,968       281,272,968      281,272,968
                                                                      ===========       ===========      ===========
   Shares in computing diluted net income (loss) per share            281,272,968       281,272,968      281,272,968
                                                                      ===========       ===========      ===========
Axon Research Pty. Limited

   Basic net income (loss) per share                                         0.00              0.02             0.00
                                                                      ===========       ===========      ===========
   Diluted net income (loss) per share                                       0.00              0.02             0.00
                                                                      ===========       ===========      ===========
   Shares used in computing basic net income (loss) per share           1,000,000         1,000,000        1,000,000
                                                                      ===========       ===========      ===========
   Shares in computing diluted net income (loss) per share              1,000,000         1,000,000        1,000,000
                                                                      ===========       ===========      ===========
</TABLE>

                                      25.
<PAGE>

                             AXON INSTRUMENTS, INC.

                   COMBINED STATEMENT OF SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>

                          AXON INSTRUMENTS, INC.    AXON RESEARCH PTY. LTD.
                               COMMON STOCK               COMMON STOCK                      ACCUMULATED
                          ---------------------     ----------------------                     OTHER                      TOTAL
                                                                             ADDITIONAL    COMPREHENSIVE   RETAINED    SHAREHOLDERS'
                            SHARES        AMOUNT     SHARES        AMOUNT     CAPITAL         INCOME       EARNINGS       EQUITY
                          ----------      ------    ---------      ------    ---------      ------------   --------     -----------
                                            US$                      US$         US$            US$           US$            US$
<S>                      <C>              <C>       <C>            <C>       <C>           <C>             <C>         <C>
Balances at

December 31, 1996        281,272,968      10,548    1,000,000       7,943      237,708              0      5,807,996      6,064,195

Net income                                                                                                   338,888
Translation adjustment                                                                        (23,904)
Balances at              -----------      ------    ---------       -----      -------        -------      ---------      ---------
December 31, 1997        281,272,968      10,548    1,000,000       7,943      237,708        (23,904)     6,146,884      6,379,179

Net income                                                                                                   308,940
Translation adjustment                                                                         (6,894)
Balances at              -----------      ------    ---------       -----      -------        -------      ---------      ---------
December 31, 1998        281,272,968      10,548    1,000,000       7,943      237,708        (30,798)     6,455,824      6,681,225

Net (loss)                                                                                                  (663,110)
Translation adjustment                                                                         10,939
Balances at              -----------      ------    ---------       -----      -------        -------      ---------      ---------
June 30, 1999            281,272,968      10,548    1,000,000       7,943      237,708        (19,859)     5,792,714      6,029,054
                         ===========      ======    =========       =====      =======        =======      =========      =========
</TABLE>

                                      26.
<PAGE>

                             AXON INSTRUMENTS, INC.

                        COMBINED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                       SIX MONTHS
                                                                          ENDED              YEARS ENDED DECEMBER 31,
                                                                         JUNE 30,          -------------------------
                                                                          1999              1998              1997
                                                                        ---------          -------------------------
                                                                           US$               US$               US$
<S>                                                                    <C>                 <C>             <C>
OPERATING ACTIVITIES

Net (loss) income                                                        (663,110)          308,940          338,888
Adjustments to reconcile net (loss) income to net cash provided
   by operating activities:
   Depreciation and amortization                                          199,866           379,611          362,979
   (Gain) loss on disposal of equipment and leasehold
     improvements                                                          (5,111)           (5,568)             494
   Deferred income taxes                                                  (33,157)          (88,480)         (42,319)
   Changes in operating assets and liabilities:
     Accounts receivable                                                  548,555          (863,689)          39,523
     Accounts receivable - employee                                         5,953           (54,821)         (16,846)
     Accounts receivable - related party                                   (4,279)            1,523           (3,962)
     Inventories                                                       (1,184,590)          124,343         (394,161)
     Income taxes receivable                                              (12,231)          122,127         (183,200)
     Other current assets                                                 (62,823)          (41,497)         (35,263)
     Accounts payable                                                     281,422           144,270           15,941
     Accrued liabilities                                                  120,652           134,319         (137,395)
     Advances from customers                                              134,393            (8,555)         (60,424)
     Income taxes payable                                                       -                 -         (158,099)
     Employee entitlement provisions                                        7,923             6,329                -
                                                                        ---------         ---------        ---------
   Net cash (used in) provided by operating activities                   (666,537)          158,852         (273,844)
                                                                        =========         =========        =========

INVESTING ACTIVITIES

Acquisition of equipment and leasehold improvements                      (176,309)         (415,086)        (203,450)
Deposits and other assets                                                       -            (1,199)            (507)
                                                                        ---------         ---------        ---------
Net cash (used in) investing activities                                  (176,309)         (416,285)        (203,957)
                                                                        ---------         ---------        ---------

Net (decrease) in cash and cash equivalents                              (842,846)         (257,433)        (477,801)
Cash and cash equivalents at beginning of period                        1,395,956         1,653,389        2,131,190
                                                                        ---------         ---------        ---------
Cash and cash equivalents at end of period                                553,110         1,395,956        1,653,389
                                                                        =========         =========        =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid during the period for interest                                        -               283            1,904
                                                                        =========         =========        =========
Cash paid during the period for income taxes                               22,470                 -          490,859
                                                                        =========         =========        =========
</TABLE>

                                      27.
<PAGE>

                             AXON INSTRUMENTS, INC.

                   COMBINED STATEMENTS OF COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                      SIX MONTHS
                                                                         ENDED               YEARS ENDED DECEMBER 31,
                                                                        JUNE 30,             ------------------------
                                                                          1999               1998             1997
                                                                       ----------           -------          -------
                                                                           US$                US$              US$
<S>                                                                   <C>                   <C>              <C>
Net (loss) income                                                        (663,110)          308,940          338,888
Other comprehensive income, net of tax Foreign currency
   translation adjustments (net of $nil tax effect)                        10,939            (6,894)         (23,904)
                                                                      -----------           -------          -------
Comprehensive (loss) income during period                                (652,171)          302,046          314,984
                                                                      ===========           =======          =======
</TABLE>

                                      28.
<PAGE>

                             AXON INSTRUMENTS, INC.

                     NOTES TO COMBINED FINANCIAL STATEMENTS

1.    SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

Axon Instruments, Inc. ("Axon" or the "Company") is a California corporation
that designs, manufactures, and markets electronic instrumentation and software
for cellular neurosciences and biophysical research.

BASIS OF PRESENTATION

The combined financial statements as at and for the periods ended 30 June 1999
and 31 December 1998 and 1997 include results of operations of the Company and
its wholly owned subsidiary, Axon Instruments (Europe) GmbH, and the results of
Axon Research Pty. Limited, a company under common majority shareholder
ownership. Significant intercompany accounts and transactions have been
eliminated upon combination. Accounts denominated in foreign currencies have
been remeasured using the U.S. dollar as the functional currency.

The proforma consolidated balance sheet has been prepared to reflect the
position of Axon Instruments, Inc. as at June 30, 1999 after accounting for
material transactions subsequent to period end that are associated with the
listing, changes to the group structure or those that are considered once off
such that an exclusion would mislead the proposed readers of the financial
statements, as set out in Note 2.

OPERATIONS AND FINANCING

The Company is substantially dependent upon external financing to pursue its
intended business activities. The Company has, during the six months ended June
30, 1999, incurred a net loss of US$663,110. Losses have resulted principally
from costs incurred in research and development activities, marketing, and
product introduction expenses, and from general and administrative costs. The
Company's ability to return to profitable operations is dependent on its ability
to successfully market and sell its products, to enter into agreements for
product development and commercialization with corporate partners, and to
cost-effectively manufacture its products. There can be no assurance that the
Company will continue to be able to develop, commercialize, patent, manufacture,
and market its products, or achieve sustained profitability. The Company's
ultimate success also depends on its ability to secure financing. If such
financing is not available, the Company may need to reevaluate its operating
plans, and management has the intent, and believes it has the ability, to delay
or reduce expenditures so as not to require additional financial resources if
such resources were not available.

USE OF ESTIMATES

The preparation of the combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the combined financial
statements and accompanying notes. Actual results could differ from these
estimates.

CASH AND CASH EQUIVALENTS

The Company considers all cash deposits and highly liquid investments purchased
with an original maturity of three months or less to be cash and cash
equivalents. Cash equivalents represent money market funds and government
treasury bills.

CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of trade receivables. The Company markets its
products primarily to universities and research institutions in the United
States and internationally (see Note 8). The Company performs ongoing
evaluations of its customers' financial condition and generally requires no
collateral. The Company maintains reserves for potential credit losses, and such
losses have historically been minimal.

                                       29.
<PAGE>

                             AXON INSTRUMENTS, INC.

                     NOTES TO COMBINED FINANCIAL STATEMENTS

DEPENDENCE ON KEY SUPPLIER

The Company outsources all subassembly to a single supplier. Any significant
interruption to this arrangement could require the Company to qualify a new
subassembler, if available, and could have a material adverse effect on the
Company's results of operations and financial condition due to an inability to
supply finished products in a timely manner.

REVENUE RECOGNITION

The Company generally recognizes revenue upon shipment of its systems. Estimated
costs for insignificant postshipment obligations are accrued for at the time of
shipment. If significant postshipment obligations exist or there are concerns
about collection at the time of shipment, revenue is deferred until obligations
are met or collection occurs. Cash received in advance of product shipment or
fulfilment of postshipment obligations is recorded as deferred revenue. No
customers have been given a contractual right of return or stock rotation
privileges.

Certain of the Company's products include a significant software portion.
Software revenues are recognized when persuasive evidence of an agreement
exists, delivery of the product has occurred, no significant obligations with
regard to implementation remain, the fee is fixed or determinable, and
collection is probable. Effective January 1, 1998, the Company adopted Statement
of Position ("SOP") 97-2, "Software Revenue Recognition" ("SOP 97-2"), and SOP
98-4, "Deferral of the Effective Date of a Provision of SOP 97-2, Software
Revenue Recognition" ("SOP 98-4"). SOP 97-2 and SOP 98-4 provide guidance for
recognizing revenue on software transactions and superseded SOP 91-1. The
adoption of SOP 97-2 and SOP 98-4 did not have a material impact on the
Company's financial results.

In December 1998, the American Institute of Certified Public Accountants issued
SOP 98-9, "Modification of SOP 97-2, Software Revenue Recognition, With Respect
to Certain Transactions" ("SOP 98-9"). SOP 98-9 amends SOP 98-4 to extend the
deferral of the application of certain passages of SOP 97-2 provided by SOP 98-4
through fiscal years beginning on or before March 15, 1999. All other provisions
of SOP 98-9 are effective for transactions entered into in fiscal years
beginning after March 15, 1999. The Company has not yet determined the full
effect of the final adoption of SOP 98-9 on its financial condition or results
of operations.

COMPREHENSIVE INCOME

The combined financial statements have been prepared in accordance with SFAS No.
130, "Reporting Comprehensive Income" ("SFAS 130").

The concept of "comprehensive income" as applied to the preparation of the
combined statement of comprehensive income is not yet recognised under
Australian GAAP. However, in the form in which it applies under US GAAP, it is a
similar concept to that prescribed in the revised AASB 1018 "Statement of
Financial Performance", paragraph 4.3, which will be applicable to entities with
financial years ending on or after 30 June 2001.

ADVERTISING EXPENSE

The cost of advertising is expensed as incurred. The Company incurred US$32,265,
US$60,622, and US$53,502 in advertising costs during 1999, 1998, and 1997,
respectively.

INCOME TAXES

The Company provides for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("FAS 109"). Under FAS 109, the
liability method is used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.

                                       30.
<PAGE>
                             AXON INSTRUMENTS, INC.

                     NOTES TO COMBINED FINANCIAL STATEMENTS

NET INCOME (LOSS) PER SHARE

Basic and diluted net income (loss) per share have been calculated using the
weighted-average common shares outstanding during the periods in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"), issued by the Financial Accounting Standards Board.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is computed on a
currently adjusted standard basis, which approximates actual cost on a current
average or first-in, first-out basis. The Company makes inventory provisions for
potentially excess and obsolete inventory based on backlog and forecast demand.
However, such backlog demand is subject to revisions, cancellations, and
rescheduling. Actual demand will inevitably differ from such backlog and
forecast demand, and such differences may be material to the financial
statements.

Inventories consist of the following:

<TABLE>
<CAPTION>
                                    PROFORMA
                                  CONSOLIDATED
                                     JUNE 30,          COMBINED JUNE 30,         COMBINED DECEMBER 31,
                                  -------------        -----------------       ------------------------
                                      1999                  1999                 1998           1997
                                  -------------        -----------------       ---------      ---------
                                      US$                     US$                 US$            US$
<S>                               <C>                  <C>                     <C>            <C>
Raw material                          1,167,230                1,167,230         577,669        495,265
Work-in-process                         747,696                  747,696         543,470        497,125
Finished goods                          881,483                  881,483         490,680        743,772
                                      ---------                ---------       ---------      ---------
                                      2,796,409                2,796,409       1,611,819      1,736,162
                                      =========                =========       =========      =========
</TABLE>

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Equipment and leasehold improvements are stated at cost, less accumulated
depreciation and amortization. Depreciation of equipment is provided on the
double-declining balance method over the estimated useful lives of the assets,
which range from three to five years. Leasehold improvements are amortized using
the straight-line method over the shorter of the estimated useful life or the
lease term.

Equipment and leasehold improvements consist of the following:

<TABLE>
<CAPTION>

                                    PROFORMA
                                  CONSOLIDATED                                   COMBINED DECEMBER 31,
                                     JUNE 30,          COMBINED JUNE 30,       ------------------------
                                       1999                  1999                1998           1997
                                  -------------        -----------------       ---------      ---------
                                      US$                     US$                 US$            US$
<S>                               <C>                  <C>                     <C>            <C>
Machinery and equipment               1,228,359                1,228,359       1,122,101        929,193
Office furniture and fixtures           238,098                  238,098         233,061        227,871
Computer equipment                    1,419,328                1,419,328       1,357,691      1,187,299
                                      ---------                ---------       ---------      ---------
Leasehold improvements                  447,468                  447,468         438,557        413,126
                                      ---------                ---------       ---------      ---------
                                      3,333,253                3,333,253       3,151,410      2,757,489
Less accumulated

depreciation and amortization         2,810,062                2,810,062       2,616,585      2,262,563
                                      ---------                ---------       ---------      ---------
                                        523,191                  523,191         534,825        494,926
                                      =========                =========       =========      =========
</TABLE>

                                       31.
<PAGE>

                             AXON INSTRUMENTS, INC.

                     NOTES TO COMBINED FINANCIAL STATEMENTS

INVESTMENTS

From March 1994 to September 1999, the Company held more than 20% of the share
capital of Optiscan Imaging Limited ("Optiscan"). In September 1999, the Company
sold part of its investment in Optiscan. The investment, previously equity
accounted for, has been accounted for under the cost method for all periods
presented, as the Company no longer has the capacity to exert significant
influence over Optiscan.

SOFTWARE DEVELOPMENT COSTS

Product development costs include costs related to software products that are
expensed as incurred until the technological feasibility of the product is
established. After technological feasibility is established, any additional
costs are capitalized in accordance with Statement of Financial Accounting
Standards No. 86, "Accounting for the Cost of Computer Software to be Sold,
Leased, or Otherwise Marketed" ("FAS 86"). Based on the Company's product
development process, technological feasibility is established upon the
completion of a working model. Costs incurred by the Company between the
completion of the working model and the point at which the product is ready for
general release have been insignificant. Therefore, through June 30, 1999, the
Company has charged all such costs to research and development expense in the
period incurred.

STOCK-BASED COMPENSATION

In October 1995, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS
123"). The Company has elected to account for employee stock options in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" and to adopt the "disclosure only" alternative
described in FAS 123.

LONG LIVED ASSETS

In 1996, the Company adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" ("FAS 121"). FAS 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the nondiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amounts. The Company evaluates the net
realizable value of long-lived assets periodically on the basis of nondiscounted
cash flows in accordance with FAS 121 and has found no impairment to date.

RECLASSIFICATION

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

                                      32.
<PAGE>

                             AXON INSTRUMENTS, INC.

                     NOTES TO COMBINED FINANCIAL STATEMENTS

NET INCOME (LOSS) PER SHARE

Basic and diluted net income (loss) per share have been calculated using the
weighted-average common shares outstanding during the periods in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"), issued by the Financial Accounting Standards Board.

The following tables set forth the computation of basic and diluted net income
(loss):

AXON INSTRUMENTS, INC.

<TABLE>
<CAPTION>

                                                               SIX MONTHS ENDED                  YEARS ENDED DECEMBER 31,
                                                                JUNE 30, 1999              -------------------------------------
                                                                     1999                      1998                      1997
                                                               ----------------            -----------               -----------
                                                                      US$                      US$                       US$
<S>                                                            <C>                         <C>                       <C>
Net (loss) income                                                      (663,957)               286,515                   338,715
                                                                    ===========            ===========               ===========
Shares used in computing basic net
   income (loss) per share                                          281,272,968            281,272,968               281,272,968
                                                                    ===========            ===========               ===========
Basic net income (loss) per share                                         (0.00)                  0.00                      0.00
                                                                    ===========            ===========               ===========
Calculation of shares outstanding for
   computing diluted net income (loss)
   per share:
   Shares used in computing basic net
     income (loss) per share                                        281,272,968            281,272,968               281,272,968
   Shares used to reflect the effect of the
     assumed conversion of employee
     stock options                                                           --             86,504,504                62,691,766
                                                                    -----------            -----------               -----------
Shares used in computing fully-diluted
   net income (loss) per share                                      281,272,968            367,777,472               343,964,734
                                                                    ===========            ===========               ===========
Diluted net income (loss) per share                                       (0.00)                  0.00                      0.00
                                                                    ===========            ===========               ===========
</TABLE>

Options to purchase 95,824,271 shares of the Company's common stock at June 30,
1999 were excluded from the computation of diluted net loss per share as they
had an antidilutive effect.

                                      33.
<PAGE>

                           AXON INSTRUMENTS, INC.

                     NOTES TO COMBINED FINANCIAL STATEMENTS

The following tables set forth the computation of basic and diluted net income
(loss):

AXON RESEARCH PTY. LIMITED

<TABLE>
<CAPTION>
                                                                             SIX MONTHS
                                                                               ENDED
                                                                              JUNE 30            YEARS ENDED DECEMBER 31,
                                                                               1999               1998             1997
                                                                             ----------        ----------        ---------
                                                                                US$               US$               US$
<S>                                                                          <C>               <C>               <C>
Net income                                                                          847            22,425              173
                                                                              =========        ==========        =========
Shares used in computing basic net income per share                           1,000,000         1,000,000        1,000,000
                                                                              =========        ==========        =========
Basic net income per share                                                        (0.00)             0.02             0.00
                                                                              =========        ==========        =========
Calculation of shares outstanding for computing diluted net income per
    share:
    Shares used in computing basic net income per share                       1,000,000         1,000,000        1,000,000
                                                                              ---------        ----------        ---------
Shares used in computing fully-diluted net income per share                   1,000,000         1,000,000        1,000,000
                                                                              =========        ==========        =========
Diluted net income per share                                                       0.00              0.02             0.00
                                                                              =========        ==========        =========
</TABLE>

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
133"), which will be effective for the year ending December 31, 2001. This
statement establishes accounting and reporting standards requiring that every
derivative instrument, including certain derivative instruments embedded in
other contracts, be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statement also requires that changes
in the derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. Axon believes the adoption of SFAS 133 will not
have a material effect on the financial statements, since it currently does not
invest in derivative instruments and engage in hedging activities.

In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") No. 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 requires
that entities capitalize certain costs related to internal-use software once
certain criteria have been met. Axon is required to adopt SOP 98-1 effective
January 1, 1999. Axon believes that the adoption of SOP 98-1 will not have a
material impact on its financial statements.

2.    ASSUMPTIONS USED IN COMPILING THE PROFORMA CONSOLIDATED BALANCE SHEET

The proforma consolidated balance sheet has been prepared to reflect the
position of Axon Instruments, Inc. as at June 30, 1999 after accounting for
material transactions subsequent to period end that are associated with the
listing, changes to the group structure or those that are considered once off
such that an exclusion would mislead the proposed readers of the financial
statements. The proforma consolidated balance sheet has been compiled as if the
following transactions and events had occurred at June 30, 1999. The proforma
consolidated balance sheet has not taken into account those events noted as
subsequent set out in Note 10, on the basis that they have arisen under normal
trading conditions.

                                      34.
<PAGE>

                             AXON INSTRUMENTS, INC.

                     NOTES TO COMBINED FINANCIAL STATEMENTS

A.    CASH

<TABLE>
<CAPTION>
                                                                             US$
                                                                          ---------
<S>                                                                       <C>
Cash reconciled as follows:
   Cash held as at June 30, 1999 as per pre-listing combined
     balance sheet                                                          553,110
   Proceeds due to Axon Instruments, Inc. from Public Offer
     (Note 2B)                                                            8,890,000
   Cost of listing (Note 2B)                                               (952,500)
   Proceeds from Offer of Options (Note 2B)                                  82,536
   Proceeds on sale of part of investment in Optiscan Imaging
     Limited (Note 10)                                                      562,165
   Settlement of acquisition of subsidiary                                 (155,179)
                                                                          ---------
   Cash held as per proforma consolidated balance sheet                   8,980,132
                                                                          =========
</TABLE>

B.       SHARE CAPITAL

<TABLE>
<CAPTION>
                                                                                  NUMBER
                                                                                 OF SHARES              US$
                                                                                -----------          ---------
<S>                                                                             <C>                  <C>
Issued share capital as at June 30, 1999                                        282,272,968              18,491

Consolidation of Subsidiary Entity
Elimination of the share capital of Axon Research Pty Ltd on
  acquisition                                                                    (1,000,000)            (7,943)
                                                                                -----------          ---------
                                                                                281,272,968             10,548
Share Issue to the Public
Pursuant to the offer under this Prospectus, Axon Instruments, Inc. will
  issue 70,000,000 New Shares at A$0.20. The proceeds of US$8,890,000
  (A$14,000,000) net of issue costs totalling US$952,500 (A$1,500,000), are
  US$7,937,500 (A$12,500,000). Issue costs have been offset against funds
  raised and are directly  attributable to the cost of the public listing        70,000,000          7,937,500
                                                                                -----------          ---------
Issued share capital as per proforma balance sheet                              351,272,968          7,948,048
                                                                                ===========          =========
</TABLE>

The above table is based on the assumption that no stock options are exercised
during the period 1 July 1999 until after the date of this Prospectus.

Since 1 July 1999, 384,523 existing options have been converted to fully paid
shares. As a result, upon listing, Axon is expected to have 351,657,491 issued
shares.

                                      35.
<PAGE>

                            AXON INSTRUMENTS, INC.

                     NOTES TO COMBINED FINANCIAL STATEMENTS

C.    STOCK OPTIONS

<TABLE>
<CAPTION>
                                                                                      NUMBER
                                                                                    OF OPTIONS         US$
                                                                                    -----------      -------
<S>                                                                                 <C>              <C>
Issued stock options as at June 30, 1999                                            95,824,271            --
Individual Options (See Note 6)                                                      4,100,000            --
------------------

Offer of Options (See Note 6)
----------------
Pursuant to the offer under this Prospectus, an offer will be made to
   shareholders of Circadian Technologies Limited of a maximum of 12,997,845
   options to be priced at A$0.01 each, convertible into one common share. The
   proceeds are US$82,536 (A$129,978), and the options are
   valued at US$825,360 (A$1,299,785)                                                12,997,845      825,360
                                                                                    -----------      -------

Issued stock options as per proforma balance sheet                                  112,922,116      825,360
                                                                                    ===========      =======
</TABLE>

The above table is based on the assumptions that no stock options, other than
those listed above, are issued during the period 1 July 1999 until after the
date of this Prospectus, and that no stock options are exercised during the
period 1 July 1999 until after the date of this Prospectus.

Since 1 July 1999, 384,523 existing options have been converted to fully paid
shares, 3,042,591 options have been cancelled, and a further 12,613,018 stock
options issued. As a result, upon listing, Axon is expected to have 122,108,020
issued stock options.

D.    RETAINED EARNINGS

<TABLE>
<CAPTION>
                                                                                   US$
                                                                                ---------
<S>                                                                             <C>
Retained earnings reconciled as follows:

   Retained earnings as at June 30, 1999 as per pre-listing combined            5,792,714
     balance sheet
   Elimination of pre-acquisition retained earnings of subsidiary                (147,236)
   Deemed dividend arising on offer of options to the shareholders of            (742,824)
     Circadian Technologies Limited
   Profit on sale of part of investment in Optiscan Imaging Limited               485,988
                                                                                ---------
     (Note 10)
   Retained earnings as per proforma consolidated balance sheet                 5,388,642
                                                                                =========
</TABLE>

3.    LINE OF CREDIT

The Company has a line of credit with a bank that provides for borrowings not to
exceed US$500,000. Borrowings or "advances" under the line of credit bear
interest at the bank's prime rate plus 0.75%. There were no advances under the
line of credit at December 31, 1998 or 1997. The line of credit expired in June
1999 (See Note 10).

                                      36.
<PAGE>

                             AXON INSTRUMENTS, INC.

                     NOTES TO COMBINED FINANCIAL STATEMENTS

4.    COMMITMENTS

The Company leases certain real and personal property under noncancelable
operating leases. Certain leases require the Company to pay property taxes,
insurance, and routine maintenance, and include escalation clauses. Rent expense
was approximately US$208,000 for the six months ended June 30, 1999 and
US$416,000 and US$411,000 for the years ended December 31, 1998 and 1997,
respectively.

At June 30, 1999, future minimum lease commitments under noncancelable operating
leases are as follows:

<TABLE>
<CAPTION>
                                                 US$
                                              ---------
<S>                                           <C>
2000                                            781,009
2001                                            761,932
2002                                            753,463
2003                                            768,492
2004                                            787,452
Thereafter                                       90,955
                                              ---------
                                              3,943,303
                                              =========
</TABLE>

5.    STOCK OPTION PLANS

The Company has elected to follow APB Opinion No. 25 and related interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FAS 123 requires the use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB Opinion No. 25, when the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation is recognized.

Under the 1987 Employee Stock Option Plan (the "Plan"), as amended and restated
in 1993, incentive and nonstatutory stock options may be granted by the board of
directors to employees, outside consultants, and directors. The board of
directors sets terms and conditions of stock options at the time of grant. The
Company grants stock options under the Plan at a price not less than 100% of the
fair market value of the stock at the date of grant for incentive stock options,
and 85% of the fair value at the date of grant for nonstatutory stock options as
determined by the board of directors. Generally subject to continued service,
stock options vest over a maximum period of four years and expire ten years from
the date of grant.

In 1998, the board of directors approved an increase in the shares of common
stock reserved for issuance under the Plan from 79,998,000 to 133,330,000. At
June 30,1999, the Company has 118,717,032 shares of common stock reserved for
issuance under the Plan.

                                      37.
<PAGE>

                             AXON INSTRUMENTS, INC.

                     NOTES TO COMBINED FINANCIAL STATEMENTS

The following table summarises the Company's stock option activity and related
information for the two years ended December 31,1998 and the six months ended
June 30, 1999:

<TABLE>
<CAPTION>
                                                                              WEIGHTED-AVERAGE
                                   AVAILABLE FOR GRANT   OUTSTANDING SHARES    EXERCISE PRICE
                                   -------------------   ------------------   ----------------
                                                                                      US$
<S>                                <C>                   <C>                  <C>
Outstanding at December 31, 1997

                                             2,693,266           62,691,766               0.02
  Reserved                                  53,332,000                   --                 --
  Granted                                  (24,479,388)          24,279,388               0.02
  Cancelled                                    666,650             (666,650)              0.02
                                   -------------------   ------------------   ----------------
Outstanding at December 31, 1998
                                            32,212,528           86,504,504               0.02
  Granted                                   (9,319,767)           9,319,767               0.05
                                   -------------------   ------------------   ----------------
Outstanding at June 30, 1999                22,892,761           95,824,271               0.02
                                   ===================   ==================   ================
</TABLE>

The following table summarises information about stock options outstanding at
June 30, 1999:

<TABLE>
<CAPTION>
                               Options Outstanding                          Options Exercisable
                 ------------------------------------------------   -----------------------------------
                                                 Weighted-Average
Exercise Price   Number of    Weighted-Average      Remaining          Number of       Weighted-Average
    Range          Shares      Exercise Price    Contractual Life        Shares         Exercise Price
--------------   ----------   ----------------   ----------------   ----------------   ----------------
     US$                            US$             (In years)                               US$
<S>              <C>          <C>                <C>                <C>                <C>
     0.02-0.05   95,824,271        0.02               6.79              65,589,902           0.02
</TABLE>

PROFORMA DISCLOSURES

Proforma information regarding net income (loss) is required by FAS 123, which
also requires that the information be determined as if the Company has accounted
for its employee stock options granted subsequent to December 31, 1994 under the
fair value method. The fair value for these options was estimated at the date of
grant using the minimum value method with the following weighted-average
assumptions for the six months ended June 30, 1999 and the years ended December
31, 1998 and 1997: risk-free interest rates of 4.7%, 5.8% and 6.3%,
respectively; no dividend yield; no volatility; and an expected life of the
options of five, five, and six years, respectively.

The minimum value method requires the input of highly subjective assumptions,
including the expected life and exercise date of each option. Because the
Company's incentive and nonstatutory stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

                                       38.

<PAGE>

                             AXON INSTRUMENTS, INC.

                     NOTES TO COMBINED FINANCIAL STATEMENTS

For purposes of proforma disclosures, the estimated fair value of the options is
amortized to expense over the options' vesting period. Proforma information
relates to the results of Axon Instruments, Inc. as these were the only stock
option plans in existence during the periods presented. The Company's proforma
information follows:

<TABLE>
<CAPTION>
                                 SIX MONTHS ENDED JUNE 30,   YEARS ENDED DECEMBER 31,
                                 -------------------------   ------------------------
                                           1999                 1998          1997
                                 -------------------------   --------        --------
                                            US$                 US$           US$
<S>                              <C>                         <C>             <C>
Net (loss) income                        (663,957)            286,505         337,715
Less:  Compensation expense               (78,193)            (40,487)        (26,318)
                                 ----------------            --------        --------

Proforma net (loss) income               (742,150)            246,028         312,397
                                 ================            ========        ========
Proforma net (loss) income per
   share:
   Basic                                    (0.00)               0.00            0.00
                                 ================            ========        ========
   Diluted                                  (0.00)               0.00            0.00
                                 ================            ========        ========
</TABLE>

The weighted-average fair value of options granted during the six months ended
June 30, 1999 and the years ended December 31, 1998 and 1997 was US$0.01 per
share for all periods presented.

Because FAS 123 is applicable only to options granted subsequent to December 31,
1994, its proforma effect will not be fully reflected until subsequent years.
The effects on proforma disclosures of applying FAS 123 are not likely to be
representative of the effects on proforma disclosures in future years.

6.    SHARE CAPITAL

STOCK SPLIT

On December 7, 1999, the Company's board of directors approved a 266.66-for-1
stock split of the Company's common stock. All share amounts included in the
accompanying financial statements have been retroactively adjusted to reflect
these changes.

CIRCADIAN ENTITLEMENT

In conjunction with the proposed listing on the Australian Stock Exchange, the
board of Axon has approved the offer and sale of 12,997,845 options to
shareholders of Circadian Technologies Limited, which is a significant
shareholder of Axon. The options will be priced at A$0.01 each and will give the
Circadian shareholders the right to buy one share of common stock in Axon for
A$0.20 at any time on or before 5 years after the date of grant of the option,
for every 2.5 shares held in Circadian at the record date (the date 10 business
days after the ASX quotation of Axon securities). The options have been valued
at A$0.10 each using the Black-Scholes model and the following assumptions;
volatility of 0.5, risk-free interest rate of 6%, an exercise price of A$0.20,
an estimated life of 5 years, and a dividend yield of 0%. The Black-Scholes
value of the options (US$742,824) will result in a deemed dividend and reduce
retained earnings available to common shareholders. The offer and sale of
options to the shareholders of Circadian has been included in the proforma
adjustments as at 30 June 1999.

                                       39.

<PAGE>

                             AXON INSTRUMENTS, INC.

               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

RIGHTS ATTACHING TO INDIVIDUAL OPTIONS

The Company has granted the following options not pursuant to the stock plan.

<TABLE>
<CAPTION>
                                EXERCISE
                  NUMBER OF      PRICE
                   OPTIONS       A$
<S>               <C>           <C>
Geoffrey Powell   2,000,000       0.20
Stanley Crooke    1,400,000       0.20
Alan Stockdale      400,000       0.20
Chris Belyea        200,000       0.20
David Kenley        100,000       0.20
</TABLE>

The rights attaching to the options are the same as the rights attaching to the
options as set out above in the Circadian Entitlement, except for the options
granted to Alan Stockdale and Stanley Crooke.

The Individual Options granted to Alan Stockdale and Stanley Crooke are for 5
years and may be exercised in the following proportions from the following
dates:

<TABLE>
<S>          <C>                                                  <C>
(a)          the date 1 year after the issue of the options        25%
(b)          the date 2 years after the issue of the options       50%
(c)          the date 3 years after the issue of the options       75%
(d)          the date 4 years after the issue of the options      100%
</TABLE>

DIRECTORS' INTERESTS

Set out below are details of the interests of the Directors in the securities of
Axon immediately prior to lodgement of the Prospectus with the ASIC for
registration:

<TABLE>
<CAPTION>
DIRECTOR          UNDERLYING SHARES    OPTIONS
<S>               <C>                 <C>
Alan Finkel          99,997,500*      10,399,740
Geoffrey Powell              --       38,532,420
Alan Stockdale               --          400,000
Henry Lester                 --        3,733,240
Stanley Crooke               --        1,400,000
</TABLE>

*Alan Finkel's spouse, Elizabeth Finkel, also holds 99,997,500 Underlying
Shares.

7.    401(k) PLAN

In January 1993, the Company adopted a defined contribution plan that qualifies
under Section 401(k) of the Internal Revenue Code. U.S. employees who meet
certain minimum eligibility criteria may elect each quarter to have salary
reduction contributions made to the plan. The Company may make contributions to
the 401(k) plan at the discretion of the board of directors. The Company's
contributions for the six months ended June 30,1999 and the years ended December
31, 1998 and 1997 were US$86,897, US$148,322 and US$121,351, respectively.

                                       40.

<PAGE>

                             AXON INSTRUMENTS, INC.

               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

8.    INDUSTRY AND GEOGRAPHIC INFORMATION

In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information" ("SFAS 131"), effective for financial
statements for periods beginning after December 15, 1997. SFAS 131 establishes
standards for the way that public business enterprises report financial and
descriptive information about reportable operating segments in annual financial
statements and interim financial reports issued to shareholders. Axon operates
in one segment. Operating losses generated by the foreign operations of Axon and
their corresponding identifiable assets were not material in any period
presented.

The Company markets its products in both the United States and foreign countries
through its sales personnel and distributors. Substantially all of the Company's
assets are in the United States. All sales are accepted and approved in the
United States. The Company's sales into different geographic areas were as
follows:

<TABLE>
<CAPTION>
                          SIX MONTHS ENDED JUNE 30,         YEARS ENDED DECEMBER 31,
                          -------------------------    -----------------------------------
                                    1999                     1998             1997
                          -------------------------    ----------------   ----------------
                             US%                           US%               US%
<S>                       <C>                   <C>    <C>          <C>   <C>          <C>
United States             3,528,079              54%    7,367,742    53%   5,946,339    51%
Western Europe            1,364,000              21%    3,333,000    24%   2,758,000    23%
Japan                       650,000              10%    1,012,000     7%     968,000     8%
Canada and Mexico           400,000               6%      775,000     6%     668,000     6%
Asia                        312,000               5%      578,000     4%     549,000     5%
Other foreign countries     297,000               4%      852,000     6%     794,000     7%
                          ---------             ---    ----------   ---   ----------   ---
                          6,551,079             100%   13,917,742   100%  11,683,339   100%
                          =========             ===    ==========   ===   ==========   ===
</TABLE>

9.    INCOME TAXES

Provision (benefit) for income taxes consists of:

<TABLE>
<CAPTION>
                                        DECEMBER 31,
                           JUNE 30,   -----------------
                             1999       1998     1997
                           --------   -------   -------
                             US$        US$       US$
<S>                        <C>        <C>       <C>
Current:
   U.S. federal                  --    97,990   149,767
   U.S. state and local         800    24,137    (7,066)
   Foreign (Australian)       1,773     8,683     8,203
                           --------   -------   -------
                              2,573   130,810   150,904
                           --------   -------   -------
Deferred:

   U.S. federal            (162,262)  (46,680)  (27,254)
   U.S. state and local     116,074   (41,800)  (15,065)
                           --------   -------   -------
                            (46,188)  (88,480)  (42,319)
                           --------   -------   -------
Benefit for income taxes    (43,615)   42,330   108,585
                           ========   =======   =======
</TABLE>

                                       41.
<PAGE>

                             AXON INSTRUMENTS, INC.

               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

Deferred income taxes reflect the net tax effects of tax carryovers and
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the deferred tax assets and liabilities as of June 30,
1999 and December 31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                                                   DECEMBER 31,
                                                JUNE 30,               ----------------------------------
                                                 1999                     1998                     1997
                                              ---------                --------                   -------
                                                 US$                      US$                       US$
<S>                                           <C>                      <C>                       <C>
Deferred tax assets:
   Net operating loss carryovers                139,031                      --                        --
   Tax credit carryovers                        235,845                 112,092                    15,894
   Inventory reserves                           203,858                 127,057                    83,502
   Book/tax depreciation differences            167,809                 166,417                   146,073
   Accrued expenses not currently
     deductible                                  50,931                  64,234                    90,756
   Long-term equity investments                 256,926                 236,618                   145,950
                                              ---------                 -------                   -------
Total deferred tax assets                     1,054,400                 706,418                   482,175

                                               (596,539)               (281,714)                 (145,951)
                                              ---------                 -------                   -------
Less valuation allowance                        457,861                 424,704                   336,224
                                              =========                 =======                   =======
</TABLE>

The valuation allowance increased US$57,955 during the year ended December 31,
1997. The valuation allowance relates to the Company taking a conservative
position in relation to future earnings. Due to the costs of product development
and uncertainty over the level of future costs associated with operating as a
public company, the Company does not believe at this time that it is more likely
than not that all of its deferred tax assets will be realized in the foreseeable
future. Accordingly, a valuation allowance has been established against those
deferred tax assets which the Company does not believe at this time are more
likely than not to be realized in the foreseeable future. Realizability of the
deferred tax assets will be reviewed on a semiannual basis.

The following is a reconciliation between statutory federal income taxes and the
total provision (benefit) for income taxes.

<TABLE>
<CAPTION>
                                                                                                     DECEMBER 31,
                                                             JUNE 30,                      ----------------------------------
                                                               1999                         1998                       1997
                                                              -------                      ------                     -------
                                                                US$                         US$                         US$
<S>                                                          <C>                          <C>                         <C>
Income (loss) before taxes                                   (706,725)                    351,270                     447,473
Statutory federal income tax provision (benefit)             (240,287)                    119,432                     152,141
State taxes, net of federal benefit                            77,137                     (11,658)                    (14,606)
Tax credits                                                   (67,649)                    (90,776)                    (49,064)
Valuation allowance                                           182,960                      14,412                          --
Foreign losses not currently benefited                         17,333                      81,637                      70,927
Other                                                         (13,109)                    (70,717)                    (50,813)
                                                             --------                     -------                     -------
                                                              (43,615)                     42,330                     108,585
                                                             ========                     =======                     =======
</TABLE>

                                       42
<PAGE>

                             AXON INSTRUMENTS, INC.

               NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

10.      SUBSEQUENT EVENTS (UNAUDITED)

LINE OF CREDIT

In July 1999, the Company secured a line of credit with a bank which allows the
Company to borrow up to US$1,250,000 under two facilities. The first facility
provides for borrowings up to US$1,000,000 (the "Accounts Receivable Credit
Facility"). All borrowings under the Accounts Receivable Credit Facility are due
on August 10, 2000 and bear interest at 1.25% above the bank's prime lending
rate. Interest on the outstanding borrowings is payable monthly. Utilization of
the line of credit has been minimal during the year ended December 31, 1999.

The second facility provides for borrowings to finance the acquisition of
equipment up to US$250,000 and is available through July 19, 2000 (the
"Equipment Credit Facility"). All borrowings under the Equipment Credit Facility
are to be repaid in equal monthly instalments over a term of between three and
eight years, as determined at the time of the advance. Borrowings under the
Equipment Credit Facility bear interest at either a fixed rate, to be determined
at the time of the advance, or at 1.00% above the bank's prime rate, at the
option of the Company.

In conjunction with the loan agreement, the Company granted the bank a security
interest in all accounts, inventory, equipment, general intangibles, and
contract rights of the Company.

INVESTMENTS

From March 1994 to September 1999, the Company held more than 20% of the share
capital of Optiscan Imaging Limited ("Optiscan"). In September 1999, the Company
sold part of its investment in Optiscan. The proceeds on sale were US$562,165,
and the profit on sale was US$485,988. The sale has been disclosed as a proforma
adjustment in the consolidated balance sheet as at June 30, 1999.

The investment, previously equity accounted for, has been accounted for under
the cost method for all periods presented, as the Company no longer has the
capacity to exert significant influence over Optiscan.

                                       43
<PAGE>

                   SECTION 9. VALUATION BY INDEPENDENT EXPERT

17 January 2000

The Directors
Axon Instruments, Inc
1101 Chess Dr
Foster City, CA 94404
United States of America

Dear Sirs

This report has been prepared in accordance with your request for an Independent
Expert's Report and Valuation for inclusion in a Prospectus for the issuance by
Axon Instruments, Inc ('Axon') of approximately 70 million shares at A$0.20.

We have been asked to provide an independent assessment on Axon's research
activities; products and product development programs; and technology assets. A
valuation of the company's intellectual property ('IP') was requested as part of
the assessment. The IP as defined in our valuation includes patents, copyrights,
in-house secrets, knowhow and expertise, market approvals and any other
intangible assets that enable the development, production and marketing of the
company's technology.

Axon has a growing business in the design, manufacturing and marketing of
instruments to the neurosciences community, and has recently entered the
surgical instruments arena and introduced a novel gene array reader.

WE OFFER THE OPINION THAT AXON'S BUSINESS VALUE (EXCLUDING ITS SHARE HOLDING IN
OPTISCAN) IS IN THE RANGE A$74.8 MILLION TO A$84.8M (mean value of A$79.7m). The
estimated value is based on extrapolation of current product sales with
historically verifiable growth and the potential for the IP behind existing and
new products to generate future income following adjustment of forecasts for
both technical and commercial risks. In determining the net present value of the
forecast cash flow we are deriving the value of the business as a whole, and
express the opinion that the gap between the net tangible assets and the risk
adjusted net present value is the value of the combined IP and company goodwill.
We further offer the opinion that the IP is the major component of the
intangible assets.

Axon holds approximately 9.6 million shares in listed company Optiscan Imaging
Limited. At the time of the valuation, 31 December 1999, this shareholding was
worth $24.3m.

Thus the values we ascribe to Axon are (A$ mil):

<TABLE>
<CAPTION>
                                         LOW VALUE        UPPER VALUE
                                         ---------        -----------
<S>                                      <C>              <C>
NTA (31 Dec 99)                            10.1             10.1
Intangible assets (IP)                     64.6             74.8
Optiscan shares                            24.3             24.3
                                           ----            -----
TOTAL                                      99.0            109.2
                                           ====            =====

</TABLE>

The cash flow model used in the valuation makes the assumption that Axon has, or
will have, sufficient funds to support further development of products,
manufacturing techniques and expanded marketing, as well as to cover any debts
that the company may have currently or will incur.

We offer the opinion that the company has a sound business with existing
products and has committed resources to the development of new technologies
which should ensure strong growth to existing products as they are enhanced or
enter new markets and should create new business opportunities through
innovative products. Axon is in a commanding position to capitalise on the
emerging DNA microarray technologies that will enable both gene discovery
programs and the application of gene technologies to diagnosis and therapy.

                                       44
<PAGE>

BACKGROUND

Axon is a developer of products for imaging, data acquisition and analysis,
physiology, electro-physiology, electrochemistry and biophysics. Products
include fluorescence imaging software, image processing boards, low-noise data
acquisition systems, low-noise microelectrode amplifiers and potentiometers,
signal-conditioning amplifiers with customizable transducer adapters, and
technical graphics and analysis software. Until recently products sales were
predominantly sold to scientific and research laboratories.

The company has developed and now markets instruments for neurosurgery and
neurology, for example an instrument used in pallidotomy for Parkinson's
disease.

The company directly employs approximately 80 people and has offices in the
United States - where most of its market is situated, and Australia - used as an
R&D base. The company has distribution in France, Germany. UK, Japan and
Australia. Sales have shown strong growth over the past five years, averaging
10%. Due to a high R&D spend of around 30% of turnover, profits in recent years
have been constrained.

The most significant advance, a direct consequence of the research effort, has
been the development of a microarray scanner, referred to as the GenePix(TM)
4000 Scanner. The instrument, which will find application in genomics research,
clinical diagnostics, drug screening and forensic testing, features novel and
patented hardware and software. The two colour scanner capitalises on technology
previously developed at Axon in imaging and data acquisition systems for
cellular neurosciences, but its design also incorporates new optomechanical
techniques as well as innovative software and electronic designs. Other genomics
products in development include a bioinformatics product for the analysis of
large quantities of DNA microarray data as well as follow on products in the
GenePix 4000 DNA microarray scanner series. Axon's management is also committed
to the development of a variety of products to be used in later stages of the
drug discovery process. Foremost among these is a fluorescent cell imaging
system used for high throughput screening of candidate drugs.

VALUATION METHODOLOGY

Our insight into the Axon IP, as well as the markets and competition for the
products, derive from discussions with relevant company principals and
development scientists and examination of individual business and research
plans.

To independently assess the markets and competition we conducted computerised
searches of the scientific, commercial and patent literature, and searches of
the Internet.

We considered a number of valuation methodologies including: establishment of
replacement value, orderly realisation of component parts, capitalisation of the
estimated maintainable earnings and Net Present Value (NPV) of future cash flows
deriving from net margins or royalties. Consideration was also given to
comparison of the IP to capital raisings, acquisitions and market capitalisation
of businesses that are developing or exploiting similar products and processes.

The technique chosen was a risk adjusted Net Present Value of future cash flows,
which adjusts discount rate in proportion with perceived commercial and
technical risks. The discount rate is traditionally determined from a number of
considerations including the cost of equity and the potential return from a risk
free alternative investment. The choice of discount rate also reflects the
technology field and industry risks involved.

Revenue forecasts used in the valuation models are based on historical sales and
growth rates for existing products, and our independent estimates of sales for
the GenePix, its derivatives and other drug discovery products such as
bioinformatics software and high throughput fluorescence cell screening systems.
GenePix sales derive from estimates of market size and competition, the current
high level of interest in the product, and product pricing as deemed competitive
in current markets and based on reliable manufacturing costs and overhead
expenses.

ASSUMPTIONS

Projected revenues for Neurosciences Products are based on the historical sales
with continued growth at the average rate achieved over the previous five years
of 10%.

The Clinical Products sales, a new business area, are extrapolations of the 1998
figure with growth rates of 12% pa.

GenePix Microarray sales are assumed to be 200 units, at US$50,000 each in
calendar year 2000, followed by growth rates of 50%, 50% and 39% for the
subsequent three years. Estimated sales for 1999 are approximately 50.

                                       45
<PAGE>

The following additional assumptions have been used in our valuation model:

-        The value has been determined as at 31 December 1999;

-        We have utilised current ratios for expenses to revenues as achieved by
         the company over the past five years, except for R&D expenditure. The
         company has maintained a high R&D investment culminating at 31% of
         turnover for the past two years. We have assumed that, as the current
         range of products approaches completion, the company will return to an
         R&D spend of 20% of turnover declining to 10% by 2003;

-        We have not included any tax benefit that may derive from R&D expenses
         but have assumed that R&D is written of as expended;

-        Before tax discount rates from 24% to 28% have been used in determining
         the net present value of future cash flows, corresponding to our view
         that there are minor technical risks associated with completing product
         development and moderate commercial risk in achieving the revenue
         forecasts;

-        The NPV thus determined is assumed to be indicative of the overall
         business value. To determine the value of intangible assets, assumed to
         be LP and goodwill, we have deducted the company's net tangible assets
         as at 30 June 1999;

-        The analysis is in constant 1999 dollars and no consideration has been
         allowed for inflation. The discount rate is, therefore, a real rate. A
         conversion rate of US$0.63 per Australian dollar has been used.

THE MARKETS & COMPETITION

Increasing genetic knowledge is generating unprecedented demand for genearray
technologies. Large-scale sequencing programs, polymorphism discovery efforts,
and growing interest in pharmacogenomics are all generating a greater
understanding of genes and their role in health and disease.

There is considerable excitement over the potential for genearray technology,
but to date the biomedical research community has had limited access to suitable
instruments. To some extent the consumer is faced with a variety of incomplete
technologies and is expected to `mix and match' to suit his/her particular
application. This is changing as companies enter the market with more advanced
and comprehensive instrumentation and as DNA chips, or slides, probes and clones
become commercially available. Companies active in the area include Affymetrix,
Clontech, Genometrix, Incyte and its subsidiary Synteni (DNA chips, slide arrays
and filters), and Molecular Dynamics, Hewlett Packard and Fuji (readers).

To arrive at an estimate of the potential market size for the microarray
technology, a technology that is currently in the process of creating a market,
we considered comparison with DNA sequencer sales. Initial sales of the
microarray technology will be to research laboratories conducting activities
similar to those performed by DNA sequencers. As researchers move from gene
sequencing to the next important task of assigning function, followed by the use
of probes and markers to evaluate new tests and investigate disease processes
and incidence, they will implement microarray technology to expedite activities.

Recent estimates of the annual value of gel electrophoresis DNA sequencing
technology, instruments and reagents, range between US$500m and US$1,000m. Based
on other biotechnology instrumentation figures, 60% of these amounts could be
due to instrumentation itself.

Such an estimate would suggest 3,000 to 6,000 instruments a year.

An approximate breakdown by region would be:

<TABLE>
<S>                       <C>
North America             41%
Europe                    27%
Japan                     21%
Pacific Rim                5%
Latin America              1%
Rest of world              5%
</TABLE>

                                      46.

<PAGE>

It has been estimated that world sales of molecular diagnostics and gene
detection products will increase rapidly during the next few years, reaching
US$800 million by the millennium compared with US$360 million in 1996. The
number of molecular diagnostic tests performed by clinical laboratories is still
extremely small, but this is the fastest growing segment of the diagnostics
market.

Our second approach aimed to derive a market based on the numbers of
laboratories capable of using such an instrument. In the first instance these
may be research facilities involved in gene identification, and drug and
biotechnology companies. Many of these organisations may acquire multiple
instruments.

As probes are already available for oncogene detection, the technology will be
utilised by cancer research units, extending to pathology laboratories. Use in
medical research and pathology can be expected to grow as probes become
available for genetic and other diseases. Forensic applications will also be
important.

In 1993 in the United States, there were roughly 29,000 medical laboratories,
13,000 in Canada and 31,000 in Europe. This number has slowly increased since
that time. Roughly one third of labs in the USA had molecular testing capability
(in 1997) and this will obviously increase as more routine diagnostic tests
become available and as equipment prices drop.

If one assumes 100,000 relevant laboratories worldwide with only half using DNA
analysis systems, a potential market of 50,000 exists. If this level of sales is
achieved over 5 years, 10,000 units pa, at US$50,000, then the potential annual
market is around US$500m. Genomic applications to non-human organisms may
involve an equally large number of laboratories and sales.

Based on our analysis and other information we would predict that the rate of
uptake by the market will be faster than it has been for DNA sequencers and that
the overall market will be larger because of the broader utility of the
microarray readers. Thus, a conservative estimate would see annual sales of
10,000 units within five to eight years. At US$50,000 per unit, which is the
bottom end of the market, this equates to US$500m. Depending on discoveries
resulting from the human genome project and the linking of genes to common
diseases, diagnosis- and/or discipline-specific (i.e., cancer, food pathogens,
etc) and lower cost devices will be developed resulting in significantly higher
unit sales. A market of US$2,000m for instruments alone within 10 years is
realistic.

RISKS

We view the ongoing growth of the company's existing neurosciences business to
be readily achievable. Over the past five years the company has demonstrated
consistent growth of 10% with these products and enhancements will ensure
continuation at this rate. The company must continue to innovate in order to
maintain its current levels of growth.

Neurosurgery is a new field for all medical and scientific instrument makers.
Its growth rate is uncertain, but growth there will be, and the dominant players
have still to be decided. The Axon projections used in our model are, in our
opinion, based on realistic assumptions.

The Axon genearray technology has as yet to be proven in the marketplace. We
have not been able to technically evaluate the GenePix or to make meaningful
comparisons with competitive offerings although we have sighted testimonials
from users commenting on its superior performance. There is a risk that these
opinions will not be shared universally and that GenePix will not perform as
well as products from established and better known companies. We have not
examined production costs and it is possible that Axon may not be able to
sustain a price of US$50,000.

The market will be highly contested with significant hardware vendors, such as
Hewlett Packard and Molecular Dynamics, aggressively marketing their products.
Axon will need to establish its credentials early to capture reasonable market
share.

OTHER MATTERS

Neither Acuity Technology Management nor its principals have any pecuniary
interest in Axon that could be regarded as affecting the ability to provide an
unbiased opinion of the matters contained in this letter. Acuity will receive a
professional fee for the preparation of this report.

                                      47.

<PAGE>

We have given our written consent to the issue of this report as appearing in
the Prospectus included in the form and context in which it appears. We have
been involved only in the preparation of this Report and not in the preparation
of any other part of this Prospectus, and specifically disclaim liability to any
person in respect of any statements included elsewhere in this Prospectus. We
have not, other than as set out above, been involved in the preparation of or
authorised or caused the issue of this Prospectus.

Yours sincerely
/s/ D H RANDERSON
D H RANDERSON
Managing Director

                                      48.

<PAGE>

                            SECTION 10. RISK FACTORS

This section identifies the areas the Directors regard as the major risks
associated with an investment in Axon. Investors should be aware that an
investment in Axon involves many risks which may be higher than the risk
associated with an investment in other companies. The Axon Security price may be
subject to significant volatility. Intending subscribers should read the whole
of this Prospectus in order to fully appreciate such matters and the manner in
which Axon intends to operate before any decision is made to subscribe for
Securities or Entitlement Options or both.

Axon's Underlying Shares and Entitlement Options are expected to be quoted on
the ASX, where their price may rise or fall. The Securities allotted under this
Prospectus carry no guarantee in respect of profitability, dividends, return of
capital, or the price on which they might trade on the ASX.

Certain statements in this Prospectus constitute forward-looking statements that
are subject to risks and uncertainties which may cause the actual result to be
different from expectations both expressed and implied.

In addition to the risks outlined above there are numerous widespread risks
associated with investing in any form of business and with investing in the
sharemarket generally.

There are also a range of specific risks associated with Axon's business and its
involvement in the biotechnology research and development industry. Potential
investors in Axon should consider that the investment has a significant
speculative component and should note the following major risks prior to
investing.

COMPETITION

Intense competition exists in the industries in which Axon operates, including
related to:

-        developing products for existing and new markets;

-        obtaining and sustaining proprietary rights to technology; and

-        marketing, selling and distributing products.

The risk exists that one or more of the competitive products in development now
or in the future will prove more efficacious, more cost effective or more
acceptable to customers than the Axon product. It is possible that a competitor
might position itself in the market place sooner than Axon and establish itself
as the preferred vendor. Possible future competitors of Axon include large
instrument and diagnostics companies that may be able to use their development
and marketing resources to the disadvantage of Axon.

Such competition and new technologies can have the effect of:

-        rendering costly research and development obsolete;

-        decreasing the financial value of products or research projects; and

-        reducing pricing and profit margins.

MARKET ACCEPTANCE

While the Directors believe that Axon's existing product line for the
neurosciences and neurosurgery market is mature and that Axon is well accepted
by that market as a dominant player it is a newcomer to the genomics and
pharmaceutical drug discovery markets. There can be no guarantee Axon will
repeat that success and gain market recognition in these emerging growth markets
in the timely manner that is required to maximise opportunities.

TECHNOLOGICAL UNCERTAINTIES

Certain predictions made by many commentators, to which reference has been made
in this Prospectus, are to the effect that the DNA chip and other
miniaturisation technologies will revolutionise the process of drug discovery
and diagnostics. The potential future

                                      49.

<PAGE>

markets for DNA chip scanners and other devices in this market is heavily
sensitive to the actual extent and speed of this expected revolution. Investors
should view scenarios for the future importance of these technologies as having
a high degree of uncertainty.

INTELLECTUAL PROPERTY RIGHTS

Securing rights to technology and patents is an integral part of securing
potential product value in the outcomes of biotechnology research and
development. Competition in retaining and sustaining protection of technology
and the complex nature of technologies can lead to patent disputes.

The granting of a patent does not guarantee that the rights of others are not
infringed or that competitors will not develop technology to avoid Axon's
patented technology.

Axon's success will depend, in part, on its ability to obtain adequate and valid
patent protection, maintain trade secret protection and operate without
infringing on the proprietary rights of third parties or having third parties
circumvent Axon's rights. No guarantee can be given that such protection will be
successfully and validly obtained by Axon. If such patents are not granted, it
may be possible for a third party to imitate or otherwise obtain and use Axon's
products without authorisation or to develop and use similar technology
independently. While Axon believes it has taken appropriate steps to protect its
products and technology, the law may not adequately protect it in all places
Axon does or may do business, or enable Axon's rights to be enforced with any
adequacy. There can be no assurance that the measures taken by Axon have been,
or will be, adequate to protect Axon's products and technology.

Axon intends to pursue vigorously both its existing and all future patent
applications for USA, Australian and foreign patents in relation to its
products. Whilst Axon Directors believe that at least some of Axon's patent
applications should be successful, no guarantee can be given nor does the grant
of a patent guarantee that the patent concerned is valid or that the patented
technology does not infringe the rights of others.

The enforceability of a patent is dependent on a number of factors which may
vary between jurisdictions. These factors include the validity of the patent and
the scope of protection it provides. The validity of a patent depends upon
factors such as the novelty of the invention, the requirement in many
jurisdictions that the invention not be obvious in light of the prior art
(including any prior use of documentary disclosure of the invention), the
utility of the invention and the extent to which the patent specification
clearly discloses the best method of working or carrying out the invention. The
legal interpretation of these requirements often varies between jurisdictions.
The scope of rights provided by a patent can also differ between jurisdictions.
There can be no assurance even if Axon succeeds in obtaining the grant of
patents, that others will not seek to imitate Axon's products, and in doing so,
attempt to design their products in such a way as to circumvent Axon's patent
rights. Additionally, the ability of the legal process to provide efficient and
effective procedures for dealing with actual or suspected infringements can vary
considerably between jurisdictions.

DEPENDENCE ON KEY PERSONNEL

Axon is dependent on the principal members of its scientific and management
personnel, the loss of whose services could materially and adversely affect Axon
and might impede the achievements of its research and development objectives.

Because of the specialised nature of Axon's business, Axon's ability to
effectively maintain its program will depend in part upon its ability to attract
and retain qualified research people. There can be no assurance that Axon will
be able to retain sufficient qualified personnel on a timely basis, retain its
key scientific and management personnel or maintain its relationships with its
collaborators. The failure to retain such personnel and develop such expertise
could materially adversely affect Axon's prospects for success.

RISK OF PRODUCT LIABILITY

Axon's business exposes it to potential product liability, in particular the
clinical trials, manufacture, marketing and use of neurosurgical products. Axon
will seek to obtain adequate product liability insurance whenever prudent. There
can be no assurance that adequate or necessary insurance coverage will be
available at an acceptable cost or in sufficient amounts, if at all, or that a
product liability or other claim would not materially and adversely affect the
business or financial condition of Axon.

ABSENCE OF DIVIDENDS

The ability of Axon to pay any dividend in the future is dependent on many
factors including the outcome of its research and development and its ability to
commercialise resultant products. At that time, the amount, timing and payment
of any future dividend will depend on a range of factors including future
capital and research and development requirements and the financial position
generally of Axon at the time. There will also be factors that affect the
ability of Axon to pay dividends and the timing of those

                                      50.

<PAGE>

dividends that will be outside the control of Axon and its Directors. The
Directors are therefore unable to give any assurance regarding the payment of
dividends in the future, if at all.

Further, given the stage of development of Axon's potential products, it is
difficult to forecast with any degree of certainty the likely financial result
of Axon for the 2000 financial year or any year thereafter. Such a forecast
would in the view of the Directors be potentially more likely to mislead than to
inform potential investors in Axon. The Directors do not therefore intend at
this stage to make any forecast of the future profitability (or otherwise) of
Axon.

GROWTH MANAGEMENT AND PERFORMANCE

Axon's anticipated growth may place a significant strain on its managerial,
operational and financial resources. To manage its potential growth, Axon must
implement and improve its operational and financial systems and to expand, train
and manage its employee base. There can be no assurance that Axon will be able
to effectively manage the expansion of its operations, that Axon's systems,
procedures or controls will be adequate to support its operations or that Axon
management will be able to achieve the rapid expansion necessary to fully
exploit the market opportunity for its product. Any inability to manage growth
effectively could have a material adverse effect on Axon's business, results of
operations and financial condition.

The performance of Axon's products is critical to its reputation and to its
ability to achieve market acceptance of these products. Any product failure
could have a material adverse effect on Axon's business, results of operations
and financial conditions. Axon's performance is substantially dependent on its
senior management and key technical personnel to continue to develop the
technology and Axon's products. Axon's success also depends substantially on the
continued efforts of its senior management team, which currently is comprised of
a small number of individuals. The loss of the services of any of its executive
officers or other key employees could have a material adverse effect on the
business, results of operations and financial condition of Axon.

Axon's future success also depends on its continuing ability to attract and
retain highly qualified technical and managerial personnel. Competition for such
personnel can be intense and there can be no assurance that Axon will be able to
retain its key managerial and technical employees or that it will be able to
attract and retain additional highly qualified technical and managerial
personnel in the future. The inability to attract and retain the necessary
technical and managerial personnel could have a material and adverse effect upon
Axon's business, results of operations and financial condition.

CAPITAL REQUIREMENTS

While Axon believes it will have sufficient funds after completion of the Offer
to meet all of its growth and capital requirements for at least the next 24
months, Axon is operating in a dynamic and rapidly growing industry. There can
be no assurance that Axon will not seek to exploit business opportunities of a
kind which will require it to raise additional capital from equity or debt
sources. There can be no assurance that Axon will be able to raise such capital
on favourable terms or at all. If Axon is unable to obtain such additional
capital, Axon may be required to reduce the scope of its anticipated expansion,
which could adversely affect its business, financial condition and results of
operation.

RESEARCH AND DEVELOPMENT

Axon's research and development program is dependent on Axon's research and
development agreements remaining in place and the other parties to such
agreements fulfilling their responsibilities. There can be no guarantee that
this will be achieved.

Application of the technology to a wide range of industrial
applications/processes will need a substantial increase in research and
development effort. There can be no guarantee that Axon can sustain that effort
in terms of manpower or financial capacity.

Research and development expenditure is by its very nature speculative. There
can be no guarantee that any new technologies developed will become commercially
viable products that generate revenue for Axon.

FINANCIAL PERFORMANCE

The Directors' estimates of future demand for new and existing products
incorporating the technology may not be able to be achieved.

The initial objective of Axon is to further develop and commercialise its
technology. It is likely that in the short term all of Axon's available funds
will be used for that purpose. Therefore, investors should not anticipate the
payment of dividends in the short to medium term.

                                      51.

<PAGE>

There can be no assurance that Axon will be able to establish effective sales
and distribution capabilities or be successful in gaining market acceptance for
products embodying the technology.

Axon may not achieve budgeted production levels for reasons such as equipment
failure, industrial disputes, shipping difficulties or a range of other causes,
some of which may be totally outside the control of Axon.

FORCE MAJEURE

Axon is based in Foster City, California, an area with a high risk of earthquake
activity. If an earthquake of significant magnitude were to occur, it would have
a significant materially adverse effect on Axon's business and financial
position. To mitigate this risk, Axon takes all precautions and safeguards as
required by California law in order to reduce the risk of damage via
earthquakes.

DOING BUSINESS INTERNATIONALLY

There are certain risks inherent in doing business on an international level,
such as unexpected changes in regulatory requirements (including taxation),
tariffs, customs, duties and other trade barriers, longer payment cycles,
problems in collecting accounts receivable, political instability, war and other
political risks, fluctuations in currency exchange risk, foreign exchange
controls which restrict or prohibit repatriation of funds, technology exports
and import restrictions or prohibitions, seasonal reductions in business
activity and potentially adverse tax consequences, any of which could adversely
impact on the success of Axon's international operations. Companies doing
business in foreign countries may be required to obtain operating licences in
new and uncertain regulatory environments. Such licences could prove to be
difficult to obtain and retain, depending on government policies, customers,
changes in political leadership and other factors.

Axon, headquartered in the United States and with its current or proposed
operations in the United States and other parts of the world, will earn a
substantial amount of its revenues in United States currency. Fluctuations in
the exchange rate between the A$ and the US$ may affect Axon's earnings from the
perspective of Australian shareholders. At this time, Axon has not developed any
hedging strategy to deal with currency risks.

Changes in interest rates, exchange rates, relevant taxation and other legal
regimes and Government policies may adversely affect Axon.

TAXATION

Australia has entered into a special tax treaty (double taxation agreement) with
the US Government to seek to prevent double taxation and allow co-operation
between Australian and US tax authorities in enforcing their respective tax
laws. The Australian tax implications under the double taxation agreement of
investing in Securities may vary depending on the circumstances of particular
investors. In general terms, the double taxation agreement will, in its current
form, limit US tax on dividends paid by Axon to Australian residents to 15% on
unfranked dividends. Its operation on capital or revenue gains or losses may
vary depending on the circumstances of particular investors. Prospective
investors are urged to consult their tax advisers regarding Australian and US
federal, state, local and other tax consequences (including those under the
double taxation agreement) attendant upon the acquisition, ownership and
disposition of Securities. Tax laws in the US and Australia are subject to
change, possibly with retroactive effect. Certain US tax issues relevant to Axon
itself are described in section 11.2.

The above list of risk factors ought not to be taken as exhaustive of the risks
faced by Axon or by investors in Axon. The above factors, and others not
specifically referred to above, may in the future materially affect the
financial performance of Axon and the value of the Securities offered under this
Prospectus.

Therefore, the Securities to be issued pursuant to this Prospectus carry no
guarantee with respect to the payment of dividends, returns of capital or the
market value of those Securities.

This investment is regarded as highly speculative and neither Axon nor any of
its Directors or any other party associated with the preparation of this
Prospectus guarantees that any specific objectives of Axon will be achieved or
that any particular performance of Axon or of its securities or options,
including those offered by this Prospectus, will be achieved.

                                      52.

<PAGE>

                       SECTION 11. ADDITIONAL INFORMATION

         11.1     INCORPORATION

         Axon was incorporated in California on 15 October 1984, USA as a
         private company.

         11.2     COMPANY TAX STATUS

         Axon is a regular corporation for U.S federal and state income tax
         purposes. As such it is subject to U.S federal income tax rate on net
         taxable income at rates commencing currently at 15% for amounts up to
         $50,000, 25% up to $75,000 and 34% for amounts of $100,000 and over
         (with phase-out of the lower than 34% rates, to equalise to 34%). In
         addition, an `alternative minimum tax' may be imposed on certain items
         of `tax preference'. Quarterly estimated tax payments are due. Axon is
         currently permitted to generally carry back any net operating losses to
         the preceding two years and forward for 20 years. A 20% credit against
         income tax may currently be taken for eligible research and development
         expenses in excess of a base period amount.

         As a California corporation, Axon is also subject to California
         Franchise Tax - a corporate income tax computed similarly to U.S
         federal income tax. The rate is currently 9.3% on income derived from
         or attributable to sources within California with an $800 minimum tax.
         California income tax paid is deductible in computing federal income
         tax liability. Axon may also be subject to income tax in the other US
         states or foreign countries in which it does business or derives
         income.

         Dividends paid to Australian shareholders out of Axon's earnings and
         profits are subject to 15% U.S. withholding tax, under the provisions
         of the U.S.- Australia Income Tax Treaty. This tax should be creditable
         for Australian tax purposes. This discussion is based upon provisions
         of US law now in effect which are subject to change, possibly with
         retroactive effect. This summary does not discuss all aspects of US
         federal and state income taxation that may be relevant to a particular
         investor or Axon. Each potential investor should seek their own
         professional tax advice to consider the tax implications of their own
         particular circumstances. Investors should consult their own tax
         advisors to determine the tax effect of any investment in Axon.

         11.3     AUDIT COMMITTEE

         The Audit Committee of Axon comprises Henry Lester, Geoffrey Powell,
         and Stanley Crooke, directors of Axon.

         11.4     CORPORATE GOVERNANCE

         The Directors intend that Axon adopt, before the end of the reporting
         period ending 30 June 2000, appropriate corporate governance policies
         and practices as provided in Appendix 4A to the ASX Listing Rules.

         11.5     LEGAL PROCEEDINGS

         The Directors are not aware of any litigation of a material nature
         pending or threatened which may significantly affect Axon.

         11.6     MATERIAL CONTRACT

         The Directors consider that the following contract is significant or
         material to Axon or is of such a nature that an investor may wish to
         have particulars of it when making an assessment of whether to apply
         for Securities (`Material Contract'). The main provisions of the
         Material Contract are summarised below. To understand fully all rights
         and obligations pertaining to the Material Contract, it will be
         necessary to read it in full at the premises nominated in section
         11.19.

         UNDERWRITING AGREEMENT

         The Issue is partially underwritten in the amount of A$8.8 million by
         D&D-Tolhurst Limited and Saw James Capel Limited (`UNDERWRITERS') under
         an Underwriting Agreement dated 27 January 2000 between the
         Underwriters and the Company.

         The following is a summary of the material provisions of the
         Underwriting Agreement:

         1.       Immediately after the issue of all of the underwritten
                  Securities, the Company must pay the Underwriters a fee of
                  A$200,000 each.

                                      53.

<PAGE>
2.          The liability of the Underwriters will cease on the first to occur
            of:

         (a)      the Company issuing all of the underwritten Securities;

         (b)      the expiration of time for the Company to give a shortfall
                  notice to the Underwriters without the Company having done so;

         (c)      the date on which the Underwriters terminate their obligations
                  due to the occurrence of a termination event;

3.          Without the Underwriters' prior written consent, the Company will
            not before the end of the Closing Date, issue, agree to issue, issue
            an invitation, or offer to issue any shares, options or any other
            securities other than arising from the exercise of any pre-existing
            options;

4.          The Underwriters may by notice to the Company, terminate their
            underwriting liability if any of the following events occur before
            the Company issues the underwritten Securities. The Underwriters can
            only exercise their right to terminate if the Underwriters determine
            reasonably and in good faith that the event has or has had a
            material adverse effect on the Issue or will create a potentially
            material liability for the Underwriters under the Corporations Law:

         (a)      (CHANGE IN LAW) Any of the following occurs which does or is
                  likely to prohibit, restrict or regulate the Issue or
                  materially reduces the level or likely level of Valid
                  Applications:

                  (i)      the introduction of legislation not currently
                           foreshadowed into the parliament of the Commonwealth
                           of Australia or of any State or Territory of
                           Australia;

                  (ii)     the public announcement of prospective legislation
                           not currently foreshadowed or policy by the Federal
                           Government or the Government of any State or
                           Territory; or

                  (iii)    the adoption by ASIC or its delegates or the Reserve
                           Bank of Australia of any regulations or policy not
                           currently foreshadowed.

         (b)      (LISTING)

                  (i)      ASX makes an official statement to any person, or
                           indicates to the Company or an Underwriter that an
                           ASX Approval will not be given; or

                  (ii)     an ASX Approval has not been given before the Closing
                           Date; or

                  (iii)    the notification given by the Registrar on the day
                           before the Closing Date under clause 7.2(c) indicates
                           that the condition in paragraph (ii) of the
                           definition of `ASX Approval' will not be satisfied;
                           or

                  (iv)     an ASX Approval is subsequently withdrawn or varied
                           to include terms not approved by the Underwriters.

         (c)      (DEFAULT) The Company is in default of any of the terms and
                  conditions of this agreement or breaches any warranty or
                  covenant given or made by it under this agreement and that
                  default or breach is either incapable of remedy or is not
                  remedied within 5 Business Days after it occurs.

         (d)      (FAILS TO COMPLY) The Company or any Related Body Corporate
                  fails to comply in relation to the Issue with any of the
                  following:

                  (i)      the Listing Rules;

                  (ii)     a clause of its constitution;

                  (iii)    a statute; or

                  (iv)     any material policy or guideline of ASIC or any other
                           requirement, order or request made by or on behalf of
                           ASIC or any governmental agency.

                                      54.

<PAGE>

         (e)      (CONSTITUTION ALTERED) The constitution or any other
                  constituent document of the Company or a Related Body
                  Corporate is amended without the prior written consent of the
                  Underwriters, which consent must not be unreasonably withheld.

         (f)      (BUSINESS) The Company or a Related Body Corporate:

                  (i)      disposes, or agrees to dispose, of the whole, or a
                           substantial part, of its business or property; or

                  (ii)     ceases or threatens to cease to carry on business,

                  (iii)    in either case without the prior written consent of
                           the Underwriters.

         (g)      (FINANCIAL POSITION) A materially adverse change, or
                  development involving a prospective materially adverse change,
                  occurs in the financial or trading position of the Company or
                  a Related Body Corporate.

         (h)      (PROSPECTUS) Without limiting any other paragraph of this
                  schedule:

                  (i)      there is a material omission from the Prospectus;

                  (ii)     the Prospectus contains a material statement that is
                           false or misleading; or

                  (iii)    a material statement in the Prospectus becomes false
                           or misleading.

         (i)      (CORPORATIONS LAW) Without limiting any other paragraph of
                  this schedule:

                  (i)      ASIC applies for an order under section 1004 of the
                           Corporations Law in relation to the Prospectus and
                           the application is not dismissed or withdrawn before
                           the Issue is completed; or

                  (ii)     ASIC gives notice of intention to hold a hearing in
                           relation to the Prospectus under section 1033(3) of
                           the Corporations Law or makes an interim order under
                           section 1033(4) of the Corporations Law.

         (j)      (SUPPLEMENTARY PROSPECTUS) Any Underwriter reasonably forms
                  the view that a supplementary prospectus or a replacement
                  prospectus must be lodged with ASIC under section 1023B(2) or
                  section 1024(2) of the Corporations Law and the Company does
                  not lodge a supplementary prospectus or a replacement
                  prospectus in the form, with the content and within the time
                  reasonably required by the Underwriter.

         (k)      (INDICTABLE OFFENCE) A director (or, if he is not a director,
                  the Chief Executive Officer, the Chief Financial Officer or
                  the Chief Operating Officer) of the Company or a Related Body
                  Corporate is charged with an indictable offence relating to a
                  financial or corporate matter.

         (l)      (INSOLVENCY EVENT) An Insolvency Event occurs with respect to
                  the Company or a Related Body Corporate.

         (m)      (ALL ORDINARIES INDEX) the All Ordinaries Index of the ASX
                  falls 10% below the level of the All Ordinaries Index at the
                  date of this agreement for a period of 3 consecutive Business
                  Days.

         (n)      (NASDAQ INDEX) the NASDAQ Index falls 10% below the level of
                  the Index at the date of this Agreement for a period of 3
                  consecutive Business Days.

5.          The Underwriters are to seek subscriptions in accordance with the
            provisions relating to the US Securities Act and no action letter
            issued by the SEC as outlined in the Prospectus.

                                      55.

<PAGE>

         11.7     SHARE CAPITAL

         The existing shareholders are as follows:

<TABLE>
<CAPTION>
                                            Number of               % prior to Offer         % on completion of Offer
         Holder                            Securities                  (approx)(2)                (approx)(3)
------------------------                   ----------               ----------------         ------------------------
<S>                                        <C>                      <C>                      <C>
Alan Finkel                                99,997,500                      35.5                        28.4

Elizabeth Finke(l)                         99,997,500                      35.5                        28.4

Circadian Technologies                     66,665,000                      23.7                          19

Limited(1)

Exercised Optionholders(4)                 14,997,491                       5.3                         4.3
</TABLE>

         1.       Through its wholly owned subsidiary, Precision Patchclamps
                  (Int) Pty Ltd CAN 006 455 465.

         2.       Before exercise of existing unexercised options in Axon.

         3.       Assumes successful completion of capital raising under this
                  Prospectus and before exercise of any of the options granted
                  by Axon.

         4.       Comprises various executives and employees who have exercised
                  options prior to the Offer.

         11.8     RIGHTS ATTACHING TO SECURITIES

         The Securities to be issued under this prospectus are a form of CHESS
         Depositary Interest (`CDIS') known as CHESS Units of Foreign Securities
         (`CUFS'). Holders of CUFS will become registered holders of the
         beneficial interest in the Underlying Shares of Axon. Legal ownership
         is to be vested in CHESS Depositary Nominees Pty Ltd (`CDN'), a wholly
         owned subsidiary of ASX Settlement and Transfer Corporation Pty Ltd.

         The relationship between Axon, CDN and holders of CUFS is governed by
         the Securities Clearing House (`SCH') Business Rules which have force
         under the Corporations Law.

         RIGHTS UNDER SCH BUSINESS RULES

         The following is a summary of the rights and obligations of these
         parties as set out in the SCH Business Rules.

         TITLE

         Axon must cause the legal title to the securities underlying the CUFS,
         ie: Shares in Axon (`Underlying Shares'), to be vested in CDN.

         The beneficial title to the Underlying Shares is vested in the holders
         of CUFS. The holders of CUFS are to receive all direct economic
         benefits and any other entitlements with respect to the Underlying
         Shares.

         CDN is not to dispose of any of the Underlying Shares unless authorised
         by the SCH Business Rules, and is not able to create any interest that
         is inconsistent with the title of the holders of CUFS.

         REGISTERS

         Axon is to maintain an Underlying Share register containing information
         on the holder(s) of the Underlying Shares (ie legal interest).

                                      56.

<PAGE>

         Axon must also maintain a CDI register (comprising an issuer sponsored
         subregister of CUFS and an uncertificated CHESS subregister of CUFS)
         that contains all information that would otherwise be required to be
         kept under the Corporations Law as if Axon were an Australian listed
         company and the CUFS were physical securities of that company.

         Axon must ensure that at all times the total number of Securities on
         the CDI register reconciles with the number of Securities registered in
         the name of CDN on the Underlying Share register.

         Axon must make available for inspection the Underlying Share register
         and the CDI register as if that register were a register of securities
         of an Australian listed public company.

         TRANSFER

         Unless permitted by the ASX Listing Rules, Axon or CDN must not refuse
         nor fail to register, nor give effect to, nor otherwise interfere with
         the processing and registration of a transfer of CUFS.

         Any obligation to transfer a quantity of Underlying Shares shall be
         made by initiating a transfer of the corresponding quantity of CUFS in
         respect of the Underlying Shares.

         DIVIDENDS

         Any dividend declared in respect of the Underlying Shares vested in CDN
         is to be distributed to the holder of the CUFS.

         CDN is taken to have directed Axon to distribute any dividend that
         would otherwise be payable to it under Axon's constitution to the
         holders of CUFS.

         BONUS ISSUES, RIGHTS ISSUES AND RECONSTRUCTIONS

         Axon must administer all bonus issues, rights issues, merger and
         reconstructions that result in the issue of additional or replacement
         Underlying Shares so that the benefits are distributed to holders of
         CUFS on the same terms as would otherwise have applied if the holders
         of CUFS were the holders of the Underlying Shares.

         DIVIDEND REINVESTMENT AND BONUS SHARE PLANS

         In relation to any dividend reinvestment scheme or bonus share plan in
         respect of the Underlying Shares. Axon must:

         -        make available to the holder of the CUFS all benefits and
                  entitlements arising under the dividend reinvestment scheme or
                  bonus share plan;

         -        distribute all benefits and entitlements arising under the
                  dividend reinvestment scheme or bonus share plan to the holder
                  of CUFS;

         -        ensure that any right under such a plan to elect to receive
                  securities rather than cash is exercised by the holders of
                  CUFS rather than CDN; and

         -        if the holders of CUFS elect to receive securities, issue
                  Underlying Shares to CDN and distribute corresponding CUFS to
                  the holder of the CUFS.

         VOTING

         CDN as the shareholder of record of Axon's stock will receive notice of
         all shareholder meetings and be entitled to attend and vote at Axon
         shareholder meetings. Except for shareholders' votes regarding the
         election of Directors, shareholders are entitled to one vote per share
         on all matters to be voted upon by the shareholders. When a shareholder
         vote regards the election of Directors, shareholders are entitled to
         Cumulative Voting if the candidates' names have been placed in
         nomination prior to the voting and any shareholder has given notice
         prior to the voting of the shareholder's intention to cumulate the
         shareholder's votes.

                                      57.

<PAGE>

         Holders of CUFS are not entitled as of right to attend meetings of
         holders of Underlying Shares, however Axon will invite CUFS holders to
         attend shareholder meetings but they will not be permitted to vote
         other than by direction to CDN.

         Axon must send a notice of the meeting to each holder of CUFS at the
         address recorded in the CDI register if any meeting is convened for the
         holders of Underlying Shares. The notice must:

         (a)      inform the holder of the CUFS of his or her rights to direct
                  CDN on how it should vote with respect to the resolutions
                  described in the notice;

         (b)      make provision for a direction to be given by the holders of
                  CUFS in relation to how CDN should so vote;

         (c)      provide the time and date by which holders of CUFS must
                  provide their direction to CDN; and

         (d)      make appropriate arrangements to collect and process any
                  direction by holders of CUFS and provide CDN with a report in
                  writing that clearly shows how CDN must exercise its right to
                  vote by proxy at the meeting, in sufficient time to enable CDN
                  to lodge a proxy for the meeting.

         Following the time and date by which holders of CUFS must provide their
         direction to CDN, CDN will calculate the number of votes in favour of
         the resolution, the number of votes against the resolution and the
         number of votes abstaining. CDN shall then appoint two proxies. One of
         the two proxies shall indicate the number of CUFS in favour of the
         resolution described in the proxy, and the second proxy shall indicate
         the number of CUFS against the resolution described in the proxy.

         If it is necessary or appropriate that a meeting of the holders of CUFS
         be convened, the notice and conduct of the meeting shall be held in
         accordance with the Constitution and By-law requirements which would
         apply to ordinary shareholders.

         11.9     RIGHTS UNDER AXON CONSTITUTION AND BY-LAWS IE: RIGHTS
                  ATTACHING TO THE UNDERLYING SHARES

         VOTING

         Every holder of shares present in person or by proxy, attorney or
         representative at a meeting of shareholders has one vote on a vote
         taken by a show of hands, and, on a poll every holder of shares who is
         present in person or by proxy, attorney or representative has one vote
         for every fully paid share held by him or her, and a proportionate vote
         for every partly paid share, registered in such shareholder's name on
         the Company's share register.

         Under Californian law, shareholders have the right to invoke Cumulative
         Voting when appointing Directors.

         DIVIDENDS

         Dividends are payable out of the Company's profits and are declared or
         determined to be payable by the Directors. Dividends declared will be
         payable on the shares at a fixed amount per share.

         TRANSFER OF SHARES

         A shareholder may transfer shares by a written transfer in any usual
         form or any other form approved by the Directors, in accordance with
         the Constitution and By-laws of the Company and Californian
         Corporations Code.

         The directors of the Company may only refuse to register any transfer
         of shares, where expressly permitted by the Listing Rules.

         MEETINGS AND NOTICE

         Each shareholder is entitled to receive notice of and to attend general
         meetings for the Company and to receive all notices, accounts and other
         documents required to be sent to shareholders under the constitution of
         the Company, the Californian Corporations Code or the Listing Rules.

                                      58.

<PAGE>

         LIQUIDATION RIGHTS

         Once all the liabilities of the Company are satisfied, a liquidator
         may, with the authority of a special resolution of shareholders, divide
         among the shareholders at the time the whole or any part of the
         remaining assets of the Company. The liquidator may with the sanction
         of a special resolution of the Company vest the whole or any part of
         the assets in trust for the benefit of shareholders as the liquidator
         thinks fit, but no shareholder of the Company can be compelled to
         accept any shares or other securities in respect of which there is any
         liability.

         SHAREHOLDER LIABILITY

         As the shares offered and currently issued by the Company are fully
         paid shares, they are not subject to any calls for money by the
         Directors and will therefore not become liable for forfeiture.

         AMENDMENTS TO CONSTITUTION AND BY-LAWS

         New clauses and by-laws may be adopted or existing clauses and by-laws
         may be amended or repealed by the vote or written consent of holders of
         a majority of the outstanding shares entitled to vote or by the Board
         of Directors.

         11.10    RIGHTS ATTACHING TO ENTITLEMENT OPTIONS

         Entitlement Options will be issued shortly to Circadian shareholders
         (see section 7 for details).

         The following are the rights attaching to Entitlement Options: Each
         Entitlement Option will entitle the holder of the option
         (`Optionholder') to subscribe for and be issued either one fully paid
         ordinary share (`Share') or, if there are CUFS over Underlying Shares
         on issue at the time of exercise, one CUFS over one Underlying Share
         (the share or the CUFS, as applicable, `Option Security') in Axon on
         the terms and conditions set out below:

         1.       Each Entitlement Option is exercisable at any time on or
                  before 5.00 pm Melbourne legal time on 5 years from date of
                  issue.

         2.       The Entitlement Options may be exercised wholly or in part by
                  giving notice in writing (`Notice of Exercise') to Axon at any
                  time during the Option Period.

         3.       The exercise price for each Entitlement Option (which is
                  payable immediately on exercise) is A$0.20 (`Exercise Price').

         4.       On receipt by Axon of the Notice of Exercise and payment of
                  the relevant Exercise Price, Axon must, within 14 days, allot
                  to the Option Holder the number of Option Securities in
                  respect of which the Entitlement Option is exercised and
                  despatch the relevant certificate for the Option Securities or
                  other appropriate acknowledgement as soon as reasonably
                  practicable thereafter.

         5.       If there are CUFS over Underlying Shares on issue at the time
                  of exercise, on receipt by Axon of the Notice of Exercise and
                  payment of the relevant Exercise Price, Axon must, within 14
                  days, allot to CDN an equal number of Underlying Shares to the
                  number of Option Securities required to be allotted

         6.       Option Securities allotted on the exercise of any Entitlement
                  Options will rank equally in all respects with the then
                  existing issued Securities or Underlying Shares (as
                  applicable) in Axon.

         7.       Adjustments to the number of Securities over which Entitlement
                  Options exist and/or the Exercise Price may be made as
                  described in paragraph 9 to take account of changes to the
                  capital structure of Axon by way of pro rata bonus and cash
                  issues. Axon agrees to notify all Option Holders and its Home
                  Branch within one month after the record date for a pro rata
                  bonus or cash issue, of any adjustment to the number of
                  Securities over which the Entitlement Options exist and/or any
                  adjustment to the Exercise Price.

         8.       Subject to paragraphs 7 and 9 Entitlement Options do not
                  confer rights to participate in new issues of securities of
                  Axon.

                                      59.

<PAGE>

         9.       The method of adjustment for the purpose of paragraph 7 shall
                  be in accordance with Listing Rule 6.22.2 and 6.22.3 of the
                  Official Listing Rules of the Australian Stock Exchange
                  Limited which provides:

                  (a)      Pro-Rata Cash issues

                           Where a pro-rata issue is made (except a bonus issue)
                           to the holders of underlying securities, the Exercise
                           Price of an option may be reduced according to the
                           following formula:

                                     O'      =      O -      E[P-(S+D)]
                                                             ----------
                                                               N + I

                                   Where:

                                     O'      =      the new exercise price of
                                                    the option.

                                     O       =      the old exercise price of
                                                    the option.

                                     E       =      the number of underlying
                                                    securities into which one
                                                    option is exercisable.

                                     P       =      the average market price per
                                                    security (weighted by
                                                    reference to volume) of the
                                                    Underlying Share during the
                                                    5 trading days ending on the
                                                    day before the ex rights
                                                    date or ex entitlements
                                                    date.

                                     S       =      the subscription price for
                                                    a security under the pro
                                                    rata issue.

                                     D       =      the dividend due but not
                                                    yet paid on the existing
                                                    underlying securities
                                                    (except those to be issued
                                                    under the pro rata issue).

                                     N       =      the number of securities
                                                    with rights or entitlements
                                                    that must be held to receive
                                                    a right to one new security.

                  (b)      Pro-Rata Bonus Issues

                           If there is a bonus issue to the holders of the
                           underlying securities, on the exercise of any
                           options, the number of securities received will
                           include the number of bonus securities that would
                           have been issued if the options had been exercised
                           prior to the record date for bonus issues. The
                           Exercise Price will not change.

         10.      In the event of any reorganisation (including consolidation,
                  sub-division, reduction or return) of the issued capital of
                  Axon:

                  (a)      the number of Entitlement Options or the Exercise
                           Price or both shall be reorganized (as appropriate)
                           in a manner which will not result in any benefit
                           being conferred on the Option Holders which are not
                           conferred on securityholders of Axon; and

                  (b)      Axon may round up the number of Securities to be
                           received on conversion of the Entitlement Options if
                           the rounding up is approved at a meeting of
                           securityholders which approves the reorganisation.

         11.      In any reorganisation as referred to in paragraph 10, the
                  rights of an Optionholder will comply with the ASX Listing
                  Rules applying to a reorganisation of capital at the time of
                  the reorganisation.

         12.      All Entitlement Option Securities will lapse in the event of
                  the liquidation of Axon.

                                      60.

<PAGE>

         11.11    RIGHTS ATTACHING TO INDIVIDUAL OPTIONS

         Axon has granted the following options not pursuant to the stock plan
         which is discussed in section 11.12.

<TABLE>
<CAPTION>
    Holder                                   Options
---------------                             ---------
<S>                                         <C>
Geoffrey Powell                             2,000,000

Stanley Crooke                              1,400,000

Alan Stockdale                                400,000

Chris Belyea                                  200,000

David Kenley                                  100,000
</TABLE>

         The rights attaching to these options are the same as the rights
         attaching to the Entitlement Options as set out in section 11.10,
         except for the options granted to Alan Stockdale and Stanley Crooke.

         The Individual Options granted to Alan Stockdale and Stanley Crooke are
         for 5 years and may be exercised in the following proportions from the
         following dates:

         (a)      the date 1 year after the issue of the options 25%

         (b)      the date 2 years after the issue of the options 50%

         (c)      the date 3 years after the issue of the options 75%

         (d)      the date 4 years after the issue of the options 100%

         The Individual Options are non-transferable. Otherwise the rights
         attaching to these options are the same as the rights described in
         section 11.10.

         11.12    RIGHTS ATTACHING TO ORIGINAL OPTIONS

         Original Options have been granted to employees, officers and
         executives of Axon and associated research staff pursuant to a stock
         plan adopted by Axon's Board of Directors and shareholders in 1987. The
         stock plan was amended and restated in 1997 and amended again in 1999.
         The purpose of the stock plan is to offer selected employees, Directors
         and consultants an opportunity to acquire a proprietary interest in the
         success of Axon, and to increase such interest, by purchasing Shares of
         Axon's stock. The stock plan provides awards, which may include
         incentive stock options, non-statutory stock options and stock awards.
         The Board has reserved a total of 146,663,000 Shares of common stock
         under the plan of which 26,555,334 remain available for grant as of 24
         January 2000. As at 24 January 2000, 14,997,491 Shares had been issued
         upon the exercise of stock options granted under the stock plan and
         105,010,175 stock options are currently unexercised and are exercisable
         at prices ranging from A$0.03 to A$0.20 (based on current exchange
         rates). As at 24 January 2000, 75,437,581 of the unexercised stock
         options had vested (72% of the total amount of stock options issued
         that remain unexercised).

         If all unexercised options under the plan were exercised Axon would
         receive consideration of approximately A$5.9 million. If all options
         vested as at 24 January 2000 were exercised, Axon would receive
         consideration of approximately A$2.6 million. Any Original Options
         which have been granted but which expire or terminate unexercised are
         returned to the plan and may be granted at a later date to any
         qualified recipient.

         A committee, initially comprised of the Board of Directors, serves as
         the plan administrator of the stock plan (`Committee'). The Board of
         Directors may suspend or terminate the stock plan at any time. Unless
         sooner terminated by the Board of Directors, the plan will terminate on
         1 January 2008.

                                      61.

<PAGE>

         STOCK AWARDS

         The stock plan authorises the Committee to award shares of common stock
         subject to terms, conditions and restrictions by the Committee in its
         sole discretion. The terms, conditions and restrictions that the
         Committee has the power to determine include the manner in which Shares
         subject to stock awards are held during the periods they are subject to
         restrictions and the circumstances under which forfeiture of restricted
         stock will occur because of termination of the holder's services.

         Holders of restricted stock are shareholders of Axon and generally have
         all rights of shareholders with respect to those shares.

         No awards granted under the stock plan may be assigned or transferred
         by the holder.

         In addition to share awards, the Committee can award the right to
         purchase shares at a price not less than 85% of the fair market value
         of the shares. For any participant who owns stock possessing more than
         10% of the voting power of all classes of outstanding stock of Axon or
         any of its subsidiaries, the Committee can award the right to purchase
         shares at a price not less than 100% of the fair market value.

         STOCK OPTION GRANTS

         The Committee has the authority to select individuals to receive
         options under the stock plan and to specify the terms and conditions of
         each option granted, the exercise price, the vesting provisions and the
         option term.

         For non-statutory stock options, the exercise price must be not less
         than 85% of the fair market value of the common stock on the grant
         date, and for incentive stock options, the exercise price must be equal
         to at least the fair market value of the common stock on the grant
         date. For any employee who owns stock possessing more than 10% of the
         voting power of all classes of outstanding stock of Axon or any of its
         subsidiaries, the exercise price of any stock option granted must equal
         at least 110% of the fair market value of a share on the grant date,
         and, in the case of an incentive stock option, the term of such
         incentive stock option must not exceed five years.

         The Committee at its sole discretion may determine when an Original
         Option is to expire, but the term of an Original Option must not exceed
         10 years. If an Original Option holder's service with Axon terminates,
         the Original Option will expire at the expiration date determined by
         the plan administrator or after 6 months (12 months if service
         terminates due to death or total and permanent disability) from
         termination, if earlier.

         No stock option granted under the stock plan may be assigned or
         transferred by the holder other than by will or the applicable laws of
         descent and distribution.

         During the Original Option holder's lifetime, awards may be exercised
         only by the holder, or the holder's guardian or legal representative.

         The vesting provisions of any stock option granted will be determined
         by the Committee at its sole discretion, but Original Options must vest
         at least as rapidly as 25% in each of the first four years from the
         grant.

         An Original Option holder has no rights as a shareholder with respect
         to shares covered by the Original Option until such person is entitled
         to receive such shares.

         In the event of a subdivision of the outstanding stock, a declaration
         of a dividend payable in Shares, a declaration of a dividend payable in
         the form other than Shares in an amount that has a material effect on
         the value of Shares, a combination or consolidation of the outstanding
         stock into a lesser number of Shares, a recapitalization, a spinoff, a
         reclassification, a stock split or a similar occurrence, the Committee
         may adjust the number of Original Options available for future grants,
         the number of Original Options granted to an individual, and/or the
         exercise price of such Original Options.

         In the event that Axon is a party to a merger or consolidation, each
         outstanding Original Option will be subject to the terms of the merger
         agreement. In the event Axon is not the surviving corporation and the
         surviving corporation will not assume the outstanding Original Options,
         the agreement of merger or consolidation may provide for payment of a
         cash settlement for exercisable options equal to the difference between
         the amount to be paid for one Share under such agreement and the
         exercise price and for the cancellation of Original Options not
         exercised or settled, in either case without the Original Option
         holder's consent.

                                      62.

<PAGE>

         11.13    DIRECTORS' INTERESTS

         Except as disclosed in this Prospectus, no Director of Axon, or firm in
         which a Director is a partner, has any interest, nor has had any
         interest within 2 years before the lodging of this Prospectus for
         registration, in the promotion of Axon nor has received nor is entitled
         to receive any sum for services rendered by himself or the firm either
         to induce him to become or qualify him as a Director, or otherwise in
         connection with the promotion or formation of Axon.

         SHAREHOLDING QUALIFICATIONS

         The Directors are not required to hold any securities in Axon under the
         Constitution and By-laws of Axon.

         REMUNERATION OF DIRECTORS

         The Constitution and By-laws of Axon provide that the non-executive
         directors may collectively be paid as remuneration for their services a
         fixed sum not exceeding the aggregate maximum sum from time to time
         determined by Axon in general meeting (currently US$200,000).

         For the current financial year ending 30 June 2000, it is expected that
         the non-executive directors fees will collectively not exceed A$150,000
         per annum.

         A Director may be paid fees or other amounts as the Directors determine
         where a Director performs special duties or otherwise performs services
         outside the scope of the ordinary duties of a director. A Director may
         also be reimbursed for out of pocket expenses incurred as a result of
         their directorship or any special duties.

         Each of the Executive Directors, Alan Finkel and Geoffrey Powell, will
         receive salaries from Axon as employees. The employment arrangements
         provide for the payment of salaries and other benefits on commercial
         terms commensurate with the salary packages offered to the executive
         directors of public companies of a similar size and industry grouping
         and are on normal commercial terms. Henry Lester, a non executive
         director, receives a fee for scientific consulting. The fee paid is
         consistent with the amount paid to other scientific consultants for
         similar levels of consulting.

         DIRECTORS' INTERESTS

         Set out below are details of the interests of the Directors in the
         securities of Axon immediately prior to lodgement of the Prospectus
         with the ASIC for registration:

<TABLE>
<CAPTION>
   Holder                                           Underlying Shares                    Options
---------------                                     -----------------                   ----------
<S>                                                 <C>                                 <C>
Alan Finkel                                            99,997,500*                      10,399,740

Geoffrey Powell                                                 -                       38,532,420

Alan Stockdale                                                  -                          400,000

Henry Lester                                                    -                        3,733,240

Stanley Crooke                                                                           1,400,000
</TABLE>

         * Alan Finkel's wife, Elizabeth Finkel, also holds 99,997,500
         Underlying Shares.

         The Directors may subscribe for Securities under this Prospectus.

         11.14    OTHER INTERESTS OF DIRECTORS

         Alan Finkel and his wife, Elizabeth Finkel, are shareholders of
         Circadian, which:

                                      63.

<PAGE>

         (a)      owns 100% of Precision Patchclamps (Int) Pty Ltd which in turn
                  owns 66,665,000 Axon Shares; and

         (b)      enables them to participate in the grant of Entitlement
                  Options.

         11.15 INTERESTS AND CONSENTS OF EXPERTS

         Except as set out in this Prospectus, no expert nor any firm in which
         any expert is a partner, has any interest nor has had any interest in
         the two years prior to the lodgement of this Prospectus for
         registration, in the promotion of Axon, and no amounts have been paid
         or agreed to be paid to any expert or any firm in which such expert is
         a partner, for services rendered by the expert or firm in connection
         with the promotion or formation of Axon.

         (a)      Ernst &Young has prepared the Independent Accountant's Report
                  included in the Prospectus. Axon has agreed to pay the fees of
                  Ernst &Young for this work on the basis of its usual time
                  related charge out rates. Total estimated fees for this
                  work:A$460,000.

                  Ernst &Young has given its written consent to the issue of
                  this Prospectus with the report appearing in section 8 of this
                  Prospectus included in the form and context in which it
                  appears and has not withdrawn that consent prior to the date
                  of lodgement of this Prospectus with the Australian Securities
                  and Investments Commission.

         (b)      Acuity Technology Management Pty Ltd has prepared the
                  valuation of Axon included in this Prospectus.

                  Acuity Technology Management Pty Ltd has given its written
                  consent to the issue of this Prospectus with the report
                  appearing in section 9 of the Prospectus included in the form
                  and context in which it appears and has not withdrawn that
                  consent prior to the date of lodgement of the prospectus with
                  the Australian Securities and Investments Commission. Total
                  fees for this work: A$11,500.

         11.16    CONSENTS TO BE NAMED

         Each of the following has consented (and has not withdrawn such consent
         prior to the lodgement of the Prospectus for registration) to be named
         in the Prospectus as performing, or having performed, in the capacity
         specified:

         -        Minter Ellison -Australian Solicitors to the Issue

         -        D&D-Tolhurst Limited - Underwriter

         -        Saw James Capel Limited - Underwriter

         -        Ernst &Young (Australia) - Independent Accountants

         -        Ernst &Young LLP (US) - Auditors

         -        Computershare Registry Services Pty Ltd - Share Registry

         -        Acuity Technology Management Pty Ltd - Independent Valuer

         11.17    RESPONSIBILITY STATEMENTS

         Ernst &Young (Australia) has been involved only in the preparation of
         the Independent Accountants' Report set out in section 8 of this
         Prospectus, and the above references to its name and has not been
         involved in the preparation of any other part of this Prospectus, and
         specifically disclaims liability to any person in respect of any
         statements included elsewhere in this Prospectus. Ernst &Young
         (Australia) has not, other than as set out above, been involved in the
         preparation of or authorised or caused the issue of this Prospectus.

         D&D-Tolhurst Limited and Saw James Capel Limited have not been involved
         in the preparation of this Prospectus other than this paragraph and the
         references in this Prospectus to its name. D&D Tolhurst Limited and Saw
         James Capel Limited have consented only to be named in this Prospectus
         as having acted in the capacity of Underwriters to the Issue and
         specifically disclaims liability to any person in respect of any
         statements included in or any omissions from this Prospectus.

         Ernst &Young LLP (US) has not been involved in the preparation of this
         Prospectus other than this paragraph, and the references in this
         Prospectus to its name. Ernst & Young LLP (US) has consented only to be
         named in this Prospectus as having acted as Auditors and specifically
         disclaims liability to any person in respect of any statements included
         in or any omissions from this Prospectus.

                                      64.

<PAGE>

         Computershare Registry Services Pty Ltd has not been involved in the
         preparation of this Prospectus other than this paragraph and the
         references in this Prospectus to its name. Computershare Registry
         Services Pty Ltd has consented only to be named in this Prospectus as
         having acted in the capacity of Share Registry to Axon and specifically
         disclaims liability to any person in respect of any statements included
         in or any omissions from this Prospectus.

         Acuity Technology Management Pty Ltd has been involved only in the
         preparation of the valuation of Axon set out in section 9 of this
         Prospectus and the above references to its name and has not been
         involved in the preparation of any other part of this Prospectus, and
         specifically disclaims liability to any person in respect of any
         statements included elsewhere in this Prospectus. Acuity Technology
         Management Pty Ltd has not, other than as set out above, been involved
         in the preparation of or authorised or caused the issue of this
         Prospectus.

         11.18    COSTS OF THE ISSUE

         If the Issue proceeds, the total estimated costs of the Issue,
         including underwriting fees, legal fees incurred, registration fees,
         fees for other advisers, Prospectus design, printing and advertising
         expenses and other miscellaneous expenses, will be approximately
         A$1,500,000.

         11.19    DOCUMENTS FOR INSPECTION

         Verified copies of the following documents:

         -        the consents of Minter Ellison, Ernst &Young (Australia),
                  Ernst &Young LLP (US), D&D-Tolhurst Limited, Saw James Capel
                  Limited and Computershare Registry Services Pty Ltd and Acuity
                  Technology Management Pty Ltd referred to in section 11.16;

         -        the valuation by Acuity Technology Management Pty set out in
                  section 9;

         -        the Material Contract summarised in section 11.6; and

         -        the Constitution and By-Laws of Axon,

         will be available for inspection free of charge during business hours
         after seven days from lodgement of this Prospectus for a period of not
         less than 12 months after the date of the lodgement of this Prospectus
         at 6 Wallace Avenue, Toorak, Victoria 3142.

                                      65.

<PAGE>

                              SECTION 12. GLOSSARY

The following definitions apply throughout this document unless the context
requires otherwise.

         `APPLICANT(S)' means person(s) who submit valid Application Forms
         pursuant to this Prospectus.

         `APPLICATION FORM' means the form so described accompanying copies of
         this Prospectus.

         `APPLICATION LIST' means a list of members of the public who have
         applied for Securities under the Offer.

         `APPLICATIONS OPENING DATE' means 9.00 am Australian Eastern Standard
         Time on 14 February 1999.

         `APPLICATIONS CLOSING DATE' means 5.00 pm Australian Eastern Standard
         Time on 29 February 1999 or such other date as Axon may determine.

         `ASIC' means the Australian Securities and Investments Commission.

         `ASX' means Australian Stock Exchange Limited.

         `AXON' means Axon Instruments, Inc ARBN 090 106 844.

         `CDI' means a CHESS Depositary Interest.

         `CDI REGISTER' means a register of holders of the Securities issued
         under this Prospectus.

         `CDN' means CHESS Depositary Nominee.

         `CHESS' means the Clearing House Electronic Subregister System.

         `CIRCADIAN' means Circadian Technologies Limited ACN 006 340 567.

         `CUFS' means CHESS Units of Foreign Securities.

         `CUMULATIVE VOTING' is a voting procedure available to shareholders
         under the California Corporations Code for the election of Directors.
         Under this voting procedure a shareholder may cumulate votes by either
         giving one candidate a number of votes equal to the number of directors
         to be elected multiplied by the number of votes to which the
         shareholder's shares are normally entitled or distributing the
         shareholder's votes on the same principle among as many candidates as
         the shareholder thinks fit.

         `DIRECTORS' means the directors of Axon.

         `ENTITLEMENT OPTION' means one option, at 1 cent, to take up one
         unissued security in Axon at 20 cents at any time on or before 5 years
         after the date of issue for every 2.5 shares in Circadian held as at
         the Record Date, being the date 10 business days after ASX quotation of
         the Axon Shares.

         `ERNST & YOUNG' means Ernst &Young (Australia) and Ernst &Young LLP
         (US) unless otherwise stated.

         `HOME BRANCH' means the branch of the ASX designated to an entity by
         ASX as the entity's home branch for administrative purposes.

         `ISSUE' means the issue of Securities pursuant to this Prospectus.

         `LISTING RULES' means the official listing rules of the ASX.

         `OFFER' means the invitation to the public made in this Prospectus to
         subscribe for Securities.

         `OFFICIAL LIST' means the official list of entities that ASX has
         admitted and not removed.

                                      66.

<PAGE>

         `OFFICIAL QUOTATION' means ASX allows quotation on the Official List.

         `ORIGINAL OPTION' means an option granted by the Board of Directors of
         Axon pursuant to Axon's Stock Option Plan.

         `PRINCIPAL REGISTER' means a register of holders of the Underlying
         Shares.

         `RECORD DATE' means the date 10 business days after ASX quotation of
         the Axon securities, being the date to determine those Circadian
         securityholders eligible to receive the Offer by Axon of Entitlement
         Options.

         `RELATED BODY CORPORATE' means a body corporate which is related to
         Axon pursuant to section 50 of the Corporations Law.

         `SCH' means Security Clearing House.

         `SCH BUSINESS RULES' has the same meaning as in the Corporations Law.

         `SECURITY(IES)' means units of CUFS which confer the beneficial
         interest to the Underlying Share of Axon being `units' of such
         Share(s).

         `SHARE(S)' means an ordinary share in the common stock of Axon.

         `UNDERLYING SHARE' means an ordinary share in the common stock of Axon.

         `US PERSON' means:

         (a)      any natural person resident in the United States;

         (b)      any partnership or corporation organized or incorporated under
                  the laws of the United States;

         (c)      any estate of which any executor or administrator is a US
                  person;

         (d)      any trust of which any trustee is a US person;

         (e)      any agency or branch of a foreign entity located in the United
                  States;

         (f)      any non-discretionary account or similar account (other than
                  an estate or trust) held by a dealer or other fiduciary for
                  the benefit or account of a US person;

         (g)      any discretionary account or similar account (other than an
                  estate or trustee) held by a dealer or other fiduciary
                  organized, incorporated or (if an individual) resident in the
                  United States; and

         (h)      any partnership or corporation if:

                  (i)      organized or incorporated under the laws of any
                           foreign jurisdiction; and;

                  (ii)     formed by a US person principally for the purpose of
                           investing in securities not registered under the
                           Securities Act, unless it is organized or
                           incorporated, and owned, by accredited investors (as
                           defined by Rule 501(a)) who are not natural persons,
                           estates or trusts.

         The following are not US persons:

         (a)      any discretionary account or similar account (other than an
                  estate or trust) held for the benefit or account of a non-US
                  person by a dealer or other professional fiduciary organized,
                  incorporated, or (if an individual) resident in the United
                  States;

         (b)      any estate of which any professional fiduciary acting as
                  executor or administrator is a US person if:

                                      67.

<PAGE>

                  (i)      an executor or administrator of the estate who is not
                           a US person has sole or shared investment discretion
                           with respect to the assets of the estate; and

                  (ii)     the estate is governed by foreign law;

         (c)      any trust of which any professional fiduciary acting as
                  trustee is a US person, if a trustee who is not a US person
                  has sole or shared investment discretion with respect to the
                  trust assets, and no beneficiary of the trust (and no settlor
                  if the trust is revocable) is a US person;

         (d)      an employee benefit plan established and administered in
                  accordance with the law of a country other than the United
                  States and customary practices and documentation of such
                  country;

         (e)      any agency or branch of a US person located outside the United
                  States if:

                  (i)      the agency or branch operates for valid business
                           reasons; and

                  (ii)     the agency or branch is engaged in the business of
                  insurance or banking and is subject to substantive insurance
                  and banking regulation, respectively, in the jurisdiction
                  where located; and

         (f)      the International Monetary Fund, the International Bank for
                  Reconstruction and Development, the Inter-American Development
                  Bank, the Asian Development Bank, the African Development
                  Bank, the United Nations, and their agencies, affiliates and
                  pension plans, and any other similar international
                  organisations, their agencies, affiliates and pension plans.

         `UNITED STATES' means the United States of America, its territories and
         possessions, any State of the United States, and the District of
         Columbia.

         `US SECURITIES ACT' means United States Securities Act of 1933, as
         amended.

         REFERENCES TO CURRENCY, INCLUDING $, CENTS AND A$ ARE REFERENCES TO
         AUSTRALIAN CURRENCY UNLESS OTHERWISE STATED BY, FOR EXAMPLE, REFERENCES
         TO US$.

                                      68.

<PAGE>

                       SECTION 13. DIRECTORS' SIGNATURES

This Prospectus has been signed by each Director (or by a person authorised by
him in writing to sign on his behalf).

/s/ Alan Finkel
________________________________________________
Alan Stockdale
(by his agent duly authorised in writing)

/s/ Alan Finkel
________________________________________________
Alan Finkel

/s/ John Steven
________________________________________________
Geoffrey Powell
(by his agent duly authorised in writing)

/s/ Alan Finkel
________________________________________________
Henry Lester
(by his agent duly authorised in writing)

/s/ John Steven
________________________________________________
Stanley Crooke
(by his agent duly authorised in writing)

                                      69.
<PAGE>

                             Axon Instruments, Inc.

                               REGISTERED OFFICES

6 Wallace Avenue                                 1101 Chess Drive
Toora K, Victoria 3142, Australia                Foster City, CA 94404, USA
Telephone: (03) 9026 0399                        Telephone: 00111650 571 9400
E mail: InvestorInfo@axon.com                    E mail: InvestorInfo@axon.com
<PAGE>

Pin cheque here
(do not staple)

                               REGISTRARS USE ONLY

APPLICATION FORM

AXON INSTRUMENTS, INC. ('COMPANY')
ARBN 090 106 844

TO MEET THE REQUIREMENTS OF THE CORPORATION LAW, THIS APPLICATION
FORM MUST NOT BE HANDED ON UNLESS ATTACHED TO THE PROSPECTUS.

<TABLE>
<S>                                                                                                <C>                <C>
                                                                                                   Brokers Code       Brokers Stamp
FILL OUT THIS APPLICATION FORM IF YOU WANT TO APPLY FOR SECURITIES IN AXON INSTRUMENTS, INC.
      -       Follow instructions overleaf to complete this Application Form.
      -       Print clearly in capital letters using black or blue ink.                            Adviser
</TABLE>

<TABLE>
<S>  <C>                        <C>                 <C>                    <C>                 <C>
------------------------------------------------------------------------------------------------------------------------------------
A    I/We apply for             Number of Securities or such lesser number of Securities as may be allocated to me/us by the
                                Company. (All applications must be for a minimum of 10,000 Securities and thereafter in multiples of
                                5,000 shares).
------------------------------------------------------------------------------------------------------------------------------------
B    I/We lodge full application monies             A$                                         .00 ($0.20 per Security) - refer to
                                                                                                   Note B overleaf
------------------------------------------------------------------------------------------------------------------------------------
C    SINGLE/JOINT APPLICANT NO. 1 - REFER OVERLEAF FOR CORRECT FORMS OR REGISTRABLE TITLE(S)

     Title                      Given name(s)                              Surname

     JOINT APPLICANT NO. 2 OR ACCOUNT DESIGNATION

     Title                      Given name(s)                              Surname

     Title                      Given name(s)                              Surname

------------------------------------------------------------------------------------------------------------------------------------
D    ENTER YOUR POSTAL ADDRESS DETAILS - INCLUDE STATE AND POSTCODE

     Unit Number                Street Number                              Post Office Box or other Mail Box detail (if applicable)

                                                    OR

     Street Name

     Suburb/City                                                           State                               Postcode

------------------------------------------------------------------------------------------------------------------------------------
E    Contact Name               Home Telephone Number                      Work Telephone Number

     e-mail Address

------------------------------------------------------------------------------------------------------------------------------------
F    CHESS PARTICIPANT - HIN
     (if applicable)
------------------------------------------------------------------------------------------------------------------------------------
G    ENTER YOUR TAX FILE NUMBER(S) OR EXEMPTION CATEGORY

------------------------------------------------------------------------------------------------------------------------------------
     LODGE YOUR APPLICATION FORM AS SOON AS POSSIBLE.  Pin your cheque above - Cheques should be crossed NOT NEGOTIABLE and made
     payable to:
     AXON INSTRUMENTS, INC. - FLAT ACCOUNT.

     Cheque Details             Bank                                       BSB                                 Amount of Cheque
     Drawer
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

By lodging this application form, I/We declare that this application is
completed and lodged according to the declarations/appropriate statements on the
reverse of this form and agree to be bound by the Constitution and By-Laws of
the Company and that all statements made by me/us are complete and accurate,
notwithstanding that my/our signature does not appear on this form. Further,
I/we acknowledge that I am/we are not a US Person and I am/we are not acting for
the account or benefit of another US Person within the United States. We
represent the accuracy of, and agree to, each of the matters set out in
paragraphs (1), (2), (3) and (4) of Section 6.7.

YOU SHOULD READ THE PROSPECTUS CAREFULLY BEFORE COMPLETING THIS APPLICATION
FORM.

                                       70.
<PAGE>

INSTRUCTIONS TO APPLICANTS

Please complete all sections of the Application Form using BLOCKLETTERS.
Applications for the Securities offered by this Prospectus must be made and can
only be accepted on the Application Form which forms part of this Prospectus.

A    Insert the number of Securities you wish to apply for. The minimum number
     of Securities which may be applied for is 10,000. Additional Securities in
     excess of the minimum must be applied for in multiples of 5,000 Securities.

B    Application moneys must be for the full amount in Australian dollars
     (numbers of Securities multiplied by $0.20 per Security).CHEQUES MUST BE
     MADE PAYABLE TO `AXON INSTRUMENTS, INC-FLOAT ACCOUNT' AND CROSSED `NOT
     NEGOTIABLE'. If your Application Form is not completed correctly, or if the
     accompanying payment is for the wrong amount, it may still be treated as
     valid. The Company's decision as to whether to treat your application as
     valid, and how to construe, amend or complete it, will be final. The
     Company's decision on the number of Securities to be allocated to you will
     also be final. You will not, however, be treated as having offered to
     purchase more Securities in the Company than is indicated in Box A. Where
     the number of Securities allotted is less than the number of Securities
     applied for, surplus application moneys will be refunded within 14 days of
     the closing date. Interest will not be paid on refunded moneys.

C    Applications must be in the name(s) of natural person(s), companies or
     other legal entities acceptable to the Company up to a maximum - - of three
     names per application. Applications in the name of a trust or estate,
     business, firm or partnership, club, association or other unincorporated
     body cannot be accepted. However, applications made solely in the
     individual name(s) of the person who is the trustee, proprietor, partner or
     office bearer (as applicable) of those entities will be accepted. For a
     guide, please refer below:

<TABLE>
<CAPTION>
TYPE OF INVESTOR                               CORRECT FORM OF REGISTRABLE TITLE           INCORRECT FORM OF REGISTRABLE TITLE
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>                                         <C>
INDIVIDUAL
Use given names, not initial                   Mr. John James Smith                        JJ Smith
-----------------------------------------------------------------------------------------------------------------------------------
COMPANY
Use Company title, not abbreviations           Smith Pty Ltd.                              Smith P/L
                                                                                           Smith Co
-----------------------------------------------------------------------------------------------------------------------------------
TRUSTS
Use trustee(s) personal names(s),              Mrs. Tracy Smith                            Tracy Smith Family Trust
do not use the name of the trust               <Tracy Smith A/C>
-----------------------------------------------------------------------------------------------------------------------------------
DECEASED ESTATES
Use executor(s) personal names(s),             Ms. Prue Smith                              Estate of late John Smith
do not use the name of the deceased            <Est John Smith A/C>
-----------------------------------------------------------------------------------------------------------------------------------
PARTNERSHIPS
Use the partners personal names(s),            Mr. John  Smith +                           John Smith and Son
do not use the name of the partnership         Mr. Bart Smith
                                               <John Smith and Son A/C>

CLUB/INCORPORATED BODIES/BUSINESS NAMES
Use office bearer(s) personal name(s),         Mr. Danny Smith                             Smith Tennis Association
do not use the name of the club etc.           <Smith Tennis Association A/C>

SUPERANNUATION FUNDS
Use name of trustee of fund,                   Prue Smith Pty Ltd                          Prue Smith Pty Ltd Superannuation Fund
do not use the name of the fund                <Super Fund A/C>
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

D.   Please enter your postal address for all correspondence. All communications
     to you from the Company's share registry (Issuer holding statements,
     annual/interim reports, correspondence etc) will be mailed to the person(s)
     and address as shown. You should notify the Company of any change of
     address. For joint applications only one address is required.

E.   Please provide us with telephone numbers. e-mail address (including the
     person responsible in the case of an application by a company) so that we
     can contact you quickly if there is an irregularity in your Application
     Form. IF YOU HAVE ANY QUESTIONS ON HOW TO COMPLETE THIS APPLICATION FORM
     PLEASE TELEPHONE D&D-TOLHURST LIMITED ON TELEPHONE (03) 9242 4000 OR SAW
     JAMES CAPEL LIMITED ON (08) 9288 9288.

F.   INSTRUCTIONS FOR PARTICIPATION IN CHESS - the Company will apply to the ASX
     to participate in CHESS. This means that a holder will receive a statement
     of holding rather than a share certificate. If you are already a
     participant in CHESS you may complete this section or send the signed
     Application Form to your sponsoring broker for completion prior to
     lodgement, otherwise leave this section blank. All shareholders will
     receive CUFS on the issuer sponsored subregister or CHESS subregister
     unless they specifically advise the Company in writing that they wish to
     receive shares in certificated form. For holders who are currently
     sponsored on CHESS, please provide the relevant CHESS HIN in the space
     provided. Applicants should specify a CHESS HIN which is designated as
     `Domestic'. Any queries in this regard should be directed to your
     sponsoring broker.

G.   TAX FILE NUMBERS -Collection of tax file numbers (`TFN') is authorised by
     tax law and the Privacy Act. The failure to quote a TFN will not invalidate
     your application for Securities.

LODGEMENT OF APPLICATIONS Please post or deliver the completed Application Form
together with your cheque to the following address:

<TABLE>
<S>                                             <C>                                     <C>
COMPUTERSHARE REGISTRY SERVICES PTY LIMITED     D&D-TOLHURST LIMITED PTY LIMITED        SAW JAMES CAPEL LIMITED
LEVEL 12                                        LEVEL 30                                152-158 ST GEORGE'S TERRACE
565 BURKE STREET                                459 COLLINS STREET                      PERTH WA 6000
MELBOURNE VIC 3000                              MELBOURNE VIC 3000                      TEL: (08) 9288 9288
TEL: (03) 9611 5711                             TEL: (03) 9242 4000
</TABLE>

The offer opens at 9:00am on 14 February 2000 and will remain open until 5:00pm
on 29 February 2000 subject to the right of the Company to close the offer at
any time or to extend the closing date for applications without prior notice.
Applications may be lodged prior to the opening of the offer. HOWEVER,
APPLICATION FORMS MUST BE RECEIVED O LATER THAN 5:00PM ON 29 FEBRUARY 2000.

Before lodging the application Form. Applicant(s) should read the entire
Prospectus dated 28 January 2000 to which this application relates. The
Applicant(s) agrees that this application is for Securities in the Company upon
and subject to the terms of the Prospectus. The Applicant(s) agrees to take any
number of Securities equal to or less than the number of Securities indicated in
Box A that may be allotted to the Applicant(s) pursuant to the Prospectus. The
applicant(s) declares that all details and statements made by him/her are
complete and accurate.

                                       71.

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