HOLOGIC, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except per share data)

(1) Basis of Presentation

The consolidated financial statements of Hologic, Inc. (the Company) presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended September 24, 2005, included in the Company’s Form 10-K as filed with the Securities and Exchange Commission on December 6, 2005.

The balance sheet at September 24, 2005 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The consolidated balance sheet as of March 25, 2006, the consolidated statements of income for the three and six months ended March 25, 2006 and March 26, 2005 and the consolidated statements of cash flows for the six months ended March 25, 2006 and March 26, 2005, are unaudited but, in the opinion of management, include all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation of results for these interim periods.

The results of operations for the three months and six months ended March 25, 2006 and March 26, 2005 are not necessarily indicative of the results to be expected for the entire fiscal year ending September 30, 2006. Certain prior-period amounts have been reclassified to conform with the current-period presentation.

On November 30, 2005, the Company effected a two-for-one stock split in the form of a stock dividend. The stock split has been retroactively reflected in the accompanying consolidated financial statements and notes for all periods presented.

(2) Significant Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Significant estimates and assumptions by management affect the Company’s revenue recognition, allowance for doubtful accounts, deferred tax assets, certain accrued expenses, amortization periods, stock-based compensation and impairment of goodwill, intangible and long-lived assets.

Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from management’s estimates if past experience or other assumptions do not turn out to be substantially accurate.

(3) Acquisition of Intangible Assets

On September 29, 2005, pursuant to an Asset Purchase Agreement between Hologic, Inc. (Hologic) and Fischer Imaging Corporation (Fischer) (the Purchase Agreement), dated June 22, 2005, Hologic acquired the intellectual property and customer lists relating to Fischer’s mammography business and products for $26.9 million in cash and cancellation of the principal and interest outstanding under a $5.0 million secured loan previously provided by Hologic to Fischer.

6

Table of Contents

The aggregate purchase price for the Fischer intellectual property and customer lists was approximately $33.0 million, which includes approximately $1.0 million related to direct acquisition costs. In accordance with Emerging Issues Task Force Issue No. 98-3, Determining Whether a Non-monetary Transaction Involved Receipt of Productive Assets or of a Business, the Company determined the acquisition does not qualify as an acquisition of a business and in accordance with SFAS No. 141 and SFAS No. 142, the purchase price has been allocated to the acquired assets of Fischer based on their fair value.

As part of the purchase price allocation, all intangible assets that are a part of the acquisition were identified and valued. It was determined that technology assets and customer lists had separately identifiable values. As a result of this identification and valuation process, the Company allocated approximately $4.2 million of the purchase price to in-process research and development projects related to Fischer’s digital mammography product. This allocation represented the estimated fair value assuming these projects were completed based on risk-adjusted cash flows related to the incomplete research and development projects. At the date of acquisition, the development of these projects had not yet reached technological feasibility, and the research and development in progress had no alternative future use. The Company does not intend to complete these projects. Accordingly, these costs were expensed as of the acquisition date.

In addition, the Company allocated approximately $23.2 million and $5.6 million to developed technology and customer lists, respectively through the application of the income approach to determine the fair value of the acquired assets. Developed technology represents patented and unpatented technology and know-how related to the Fischer digital mammography and breast biopsy systems. Developed technology is expected to be amortized over a period of 12.5 years. Customer lists represent established relationships with customers, which provides a ready channel for the sale of additional products and services. Customer lists are expected to be amortized over a period of 8.5 years.

The aggregate purchase price of approximately $33 million including acquisition costs was allocated as follows:

The Company considered whether any contingencies were acquired, as the price paid was more than the fair market value of the intangible assets and determined none were acquired.

(4) Inventories

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

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

7

Table of Contents

(5) Net Income Per Share

A reconciliation of basic and diluted share amounts are as follows:

Diluted weighted average shares outstanding do not include options outstanding to purchase 149 and 262 common-equivalent shares for the three and six months ended March 25, 2006, respectively, and 120 and 256 common-equivalent shares for the three and six months ended March 26, 2005, respectively, as their effect would have been antidilutive.

(6) Stock Based Compensation

On December 16, 2004 the FASB issued SFAS Statement No. 123 (R) (SFAS 123(R)), Share-Based Payment, which is a revision of SFAS Statement No. 123 (SFAS 123), Accounting for Stock-Based Compensation. SFAS 123(R) supersedes APB Opinion No. 25, (Opinion 25), Accounting for Stock Issued to Employees, and amends SFAS No. 95, Statement of Cash Flows. Generally, the approach on SFAS 123(R) is similar to the approach described in SFAS 123. However, SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

SFAS 123(R) must be adopted for fiscal years starting after June 15, 2005. As a result, the Company adopted SFAS 123(R) starting in its fiscal first quarter of 2006, which began on September 25, 2005.

As permitted by SFAS 123, the Company historically accounted for share-based payments to employees using Opinion 25’s intrinsic value method and, as such, generally recognized no compensation cost for employee stock options. The Company has adopted the “modified prospective” method alternative outlined in SFAS 123(R). A “modified prospective” method is one in which compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS 123(R) for all share-based payments granted after the effective date and (b) based on the requirements of SFAS 123 for all awards granted to employees prior to the effective date of SFAS 123(R) that remain unvested on the effective date. As a result, the Company is amortizing the unamortized stock-based compensation expense related to unvested option grants issued prior to the adoption of SFAS 123(R), whose fair value was calculated utilizing a Black-Scholes Option Pricing Model. In addition, SFAS 123(R) requires companies to utilize an estimated forfeiture rate when calculating the expense for the period, whereas, SFAS 123 permitted companies to record forfeitures based on actual forfeitures, which was the Company’s historical policy under SFAS 123. As a result, the Company has applied an estimated forfeiture rate of 9.7% in the first quarter and 10.6% in the second quarter of fiscal 2006 in determining the expense recorded in the Company’s consolidated statement of income.

8

Table of Contents

As a result of the adoption of SFAS 123(R), the Company has recorded stock-based compensation expense as follows:

The compensation expense reduced both basic and diluted earnings per share by $0.01 for the three months ended March 25, 2006 and reduced both basic and diluted earnings per share by $0.02 for the six months ended March 25, 2006. These results reflect stock compensation expense of $738 and related tax benefit of $261 for the three months ended March 25, 2006. These results reflect stock compensation expense of $1,405 and related tax benefit of $509 for the six months ended March 25, 2006. No stock-based compensation expense was capitalized as part of inventory during the six months ended March 25, 2006. In accordance with the modified-prospective transition method of SFAS 123(R), results for prior periods have not been restated. As of March 25, 2006, there was $9.5 million of unrecognized compensation expense related to non-vested market-based share awards that is expected to be recognized over a weighted-average period of 2.6 years.

Prior to adopting SFAS 123(R), the Company accounted for stock-based compensation under APB 25. The following table illustrates the effect on net income and earnings per share if the fair value based method had been applied to the year-ago period.

Effective with the adoption of SFAS 123(R), the Company has elected to use a bi-nomial model to determine the weighted average fair value of options, rather than the Black-Scholes model. The Company considered a number of factors to determine the fair value of options including the advice of an outside valuation advisor and the advisor’s model.

9

Table of Contents

The Company had used the Black-Scholes option pricing model to determine the weighted average fair value of options prior to adopting SFAS 123(R). The weighted average fair value of options granted during the three and six months ended March 25, 2006, under the binomial valuation method, were $19.60 and $17.26, respectively. The weighted average fair value of options granted during the three and six months ended March 26, 2005, under the Black-Scholes valuation method, were $7.97 and $6.07, respectively. The fair value of options at the date of grant and the weighted-average assumptions utilized to determine such values are indicated in the following table:

The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. Expected volatility is based on an average of the implied volatility, the volatility for the most recent period commensurate with the expected option life and the historical volatility over a period commensurate with the contractual term of the option. The Company estimated the expected life of stock options and stock option forfeitures based on historical experience.

The assumptions used to calculate the SFAS No. 148 pro forma disclosure for shares purchased under the Employee Stock Purchase (ESP) Plan under the Black-Scholes method were as follows:

On February 28, 2005, the Board of Directors voted to discontinue the ESP Plan effective July 1, 2005.

The following table summarizes all stock option activity under all of the plans for the six months in the period ended March 25, 2006 (in thousands, except per share and weighted-average data):

10

Table of Contents

The range of exercise prices for options outstanding and exercisable as of March 25, 2006 are as follows:

(7) Comprehensive Income

The Company’s only item of other comprehensive income relates to foreign currency translation adjustments, and is presented separately on the balance sheet as required.

A reconciliation of comprehensive income is as follows:

11

Table of Contents

(8) Business Segments and Geographic Information

Beginning in fiscal 2006, the Company combined its previously reported mammography and digital detector operating segments, to better reflect how the Company views its operations and manages its business. In fiscal 2006, the primary function of the digital detector business is to support the Company’s mammography product line.

The Company now reports its business as three segments: mammography, osteoporosis assessment and other. The Company’s other business segment includes its mini C-arm, extremity MRI, conventional general radiography service and digital general radiography systems businesses. Identifiable assets for the three principal operating segments consist of inventories, intangible assets, and property and equipment. The Company has presented all other identifiable assets as corporate assets. Intersegment sales and transfers are not significant. Prior periods have been restated to conform to this presentation. Segment information for the three months and six months ended March 25, 2006 and March 26, 2005 is as follows:

Export sales from the United States to unaffiliated customers, primarily in Europe, Asia and Latin America during the three months and six months March 25, 2006 totaled approximately $29,104 and $53,150, respectively, and for the three and six months ended March 26, 2005 totaled approximately $21,603 and $39,585, respectively.

12

Table of Contents

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

Export product sales as a percentage of total product sales are as follows:

(9) Litigation and Other Matters

In March 2005, the Company was served with a Complaint filed on November 12, 2004 by Oleg Sokolov with the United States District Court for the District of Connecticut alleging that the Company’s HTC ^™ grid infringes U.S. Patent Number 5,970,118. The plaintiff is seeking to preliminarily and permanently enjoin the Company from infringing the patent, as well as damages resulting from the alleged infringement, treble damages and reasonable attorney fees, and such other and further relief as may be available. On April 25, 2005, the Company filed an Answer and Counterclaims in response to the Complaint in which the Company denied the plaintiff’s allegations and, among other things, sought declaratory relief with respect to the patent claims and damages, as well as other relief. The Company does not believe that it infringes any valid or enforceable patents of the plaintiff and intends to vigorously defend its interests. As such, no amounts have been accrued related to this matter as of March 25, 2006.

The Company is the subject of a non-public FTC investigation to determine whether the Company’s recent acquisition of certain assets owned by Fischer Imaging Corporation may be anticompetitive and in violation of Section 7 of the Clayton Act or Section 5 of the Federal Trade Commission Act. The Company is in the process of responding to the FTC requests. The Company cannot predict the outcome or effect, if any, that this investigation will have on the Company’s business.

In the ordinary course of business, the Company is party to various types of litigation. The Company believes that all other litigation currently pending or threatened will not reasonably be likely to have a material effect on the Company’s financial condition or results of operations.

(10) Income Taxes

The Company’s effective tax rates for the three months ended March 25, 2006 and March 26, 2005 were 36% and 20%, respectively, and for the six months ended March 25, 2006 and March 26, 2005 were 36% and 14%, respectively, which were lower than the Company’s statutory federal and state rate of 40.0%. For the three and six months ended March 25, 2006, the lower effective rate was due to certain permanent tax differences. The Company’s effective income tax rate for the three and six months ended March 26, 2005 was lower than the statutory rate primarily due to the utilization of previously unrecognized net operating losses. The Company currently expects to realize recorded deferred tax assets as of March 25, 2006 of approximately $12.3 million. Management’s conclusion that such assets will be recovered is based upon its expectation that future earnings of the Company combined with tax planning strategies available to the Company will provide sufficient taxable income to realize recorded tax assets. Such tax strategies include estimates and involve judgment. While the realization of the Company’s net recorded deferred tax assets cannot be assured, to the extent that future taxable income against which these tax assets may be applied is not

13

Table of Contents

sufficient, some or all of the Company’s net recorded deferred tax assets would not be realizable. The Company’s net deferred tax asset increased $7.8 million in the current six month period primarily due to the benefit from the exercise of non-qualified stock options.

(11) Product Warranties

The Company typically offers a one-year warranty for all of its products. The Company provides for the estimated cost of product warranties at the time product revenue is recognized. Factors that affect the Company’s warranty reserves include the number of units sold, historical and anticipated rates of warranty repairs and the cost per repair. The Company periodically assesses the adequacy of the warranty reserve and adjusts the amount as necessary.

Product warranty activity for the six months ended March 25, 2006 and March 26, 2005 is as follows:

(12) Related Party Transactions

In fiscal 2000 and 2001, the Company loaned an officer an aggregate of $500, which is required to be repaid quarterly through April 2006. In the event of a change in control, as defined, the amounts outstanding will be forgiven. The note is unsecured and bears interest at 7% per annum.

In December 2002, the Compensation Committee of the Board of Directors approved a special bonus program to provide the officer with the funds necessary to pay the quarterly installments due under the loan. Under the special bonus program, for so long as the officer remains an officer of the Company and there are amounts remaining to be repaid under the loan, the Company will pay the officer a special quarterly bonus equal to the amount due under the loan, including interest due, plus an additional payment equal to the taxes due as a result of the special bonus and such additional payment, such that the net-after-tax special quarterly bonus to be received by the officer will equal the principal and interest then due under the loan. During the six months ended March 25, 2006 and March 26, 2005 the Company recognized $75 and $159, respectively, in bonus expense in connection with this program. As of January 1, 2006, the full amount of the loan had been repaid, and no further amounts will be paid to the officer under this special bonus program.

In May 2006, the Company entered into retention and severance agreements with certain executives that provide for retention payments in cash totaling $3 million if these executives remain employed with the Company through December 31, 2008 (“Retention Date”). The Company has determined that it is probable that these amounts will be paid and therefore, is accruing these amounts ratably through the Retention Date. In addition, in connection with the retention and severance agreements, these executives were awarded 53,903 restricted stock units with an aggregate value of $2.5 million. These restricted stock units cliff vest on the Retention Date. These shares will be excluded from the computation of basic earnings per share until the shares vest because the employee is not entitled to the rewards of stock ownership. The Company will record the $2.5 million as deferred stock based compensation, which will be amortized over the vesting period. The retention and severance agreements also provide these executives with certain cash payments and continuation of benefits, as defined, in the event of termination without cause.

In May 2006, the Company also entered into severance agreements with certain other key officers that provide for certain cash payments and continuation of benefits, as defined, in the event of termination without cause.

(13) Goodwill and Intangible Assets

Consistent with prior years, the Company conducted its annual impairment test of goodwill during the second quarter of fiscal 2006. The Company considered a number of factors, including an independent valuation, from prior years, to conduct this test. The valuation was based upon expected future discounted operating cash flows of the mammography reporting unit as well as analysis of recent sales or offerings of similar companies. The timing and size of impairment charges involve the application of management’s judgment and could significantly affect the Company’s operating results. The Company determined that it met all of the criteria under SFAS No. 142 to carry-forward the prior year determination of reporting unit fair value and based on the applicable valuation determined that no impairment exists.

14

Table of Contents

Goodwill by reporting segment consists of the following:

Intangible assets consist of the following:

The estimated remaining amortization expense for each of the five succeeding fiscal years:

(14) Subsequent Events

On April 17, 2006, the Company entered into a definitive agreement to acquire Suros Surgical Systems, Inc. The purchase price for the transaction will be $240 million (subject to adjustment), plus a two-year earn out. The closing consideration will consist of $132 million in cash and an additional $108 million payable, at the election of Hologic, in cash, shares of Hologic Common Stock or a combination thereof. The price per share will be equal to the ten-day trading average of the closing price per share of Hologic Common Stock for the period ending two trading days prior to the closing date. The earn-out will be payable in two annual cash installments equal to the incremental revenue growth in Suros Surgical’s business in the two years following the closing. This transaction is subject to customary closing conditions, including Suros Surgical stockholder approval and the expiration or termination of the waiting period under the Hart-Scott Rodino Antitrust Improvements Act.

On April 24, 2006, the Company entered into a definitive agreement to acquire R2 Technology, Inc. The purchase price for the transaction will be $220 million (subject to adjustment) payable in shares of Hologic Common Stock. The price per share will be equal to the ten-trading day average of the closing price per share of Hologic Common Stock for the period ending two trading days prior to the closing date. This transaction is subject to a fairness hearing before the Commissioner of the California Department of Corporations, and to customary closing conditions, including R2 stockholder approval and the expiration or termination of the waiting period under the Hart-Scott Rodino Antitrust Improvements Act.

15

Table of Contents

On May 2, 2006, the Company acquired AEG Elektrofotografie GmbH and its group of related companies for a purchase price of EUR 21 million (subject to adjustment), excluding acquisition costs, plus a one-year earn-out of EUR 1.7 million. The purchase price consists of EUR 16,297,650 in cash and an additional 109,720 shares of Hologic Common Stock. The cash payment includes an escrow amount of EUR 2.8 million related to certain items and will be fully released 24 months after the closing date absent any asserted claims. The earn-out will be payable in cash if AEG Elektrofotografie calendar year 2006 EBITDA exceeds a pre-set amount. Goodwill will be increased by the amount of the additional consideration, if any, when it becomes due and payable. The Company is not required to make any further earn-out payments. This transaction will be accounted for using the purchase method of accounting and, accordingly, results of operation for AEG will be included in the Company’s consolidated financial statements from the date of acquisition. The Company has not yet completed the allocation of the purchase price, as appraisals associated with the valuation are not yet complete.

The Company has existing relationships with these parties as suppliers of inventory items. The supply agreements were entered into in prior years at arm’s length terms and conditions. No minimum purchase requirements exist and the pricing was consistent with other vendor agreements.

PART I - FINANCIAL INFORMATION (Continued)