Common use of Report of Independent Auditors Clause in Contracts

Report of Independent Auditors. The Board of Directors Sequenom, Inc. We have audited the accompanying consolidated balance sheet of Sequenom, Inc. (a development stage company) as of December 31, 1997 and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the year ended December 31, 1997 and the period from February 14, 1994 (inception) through December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The financial statements as of December 31, 1996, and for the period February 14, 1994 (inception) through December 31, 1996, were audited by other auditors whose report dated May 15, 1997 expressed an unqualified opinion on those statements. The financial statements for the period February 14, 1994 (inception) through December 31, 1996 include total revenues and net loss of $917,994 and $(6,283,696), respectively. Our opinion on the statements of operations, stockholders' equity, and cash flows for the period February 14, 1994 (inception) through December 31, 1997, insofar as it relates to amounts for prior periods through December 31, 1996, is based solely on the report of other auditors. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audit and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sequenom, Inc. ( a development stage company) at December 31, 1997, and the result of its operations and its cash flows for the year then ended and the period from February 14, 1994 (inception) through December 31, 1997, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP March 13, 1998 Sequenom, Inc. (a development stage company) Consolidated Balance Sheets DECEMBER 31, 1997 1996 --------------------------- Assets Current Assets: Cash and cash equivalents $ 832,782 $ 1,326,137 Grant receivable 181,350 241,947 Refundable value added tax 57,474 32,922 Other current assets and prepaid expenses 50,968 140,809 --------------------------- Total current assets 1,122,574 1,741,815 Property, equipment and leasehold improvements, net 1,002,197 921,034 Organizational costs, net 9,996 18,000 Other assets 137,806 32,834 Total assets $ 2,272,573 $ 2,713,683 =========================== Liabilities and stockholders' equity (deficit) Current liabilities: Accounts payable and accrued expenses $ 1,121971 $ 796,662 Unearned revenue - current portion 126,000 125,500 --------------------------- Total current liabilities 1,247,971 922,162 Unearned revenue - long term portion -- 125,500 Accrued long-term interest payable 424,000 274,500 Long-term debt 3,348,000 2,597,600 Commitments Stockholders' equity (deficit): Series A Convertible Preferred Stock, $0.001 par value 1,650,000 shares authorized; 1,580,000 shares issued and outstanding 1,580 1,580 (liquidation preference $790,000) Series B Convertible Preferred Stock, $0.0001 par value, 2,976,663 shares 2,977 2,977 authorized, issued and outstanding (liquidation preference $4,464,995) Series C Convertible Preferred Stock, $0.001 par value, 3,365,061 shares 1,065 -- authorized; 1,065,079 shares issued and outstanding in 1997 (liquidation preference $3354,999) Common Stock, $0.001 par value; 9,218,000 shares authorized; 292,251 and 292 148 148,251 shares issue and outstanding in 1997 and 1996, respectively Additional paid-in capital 8,569,705 5,229,576 Deferred compensation -- (25,000) Cumulative translation adjustment (225,452) (131,664) Deficit accumulated in the development stage (11,097,565) (6,283,696) --------------------------- Total stockholders' equity (deficit) (2,747,396) (1,206,079) --------------------------- Total liabilities and stockholders' equity (deficit) $ 2,272,573 $ 2,713,683 =========================== See accompanying notes. Sequenom, Inc. (a development stage company) Consolidated Statements of Operations For the period from February 14,1994 (inception) to Years ended December 31, December 31, ---------------------------------- 1997 1996 1997 ----------- ----------- --------------------- Income: Research and development grants $ 526,573 $ 892,903 $ 1,419,476 Other income 88,740 25,091 113,831 ----------- ----------- ------------ 615,313 917,994 1,533,307 Operating expenses: Research and development 3,620,298 3,161,296 8,977,847 General and administrative 1,860,629 1,032,005 3,542,619 ----------- ----------- ------------ 5,480,927 4,193,301 12,520,466 ----------- ----------- ------------ Net loss from operations (4,865,614) (3,275,307) (10,987,159) Interest income 56,986 72,918 134,964 Interest expense (308,191) (274,793) (611,505) Foreign currency transaction gain 302,950 63,185 366,135 ----------- ----------- ------------ Net loss $(4,813,869) $(3,413,997) $(11,097,565) =========== =========== ============ See accompanying notes. SEQUENOM, INC. (A DEVELOPMENT STAGE COMPANY) Consolidated Statements of Stockholders' Equity (Deficit) Period from February 14, 1994 (inception) through December 31, 1997 SERIES A CONVERTIBLE SERIES B CONVERTIBLE SERIES C CONVERTIBLE PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK --------------------------------------------------------------------------------------- Shares Amount Shares Amount Shares Amount Shares Amount --------------------------------------------------------------------------------------- Issuance of Common Stock - $ - - $ - - $ - - $ - Issuance of Series A 442,000 442 - - - - - - Convertible Preferred Stock, net of issuance costs of $35,484 Issuance of Series A 38,000 38 - - - - - - Convertible Preferred Stock for services Issuance of Series A 1,100,000 1,100 - - - - - - Convertible Preferred Stock for holdings Translation adjustment - - - - - - - - Net loss - - - - - - - - -------------------------------------------------------------------------------------- Balance at December 31, 1994 1,500,000 1,500 - - - - - - Issuance of Series B Convertible Preferred Stock, net of issuance costs of $32,940 - - 2,333,333 2,333 - - - - Issuance of Common Stock - - - - - - 26,250 26 Exercise of Stock Options - - - - - - 122,000 122 Translation adjustment - - - - - - - - Net loss - - - - - - - - -------------------------------------------------------------------------------------- Balance at December 31, 1995 1,500,000 1,500 2,333,333 2,333 - - 148,251 148 Issuance of Series B Convertible Preferred Stock, net of issuance costs of $10,648 - - 643,330 644 - - - - Issuance of warrants - - - - - - - - Deferred compensation related - - - - - - - - to issuance of options to consultants Translation adjustment - - - - - - - - Net loss - - - - - - - - -------------------------------------------------------------------------------------- Balance at December 31, 1996 1,500,000 1,500 2,976,663 2,977 - - 144,251 148 Exercise of stock options - - - - - - 144,000 144 Issuance of Series C Convertible Preferred Stock, net of issuance costs of $49,661 - - - - 1,065,079 1,065 - - Amortization of deferred - - - - - - - - compensation Translation adjustment - - - - - - - - Net loss - - - - - - - - -------------------------------------------------------------------------------------- Balance at December 31, 1997 1,500,000 $1,500 2,976,663 $2,977 1,065,079 $1,065 292,251 $292

Report of Independent Auditors. The Board of Directors Sequenomand Stockholders Digex, Inc. Incorporated We have audited the accompanying consolidated balance sheet sheets of SequenomDigex, Inc. Incorporated (a development stage companyformerly the Web site hosting unit of Business Internet, Inc.) as of December 31, 1997 1998 and 1999, and the related consolidated statements of operations, stockholders' changes in stockholders'/owner's equity (deficit), and cash flows for the year period from July 7, 1997 (date of acquisition) to December 31, 1997, and the years ended December 31, 1997 1998 and 1999. Our audits included the period from February financial statement schedule listed in the index at Item 14, 1994 (inception) through December 31, 1997. These consolidated financial statements and this schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audit. The financial statements as of December 31, 1996, and for the period February 14, 1994 (inception) through December 31, 1996, were audited by other auditors whose report dated May 15, 1997 expressed an unqualified opinion on those statements. The financial statements for the period February 14, 1994 (inception) through December 31, 1996 include total revenues and net loss of $917,994 and $(6,283,696), respectively. Our opinion on the statements of operations, stockholders' equity, and cash flows for the period February 14, 1994 (inception) through December 31, 1997, insofar as it relates to amounts for prior periods through December 31, 1996, is based solely on the report of other auditorsaudits. We conducted our audit audits in accordance with auditing standards generally accepted auditing standardsin the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audit and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SequenomDigex, Inc. ( a development stage company) Incorporated at December 31, 19971998 and 1999, and the result results of its operations and its cash flows for the year then period from July 7, 1997 (date of acquisition) to December 31, 1997 and the years ended December 31, 1998 and 1999, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ ERNST & YOUNG LLP Tampa, Florida February 2, 2000 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Digex, Incorporated We have audited the accompanying statements of operations, changes in owner's equity, and cash flows of the Web site hosting unit of Business Internet, Inc. for the period from February January 1, 1997 to July 6, 1997. Our audits included the financial statement schedule listed in the index at Item 14. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, 1994 (inception) through December 31on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of the Web site hosting unit of Business Internet, Inc. for the period from January 1, 1997 to July 6, 1997, in conformity with accounting principles generally accepted accounting principlesin the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ ERNST & YOUNG LLP March 13Tampa, 1998 SequenomFlorida April 23, Inc. 1999 DIGEX, INCORPORATED BALANCE SHEETS (a development stage company) Consolidated Balance Sheets DECEMBER 31AMOUNTS IN THOUSANDS, 1997 1996 --------------------------- Assets Current Assets: Cash and cash equivalents $ 832,782 $ 1,326,137 Grant receivable 181,350 241,947 Refundable value added tax 57,474 32,922 Other current assets and prepaid expenses 50,968 140,809 --------------------------- Total current assets 1,122,574 1,741,815 Property, equipment and leasehold improvements, net 1,002,197 921,034 Organizational costs, net 9,996 18,000 Other assets 137,806 32,834 Total assets $ 2,272,573 $ 2,713,683 =========================== Liabilities and stockholders' equity (deficit) Current liabilities: Accounts payable and accrued expenses $ 1,121971 $ 796,662 Unearned revenue - current portion 126,000 125,500 --------------------------- Total current liabilities 1,247,971 922,162 Unearned revenue - long term portion -- 125,500 Accrued long-term interest payable 424,000 274,500 Long-term debt 3,348,000 2,597,600 Commitments Stockholders' equity (deficit): Series A Convertible Preferred Stock, $0.001 par value 1,650,000 shares authorized; 1,580,000 shares issued and outstanding 1,580 1,580 (liquidation preference $790,000) Series B Convertible Preferred Stock, $0.0001 par value, 2,976,663 shares 2,977 2,977 authorized, issued and outstanding (liquidation preference $4,464,995) Series C Convertible Preferred Stock, $0.001 par value, 3,365,061 shares 1,065 -- authorized; 1,065,079 shares issued and outstanding in 1997 (liquidation preference $3354,999) Common Stock, $0.001 par value; 9,218,000 shares authorized; 292,251 and 292 148 148,251 shares issue and outstanding in 1997 and 1996, respectively Additional paid-in capital 8,569,705 5,229,576 Deferred compensation -- (25,000) Cumulative translation adjustment (225,452) (131,664) Deficit accumulated in the development stage (11,097,565) (6,283,696) --------------------------- Total stockholders' equity (deficit) (2,747,396) (1,206,079) --------------------------- Total liabilities and stockholders' equity (deficit) $ 2,272,573 $ 2,713,683 =========================== See accompanying notes. Sequenom, Inc. (a development stage company) Consolidated Statements of Operations For the period from February 14,1994 (inception) to Years ended December 31, December 31, ---------------------------------- 1997 1996 1997 ----------- ----------- --------------------- Income: Research and development grants $ 526,573 $ 892,903 $ 1,419,476 Other income 88,740 25,091 113,831 ----------- ----------- ------------ 615,313 917,994 1,533,307 Operating expenses: Research and development 3,620,298 3,161,296 8,977,847 General and administrative 1,860,629 1,032,005 3,542,619 ----------- ----------- ------------ 5,480,927 4,193,301 12,520,466 ----------- ----------- ------------ Net loss from operations (4,865,614) (3,275,307) (10,987,159) Interest income 56,986 72,918 134,964 Interest expense (308,191) (274,793) (611,505) Foreign currency transaction gain 302,950 63,185 366,135 ----------- ----------- ------------ Net loss $(4,813,869) $(3,413,997) $(11,097,565) =========== =========== ============ See accompanying notes. SEQUENOM, INC. (A DEVELOPMENT STAGE COMPANY) Consolidated Statements of Stockholders' Equity (Deficit) Period from February 14, 1994 (inception) through December 31, 1997 SERIES A CONVERTIBLE SERIES B CONVERTIBLE SERIES C CONVERTIBLE PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK --------------------------------------------------------------------------------------- Shares Amount Shares Amount Shares Amount Shares Amount --------------------------------------------------------------------------------------- Issuance of Common Stock - $ - - $ - - $ - - $ - Issuance of Series A 442,000 442 - - - - - - Convertible Preferred Stock, net of issuance costs of $35,484 Issuance of Series A 38,000 38 - - - - - - Convertible Preferred Stock for services Issuance of Series A 1,100,000 1,100 - - - - - - Convertible Preferred Stock for holdings Translation adjustment - - - - - - - - Net loss - - - - - - - - -------------------------------------------------------------------------------------- Balance at December 31, 1994 1,500,000 1,500 - - - - - - Issuance of Series B Convertible Preferred Stock, net of issuance costs of $32,940 - - 2,333,333 2,333 - - - - Issuance of Common Stock - - - - - - 26,250 26 Exercise of Stock Options - - - - - - 122,000 122 Translation adjustment - - - - - - - - Net loss - - - - - - - - -------------------------------------------------------------------------------------- Balance at December 31, 1995 1,500,000 1,500 2,333,333 2,333 - - 148,251 148 Issuance of Series B Convertible Preferred Stock, net of issuance costs of $10,648 - - 643,330 644 - - - - Issuance of warrants - - - - - - - - Deferred compensation related - - - - - - - - to issuance of options to consultants Translation adjustment - - - - - - - - Net loss - - - - - - - - -------------------------------------------------------------------------------------- Balance at December 31, 1996 1,500,000 1,500 2,976,663 2,977 - - 144,251 148 Exercise of stock options - - - - - - 144,000 144 Issuance of Series C Convertible Preferred Stock, net of issuance costs of $49,661 - - - - 1,065,079 1,065 - - Amortization of deferred - - - - - - - - compensation Translation adjustment - - - - - - - - Net loss - - - - - - - - -------------------------------------------------------------------------------------- Balance at December 31, 1997 1,500,000 $1,500 2,976,663 $2,977 1,065,079 $1,065 292,251 $292EXCEPT SHARE INFORMATION)

Report of Independent Auditors. The Board of Directors Sequenomand Shareholders of Unifi, Inc. We have audited the accompanying consolidated balance sheet sheets of SequenomUnifi, Inc. (a development stage company) as of December 31June 25, 1997 2000, and June 27, 1999, and the related consolidated statements of operationsincome, stockholderschanges in shareholders' equity (deficit)and comprehensive income, and cash flows for each of the year ended December 31, 1997 and three years in the period from February 14ended June 25, 1994 (inception) through December 31, 19972000. Our audits also include the financial statement schedule listed in the Index at Item 14(a). These consolidated financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial fi- nancial statements and schedule based on our audit. The financial statements as of December 31, 1996, and for the period February 14, 1994 (inception) through December 31, 1996, were audited by other auditors whose report dated May 15, 1997 expressed an unqualified opinion on those statements. The financial statements for the period February 14, 1994 (inception) through December 31, 1996 include total revenues and net loss of $917,994 and $(6,283,696), respectively. Our opinion on the statements of operations, stockholders' equity, and cash flows for the period February 14, 1994 (inception) through December 31, 1997, insofar as it relates to amounts for prior periods through December 31, 1996, is based solely on the report of other auditorsaudits. We conducted our audit audits in accordance with generally accepted auditing standardsxxxx- dards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material mate- rial misstatement. An audit includes examining, on a test basis, evidence supporting sup- porting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentationpre- sentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinionopin- ion. In our opinion, based on our audit and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of SequenomUnifi, Inc. ( a development stage company) at December 31June 25, 19972000, and June 27, 1999, and the result consolidated results of its operations opera- tions and its cash flows for each of the year then ended and three years in the period from February 14ended June 25, 1994 (inception) through December 31, 19972000, in conformity with generally accepted accounting principles. ERNST Also, in our opinion, the related financial statement schedule, when considered in rela- tion to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Ernst & YOUNG Young LLP March 13[Signature of Ernst & Young LLP] Greensboro, 1998 SequenomNorth Carolina July 18, Inc. (a development stage company) 2000 Consolidated Balance Sheets DECEMBER 31(Amounts in thousands) June 25, 1997 1996 --------------------------- Assets 2000 June 27, 1999 ---------------------- ------------- ------------- ASSETS: Current Assetsassets: Cash and cash equivalents equivalents......................... $ 832,782 18,778 $ 1,326,137 Grant receivable 181,350 241,947 Refundable value added tax 57,474 32,922 44,433 Receivables....................................... 214,001 185,784 Inventories....................................... 147,640 129,917 Other current assets and prepaid expenses 50,968 140,809 --------------------------- assets.............................. 2,958 2,015 ---------- ---------- Total current assets 1,122,574 1,741,815 assets........................... 383,377 362,149 ---------- ---------- Property, equipment plant and leasehold improvements, net 1,002,197 921,034 Organizational costs, net 9,996 18,000 equipment: Land.............................................. 5,560 6,973 Buildings and air conditioning.................... 239,245 241,852 Machinery and equipment........................... 853,553 848,701 Other............................................. 152,112 133,487 ---------- ---------- 1,250,470 1,231,013 Less accumulated depreciation...................... 592,083 541,275 ---------- ---------- 658,387 689,738 Investment in unconsolidated affiliates............ 208,918 207,142 Other assets 137,806 32,834 Total assets $ 2,272,573 $ 2,713,683 =========================== Liabilities and stockholdersnoncurrent assets............................ 104,082 106,811 ---------- ---------- LIABILITIES AND SHAREHOLDERS' equity (deficit) EQUITY: Current liabilities: Accounts payable and accrued expenses $ 1,121971 $ 796,662 Unearned revenue - current portion 126,000 125,500 --------------------------- Total current liabilities 1,247,971 922,162 Unearned revenue - long term portion -- 125,500 Accrued long-term interest payable 424,000 274,500 Long-term debt 3,348,000 2,597,600 Commitments Stockholders' equity (deficit): Series A Convertible Preferred Stock, $0.001 par value 1,650,000 shares authorized; 1,580,000 shares issued and outstanding 1,580 1,580 (liquidation preference 1,354,764 $790,000) Series B Convertible Preferred Stock, $0.0001 par value, 2,976,663 shares 2,977 2,977 authorized, issued and outstanding (liquidation preference $4,464,995) Series C Convertible Preferred Stock, $0.001 par value, 3,365,061 shares 1,065 -- authorized; 1,065,079 shares issued and outstanding in 1997 (liquidation preference $3354,999) Common Stock, $0.001 par value; 9,218,000 shares authorized; 292,251 and 292 148 148,251 shares issue and outstanding in 1997 and 1996, respectively Additional paid-in capital 8,569,705 5,229,576 Deferred compensation -- (25,000) Cumulative translation adjustment (225,452) (131,664) Deficit accumulated in the development stage (11,097,565) (6,283,696) --------------------------- Total stockholders' equity (deficit) (2,747,396) (1,206,079) --------------------------- Total liabilities and stockholders' equity (deficit) $ 2,272,573 $ 2,713,683 =========================== See accompanying notes. Sequenom, Inc. (a development stage company) Consolidated Statements of Operations For the period from February 14,1994 (inception) to Years ended December 31, December 31, ---------------------------------- 1997 1996 1997 ----------- ----------- --------------------- Income: Research and development grants $ 526,573 $ 892,903 $ 1,419,476 Other income 88,740 25,091 113,831 ----------- ----------- ------------ 615,313 917,994 1,533,307 Operating expenses: Research and development 3,620,298 3,161,296 8,977,847 General and administrative 1,860,629 1,032,005 3,542,619 ----------- ----------- ------------ 5,480,927 4,193,301 12,520,466 ----------- ----------- ------------ Net loss from operations (4,865,614) (3,275,307) (10,987,159) Interest income 56,986 72,918 134,964 Interest expense (308,191) (274,793) (611,505) Foreign currency transaction gain 302,950 63,185 366,135 ----------- ----------- ------------ Net loss $(4,813,869) $(3,413,997) $(11,097,565) =1,365,840 ========== ========== Accounts payable.................................. $ 97,875 $ 68,716 Accrued expenses.................................. 50,160 52,889 Income taxes payable.............................. 2,430 7,392 Current maturities of long-term debt and other current liabilities.............................. 217,308 16,255 ---------- ---------- Total current liabilities...................... 367,773 145,252 ---------- ---------- Long-term debt and other liabilities............... 261,830 478,898 ---------- ---------- Deferred income taxes.............................. 86,046 78,369 ---------- ---------- Minority interests................................. 16,677 17,183 Shareholders' equity: ---------- ---------- Common stock...................................... 5,516 5,955 Capital in excess of par value.................... -- 13 Retained earnings................................. 649,444 658,353 Unearned compensation............................. (1,260) -- Accumulated other comprehensive loss.............. (31,262) (18,183) ---------- ---------- 622,438 646,138 ---------- ---------- $1,354,764 $1,365,840 ========== ========== The accompanying notes are an integral part of the financial statements. Consolidated Statements of Income Amounts in thousands, except per hare data) June 25, 2000 June 27, 1999 June 28, 1998 -------------------------------- ------------- ------------- ------------- et sales............................ $1,280,412 $1,251,160 $1,377,609 ---------- ---------- ---------- osts and expenses: Cost of sales....................... 1,116,841 1,076,610 1,149,838 Selling, general and administrative expense............................ 58,063 55,338 43,277 Provision for bad debts............. 8,694 1,129 724 Interest expense.................... 30,294 27,459 16,598 Interest income..................... (2,772) (2,399) (1,869) Other (income) expense.............. Equity in (earnings) losses of 1,052 440 (335) unconsolidated affiliates.......... 2,989 (4,214) (23,030) Minority interest................... 9,543 ---------- 1,224,704 ---------- 9,401 ---------- 1,163,764 ---------- 723 ---------- 1,185,926 ---------- ( s - N C Income before income taxes and cumulative effect of accounting change.............................. 55,708 87,396 191,683 Provision for income taxes........... 17,675 28,369 62,782 Income before cumulative effect of ---------- ---------- ---------- accounting change................... 38,033 59,027 128,901 Cumulative effect of accounting change (net of applicable income taxes of $1,696 for June 27, 1999 and $2,902 for June 28, 1998)....... -- 2,768 4,636 ---------- ---------- ---------- Net income........................... $ 38,033 $ 56,259 $ 124,265 ========== See ========== ========== Earnings per common share: Income before cumulative effect of accounting change.................. $ .65 $ .97 $ 2.10 Cumulative effect of accounting change............................. -- (.04) (.07) ---------- ---------- ---------- Net income per common share......... $ .65 $ .93 $ 2.03 ========== ========== ========== Earnings per common share -- assuming dilution: Income before cumulative effect of accounting change.................. $ .65 $ .97 $ 2.08 Cumulative effect of accounting change............................. -- (.04) (.07) ---------- ---------- ---------- Net income per common share......... $ .65 $ .93 $ 2.01 ========== ========== ========== The accompanying notesnotes are an integral part of the financial statements. SEQUENOM, INC. (A DEVELOPMENT STAGE COMPANY) Consolidated Statements of StockholdersChanges in Shareholders' Equity and Comprehensive Income Capital in Other Total Comprehensive (DeficitAmounts in thousands, Shares Common Excess of Retained Unearned Comprehensive Shareholders' Income except per share data) Period from February 14Outstanding Stock Par Value Earnings Compensation Income Equity Note 1 Balance June 29, 1994 1997... 61,210 $6,121 $ -- $545,099 $ -- $ (inception2,689) through December 31$548,531 $110,761 ====== ======= ======== ======= ======== ======== ======== (54) (618) (19,515) -- -- (20,187) -- ====== Purchase of stock (539) Options exercised....... Stock option tax 402 40 2,154 -- -- -- 2,194 -- benefit................ -- -- -- 2,599 -- -- 2,599 -- Stock issued for acquisition............ 561 56 20,918 -- -- -- 20,974 -- Cash dividends -- $.56 per share.............. -- -- -- (34,320) -- -- (34,320) -- Currency translation adjustments............ -- -- -- -- -- (7,859) (7,859) (7,859) Net income.............. -- -- -- 124,265 -- -- 124,265 124,265 ------ ------ ------- -------- ------- -------- -------- -------- Balance June 28, 1997 SERIES A CONVERTIBLE SERIES B CONVERTIBLE SERIES C CONVERTIBLE PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK --------------------------------------------------------------------------------------- Shares Amount Shares Amount Shares Amount Shares Amount --------------------------------------------------------------------------------------- 1998... 61,634 6,163 22,454 618,128 -- (10,548) 636,197 116,406 ====== ====== ======= ======== ======= ======== ======== ======== Purchase of stock....... (2,112) (211) (23,092) (16,034) -- -- (39,337) -- Options exercised....... 26 3 651 -- -- -- 654 -- Currency translation adjustments............ -- -- -- -- -- (7,635) (7,635) (7,635) Net income.............. -- -- -- 56,259 -- -- 56,259 56,259 Balance June 27, 1999... 59,548 5,955 13 658,353 -- (18,183) 646,138 48,624 ====== ====== ======= ======== ======= ======== ======== ======== Purchase of stock....... (4,462) (446) (840) (47,623) -- -- (48,909) -- Options exercised....... 1 -- 14 -- -- -- 14 -- Grantor's trust tax benefit................ -- -- -- 681 -- -- 681 -- Stock forfeited to satisfy income tax withholding............ (53) (5) (630) -- -- -- (635) -- Issuance of Common Stock - restricted stock.................. 129 12 1,443 -- (1,455) -- -- -- Amortization of restricted stock....... -- -- -- -- 195 -- 195 -- Currency translation adjustments............ -- -- -- -- -- (13,079) (13,079) (13,079) Net income.............. -- -- -- 38,033 -- -- 38,033 38,033 Balance June 25, 2000... 55,163 $5,516 $ - - -- $649,444 $(1,260) $(31,262) $622,438 $ - - 24,954 ====== ====== ======= ======== ======= ======== ======== ======== The accompanying notes are an integral part of the financial statements. Consolidated Statements of Cash Flows (Amounts in thousands) ---------------------- June 25, 2000 ------------- June 27, 1999 ------------- June 28, 1998 ------------- Cash and cash equivalents at beginning of year................... $ - - 44,433 $ - Issuance 8,372 $ 9,514 Operating activities: Net income.......................... 38,033 56,259 124,265 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of Series A 442,000 442 - - - - - - Convertible Preferred Stockaccounting change (net of applicable income taxes)............................ -- 2,768 4,636 (Earnings) losses of unconsolidated equity affiliates, net of issuance costs distributions..................... 6,200 5,287 (15,282) Depreciation....................... 83,037 82,993 65,033 Amortization....................... 7,491 6,883 4,677 Deferred income taxes.............. Provision for bad debts and quality claims............................ 10,692 14,866 4,641 6,241 12,201 3,917 Other.............................. Changes in assets and liabilities, excluding effects of $35,484 acquisitions and foreign currency adjustments: Receivables....................... 2,135 (39,257) 415 28,234 (350) 5,711 Inventories....................... (18,088) 16,320 (793) Other current assets.............. (1,330) (948) 1,556 Payables and accruals............. 27,118 (13,959) (25,213) Income taxes...................... Net -- operating activities......... (4,430) -------- 126,467 -------- 14,697 --------- 209,831 --------- 1,329 --------- 181,687 --------- Investing activities: Capital expenditures................ (58,609) (118,846) (250,064) Acquisitions........................ (7,953) (27,112) (25,776) Investments in unconsolidated equity affiliates......................... (16,069) (10,000) (39,492) Sale of capital assets.............. 5,637 847 2,428 Other............................... Net -- investing activities......... (1,138) -------- (78,132) -------- (4,508) --------- (159,619) --------- (2,755) --------- (315,659) --------- Financing activities: Borrowing of long-term debt......... 72,342 97,000 440,273 Repayment of long-term debt......... (81,589) (61,596) (252,844) Issuance of Series A 38,000 38 - - - - - - Convertible Preferred Company stock........... 14 654 2,194 Stock for services Issuance option tax benefit............ -- -- 2,599 Purchase and retirement of Series A 1,100,000 1,100 - - - - - - Convertible Preferred Stock for holdings Translation adjustment - - - - - - - - Net loss - - - - - - - - -------------------------------------------------------------------------------------- Balance at December 31, 1994 1,500,000 1,500 - - - - - - Issuance of Series B Convertible Preferred Stock, net of issuance costs of $32,940 - - 2,333,333 2,333 - - - - Issuance of Common Stock - - - - - - 26,250 26 Exercise of Stock Options - - - - - - 122,000 122 Translation adjustment - - - - - - - - Net loss - - - - - - - - -------------------------------------------------------------------------------------- Balance at December 31, 1995 1,500,000 1,500 2,333,333 2,333 - - 148,251 148 Issuance of Series B Convertible Preferred Stock, net of issuance costs of $10,648 - - 643,330 644 - - - - Issuance of warrants - - - - - - - - Deferred compensation related - - - - - - - - Company stock.............................. (48,909) (39,337) (20,187) Cash dividends paid................. -- -- (34,320) Distributions to issuance of options to consultants Translation adjustment - - - - - - - - Net loss - - - - - - - - -------------------------------------------------------------------------------------- Balance at December 31, 1996 1,500,000 1,500 2,976,663 2,977 - - 144,251 148 Exercise of stock options - - - - - - 144,000 144 Issuance of Series C Convertible Preferred Stock, net of issuance costs of $49,661 - - - - 1,065,079 1,065 - - Amortization of deferred - - - - - - - - compensation Translation adjustment - - - - - - - - Net loss - - - - - - - - -------------------------------------------------------------------------------------- Balance at December 31, 1997 1,500,000 $1,500 2,976,663 $2,977 1,065,079 $1,065 292,251 $292minority shareholders....................... (12,000) (9,000) --

Report of Independent Auditors. The Board of Directors Sequenomand Stockholders Digex, Inc. Incorporated We have audited the accompanying consolidated balance sheet sheets of SequenomDigex, Inc. (a development stage company) Incorporated as of December 31, 1997 2000 and 1999, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for each of the year three years in the period ended December 31, 1997 and 2000. Our audits also included the period from February 14, 1994 (inception) through December 31, 1997financial statement schedule listed in the Index at Item 14(a). These consolidated financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audit. The financial statements as of December 31, 1996, and for the period February 14, 1994 (inception) through December 31, 1996, were audited by other auditors whose report dated May 15, 1997 expressed an unqualified opinion on those statements. The financial statements for the period February 14, 1994 (inception) through December 31, 1996 include total revenues and net loss of $917,994 and $(6,283,696), respectively. Our opinion on the statements of operations, stockholders' equity, and cash flows for the period February 14, 1994 (inception) through December 31, 1997, insofar as it relates to amounts for prior periods through December 31, 1996, is based solely on the report of other auditorsaudits. We conducted our audit audits in accordance with auditing standards generally accepted auditing standardsin the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audit and the report of other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of SequenomDigex, Inc. ( a development stage company) Incorporated at December 31, 19972000 and 1999, and the result consolidated results of its operations and its cash flows for each of the year then ended and three years in the period from February 14, 1994 (inception) through ended December 31, 19972000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note 1 to the consolidated financial statements, in 2000 the Company changed its method of accounting principlesfor revenue recognition. /s/ ERNST & YOUNG LLP -------------------------------------- McLean, Virginia January 30, 2001 Except for Notes 13 and 15, as to which the date is March 132, 1998 Sequenom2001 DIGEX, Inc. INCORPORATED CONSOLIDATED BALANCE SHEETS (a development stage companyAMOUNTS IN THOUSANDS, EXCEPT SHARE INFORMATION) Consolidated Balance Sheets DECEMBER 31, 1997 1996 --------------------------- Assets ------------------- 2000 1999 -------- -------- ASSETS Current Assetsassets: Cash and cash equivalents equivalents................................. $ 832,782 83,434 $ 1,326,137 Grant receivable 181,350 241,947 Refundable value added tax 57,474 32,922 Other 88,778 Restricted investments.................................... 2,000 -- Accounts receivable, net of allowance of $4,741 and $4,362 in 2000 and 1999, respectively......................... 42,201 17,271 Due from Intermedia....................................... 40 3,110 Deferred costs............................................ 8,627 -- Prepaid expenses and other current assets and prepaid expenses 50,968 140,809 --------------------------- assets................. 7,452 1,496 -------- -------- Total current assets 1,122,574 1,741,815 Propertyassets.............................. 143,754 110,655 Property and equipment, equipment and leasehold improvementsnet................................. 348,975 205,903 Intangible assets, net 1,002,197 921,034 Organizational costs, net 9,996 18,000 net...................................... 23,222 27,213 Other assets 137,806 32,834 assets................................................ 5,100 538 -------- -------- Total assets $ 2,272,573 $ 2,713,683 ===================assets...................................... $521,051 $344,309 ======== Liabilities and stockholders======== LIABILITIES AND STOCKHOLDERS' equity (deficit) EQUITY Current liabilities: Accounts payable and accrued expenses expenses..................... $ 1,121971 59,455 $ 796,662 Unearned revenue - current 33,619 Current portion 126,000 125,500 --------------------------- of deferred revenue....................... 7,734 222 Current portion of note payable........................... 2,772 1,235 Current portion of capital lease obligations.............. 1,871 801 -------- -------- Total current liabilities 1,247,971 922,162 Unearned revenue - long term portion liabilities......................... 71,832 35,877 Deferred revenue............................................ 4,025 -- 125,500 Accrued long-term interest payable 424,000 274,500 Long-term debt 3,348,000 2,597,600 Commitments Note payable................................................ 1,435 2,477 Capital lease obligations................................... 27,131 15,766 -------- -------- Total liabilities................................. 104,423 54,120 -------- -------- Stockholders' equity (deficit): equity: Preferred stock, $.01 par value; 5,000,000 shares authorized; 100,000 shares designated as Series A Convertible; 100,000 Series A Convertible Preferred Stock, $0.001 par value 1,650,000 shares authorized; 1,580,000 shares issued and outstanding 1,580 1,580 (liquidation preference $790,000) Series B Convertible Preferred Stock, $0.0001 par value, 2,976,663 shares 2,977 2,977 authorized, issued and outstanding (liquidation preference $4,464,995) Series C Convertible Preferred Stock, $0.001 par value, 3,365,061 shares 1,065 -- authorized; 1,065,079 shares issued and outstanding in 1997 (liquidation preference $3354,999) Common Stock2000................................ 1 -- Class A common stock, $0.001 .01 par value; 9,218,000 100,000,000 shares authorized; 292,251 24,546,543 and 292 148 148,251 11,500,000 shares issue issued and outstanding in 1997 2000 and 19961999, respectively respectively............. 245 115 Class B common stock, $.01 par value; 50,000,000 shares authorized; 39,350,000 and 50,000,000 issued and outstanding in 2000 and 1999, respectively............. 394 500 Additional paid-in capital 8,569,705 5,229,576 Deferred compensation -- capital........................................ 622,036 354,553 Accumulated deficit....................................... (25,000) Cumulative translation adjustment (225,452195,869) (131,66452,768) Deficit accumulated in the development stage Deferred compensation..................................... (11,097,56510,141) (6,283,69612,211) --------------------------- Accumulated other comprehensive loss...................... (38) -- -------- -------- Total stockholders' equity (deficit) (2,747,396) (1,206,079) --------------------------- equity........................ 416,628 290,189 -------- -------- Total liabilities and stockholders' equity (deficit) $ 2,272,573 $ 2,713,683 equity........ $521,051 $344,309 ==================== ======== See accompanying notesnotes to consolidated financial statements. SequenomDIGEX, Inc. INCORPORATED CONSOLIDATED STATEMENTS OF OPERATIONS (a development stage companyAMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Consolidated Statements of Operations For the period from February 14,1994 (inception) to Years ended December YEAR ENDED DECEMBER 31, December 31, ---------------------------------- 1997 1996 1997 --------------------------------------- 2000 1999 1998 ----------- ----------- --------------------- Income----------- Revenues................................................ $ 168,085 $ 59,786 $ 22,635 Costs and expenses: Research Cost of operations.................................... 21,244 9,656 6,710 Cost of services...................................... 69,658 21,750 7,044 Selling, general and development grants $ 526,573 $ 892,903 $ 1,419,476 administrative................... 144,876 70,213 17,512 Deferred compensation................................. 4,101 1,299 -- Depreciation and amortization......................... 78,819 29,070 8,109 ----------- ----------- ----------- Total costs and expenses...................... 318,698 131,988 39,375 ----------- ----------- ----------- Loss from operations.................................... (150,613) (72,202) (16,740) Other income 88,740 25,091 113,831 (expense): Interest expense...................................... (2,008) (1,094) -- Interest and other income............................. 12,608 3,458 -- Merger-related expenses............................... (2,922) -- -- ----------- ----------- ------------ 615,313 917,994 1,533,307 Operating expenses: Research and development 3,620,298 3,161,296 8,977,847 General and administrative 1,860,629 1,032,005 3,542,619 ----------- Loss before income tax benefit.......................... (142,935) (69,838) (16,740) Income tax benefit...................................... -- 4,839 159 ----------- ----------- ------------ 5,480,927 4,193,301 12,520,466 ----------- Loss before cumulative effect of change in accounting principle............................................. (142,935) (64,999) (16,581) Cumulative effect of change in accounting principle..... (166) -- -- ----------- ----------- ------------ ----------- Net loss from operations loss................................................ $ (4,865,614143,101) $ (3,275,30764,999) $ (10,987,159) Interest income 56,986 72,918 134,964 Interest expense (308,191) (274,793) (611,505) Foreign currency transaction gain 302,950 63,185 366,135 ----------- ----------- ------------ Net loss $(4,813,869) $(3,413,997) $(11,097,56516,581) =========== =========== =========== LOSS PER COMMON SHARE -- BASIC AND DILUTED: Loss before cumulative effect of change in accounting principle............................................. $ (2.25) $ (1.19) $ (0.33) Cumulative effect of change in accounting principle..... (0.01) -- -- ----------- ----------- ----------- Net loss per common share............................... $ (2.26) $ (1.19) $ (0.33) =========== =========== =========== PRO FORMA AMOUNTS, ASSUMING THE ACCOUNTING CHANGE IS APPLIED RETROACTIVELY: Net loss................................................ $ (142,935) $ (65,115) $ (16,618) =========== =========== =========== Net loss per common share............................... $ (2.25) $ (1.19) $ (0.33) =========== =========== =========== Shares used in computing basic and diluted net loss per share................................................. 63,404,839 54,726,027 50,000,000 =========== =========== =========== See accompanying notesnotes to consolidated financial statements. SEQUENOMDIGEX, INC. INCORPORATED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (AMOUNTS IN THOUSANDS) COMMON STOCK ---------------------------------- PREFERRED STOCK CLASS A DEVELOPMENT STAGE COMPANY) Consolidated Statements of Stockholders' Equity (Deficit) Period from February 14, 1994 (inception) through December CLASS B --------------- --------------- ---------------- ADDITIONAL ACCUMULATED SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT ------ ------ ------ ------ ------- ------ ---------- ----------- BALANCE AT DECEMBER 31, 1997 SERIES A CONVERTIBLE SERIES B CONVERTIBLE SERIES C CONVERTIBLE PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK --------------------------------------------------------------------------------------- Shares Amount Shares Amount Shares Amount Shares Amount --------------------------------------------------------------------------------------- 1997............ -- -- -- -- -- -- -- -- Total allocated costs................... -- -- -- -- -- -- -- -- Funding for working capital............. -- -- -- -- -- -- -- -- Funding for purchases of property, plant and equipment......................... -- -- -- -- -- -- -- -- Net loss................................ -- -- -- -- -- -- -- -- ------ ------ ------ ------ ------- ------ ---------- ----------- BALANCE AT DECEMBER 31, 1998............ -- -- -- -- -- -- -- -- Total allocated costs................... -- -- -- -- -- -- -- -- Funding for working capital............. -- -- -- -- -- -- -- -- Funding for purchases of property, plant and equipment......................... -- -- -- -- -- -- -- -- Recapitalization by Intermedia.......... -- -- -- -- 50,000 500 114,566 -- Contributions from Intermedia following recapitalization...................... -- -- -- -- -- -- 47,689 -- Initial public offering of common stock, net of issuance cost.................. -- -- 11,500 115 -- -- 178,788 -- Issuance of Common Stock - $ - - $ - - $ - - $ - stock options under long-term compensation plan........... -- -- -- -- -- -- 13,510 -- Amortization of deferred compensation... -- -- -- -- -- -- -- -- Net loss................................ -- -- -- -- -- -- -- (52,768) ------ ------ ------ ------ ------- ------ ---------- ----------- BALANCE AT DECEMBER 31, 1999............ -- -- 11,500 115 50,000 500 354,553 (52,768) Issuance of Series A 442,000 442 - - - - - - Convertible Preferred Stockpreferred stock, net of available equipment credits..................... 100 1 -- -- -- -- 87,669 -- Subsequent public offering of common stock, net of issuance costs cost........... -- -- 12,650 126 (10,650) (106) 171,625 -- Issuance of $35,484 stock options under long-term compensation plan, net of forfeitures........................... -- -- -- -- -- -- 2,067 -- Exercise of common stock options........ -- -- 397 4 -- -- 6,122 -- Amortization of deferred compensation... -- -- -- -- -- -- -- -- Foreign currency translation adjustment............................ -- -- -- -- -- -- -- -- Net loss................................ -- -- -- -- -- -- -- (143,101) ------ ------ ------ ------ ------- ------ ---------- ----------- BALANCE AT DECEMBER 31, 2000............ 100 $ 1 24,547 $ 245 39,350 $ 394 $ 622,036 $ (195,869) ====== ====== ====== ====== ======= ====== ========== =========== ACCUMULATED OWNER'S OTHER NET DEFERRED COMPREHENSIVE INVESTMENT COMPENSATION LOSS (DEFICIT) TOTAL ------------ ------------- ---------- --------- BALANCE AT DECEMBER 31, 1997............ -- -- $ 45,527 $ 45,527 Total allocated costs................... -- -- 10,018 10,018 Funding for working capital............. -- -- 912 912 Funding for purchases of property, plant and equipment......................... -- -- 30,969 30,969 Net loss................................ -- -- (16,581) (16,581) ------------ ------------- ---------- --------- BALANCE AT DECEMBER 31, 1998............ -- -- 70,845 70,845 Total allocated costs................... -- -- 3,541 3,541 Funding for working capital............. -- -- 11,443 11,443 Funding for purchases of property, plant and equipment......................... -- -- 89,574 89,574 Recapitalization by Intermedia.......... -- -- (115,066) -- Contributions from Intermedia following recapitalization...................... -- -- (48,106) (417) Initial public offering of common stock, net of issuance cost.................. -- -- -- 178,903 Issuance of stock options under long-term compensation plan........... (13,510) -- -- -- Amortization of deferred compensation... 1,299 -- -- 1,299 Net loss................................ -- -- (12,231) (64,999) ------------ ------------- ---------- --------- BALANCE AT DECEMBER 31, 1999............ (12,211) -- -- 290,189 Issuance of Series A 38,000 38 - - - - - - Convertible Preferred Stock for services Issuance preferred stock, net of Series A 1,100,000 1,100 - - - - - - Convertible Preferred Stock for holdings Translation adjustment - - - - - - - - Net loss - - - - - - - - -------------------------------------------------------------------------------------- Balance at December 31, 1994 1,500,000 1,500 - - - - - - Issuance available equipment credits..................... -- -- -- 87,670 Subsequent public offering of Series B Convertible Preferred Stockcommon stock, net of issuance costs of $32,940 - - 2,333,333 2,333 - - - - cost........... -- -- -- 171,645 Issuance of Common Stock - - - - - - 26,250 26 Exercise of Stock Options - - - - - - 122,000 122 Translation adjustment - - - - - - - - Net loss - - - - - - - - -------------------------------------------------------------------------------------- Balance at December 31, 1995 1,500,000 1,500 2,333,333 2,333 - - 148,251 148 Issuance of Series B Convertible Preferred Stockstock options under long-term compensation plan, net of issuance costs of $10,648 - - 643,330 644 - - - - Issuance of warrants - - - - - - - - Deferred compensation related - - - - - - - - to issuance of options to consultants Translation adjustment - - - - - - - - Net loss - - - - - - - - -------------------------------------------------------------------------------------- Balance at December 31, 1996 1,500,000 1,500 2,976,663 2,977 - - 144,251 148 forfeitures........................... (2,067) -- -- -- Exercise of common stock options - - - - - - 144,000 144 Issuance of Series C Convertible Preferred Stock, net of issuance costs of $49,661 - - - - 1,065,079 1,065 - - options........ -- -- -- 6,126 Amortization of deferred - - - - - - - - compensation Translation adjustment - - - - - - - - compensation... 4,137 -- -- 4,137 Foreign currency translation adjustment............................ -- (38) -- (38) Net loss - - - - - - - - -------------------------------------------------------------------------------------- Balance at December loss................................ -- -- -- (143,101) ------------ ------------- ---------- --------- BALANCE AT DECEMBER 31, 1997 1,500,000 $1,500 2,976,663 $2,977 1,065,079 $1,065 292,251 $2922000............ $ (10,141) $ (38) -- $ 416,628 ============ ============= ========== ========= See accompanying notes to consolidated financial statements. DIGEX, INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (AMOUNTS IN THOUSANDS)