TableUNITED of ContentsSTATES

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. ~~20549~~ 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) ~~OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~OF ~~the~~THE ~~quarterly~~SECURITIES ~~period~~EXCHANGE ~~ended~~ACT ~~June 30,~~OF ~~2004~~ 1934

~~Commission~~For ~~File~~the quarterly ~~Number~~period ~~0-26670~~ ended March 31, 2005

~~BioSource~~Commission File ~~International,~~Number ~~Inc.~~ 0-26670

(ExactBioSource nameInternational, of registrant as specified in its charter)Inc.

~~Delaware~~ (~~State~~Exact orname ~~other jurisdiction~~ of registrant ~~incorporation~~as orspecified ~~organization)~~in ~~51-0366422~~its ~~(I.R.S. Employer Identification No.~~charter)

542 Flynn Road, Camarillo, CA 93012 (Address of principal executive offices)

Delaware		77-0340829
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

~~(805) 987-0086~~542 Flynn ~~(Registrant’s~~Road, ~~telephone number~~Camarillo, ~~including~~CA ~~area code)~~ 93012

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

~~Indicate by check mark whether the Registrant is an accelerated filer~~ (~~as defined in Rule 12b-2 of the Exchange Act~~805). ~~Yes [ ] No [X]~~ 987-0086

~~The number of shares of the~~ (Registrant’s ~~Common~~telephone ~~Stock~~number, ~~$.001 par value,~~ ~~outstanding~~including asarea ~~of August 6, 2004 was 9,469,340 shares.~~ code)

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

~~Table~~Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of ~~Contents~~the Exchange Act). Yes o No ý

~~BIOSOURCE~~The ~~INTERNATIONAL~~number of shares of the Registrant’s Common Stock, ~~INC~~$.001 par value, outstanding as of June 23, 2005 was 9,844,913 shares.

~~Index~~ BIOSOURCE INTERNATIONAL, INC.

		Page
Part I – Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003		3
Consolidated Statements of Operations for the three and six months ended June 30, 2004 and 2003		4
Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and 2003		5
Condensed Notes to the Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 3. Quantitative and Qualitative Disclosures About Market Risk		26
Item 4. Controls and Procedures		26
Part II – Other Information
Item 4. Submission of Matters to a Vote of Security Holders		27
Item 6. Exhibits and Reports on Form 8-K		27
Signatures		29
Exhibits		30
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

Index

- 2 -

	Part I – Financial Information

Item 1.	Financial Statements

Consolidated Balance Sheets as of March 31, 2005 and December 31, 2004
Consolidated Statements of Income for the three months ended March 31, 2005 and 2004
Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004
Condensed Notes to the Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Item 4.	Controls and Procedures

	Part II – Other Information

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.	Exhibits

Signatures

Exhibits

~~Table of Contents~~1

BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES

Consolidated Balance Sheets ~~(Unaudited) (amounts in thousands)~~

	June 30,			December 31,
	2004			2003
Assets
Current assets
Cash and cash equivalents	$	4,955		$	3,297
Accounts receivable less allowance for doubtful account of $243 at June 30, 2004 and $258 at December 31, 2003		7,095			6,308
Inventories, net		8,769			9,074
Deferred income taxes		2,363			2,363
Prepaid expenses and other current assets		1,087			652
Total current assets		24,269			21,694
Property and equipment, net		6,066			6,235
Intangible assets, net		5,223			5,500
Goodwill, net		307			307
Deferred income taxes		10,078			10,078
Other assets		558			519
Total assets	$	46,501		$	44,333
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	2,310		$	2,451
Accrued expenses		3,759			3,227
Deferred revenue		219			249
Income taxes payable		629			104
Total current liabilities		6,917			6,031
Commitments and contingencies
Stockholders’ equity
Common stock, $.001 par value, 20,000,000 shares authorized; 9,465,801 and 9,376,860 shares issued and outstanding as of June 30, 2004 and December 31, 2003, respectively		9			9
Additional paid-in capital		42,974			42,633
Accumulated deficit		(3,299	)		(4,452	)
Accumulated other comprehensive income (loss)		(100	)		112
Total stockholders’ equity		39,584			38,302
Total liabilities and stockholders’ equity	$	46,501		$	44,333

(Unaudited)
(amounts in thousands, except par value)

See notes to the consolidated financial statements.

	March 31, 2005			December 31, 2004

Assets

Current assets
Cash and cash equivalents	$	5,176		$	4,210
Accounts receivable, net	8,064			7,165
Inventories, net	7,891			7,857
Notes receivable	—			544
Deferred income taxes	1,828			1,822
Prepaid expenses and other current assets	1,220			941

Total current assets	24,179			22,539

Property and equipment, net	4,942			5,241
Acquired intangible assets, net	4,808			4,946
Goodwill, net	307			307
Deferred income taxes, net	9,616			9,865
Other assets	700			651

Total assets	$	44,552		$	43,549

Liabilities and Stockholders’ Equity

Current liabilities
Accounts payable	$	3,400		$	2,358
Accrued expenses	3,563			3,891
Deferred revenue	253			410
Income taxes payable	462			462

Total current liabilities	7,678			7,121

Commitments and contingencies

Stockholders’ equity
Common stock, $.001 par value, 20,000,000 shares authorized; 9,744,879 and 9,708,860 shares issued and outstanding as of March 31, 2005 and December 31, 2004, respectively	10			10
Additional paid-in capital	44,541			44,361
Treasury stock, at cost; 642,970 and 634,770 shares at March 31, 2005 and December 31, 2004, respectively	(4,101		)	(4,046		)
Accumulated deficit	(3,990		)	(4,670		)
Accumulated other comprehensive income	414			773

Total stockholders’ equity	36,874			36,428

Total liabilities and stockholders’ equity	$	44,552		$	43,549

-See 3condensed -notes to the consolidated financial statements.

~~Table of Contents~~2

BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES

Consolidated Statements of ~~Operations (Unaudited) (amounts in thousands except per share data)~~ Income

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2004			2003			2004			2003
Net sales	$	11,954		$	11,734		$	24,240		$	22,633
Cost of goods sold		5,522			5,391			10,948			10,081
Gross profit		6,432			6,343			13,292			12,552
Operating expenses:
Sales and marketing		2,392			2,488			4,862			4,876
General and administrative		2,086			1,359			4,041			2,935
Research and development		1,413			1,863			2,798			3,842
Amortization of intangible assets		139			145			277			290
Total operating expenses		6,030			5,855			11,978			11,943
Income from operations		402			488			1,314			609
Interest and other income (expense), net		3			(47	)		(13	)		(54	)
Income before provision for income taxes		405			441			1,301			555
Provision (benefit) for income taxes		(40	)		116			148			128
Net income	$	445		$	325		$	1,153		$	427
Earnings per share:
Basic	$	0.05		$	0.03		$	0.12		$	0.05
Diluted	$	0.05		$	0.03		$	0.12		$	0.04
Shares used in per share calculations:
Basic		9,435			9,538			9,415			9,441
Diluted		9,768			9,885			9,745			9,773

(Unaudited)

~~See~~(amounts in ~~notes~~thousands toexcept ~~the~~per ~~consolidated~~share ~~financial statements.~~ data)

- 4 -

	Three Months Ended March 31,
	2005			2004
				(as restated)

Net sales	$	12,733		$	11,532

Cost of goods sold	5,345			4,888

Gross profit	7,388			6,644

Operating expenses:
Sales and marketing	2,528			2,339
General and administrative	2,028			1,891
Research and development	1,558			1,385
Amortization of intangible assets	139			139
Total operating expenses	6,253			5,754

Income from continuing operations	1,135			890

Interest and other income (expense), net	(76		)	(17		)

Income from continuing operations before income taxes and other items	1,059			873

Provision for income taxes	379			180

Income from continuing operations before other items	680			693

Discontinued operations, net	—			(38		)

Net income	$	680		$	655

Basic earnings per share:
Income from continuing operations	$	0.07		$	0.07
Discontinued operations, net	—			—

Basic earnings per share	$	0.07		$	0.07

Diluted earnings per share:
Income from continuing operations	$	0.07		$	0.07
Discontinued operations, net	—			—

Diluted earnings per share	$	0.07		$	0.07

Shares used in per share calculations:
Basic	9,087			9,395

Diluted	9,226			9,752

~~Table~~See ofcondensed ~~Contents~~notes to the consolidated financial statements.

~~BIOSOURCE INTERNATIONAL, INC.~~ 3

~~Consolidated Statements of Cash Flows~~BIOSOURCE ~~(Unaudited) (amounts~~INTERNATIONAL, inINC. ~~thousands)~~ AND SUBSIDIARIES

	Six months Ended
	June 30,
	2004			2003
Cash flows from operating activities:
Net income	$	1,153		$	427
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		1,283			1,308
Changes in operating assets and liabilities:
Accounts receivable		(913	)		(1,029	)
Inventories		157			(742	)
Prepaid expenses and other assets		(474	)		(737	)
Accounts payable		(47	)		82
Accrued expenses		592			(38	)
Deferred revenue		(30	)		(116	)
Income taxes payable		566			413
Net cash provided by (used in) operating activities		2,287			(432	)
Cash flows from investing activities:
Capital expenditures		(900	)		(603	)
Net cash used in investing activities		(900	)		(603	)
Cash flows from financing activities:
Purchases of common stock as treasury stock		—			(3,455	)
Proceeds from exercise of stock options and stock purchase plan		340			277
Net cash provided by (used in) financing activities		340			(3,178	)
Effect of exchange rate changes on cash		(69	)		(46	)
Net increase (decrease) in cash and cash equivalents		1,727			(4,213	)
Cash and cash equivalents at beginning of period		3,297			5,941
Cash and cash equivalents at end of period	$	4,955		$	1,682

Consolidated Statements of Cash Flows

~~See notes to the consolidated financial statements.~~ (Unaudited)

-(amounts 5in - thousands)

	Three Months Ended March 31,
	2005			2004
				(as restated)
Cash flows from operating activities:
Net income from continuing operations	$	680		$	693
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:
Depreciation and amortization	741			548
Deferred income taxes	242			(33		)
Income tax benefit from the exercise of stock options	49			—
Changes in operating assets and liabilities:
Accounts receivable	(1,077		)	(950		)
Notes receivable	544			—
Inventories, net	(193		)	(223		)
Prepaid expenses and other assets	(423		)	(309		)
Accounts payable	1,106			647
Accrued expenses	(239		)	(46		)
Deferred revenue	(157		)	(41		)
Income taxes payable	128			446

Net cash provided by operating activities	1,401			732

Cash flows from investing activities:
Capital expenditures	(328		)	(502		)

Net cash provided by investing activities	(328		)	(502		)

Cash flows from financing activities:
Purchases of common stock as treasury stock	(55		)	—
Proceeds from exercise of stock options	131			65

Net cash provided by financing activities	76			65

Net cash provided by discontinued operations	—			162

Effect of exchange rate changes on cash and cash equivalents	(183		)	40

Net increase in cash and cash equivalents	966			497

Cash and cash equivalents at beginning of period	4,210			3,297

Cash and cash equivalents at end of period	$	5,176		$	3,794

Supplementary disclosure of cash flows information:
Cash paid for interest	$	—		$	2
Cash paid for income taxes	$	118		$	132

~~BIOSOURCE~~See ~~INTERNATIONAL,~~condensed ~~INC.~~notes to the consolidated financial statements.

~~Condensed Notes to Consolidated Financial Statements (Unaudited)~~ 4

~~Note~~BIOSOURCE INTERNATIONAL, 1INC. –AND ~~Consolidated Financial Statements~~ SUBSIDIARIES

~~Basis~~Condensed ofNotes ~~Presentation~~ to Consolidated Financial Statements

~~The accompanying consolidated financial statements of BioSource International, Inc.~~ (~~the “Company”~~Unaudited) are unaudited and reflect all material adjustments, consisting of normal recurring adjustments which management considers necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the interim periods. The results of operations for the current interim period are not necessarily indicative of the results to be expected for the entire fiscal year.

~~These~~Note ~~consolidated~~1 ~~financial~~– ~~statements have been prepared in accordance with~~Consolidated ~~the~~Financial rules and regulations of the Securities and Exchange Commission. Certain information and footnotes normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted pursuant to these rules and regulations. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the year ended December 31, 2003. Statements

~~Certain~~Basis ~~reclassifications~~of ~~have been made to prior period balances in order to conform to the current period presentation.~~ Presentation

~~General~~The accompanying consolidated financial statements of BioSource International, Inc. (together with its subsidiaries, the “Company”) are unaudited and reflect all material adjustments, consisting of normal recurring adjustments which management considers necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the interim periods. The results of operations for the current interim period are not necessarily indicative of the results to be expected for the entire fiscal year.

~~The~~These ~~Company~~consolidated financial ~~develops,~~statements ~~manufactures,~~have ~~markets~~been prepared in accordance with the rules and regulations ~~distributes~~of ~~products~~the ~~used~~Securities and Exchange Commission. Certain information and footnotes normally ~~worldwide~~included in ~~biomedical~~financial ~~research.~~statements ~~These~~prepared ~~products~~in ~~include~~accordance ~~assays,~~with ~~biologicals~~generally accepted ~~and~~accounting ~~cell~~principles ~~growth~~in ~~materials,~~the ~~all~~United ~~enabling~~States ~~scientists~~of America have been condensed or omitted pursuant to ~~better~~these ~~understand~~rules and regulations. These consolidated financial statements should be read in conjunction with the consolidated financial statements and ~~biochemistry~~the notes thereto included in the Company’s Annual Report on Form 10-K, ~~immunology~~as filed with the Securities and ~~cell~~Exchange ~~biology~~Commission offor the ~~human~~year ~~body~~ended December 31, 2004, as ~~well~~amended asby ~~disease~~the Company’s Annual Report on Form 10-K/A filed on June 28, ~~processes~~2005.

~~Use~~Description of ~~Estimates~~ Business

InThe Company ~~the~~develops, ~~normal~~manufactures, ~~course~~markets ofand ~~preparing~~distributes ~~the~~products ~~financial~~used ~~statements~~ worldwide in ~~conformity~~disease ~~with generally~~related ~~accepted~~biomedical ~~accounting~~research ~~principles~~and inclinical ~~the United States~~diagnostics, ~~management~~principally isin ~~required~~the tofields ~~make~~of ~~estimates~~immunology and ~~assumptions~~molecular ~~that~~biology. Our ~~affect~~products ~~the~~include ~~reported~~assay ~~amounts~~test ~~of assets~~kits, ~~and~~clinical ~~liabilities~~diagnostic ~~and~~kits, bioactive ~~disclosure~~proteins, ofantibodies, ~~contingent~~bioactive ~~assets~~peptides, ~~and~~oligonucleotides, ~~liabilities at~~serum, ~~the~~media ~~date~~and ofrelated ~~the~~products. ~~financial~~These ~~statements~~products ~~and~~enable ~~reported~~biomedical ~~amounts~~researchers ~~of revenue and~~to ~~expenses~~better ~~during~~understand the ~~reporting~~biochemistry, ~~period.~~immunology ~~Actual~~and ~~results~~cell ~~could~~biology ~~differ~~of ~~from~~the ~~those~~human ~~amounts~~body.

~~Accounting~~Use ~~for~~of ~~Stock-based Compensation~~ Estimates

The preparation ~~Company~~of ~~accounts~~financial ~~for~~statements ~~its~~in ~~stock~~conformity ~~option~~with ~~awards~~accounting principles generally accepted in the United States requires management to ~~employees~~make estimates and ~~directors using~~assumptions ~~the~~that ~~intrinsic~~affect ~~value~~the ~~method~~reported amounts of ~~accounting~~assets inand ~~accordance~~liabilities ~~with Accounting~~and ~~Principles~~disclosure ~~Board~~of ~~(“APB”)~~contingent ~~Opinion~~assets ~~No. 25,~~and ~~“Accounting~~liabilities ~~for~~at ~~Stock~~the ~~Issued~~date toof the financial ~~Employees,”~~statements and ~~has~~the ~~adopted~~reported ~~the~~amounts ~~disclosure~~of ~~only~~revenues ~~provisions~~and ofexpenses ~~Statement~~during ofthe ~~Financial~~reporting ~~Accounting~~period. Actual ~~Standards~~results ~~(“SFAS”)~~could differ Nofrom those estimates. ~~123~~ Significant areas requiring the use of management estimates relate to the valuation of inventories, ~~“Accounting~~accounts ~~for~~receivable ~~Stock~~allowances, long-~~Based Compensation.”~~lived ~~Accordingly~~asset impairments, noloss contingencies ~~compensation~~and ~~cost~~income ~~has~~taxes. In addition, ~~been~~the ~~recognized~~Company ~~for~~uses assumptions when employing the Black-Scholes ~~option~~valuation ~~plans~~model ~~under~~to estimate the fair value ~~recognition~~of ~~provisions~~stock ofoptions ~~SFAS~~granted ~~No. 123.~~for pro forma disclosures.

~~Had compensation cost for the Company’s stock options been recognized based upon the estimated fair value on the grant date under the fair~~ 5

-Recent 6Accounting - Pronouncements

~~Table~~SFAS of123(R), ~~Contents~~“Share-Based Payment”

~~value~~In ~~methodology~~December 2004 ~~prescribed~~the byFASB issued SFAS ~~No.~~ 123 (revised 2004), ~~the~~“Share-Based ~~Company’s~~Payment,” ~~net~~which ~~income~~is ~~and~~a ~~earnings~~revision of SFAS 123, “Accounting for Stock-Based Compensation.” Statement 123(~~loss~~R) ~~per~~ ~~share~~supercedes ~~would~~APB ~~have~~25, ~~been~~“Accounting for asStock ~~follows~~Issued to Employees.” Generally, the approach in SFAS 123(R) is similar to the approach described in ~~thousands~~SFAS 123. However, ~~except~~SFAS ~~per~~123(R) requires all share-based payments to employees, including ~~data~~grants of employee stock options to be recognized in the statement of operations based on their fair values. Pro forma disclosure of fair value recognition will no longer be an alternative. SFAS 123(R): must be adopted no later than January 1, 2006, with earlier adoption permitted. The Company expects to adopt this new standard on January 1, 2006. The Company has not yet determined which fair-value method and transitional provision it will follow.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2004			2003			2004			2003
Net income, as reported	$	445		$	325		$	1,153		$	427
Less: total stock-based compensation (1)		(326	)		(331	)		(583	)		(609	)
Net income, as adjusted	$	119		$	(6	)	$	570		$	(182	)
Basic earnings per share, as reported	$	.05		$	.03		$	.12		$	.05
Diluted earnings per share, as reported	$	.05		$	.03		$	.12		$	.04
Basic earnings (loss) per share, as adjusted	$	.01		$	—		$	.06		$	(.02	)
Diluted earnings (loss) per share, as adjusted	$	.01		$	—		$	.06		$	(.02	)

As permitted by SFAS 123, the Company currently accounts for share-based payments to employees using APB 25’s intrinsic value method. As a consequence, no compensation cost is recognized for employee stock options. Although the adoption of SFAS 123(R)’s fair value method will have no adverse impact on the balance sheet or net cash flows, it is expected to have a significant adverse impact on net income and earnings per share. The pro forma effects on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS 123 to share-based payments to employees in prior periods are disclosed in Note 7 under “Stock Incentive Plans.” Although the pro forma effects of applying SFAS 123 may be indicative of the effects of applying SFAS 123(R), the provisions of these two statements differ in some important respects. The actual effects of adopting SFAS 123(R) will depend on numerous factors including the valuation model used to value future share-based payments to employees, estimated forfeiture rates and the accounting policies adopted concerning the method of recognizing the fair value of awards over the requisite service period.

~~(1)~~SFAS As151, ~~determined~~“Inventory ~~under the fair value method.~~Costs”

~~The~~In November 2004, ~~Company~~FASB ~~uses~~issued ~~the~~SFAS ~~Black-Scholes~~No.151, ~~option-pricing~~“Inventory Costs, ~~model~~an ~~for~~amendment ~~estimating~~of ~~the~~ARB ~~fair value~~43, ofChapter ~~options~~4,”(SFAS ~~granted.~~151) ~~The~~which ~~Black-Scholes~~amends the ~~option-pricing~~guidance ~~model~~in ~~was~~ARB ~~developed~~No. 43, Chapter 4, “Inventory ~~for~~Pricing.” ~~use~~This inStatement ~~estimating~~is the ~~fair~~result ~~value~~ of ~~traded~~a ~~options~~broader ~~that~~effort ~~have~~by ~~no vesting~~the ~~restrictions~~FASB ~~and~~working ~~are~~with ~~fully~~the ~~transferable.~~International InAccounting ~~addition,~~Standards ~~option~~Board ~~valuation~~to ~~models~~reduce ~~require~~differences ~~the~~between ~~input~~U.S. ofand ~~highly~~international ~~subjective~~accounting ~~assumptions,~~standards. ~~including~~SFAS151 eliminates the ~~expected stock~~“so ~~price~~abnormal” ~~volatility.~~criterion ~~The~~in ~~Company~~ARB ~~uses~~No. 43 ~~projected~~and ~~volatility~~companies ~~rates,~~will ~~based~~no ~~upon~~longer ~~historical~~be ~~volatility~~permitted ~~rates,~~to ~~trended~~capitalize ~~into~~inventory ~~future~~costs ~~years.~~on ~~Because~~their ~~the Company’s~~balance ~~employee~~sheets ~~stock~~when the ~~options~~production ~~have~~defect ~~characteristics~~rate varies significantly ~~different~~ from ~~those~~the ofexpected ~~traded~~rate. ~~options~~It ~~and because changes in the subjective input~~also ~~assumptions~~makes ~~can~~clear ~~materially~~that ~~affect~~fixed ~~the~~overhead ~~fair~~should ~~value~~be ~~estimate,~~allocated ~~the~~based ~~existing~~on ~~models,~~“normal capacity.” inThe ~~management’s~~provisions ~~opinion,~~of dothis ~~not~~Statement ~~necessarily~~will ~~provide~~be aeffective ~~reliable,~~for ~~single~~inventory ~~measure~~costs incurred ofduring the ~~fair value of the~~ Company’s ~~options~~2006 fiscal year. ~~For~~The ~~purposes~~Company ofis ~~pro~~currently ~~forma~~analyzing this ~~disclosures,~~statement ~~the~~and ~~estimated~~has ~~fair~~not ~~values~~yet ofdetermined ~~the~~its ~~options~~expected ~~are~~impact ~~amortized~~on ~~over~~ the consolidated ~~options’~~financial ~~vesting periods~~statements.

~~Note 2 – Earnings per Share~~ 6

~~Basic~~Note ~~earnings~~2 ~~per~~– ~~share~~Earnings ~~is computed by dividing the net income by the weighted average number of shares outstanding for the period. Diluted earnings~~ per ~~share~~ is computed by dividing the net income by the sum of the weighted average number of common shares outstanding for the period plus the assumed exercise of all dilutive securities by applying the treasury stock method unless such assumed exercises are anti-dilutive. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data): Share

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2004		2003		2004		2003
Net income	$	445	$	325	$	1,153	$	427
Weighted average shares outstanding — Basic		9,435		9,538		9,415		9,441
Dilutive effect of stock options and warrants		333		347		330		332
Weighted average shares outstanding — Diluted		9,768		9,885		9,745		9,773
Basic earnings per share	$	05	$	.03	$	.12	$	.05
Diluted earnings per share	$	.05	$	.03	$	.12	$	.04

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the sum of the weighted average number of common and dilutive potential common shares outstanding. Potential common shares consist of the shares issuable upon the exercise of stock options or warrants under the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share amounts):

Stock options to purchase 560,109 and 1,081,311 common shares for the three months ended June 30, 2004, and 2003, respectively, and 667,538 and 1,071,666 common shares for the six months ended June 30, 2004 and 2003, respectively, were not included in the computation of diluted earnings per share because their effect would have been anti-dilutive.

	Three Months Ended March 31,
	2005		2004
			(as restated)

Net income	$	680	$	655

Weighted average shares outstanding - Basic	9,087		9,395
Dilutive effect of stock options and warrants	139		357

Weighted average shares outstanding - Diluted	9,226		9,752

Basic earnings per share	$	0.07	$	0.07
Diluted earnings per share	$	0.07	$	0.07

-Stock 7options -to purchase 1,240,000 and 761,000 common shares for the three months ended March 31, 2005, and 2004, respectively, were not included in the computation of diluted earnings per share because the option exercise prices were greater than the average market price of the Company’s common stock during the respective periods. In addition, warrants to purchase 1,287,000 shares were excluded from each period as the warrant exercise prices were also greater than the average market price of the Company’s common stock.

~~Table~~Note of3 ~~Contents~~– Notes Receivable

~~Warrants~~In December 2004, tothe ~~purchase~~Company ~~1,287,000~~sold ~~shares~~all ~~were~~of the outstanding asstock of ~~June~~its wholly owned subsidiaries, Quality Controlled Biochemicals, 30Inc. and Javelle, ~~2004~~Inc (together “QCB”), which operated the Company’s custom antibodies and peptides ~~2003~~business ~~but~~for ~~were~~approximately ~~not~~$0.8 ~~included~~million consisting of $0.2 million in cash consideration, and loans for $0.6 million. In addition, the ~~computation~~Company ofagreed ~~diluted~~to ~~net~~provide ~~income~~a ~~per~~short-term ~~share~~working capital loan for ~~the~~up ~~three~~to ~~and~~an ~~six~~additional ~~months~~$150,000. ~~ended~~As ~~June~~of December 3031, 2004 ~~and~~the ~~2003~~notes receivable ~~because~~totaled ~~their~~$544,000. The ~~effect~~Company ~~would~~advanced bean ~~anti-dilutive~~additional $150,000 on the working capital loan in the first two months of 2005. During the three months ended March 31, 2005, the loans including accrued interest were paid off.

~~Note~~In accordance 3with –the ~~Inventories~~provisions of SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company accounted for the sale as discontinued operations. QCB’s operating results and cash flows have therefore been segregated from continuing operations on the statements of operations and statements of cash flows for all periods prior to the sale. Discontinued operations are summarized as follows (in thousands):

Inventories are valued at the lower of cost or market as determined under the first-in, first-out method. Costs include materials, labor and manufacturing overhead. Inventories are shown net of applicable reserves and allowances. Inventories consist of the following (in thousands):

	Three Months Ended March 31,
	2005		2004

Loss before income taxes	$	—	$	(64	)
Income taxes benefit	—		26
Discontinued operations, net	$	—	$	(38	)

Net sales from discontinued operations	$	—	$	753

	June 30,		December 31,
	2004		2003
Raw materials	$	3,172	$	3,193
Work in process		540		455
Finished goods		5,057		5,426
	$	8,769	$	9,074

Note 4 – ~~Property and Equipment (in thousands)~~ Inventories

	June 30,			December 31,
	2004			2003
Machinery and equipment	$	9,630		$	9,225
Office furniture and equipment		4,501			4,270
Leasehold improvements		1,961			1,874
		16,092			15,369
Less accumulated depreciation and amortization		(10,026	)		(9,134	)
	$	6,066		$	6,235

Inventories are summarized as follows (in thousands):

Note 5 – Stockholders’ Equity

	March 31, 2005		December 31, 2004
			(as restated)

Raw materials	$	2,889	$	2,424
Work in process	677		563
Finished goods	4,325		4,870

	$	7,891	$	7,857

~~Stock~~Note ~~Repurchase~~5 ~~Program~~– Property and Equipment

~~The Company’s Board of Directors previously authorized the repurchase of up to~~Property ~~$15 million~~and ~~of the Company’s outstanding common stock. During the first six months of fiscal 2004~~equipment, ~~the~~at ~~Company did not repurchase any shares. As of June 30~~cost, ~~2004,~~is ~~the~~summarized ~~Company~~as ~~had~~follows ~~repurchased~~(in ~~and retired 1,536,000 shares of common stock for an aggregate purchase price of $8.7 million since the inception of this stock repurchase program. This program expired on June 30, 2004.~~ thousands):

On July 27, 2004, the Company’s Board of Directors authorized the repurchase of up to an additional $10 million of the Company’s outstanding common stock.

	March 31, 2005			December 31, 2004

Machinery and equipment	$	8,899		$	8,781
Office furniture and equipment	4,586			4,555
Leasehold improvements	1,892			1,921
	15,377			15,257
Less accumulated depreciation and amortization	(10,435		)	(10,016		)
	$	4,942		$	5,241

~~The~~Note ~~amount~~6 ~~the~~– ~~Company spends and the number of shares repurchased varies based~~Stockholders’ ~~upon a variety of factors, including the stock price and blackout periods in which the Company is restricted from repurchasing shares.~~ Equity

~~Comprehensive~~Treasury ~~Income~~ Stock

~~The~~In ~~components~~July 2004, ofthe Company ~~comprehensive~~adopted ~~income~~a ~~are~~new asstock ~~follows~~repurchase (program under which it can repurchase up to $10 million of common stock in ~~thousands):~~open market purchases. During the three months ended March 31, 2005, the Company repurchased 8,200 shares of common stock for an aggregate purchase price of $55,000. The amount the Company spends and the number of shares repurchased varies based upon a variety of factors, including the stock price and blackout periods during which the Company is restricted from repurchasing shares.

~~- 8 -~~Comprehensive Income

~~Table~~The components of comprehensive ~~Contents~~income are as follows (in thousands):

	Three Months Ended						Six Months Ended
	Three Months Ended March 31,
	June 30,						June 30,
	2005			2004
	2004				2003		2004			2003
				(as restated)
Net income	$	~~445~~680		$	$655	~~325~~	$	~~1,153~~		$	~~427~~
Foreign currency translation adjustments, net of tax	(359	~~(49~~	)	(164		~~359~~)		~~(213~~	)		~~600~~
Total comprehensive income	$	396			$	684	$	940		$	1,027
Comprehensive income	$	321		$	491

~~Note 6 – Business Segments~~ 8

~~The~~Note ~~Company~~7 is– ~~engaged~~Stock ~~in a single industry: the development, manufacture,~~Incentive marketing and distribution of products used in biomedical research. The Company conducts business globally and is managed geographically. The Company’s management makes financial decisions and allocates resources based on the information it receives from its internal management system. Prior to the second quarter of fiscal 2004, the Company’s management analyzed its business based on three strategic business units, Cytokines, Signal Transduction and Custom. Beginning in the second quarter of fiscal 2004, the Company’s internal management system was realigned to be consistent with the Company’s strategy of focusing on assays, biologicals and other product lines. As a result, effective in the second quarter of fiscal 2004, the Company’s management analyzes sales and operating income by geographic region as well as sales by product grouping consistent with the strategy outlined above. Prior period information has been reclassified to conform to the current period’s presentation. Plans

~~Segment~~The ~~information~~following istable illustrates ~~summarized~~the aseffect ~~follows~~on net income and income per share if the Company had applied the fair value methodology of SFAS No. 123 (in thousands, except per share data):

	Three Months Ended							Six Months Ended
	Three Months Ended March 31,
	June 30,							June 30,
	2005			2004
	2004				2003			2004			2003
				(as restated)
Sales – by Geography:
Net income, as reported	$	680		$	655
Net sales to external customers in:
Less: Stock-based employee compensation expense determined under fair value method, net of tax	(209		)	(240		)
United States	$	6,406			$	6,334		$	12,727			12,361
Pro forma net income	$	471		$	415
Europe		3,954				3,502			7,886			6,776
Net income per share:
Asia-Pacific		1,200				1,332			2,819			2,557
Basic – as reported	$	0.07		$	0.07
Other		394				566			808			939
Basic – pro forma	$	0.05		$	0.04
Total	$	11,954			$	11,734		$	24,240		$	22,633
Diluted – as reported	$	0.07		$	0.07
Operating income (loss):
Diluted – pro forma	$	0.05		$	0.04
United States	$	(424	)		$	(170	)	$	(606	)	$	(907	)
Europe		826				658			1,920			1,516
Total	$	402			$	488		$	1,314		$	609
Sales – by Product Group:
Assays	$	4,922			$	4,552		$	9,995			8,884
Biologicals		3,606				3,631			7,448			6,968
Custom & Other		3,426				3,551			6,797			6,781
Total	$	11,954			$	11,734		$	24,240		$	22,633

~~Note~~The 7Company –uses ~~Line~~the Black-Scholes option-pricing model for estimating the fair value of ~~Credit~~options granted. Assumptions used for the valuation model are set forth below.

In June 2003, the Company established a one-year revolving loan with a commercial bank that allowed the Company to withdraw up to an aggregate of $2,500,000. The loan was established for working capital and stock repurchase needs, and expired in June 2004. The Company had no borrowings under the revolving loan during 2004.

	March 31,
	2005		2004
Expected dividend yield	0.0	%	0.0	%
Risk-free interest rate	2.9	%	2.9	%
Expected volatility	45.1	%	45.1	%
Expected life (years)	4.0		4.1

The Black-Scholes 9 option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including expected stock price volatility. The Company uses projected volatility rates, based upon historical volatility rates, trended into future years. Because the Company’s employee 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, the existing models, in management’s opinion, do not necessarily provide a reliable single measure of the fair value of the Company’s options. In the future, the Company may elect or be required to use a different valuation model which could result in a significantly different impact on the Company’s pro forma net income.

~~Table of Contents~~9

~~Item~~Note 2.8 ~~Management’s~~– ~~Discussion~~Business Segments and ~~Analysis~~Geographic ~~of Financial Condition and Results of Operations~~Information

~~This~~The Company ~~discussion~~is engaged in a single industry: the development, manufacture, marketing and ~~analysis~~distribution of ~~financial~~products ~~condition~~used in biomedical research. The Company conducts business globally and ~~results~~is managed ofgeographically. ~~operations~~The Company’s management makes financial decisions and ~~should~~allocates beresources ~~read~~based inon ~~conjunction~~the ~~with~~information it receives from its internal management systems. Prior to the ~~consolidated~~second ~~financial~~quarter ~~statements~~of fiscal 2004, the Company’s ~~notes~~management ~~thereto~~analyzed ~~and~~its ~~other~~business ~~information~~based on three strategic business units, Cytokines, ~~including~~Signal ~~information~~Transduction ~~set~~and ~~forth~~Custom. Beginning in ~~our~~the second quarter of ~~Annual~~fiscal ~~Report~~2004, onthe ~~Form~~Company’s ~~10-K~~internal ~~for~~management systems were realigned to be consistent with the ~~fiscal~~Company’s ~~year~~strategy ~~ended~~of ~~December 31~~focusing on assays, ~~2003~~biologicals and other product lines. As a result, effective in the second quarter of fiscal 2004, the Company’s management analyzes sales by geographic region and ~~all~~by product grouping and also analyzes ~~other~~operating ~~filings~~income wewithin ~~made~~the United States and Europe consistent with the strategy ~~Securities~~outlined ~~and~~above. ~~Exchange~~Prior ~~Commission~~period ~~from~~information ~~time~~has been reclassified to ~~time~~conform to the current period’s presentation.

~~This Form 10-Q contains forward-looking statements, which are made pursuant to~~Segment ~~the~~information ~~safe-harbor~~is ~~provisions~~summarized ~~of the Private Securities Litigation Reform Act of 1995. Within this Form 10-Q, words such~~ as ~~“believes,”~~follows “expects,” “anticipates,” “intends,” “strategy,” “estimates,” “continue,” “may,” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These forward-looking statements involve a number of risks, uncertainties and other factors described throughout this Form 10-Q and (in our other filings with the Securities and Exchange Commission. The actual results that we achieve may differ from any forward-looking statements due to such risks and uncertainties. We do not undertake any obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this report. thousands):

Overview

	Three Months Ended March 31,
	2005			2004
				(as restated)
Sales – by Geography:
Net sales to external customers in:
United States	$	6,159		$	5,559
Europe	4,415			3,926
Asia-Pacific	1,406			1,645
Other	753			402
Total	$	12,733		$	11,532

Operating income (loss):
United States	$	(227	)	$	(190	)
Europe	1,362			1,080
Total	$	1,135		$	890

Sales – by Product Group:
Assays	$	5,480		$	5,158
Biologicals	3,077			2,993
Other	4,176			3,381
Total	$	12,733		$	11,532

We develop, manufacture, market and distribute products and services that are widely used in biomedical research. Our products and services enable scientists to better understand the biochemistry, immunology and cell biology of the human body, aging and certain diseases such as cancer, arthritis, AIDS, Alzheimer’s and other critical diseases. We have a wide variety of products, including immunoassay test kits and biological reagents, bioactive proteins (cytokines, growth factors and adhesion molecules), oligonucleotides, and monoclonal and polyclonal antibodies. We also manufacture and market custom oligonucleotides, peptides and antibodies to the specifications of our customers. We use recombinant DNA technology to produce cytokines and other proteins and have registered certain of our reagents with the United States Food and Drug Administration (“FDA”) for which we have received license to sell such products as Class I Medical Devices. We market these products to in vitro diagnostic manufacturers and clinical reference laboratories as “active ingredients” in the tests those parties produce to identify specific diseases or conditions. We also provide sera and media which provide the physiological conditions and nutrients for cells to grow outside their natural environment.

	March 31, 2005		December 31, 2004
Long-lived assets:
United States	$	9,028	$	9,319
Europe	1,729		1,826
Total	$	10,757	$	11,145

All assets:
United States	$	33,199	$	32,597
Europe	11,353		10,952
Total	$	44,552	$	43,549

The principal markets for our products include the life sciences research market and the biopharmaceutical production market. The life sciences research market consists of laboratories generally associated with universities, medical research centers, government institutions, and other research institutions as well as biotechnology and pharmaceutical companies. Life sciences researchers use our products to perform a broad range of experiments in the laboratory. 10

OurNote strategy9 focuses– onRestatement our core strengths as an assay company. These assay products are higher margin products and are focused on gaining scientific understanding of bothPreviously intraIssued andFinancial extra-cellular pathways and the impact to those pathways by drugs or disease. Our strategy focuses our direction on these high margin products where we have a strong market position and allows us to more effectively market our complimentary product lines, including our Phospho Site Specific Antibodies, or PSSA’s, and our sera and media and custom products to the same customers who are already pleased with our differentiated assay products. Statements

~~Our~~The Company ~~products~~restated ~~are~~its ~~used~~consolidated ~~for~~financial ~~research~~statements ~~purposes~~as of December 31, 2004 and ~~their~~2003 ~~use~~and byfor ~~our~~each ~~customers~~of the years in the three-year period ended December 31, ~~generally~~2004. The isrestatement ~~not~~reflects adjustments ~~regulated~~due byto ~~the~~changes ~~FDA~~to orthe byaccounting ~~any~~treatment ~~comparable~~of ~~international~~(1) manufactured ~~organization,~~antibody ~~with~~inventory ~~several~~reserves ~~limited~~and ~~exceptions~~(2) the modification of terms in the warrant agreements. ~~Some~~Subsequent to the filing of our ~~products~~2004 ~~and~~Form 10-K, ~~their~~the ~~manufacturing~~Company ~~sites~~conducted ~~are~~additional ~~subject~~analysis with respect to ~~FDA~~its ~~regulation~~manufactured antibody inventory loss experience and ~~oversight~~determined that the previous loss reserves were not appropriate. The Company’s revised reserve methodology is based on analysis of sales levels by product, projections of future demand and ~~are~~age of inventory. In addition, the Company ~~required~~also toconducted ~~comply~~an ~~with~~analysis of the ~~Quality~~accounting ~~System~~treatment ~~Regulations,~~for ~~which~~its ~~was~~warrant agreements ~~formerly~~issued in connection with a private placement in 2000 and determined ~~known~~that the impact of the modification of terms should be reflected as ~~current~~a ~~good~~dividend. The ~~manufacturing~~effects of the restatement on previously reported consolidated financial statements for the three months ended March 31, 2004 are summarized below (in thousands, except for per share data).

- 10 -

	Three Months Ended March 31, 2004
	As Previously Reported			As Restated

Statement of Operations:
Cost of goods sold	$	4,802		$	4,888
Gross profit	6,730			6,644
Income from continuing operations	976			890
Provision for income taxes	213			180
Income from continuing operations before other items	746			693
Net income	708			655

Basic earnings per share:
Income from continuing operations	$	0.08		$	0.07
Discontinued operations, net	—			—
Basic earnings per share	$	0.08		$	0.07

Diluted earnings per share:
Income from continuing operations	$	0.08		$	0.07
Discontinued operations, net	—			—
Diluted earnings per share	$	0.08		$	0.07

Statement of Cash Flows:
Net income from continuing operations	746			693
Deferred income taxes	—			(33		)
Inventories, net	(309		)	(223		)

~~Table of Contents~~11

practice,Item or2. cGMP,Management’s Discussion and isAnalysis described in 21 CFR part 820. Additionally, some of theseFinancial sameCondition sites and productsResults complyof with certain voluntary quality programs such as ISO 9001. Operations

WeThis ~~manufacture~~discussion ~~our~~and ~~products~~analysis inof financial ~~our~~condition ~~facilities~~and results of operations should be read in ~~Camarillo~~conjunction with the consolidated financial statements and ~~Foster~~the ~~City,~~notes thereto included ~~California;~~herein ~~Rockville,~~and ~~Maryland;~~other ~~Hopkinton~~information, ~~Massachusetts;~~including ~~and~~information ~~Nivelles,~~set forth in our Annual ~~Belgium.~~Report Inon ~~addition~~Form 10-K for the fiscal year ended December 31, 2004, as amended, and the other filings we ~~purchase~~made ~~products~~with ~~from~~the ~~third-party~~Securities ~~manufacturers~~and ~~for~~Exchange ~~resale~~Commission from time to time in 2005.

WeThis ~~conduct~~Form 10-Q ~~research~~contains forward-looking ~~activities~~statements, inwhich are made pursuant to the ~~United~~safe-harbor ~~States~~provisions of the Private Securities Litigation Reform Act of 1995. Within this Form 10-Q, words such as “believes,” “expects,” “anticipates,” “plans,” “intends,” “strategy,” “estimates,” “continue” and ~~Belgium~~“may,” and ~~business~~similar expressions are intended to identify forward-looking ~~development~~statements ~~activities~~but ~~around~~are not the ~~world~~exclusive means of identifying such statements. These Inforward-looking ~~addition~~statements toinvolve ~~these~~a number ~~activities~~of risks, weuncertainties and other factors described throughout this Form 10-Q ~~actively~~and ~~seek~~in toour ~~license~~other ~~intellectual~~filings ~~property~~with the Securities and ~~technology~~Exchange Commission. The actual results that we achieve may differ from ~~academic,~~any forward-looking statements ~~government,~~due to such risks and ~~commercial~~uncertainties ~~institutions~~and other factors. We do not undertake any obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this report.

Except for our oligonucleotide, antibody and peptide custom businesses, which are make-to-order businesses, we principally manufacture products for inventory and ship products shortly after the receipt of orders. We do not currently have a significant backlog and do not anticipate we will develop a material backlog in the future. In addition, we rely on third-party manufacturers to supply certain of our raw materials, product components, and in some cases, entire products. Overview

We ~~conduct our commercial operations through subsidiaries in Europe and the~~ ~~United~~manufacture, ~~States.~~market ~~Each subsidiary records its income~~ and ~~expenses~~distribute ~~using~~products ~~the~~used ~~local currency~~worldwide offor ~~the country in which the subsidiary resides. To consolidate the~~understanding ~~income~~disease and ~~expenses~~developing ofnew ~~all~~drug oftherapies ~~our~~and ~~subsidiaries,~~medical ~~we translate each subsidiary’s results into U~~diagnostics.S. ~~dollars~~Our ~~using exchange rates during the period. Changes in~~products ~~currency~~enable ~~exchange~~biomedical ~~rates~~researchers ~~have~~to ~~affected,~~better ~~and~~understand ~~will~~disease ~~continue~~processes toas ~~affect,~~well ~~our~~as ~~consolidated~~the ~~revenues~~biochemistry, ~~revenue~~immunology ~~growth~~and ~~rates,~~cell ~~gross~~biology ~~margins~~of ~~and~~the ~~net~~human ~~income~~body. ~~In addition,~~We ~~certain~~offer ~~of our subsidiaries conduct~~ a wide ~~portion~~variety of ~~their~~products ~~business~~that ~~in currencies~~are ~~other~~grouped ~~than~~into the ~~subsidiary’s~~following ~~local~~three ~~currency, which can result in~~categories: ~~foreign~~Assays ~~currency~~(test ~~transaction~~kits); ~~gains~~Biologicals or(antibodies ~~losses.~~and ~~Exchange~~bioactive ~~gains~~proteins) and ~~losses~~Other ~~arising~~(serum, ~~from~~media, ~~transactions~~oligonucleotides ~~denominated~~and inclinical ~~these currencies are recorded in the Consolidated Statements of Income using the actual exchange rate differences on the date of the transaction~~diagnostics).

WeThe principal ~~anticipate~~markets ~~that~~for our ~~results~~products ofinclude ~~operations~~the ~~may~~life ~~fluctuate~~sciences onresearch ~~a quarterly and~~market ~~annual basis~~ and ~~will~~the bebiopharmaceutical ~~difficult~~production ~~to predict~~market. The ~~timing~~life ~~and~~sciences ~~degree~~research ~~of fluctuation~~market ~~will~~consists ~~depend~~of ~~upon~~laboratories ~~several factors, including those discussed under~~generally ~~“Risk~~associated ~~Factors~~with ~~Related to Our Business.” In addition~~universities, ~~our~~medical ~~results~~research ofcenters ~~operations could be affected by the timing of orders from distributors~~ and ~~the~~government institutions ~~mix~~as ~~of sales~~well ~~between~~as ~~distributors~~biotechnology and ~~our~~pharmaceutical ~~direct sales force~~companies. Life ~~Although~~sciences weresearchers ~~have experienced~~use ~~revenue~~our ~~growth~~products ~~in recent years, we cannot assure you that we will~~to beperform ~~able~~a tobroad ~~sustain~~range ~~such~~of ~~growth~~experiments orin ~~maintain~~the ~~profitability on a quarterly basis~~laboratory.

~~Results~~Our strategy focuses on our core strengths of ~~Operations~~producing assay products. These assay products generally are higher margin products and are focused on gaining scientific understanding of both intra and extra-cellular pathways and the impact on those pathways of drugs or disease. We believe the strong market position of our assay products allows us to more effectively market our complimentary product lines to our existing customers.

~~Three~~We anticipate ~~Months~~that ~~Ended~~our ~~June~~results of operations may fluctuate on a quarterly and annual basis and will be difficult to predict. 30 The timing and degree of fluctuation will depend upon several factors, including ~~2004~~those ~~Compared~~discussed tobelow ~~Three~~under ~~Months~~“Risk ~~Ended~~Factors ~~June 30~~Related to Our Business.” In addition, ~~2003~~our results of operations could be affected by the timing of orders from distributors and the mix of sales between distributors and our direct sales force. Although we have experienced revenue growth in recent years, there is no assurance that we will be able to sustain such growth or report profits on a quarterly basis.

~~Net sales. Net sales increased $0.2 million, or 2%, to $~~12.0 million for the three months ended June 30, 2004 from $11.8 million for the three months ended June 30, 2003. Changes in foreign currency exchange rates increased U.S. dollar-denominated revenues by $0.3 million when comparing the three months ended June 30, 2004 with the corresponding period in 2003.

~~Gross profit. Gross profit increased $0.1 million, or 1%, to $6.4 million for~~Results ~~the three months ended June 30, 2004 from $6.3 million for the three months ended June 30, 2003. Our gross profit as a percent~~ of ~~sales of 54% was consistent with the corresponding period of 2003.~~ Operations

~~Sales~~Three ~~and~~Months ~~marketing.~~Ended ~~Sales and marketing expenses were $2.4~~March ~~million~~31, 2005 ~~for~~Compared ~~the three~~to ~~months~~Three ~~ended~~Months ~~June~~Ended March 3031, 2004 ~~which was consistent with the comparable 2003 period.~~

-The 11table -below and the discussion that follows are based upon the way we analyze our product groups. Prior to the second quarter of 2004, we analyzed our business based on three strategic business units, Cytokines, Signal Transduction and Custom. In the second quarter of 2004, we revised our internal management reporting systems to be consistent with our strategy of focusing on assays, biologicals and other product lines. See Note 8 to the consolidated financial statements for additional information about business segments.

(Dollars in thousands)	Q1 2005		% of Net Sales		Q1 2004		% of Net Sales		2004-2005 % Change
Assays	$	5.5	43.3	%	$	5.1	44.3	%	7.8	%
Biologicals	3.1		24.4	%	3.0		26.1	%	3.3	%
Other	4.1		32.3	%	3.4		29.6	%	20.6	%
Total Sales	$	12.7			$	11.5			10.4	%

~~General~~Net ~~and administrative expenses~~sales. Net ~~General~~sales ~~and administrative expenses~~ increased $01.7 2 million, or 5410%, to $212.1 7 million for the three months ended ~~June 30~~March 31, ~~2004~~2005 from $111.~~4 million~~5 million for the three months ended ~~June~~March 3031, ~~2003~~2004. Changes ~~The~~in foreign currency exchange rates increased U.S. dollar-denominated ~~increase~~net issales ~~primarily~~by ~~attributable~~$0.3 tomillion ~~modest~~when ~~increases~~comparing inthe ~~payroll~~three ~~and~~months ~~benefits~~ended March 31, ~~increases~~2005 inwith ~~professional~~the ~~fees~~corresponding ~~for~~period ~~such~~in ~~items~~2004. The asremainder ~~Sarbanes-Oxley~~of ~~compliance efforts~~the asincrease ~~well~~was asdue ~~one-time~~primarily ~~costs~~to ~~incurred~~volume ~~associated~~increases ~~with~~ in the ~~resignation~~sales of our ~~former~~assays, ~~chief~~biologicals ~~financial~~and ~~officer~~other product lines.

~~Research~~Gross ~~and development~~profit. Gross ~~Research~~profit ~~and~~increased ~~development (“R&D”) expenses decreased~~ $0.5 7 million, or 2411%, to $17.4 million for the three months ended ~~June~~March 3031, ~~2004~~ 2005 from $16.9 6 million for the three months ended ~~June~~March 3031, ~~2003~~2004. Our ~~The~~gross ~~decrease~~profit ~~in R&D~~as ~~spending~~a ispercent ~~primarily~~of ~~related~~sales ~~to headcount reductions, which is consistent with management’s efforts to align our R & D investments with our core strength~~ of ~~assay development. Our R&D spending reflects our belief that to maintain~~58% ~~our competitive position~~ in athe ~~market~~first ~~characterized~~quarter ~~by rapid rates~~ of ~~technological~~ ~~advancement,~~2005 weis ~~must~~comparable ~~continue~~ to ~~invest~~the ~~significant~~first ~~resources~~quarter ~~in new~~of ~~product~~the ~~development, as well as continue to enhance existing products.~~prior year.

~~Amortization~~Operating ~~of intangible assets. Amortization of intangible assets was $0.1 million for the three months ended June 30, 2004 which was consistent with the comparable 2003 period.~~ expenses

Provision for income taxes. Our effective tax rate for the three months ended June 30, 2004 and 2003 was (10%) and 26%, respectively. We recognized a benefit in our provision for income taxes in the second quarter of 2004. During the quarter, the Internal Revenue Service concluded an audit of certain tax returns for which we had previously recorded reserves of $0.1 million. We reversed those reserves during the three months ended June 30, 2004 as a result of the favorable outcome of the examination which had the effect of reducing our income tax provision. Excluding the impact of the reversal of this reserve, our effective tax rate for the three months ended June 30, 2004 would have been approximately 21%.

(Dollars in millions)	Q1 2005		% of Net Sales		Q1 2004		% of Net Sales		2004-2005 % Change
Sales and marketing	$	2.5	19.9	%	$	2.3	20.3	%	8.1	%
General and administrative	2.0		15.9	%	1.9		16.4	%	7.3	%
Research and development	1.6		12.3	%	1.4		12.0	%	12.4	%
Amortization of intangible assets	0.2		1.1	%	0.2		1.2	%	0.0	%
Total operating expenses	$	6.3	49.2	%	$	5.8	49.9	%	8.7	%

~~Six~~Sales ~~Months~~and ~~Ended~~marketing. Sales ~~June 30~~and marketing expenses were $2.5 million, ~~2004~~or ~~Compared~~19.9% of sales, for the 2005 first quarter compared to ~~Six~~$2.3 ~~Months~~million ~~Ended~~or ~~June 30~~20.3% of sales, ~~2003~~in the first quarter of 2004. The decrease as a percentage of net sales was due to the continued focus on controlling our sales and marketing costs as sales increase.

~~Net~~General ~~sales~~and administrative expenses. General ~~Net~~and administrative ~~sales~~(“G&A”) ~~increased~~expenses were $12.6 0 million, or 715.9%, toof ~~$24.2 million for the six months ended June 30~~sales, ~~2004 from $22.6 million~~ for the ~~six~~three months ended ~~June 30~~March 31, ~~2003.~~2005 ~~Changes~~compared into ~~foreign currency exchange rates increased U.S. dollar-denominated revenues by~~ $01.9 million, ~~when~~or ~~comparing the six months ended~~16.4% ~~June 30~~of sales, ~~2004~~in ~~with~~ the ~~corresponding~~first ~~period~~quarter ~~in 2003 and accounted for 4%~~ of ~~the~~2004. 7%G&A ~~increase~~decreased inas ~~sales.~~a ~~The~~percentage ~~remainder~~ of ~~the~~net ~~increase~~sales ~~was~~ due ~~primarily~~ to ~~growth~~a incontinued ~~our~~focus on ~~assay~~controlling ~~product~~ costs as sales increase.

~~Gross~~Research and ~~profit~~development. Research ~~Gross~~and ~~profit~~development ~~increased~~expenses ~~$0.7 million,~~in or2005 were ~~6%,~~relatively toconsistent ~~$13.3 million~~with ~~for the~~that ~~six~~of ~~months~~2004 ~~ended~~increasing ~~June 30~~$0.2 million, ~~2004~~to ~~from~~ $121.6 million or 12.3% of sales, for the ~~six~~three months ended ~~June~~ March 3031, ~~2003.~~2005 ~~Gross profit as a percent of sales decreased~~ from ~~56% to 55%~~ ~~during this period~~$1.4 ~~The~~million, ~~decrease~~or in12.0% ~~gross profit as a percentage~~ of sales, ~~was primarily~~for ~~due to changes in~~ the ~~product~~three ~~mix~~months asended ~~well as competitive pricing~~March 31, ~~pressures~~2004.

~~Sales~~Amortization ~~and~~of ~~marketing~~intangible assets. Amortization of ~~Sales~~intangible ~~and~~assets ~~marketing~~was ~~expenses were~~ $40.9 2 million for the ~~six~~ three months ended ~~June~~March 3031, 2005 ~~2004~~ which was consistent with the comparable ~~2003~~ 2004 period.

General and administrative expenses. General and administrative expenses increased $1.1 million, or 38%, to $4.0 million for the six months ended June 30, 2004 from $2.9 million for the six months ended June 30, 2003. The increase is primarily attributable to increases in payroll and benefits, increases in professional fees for such items as Sarbanes-Oxley compliance efforts as well as one-time costs incurred associated with the resignation of our former chief financial officer. 13

~~Research~~Non-Operating Income and development. R&D costs decreased $1.0 million or 27% to $2.8 million for the six months ended June 30, 2004 from $3.8 million for the six months ended June 30, 2003. The decrease in R&D spending is primarily related to headcount reductions, which is consistent with management’s Expenses

-Income 12taxes. Our -consolidated effective tax rate for the three months ended March 31, 2005 was 36%, compared with 21% in the first quarter of 2004. Income taxes are determined using an estimated annual effective tax rate. The increase in the effective rate for 2005 is primarily due to lower anticipated tax credits in 2005 compared to 2004. In addition, as our taxable income increases, the impact of credits is reduced thus increasing our consolidated effective tax rate.

~~Table~~Discontinued operations. In December 2004 we sold our wholly owned subsidiaries, Quality Controlled Biochemicals, Inc. and Javelle, Inc., and accounted for the sale as discontinued operations. In accordance with SFAS 144, we have segregated the operating results of ~~Contents~~this business from continuing operations on our statement of operations for all periods prior to the sale. We recorded a net loss from discontinued operations of $38,000 in the first quarter of fiscal 2004. See Note 3 to the consolidated financial statements.

~~efforts to align~~Critical ~~our~~Accounting R&D investments with our core strength of assay development. Our R&D spending reflects our belief that to maintain our competitive position in a market characterized by rapid rates of technological advancement, we must continue to invest significant resources in new product development, as well as continue to enhance existing products. Policies

~~Amortization~~The preparation of ~~intangible~~financial ~~assets.~~statements ~~Amortization~~and related disclosures in conformity with generally accepted accounting principles in the United States of ~~intangible~~America requires ~~assets~~management ~~was~~to ~~$0.3~~make judgments, assumptions and estimates that affect ~~million~~the amounts reported in the Consolidated Financial Statements and accompanying notes. Estimates are used for, among other things, the ~~six~~accounting ~~months~~for ~~ended~~revenue recognition, ~~June 30~~allowance for doubtful accounts and inventories, ~~2004~~long-lived ~~which~~asset impairments, ~~was~~loss ~~consistent~~contingencies ~~with~~and ~~the~~income taxes. Actual results could differ ~~comparable~~substantially ~~2003~~from ~~period~~these estimates. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of the Consolidated Financial Statements.

Provision for income taxes. Our effective tax rate for the six months ended June 30, 2004 and 2003 was 11% and 23%, respectively. We recognized a benefit in our provision for income taxes in the second quarter of 2004. During the quarter, the Internal Revenue ~~Service concluded an audit of certain tax returns~~ for which we had previously recorded reserves of $0.1 million. We reversed those reserves during the three months ended June 30, 2004 as a result of the favorable outcome of the examination which had the effect of reducing our income tax provision. Excluding the impact of the reversal of this reserve, our effective tax rate for the six months ended June 30, 2004 would have been approximately 21%. Recognition

~~Critical~~We apply the provisions of SEC Staff Accounting ~~Policies~~Bulletin No. 104, Revenue Recognition (SAB No. 104), which codifies, revises and rescinds certain sections of SAB No. 101, Revenue Recognition, in order to make this interpretive guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. In accordance with SAB No. 104 and 101, the Company recognizes revenue related to product sales when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price is fixed or determinable, and (iv) collectibility is reasonably assured.

~~The preparation of financial statements and related disclosures in conformity~~Allowance with generally accepted accounting principles in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Note 1 to the Consolidated Financial Statements in our Annual Report on Form 10-K for ~~the~~Doubtful year ended December 31, 2003, describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. Estimates are used for, but not limited to, the accounting for revenue recognition, allowance for doubtful accounts and inventories, goodwill and long-lived asset impairments, loss contingencies, and taxes. Actual results could differ substantially from these estimates. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of the Consolidated Financial Statements. Accounts

~~Revenue~~We make ~~Recognition~~ongoing assumptions relating to the collectibility of our accounts receivable. The accounts receivable amount on our balance sheet includes a reserve for accounts that might not be paid. In determining the amount of the reserve, we consider our historical level of credit losses and the aging of the accounts receivable. We also make judgments about the collectibility of customer accounts based on ongoing evaluations. Our reserves have generally been adequate to cover our actual credit losses. However, since we cannot reliably predict future changes in the financial stability of our customers, we cannot guarantee that our reserves will continue to be adequate. If actual credit losses are significantly greater than the reserve we have established, that would increase our general and administrative expenses and reduce our reported net income. Conversely, if actual credit losses are significantly less than our reserve, this would eventually decrease our general and administrative expenses and increase our reported net income.

We apply the provisions of SEC Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements,” which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. SAB No. 101 outlines the basic criteria that must be met to recognize revenue and provides guidance for the disclosure of revenue recognition policies. In general, we recognize revenue related to our product sales when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the price is fixed or determinable, and (iv) collectibility is reasonably assured. 14

~~Allowance~~Allowances for ~~Doubtful Accounts~~ Inventory

~~The~~Inventories are ~~allowance~~stated ~~for~~at ~~doubtful~~the ~~accounts~~lower isof ~~based~~cost on(determined ~~our~~by ~~assessment~~the offirst-in, ~~the~~first-out method) ~~collectibility~~or ofmarket ~~specific~~(net ~~customer~~realizable ~~accounts~~value). At ~~and~~each ~~the~~balance ~~aging~~sheet ofdate, ~~the~~we ~~accounts~~evaluate ~~receivable.~~ending Ifinventories ~~there~~for ~~was~~excess aquantities ~~deterioration~~and obsolescence. This evaluation includes analyses of asales ~~major~~levels ~~customer’s~~by ~~credit~~product, projections of future demand and ~~worthiness~~age orof ~~actual~~inventory. If ~~defaults~~the ~~are~~determination is ~~higher~~made ~~than~~that ~~our~~inventory ~~historical~~is ~~experience~~obsolete, ~~our estimates~~these ofinventories are reserved for in the period ~~recoverability~~the ofdetermination ~~amounts~~is ~~due~~made. usInventories ~~could~~are beshown ~~overstated~~net ~~which~~of reserves of $6.0 ~~could~~million ~~have~~and an$6.6 ~~adverse~~million ~~impact~~at onMarch 31, ~~our~~2005 ~~financial~~and ~~results.~~December 31, 2004, respectively.

~~Allowances~~Impairment of ~~for~~Long-lived ~~Inventory~~ Assets

We assess ~~review~~ the ~~components~~impairment of ~~our~~long-lived ~~inventory~~assets, onwhich ainclude ~~regular~~equipment ~~basis~~and leasehold ~~for~~improvements ~~excess~~and identifiable intangible assets, ~~obsolete~~ ~~and~~whenever ~~impaired~~events ~~inventory~~and circumstances ~~based~~indicate onthat ~~estimated~~such ~~future~~assets ~~usage~~might ~~and~~be ~~sales~~impaired. In ~~The manufacturing~~the ~~process~~event ~~for~~the ~~antibodies~~expected ~~has~~undiscounted ~~and~~future cash ~~may~~flow ~~continue~~attributable to ~~produce~~the ~~quantities substantially~~asset inis ~~excess~~less ofthan ~~forecasted~~the ~~usage~~carrying ~~and~~amount ~~anticipated~~of ~~antibody sales~~the ~~volumes~~asset, ~~are~~an ~~highly~~impairment ~~uncertain~~loss ~~and~~equal ~~realization~~to the excess of ~~individual~~the ~~product~~asset’s ~~cost~~carrying value over its fair value is recorded.

-Accounting 13for Stock- Based Incentive Programs

~~Table~~We currently measure compensation expense for our stock-based incentive programs using the intrinsic value method prescribed by Accounting Principles Board, or APB, Opinion No. 25, “Accounting for Stock Issued to Employees.” Under this method, we do not record compensation expense when stock options are granted to eligible participants as long as the exercise price is not less than the fair market value of ~~Contents~~the stock when the option is granted. In accordance with SFAS 123, “Accounting for Stock-Based Compensation,” and SFAS 148, “Accounting for Stock-Based Compensation – Transition and Disclosure,” we disclose our pro forma net income or loss and net income or loss per share as if the fair value-based method had been applied in measuring compensation expense for our stock-based incentive programs.

~~may~~Income ~~not occur.~~Taxes As– aEstimates ~~result, we reserve our entire manufactured antibody inventory at 100%~~ of ~~its~~Effective ~~value.~~Tax ~~As of June 30~~Rates, ~~2004, we had $4,685,000 of manufactured~~ ~~antibodies~~Deferred inTaxes ~~our inventory which were fully reserved. We will continue to monitor our antibody inventory~~ and ~~the~~Valuation continued need for a 100% reserve. Additionally, material inventory write-downs can occur if competitive conditions or new product introductions by our customers or us vary from our current expectations. Allowance

~~Goodwill~~When we prepare our consolidated financial statements, we estimate our income taxes based on the various jurisdictions where we conduct business. Significant judgment is required in determining our worldwide income tax provision. We recognize liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due. We record an additional amount in our provision for income taxes in the period in which we determine that our recorded tax liability is less than we expect the ultimate tax assessment to be. If in a later period we determine that payment of this additional amount is unnecessary, we reverse the liability and recognize a tax benefit in that later period. As a result, our ongoing assessments of the probable outcomes of the audit issues and related tax positions require judgment and can materially increase or decrease our effective tax rate as well as impact our operating results. This also requires us to estimate our current tax exposure and to assess temporary differences that result from differing treatments of certain items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which we show on our consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be realized. To the extent we believe that realization is not likely, we establish a valuation allowance. When we establish a valuation allowance or increase this allowance in an accounting period, we record a corresponding tax expense on our statement of operations.

WeOur net ~~perform~~deferred ~~goodwill~~tax ~~impairment~~asset ~~tests~~at onMarch 31, an2005 ~~annual~~was ~~basis~~$11.5 million, ~~and~~net ~~between annual~~of ~~tests~~the invaluation ~~certain~~allowance ~~circumstances~~of $0.1 million. InWe ~~response~~recorded tothe ~~changes~~valuation allowance into ~~industry~~reflect ~~and~~uncertainties ~~market conditions,~~about whether we ~~may~~will ~~strategically~~be ~~realign~~able ~~our~~to ~~resources and consider~~utilize ~~restructuring,~~some ~~disposing~~ of, orour ~~otherwise~~deferred ~~exiting~~tax ~~businesses,~~assets ~~which~~(consisting ~~could result~~primarily inof ancertain ~~impairment~~net ~~of goodwill.~~operating loss and credit

~~Impairment of Long-lived Assets~~ 15

Wecarryforwards) before ~~assess~~they ~~the~~expire. ~~impairment~~The ofvaluation ~~long-lived~~allowance ~~assets,~~is ~~which~~based ~~include~~on ~~equipment~~our ~~and~~estimates of ~~leasehold~~taxable ~~improvements~~income ~~and~~for ~~identifiable~~the ~~intangible~~jurisdictions ~~assets,~~in ~~whenever~~which ~~events~~we operate and the period over ~~circumstances~~which ~~indicate~~our ~~that~~deferred ~~such~~tax assets ~~might~~will be ~~impaired~~realizable. InWhile we have considered future taxable income in assessing the ~~event~~need for the ~~expected~~ ~~undiscounted~~valuation ~~future~~allowance, ~~cash~~we could ~~flow~~be ~~attributable~~required to increase the ~~asset~~valuation isallowance ~~less~~to ~~than the~~take ~~carrying~~into ~~amount~~account additional ofdeferred ~~the~~tax ~~asset,~~assets anthat ~~impairment~~we ~~loss~~may ~~equal~~be unable to ~~the~~realize. ~~excess~~An ofincrease in the valuation allowance would have an adverse impact, which could be material, ~~asset’s~~on ~~carrying~~our ~~value~~income ~~over~~tax ~~its~~provision ~~fair~~and ~~value~~net isincome ~~recorded.~~in the period in which we make the increase.

Loss Contingencies

We record liabilities related to pending litigation when an unfavorable outcome is is probable and we can reasonably estimate the amount of the loss. We are subject to various legal proceedings and claims, either asserted or unasserted, that arise in the ordinary course of business. We evaluate, among other factors, the degree of probability of an unfavorable outcome and an estimate of the amount of the loss. Significant judgment is required in both the determination of the probability and as to whether an exposure can be reasonably estimated. When we determine that it is probable that a loss has been incurred and the amount can be reasonably estimated, the effect is recorded promptly in ~~the~~our consolidated financial statements. Although the ~~outcome~~ outcome of these claims cannot be predicted with certainty, we do not believe that any of ~~the~~our existing legal matters will have a material adverse effect on ~~our~~ our financial condition or results of operations.

~~Deferred Taxes~~Liquidity and Capital Resources

WeTo date, ~~account~~our ~~for~~short-term ~~income~~liquidity ~~taxes~~needs ~~using~~have ~~the~~generally ~~liability~~consisted ~~method.~~of ~~Deferred taxes are~~operating ~~determined~~capital ~~based~~to onfinance ~~the~~growth ~~differences~~in ~~between~~inventories, ~~the~~trade ~~financial~~accounts ~~statement~~receivable, ~~and tax~~new ~~bases~~product ofresearch ~~assets~~ and ~~liabilities~~development, ~~using~~capital ~~enacted~~expenditures, ~~tax~~stock ~~rates~~repurchases, acquisitions inand ~~effect~~investments ~~for the year~~ in ~~which~~strategic ~~the~~licensing. We ~~differences~~have ~~are~~satisfied these ~~expected~~needs toprimarily ~~reverse.~~through ~~Valuation~~a ~~allowances~~combination ~~are established~~of ~~when~~cash ~~necessary~~generated toby ~~reduce~~operations ~~deferred~~and from ~~tax~~private ~~assets~~placements toof ~~the~~our ~~amounts expected~~common ~~to be realized~~stock.

~~Liquidity~~The following sections discuss the effects of changes in our cash flows. At March 31, 2005 our cash and ~~Capital~~cash equivalents ~~Resources~~totaled $5.2 million, an increase of $1.0 million from December 31, 2004.

ToOperating Activities. Cash ~~date~~flows from operating activities can fluctuate significantly from period to period, ~~our~~as ~~short-term~~net ~~liquidity~~income, ~~needs~~tax ~~have~~timing differences ~~generally~~and ~~consisted~~other items can significantly impact cash flows. In the first quarter of 2005, net cash provided by operating activities was $1.4 million, an increase of $0.7 million ~~capital~~compared to ~~finance~~net ~~growth~~cash provided by operating activities during the first quarter of 2004. This change was primarily due to a $0.2 million net change in ~~inventories,~~operating ~~trade~~assets ~~accounts~~and ~~receivable,~~liabilities ~~new~~as well as to ~~product~~an ~~research~~increase in non-cash operating items of $0.5 million. The increase in non-cash operating items was principally related to the effect of deferred taxes as well as to increased depreciation and ~~development,~~amortization. The change ~~capital~~in ~~expenditures,~~operating ~~stock~~assets ~~repurchases,~~and liabilities was primarily due to the receipt of ~~acquisitions~~$0.5 million related to obligations due under notes receivable issued in connection with the sale of our custom antibodies and ~~strategic~~peptides ~~investments~~business in 2004. ~~related~~Changes ~~businesses~~in our operating assets and liabilities excluding notes receivable used $0.8 Wemillion ~~have~~and $0.5 million during the first three months of ~~satisfied~~2005 ~~these~~and ~~needs~~2004, respectively due primarily ~~through~~to athe ~~combination~~timing of ~~cash~~customer ~~generated~~receipts, byvendor ~~operations~~payments and ~~from~~tax ~~private~~payments. Accounts receivable ~~placements~~increased $0.9 million during the first quarter of ~~our~~2005. Accrued ~~common~~expenses ~~stock~~decreased primarily due to the payout of 2004 incentive compensation in the first quarter of 2005. Changes in prepaid expenses and other current assets and liabilities were due to timing of payments versus when the expenses are incurred.

~~The~~Investing ~~following~~activities. During ~~sections~~the ~~discuss~~three ~~the~~months ~~effects~~ended ofMarch 31, 2005 ~~changes~~we inused ~~our~~$0.3 ~~balance~~million ~~sheets~~for investing activities, compared with $0.5 million ~~cash~~for ~~flows,~~the ~~and~~comparable ~~commitments~~period onin ~~our~~2004. The decrease ~~liquidity~~was ~~and~~primarily due to lower capital ~~resources.~~expenditures in 2005 due primarily to the timing of capital investments.

~~- 14 -~~ 16

~~Table~~Financing activities. Net cash provided by financing activities during the three months ended March 31, 2005 was $0.1 million which was consistent with the comparable period in 2004. Financing activities in 2005 consisted of ~~Contents~~cash received from the exercise of stock options of $131,000 which was partially offset by purchases of our common stock under our stock repurchase program of $55,000. During the three months ended March 31, 2004, we received $65,000 from the exercise of stock options.

~~Balance~~We ~~Sheet~~expect that cash flows may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, working capital management, research and development ~~Cash~~expenses, ~~Flows~~capital expenditures and stock repurchases. In addition, proceeds from the exercise of stock options will vary from period to period based upon, among other factors, fluctuations in the market value of our stock relative to the exercise price of such options.

~~Cash and cash equivalents. At June 30, 2004, we had cash and cash equivalents,~~Stock ~~aggregating~~Repurchase approximately $5 million, an increase of approximately $1.7 million from $3.3 million at December 31, 2003. The increase was primarily a result of (i) 2004 operating cash flow of $2.3 million, (ii) proceeds of $0.3 million from the exercise of stock options partially offset by (iii) 2004 capital expenditures of $0.9 million. Program

WeOur Board ~~expect~~of ~~that~~Directors ~~cash~~has ~~may~~initiated ~~fluctuate~~multiple incommon ~~future~~stock ~~periods~~repurchase asprograms. aDuring the ~~result~~first three months of afiscal ~~number~~2005 we repurchased 8,200 shares of our common ~~factors,~~stock ~~including~~for ~~fluctuations~~$0.1 million inunder our ~~operating~~only ~~results,~~active ~~accounts~~stock ~~receivable collections,~~repurchase ~~inventory~~program. ~~management~~At March 31, 2005 ~~research~~authorized ~~and~~funds ~~development~~of ~~expenses,~~$5.9 million ~~capital~~remained available under this ~~expenditures~~program ~~and~~to ~~stock~~repurchase ~~repurchases~~shares in the future.

During the six months ended June 30, 2004, we received $0.3 million from the exercise of stock options. Proceeds from the exercise of stock options will vary from period to period based upon, among other factors, fluctuations in the market value of our stock relative to the exercise price of such options. Other

~~Accounts receivable. Accounts receivable increased approximately $0.8 million~~We tohave ~~$7.1 million~~never atpaid ~~June 30,~~cash ~~2004,~~dividends ~~from~~on ~~$6.3 million~~our atcommon ~~December 31,~~stock ~~2003.~~and ~~The increase~~have isno ~~primarily~~plans ~~attributable~~ to ~~increased~~do ~~sales in the final two months~~so ~~for the second quarter ended June 30, 2004 compared to the final two months of fiscal 2003. We experience a certain amount of seasonality~~ in ~~our business. Over~~ the ~~past~~foreseeable ~~three years, our second quarter sales have historically been stronger than our fourth quarter sales resulting in an increase in accounts receivable at the end of our second quarter~~future.

~~Prepaid~~We expect ~~expenses~~to ~~and~~be ~~other~~able ~~current~~to ~~assets.~~meet Atour ~~June 30,~~future ~~2004,~~cash ~~prepaid expenses~~ and ~~other~~working ~~current~~capital ~~assets~~requirements ~~were~~for operations ~~approximately~~and ~~$1.1 million,~~capital anexpenditures ~~increase~~through ~~of approximately~~currently ~~$0.4 million~~available ~~from~~funds ~~$0.7 million~~and atcash generated ~~December 31,~~from ~~2003~~operations. Our ~~The~~future ~~increase~~capital isrequirements ~~primarily~~and ~~related to~~ the ~~renewal~~adequacy of ~~our~~available ~~annual~~funds ~~insurance~~will ~~policies during~~depend ~~the~~on ~~three~~many factors, ~~months~~including ~~ended~~future ~~June 30~~business acquisitions, ~~2004.~~stock repurchases and levels of research and development expenditures.

~~Accounts payable and accrued expenses. Accounts payable and accrued expenses~~Contractual increased approximately $0.4 million to $6.1 million as of June 30, 2004, from $5.7 million at December 31, 2003. The increase was primarily a result of accrued severance and other payroll related expenses. Obligations

~~Liquidity~~We have operating lease obligations for facilities and ~~Capital~~equipment ~~Resource~~under non-cancelable ~~Requirements~~operating lease agreements. Future minimum lease payments are subject to annual adjustment for increases in the Consumer Price Index. As of March 31, 2005, the payments due by period are as follows:

We have operating lease obligations for facilities and equipment under non-cancelable operating lease agreements. Future minimum lease payments are subject to annual adjustment for increases in the Consumer Price Index.

	Payments Due By Period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years

Operating leases	$	4,068,000	$	1,238,000	$	1,617,000	$	1,103,000	$	110,000

	Payments Due By Period
			Less than 1						More than
	Total		year		1-3 years		3-5 years		5 years
Operating Leases	$	3,408,000	$	1,411,000	$	1,805,000	$	192,000	$	—

In December 2004, we sold our Hopkinton custom manufacturing operations. As part of this transaction, we guaranteed the real estate lease obligations through its expiration in May 2006.

InRecent ~~July 2004, we adopted a new stock repurchase program under which we can~~Accounting repurchase up to $10 million of our common stock. Our previous stock repurchase program expired in June 2004. Our Board of Directors continues to believe that the price at which the Company’s common stock is currently trading is not a proper reflection of its long-term value, and that utilizing our excess cash to repurchase our shares, at the discretion of management and when market conditions permit, is a prudent investment. During the six months ended June 30, 2004, we did not repurchase any shares of our common stock. From October 2001 through June 30, 2004, we repurchased 1,536,000 of our outstanding common Pronouncements

In December 2004 the FASB issued SFAS 123 (revised 2004), “Share-Based 15Payment,” which is a revision of SFAS 123, “Accounting for Stock-Based Compensation.” Statement 123(R) supercedes APB 25, “Accounting for Stock Issued to Employees.” Generally, the approach in 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 statement of operations

~~Table of Contents~~17

~~shares,~~based on ~~with~~their ~~cash~~fair ~~outlays~~values. ~~totaling~~Pro $8forma disclosure of fair value recognition will no longer be an alternative.7 SFAS 123(R) must be adopted no later than January ~~million~~1, 2006, with earlier adoption permitted. ~~All~~The ~~repurchased~~Company ~~shares~~expects to adopt this new ~~have~~standard ~~been~~on ~~retired~~January 1, 2006. The Company has not yet determined which fair-value method and transitional provision it will follow.

InAs permitted ~~June 2003~~by SFAS 123, wethe ~~established~~Company acurrently ~~one~~accounts for share-~~year~~based ~~revolving~~payments to ~~loan~~employees ~~with~~using APB 25’s intrinsic value method. As a ~~commercial~~consequence, ~~bank~~no ~~that~~compensation ~~allowed~~cost usis torecognized ~~withdraw~~for upemployee tostock anoptions. ~~aggregate~~Although the adoption of $2SFAS 123(R)’s fair value method will have no adverse impact on the balance sheet or net cash flows, it is expected to have a significant adverse impact on net income and earnings per share.~~5 million.~~ The ~~loan~~pro ~~was established~~forma ~~for~~effects ~~working~~on ~~capital~~net income and ~~stock~~earnings ~~repurchase~~per ~~needs~~share if the Company had applied the fair value recognition provisions of SFAS 123 to share-based payments to employees in prior periods are disclosed in Note 7 under “Stock Incentive Plans.” Although the pro forma effects of applying SFAS 123 may be indicative of the effects of applying SFAS 123(R), ~~when~~the ~~and~~provisions asof ~~necessary~~these ~~and~~two ~~expired~~statements differ in ~~June 2004~~some important respects. The actual effects of adopting SFAS 123(R) will depend on numerous factors including the valuation model used to value future share-based payments to employees, estimated forfeiture rates and the accounting policies adopted concerning the method of recognizing the fair value of awards over the requisite service period.

WeIn November 2004, ~~have~~FASB ~~never~~issued ~~paid~~SFAS ~~dividends~~No.151, on“Inventory ~~common~~Costs, ~~stock~~an ~~and~~amendment ~~have~~of ARB no43, ~~plans~~Chapter 4,”(SFAS 151) which amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing.” This Statement is the result of a broader effort by the FASB working with the International Accounting Standards Board to reduce dodifferences between U.S. and international accounting standards. SFAS151 eliminates the “so abnormal” criterion in ARB No. 43 and companies will no ~~fiscal~~longer ~~2004~~be permitted to capitalize inventory costs on their balance sheets when the production defect rate varies significantly from the expected rate. It also makes clear that fixed overhead should be allocated based on “normal capacity.” The provisions of this Statement are effective for inventory costs incurred during our 2006 fiscal year. We are currently analyzing this statement and have not yet determined its expected impact on our consolidated financial statements.

~~We expect to be able to meet our future cash and working capital requirements~~Foreign for operations and capital additions through currently available funds and cash generated from operations. Our future capital requirements and the adequacy of available funds will depend on many factors including future business acquisitions, stock repurchases and the level of research and development expenditures. Currency

~~Foreign~~Changes ~~Currency~~in foreign currency exchange rates can affect our reported results of operations, which are reported in U.S. dollars. Based on the foreign currency rate in effect at the time of the translation of our non-U.S. results of operations into U.S. dollars, reported results could be different from prior periods even if the same amount and mix of our products were sold at the same local prices during the two periods. This will affect our reported results of operations, and also makes the comparison of our business performance in different periods more difficult. For example, our sales for the three months ended March 31, 2005, were $12.7 million using applicable foreign currency exchange rates for that period. However, applying the foreign currency exchange rates in effect during the three months ended March 31, 2004, to our non-U.S. sales for the same period in 2005 would result in $0.3 million less revenue for the 2005 period. These changes in currency exchange rates have affected, and will continue to affect, our reported results, including our sales, sales growth rates, gross margins and income or losses as well as assets and liabilities.

~~Changes in foreign currency exchange rates can affect our reported results of~~Risk operations, which are reported in U.S. dollars. Based on the foreign currency rate in effect at the time of the translation of our non-U.S. results of operations into U.S. dollars, reported results could be different from prior periods even if the same amount and mix of our products were sold at the same local prices during the two periods. This will affect our reported results of operations, and also makes the comparison of our business performance in two periods more difficult. For example, our revenues for the three months ended June 30, 2004, were $12.0 million using applicable foreign currency exchange rates for that period. However, applying the foreign currency exchange rates in effect during the three months ended June 30, 2003, to our non-U.S. revenues for the same period in 2004 would result in $0.3 million less revenue for that period. These changes in currency exchange rate have affected, and will continue to affect, our reported results, including our revenues, revenue growth rates, gross margins, income and losses as well as assets and liabilities. Factors

~~Risk~~You should ~~Factors~~carefully consider the following risk factors and all other information contained in this report which are incorporated herein by reference before purchasing shares of our common stock. Investing in our common stock involves a high degree of risk. If any of the following events or outcomes occurs, our business, operating results and financial condition could suffer. The risks described below are not the only ones we face. Additional risks not precisely known to us or that we currently deem immaterial may

You should carefully consider the following risk factors and all other information contained in this report which are incorporated herein by reference before purchasing shares of our common stock. Investing in our common stock involves a high degree of risk. If any of the following events or outcomes actually occurs, our business, operating results and financial condition could suffer. The risks described below are not the only ones we face. Additional risks, not precisely known to us or that we currently deem immaterial may also adversely affect our business. As a result, the trading price of our common stock could decline, and you may lose all or part of the money you paid to purchase our common stock. 18

~~Risks~~also adversely ~~Related~~affect toour ~~Our Business~~ business.

~~Failure~~Risks Related to ~~execute~~Our ~~on our recently adopted long-term strategic plan could impair our business.~~ Business

WeFailure ~~historically have sought~~ to ~~increase~~execute our sales and profitability primarily through the acquisition or internal development of new product lines, additional customers and new businesses. Our historical revenue growth is primarily attributable to our acquisitions and new product development and, to a lesser extent, to increased revenues from our existing products. In the quarter ended December 31, 2003, we adopted a fundamental shift in strategy to focus our time, effort and financial resources on our ~~core~~long-term ~~strengths as an assay company. We have built a~~ strategic plan tocould ~~continue~~impair ~~to penetrate and increase~~ our ~~market share in the assay market. This strategy focuses our~~ energies on these high margin products and allows us to pull through our complimentary product lines, including our Phospho Site Specific Antibodies, or PSSA’s, sera and media and our custom products, peptides, antibodies and oligonucleotidesbusiness.

-We historically 16have sought to increase our sales and profitability primarily through the acquisition or internal development of new product lines, additional customers and new businesses. Our historical sales growth is primarily attributable to our acquisitions and new product development and, to a lesser extent, to increased sales from our existing products. In the fourth quarter ended December 31, 2003, we adopted a fundamental shift in strategy to focus our time, effort and financial resources on our core strengths producing assay products. We have built a strategic plan to continue to penetrate and increase our market share in the assay market. This strategy focuses our energies on these high margin products and allows us to simultaneously cross-market our complimentary product lines. However, by focusing heavily on the assay products, we may lose the benefits of a diversified business including the ability to offset or reduce the effect on the Company of adverse changes specific to the assay products market.

~~Table~~Our ability to achieve our strategic objectives depends upon a variety of ~~Contents~~factors, including:

~~Our~~• the market’s ~~ability~~continuing toacceptance ~~achieve~~of our ~~strategic~~assay ~~objectives depends upon a variety of factors, including:~~ products;

• our ability ~~the~~to ~~market’s~~internally ~~continuing~~develop ~~acceptance~~new ~~of our assay~~ products;

• our ability to ~~internally~~acquire ~~develop~~products ~~new~~or ~~products~~licenses to necessary technologies;

• our ability to ~~acquire~~facilitate ~~products~~transactions orwith ~~licenses~~strategic ~~to necessary technologies~~partners;

• establishment of ~~our~~new ~~ability~~relationships toor ~~facilitate~~expansion ~~transactions~~of existing relationships with ~~strategic~~customers ~~partners~~and suppliers; and

• ~~establishment~~ availability of ~~new relationships or expansion of existing relationships with customers and suppliers; and~~capital.

•Additionally, our ~~availability~~shift in strategy caused us to evaluate other non-strategic products and to discontinue certain products we offered in the past. We expect to review our products on an ongoing basis. While the impact to our financial results from our continuing evaluation of ~~capital~~products is unknown at this time, future product discontinuances would likely adversely affect our operating results.

~~Additionally,~~If we ~~our~~are ~~shift~~unable ~~in strategy caused us~~ to ~~evaluate~~manage ~~other~~this ~~non-~~strategic ~~products~~ ~~and~~shift toeffectively, ~~discontinue~~our ~~certain~~operating ~~products~~results could webe ~~offered~~adversely ~~in the past~~affected. ~~We expect~~ Moreover, tothere ~~review~~can ~~our~~be ~~products~~no onassurance anthat ~~ongoing~~our ~~basis.~~historic ~~While~~rate ~~the~~of ~~impact~~growth towill ~~our financial~~continue ~~results~~through ~~from~~this ~~our~~strategic ~~continuing~~shift, ~~evaluation~~that ofwe ~~products~~will iscontinue ~~unknown~~to atsuccessfully ~~this~~expand ~~time,~~or ~~future~~that ~~product~~growth ~~discontinuances~~or ~~would~~expansion ~~likely~~will ~~adversely~~result ~~affect~~in ~~our operating results~~profitability.

IfReduction or wedelays ~~are~~in ~~unable~~research toand ~~manage~~development ~~this~~budgets ~~strategic~~and ~~shift~~in ~~effectively,~~government ~~our~~funding ~~operating~~may ~~results~~negatively ~~could~~impact beour ~~adversely affected~~sales. Industry consolidation ~~Moreover,~~also ~~there~~could ~~can~~adversely beaffect ~~no assurance that~~ our ~~historic rate of growth will continue through this strategic shift, that we will continue to successfully expand or that growth or expansion will result in profitability~~business.

Our customers ~~ability~~include toresearchers ~~raise~~at pharmaceutical and biotechnology companies, academic institutions and government and private laboratories. Fluctuations in the ~~capital~~research ~~necessary~~and todevelopment budgets ~~expand~~of these researchers and their organizations could have a significant effect on the demand for our ~~business~~products. Research orand ~~otherwise~~development budgets fluctuate due ~~achieve~~to numerous factors that are outside of our ~~long-term~~control ~~objectives~~and isare ~~uncertain~~difficult to predict, including changes in available resources, spending priorities and institutional budgetary policies. Our business could be seriously damaged by any significant decrease in life sciences research and development expenditures by pharmaceutical and biotechnology companies, academic institutions or government and private laboratories.

InA significant ~~the~~portion ~~future,~~of ~~in order to expand~~ our ~~business~~sales ~~through~~has ~~internal~~been ~~development or acquisitions or~~ to ~~otherwise achieve our long-term objectives~~researchers, ~~we may need to~~universities, ~~raise~~government ~~substantial~~laboratories ~~additional funds through equity or debt financings, research~~ and ~~development~~private ~~financings~~foundations orwhose ~~collaborative~~funding ~~relationships.~~is ~~However,~~dependent ~~this~~upon ~~additional~~grants ~~funding~~from ~~may~~government ~~not~~agencies besuch ~~available~~as ~~or,~~the ~~if available, it may not be available on economically reasonable terms~~U.S. InNational ~~addition,~~Institutes ~~any~~of ~~additional funding~~Health ~~may~~(NIH) ~~result~~and insimilar ~~significant~~domestic ~~dilution~~and tointernational ~~existing stockholders~~agencies. IfGovernment ~~adequate funds are not available, we may be required to curtail our operations or obtain funds through collaborative partners that may require us to release material rights to our products.~~ funding

~~We cannot guarantee that future acquisitions will be successful.~~ 19

Weof research ~~compete~~and ~~for~~development ~~acquisition~~is ~~and~~subject ~~expansion~~to ~~opportunities~~the ~~with~~political ~~companies~~process, which is ~~have~~inherently ~~significantly~~fluid ~~greater financial~~ and ~~management resources than us~~unpredictable. ~~There~~ Our ~~can~~sales bemay ~~no assurance that suitable acquisition or investment opportunities will~~ be ~~identified,~~adversely ~~that~~affected ~~any of these transactions can be consummated, or that,~~ if ~~acquired,~~ ~~these new businesses can be integrated successfully and profitably into~~ our ~~operations.~~customers ~~These~~delay ~~acquisitions~~purchases ~~and~~as ~~investments may also require~~ a ~~significant~~ ~~allocation~~result of uncertainties ~~resources,~~surrounding ~~which will reduce our ability to focus on~~ the ~~other~~approval ~~portions~~ of ~~our~~government ~~business~~budget proposals. Also, ~~including~~government ~~many~~proposals ofto ~~the~~reduce ~~factors listed in the~~or ~~prior~~eliminate ~~risk~~budgetary ~~factor.~~deficits ~~Even~~have ifsometimes weincluded ~~are~~reduced ~~able~~allocations to ~~integrate our acquired operations,~~the weNIH ~~cannot~~and ~~assure~~other ~~you~~government agencies that wefund ~~will~~research ~~achieve~~and ~~synergies~~development activities. A ~~Our~~reduction ~~failure~~in togovernment ~~achieve synergies~~funding ~~could~~for ~~have a material adverse effect on~~ the ~~business,~~NIH or ~~results~~other ~~of operations~~government ~~and~~research ~~financial~~agencies ~~condition~~could ofseriously ~~the~~damage ~~Company~~our business.

~~Reduction~~Many of orour ~~delays~~customers receive funds from approved grants at particular times of the year, as determined by the federal government. Grants have, in ~~research~~the ~~and~~past, ~~development~~been ~~budgets~~frozen for extended periods or have otherwise become unavailable to various institutions without advance notice. The timing of the receipt of grant funds affects the timing of purchase decisions by our customers and, inas ~~government~~a ~~funding~~result, ~~may~~can ~~negatively~~cause ~~impact~~fluctuations in our sales and operating results.

~~Our~~In recent ~~customers~~years, ~~include~~the ~~researchers at~~ pharmaceutical ~~and~~industry ~~biotechnology companies,~~has ~~academic~~undergone ~~institutions~~substantial downsizing and ~~government~~consolidation. This ~~and~~could ~~private~~have ~~laboratories.~~an ~~Fluctuations~~adverse ineffect on the ~~research~~ability ~~and~~of ~~development~~some ~~budgets~~ of ~~these~~our ~~researchers~~existing ~~and their~~customers ~~organizations~~to ~~could~~compete ~~have~~with larger acompanies ~~significant~~in ~~effect~~part onbecause ~~the~~competition ~~demand~~ for ~~our products.~~funding ~~Research~~may become more centralized and ~~development~~fierce ~~budgets~~because ~~fluctuate~~higher ~~due~~stakes toare ~~numerous~~involved. Additional ~~factors~~mergers or corporate ~~that~~consolidations ~~are~~in ~~outside~~the ~~our~~pharmaceutical ~~control~~industry ~~and~~could ~~are~~cause ~~difficult~~us to ~~predict~~lose existing customers and potential future customers, ~~including~~which ~~changes~~could inhave a harmful effect on ~~available~~our ~~resources~~business, ~~spending~~financial ~~priorities~~condition and ~~institutional~~ results of operations.

-We 17rely on -raw materials and specialized equipment for our manufacturing, which we may not always be able to obtain on favorable terms.

~~Table~~Our manufacturing process relies on the continued availability of ~~Contents~~high-quality raw materials, including biological materials, and specialized equipment. It is possible that a change in vendors, or in the quality or price of the raw materials supplied to us, could have an adverse impact on our manufacturing process and, ultimately, on the sale of our finished products. We have from time to time experienced a disruption in the quality or availability of key raw materials, which has created delays in our ability to fill orders for specific test kits. This could occur again in the future and could have a detrimental impact on the sale of our products and our results of operations. For example, the supply of raw fetal bovine serum (“FBS”) is sometimes limited because serum collection tends to be cyclical. These factors can cause the price of raw FBS to fluctuate. The profit margins we achieve on finished FBS, one of our major products, have been unstable in the past because of the fluctuations in the price of raw FBS, and any increase in the price could adversely affect those profit margins. In addition, if we are unable to obtain an adequate supply of FBS, we may lose market share. The availability and price of certain raw materials may be affected by scares or outbreaks of disease or similar health concerns, or perceptions about the materials’ safety, governmental regulation and trade restrictions. In addition, we rely on highly specialized manufacturing equipment that if damaged or disabled could adversely affect our ability to manufacture our products and therefore negatively impact our business.

~~budgetary policies.~~ Our ~~business could be seriously damaged by any significant decrease in life~~ ~~sciences~~ research and development ~~expenditures~~efforts byfor ~~pharmaceutical~~new ~~and biotechnology~~products ~~companies,~~may ~~academic~~be ~~institutions or government and private laboratories~~unsuccessful.

InWe incur ~~recent~~significant ~~years,~~research ~~the~~and ~~pharmaceutical~~development ~~industry~~expenses ~~has~~to ~~undergone~~develop ~~substantial downsizing~~new products and technologies ~~consolidation~~in an effort to maintain our competitive position in a market characterized by rapid rates of technological advancement. There ~~Additional~~can ~~mergers~~be no assurance that any of these products or ~~corporate~~technologies ~~consolidations~~will be successfully developed or that, if developed, inwill ~~the~~be ~~pharmaceutical~~commercially ~~industry~~successful. In ~~could~~the event ~~cause~~that uswe are unable to ~~lose~~develop ~~existing~~commercialized ~~customers~~products ~~and~~from our research ~~potential~~and ~~future~~development ~~customers,~~efforts ~~which~~or ~~could~~we ~~have~~are aunable ~~harmful~~or ~~effect~~unwilling onto allocate amounts beyond our ~~business~~currently anticipated research and development investment, we could ~~financial~~lose ~~condition~~our ~~and~~entire ~~results~~investment ofin ~~operations~~these new products and technologies. Any failure to translate research and development expenditures into successful new product introductions could have an adverse effect on our business.

A significant portion of our sales has been to researchers, universities, government laboratories and private foundations whose funding is dependent upon grants from government agencies such as the U.S. National Institutes of Health and similar domestic and international agencies. Government funding of research and development is subject to the political process, which is inherently fluid and unpredictable. Our revenues may be adversely affected if our customers delay purchases as a result of uncertainties surrounding the approval of government budget proposals. Also, government proposals to reduce or eliminate budgetary deficits have sometimes included reduced allocations to the NIH and other government agencies that fund research and development activities. A reduction in government funding for the NIH or other government research agencies could seriously damage our business. 20

~~Many~~Our loss of ~~our~~existing ~~customers~~licenses ~~receive funds from approved grants at particular times of the year, as determined by the federal government. Grants have, in the past, been frozen for extended periods~~ or ~~have~~failure ~~otherwise become unavailable~~ to ~~various~~license ~~institutions~~new ~~without~~technologies ~~advance~~could ~~notice. The timing~~impair ~~of the receipt of grant funds affects the timing of purchase decisions by~~ our ~~customers~~ ~~and,~~new asproduct ~~a result, can cause fluctuations in our sales and operating results~~development.

WeOur business ~~rely~~model onof ~~raw~~providing ~~materials~~products ~~and~~to ~~specialized~~researchers ~~equipment~~working ~~for~~on ~~our~~a ~~manufacturing,~~variety ~~which~~of scientific wedisciplines ~~may~~requires ~~not~~us ~~always~~to bedevelop ~~able~~a wide spectrum of products. To generate broad product lines it is advantageous to ~~obtain~~sometimes license technologies from others rather than relying exclusively on ~~favorable~~our ~~terms~~own internal development efforts. As a result, we believe our ability to license new technologies from third parties is and will continue to be important to our ability to offer new products.

~~Our~~In addition, ~~manufacturing~~from ~~process~~time ~~relies~~to ontime ~~the~~we ~~continued~~are ~~availability~~notified ofor ~~high-quality raw~~become ~~materials~~aware ~~and~~of ~~specialized~~patents ~~equipment.~~held Itby third isparties ~~possible~~ that aare ~~change~~related ~~in vendors,~~to ortechnologies inwe ~~the~~are ~~quality~~selling ofor may sell in the ~~raw~~future. After ~~materials~~a ~~supplied~~review toof usthese patents, ~~could~~we ~~have~~may ~~an adverse~~decide ~~impact~~to onobtain ~~our~~a ~~manufacturing~~license ~~process~~for ~~and,~~these ~~ultimately,~~technologies onfrom ~~the~~these third ~~sale~~parties ofor ~~our finished~~discontinue the products. There Wecan ~~have~~be ~~from~~no ~~time~~assurance tothat ~~time~~we ~~experienced~~will abe ~~disruption~~able into ~~the~~continue to ~~quality~~successfully oridentify ~~availability~~new oftechnologies ~~key~~developed ~~raw~~by ~~materials,~~others. Even ~~which~~if ~~has~~we ~~created~~are ~~minor~~able ~~delays~~to inidentify new ~~our~~technologies ~~ability~~of tointerest, ~~fill~~we ~~orders~~may ~~for~~not ~~specific~~be ~~test~~able ~~kits.~~to ~~This~~negotiate ~~could~~a ~~occur~~license ~~again in~~on ~~the~~favorable ~~future~~terms, ~~resulting~~or inat ~~significant~~all. If ~~delays,~~we ~~and~~lose the ~~could~~rights ~~have~~to apatented ~~detrimental impact~~technology onor ~~the~~fail ~~sale~~to oflicense technologies important to our ~~products~~new ~~and~~product ~~our~~development, ~~results~~we ofmay ~~operations.~~need ~~For~~to ~~example, the~~discontinue ~~supply~~selling ofcertain products ~~raw~~or ~~fetal~~redesign ~~bovine~~our ~~serum~~products, ~~(“FBS”)~~and iswe ~~sometimes~~may ~~limited~~lose ~~because~~a ~~serum~~competitive ~~collection~~advantage. Competitors ~~tends~~could toin-license technologies bethat ~~cyclical.~~we ~~These~~fail ~~factors~~to ~~can~~license ~~cause~~and ~~the~~potentially ~~price~~erode ofour ~~raw~~market ~~FBS~~share for tocertain ~~fluctuate~~products. Our ~~The~~licenses ~~profit~~typically subject ~~margins~~us weto ~~achieve~~various oncommercialization, ~~finished~~sublicensing, ~~FBS~~minimum payment, ~~one~~and other ofobligations. If ~~our~~we ~~major~~fail to comply ~~products,~~with ~~have~~these ~~been~~requirements, ~~unstable~~we incould ~~the~~lose ~~past~~important ~~because~~rights ofunder ~~the~~a ~~fluctuations~~license, insuch as the ~~price~~ ofright ~~raw~~to ~~FBS,~~exclusivity ~~and~~in ~~any~~a ~~increase~~certain inmarket, ~~the~~or ~~price~~we could ~~adversely~~lose ~~affect~~all ~~those~~rights ~~profit~~under ~~margins.~~a license. In addition, ifcertain rights wegranted ~~are~~under ~~unable~~the tolicense ~~obtain~~could anbe ~~adequate~~lost ~~supply~~for reasons outside of our ~~FBS~~control. For example, wethe ~~may~~licensor could lose ~~market~~patent ~~share.~~protection Infor ~~addition,~~a wenumber ~~rely~~of onreasons, ~~highly~~including ~~specialized manufacturing~~invalidity ~~equipment~~of ~~that~~the licensed ifpatent. We ~~damaged~~do ornot ~~disabled~~always receive ~~could~~significant ~~adversely~~indemnification ~~affect~~from ~~our ability~~a tolicensor ~~manufacture~~against ~~our~~third ~~products~~party ~~and~~claims of ~~therefore~~intellectual ~~negatively~~property ~~impact our business~~infringement.

~~Our~~If ~~research~~we fail ~~and~~to ~~development~~introduce ~~efforts~~new ~~for~~products or our new products are not accepted by potential customers, we may belose ~~unsuccessful~~market share.

WeRapid technological ~~incur~~change ~~significant~~and ~~research~~frequent ~~and~~new ~~development~~product ~~expenses~~introductions toare ~~develop~~typical ~~new~~for ~~products~~the ~~and~~markets ~~technologies~~we serve. Our ~~There~~future ~~can~~success will bedepend noin ~~assurance~~part ~~that~~on ~~any~~continuous, oftimely ~~these~~development ~~products~~and ~~or technologies~~introduction ~~will~~of benew products ~~successfully developed or~~ that ifaddress ~~developed,~~evolving ~~will~~market ~~be commercially successful~~requirements. To In the ~~event~~extent ~~that~~ we ~~are~~fail ~~unable~~ to ~~develop commercialized~~introduce ~~products~~new ~~from our research~~ and innovative ~~development~~products, ~~efforts or~~ we ~~are unable~~may orlose ~~unwilling~~market share to ~~allocate amounts beyond~~ our ~~currently anticipated research and development investment~~competitors, wewhich ~~could~~will ~~lose~~be difficult ~~our~~or ~~entire~~impossible ~~investment~~to inregain. Any ~~these~~inability, ~~new~~for ~~products~~technological ~~and~~or ~~technologies.~~other ~~Any~~reasons, ~~failure~~ to ~~translate~~successfully ~~research~~develop and ~~development~~introduce ~~expenditures into successful~~ new ~~product~~products ~~introductions~~ could ~~have an~~reduce ~~adverse~~our ~~effect~~growth onrate or damage our business.

-In the 18past -we have experienced, and are likely to experience in the future, delays in the development and introduction of products. We cannot assure that we will keep pace with the rapid rate of change in life sciences research or that our new products will adequately meet the requirements of the marketplace or achieve market acceptance. Some of the factors affecting market acceptance of new products include:

~~Table~~• availability, ofquality ~~Contents~~and price relative to competitive products;

~~business.~~• the timing of introduction of the product relative to competitive products;

~~Failure~~• customers’ toopinion ~~license~~of ~~new~~the ~~technologies could impair our new~~ product’s ~~development.~~ utility;

~~Our~~• ease ~~business model~~ of providing products to researchers working on a variety of scientific disciplines requires us to develop a wide spectrum of products. To generate broad product lines it is advantageous to sometimes license technologies from others rather than depending exclusively on our own internal development efforts. As a result, we believe our ability to license new technologies from third parties is and will continue to be important to our ability to offer new products. use;

In• consistency addition, from time to time we are notified or become aware of patents held by third parties that are related to technologies we are selling or may sell in the future. After a review of these patents, we may decide to obtain a license for these technologies from these third parties or discontinue the products. There can be no assurance that we will be able to continue to successfully identify new technologies developed by others. Even if we are able to identify new technologies of interest, we may not be able to negotiate a license on favorable terms, or at all. If we lose the rights to patented technology, we may need to discontinue selling certain products or redesign our products, and we may lose a competitive advantage. Potential competitors could in-license technologies that we fail to license and potentially erode our market share for certain products. Our licenses typically subject us to various commercialization, sublicensing, minimum payment, and other obligations. If we fail to comply with ~~these requirements,~~prior we could lose important rights under a license. In addition, certain rights granted under the license could be lost for reasons out of our control. For example, the licensor could lose patent protection for a number of reasons, including invalidity of the licensed patent. We do not always receive significant indemnification from a licensor against third party claims of intellectual property infringement. practices;

We• citation ~~are~~of ~~currently in~~ the ~~process~~product ~~of negotiating several of these licenses and expect that we will also negotiate these types of licenses~~ in ~~the future.~~published ~~There~~research; ~~can be no assurances that we will be able to negotiate these licenses on favorable terms, or at all.~~ and

If• general wetrends ~~fail~~in tolife ~~introduce~~sciences ~~new products, or our new products are not accepted by potential customers, we may lose market share~~research.

~~Rapid technological change and frequent new product introductions are typical~~The ~~for the markets we serve. Our future success will depend in part on continuous~~development, ~~timely~~introduction ~~development~~ and ~~introduction~~marketing of ~~new~~innovative products ~~that~~in ~~address~~our rapidly evolving ~~market~~markets ~~requirements.~~will Werequire ~~believe successful new product introductions provide a~~ significant ~~competitive~~sustained ~~advantage~~investment. We Tocannot ~~the~~assure ~~extent~~you wethat ~~fail~~cash tofrom ~~introduce~~operations ~~new~~or ~~and~~other ~~innovative~~sources ~~products, we may lose market share to our competitors, which~~ will be ~~difficult~~sufficient ~~or impossible~~ to ~~regain.~~meet ~~Any~~these ~~inability,~~ongoing ~~for technological or other reasons, to successfully develop and introduce new products could reduce our growth rate or damage our business~~requirements.

In the past we have experienced, and are likely to experience in the future, delays in the development and introduction of products. We cannot assure that we will keep pace with the rapid rate of change in life sciences research or that our new products will adequately meet the requirements of the marketplace or achieve market acceptance. Some of the factors affecting market acceptance of new products include: 21

•The expenses ~~availability,~~or ~~quality~~losses ~~and~~associated ~~price~~with ~~relative~~unsuccessful toproduct ~~competitive~~development activities or lack of market acceptance of our new products; could materially and adversely affect our business, operating results and financial condition.

•Failure to ~~the~~attract ~~timing~~and ofretain ~~introduction~~qualified scientific or production personnel or loss of key ~~the~~management ~~product~~or ~~relative~~key topersonnel ~~competitive~~could ~~products;~~adversely affect our business.

•Recruiting and ~~customers’~~retaining ~~opinion~~qualified scientific and production personnel to perform research and development work and product manufacturing are critical to our success. We are in a very competitive industry and face significant challenges attracting and retaining this qualified personnel base. Although we believe we have been and will be able to attract and retain these personnel, there can be no assurance that we will be able to continue to successfully attract and retain qualified personnel. In addition, our growth and expansion into areas and activities requiring additional expertise may require the addition of new scientific and production management and the development ~~product’s~~of ~~utility;~~additional expertise within existing management. Additionally, some measures that we implement during the course of integrating acquired companies and businesses into our operations may be disruptive to some of our key personnel, including those in research and development, and cause them to leave us. The failure to attract and retain these personnel or, alternatively, to develop this expertise internally could adversely affect our business.

•Our success ~~ease~~also will continue to depend to a significant extent on the members of our ~~use;~~senior management team and other key personnel. We do not maintain “key man” insurance policies regarding any of these individuals. We may not be able to retain the services of our executive officers and key personnel or attract additional qualified members to management in the future. The loss of services of our key management or employees could have a material adverse effect upon our business.

•Some ~~consistency~~of our ~~with~~customers ~~prior~~are ~~practices;~~obtaining products through alternative distribution channels and methods that may adversely impact our results of operations and financial condition.

•Certain of ~~citation~~our customers have developed purchasing initiatives to reduce their number of ~~the~~vendors ~~product~~and to lower their supply costs. In some cases, these customers have established agreements with large distributors who provide volume discounts and in-house ~~published~~purchasing ~~research;~~processes and personnel. These agreements may limit the prices we can charge for our products, which could adversely impact our business, financial condition and results of operations. In addition, although we accept and process some orders through our internet website, we also implement sales through third party internet vendors. Internet sales through third parties will negatively impact our operating income because we pay commission on these sales. However, if we do not enter into arrangements with third party e-commerce providers, we may lose customers who prefer to purchase using that method. Our business may be harmed as a result of these web sites or other sales methods which may be developed in the future.

-We ~~19 -~~rely on rapid transport to ship product.

~~Table~~We rely on the timely transport of ~~Contents~~raw materials and finished products. Any disruption in rapid transportation systems could have an adverse impact on our ability to manufacture and supply products and could accordingly have an adverse effect on our business.

•We ~~general~~rely on ~~trends~~international insales, ~~life~~which ~~sciences~~are ~~research~~subject to additional risks, including foreign currency risk.

~~The~~International sales ~~expenses~~accounted orfor ~~losses~~approximately ~~associated~~52% ~~with~~of ~~unsuccessful~~our ~~product~~net ~~development activities~~sales orin ~~lack~~the offirst ~~market~~three months ~~acceptance~~ of ~~our~~2005 ~~new~~and ~~products~~2004. International sales ~~could~~can ~~materially adversely~~be ~~affect~~subject ~~our~~to ~~business,~~many ~~operating~~inherent ~~results~~risks ~~and~~that ~~financial~~are ~~condition.~~difficult or impossible for us to predict or control, including:

The development, introduction and marketing of innovative products in our rapidly evolving markets will require significant sustained investment. We cannot assure that cash from operations or other sources will be sufficient to meet these ongoing requirements. 22

~~Failure~~• unexpected tochanges ~~attract~~in ~~and~~regulatory ~~retain qualified scientific or production personnel or~~requirements ~~loss~~and ~~of key management or key personnel could adversely affect our business.~~ tariffs;

~~Recruiting~~• difficulties and ~~retaining~~costs ~~qualified~~associated ~~scientific and production personnel to~~with ~~perform~~staffing ~~research~~ and ~~development~~managing ~~work~~foreign and product manufacturing are critical to our success. We are in a very competitive industry and face significant challenges attracting and retaining this qualified personnel base. Although we believe we have been and will be able to attract and retain these personneloperations, ~~there~~ ~~can~~including beforeign ~~no assurance that we will be able to continue to successfully~~distributor attract and retain qualified personnel. In addition, our growth and expansion into areas and activities requiring additional expertise may require the addition of new scientific and production management and/or the development of additional expertise within existing management. The failure to attract and retain these personnel or, alternatively, to develop this expertise internally could adversely affect our business. relationships;

~~Our~~• longer ~~success~~accounts ~~also~~receivable ~~will~~collection ~~continue to depend to a significant extent on the members~~cycles of our senior management team. We do not maintain “key man” insurance policies regarding any of these individuals. We may not be able to retain the services of our executive officers and key personnel or attract additional qualified members to management in ~~the~~certain ~~future.~~foreign ~~The loss of services of our key management or employees could have a material adverse effect upon our business.~~ countries;

~~Some~~• adverse ofeconomic ~~our~~or ~~customers~~political ~~are obtaining products through new distribution channels and methods that may adversely impact our results of operations and financial condition.~~ changes;

~~Certain~~• limited ofprotection ~~our~~for ~~customers~~intellectual ~~have developed purchasing initiatives to reduce the~~property ~~number of vendors they purchase from and to lower their supply costs. In some cases, these customers have established agreements with large distributors who provide volume discounts and~~ in~~-house~~ purchasing processes and personnel. These agreements may limit our pricing flexibility with respect to our products, which could adversely impact our business, financial condition and results of operations. In addition, although we accept and process some orders through our internet website, we also implement sales through a third party internet vendor. Internet sales through third parties will negatively impact our gross margins because we pay commission on these sales. On the other hand, if we do not enter into arrangements with third party e-commerce providers, we may lose customers who prefer to purchase via that method. Our business may be harmed as a result of these web sites or other sales methods which may be developed in the future. countries;

We• foreign ~~rely~~currencies onwe ~~rapid~~receive ~~transport~~for sales outside the U.S. could be subject to ~~ship~~unfavorable ~~product~~exchange rates with the U.S. dollar and reduce the amount of revenue we recognize;

We• potential ~~rely~~trade onrestrictions, ~~the timely transport of raw materials and finished products. Any~~exchange ~~disruption~~controls ~~in rapid transportation systems could have an adverse impact on our ability to manufacture~~ and ~~supply~~import ~~products~~ and ~~could~~export ~~accordingly~~licensing ~~have an adverse effect on our business.~~ requirements;

We• problems ~~rely~~in oncollecting ~~international~~accounts ~~sales, which are subject to additional risks.~~receivable; and

-• potentially 20adverse -tax consequences of overlapping tax structures.

~~Table~~Our ability to distribute goods internationally could be impaired by governmental regulation and loss of ~~Contents~~key distributors of our products.

~~International~~We generate significant revenues from sales ~~accounted~~outside ~~for~~the ~~approximately~~United ~~47%~~States. International ~~and~~distribution ~~45%~~may ofbe ~~our~~subject ~~revenues~~to greater governmental regulation in the ~~first~~future. These ~~six~~regulations, ~~months~~which ofinclude ~~2004~~requirements for approvals or clearance to market, additional time required for regulatory review and ~~2003~~sanctions imposed for violations, ~~respectively.~~as ~~International~~well ~~sales~~as ~~can~~the other risks indicated in the items listed in the above paragraph, vary by country. We may not be ~~subject~~able to ~~many~~obtain ~~inherent~~regulatory ~~risks~~approvals ~~that~~in ~~are~~the ~~difficult~~countries in which we currently sell our products or ~~impossible~~in ~~for~~countries uswhere towe may sell our products in ~~predict~~the orfuture. In ~~control~~addition, ~~including:~~we may be required to incur significant costs in obtaining necessary regulatory approvals. Failure to obtain necessary regulatory approvals or any other failure to comply with regulatory requirements could result in a material reduction in our revenues and earnings.

•We also ~~unexpected~~depend ~~changes~~on third-party distributors for a significant portion of our international sales. If we suffer a significant reduction in ~~regulatory~~sales ~~requirements~~to ~~and~~certain ~~tariffs;~~distributors, our business could be materially adversely affected.

•Our ability ~~difficulties~~to ~~and~~raise ~~costs~~the ~~associated~~capital ~~with~~necessary ~~staffing~~to ~~and~~expand ~~managing~~our ~~foreign~~business ~~operations,~~or ~~including~~otherwise achieve ~~foreign~~our ~~distributor~~long-term ~~relationships;~~objectives is uncertain.

•In the ~~longer~~future, ~~accounts~~in ~~receivable~~order ~~collection~~to ~~cycles~~expand our business through internal development or acquisitions or to otherwise achieve our long-term objectives, we may need to raise substantial additional funds through equity or debt financings, research and development financings or collaborative relationships. This additional funding may not be available or, if available, may not be available on economically reasonable terms. Further, any additional funding may result in ~~certain~~significant ~~foreign~~dilution ~~countries;~~to existing stockholders. If adequate funds are not available, we may be required to curtail our operations or obtain funds through collaborative partners that may require us to release material rights to our products. To the extent that additional capital is raised through the sale of equity, or securities convertible into equity, you may experience dilution of your proportionate ownership of us.

•We ~~adverse~~cannot ~~economic~~guarantee orthat ~~political~~future ~~changes;~~acquisitions will be successful.

•We compete ~~limited~~for ~~protection~~acquisition ~~for~~and ~~intellectual~~expansion ~~property~~opportunities with companies which have significantly greater financial and management resources than us. There can be no assurance that suitable acquisition or investment opportunities will be identified, that any of these transactions can be consummated, or that, if acquired, these new businesses can be integrated successfully and profitably into our operations. These acquisitions and investments also may require a significant allocation of resources, which will reduce our ability to focus on the other portions of our business, including many of the factors listed in ~~some~~the ~~countries;~~prior risk factor. Even if we are able to integrate our acquired operations, we cannot assure you that we will

~~• foreign currencies we receive for sales outside the U.S. could be subject to unfavorable exchange rates with the U.S. dollar and reduce the amount of revenue we recognize;~~23

•achieve synergies. Our ~~potential~~failure ~~trade~~to ~~restrictions,~~achieve synergies ~~exchange~~could ~~controls~~have ~~and~~a ~~import~~material ~~and~~adverse ~~export~~effect ~~licensing~~on ~~requirements;~~our business, results of operations and financial condition.

•Our operating ~~problems~~results inmay ~~collecting~~fluctuate ~~accounts~~in ~~receivable;~~future ~~and~~periods.

•Our operating ~~potentially~~results ~~adverse~~may ~~tax~~vary ~~consequences~~significantly from quarter to quarter and from year to year as a result of ~~overlapping~~a ~~tax~~variety ~~structures~~of factors. These factors include, among others:

~~Impairment~~• level of ~~the~~demand ~~ability~~for toour ~~transport goods internationally.~~ products;

We• changes ~~intend to continue generating revenues from sales outside the United States. This method of distribution may be subject to greater governmental regulation~~ in the future. These regulations, which include requirements for approvals or clearance to market, additional time required for regulatory review and sanctions imposed for violations, as well as the other risks indicated in the items listed in the above paragraph, vary by country. We may not be able to obtain regulatory approvals in the countries in which we currently sell our ~~products~~ orcustomer in countries where we may sell our products in the future. In addition, we may be required to incur significant costs in obtaining necessary regulatory approvals. Failure to obtain necessary regulatory approvals or any other failure to comply with regulatory requirements could result in a material reduction in our revenues and ~~earnings.~~ product mix;

We• timing ~~also depend on third-party distributors for a material portion~~ of ~~our international~~acquisitions ~~sales.~~and Ifinvestments ~~we lose or suffer any significant reduction~~ in ~~sales~~ ~~to any material distributor, our business could be materially adversely affected.~~ infrastructure;

~~Our~~• changes ~~operating results may fluctuate~~ in ~~future~~customer ~~periods.~~ research budgets;

~~Our~~• our ~~operating~~ability ~~results may vary significantly quarter~~ to ~~quarter~~control ~~and~~or ~~from~~adjust ~~year~~expenses in response to ~~year~~changes asin ~~a result of a variety of factors. These factors include, but are not limited to:~~ revenue;

• competitive ~~level of demand for our products~~conditions;

• intellectual ~~changes~~property ~~in our customer and product mix~~litigation;

• currency ~~timing~~exchange ofrate ~~acquisitions~~fluctuations; and ~~investments in infrastructure;~~

• general ~~changes~~economic inand ~~customer~~political ~~research budgets;~~conditions.

•We believe that quarterly comparisons of our ~~ability~~financial toresults ~~control~~may ornot ~~adjust~~necessarily be ~~expenses~~meaningful inand ~~response~~should tonot ~~changes~~be relied upon as an indication of future performance. Additionally, if our operating results in ~~revenue;~~one or more quarters do not meet the expectations of securities analysts or others, the price of our common stock could be adversely affected.

•Our continued ~~competitive~~investment ~~conditions;~~in product development and sales and marketing are significant ongoing expenses. If sales in a particular period fall short of expectations, we may not be able to proportionately reduce our expenses for that period, which could materially and adversely affect our operating results for that period.

•We may be unable to protect our trademarks, trade secrets and other intellectual property ~~litigation;~~rights that are important to our business.

•We regard ~~currency~~our ~~exchange~~trademarks, ~~rate~~trade ~~fluctuations;~~secrets and other intellectual property as a significant component of our success. We have only one registered trademark and rely on common law trademarks and trade secret protection. Our common law trademark rights may not be recognized in all countries and the use by third parties of similar trademarks could be confusing and interfere with our rights to use these trademarks. We also rely upon confidentiality and license agreements with employees, customers, partners and others to protect our intellectual property. Effective trademark and trade secret protection may not be available in every country in which our products are available. We cannot be certain that we have taken adequate steps to protect our intellectual property, especially in countries where the laws may not protect our rights in a manner comparable to that in the United States. In addition, our third-party confidentiality agreements might be breached and, if they are, there may not be an adequate remedy available to us. If our trade secrets become known, our competitive position could be materially and adversely impacted.

•Intellectual ~~general~~property ~~economic~~litigation and ~~political~~other ~~conditions~~litigation could harm our business.

WeLitigation regarding ~~believe~~patents ~~that~~and ~~quarterly~~other ~~comparisons~~intellectual ofproperty ~~our~~rights ~~financial~~is ~~results~~extensive ~~may~~in ~~not~~the ~~necessarily~~biotechnology beindustry. We ~~meaningful~~are ~~and~~aware that ~~should~~patents ~~not~~have bebeen ~~relied~~applied ~~upon~~for asby, anand ~~indication~~in ~~of future~~some ~~performance.~~cases ~~Additionally~~issued to, ifthird parties, ~~our~~claiming ~~operating~~technologies ~~results~~that are closely related to ours. As a result, and in ~~one~~part ordue ~~more~~to the ~~quarters~~ambiguities doand ~~not~~evolving ~~meet~~nature ~~the~~of ~~expectations~~intellectual property law, we periodically receive notices of ~~security~~potential ~~analysts~~infringement orof patents held by others,. Although ~~the~~to ~~price~~date we have successfully resolved these types of ~~our~~claims, ~~common~~we ~~stock~~may ~~could~~not be ~~materially~~able ~~adversely~~to ~~affected~~do so in the future.

~~- 21 -~~ 24

~~Table~~An intellectual ofproperty ~~Contents~~dispute might result in litigation. This litigation could involve proceedings declared by the U.S. Patent and Trademark Office or the International Trade Commission, as well as proceedings brought directly by affected third parties. Intellectual property litigation can be extremely expensive, and these expenses, as well as the consequences should we not prevail, could seriously harm our business.

~~Our~~If a ~~continued~~third ~~investment~~party inwere to claim an intellectual property right to technology we use, we might need to discontinue an important product ~~development~~or ~~and~~product ~~sales~~line, alter our products and ~~marketing~~processes, ~~are significant~~pay ~~ongoing~~license ~~expenses~~fees or cease our affected business activities. Additionally, Ifif ~~revenue~~our products inare afound ~~particular~~to ~~period~~infringe ~~falls~~a ~~short~~third ~~of expectations~~party’s intellectual property, we may ~~not~~ be required ~~able~~to pay damages. Although we might under these circumstances attempt to ~~reduce~~obtain ~~significantly~~a ~~our~~license ~~expenditures~~to ~~for~~this ~~that~~intellectual ~~period~~property, ~~which~~we ~~would~~may ~~materially~~not ~~adversely~~be ~~affect~~able ~~the~~to ~~operating~~do ~~results~~so ~~for that~~on ~~period.~~favorable terms, or at all.

WeIn addition ~~may~~to beintellectual ~~unable~~property tolitigation, ~~protect~~other substantial, complex or extended litigation could result in large expenditures by us and distraction of our ~~trademarks~~management. For example, ~~trade~~lawsuits ~~secrets~~by employees, stockholders, collaborators or distributors could be very costly and substantially ~~other~~disrupt our business. ~~intellectual~~Disputes ~~property~~from ~~rights~~time ~~that~~to time with companies or individuals are ~~important~~not uncommon toin our ~~business~~industry, and we cannot assure you that we will always be able to resolve them out of court. Unexpected results could cause our financial exposure in these matters to exceed stated reserves and insurance, requiring us to allocate additional funds and other resources to address these liabilities. In addition, the negative press generated by litigation against us could adversely affect our business.

~~We regard our trademarks, trade secrets and other intellectual property as a~~Accidents ~~component~~related ~~of our success. We rely on trademark law and trade secret protection and confidentiality and/or license agreements with employees, customers, partners and others~~ to ~~protect~~hazardous ~~our~~materials ~~intellectual~~could ~~property.~~adversely ~~Effective~~affect ~~trademark and trade secret protection may not be available in every country in which~~ our ~~products~~ ~~are available~~business. We cannot be certain that we have taken adequate steps to protect our intellectual property, especially in countries where the laws may not protect our rights as fully as in the United States. In addition, our third-party confidentiality agreements can be breached and, if they are, there may not be an adequate remedy available to us. If our trade secrets become known, we may lose our competitive position.

~~Litigation~~Portions of ~~could~~our ~~harm~~operations ~~our~~require ~~business~~the controlled use of hazardous and radioactive materials. Although we believe our safety procedures comply with the standards prescribed by federal, state, local and foreign regulations, the risk of accidental contamination of property or injury to individuals from these materials cannot be completely eliminated. In the event of an accident, we could be liable for any damages that result, which could seriously damage our business, results of operations and reputation.

~~Litigation regarding patents and other intellectual property rights is~~Our ~~extensive~~sales ~~in the biotechnology industry. We~~ are ~~aware~~subject ~~that patents have been applied for, and in some cases issued~~ to ~~others, claiming technologies that are closely related to ours~~seasonality. As a result, and in part due to the ambiguities and evolving nature of intellectual property law, we periodically receive notices of potential infringement of patents held by others. Although to date we have successfully resolved these types of claims, we may not be able to do so in the future.

InWe experience ~~the~~a ~~event~~slowing of ansales ~~intellectual~~in ~~property~~Europe ~~dispute,~~during wethe ~~may~~summer bemonths ~~forced~~and ~~to litigate.~~worldwide ~~This~~during ~~litigation could involve proceedings declared by~~ the ~~U.S.~~Christmas ~~Patent and~~holidays. ~~Trademark~~Generally, ~~Office~~our orfirst ~~the~~half ~~International~~revenues ~~Trade~~are ~~Commission,~~stronger asthan ~~well~~our assecond ~~proceedings~~half ~~brought directly by affected third parties~~revenues. We ~~Intellectual~~believe ~~property~~that ~~litigation~~period to ~~can~~period becomparisons ~~extremely~~of ~~expensive,~~our ~~and~~operating ~~these~~results ~~expenses,~~may asnot ~~well~~necessarily asbe ~~the consequences~~reliable ~~should~~indicators weof ~~not prevail, could seriously harm~~ our ~~business~~future performance.

~~If a third party were to claim an intellectual property right to technology we~~Potential ~~use, we might need to discontinue an important~~ product orliability ~~product~~claims ~~line,~~could ~~alter~~ affect our ~~products~~earnings and ~~processes,~~financial ~~pay license fees or cease our affected business activities~~condition. ~~Although we might under these circumstances attempt to obtain a license to this intellectual property, we may not be able to do so on favorable terms, or at all.~~

InWe face ~~addition~~a topotential ~~intellectual~~risk ~~property~~of ~~litigation,~~liability ~~other~~claims ~~substantial~~based on our past, ~~complex~~present orand future ~~extended~~products ~~litigation~~and ~~could~~services, ~~result~~and we have faced such claims in ~~large~~the ~~expenditures~~past. We bycarry usproduct ~~and~~liability ~~distraction~~insurance ofwhich is ~~our~~limited ~~management.~~in ~~For~~scope ~~example,~~and ~~lawsuits~~amount bybut ~~employees~~which we believe to be adequate. We cannot assure you, ~~stockholders~~however, that we will ~~collaborators~~be orable ~~distributors~~to ~~could~~maintain bethis ~~very~~insurance ~~costly~~at a reasonable cost and ~~substantially~~on ~~disrupt~~reasonable ~~our business~~terms. We ~~Disputes~~also ~~from~~cannot ~~time~~assure toyou ~~time~~that this ~~with~~insurance ~~companies~~will orbe ~~individuals~~adequate ~~are~~to ~~not uncommon~~protect inus ~~our~~against ~~industry~~a product liability claim, ~~and~~should one arise. If we do not or cannot ~~assure~~maintain ~~you~~sufficient ~~that~~liability weinsurance, ~~will~~our ~~always~~ability to market our products may be ~~able~~significantly impaired. toIn ~~resolve~~addition, ~~them~~product liability claims, as well as negative publicity arising out of ~~court.~~such claims, could have a material adverse effect on our business, operating results and financial condition.

~~Accidents related to hazardous materials could adversely affect our business.~~ 25

~~Portions of our operations require the controlled use of hazardous and~~The ~~radioactive~~labor ~~materials.~~laws ~~Although~~applicable weto ~~believe~~ our ~~safety~~employees ~~procedures~~in ~~comply~~Europe ~~with the~~may ~~standards~~restrict ~~prescribed by federal, state, local and foreign regulations,~~ the ~~risk~~ ~~of accidental contamination of property or injury to individuals from~~flexibility ~~these materials cannot be completely eliminated. In the event~~ of ~~an accident, we could be liable for any damages that result, which could seriously damage~~ our ~~business and results of operations~~management.

~~Our~~As of ~~sales~~March 31, ~~are~~2005, ~~subject~~73 toof ~~monthly~~our ~~seasonality~~242 employees worked for our BioSource Europe subsidiary, which is located in Nivelles, Belgium. As a result of certain labor laws, we are required to make specified severance payments in the event we terminate a European employee. Accordingly, we may be limited by the application of the Belgian labor laws in the determination of staffing levels resulting in less flexibility than our competitors whose employees are not subject to similar labor laws.

-Risks 22Associated - with Our Industry

~~Table~~The biomedical ofresearch ~~Contents~~products industry is very competitive, and we may be unable to continue to compete effectively in this industry in the future.

We are ~~experience~~engaged in a ~~slowing~~segment of ~~sales~~the inbiomedical ~~Europe~~research ~~during~~products ~~the~~industry ~~summer~~that ~~months~~is highly ~~and~~competitive. We compete with many ~~worldwide~~other ~~during~~suppliers ~~the~~and ~~Christmas~~new ~~holidays~~competitors continue to enter the markets. Many ~~Generally,~~of our ~~fourth~~competitors, ~~quarter~~both in the United ~~revenues~~States and elsewhere, are ~~lower~~major ~~than~~chemical ~~our~~and ~~revenues~~life inscience ~~each~~companies ofwith substantially ~~the~~greater ~~first~~capital ~~three~~resources, ~~quarters~~marketing ofexperience, ~~the~~research and ~~year~~development staffs and facilities than we have. Any Weof ~~believe~~these companies could succeed in developing products that ~~period~~are more toeffective ~~period~~than ~~comparisons~~the ofproducts ~~our~~that ~~operating~~we ~~results~~ have or may ~~not~~develop ~~necessarily~~and may also be more ~~reliable~~successful ~~indicators~~than ofus ~~our~~in ~~future~~producing ~~performance~~and marketing their products. We expect this competition to continue and intensify in the future. Competition in our markets is primarily driven by:

~~Potential~~ • product ~~liability~~performance, ~~claims~~features ~~could affect our earnings~~ and ~~financial condition.~~ liability;

We face a potential risk of liability claims based on our products and services, and we have faced such claims in the past. We carry product liability insurance which is limited in scope and amount but which we believe to be adequate. We cannot assure you, however, that we will be able to maintain this insurance at reasonable cost and on reasonable terms. We also cannot assure that this insurance will be adequate to protect us against a product liability claim, should one arise. • price;

~~The~~• timing ~~labor laws applicable to our employees in Europe may restrict the flexibility~~ of ~~our~~product ~~management.~~ introductions;

As• ability ~~of August 1, 2004, 73 of our 259 employees worked for our BioSource Europe subsidiary, which is located in Nivelles, Belgium. As a result of Belgian labor laws, we are required~~ to ~~make specified severance payments in the event we terminate a European employee. Accordingly~~develop, ~~our~~maintain ~~management~~and ~~may be limited~~protect byproprietary ~~the~~products ~~application of the Belgian labor laws in the determination of staffing levels~~ and ~~may have less flexibility in making such determinations than our competitors whose employees are not subject to similar labor laws.~~ technologies;

~~Risks~~• sales ~~Associated~~and ~~with~~distribution ~~Our Industry~~ capabilities;

~~The~~• technical ~~biomedical~~support ~~research products industry is very competitive,~~ and ~~we may be unable to continue to compete effectively in this industry in the future.~~ service;

We• brand ~~are~~loyalty; ~~engaged in a segment of the biomedical research products industry that is highly competitive. We compete with many other suppliers~~ and new competitors continue to enter the markets. Many of our competitors, both in the United States and elsewhere, are major chemical and life science companies and many of them have substantially greater capital resources, marketing experience, research and development staffs and facilities than we do. Any of these companies could succeed in developing products that are more effective than the products that we have or may develop and may also be more successful than us in producing and marketing their products. We expect this competition to continue and intensify in the future. Competition in our markets is primarily driven by:

• breadth of product ~~performance, features and liability;~~line.

•If a ~~price;~~competitor develops superior technology or cost-effective alternatives to our products, our business, financial condition and results of operations could be materially adversely affected.

•Our competitors ~~timing~~have ofin ~~product~~the ~~introductions;~~past and may in the future compete by lowering prices. Our failure to anticipate and respond to price competition could reduce our sales and profits, and may damage our market share.

•As ~~ability~~a result toof ~~develop~~consolidation in the pharmaceutical industry, ~~maintain~~we ~~and~~may ~~protect~~lose ~~proprietary~~existing customers ~~products~~or ~~and~~have ~~technologies;~~greater difficulty obtaining new customers.

•In recent ~~sales~~years, the United States pharmaceutical industry has undergone substantial consolidation. As part of many business combinations, companies frequently reduce the number of suppliers used and ~~distribution~~we ~~capabilities;~~may not be selected as a supplier after a business combination. Further, mergers or corporate consolidations in the pharmaceutical industry could cause us to lose existing customers and potential future customers, which could have a material adverse effect on our business, financial condition and results of operations.

•We ~~technical~~are subject ~~support~~to ~~and~~government ~~service;~~regulation.

•Our business ~~brand~~is ~~royalty;~~currently subject to regulation, supervision and licensing by federal, state, local and foreign governmental authorities. Also, from time to time we must expend resources to comply with newly adopted regulations, as well as changes in existing regulations. If we fail to comply with these

~~• breadth of product line.~~26

Ifregulations, we acould ~~competitor~~be ~~develops~~subject ~~superior~~to ~~technology~~disciplinary actions or ~~cost-effective~~administrative ~~alternatives to~~enforcement ~~our~~actions. These ~~products,~~actions ~~our~~could ~~business,~~result ~~financial condition and results of operations could~~in bepenalties, ~~materially~~including ~~adversely affected~~fines.

~~Our~~Risks ~~competitors~~Associated ~~have~~with ~~in the past and may in the future compete by lowering prices.~~ Our ~~failure~~Common to Stock

-Our stock 23price -has been volatile, which may affect our ability to raise capital in the future and may subject the value of your investment in our common stock to sudden changes.

~~Table~~Our common stock is quoted on the Nasdaq National Market, and there has been substantial volatility in the market price of ~~Contents~~our common stock. The trading price of our common stock has been, and is likely to continue to be, subject to fluctuations due to a variety of factors, including:

~~anticipate~~• fluctuations ~~and~~in ~~respond to price competition could reduce~~ our ~~revenues~~quarterly ~~and profits, and may damage our market share.~~financial results;

~~Our industry has also seen substantial consolidation in recent years, which has led to~~ • the ~~creation~~gain of competitors with greater financial and intellectual property resources than us. In addition, we believe that the success that others have had in our industry will attract new competitors. Some of our current and future competitors also may cooperate to better compete against us. We may not be able to compete effectively against these current or ~~future competitors. Increased competition could result in price reductions for our products, reduced margins and~~ loss of ~~market~~significant ~~share, any of which could adversely impact our business, financial condition and results of operations.~~ contracts;

As• loss ~~a result~~ of ~~consolidation~~key ~~in the pharmaceutical industry, we may lose existing customers or have greater difficulty obtaining new customers.~~ personnel;

In• announcements ~~recent years, the United States pharmaceutical industry has undergone substantial consolidation. As part~~ of ~~many~~technological ~~business~~innovations ~~combinations, companies frequently reduce the number of suppliers used and we may not be selected as a supplier after a business combination. Further, mergers~~ or ~~corporate~~ ~~consolidations~~new inproducts ~~the~~by ~~pharmaceutical industry could cause~~ us toor ~~lose~~by ~~existing customers and potential future customers, which could have a material adverse effect on~~ our ~~business, financial condition and results of operations.~~ competitors;

We• delays ~~are~~in ~~currently~~the ~~subject~~development toand ~~government~~introduction ~~regulation.~~of new products;

~~Our business is currently subject to regulation~~• acquisitions, ~~supervision~~dispositions and ~~licensing by~~other ~~federal,~~significant ~~state~~transactions ~~and~~that ~~local~~affect governmental authorities. Also, from time to time we must expend resources to comply with newly adopted regulations, as well as changes in existing regulations. If we fail to comply with these regulations, we could be subject to disciplinary actions or administrative enforcement actions. These actions could result in penalties, including fines. us;

~~Risks~~• legislative ~~Associated~~or ~~with~~regulatory ~~Our Common Stock~~ changes;

~~Our~~• general ~~stock~~trends ~~price~~in ~~has~~the ~~been volatile.~~ industry;

~~Our~~• recommendations ~~common stock is quoted on the NASDAQ National Market,~~ and/or ~~there~~changes ~~has been substantial volatility~~ in ~~the market price of our common stock. The trading~~estimates ~~price~~by ofresearch ~~our common stock has been, and is likely to continue to be, subject to significant fluctuations due to a variety of factors, including:~~ analysts;

• biological ~~fluctuations~~or inmedical ~~our quarterly operating and earnings per share results~~discoveries;

• disputes ~~the~~and/or ~~gain~~developments orconcerning intellectual ~~loss~~property, ofincluding ~~significant~~patents ~~contracts~~and litigation matters;

• public ~~loss~~concern ofas ~~key~~to ~~personnel~~the safety of new technologies;

• sales ~~announcements~~ of ~~technological~~our ~~innovations~~common orstock ~~new products~~ by ~~us or our competitors~~existing holders;

• securities ~~delays~~class inaction ~~the~~or ~~development~~other ~~and introduction of new products~~litigation;

• developments ~~legislative~~in our relationships with current or ~~regulatory~~future ~~changes~~customers and suppliers; and

• general ~~trends~~economic conditions, both in the United ~~industry;~~States and abroad.

•As a ~~recommendations~~result of these factors, and~~/or~~ ~~changes~~potentially inothers, ~~estimates~~the bysales ~~equity~~price ~~and~~of ~~market~~our common ~~research~~stock ~~analysts;~~has ranged from $5.45 to $10.69 per share from January 1, 2004 through June 23, 2005.

•In addition, ~~biological~~the orstock ~~medical~~market ~~discoveries;~~in general has experienced extreme price and volume fluctuations that have affected the market price of our common stock, as well as the stock of many biotechnology companies. Often, price fluctuations are unrelated to operating performance of the specific companies whose stock is affected.

•In the ~~disputes~~past, following periods of volatility in the market price of a company’s stock, securities class action litigation has occurred against the certain issuers. If we were subject to this type of litigation in the future, we could incur substantial costs and~~/or~~ ~~developments~~a ~~concerning~~diversion ~~intellectual~~of ~~property~~our management’s attention and resources, ~~including~~each ~~patents~~of which could have a material adverse effect on our revenue and earnings. Any adverse determination in this type of litigation ~~matters;~~could also subject us to significant liabilities.

•Anti-takeover provisions ~~public~~in ~~concern~~our asgoverning todocuments ~~the~~and ~~safety~~under applicable law could impair the ability of ~~new~~a ~~technologies;~~third party to take over our company.

•We are ~~sales~~subject ofto ~~common~~various ~~stock~~legal ofand ~~existing~~contractual ~~holders;~~provisions that may impede a change in our control, including the following:

• our ~~securities~~stockholders’ ~~class~~rights ~~action~~plan orwhich ~~other~~could result ~~litigation~~in the significant dilution of the ownership of any entity that engages in an unsolicited attempt to take over the Company; and

~~• developments in our relationships with current or future customers and suppliers; and~~27

-• the 24ability -of our board of directors to issue additional shares of our preferred stock, which shares may be given superior voting, liquidation, distribution and other rights as compared to our common stock.

~~Table~~These provisions, as well as other provisions in our certificate of ~~Contents~~incorporation and bylaws and under the Delaware General Corporation Law, may make it more difficult for a third party to acquire our company, even if the acquisition attempt was at a premium over the market value of our common stock at that time.

•Our principal ~~general~~stockholders ~~economic~~and ~~conditions,~~management ~~both~~own ina ~~the~~significant ~~United~~percentage ~~States~~of our common stock and ~~abroad~~have the ability to exercise significant influence over our affairs.

AsOur principal astockholders ~~result of these factors,~~ [and ~~potentially~~management] ~~others,~~own ~~the~~a ~~sales~~significant ~~price~~percentage of our common stock ~~has~~and ~~ranged~~have ~~from~~the ~~$4.89~~ability to ~~$13.69~~exercise ~~per~~significant ~~share~~influence ~~from~~over ~~January 1, 2001~~our ~~through August 4, 2004 and from $6~~affairs.~~05 to $9.10 per share from January 1~~ Accordingly, ~~2004~~these ~~through August 4, 2004.~~ stockholders:

In• have ~~addition,~~ the ~~stock~~ability ~~market~~to insignificantly ~~general~~influence ~~has experienced extreme price and~~the ~~volume~~composition ~~fluctuations that have affected the market price~~ of our ~~common~~board ~~stock, as well as the stock~~ of ~~many biotechnology companies. Often, price fluctuations are unrelated to operating performance of the specific companies whose stock is affected.~~ directors;

In• can ~~the~~significantly ~~past,~~influence ~~following~~matters ~~periods of volatility in the market price of a company’s~~requiring ~~stock~~stockholder approval, ~~securities~~including ~~class action litigation has occurred against~~ the ~~issuing company.~~approval ~~If we were subject to this type~~ of ~~litigation~~mergers ~~in the future, we could incur substantial costs~~ and aother ~~diversion of our management’s attention and~~significant ~~resources~~corporate transactions, ~~each~~including ofchange ~~which could have a material adverse effect on our revenue and earnings. Any adverse determination in this type~~ of ~~litigation~~control ~~could~~transactions; ~~also subject us to significant liabilities.~~ and

~~Anti-takeover~~• will ~~provisions~~continue into ~~our~~have ~~governing~~significant ~~documents and under applicable law~~influence ~~could impair the ability of a third party to take~~ over our ~~company~~business.

WeThis concentration ~~are~~of ~~subject~~ownership toof ~~various~~our ~~legal~~common ~~and~~stock ~~contractual~~could ~~provisions~~have ~~that~~the ~~may~~effect ~~impede~~of delaying, preventing or deterring a change of control of us or otherwise discouraging a potential acquirer from attempting to obtain control of us. This in turn could have a negative effect on the market price of our ~~control,~~common ~~including~~stock. It could also prevent our stockholders from realizing a premium over the ~~following:~~market prices for their shares of common stock.

~~• our adoption~~ Absence of adividends ~~stockholders’ rights plan, which~~ could ~~result~~reduce inour ~~the~~attractiveness ~~significant dilution of the proportionate ownership of any person that engages in an unsolicited attempt~~ to ~~take over our company; and~~investors.

•Some investors favor companies that pay dividends, particularly in general downturns in the ~~ability~~stock ofmarket. We have never declared or paid any cash dividends on our ~~board~~common ofstock. We ~~directors~~currently intend to ~~issue~~retain ~~additional~~any ~~shares~~future earnings offor ~~our~~funding ~~preferred~~growth and stock, ~~which~~repurchases. We ~~shares~~do ~~may~~not becurrently ~~given~~anticipate ~~superior~~paying ~~voting,~~cash dividends ~~liquidation,~~on ~~distribution~~our ~~and~~common ~~other~~stock ~~rights~~in asthe ~~compared~~foreseeable tofuture. Because we may not pay dividends, the return on an investment in our common stock likely depends on selling this stock at a profit.

~~These provisions, as well as other provisions in our certificate of~~Caution ~~incorporation~~Regarding ~~and~~Forward-Looking bylaws and under the Delaware General Corporations Law, may make it more difficult for a third party to acquire our company, even if the acquisition attempt was at a premium over the market value of our common stock at that time. Statements

~~Our~~This ~~principal~~Report ~~stockholders~~contains forward-looking statements. These forward-looking statements include our statements regarding the following: our belief that we can deliver sales and profit ~~management~~growth; ~~own~~our aexpectations ~~significant~~regarding ~~percentage~~our ofproduct development efforts; our ~~capital~~belief ~~stock~~that ~~and~~our ~~will~~current bereal ~~able~~estate leases are sufficient to ~~exercise~~meet ~~significant~~our ~~influence~~current and ~~over~~near-term needs; our expectations regarding our use of cash generated in ~~affairs.~~our business; the assumptions underlying our Critical Accounting Policies; our belief that our income tax valuation allowance is sufficient; and our expectation that we may use cash for future acquisitions of technology and businesses and stock repurchases.

~~Our~~We caution ~~principal~~investors ~~stockholders~~that ~~and~~forward-looking ~~management~~statements ~~own~~are aonly ~~significant~~predictions ~~percentage~~based ~~of our~~on ~~capital~~our ~~stock~~current ~~and~~expectations ~~will~~about befuture ~~able~~events toand ~~exercise~~are ~~significant~~not ~~influence~~guarantees ~~over~~of ~~our~~future ~~affairs~~performance. ~~Accordingly~~Our actual results, ~~these~~performance ~~stockholders:~~or achievements could differ materially from those expressed or implied by the forward-looking statements due to risks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties include the following: the impact of intense competition in our business; difficulty in developing and introducing new products and services effectively; failure of customers to adopt our new

~~• will be able to significantly influence the composition of our board of directors;~~28

•products as ~~will~~expected; ~~significantly~~difficulties ~~influence~~with ~~matters~~suppliers ~~requiring~~and ~~stockholder~~distribution ~~approval,~~channels; significant ~~including~~impairment charges due to past acquisitions; taxing authorities may challenge our tax positions; and the effects ~~approval~~of our previously announced process to evaluate strategic alternatives, including a possible sale of ~~mergers~~the Company, and ~~other~~any ~~significant~~transaction ~~corporate~~we ~~transactions~~may enter into in connection with that process. In addition, ~~including~~the ~~change~~risks ofand ~~control~~uncertainties ~~transactions;~~that are discussed in this Item 7 under the caption “Risk Factors” may also impact these forward-looking statements. We encourage you to read that section carefully along with the other information provided in this Report and in our other filings with the SEC before deciding to invest in our stock or to maintain or change your investment. We undertake no obligation to revise or update any forward-looking statement for any reason, except as required by law.

•Item will3. continueQuantitative toand haveQualitative significantDisclosures influenceAbout overMarket our business.Risk

~~This~~Information about ~~concentration~~market ofrisks ~~ownership~~for ofthe ~~our~~three ~~common~~months ~~stock~~ended ~~could~~March 31, ~~have~~2005 ~~the~~does ~~effect of~~not ~~delaying,~~differ ~~preventing~~materially orfrom ~~deterring~~that adiscussed ~~change~~under ofItem ~~control~~7A of usthe orregistrant’s ~~otherwise~~Annual ~~discouraging~~Report aon ~~potential~~Form 10-K ~~acquirer~~for ~~from attempting to obtain control of us. This in turn could have a negative effect on~~ the ~~market~~fiscal ~~price~~year ofended ~~our~~December 31, ~~common stock~~2004.

-Item 254. - Controls and Procedures

~~Table~~Evaluation of ~~Contents~~Controls and Procedures

ItUnder ~~could~~the ~~also~~supervision ~~prevent~~and with the participation of our ~~stockholders~~management, ~~from~~including ~~realizing~~our aprincipal ~~premium~~executive officer ~~over~~and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) and 15d-15(e) promulgated under the ~~market~~Securities ~~prices~~Exchange ~~for~~Act ~~their~~of ~~shares~~1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer concluded that the design and operation of ~~common~~these ~~stock~~disclosure controls and procedures were, as of the end of the period covered by this report, not effective, due solely to the fact that the Company’s internal controls over loss reserves for previous manufactured antibody inventory were not effective. As reflected in the restatement contained in the Company’s 2004 Annual Report on Form 10-K/A (Amendment No. 2), the Company has made adjustments to its manufactured antibody inventory reserves following additional analysis with respect to its manufactured antibody inventory loss experience.

~~Absence~~As of ~~dividends~~the ~~could~~end ~~reduce~~of the period covered by this report, there has been no change in our ~~attractiveness~~internal tocontrol over ~~investors.~~financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended) that materially affects, or that is reasonably likely to materially affect, this internal control.

Some investors favor companies that pay dividends, particularly in general downturns in the stock market. We have never declared or paid any cash dividends on our common stock. We currently intend to retain any future earnings for funding growth and we do not currently anticipate paying cash dividends on our common stock in the foreseeable future. Because we may not pay dividends, the return on this investment likely depends on selling this stock at a profit. 29

~~Item~~PART II 3.– ~~Quantitative~~OTHER ~~and Qualitative Disclosures About Market Risk~~INFORMATION

~~Information~~We were ~~about~~not ~~market~~required ~~risks~~to ~~for~~report the ~~three~~information ~~months~~pursuant ~~ended~~to ~~June 30,~~Items ~~2004~~1 ~~does not~~through ~~differ~~6 ~~materially~~of ~~from that discussed under Item~~Part 7A II of ~~the registrant’s Annual Report on~~ Form 10-KQ ~~for~~except ~~the~~as ~~fiscal year ended December 31, 2003.~~ follows:

Item 42. ControlsUnregistered Sales of Equity Securities and ProceduresUse of Proceeds

~~Evaluation~~Stock ofrepurchase ~~Controls~~activity ~~and~~during ~~Procedures~~the three months ended March 31, 2005 was as follows:

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15 (e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Aggregate Dollar Value of Shares that may yet be Purchased Under the Plans or Programs

1/1/05 – 1/31/05	—	$	—	—	$	5,986,128
2/1/05 – 2/28/05	—	$	—	—	$	5,986,128
3/1/05 – 3/31/05	8,200	$	6.65	8,200	$	5,931,576

Total	8,200	$	6.65	8,200

As(1) These ofrepurchases ~~the~~were made ~~end~~pursuant ofto ~~the~~a ~~period~~repurchase ~~covered~~program byfor ~~this~~up ~~report,~~to ~~there~~$10 ~~has~~million ~~been~~of noour ~~change~~common instock ~~our~~which ~~internal~~we ~~control~~announced ~~over~~on ~~financial reporting that materially affects~~July 27, or2004. ~~that~~ There is ~~reasonably~~no ~~likely~~expiration todate ~~materially~~for ~~affect,~~ this ~~internal control.~~ program.

-Item 266. - Exhibits

~~Table of Contents~~Exhibits.

PART II – OTHER INFORMATION

Exhibit No.		Title

31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as amended.
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as amended.
32.1		Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities and Exchange Act of 1934, as amended.

~~We were not required to report the information pursuant to Items 1 through 6 of Part II of Form 10-Q except as follows:~~ 30

~~Item 4. Submission of Matters to a Vote of Security Holders~~SIGNATURES

~~(a) The Company held its Annual Meeting of Stockholders on July 27, 2004. (b) Omitted pursuant~~ Pursuant to ~~Instruction~~the 3requirements ~~to Item 4~~ of ~~Form 10-Q. (c) The two matters voted upon at~~ the ~~meeting~~Securities ~~were:~~Exchange ~~(i)~~Act ~~to elect six directors to hold office for a period~~ of ~~one~~1934, ~~year expiring at~~ the ~~Annual~~Registrant ~~Meeting~~has duly ofcaused ~~Stockholders~~this inreport ~~the year 2005 (“Proposal One”); (ii)~~ to ~~ratify~~be ~~the~~signed ~~appointment~~on ofits ~~KPMG~~behalf ~~LLP~~by ~~as independent accountants of~~ the ~~Company~~undersigned ~~for~~thereunto duly ~~the year ending December 31, 2004 (“Proposal Two”)~~authorized. ~~Proposal One. Election of Directors.~~

		For		Withheld
		BIOSOURCE INTERNATIONAL, INC.
Terrance J. Bieker			7,506,400		621,027
Date: June 24, 2005	By:	/s/ Terrance J. Bieker
Jean-Pierre L. Conte			7,441,773		685,654
		Name:	Terrance J. Bieker
David J. Moffa, Ph.D.			7,441,853		685,574
		Title:	President and Chief Executive Officer
John R. Overturf, Jr.			7,504,685		622,742
Date: June 24, 2005	By:	/s/ Alan I. Edrick
Robert J. Weltman			7,505,305		622,122
		Name:	Alan I. Edrick
John Zabriskie, Ph.D.			7,442,578		684,849
		Title:	Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

~~There were no abstentions or broker non-votes. All nominees were declared to have been elected as directors to hold office until the Annual Meeting of Stockholders in the year 2005.~~31

Proposal Two. Ratification of Appointment of Independent Accountants.

For		Against				Abstain
8,116,914			2,489				8,024

Proposal Two was declared to have been approved.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits.

Exhibit No.		Title
10.1		Executive Employment Agreement between the Registrant and Jozef Vangenechten, effective as of April 1, 2004.
10.2		Management Agreement between BioSource Europe S.A. and VITA B.V.B.A., effective as of April 1, 2004.
10.3		Executive Employment Agreement between the Registrant and Alan Edrick, dated as of May 10, 2004.
31.1		Certificate of Terrance J. Bieker, Chief Executive Officer of BioSource International, Inc. pursuant to Rule 13a-14(a) under the Securities and Exchange

- 27 -

Exhibit No.		Title
		Act of 1934, as amended.
31.2		Certificate of Alan I. Edrick, Chief Financial Officer of BioSource International, Inc. pursuant to Rule 13a-14(a) under the Securities and Exchange Act of 1934, as amended.
32.1		Certificate of Terrance J. Bieker and Alan I. Edrick, Chief Executive Officer and Chief Financial Officer, respectively, of BioSource International, Inc. pursuant to Rule 13a-14(b) under the Securities and Exchange Act of 1934, as amended.

(b)		Reports on Form 8-K
		The Company filed a current report on Form 8-K dated April 23, 2004, reporting the issuance of a press release announcing the Company’s financial results for the first quarter ended March 31, 2004.
		The Company filed a current report on Form 8-K dated June 7, 2004 reporting an amendment to the warrant agreements issued to Genstar Capital Partners II, L.P. and Stargen II LLC, investors in the Company.

- 28 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		BIOSOURCE INTERNATIONAL, INC.
August 11, 2004	By:	/s/ Terrance J. Bieker
		Name: Terrance J. Bieker
		Title: President and
		Chief Executive Officer
August 11, 2004	By:	/s/ Alan I. Edrick
		Name: Alan I. Edrick
		Title: Executive Vice President and
		Chief Financial Officer

- 29 -

Filing Compare · BIOSOURCE INTERNATIONAL INC