# UNITED STATES SECURITIES AND
EXCHANGE COMMISSIONWashington, D.C. 20549

---

# FORM 10-Q

(Mark One)

|[X] |  | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE           SECURITIES EXCHANGE ACT OF 1934
|--- |  | -------------------------------------------------------------------------------------------------

For the quarterly period ended
September 30, 2004

OR

|[   ] |  | TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE           SECURITIES EXCHANGE ACT OF 1934
|----- |  | --------------------------------------------------------------------------------------------------

For the transition period
from______to_______

# Commission file number
0-12992

SYNTHETECH, INC.(Exact name of
registrant as specified in its charter)

|OREGON                            | 84-0845771         
|--------------------------------- | -------------------
|(State or Other Jurisdiction      | (I.R.S. Employer   
|of Incorporation or Organization) | Identification No.)

1290 Industrial Way 
PO Box 646 Albany, Oregon 97321 (Address of Principal
Executive Offices)

(541) 967-6575 
(Registrants
Telephone Number, Including Area 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 X | No
|----- | --

# 

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

|Yes | No X
|--- | ----

Indicate the number of shares
outstanding of each of the issuers classes of common stock, as of the latest
practicable date:

Class: Common Stock, $0.001 par
valueShares outstanding as of October 29, 2004: 14,463,093



# SYNTHETECH, INC

# INDEX

|Part I.  | Financial Information |                                                                                           | Page
|-------- | --------------------- | ----------------------------------------------------------------------------------------- | ----
|         |                       |                                                                                           |     
|         | Item 1.               | Condensed Financial Statements                                                            |     
|         |                       |                                                                                           |     
|         |                       | Balance Sheets                                                                            | 3   
|         |                       | Statements of Operations                                                                  | 5   
|         |                       | Statements of Cash Flows                                                                  | 6   
|         |                       | Notes to Unaudited Condensed Financial Statements                                         | 7   
|         |                       |                                                                                           |     
|         | Item 2.               | Management's Discussion and Analysis of Financial
    Condition and Results of Operations | 13  
|         |                       |                                                                                           |     
|         | Item 3.               | Quantitative and Qualitative Disclosure about Market
    Risk                             | 21  
|         |                       |                                                                                           |     
|         | Item 4.               | Controls and Procedures                                                                   | 22  
|         |                       |                                                                                           |     
|Part II. | Other Information     |                                                                                           |     
|         |                       |                                                                                           |     
|         | Item 2.               | Changes in Securities and Use of Proceeds                                                 | 23  
|         |                       |                                                                                           |     
|         | Item 6.               | Exhibits and Reports on Form 8-K                                                          | 23  
|         |                       |                                                                                           |     
|         | Signatures            |                                                                                           | 24  



# PART I. FINANCIAL
INFORMATION

# Item 1. Financial
Statements

# SYNTHETECH, INC.

Condensed Balance
Sheets (unaudited)

|                                     | September 30,2004 |  | March 31,2004 |           
|------------------------------------ | ----------------- |  | ------------- | ----------
|Assets                               |                   |  |               |           
|                                     |                   |  |               |           
|Current Assets:                      |                   |  |               |           
|Cash and cash equivalents            |                   |  | $             | 4,991,000 
|Accounts receivable, less allowance  |                   | 
|for doubtful accounts of $15,000 for |                   | 
|both periods                         |                   |  |               | 1,129,000 
|Inventories                          |                   |  |               | 3,868,000 
|Prepaid expenses                     |                   |  |               | 98,000    
|                                     |                   |  |               |           
|Total Current Assets                 |                   |  |               | 10,086,000
|                                     |                   |  |               |           
|                                     |                   |  |               |           
|Property, Plant and Equipment, net   |                   |  |               | 11,318,000
|                                     |                   |  |               |           
|                                     |                   |  |               |           
|                                     |                   |  |               |           
|Total Assets                         |                   |  | $             | 21,404,000
|                                     |                   |  |               |           

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

3



# SYNTHETECH, INC.

Condensed Balance
Sheets (continued)(unaudited)

|                                            | September 30,2004 |  | March 31,2004 |           
|------------------------------------------- | ----------------- |  | ------------- | ----------
|                                            |                   |  |               |           
|Liabilities and Shareholders' Equity        |                   |  |               |           
|                                            |                   |  |               |           
|Current Liabilities:                        |                   | 
|Current portion of long term debt           |                   |  | $             | 25,000    
|Accounts payable                            |                   |  |               | 530,000   
|Accrued compensation                        |                   |  |               | 136,000   
|Income taxes payable                        |                   |  |               | 180,000   
|Other accrued liabilities                   |                   |  |               | 17,000    
|                                            |                   |  |               |           
|Total Current Liabilities                   |                   |  |               | 888,000   
|                                            |                   |  |               |           
|Long Term Debt, net of current portion      |                   |  |               | 39,000    
|Other Long Term Liabilities                 |                   |  |               | 69,000    
|                                            |                   |  |               |           
|Total Liabilities                           |                   |  |               | 996,000   
|                                            |                   |  |               |           
|                                            |                   |  |               |           
|Shareholders' Equity:                       |                   | 
|Common stock, $.001 par value; authorized   |                   | 
|100,000,000 shares; issued and outstanding, |                   | 
|14,463,000 and 14,452,000 shares            |                   |  |               | 14,000    
|Paid-in capital                             |                   |  |               | 9,111,000 
|Deferred  compensation                      |                   |  |               | (19,000)  
|Retained earnings                           |                   |  |               | 11,302,000
|                                            |                   |  |               |           
|Total Shareholders' Equity                  |                   |  |               | 20,408,000
|                                            |                   |  |               |           
|Total Liabilities and Shareholders' Equity  |                   |  | $             | 21,404,000
|                                            |                   |  |               |           

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

4



# SYNTHETECH, INC.

Condensed Statements
of Operations (unaudited)

|                                     | For The Three Months EndedSeptember 30, |  | For The Six Months EndedSeptember 30, |           
|------------------------------------ | --------------------------------------- |  | ------------------------------------- | ----------
|                                     | 2004                                    |  | 2003                                  |           
|                                    
|Revenue                              |                                         |  | $                                     | 2,531,000 
|Cost of revenue                      |                                         |  |                                       | 1,956,000 
|                                     |                                         |  |                                       |           
|Gross income (loss)                  |                                         |  |                                       | 575,000   
|                                    
|Research and development             |                                         |  |                                       | 158,000   
|Selling, general and administrative  |                                         |  |                                       | 528,000   
|                                     |                                         |  |                                       |           
|Total operating expenses             |                                         |  |                                       | 686,000   
|                                     |                                         |  |                                       |           
|Operating loss                       |                                         |  |                                       | (111,000  
|                                    
|Interest income                      |                                         |  |                                       | 10,000    
|Interest expense                     |                                         |  |                                       | (2,000    
|                                     |                                         |  |                                       |           
|Loss before income taxes             |                                         |  |                                       | (103,000  
|                                    
|Benefit for income taxes             |                                         |  |                                       | --        
|                                     |                                         |  |                                       |           
|Net loss                             |                                         |  | $                                     | (103,000  
|                                     |                                         |  |                                       |           
|                                    
|Net loss per common share:           |                                         | 
|Basic and diluted loss per share     |                                         |  | $                                     | (0.01     
|                                     |                                         |  |                                       |           
|                                    
|Weighted average shares outstanding: |                                         | 
|Basic and diluted                    |                                         |  |                                       | 14,457,443
|                                     |                                         |  |                                       |           

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

5



# SYNTHETECH, INC.

Condensed Statements
of Cash Flows(unaudited)

|For The Six Month Period Ended September 30,         | 2004 |  | 2003 |          
|---------------------------------------------------- | ---- |  | ---- | ---------
|                                                     |      |  |      |          
|CASH FLOWS FROM OPERATING ACTIVITIES:                |      |  |      |          
|Net loss                                             |      |  | $    | (515,000 
|Adjustments to reconcile net loss to                 |      | 
|net cash provided by (used in) operating activities: |      | 
|Depreciation expense                                 |      |  |      | 535,000  
|Loss on retirement of equipment                      |      |  |      | --       
|Amortization of deferred compensation                |      |  |      | 8,000    
|                                                    
|(Increase) decrease in assets:                       |      | 
|Accounts receivable, net                             |      |  |      | 153,000  
|Inventories                                          |      |  |      | 304,000  
|Prepaid expenses                                     |      |  |      | 323,000  
|                                                    
|Increase (decrease) in liabilities:                  |      | 
|Accounts payable                                     |      |  |      | (29,000  
|Accrued compensation                                 |      |  |      | (42,000  
|Other accrued liabilities                            |      |  |      | (18,000  
|Other long term liabilities                          |      |  |      | 17,000   
|                                                     |      |  |      |          
|Cash Provided By (Used In) Operating Activities      |      |  |      | 736,000  
|                                                     |      |  |      |          
|                                                    
|CASH FLOWS FROM INVESTING ACTIVITIES:                |      | 
|Property, plant and equipment purchases              |      |  |      | (59,000  
|                                                     |      |  |      |          
|Cash Used In Investing Activities                    |      |  |      | (59,000  
|                                                     |      |  |      |          
|                                                    
|CASH FLOWS FROM FINANCING ACTIVITIES:                |      | 
|Principal payments under long-term debt obligations  |      |  |      | (12,000  
|Purchase of common stock                             |      |  |      | (2,000   
|Proceeds from stock option exercises                 |      |  |      | --       
|Proceeds from stock purchase plan                    |      |  |      | 10,000   
|                                                     |      |  |      |          
|Cash Provided By (Used In) Financing Activities      |      |  |      | (4,000   
|                                                     |      |  |      |          
|                                                    
|Increase (Decrease) in Cash and Cash Equivalents     |      |  |      | 673,000  
|                                                    
|Cash and Cash Equivalents at Beginning of Period     |      |  |      | 4,318,000
|                                                     |      |  |      |          
|                                                    
|Cash and Cash Equivalents at End of Period           |      |  | $    | 4,991,000
|                                                     |      |  |      |          
|                                                    
|Non-Cash Financing Activities:                       |      | 
|Forfeiture of stock options issued below fair value  |      |  |      | --       
|Deferred compensation on stock options granted       |      | 
|below fair value                                     |      |  |      | --       

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

6



SYNTHETECH, INC. NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS(Information as of September 30, 2004 and
for the three and six-month periods
ended September 30, 2004 is unaudited)

|NOTE A. |  | GENERAL AND BUSINESS
|------- |  | --------------------

Synthetech,
Inc., an Oregon corporation, is a fine chemicals company specializing in organic
synthesis, biocatalysis and chiral technologies. Synthetech develops and manufactures
amino acid derivatives, specialty amino acids, peptide fragments, and proprietary custom
chiral intermediates primarily for the pharmaceutical and cosmeceutical industries.
Synthetechs products support the development and manufacture of therapeutic peptides
and peptidomimetic small molecule drugs at every stage of a customers clinical
development pipeline, and are used as ingredients in drugs for the treatment of AIDS,
cancer, cardiovascular and other diseases, and in cosmeceuticals.

The summary financial statements
included herein have been prepared, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been condensed or
omitted pursuant to such rules and regulations, although Synthetech management believes
that the disclosures are adequate to make the information presented not misleading.
Synthetechs management suggests that these summary financial statements be read in
conjunction with the financial statements and the notes thereto included in the
Synthetechs Annual Report on Form 10-K for the year ended March 31, 2004.

The interim period information
included in this Form 10-Q reflects all adjustments, consisting of normal recurring
adjustments, that are, in the opinion of Synthetechs management, necessary for a
fair statement of the results of the respective interim periods. Results of operations for
interim periods are not necessarily indicative of results to be expected for an entire
year.

|NOTE B. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|------- |  | ------------------------------------------

Use
of Estimates:The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual results could
differ from those estimates. Significant items subject to such estimates and assumptions
include the valuation of inventory, accounts receivable, deferred tax assets and the
carrying amount of property, plant and equipment.

Cash
and Cash Equivalents: Cash and cash equivalents include demand cash and highly liquid
debt instruments with maturities of three months or less when purchased.

Cash and cash equivalents consist of
the following:

|                 | September 30,2004 |  | March 31,2004 |          
|---------------- | ----------------- |  | ------------- | ---------
|                 |                   |  |               |          
|Cash             |                   |  | $             | 1,080,000
|Cash equivalents |                   |  |               | 3,911,000
|                 |                   |  |               |          
|                 |                   |  | $             | 4,991,000
|                 |                   |  |               |          

7



Accounts
receivable:Accounts receivable are recorded at the invoiced amount and do not bear
interest. Synthetech does not finance its trade receivables by factoring the balances to a
third party. The allowance for doubtful accounts is established by a review of aged
accounts receivables and a review for collectibility of specific accounts. The allowance
for doubtful accounts as of September 30, 2004 and March 31, 2004 was $15,000.

Inventories:
Inventories are stated at the lower of cost or market, determined on the first-in,
first-out basis. Costs include direct material, direct labor, applicable manufacturing
overhead, and other direct costs.

Management evaluates
Synthetechs inventory for impairment whenever it becomes aware that indicators of
impairment exist. It is Synthetechs policy to write-down inventories to reflect an
estimate for impairment in an amount equal to the difference between the cost of inventory
and the estimated market value based upon assumptions about future demand and market
conditions. Write-downs of inventory are reported as a component of cost of revenue in the
relevant period.

Property,
Plant and Equipment: Property, plant and equipment are recorded at cost. Expenditures
for maintenance and repairs are expensed as incurred. Expenditures that materially
increase values, change capacities or extend useful lives are capitalized. When assets are
retired, sold, or otherwise disposed of, the applicable costs and accumulated depreciation
are removed from the accounts and the resulting gain or loss is recognized. Depreciation
and amortization are provided on the straight-line method over the estimated useful lives
of the individual assets which range from three to 40 years. Assets to be disposed of by
sale are stated at the lower of their fair values or carrying amounts and depreciation is
no longer recognized.

Synthetech monitors the
recoverability of the carrying value of its long-lived assets such as property, plant and
equipment. An impairment charge is recognized when the expected net undiscounted cash
flows from an assets use (including any proceeds from disposition) are less than the
assets carrying value and the assets carrying value exceeds its fair value.

Revenue
Recognition: Synthetech recognizes revenue, including shipping and handling charges
billed to customers, upon shipment of product when title and risk of loss pass to
customers. Shipping and handling costs are classified as part of cost of revenue.

8



Stock
Based Compensation:In accordance with Statement of Financial Accounting Standards No.
148, Accounting for Stock-Based Compensation-Transition and Disclosure  an
Amendment of Financial Accounting Standards Board (FASB) Statement No. 123" (SFAS
148) and Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS 123), Synthetechs pro forma option expense is
computed using the Black-Scholes option pricing model.

As permitted by SFAS No. 123, as
amended by SFAS No. 148, Synthetech has elected to continue to apply the provisions of
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations in accounting for its employee
stock option plan and employee stock purchase plan (ESPP). Synthetech is generally not
required under APB Opinion No. 25 and related interpretations to recognize compensation
expense in connection with its stock based compensation plans. Synthetech is required by
SFAS No. 123 to present, in the Notes to Financial Statements, the pro forma effects on
reported net income and earnings per share as if compensation expense had been recognized
based on the fair value method of accounting prescribed by SFAS No. 123. Compensation
expense is recorded only if, on the date of grant, the current market price of the
underlying stock exceeds the exercise price. Resulting compensation expense is recognized
over the vesting period.

Synthetech is presenting the
following table to illustrate the effect on the net loss and net loss per share if it had
applied the fair value recognition provisions of SFAS 123, as amended, to options granted
under the stock based employee compensation plans. For purposes of this pro forma
disclosure, the estimated value of the options is recognized over the options
vesting periods.

|                                   | Three Months Ended September 30, |  | Six Months Ended September 30, |         
|---------------------------------- | -------------------------------- |  | ------------------------------ | --------
|                                   | 2004                             |  | 2003                           |         
|Net loss, as reported              |                                  |  | $                              | (103,000
|Add: Stock-based employee          |                                  | 
|compensation expense included in   |                                  | 
|reported net loss, net of related  |                                  | 
|tax effects                        |                                  |  |                                | 4,000   
|                                  
|Deduct: Total stock-based employee |                                  | 
|compensation expense determined    |                                  | 
|under fair value based method for  |                                  | 
|all awards, net of related tax     |                                  | 
|effects                            |                                  |  |                                | (56,000 
|                                   |                                  |  |                                |         
|Pro forma net loss                 |                                  |  | $                              | (155,000
|                                   |                                  |  |                                |         
|Net loss per share:                |                                  | 
|Basic and Diluted - as reported    |                                  |  | $                              | (0.01   
|                                   |                                  |  |                                |         
|Basic and Diluted - pro forma      |                                  |  | $                              | (0.01   
|                                   |                                  |  |                                |         

9



In calculating pro forma
compensation, the fair value of each stock option grant and stock purchase right is
estimated on the date of grant using the Black-Scholes option pricing model and the
following weighted average assumptions. No stock options were granted by Synthetech during
the three months ended September 30, 2004.

|                                     | Three Months Ended September 30, |       | Six Months Ended September 30, |  
|------------------------------------ | -------------------------------- | ----- | ------------------------------ | -
|                                     | 2004                             |       | 2003                           |  
|Stock Options:                       |                                  |       |                                |  
|Dividend yield                       |                                  | --    |                                |  
|Expected volatility                  |                                  | --    |                                |  
|Risk-free interest rate              |                                  | --    |                                |  
|Expected life (in years)             |                                  | --    |                                |  
|Weighted-Average fair value of stock |                                  |      
|options granted                      |                                  |      
|At market value                      |                                  | --    |                                | $
|Below market value                   |                                  | --    |                                | $
|All options granted                  |                                  | --    |                                | $
|                                    
|ESPP:                                |                                  |      
|Dividend yield                       |                                  | None  |                                |  
|Expected volatility                  |                                  | 68%   |                                |  
|Risk-free interest rate              |                                  | 0.67% |                                |  
|Expected life (in years)             |                                  | 0.50  |                                |  
|Weighted-Average fair value of       |                                  |      
|purchase rights granted              | $                                | 0.69  |                                | $

|NOTE C. |  | STATEMENTS OF CASH FLOWS
|------- |  | ------------------------

| | Supplemental cash flow disclosures:
| | -----------------------------------

|Cash Paid |      | For the Three MonthsEnded September 30, |      | For the Six MonthsEnded September 30, |     
|--------- | ---- | --------------------------------------- | ---- | ------------------------------------- | ----
|          | 2004 |                                         | 2003 |                                       | 2004
|Interest  |      |                                         | $    | 2,000                                 |     

10



|NOTE D. |  | COMPREHENSIVE INCOME OR LOSS
|------- |  | ----------------------------

Synthetech has no material components
of comprehensive income or loss other than net income or loss. Accordingly, comprehensive
net income or loss was equal to net income or loss for all periods presented.

|NOTE E. |  | EARNINGS (LOSS) PER SHARE
|------- |  | -------------------------

Basic loss per share (EPS) is
computed by dividing net loss by the weighted average number of shares of common stock
outstanding during the period. Diluted loss per share is computed by dividing net loss by
the weighted average number of shares of common stock and common stock equivalents
outstanding during the period, calculated using the treasury stock method as defined in
SFAS No. 128. For the three month and six month periods ended September 30, 2004, the
weighted average shares used to compute diluted loss per share did not differ from the
weighted average shares used to compute basic loss per share.

The following common stock
equivalents were excluded from the earnings per share computation because their effect
would have been anti-dilutive:

|                                 |      | For the Three MonthsEnded September 30, |      | For the Six MonthsEnded September 30, |     
|-------------------------------- | ---- | --------------------------------------- | ---- | ------------------------------------- | ----
|                                 | 2004 |                                         | 2003 |                                       | 2004
|Common stock options outstanding |      |                                         |      | 1,229,000                             |     
|                                 |      |                                         |      |                                       |     

|NOTE F. |  | INVENTORIES
|------- |  | -----------

| | The
major components of inventories, net of reserves, are as follows:
| | ---------------------------------------------------------------------

|                  | September 30,2004 |  | March 31,2004 |          
|----------------- | ----------------- |  | ------------- | ---------
|                  |                   |  |               |          
|Finished products |                   |  | $             | 2,102,000
|Work in process   |                   |  |               | 716,000  
|Raw materials     |                   |  |               | 1,050,000
|                  |                   |  |               |          
|                  |                   |  | $             | 3,868,000
|                  |                   |  |               |          

11



|NOTE G. |  | PROPERTY, PLANT AND EQUIPMENT
|------- |  | -----------------------------

| | Property,
plant and equipment consist of the following:
| | -------------------------------------------------------

|                         | September 30,2004 |  | March 31,2004 |           
|------------------------ | ----------------- |  | ------------- | ----------
|                         |                   |  |               |           
|Land                     |                   |  | $             | 241,000   
|Buildings                |                   |  |               | 6,846,000 
|Machinery and equipment  |                   |  |               | 14,650,000
|Laboratory equipment     |                   |  |               | 1,011,000 
|Furniture and fixtures   |                   |  |               | 400,000   
|Vehicles                 |                   |  |               | 151,000   
|Construction in Progress |                   |  |               | --        
|                         |                   |  |               |           
|                         |                   |  |               | 23,299,000
|Less:                    |                   | 
|Accumulated depreciation |                   |  |               | 11,981,000
|                         |                   |  |               |           
|                         |                   |  | $             | 11,318,000
|                         |                   |  |               |           

|NOTE H. |  | LINE OF CREDIT
|------- |  | --------------

During
the third quarter of fiscal 2004, Synthetech entered into a line of credit facility with a
bank that provides for borrowings of up to $1 million. Interest is payable at prime with
an annual facility fee of 0.5 percent. The agreement is collateralized by cash and cash
equivalents, accounts receivable, inventories and equipment. The agreement requires
Synthetech to maintain various financial and other covenants. The line of credit has a
one-year term and expires in December 2004. As of September 30, 2004, Synthetech had no
borrowings outstanding under the credit agreement.

12



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

The following discussion of the
results of Synthetechs operations and financial condition should be read in
conjunction with the accompanying financial statements and the notes thereto included
within this report.

# FORWARD LOOKING
STATEMENTS

This Quarterly Report on Form 10-Q
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. This Act provides a safe harbor for
forward-looking statements to encourage companies to provide prospective information about
themselves so long as they identify these statements as forward-looking and provide
meaningful cautionary statements identifying important factors that could cause actual
results to differ from the projected results. All statements, other than statements of
historical fact, including statements regarding industry prospects and future results of
operations or financial position, made in this Quarterly Report are forward looking. Words
such as anticipates, believes, expects,
future and intends and similar expressions may identify
forward-looking statements. In particular, forward-looking statements in this report
include statements regarding: our future operating results, including margins in future
periods and our expected results for the third and fourth quarters of fiscal 2005;
customer completion of a New Drug Application, obtaining regulatory approval for new drugs
and other matters relating to drug development progress; results of cost cutting measures;
expected shipping dates; projected revenue from large-scale customer projects; increasing
competition from developing countries; financing our current and future capital
expenditures; management statements regarding market conditions including the status of
the new product development sector of the pharmaceutical industry; the financial effect on
us of successful commercialization of customer drug development projects; the effect any
change in foreign currency exchange rates would have on our operating results; adequacy of
our cash and cash equivalents, borrowing capacity including our ability to renew our
credit facility and internally generated funds to operate our business for the next twelve
months; and our ability to recognize deferred tax assets. Forward-looking statements
reflect managements current expectations, plans or projections and are inherently
uncertain. Actual results could differ materially from managements expectations,
plans or projections. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this report. The risks and
uncertainties include, but are not limited to, the following: the uncertain market for our
products, potential loss of a significant customer, customer concentration, potential
termination or suspension by customers of significant projects, potential period-to-period
revenue or expense fluctuations, higher than expected cash use, or ability to borrow funds
under our line of credit, production factors, industry cost factors, competition,
government regulation, labor disputes, technological change, and international business
risks. Investors are directed to our filings with the Securities and Exchange Commission,
including our Annual Report on Form 10-K for the fiscal year ended March 31, 2004, as
amended, for a further description of risks and uncertainties related to forward-looking
statements made by us as well as to other aspects of our business. Synthetech will not
release any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events. Readers are urged, however, to review the factors set forth in
reports that Synthetech files from time to time with the Securities and Exchange
Commission.

13



# OVERVIEW

Synthetech is a fine chemicals
company specializing in organic synthesis, biocatalysis and chiral technologies.
Synthetech develops and manufactures amino acid derivatives, specialty amino acids,
peptide fragments, and proprietary custom chiral intermediates primarily for the
pharmaceutical and cosmeceutical industries. Synthetechs products support the
development and manufacture of therapeutic peptides and peptidomimetic small molecule
drugs at every stage of a customers clinical development pipeline. Synthetechs
domestic and international customer base includes major pharmaceutical and emerging
biopharmaceutical companies, as well as contract drug synthesis firms. Synthetech also
supplies catalog quantities of specialty amino acids to research institutions,
universities and drug discovery firms. Our integrated grams to tons production
capabilities allow us to be involved with our customers from the early phases of
pharmaceutical discovery and clinical development through approval, market launch and
commercialization.

Synthetech continued to face
difficult market conditions in the second quarter of fiscal 2005. The pharmaceutical
industry remains subject to significant overcapacity at a time when low cost suppliers
from emerging economies are developing positions in the pharmaceutical supply chain
resulting in downward pressure on pricing. We expect that revenue will be substantially
lower than usual for the third quarter of fiscal 2005 before improving in the fourth
quarter.

During the second quarter of fiscal
2005, Synthetech entered into a manufacturing agreement to prepare three validation
batches and submit a Drug Master File (DMF) to the Food and Drug Administration for an
advanced cGMP intermediate. This will support a customers New Drug Application (NDA)
in calendar 2005. Synthetech also received an order for validation batches to supply a key
starting material for another customers drug under development which is expected to
be filed for regulatory approval in calendar 2005. Combined, these orders represent $1.1
million of revenue expected to ship during the second half of fiscal 2005, with shipments
predominantly weighted towards our fiscal fourth quarter ending March 31, 2005.

Management anticipates that
Synthetechs revenue will continue to be volatile from period to period. Variability
in Synthetechs level of revenue is primarily based on our participation in
large-scale customer projects and the timing of shipments arising from these projects.
Synthetech operates in a challenging business environment, characterized by the
unpredictable dynamics and life cycle of pharmaceutical projects, which can lead to rapid
fluctuations in the mix of projects and revenues. As the uncertainties inherent in drug
development projects remain outside of Synthetechs control, it is difficult to
predict the progress, timing and revenue potential of these projects.

Management believes that the new
product development sector of the pharmaceutical industry remains active. Synthetech is
participating in a variety of early-stage projects, which have traditionally been the
source for our future large-scale projects. In addition, we continue to supply products
for marketed pharmaceuticals and a marketed cosmeceutical. The progress and timing of
development projects and continued success of marketed products remain outside our
control.

14



# RESULTS OF OPERATIONS

The following table sets forth, for
the periods indicated, the percentage of revenues represented by each item included in the
Statements of Operations.

|Percentage of Revenue
|---------------------

|                                    | For the Three MonthsEnded September 30, |        | For the Six MonthsEnded September 30, | 
|----------------------------------- | --------------------------------------- | ------ | ------------------------------------- | 
|                                    | 2004                                    |        | 2003                                  | 
|Revenue                             |                                         | 100.0% |                                       | 
|Cost of revenue                     |                                         | 77.3   |                                       | 
|                                    |                                         |        |                                       | 
|Gross income (loss)                 |                                         | 22.7   |                                       | 
|                                    |                                         |        |                                       | 
|Research and development            |                                         | 6.2    |                                       | 
|Selling, general and administrative |                                         | 20.9   |                                       | 
|                                    |                                         |        |                                       | 
|Total operating expenses            |                                         | 27.1   |                                       | 
|                                    |                                         |        |                                       | 
|                                    |                                         |        |                                       | 
|Operating loss                      |                                         | (4.4)  |                                       | 
|                                    |                                         |        |                                       | 
|Interest income                     |                                         | 0.4    |                                       | 
|Interest expense                    |                                         | (0.1)  |                                       | 
|                                    |                                         |        |                                       | 
|Loss before income taxes            |                                         | (4.1)  |                                       | 
|                                    |                                         |        |                                       | 
|Benefit for income taxes            |                                         | --     |                                       | 
|                                    |                                         |        |                                       | 
|Net loss                            |                                         | (4.1)% |                                       | 
|                                    |                                         |        |                                       | 

# Revenue

Revenue of $2.5 million in the second
quarter of fiscal 2005 increased by $688,000, or 37%, from revenue of $1.8 million in the
second quarter of fiscal 2004. Revenue of $5.3 million in the first half of fiscal 2005
increased by $1.7 million, or 46%, from revenue of $3.6 million in the first half of
fiscal 2004.

Revenue from large-scale customer
projects was $1.1 million and $3.2 million in the second quarter and first half of fiscal
2005, respectively, compared to $1.1 million and $2.1 million in the same periods of
fiscal 2004. Large-scale project revenue during the first half of fiscal 2005 included
revenue from four ongoing customer projects compared to two large-scale projects in the
comparable period of fiscal 2004. Revenue in the second quarter and first half of fiscal
2005 and 2004 included a large-scale customer project in support of an established product
in the cosmeceutical sector. A cosmeceutical is a product that makes no therapeutic claims
but is intended for topical use by humans.

In addition to large-scale projects,
a significant number of other customer projects contributed to revenue during the second
quarter and first half of fiscal 2005 and 2004. While individually smaller in dollar
value, these projects support a wide variety of programs for our major pharmaceutical,
emerging biopharmaceutical and contract drug synthesis customers.

15



International sales, mainly to
Europe, were $620,000 and $818,000 for the second quarter and first half of fiscal 2005,
respectively, compared to $585,000 and $971,000 for the second quarter and first half of
fiscal 2004, respectively. International sales, like all of our revenues, are subject to
significant quarterly fluctuations.

To the extent successful customer
projects develop into larger volumes, either during late stage clinical trials, pre-launch
or as a marketed product, our per unit pricing may decline. There is a risk that the
impact on future sales and profitability from declines in pricing may not be offset by an
increase in volume.

The level of Synthetechs
business from period to period is largely unpredictable. Although revenue associated with
marketed products is more likely to provide a longer term, on-going revenue stream than
revenue associated with drugs at the clinical or discovery stages, continuation of
customer demand for our products from customers with marketed products remains subject to
various market conditions, including potential use of alternative manufacturing methods,
continued market demand for drugs or cosmeceuticals that we support, and competition from
other suppliers. Accordingly, while significant orders related to marketed products
provide increased and more predictable revenue, we expect revenue related to marketed
products and other projects to continue to fluctuate significantly from period to period.

# Gross income (loss)

Gross income for the second quarter
of fiscal 2005 was $575,000, or 23% of revenue, compared to a gross loss of $653,000, or
35% of revenue, for the second quarter of fiscal 2004. Gross income for the first half of
fiscal 2005 was $845,000 or 16% of revenue, compared to a gross loss of $1.1 million, or
30% of revenue, for the comparable period of fiscal 2004.

Compared to the second quarter and
first half of fiscal 2004, the comparable periods of fiscal 2005 benefited from a higher
level of sales, a favorable mix of projects with above average margins and from cost
controls. However, for the level of revenue reported in the second quarter, we typically
would not expect gross income to be this high.

In the second quarter and first half
of fiscal 2005, costs incurred by Synthetechs manufacturing departments decreased by
approximately $420,000 and $480,000, respectively, compared to the comparable periods of
fiscal 2004, largely due to a decrease in labor and maintenance costs. In response to
difficult business conditions, Synthetech reduced its workforce during the second quarter
of fiscal 2004 and has implemented other cost reduction measures. Cost reductions achieved
in the second quarter of fiscal 2005 are not expected to continue at this level in future
quarters.

Gross income for the second quarter
and first half of fiscal 2005 reflects charges for impaired inventory of $184,000 and
$397,000, respectively. This compares to charges for impaired inventory of $389,000 and
$583,000 in the comparable periods of 2004. Synthetech routinely develops manufacturing
processes to produce new products or to refine procedures for existing products. It is not
unusual for manufacturing costs associated with new processes to exceed the selling price
for the initial batches of product, which results in an inventory write-off. The
international fine chemicals industry has been marked by overcapacity and a resulting
downward pressure on pricing. It remains difficult to rework certain materials on a cost
effective basis.

Cost of revenue includes raw
materials, direct labor, manufacturing overhead, other direct costs, and adjustments to
inventory.

16



# Operating Expenses

R&D Expense.
Research and development (R&D) expense in the second quarter of fiscal 2005 was
$158,000, or 6% of revenue, compared to $176,000, or 10% of revenue, in the second quarter
of fiscal 2004. R&D expense in the first half of fiscal 2005 was $284,000, or 5% of
revenue, compared to $372,000, or 10% of revenue, for the comparable period of fiscal
2004.

The decrease in R&D expense for
the second quarter and first half of fiscal 2005, compared to the comparable periods of
fiscal 2004 is primarily associated with a decrease in labor costs between the periods.
The decrease in labor costs is composed of salary reductions that were implemented late in
the second quarter of fiscal 2004 and changes in staffing levels that reduced both labor
and related expenses. The first quarter and first half of fiscal 2004 include
approximately $30,000 of employee relocation costs.

Synthetechs R&D department
primarily develops processes to produce and optimize the production of our products and
their related scale-up to manufacturing quantities.

SG&A
Expense. Selling, general and administrative (SG&A) expense in the
second quarter of fiscal 2005 was $528,000, or 21% of revenue, compared to $403,000, or
22% of revenue, in the second quarter of fiscal 2004. SG&A expense in the first half
of fiscal 2005 was $1.1 million or 21% of revenue, compared to $884,000, or 24% of
revenue, for the comparable period of fiscal 2004.

The increase in SG&A expense in
the second quarter and first half of fiscal 2005, compared to the same periods in fiscal
2004 is primarily due to an increase in Synthetechs marketing activities including
the additions of a Director of Business Development in August 2003 and a Director of
business Development for Europe in February 2004. In addition, Board of Director fees and
related costs, and fees for legal services have increased $54,000 for the six month period
ended September 30, 2004 compared to the comparable period of the prior year.

SG&A expense consists of
compensation and related fringe benefits for sales and administrative employees, cost of
professional services, marketing costs, costs associated with being a public company and
costs related to administrative facilities and information services.

# Interest Income

Interest income in the second quarter
and first half of fiscal 2005 was $10,000 and $19,000, respectively, compared to $8,000
and $20,000, respectively, in the comparable periods of fiscal 2004. Synthetechs
interest income is primarily derived from earnings on our cash equivalents. The changes in
interest income for the periods presented were due to the amount of cash equivalents and
the interest rates in effect during the periods. Average rates of interest earned on
Synthetechs cash equivalents during the first six months of fiscal 2005 were 1.01%,
compared to 0.88% during the comparable period of fiscal 2004.

# Interest expense

Interest expense was $2,000 and
$4,000, respectively, for the second quarter and first half of both fiscal 2005 and 2004.

17



# Benefit for Income Taxes

Based on Synthetechs recent
history of losses, our near-term outlook and managements evaluation of available tax
planning strategies, we have concluded that it is more likely than not that Synthetech
will be unable to recognize its net deferred tax assets as a benefit for income taxes,
continuing for an uncertain period of time.

# Net Loss

Net loss for the second quarter of
fiscal 2005 was $103,000, or 4% of revenue, compared to a net loss of $1.2 million, or 67%
of revenue, for the second quarter of fiscal 2004. Net loss for the first half of fiscal
2005 was $515,000, or 10% of revenue, compared to a net loss of $2.3 million, or 64% of
revenue, for the comparable period of fiscal 2004.

# INDUSTRY FACTORS

# Market Factors

The market for Synthetechs
products is driven by the market for the drugs into which they are incorporated. The drug
development process is dictated by the marketplace, drug companies and the regulatory
environment. Synthetech has no control over the pace of these drug development efforts,
which drugs get selected for clinical trials, which drugs are approved by the FDA or, even
if approved, the ultimate market potential of the drugs. Synthetech also manufactures
products for use in a cosmeceutical, and faces similar factors in that market.

The three stages of the drug
development process include: R&D or discovery stage, clinical trial stage and marketed
drug stage. Synthetechs customers can spend years researching and developing new
drugs, and take only a small percentage to clinical trials and fewer yet to commercial
market. A substantial amount of activity continues to occur at the earlier stages of
R&D and clinical trials. The market for peptide and peptidomimetic small molecule
drugs is still developing.

Recurring sales of our products for
development programs are sporadic. Because of the high cancellation rate for drug
development programs, there is a significant likelihood that there will be no subsequent
or follow-on sales for any particular drug development program. Accordingly,
the level and timing of customer orders relating to specific drug development programs
vary substantially from period to period and we cannot rely on any one customer as a
constant source of revenue.

The size of customer orders for
marketed drugs can be substantially larger than those for the discovery or clinical trial
stages. Sales of Synthetechs products for marketed drugs may provide an opportunity
for continuing, longer-term sales. While not subject to the same high cancellation rate
faced by discovery and clinical trial-stage drug development programs, the demand for
approved drugs remains subject to many uncertainties, including price, side effects, the
existence of competing drugs and other factors affecting market acceptance. These
factors, which are outside of Synthetechs control, affect the level of demand for
the drug itself and, therefore, the demand for Synthetechs products. With
longer-term, significant or large-scale orders, we expect increased competition to supply
these products, which may result in canceled orders or downward price pressure. Also,
industry cost pressures can cause pharmaceutical companies to explore and ultimately
adopt alternative manufacturing processes that may not include Synthetechs products
as an intermediate. The

18



international fine chemicals
industry, where Synthetech is a niche participant, has been marked by significant
overcapacity and a resulting downward pressure on pricing.

Similar dynamics affect the
cosmeceutical development process and market, except that the regulatory oversight and,
consequently, the typical length of a products time to market are
reduced.

Due to the foregoing industry factors
Synthetech cannot predict future demand beyond its current order base, and existing orders
may be subject to cancellation or delay by customers. Until there is stable demand for our
products, we are likely to continue to experience significant fluctuations in our periodic
results.

# Production Factors

Synthetech has a full cycle
grams to tons production capability and has made over 400 products. With over
15 years of experience, Synthetech has developed extensive process technology and is
recognized as one of the leaders in our area of expertise. Nevertheless, initial batches
of new products and scaling up production processes for existing products may result in
significantly lower than expected yields and extended processing time, and may require
substantial rework to meet the required customer specifications. These factors could cause
increased costs and delayed shipments, either of which could negatively affect periodic
operating results.

# LIQUIDITY AND CAPITAL
RESOURCES

Synthetechs cash and cash
equivalents totaled $5.0 million at September 30, 2004, compared to $4.3 million at March
31, 2004. At September 30, 2004 and March 31, 2004, Synthetech had working capital of $9.2
million. Synthetech has a $1 million bank line of credit. Interest is payable at the prime
rate with an annual facility fee of 0.5 percent. The facility is collateralized by cash
and cash equivalents, accounts receivable, inventories and equipment. Financial covenants
contained in the agreement require Synthetech to maintain a quick ratio of 1.5 to 1 and a
tangible net worth of $19 million. Synthetech had no borrowings outstanding under the
credit facility as of September 30, 2004. The credit facility expires in December 2004.
Management expects to renew the credit facility.

Synthetech generated cash from
operating activities of $736,000 during the first half of fiscal 2005, compared to cash
used in operating activities of $1.9 million in the first half of fiscal 2004. In the
first half of fiscal 2005, the primary use of cash from operating activities was the net
loss of $515,000 which was offset by non-cash charges for depreciation of $535,000 and
amortization of deferred compensation of $8,000. Reductions in prepaid expenses,
inventories and accounts receivable were the primary sources of cash flow derived from
operating activities. Accounts receivable decreased $153,000 to $1.1 million at September
30, 2004 from $1.3 million at March 31, 2004. The change in accounts receivable between
the two periods is primarily due to differences in the timing of shipments. Inventory
decreased $304,000 to $3.9 million at September 30, 2004 from $4.2 million at March 31,
2004. The change in inventory between the two periods is consistent with normal levels of
inventory fluctuations based on the timing of raw material purchases and customer
shipments. Accounts payable of $530,000 at September 30, 2004 decreased slightly from the
March 31, 2004 balance of $559,000.

Synthetech used $59,000 of cash for
capital expenditures during the first half of fiscal 2005, compared to $285,000 in the
first half of fiscal 2004. Synthetech has completed its existing long-term capital plan
for its sole facility in Albany, Oregon. Synthetechs revised capital plan for
fiscal 2005 includes

19



various projects totaling
approximately $350,000. Based upon Synthetechs future financial results management
may defer some of these projects to conserve cash. Synthetech expects to finance all
capital expenditures from cash on hand and any internal cash flow and does not anticipate
the need for any new debt or equity financing to fund these projects.

Cash used in financing activities for
the first half of fiscal 2005 totaled $4,000 compared to cash provided by financing
activities of $4,000 in the first half of fiscal 2004.

Synthetech incurred significant
negative cash flow in fiscal 2004. Although we are unable to predict with certainty future
demand (as discussed above), based on the existing state of the fine chemicals industry,
our first half operating results and our existing order base, we expect to incur negative
cash flow for fiscal 2005, which would adversely affect our cash position.

Notwithstanding the foregoing,
Synthetech believes that its existing cash and cash equivalents, its bank line of credit
and any funds generated from operations will be sufficient to support its operations for
the next twelve months. However, any projections of future cash needs and cash flows are
subject to substantial uncertainty. There can be no assurance that current cash and cash
equivalent balances and proceeds from the bank line of credit, together with cash
anticipated to be generated from operations, will be sufficient to satisfy our liquidity
requirements. Synthetech may not be able to draw under or renew its line of credit or
obtain a replacement line of credit on acceptable terms. If sources of liquidity are
insufficient, Synthetech may have to seek additional debt or equity financing to satisfy
its liquidity requirements, may not be able to obtain adequate or favorable financing and
any financing Synthetech obtains may dilute the ownership interests of its shareholders
prior to the financing.

# CRITICAL ACCOUNTING
POLICIES AND ESTIMATES

The discussion and analysis of
Synthetechs financial condition and results of operations are based upon its
financial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial statements
requires Synthetech to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenue and expenses and related disclosure of contingent assets and
liabilities. On an on-going basis, Synthetech evaluates its estimates, including those
related to deferred tax asset realization, inventory realization, allowance for doubtful
accounts and long-lived asset impairments. Synthetech bases its estimates on historical
experience and on various other assumptions. Actual results may differ from these
estimates under different assumptions or conditions. Synthetech believes the following are
among the critical accounting policies and the related judgments and estimates that affect
the preparation of its financial statements.

# Allowance for Doubtful
Accounts

A customers creditworthiness is
analyzed by a review of a customers payment history and financial stability. The
allowance for doubtful accounts is established by a review of aged accounts receivables
and a review for collectibility of specific accounts. The allowance for doubtful accounts
as of September 30, 2004 and March 31, 2004 was $15,000. If circumstances related to a
specific customer change, Synthetechs estimate of the recoverability of receivables
could materially change.

20



# Inventories

Inventories are valued at the lower
of cost or market, determined on the first-in first-out (FIFO) basis. Costs include direct
material, direct labor, applicable manufacturing overhead, and other direct costs.

Management evaluates
Synthetechs inventory for impairment whenever it becomes aware that indicators of
impairment exist. Factors contributing to inventory impairment include, but are not
limited to: decreases in selling price; changes in customer specifications; project
terminations or holds; variations in material produced by Synthetech from customer
specifications; and production costs materially in excess of current market price. It is
our policy to write-down inventories to reflect an estimate for impairment in an amount
equal to the difference between the cost of inventory and the estimated market value based
upon assumptions about future demand and market conditions. If actual market conditions
are less favorable than those projected by management, an additional inventory write-down
may be required in the future. Write-downs of inventory are reported as a component of
cost of revenue in the relevant period.

# Long-Lived Asset
Impairment

Synthetech monitors the
recoverability of the carrying value of its long-lived assets such as property, plant and
equipment. An impairment charge is recognized when the expected net undiscounted cash
flows from an assets use (including any proceeds from disposition) are less than the
assets carrying value and the assets carrying value exceeds its fair value.
Changes in the expected use of a long-lived asset, and the financial performance of the
long-lived asset, are evaluated as indicators of possible impairment. Future cash flow
value may be based upon appraisals for property, plant and equipment, future cash flow
estimates from operating the long-lived assets and other operating considerations.

# Revenue Recognition

Synthetech recognizes revenue,
including shipping and handling charges billed to customers, when the following criteria
are met:

- Persuasive evidence of an arrangement exists,
- Delivery has occurred or services have been rendered,
- Synthetechs price to our customer is fixed or determinable, and
- Collectibility is reasonably assured.

Shipping and handling costs are
classified as part of cost of revenue.

# Item 3. Quantitative and
Qualitative Disclosures about Market Risk

Synthetechs primary market risk
exposure is the impact of interest rate fluctuations on interest income earned on our cash
equivalents. The risks associated with market, liquidity and principal are mitigated by
investing in high-credit quality securities and limiting concentrations of issuers and
maturity dates. Synthetech does not invest in derivative financial instruments.

21



Substantially all
of Synthetechs purchases and sales are denominated in U.S. dollars and, as a
result, it has relatively little exposure to foreign currency exchange risk with respect
to any of its purchases and sales. Should Synthetech enter into a significant transaction
denominated in a foreign currency, we may enter into a forward exchange contract at that
time.  Synthetech was not a party to any forward exchange contracts as of September
30, 2004.  For existing company transactions denominated in a foreign currency, the
effect of an immediate 10% change in relevant exchange rates would not have a material
impact on Synthetechs operating results or cash flows.

# Item 4. Controls and
Procedures

Synthetech maintains a system of
disclosure controls and procedures designed to provide reasonable assurance as to the
reliability of our published financial statements and other disclosures included in our
reports under the Securities Exchange Act of 1934. In accordance with Rule 13a-15(b) of
the Securities and Exchange Act of 1934, our management evaluated, under the supervision
and with the participation of our Chief Executive Officer and Chief Financial Officer, the
effectiveness of the design and operation of Synthetechs disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934) as
of the end of the period covered by this report. Based upon that evaluation, our Chief
Executive Officer and the Chief Financial Officer concluded that Synthetechs
disclosure controls and procedures were effective as of the end of the period covered by
this report to ensure that material information relating to Synthetech was made known to
them by others within Synthetech, particularly during the period in which this Quarterly
Report on Form 10-Q was being prepared.

There has been no change in our
internal control over financial reporting during the fiscal quarter ended September 30,
2004 that has materially affected or is reasonably likely to materially affect our
internal control over financial reporting.

Synthetechs Chief Executive
Officer and Chief Financial Officer do not expect that our disclosure controls and
internal controls will prevent all error and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute, assurance that the
objectives of the system are met. Further, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and
instances of fraud, if any, within Synthetech have been detected. These inherent
limitations include the realities that judgments in decision-making can be faulty, and
that breakdowns can occur because of simple mistake or error. Additionally, controls can
be circumvented by the individual acts of some persons, by collusion of two or more
people, or by management override of the control. The design of any system of controls
also is based partly on certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated goals under
all potential future conditions.

22



# PART II. OTHER
INFORMATION

# Item 2. Changes in
Securities and Use of Proceeds

The following table provides
information as of September 30, 2004 with respect to the shares of common stock
repurchased by Synthetech during the second quarter of fiscal 2005:

|Period            |  | Total Number ofShares Purchased |  | Average Price PaidPer Share | 
|----------------- |  | ------------------------------- |  | --------------------------- | 
|August 1-31, 2004 |  | 2,500 (1)                       |  | $     0.88                  | 

(1)  Synthetech has no
repurchase plans or programs.

# Item 6. Exhibits and
Reports on Form 8-K

|(a) |  | Exhibits.
|--- |  | ---------

| |  | Exhibit 3.1 |  | Articles of Incorporation of Synthetech, as amended (incorporated by reference to the
exhibits filed with Synthetechs Annual Report on Form 10-K for the fiscal year ended
March 31, 1991).
| |  | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Exhibit 3.2 |  | Bylaws
of Synthetech, as amended (incorporated by reference to the exhibits filed with Synthetechs
Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001).
| |  | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Exhibit 31.1 |  | Rule
13a-14(a) Certification of Chief Executive Officer
| |  | ------------ |  | -------------------------------------------------------

| |  | Exhibit 31.2 |  | Rule
13a-14(a) Certification of Chief Financial Officer
| |  | ------------ |  | -------------------------------------------------------

| |  | Exhibit 32.1 |  | Section
1350 Certification of Chief Executive Officer
| |  | ------------ |  | -----------------------------------------------------

| |  | Exhibit 32.2 |  | Section
1350 Certification of Chief Financial Officer
| |  | ------------ |  | -----------------------------------------------------

23



# 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.

|                          |                                                                              
|------------------------- | -----------------------------------------------------------------------------
|                          | SYNTHETECH, INC.                                                             
|                          | (Registrant)                                                                 
|                          |                                                                              
|                          |                                                                              
|Date:    November 5, 2004 | /s/ M. SreenivasanM. SreenivasanPresident & C.E.O.                           
|                          |                                                                              
|                          |                                                                              
|                          |                                                                              
|Date:    November 5, 2004 | /s/ Gary A. WeberGary A. WeberVice President Finance &Chief Financial Officer
|                          |                                                                              

24