##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, 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, 2003

OR

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

Commission file number 000-31019




ARGONAUT TECHNOLOGIES, INC.


(Exact name of registrant as specified in its charter)


|                                |  |                       
|------------------------------- |  | ----------------------
|DELAWARE                        |  | 94-3216714            
|(State or other jurisdiction of |  | (IRS Employer         
|incorporation or organization)  |  | Identification Number)

|                                                                          |  |                 
|------------------------------------------------------------------------- |  | ----------------
|1101 Chess Drive
Foster City, CA
(Address of principal executive offices) |  | 94404
(zip code)

(650) 655-4200
(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 Securities Exchange Act of 1934). Yes [  ] No
[X]

There were 20,247,613 shares of the registrants common stock outstanding on
October 31, 2003.

| |  | 
| |  | 





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TABLE OF CONTENTS



|                              |                                                                                               |                                                                |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | -------------------------------------------------------------- |  |  |  |  |  | 
|PART I: FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS                         
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS               
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS               
|                              |                                                                                               | NOTES TO UNAUDITED CONDENSED 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 1: LEGAL PROCEEDINGS                                                                    
|                              | ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                              | ITEM 3: DEFAULTS UPON SENIOR SECURITIES                                                      
|                              | ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                              | ITEM 5: OTHER INFORMATION                                                                    
|                              | ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                   
|EXHIBIT INDEX                
|EXHIBIT 31.1                 
|EXHIBIT 31.2                 
|EXHIBIT 32                   



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##### Table of Contents



Argonaut Technologies, Inc.
Form 10-Q
Quarterly Period Ended September 30, 2003

TABLE OF CONTENTS

|               |  |                                                                                       |    |  |                                                                                                                                     |  |  |   | 
|-------------- |  | ------------------------------------------------------------------------------------- | -- |  | ----------------------------------------------------------------------------------------------------------------------------------- |  |  | - | 
|PART I:        |  | FINANCIAL INFORMATION                                                                 |    |  |                                                                                                                                     | 
|Item 1.        |  | Financial Statements                                                                  |    |  | 3                                                                                                                                   | 
|               |  |                                                                                       |    |  | Condensed Consolidated Balance Sheets as of September 30, 2003 (Unaudited) and
December 31, 2002                                    |  |  | 3 | 
|               |  |                                                                                       |    |  | Condensed Consolidated Statements of Operations for the Three- and Nine-Month Periods
Ended September 30, 2003 and 2002 (Unaudited) |  |  | 4 | 
|               |  |                                                                                       |    |  | Condensed Consolidated Statements of Cash Flows for the Nine-Month Periods Ended
September 30, 2003 and 2002 (Unaudited)            |  |  | 5 | 
|               |  |                                                                                       |    |  | Notes to Condensed Consolidated Financial Statements (Unaudited)                                                                    |  |  | 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                            |    |  | 20                                                                                                                                  | 
|Item 4.        |  | Controls and Procedures                                                               |    |  | 20                                                                                                                                  | 
|PART II:       |  | OTHER INFORMATION                                                                     |    |  |                                                                                                                                     | 
|Item 1.        |  | Legal Proceedings                                                                     |    |  | 21                                                                                                                                  | 
|Item 2.        |  | Changes in Securities and Use of Proceeds                                             |    |  | 21                                                                                                                                  | 
|Item 3.        |  | Defaults Upon Senior Securities                                                       |    |  | 21                                                                                                                                  | 
|Item 4.        |  | Submission of Matters to a Vote of Security Holders                                   |    |  | 21                                                                                                                                  | 
|Item 5.        |  | Other Information                                                                     |    |  | 21                                                                                                                                  | 
|Item 6.        |  | Exhibits and Reports on Form 8-K                                                      |    |  | 21                                                                                                                                  | 
|SIGNATURES     |  |                                                                                       | 23 | 
|EXHIBITS INDEX |  |                                                                                       | 24 | 

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| |  | ------------
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##### Table of Contents






PART I: FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




ARGONAUT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

|                                     |                                               |                            |        |               |        |              |        |         |        | 
|------------------------------------ | --------------------------------------------- | -------------------------- | ------ | ------------- | ------ | ------------ | ------ | ------- | ------ | 
|                                     |                                               |                            |        | September 30, |        | December 31,
|                                     |                                               |                            |        | 2003          |        | 2002        
|                                     |                                               |                            |        |               |        |             
|                                     |                                               |                            |        | (Unaudited)   |        |             
|ASSETS                               |                                               |                            |        |               |        |              |        |        
|Current assets:                      |                                               |                            |        |               |        |              |        |        
|                                     | Cash and cash equivalents                     |                            | $      | 11,646        |        |              | $      | 20,895  |       
|                                     | Short-term investments                        |                            |        | 7,836         |        |              |        | 5,999   |       
|                                     | Accounts receivable, net                      |                            |        | 4,630         |        |              |        | 4,389   |       
|                                     | Inventories                                   |                            |        | 7,286         |        |              |        | 6,280   |       
|                                     | Prepaid expenses & other current assets       |                            |        | 797           |        |              |        | 727     |       
|                                     | Notes receivable                              |                            |        | 262           |        |              |        | 237     |       
|                                     |                                               |                            |        |               |        |              |        |        
|                                     |                                               | Total current assets       |        |               | 32,457 |              |        |         | 38,527 | 
|Restricted cash                      |                                               |                            | 11,402 |               |        |              | 12,327 |        
|Property and equipment, net          |                                               |                            | 4,398  |               |        |              | 4,921  |        
|Goodwill                             |                                               |                            | 9,410  |               |        |              | 10,173 |        
|Other intangible assets, net         |                                               |                            | 4,664  |               |        |              | 6,425  |        
|                                     |                                               |                            |        |               |        |              |        |        
|                                     |                                               | $                          | 62,331 |               |        | $            | 72,373 |        
|                                     |                                               |                            |        |               |        |              |        |        
|LIABILITIES AND STOCKHOLDERS EQUITY |                                               |                            |        |               |        |              |        |        
|Current liabilities:                 |                                               |                            |        |               |        |              |        |        
|                                     | Accounts payable                              |                            | $      | 1,361         |        |              | $      | 1,873   |       
|                                     | Accrued compensation                          |                            |        | 1,159         |        |              |        | 1,087   |       
|                                     | Other accrued liabilities                     |                            |        | 2,452         |        |              |        | 2,506   |       
|                                     | Deferred revenue                              |                            |        | 481           |        |              |        | 1,972   |       
|                                     | Current portion of capital lease obligations  |                            |        |              |        |              |        | 88      |       
|                                     | Current portion of notes payable              |                            |        | 11,304        |        |              |        |        |       
|                                     |                                               |                            |        |               |        |              |        |        
|                                     |                                               | Total current liabilities  |        |               | 16,757 |              |        |         | 7,526  | 
|Long term debt                       |                                               |                            |       |               |        |              | 12,334 |        
|Stockholders equity:                |                                               |                            |        |               |        |              |        |        
|                                     | Common stock                                  |                            |        | 2             |        |              |        | 2       |       
|                                     | Additional paid-in capital                    |                            |        | 121,526       |        |              |        | 121,388 |       
|                                     | Deferred stock compensation                   |                            |        | (17           | )      |              |        | (74     | )     
|                                     | Accumulated other comprehensive income (loss) |                            |        | 657           |        |              |        | 289     |       
|                                     | Accumulated deficit                           |                            |        | (76,594       | )      |              |        | (69,092 | )     
|                                     |                                               |                            |        |               |        |              |        |        
|                                     |                                               | Total stockholders equity |        |               | 45,574 |              |        |         | 52,513 | 
|                                     |                                               |                            |        |               |        |              |        |        
|                                     |                                               | $                          | 62,331 |               |        | $            | 72,373 |        
|                                     |                                               |                            |        |               |        |              |        |        

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

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| |  | ------------
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ARGONAUT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

|                                                                                                                                                    |                                                    |                 |        |                    |       |                   |        |       |       |      |        |        |        |   |         |        |        | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------- | --------------- | ------ | ------------------ | ----- | ----------------- | ------ | ----- | ----- | ---- | ------ | ------ | ------ | - | ------- | ------ | ------ | 
|                                                                                                                                                    |                                                    |                 |        | Three Months Ended |       | Nine Months Ended
|                                                                                                                                                    |                                                    |                 |        | September 30,      |       | September 30,    
|                                                                                                                                                    |                                                    |                 |        |                    |       |                  
|                                                                                                                                                    |                                                    |                 |        | 2003               |       | 2002              |        | 2003  |       | 2002
|                                                                                                                                                    |                                                    |                 |        |                    |       |                   |        |       |       |     
|Net sales:                                                                                                                                          |                                                    |                 |        |                    |       |                   |        |       |       |      |        |        |        |   |         |       
|                                                                                                                                                    | Products                                           |                 | $      | 4,760              |       |                   | $      | 6,238 |       |      | $      | 16,323 |        |   | $       | 16,478 |       
|                                                                                                                                                    | Services                                           |                 |        | 406                |       |                   |        | 1,044 |       |      |        | 1,980  |        |   |         | 2,284  |       
|                                                                                                                                                    |                                                    |                 |        |                    |       |                   |        |       |       |      |        |        |        |   |         |       
|                                                                                                                                                    |                                                    | Total net sales |        |                    | 5,166 |                   |        |       | 7,282 |      |        |        | 18,303 |   |         |        | 18,762 | 
|                                                                                                                                                    |                                                    |                 |        |                    |       |                   |        |       |       |      |        |        |        |   |         |       
|Costs and Expenses:                                                                                                                                 |                                                    |                 |        |                    |       |                   |        |       |       |      |        |        |        |   |         |       
|                                                                                                                                                    | Costs of products                                  |                 |        | 2,358              |       |                   |        | 3,496 |       |      |        | 8,445  |        |   |         | 8,928  |       
|                                                                                                                                                    | Costs of services                                  |                 |        | 200                |       |                   |        | 525   |       |      |        | 1,482  |        |   |         | 1,213  |       
|                                                                                                                                                    | Costs of special charges  -  restructuring         |                 |        |                   |       |                   |        | 765   |       |      |        |       |        |   |         | 765    |       
|                                                                                                                                                    | Research and development (Note A)                  |                 |        | 1,063              |       |                   |        | 1,468 |       |      |        | 3,417  |        |   |         | 4,307  |       
|                                                                                                                                                    | Selling, general and administrative (Note A)       |                 |        | 2,835              |       |                   |        | 4,476 |       |      |        | 10,356 |        |   |         | 13,190 |       
|                                                                                                                                                    | Amortization of purchased intangibles              |                 |        | 202                |       |                   |        | 209   |       |      |        | 627    |        |   |         | 524    |       
|                                                                                                                                                    | Restructuring charges                              |                 |        |                   |       |                   |        | 1,802 |       |      |        |       |        |   |         | 1,802  |       
|                                                                                                                                                    | Goodwill and other purchased intangibles write-off |                 |        | 1,612              |       |                   |        |      |       |      |        | 1,612  |        |   |         |       |       
|                                                                                                                                                    |                                                    |                 |        |                    |       |                   |        |       |       |      |        |        |        |   |         |       
|Total costs and expenses                                                                                                                            |                                                    |                 | 8,270  |                    |       |                   | 12,741 |       |       |      | 25,939 |        |        |   | 30,729  |       
|                                                                                                                                                    |                                                    |                 |        |                    |       |                   |        |       |       |      |        |        |        |   |         |       
|Loss from operations                                                                                                                                |                                                    |                 | (3,104 | )                  |       |                   | (5,459 | )     |       |      | (7,636 | )      |        |   | (11,967 | )     
|Other income (expenses):                                                                                                                            |                                                    |                 |        |                    |       |                   |        |       |       |      |        |        |        |   |         |       
|                                                                                                                                                    | Realized gain on the sale of asset                 |                 |        | 460                |       |                   |        |      |       |      |        | 460    |        |   |         |       |       
|                                                                                                                                                    | Interest and other income                          |                 |        | 172                |       |                   |        | 294   |       |      |        | 704    |        |   |         | 977    |       
|                                                                                                                                                    | Interest and other expense                         |                 |        | (173               | )     |                   |        | (173  | )     |      |        | (499   | )      |   |         | (422   | )     
|                                                                                                                                                    |                                                    |                 |        |                    |       |                   |        |       |       |      |        |        |        |   |         |       
|Net loss before provision for income taxes                                                                                                          |                                                    |                 | (2,645 | )                  |       |                   | (5,338 | )     |       |      | (6,971 | )      |        |   | (11,412 | )     
|Provision for income taxes                                                                                                                          |                                                    |                 | (420   | )                  |       |                   |       |       |       |      | (531   | )      |        |   | (200    | )     
|                                                                                                                                                    |                                                    |                 |        |                    |       |                   |        |       |       |      |        |        |        |   |         |       
|Net loss                                                                                                                                            |                                                    | $               | (3,065 | )                  |       | $                 | (5,338 | )     |       | $    | (7,502 | )      |        | $ | (11,612 | )     
|                                                                                                                                                    |                                                    |                 |        |                    |       |                   |        |       |       |      |        |        |        |   |         |       
|Net loss per common share, basic and diluted                                                                                                        |                                                    | $               | (0.15  | )                  |       | $                 | (0.27  | )     |       | $    | (0.37  | )      |        | $ | (0.59   | )     
|                                                                                                                                                    |                                                    |                 |        |                    |       |                   |        |       |       |      |        |        |        |   |         |       
|Weighted-average shares used in
computing net loss per common share, basic and diluted                                                              |                                                    |                 | 20,196 |                    |       |                   | 19,973 |       |       |      | 20,111 |        |        |   | 19,839  |       
|                                                                                                                                                    |                                                    |                 |        |                    |       |                   |        |       |       |      |        |        |        |   |         |       
|Note A: Research and development expenses and selling, general and administrative
expenses include charges for stock-based compensation as follows: |                                                    |                 |        |                    |       |                   |        |       |       |      |        |        |        |   |         |       
|Research and development                                                                                                                            |                                                    | $               | 4      |                    |       | $                 | 32     |       |       | $    | 22     |        |        | $ | 154     |       
|Selling, general and administrative                                                                                                                 |                                                    |                 | 9      |                    |       |                   | 1      |       |       |      | 40     |        |        |   | 201     |       
|                                                                                                                                                    |                                                    |                 |        |                    |       |                   |        |       |       |      |        |        |        |   |         |       
|                                                                                                                                                    |                                                    | $               | 13     |                    |       | $                 | 33     |       |       | $    | 62     |        |        | $ | 355     |       
|                                                                                                                                                    |                                                    |                 |        |                    |       |                   |        |       |       |      |        |        |        |   |         |       

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

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ARGONAUT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

|                                                 |                                                                             |                                                     |                                                     |                                       |        |                   |        |         |       |        |        |  
|------------------------------------------------ | --------------------------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------------------------------------- | ------ | ----------------- | ------ | ------- | ----- | ------ | ------ | -
|                                                 |                                                                             |                                                     |                                                     |                                       |        | Nine Months Ended
|                                                 |                                                                             |                                                     |                                                     |                                       |        | September 30,    
|                                                 |                                                                             |                                                     |                                                     |                                       |        | 2003              |        | 2002   
|                                                 |                                                                             |                                                     |                                                     |                                       |        |                   |        |        
|Cash flows from operating activities:            |                                                                             |                                                     |                                                     |                                       |        |                   |        |        
|                                                 | Net loss                                                                    |                                                     | $                                                   | (7,502                                | )      |                   | $      | (11,612 | )    
|                                                 | Adjustments to reconcile net loss to net cash used in operating activities: |                                                     |                                                     |                                       |        |                   |        |         |      
|                                                 |                                                                             | Depreciation and amortization                       |                                                     |                                       | 1,075  |                   |        |         | 1,014 |       
|                                                 |                                                                             | Amortization of other purchased intangibles         |                                                     |                                       | 657    |                   |        |         | 540   |       
|                                                 |                                                                             | Disposal of fixed assets                            |                                                     |                                       | 215    |                   |        |         |      |       
|                                                 |                                                                             | Stock-based compensation                            |                                                     |                                       | 93     |                   |        |         | 354   |       
|                                                 |                                                                             | Impairment charges                                  |                                                     |                                       | 1,612  |                   |        |         |      |       
|                                                 |                                                                             | Non-cash portion of restructuring charges           |                                                     |                                       |       |                   |        |         | 683   |       
|                                                 |                                                                             | Foreign
currency translation                        |                                                     |                                       | 11     |                   |        |         | 1     |       
|                                                 |                                                                             | Changes in assets and liabilities:                  |                                                     |                                       |        |                   |        |         |       |       
|                                                 |                                                                             |                                                     | Accounts receivable                                 |                                       |        | (487              | )      |         |       | 1,405  |       
|                                                 |                                                                             |                                                     | Inventories                                         |                                       |        | (1,589            | )      |         |       | 689    |       
|                                                 |                                                                             |                                                     | Prepaid expenses and other current assets           |                                       |        | 12                |        |         |       | (245   | )     
|                                                 |                                                                             |                                                     | Accounts payable                                    |                                       |        | (512              | )      |         |       | (1,557 | )     
|                                                 |                                                                             |                                                     | Accrued compensation                                |                                       |        | 72                |        |         |       | (604   | )     
|                                                 |                                                                             |                                                     | Other accrued liabilities                           |                                       |        | (112              | )      |         |       | 18     |       
|                                                 |                                                                             |                                                     | Deferred revenue                                    |                                       |        | (1,491            | )      |         |       | (614   | )     
|                                                 |                                                                             |                                                     |                                                     |                                       |        |                   |        |        
|                                                 |                                                                             |                                                     |                                                     | Net cash used in operating activities |        |                   | (7,946 | )       |       |        | (9,928 | )
|                                                 |                                                                             |                                                     |                                                     |                                       |        |                   |        |        
|Cash flows from investing activities:            |                                                                             |                                                     |                                                     |                                       |        |                   |        |        
|                                                 | Capital expenditures                                                        |                                                     |                                                     | (928                                  | )      |                   |        | (662    | )    
|                                                 | Business acquisition (net of cash received)                                 |                                                     |                                                     |                                      |        |                   |        | (6,273  | )    
|                                                 | Proceeds
from the sale of the HPLC assets                                   |                                                     |                                                     | 1,228                                 |        |                   |        |        |      
|                                                 | Purchase of short-term investments                                          |                                                     |                                                     | (11,236                               | )      |                   |        | (7,422  | )    
|                                                 | Proceeds from the sales of short-term investments                           |                                                     |                                                     |                                      |        |                   |        | 4,510   |      
|                                                 | Proceeds from the maturities of short-term investments                      |                                                     |                                                     | 9,400                                 |        |                   |        | 24,191  |      
|                                                 | Purchase of licenses                                                        |                                                     |                                                     | (35                                   | )      |                   |        | (1,400  | )    
|                                                 | Restricted cash                                                             |                                                     |                                                     | 1,167                                 |        |                   |        | (10,863 | )    
|                                                 |                                                                             |                                                     |                                                     |                                       |        |                   |        |        
|                                                 |                                                                             |                                                     | Net cash provided by (used in) investing activities |                                       |        | (404              | )      |         |       | 2,081  |       
|                                                 |                                                                             |                                                     |                                                     |                                       |        |                   |        |        
|Cash flows from financing activities:            |                                                                             |                                                     |                                                     |                                       |        |                   |        |        
|                                                 | Principal payments on capital lease obligations                             |                                                     |                                                     | (94                                   | )      |                   |        | (121    | )    
|                                                 | Repayment of long term debt                                                 |                                                     |                                                     | (1,167                                | )      |                   |        |        |      
|                                                 | Repurchase of common stock                                                  |                                                     |                                                     |                                      |        |                   |        | (47     | )    
|                                                 | Net proceeds from issuances of common stock                                 |                                                     |                                                     | 102                                   |        |                   |        | 177     |      
|                                                 |                                                                             |                                                     |                                                     |                                       |        |                   |        |        
|                                                 |                                                                             | Net cash provided by (used in) financing activities |                                                     |                                       | (1,159 | )                 |        |         | 9     |       
|                                                 |                                                                             |                                                     |                                                     |                                       |        |                   |        |        
|Effect
of exchange rate changes on cash          |                                                                             |                                                     | 260                                                 |                                       |        |                   | 464    |        
|Net decrease in cash and cash equivalents        |                                                                             |                                                     | (9,249                                              | )                                     |        |                   | (7,374 | )      
|Cash and cash equivalents at beginning of period |                                                                             |                                                     | 20,895                                              |                                       |        |                   | 17,996 |        
|                                                 |                                                                             |                                                     |                                                     |                                       |        |                   |        |        
|Cash and cash equivalents at end of period       |                                                                             | $                                                   | 11,646                                              |                                       |        | $                 | 10,622 |        
|                                                 |                                                                             |                                                     |                                                     |                                       |        |                   |        |        

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

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ARGONAUT TECHNOLOGIES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  BASIS OF PRESENTATION AND NEW ACCOUNTING STANDARDS

Basis of presentation

The accompanying unaudited condensed consolidated financial statements have
been prepared in conformity with generally accepted accounting principles in
the United States for interim financial information and with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not contain
all of the information and footnotes required by generally accepted accounting
principles in the United States for complete financial statements. In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments, consisting of normal recurring
accruals and adjustments, which Argonaut Technologies, Inc. (Argonaut or the
Company) considers necessary to present fairly the financial information
included herein. The condensed consolidated balance sheet at December 31, 2002
has been derived from the audited consolidated financial statements at that
date but does not include all of the information and footnotes required by
accounting principles generally accepted in the United States for complete
financial statements. This Quarterly Report on Form 10-Q should be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Companys Form 10-K, for the year ended December 31,
2002 as filed with the Securities and Exchange Commission. The interim results
presented herein are not necessarily indicative of the results of operations
that may be expected for the full fiscal year ending December 31, 2003, or any
other future period.

New Accounting Standards

In November of 2002, the EITF reached a consensus on Issue No. 00-21, Revenue
Arrangements with Multiple Deliverables. EITF Issue No. 00-21 provides
guidance on how to account for arrangements that involve the delivery or
performance of multiple products, services and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered
into in fiscal periods beginning after June 15, 2003. The effect of adopting
EITF Issue No. 00-21 did not and is not expected to have a material impact on
the Companys financial condition or results of operations.

In January of 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities. FIN No. 46 requires a variable interest entity (VIE) to
be consolidated by a company if that company is considered to be the primary
beneficiary in a VIE. Primary beneficiary is the party subject to a majority
of the risk of loss from the variable interest entitys activities or entitled
to receive a majority of the entitys residual returns or both. The
requirements of FIN No. 46 apply immediately to VIEs created after January 31,
2003. The consolidation requirements apply to older entities in the first
fiscal year or interim period ending after December 15, 2003. The Company
does not currently have any investments in variable interest entities,
therefore the adoption of FIN 46 did not and is not expected to have a material
impact on the Companys financial condition or results of operations.

In May of 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments With Characteristics of both Liabilities and Equity which requires
freestanding financial instruments such as mandatory redeemable shares, forward
purchase contracts and written put options to be reported as liabilities by
their issuers as well as related new disclosure requirements. The provisions
of SFAS No. 150 are effective for instruments entered into or modified after
May 31, 2003 and pre-existing instruments as of the beginning of the first
interim period that commences after June 15, 2003. The effect of adopting SFAS
No. 150 did not have a material impact on the Companys financial condition or
results of operations.

NOTE 2  STOCK-BASED COMPENSATION

The Company accounts for its stock-based employee compensation as permitted by
Statement of Financial Accounting Standard No. 123, Accounting for Stock-Based
Compensation  (SFAS 123), as amended by Statement of Financial Accounting
Standard No. 148, Accounting for Stock-Based Compensation  Transition and
Disclosure, whereby stock-based employee compensation arrangements are
accounted for under the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees
(APB 25). Under APB 25, when the exercise price of the Companys stock
options is less than the market price of the underlying shares on the date of
grant, compensation expense is recognized. Pro forma information regarding net
loss per share is required by SFAS 123 as if the Company had accounted for its
employee stock options under the fair value method of SFAS 123. The fair value
of these options granted prior to the Companys initial public offering in July
2000 was estimated at the date of grant using the
minimum value method. The fair value of stock options granted subsequent to the
initial public offering were valued using the Black-Scholes valuation model
based on the actual stock closing price on the date of grant. The fair value of
these options

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was estimated at the date of grant using the following weighted-average
assumptions:

|                               |  |                                  |      |                                 |  |           |      |         |  |  |      |   |  |  |      |  
|------------------------------ |  | -------------------------------- | ---- | ------------------------------- |  | --------- | ---- | ------- |  |  | ---- | - |  |  | ---- | -
|                               |  | Three Months Ended September 30, |      | Nine Months Ended September 30,
|                               |  |                                  |      |                                
|                               |  | 2003                             |      | 2002                            |  | 2003      |      | 2002   
|                               |  |                                  |      |                                 |  |           |      |        
|Risk-free interest rate        |  |                                  | 3.00 | %                               |  |           | 3.12 | %       |  |  | 2.30 | % |  |  | 3.65 | %
|Dividend yield                 |  |                                  |     |                                 |  |           |     |         |  |  |     |   |  |  |     |  
|Weighted-average expected life |  | 3.6 years                        |      | 4.0 years                       |  | 3.6 years |      | 4 years
|Volatility                     |  |                                  | 0.81 |                                 |  |           | 0.94 |         |  |  | 1.08 |   |  |  | 0.94 |  

The pro forma disclosures required by SFAS 123 are as follows (in thousands,
except per share amounts):

|                                                                                                         |  |                                  |        |                                 |  |      |        |      |  |   |        |   |  |   |         |  
|-------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------ | ------------------------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------- | -
|                                                                                                         |  | Three Months Ended September 30, |        | Nine Months Ended September 30,
|                                                                                                         |  |                                  |        |                                
|                                                                                                         |  | 2003                             |        | 2002                            |  | 2003 |        | 2002
|                                                                                                         |  |                                  |        |                                 |  |      |        |     
|Net loss, as reported                                                                                    |  | $                                | (3,065 | )                               |  | $    | (5,338 | )    |  | $ | (7,502 | ) |  | $ | (11,612 | )
|Stock-based employee compensation expense included in
reported net loss                                  |  |                                  | 13     |                                 |  |      | 15     |      |  |   | 49     |   |  |   | 312     |  
|Total stock-based employee compensation expense
determined under fair value based methods for all awards |  |                                  | (397   | )                               |  |      | (343   | )    |  |   | (1,208 | ) |  |   | (870    | )
|                                                                                                         |  |                                  |        |                                 |  |      |        |      |  |   |        |   |  |   |         |  
|Pro forma net loss                                                                                       |  | $                                | (3,449 | )                               |  | $    | (5,666 | )    |  | $ | (8,661 | ) |  | $ | (12,170 | )
|                                                                                                         |  |                                  |        |                                 |  |      |        |      |  |   |        |   |  |   |         |  
|Basid and diluted net loss per common share, as reported                                                 |  | $                                | (0.15  | )                               |  | $    | (0.27  | )    |  | $ | (0.37  | ) |  | $ | (0.59   | )
|                                                                                                         |  |                                  |        |                                 |  |      |        |      |  |   |        |   |  |   |         |  
|Pro forma basic and diluted net loss per common share                                                    |  | $                                | (0.17  | )                               |  | $    | (0.28  | )    |  | $ | (0.43  | ) |  | $ | (0.61   | )
|                                                                                                         |  |                                  |        |                                 |  |      |        |      |  |   |        |   |  |   |         |  

Equity instruments granted to non-employees are accounted for using the
Black-Scholes valuation model prescribed by SFAS 123 and, in accordance with
Emerging Issues Task Force Consensus No. 96-18, Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring or in
Conjunction with Selling Goods or Services. The equity instruments are
subject to periodic revaluations over their vesting terms. The expense is
recognized as the instruments vest.

NOTE 3  INVENTORIES

Inventories consist of the following (in thousands):

|                |  |               |       |              |  |   |       | 
|--------------- |  | ------------- | ----- | ------------ |  | - | ----- | 
|                |  | September 30, |       | December 31,
|                |  | 2003          |       | 2002        
|                |  |               |       |             
|Raw materials   |  | $             | 5,493 |              |  | $ | 4,514 | 
|Work in process |  |               | 636   |              |  |   | 709   | 
|Finished goods  |  |               | 1,157 |              |  |   | 1,057 | 
|                |  |               |       |              |  |   |       | 
|                |  | $             | 7,286 |              |  | $ | 6,280 | 
|                |  |               |       |              |  |   |       | 

In the third quarter of fiscal year 2002, the Company recorded a charge to cost
of sales of $765,000 for inventories determined to be excess and obsolete based
on the decision to discontinue active selling of those products as a component
of a broader restructuring plan. See Note 8.

NOTE 4  NET LOSS PER SHARE

Net loss per share has been computed according to Statement of Financial
Accounting Standards (SFAS) No. 128, Earnings Per Share, which requires
disclosure of basic and diluted earnings per share. Basic and diluted net loss
per share was computed using the weighted-average number of common shares
outstanding during the period. Due to the net loss position of the Company,
diluted earnings per share is calculated using the weighted average number of
common shares outstanding and excludes the effects of potential common shares
that are antidilutive. Options to purchase 3,910,832 and 4,203,616 shares of
common stock were outstanding at September 30, 2003 and September 30, 2002,
respectively, and warrants to purchase 80,665 shares of common stock were
outstanding at September 30, 2003 and September 30, 2002, but were not

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included in the computation of diluted net loss per share, since the effect
would be antidilutive.

NOTE 5  COMPREHENSIVE LOSS

Comprehensive loss is comprised of net loss and other items of comprehensive
income (loss). Other comprehensive income (loss) includes unrealized gains and
losses on the Companys short-term investments and foreign currency translation
adjustments.

For the three- and nine-month periods ended September 30, 2003 and 2002,
comprehensive loss is as follows (in thousands):

|                                  |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |         |  
|--------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------ | - |  | - | ------- | -
|                                  |  | Three Months Ended |        | Nine Months Ended
|                                  |  | September 30,      |        | September 30,    
|                                  |  |                    |        |                  
|                                  |  | 2003               |        | 2002              |  | 2003 |        | 2002
|                                  |  |                    |        |                   |  |      |        |     
|Net loss                          |  | $                  | (3,065 | )                 |  | $    | (5,338 | )    |  | $ | (7,502 | ) |  | $ | (11,612 | )
|Unrealized gain (loss)            |  |                    | 1      |                   |  |      | (9     | )    |  |   | 1      |   |  |   | (159    | )
|Cumulative translation adjustment |  |                    | 55     |                   |  |      | 291    |      |  |   | 367    |   |  |   | 608     |  
|                                  |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |         |  
|Comprehensive loss                |  | $                  | (3,009 | )                 |  | $    | (5,056 | )    |  | $ | (7,134 | ) |  | $ | (11,163 | )
|                                  |  |                    |        |                   |  |      |        |      |  |   |        |   |  |   |         |  

NOTE 6  BUSINESS COMBINATION

On February 20, 2002, Argonaut completed its acquisition of Jones
Chromatography Limited, a company organized under the laws of England and Wales
(JCL), and its wholly owned subsidiaries International Sorbent Technology
(IST) and Jones Chromatography U.S.A., Inc. (JCI) (together with JCL,
Jones Group), pursuant to a Share Purchase Agreement (the Purchase
Agreement), dated February 11, 2002, among Argonaut and the stockholders of
JCL.

The strategic acquisition of Jones Group created a combined company serving as
a global provider of solutions for chemistry development. The addition of Jones
Group to Argonaut strengthened and expanded the Companys position in chemistry
consumables sales, and increased the Companys European business. The Jones
Group is a leading manufacturer and distributor of high quality chromatography
and purification accessories, consumables and instrumentation. Consumable items
include leading brand sorbents, solid phase extraction (SPE) columns and
96-well plates, flash chromatography and High Performance Liquid Chromatography
(HPLC) columns. It manufactures purification and other chemistry development
instruments for the drug discovery market.

In the transaction, the stockholders of JCL exchanged all of their respective
shares of JCLs stock for (i) cash in an aggregate
amount of £3,825,000 ($5,431,500), (ii) 572,152 shares of unregistered Argonaut
Common Stock, and (iii) notes payable in the aggregate principal amount of
£7,650,000 ($10,863,000). The aggregate purchase price, including transaction
costs of $875,000, was approximately $19.0 million. Barclays Bank PLC
guarantees the notes payable, which are redeemable for cash over a two-year
period following the closing date. In addition, certain employees of the Jones
Group that remained as employees after the transaction received stock options
to purchase an aggregate 349,800 shares of Argonauts Common
Stock at an average price per share of $3.1967.

The acquisition was accounted for under the purchase method of accounting. The
572,152 shares of unregistered Argonaut Common Stock issued in the transaction
were valued at $3.196 per share based on the average closing price of
Argonauts Common Stock on the Nasdaq Stock Markets National Market on the two trading
days prior and two trading days subsequent to the announcement date of the
acquisition (February 11, 2002).

The Consolidated Statements of Operations include the results of Jones Group
for the period from February 21, 2002 to September 30, 2002.

The Company allocated the purchase price based on the estimated fair value of
the net tangible and intangible assets acquired. Based on the information
obtained from an independent valuation, the Company allocated the purchase
price as follows (in thousands):

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|                                                |                      |   |        |       | 
|----------------------------------------------- | -------------------- | - | ------ | ----- | 
|Net tangible assets                             |                      | $ | 5,250  |      
|Goodwill and other purchased intangible assets: |                      |   |        |      
|                                                | Completed technology |   |        | 4,090 | 
|                                                | Trade names          |   |        | 250   | 
|                                                | Goodwill             |   |        | 9,410 | 
|                                                |                      |   |        |      
|Total purchase price                            |                      | $ | 19,000 |      
|                                                |                      |   |        |      

The following unaudited pro forma summary presents the consolidated results of
operations of the Company as if the acquisition of Jones Group had occurred at
the beginning of 2002 and does not purport to be indicative of what would have
occurred had the acquisition been made as of those dates or of results which
may occur in the future.

|                   |  |                       |         |  
|------------------ |  | --------------------- | ------- | -
|                   |  | Nine Months          
|                   |  | Ended                
|                   |  | September 30,        
|                   |  | 2002                 
|                   |  |                      
|                   |  | (In thousands, except
|                   |  | per share data)      
|Total net sales    |  | $                     | 20,518  |  
|Net loss           |  |                       | (11,510 | )
|Net loss per share |  |                       | (0.58   | )

NOTE 7  GOODWILL AND OTHER PURCHASED INTANGIBLES

Goodwill and other purchased intangible assets have resulted from the
acquisition of Camile Products, LLC, now Argonaut Technologies Systems, Inc.
(ATSI) and the Jones Group. Goodwill and other intangible assets with
indefinite lives are not amortized subsequent to the Companys adoption of SFAS
142, Goodwill and Other Intangible Assets (SFAS 142).

All goodwill and intangible assets have been assigned to one of two reporting
units. The AGNT-Legacy reporting unit consists primarily of goodwill and
intangible assets related to the Companys acquisition of ATSI. The
Jones-Group reporting unit consists of goodwill and intangible assets
deriving from the Companys acquisition of Jones Chromatography, Ltd.

During the third quarter ended September 30, 2003 the Company performed an
interim test for goodwill impairment in the light of lower than
expected third quarter revenue. Based on the discounted cash flows of the
AGNT-Legacy reporting unit, the Company recognized an impairment charge of $1.6
million relating to the goodwill and intangible assets associated with ATSI.
Approximately $763,000 of the impairment charge was related to goodwill
associated with ATSI, and the remainder was related to completed technology
assets associated with the acquisition of ATSI.

The amortization expense relating to the purchased intangible assets for the
three- and nine-month periods ended September 30, 2003 was $229,000 and
$680,000 respectively. The following represents the gross carrying amounts and
accumulated amortization of amortized intangible assets at September 30, 2003:

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|                             |                      |       |   |          |       |              |   |      |        |  
|---------------------------- | -------------------- | ----- | - | -------- | ----- | ------------ | - | ---- | ------ | -
|                             |                      |       |   | Gross    |       |              |   |     
|                             |                      |       |   | Carrying |       | Accumulated 
|                             |                      |       |   | Amount   |       | Amortization
|                             |                      |       |   |          |       |             
|Amortized intangible assets: |                      |       |   |          |       |              |   |     
|                             | Completed technology |       | $ | 4,145    |       |              | $ | (975 | )     
|                             | Licenses             |       |   | 1,435    |       |              |   | (147 | )     
|                             | Tradenames           |       |   | 250      |       |              |   | (44  | )     
|                             |                      |       |   |          |       |              |   |     
|                             |                      | Total |   | $        | 5,830 |              |   | $    | (1,166 | )
|                             |                      |       |   |          |       |              |   |     

NOTE 8  RESTRUCTURING CHARGES

On August 8, 2002, the Company announced its intention to execute a
restructuring program focused on improving productivity, reducing operational
expenses in remote offices, and implementing a workforce reduction of
approximately 20% of its existing worldwide employees. As a result, the
Company recognized a charge of $1.8 million in the third quarter ended
September 30, 2002. The charge includes termination benefits and related
expenses of approximately $630,000 related to the reduction of the workforce by
44 employees, expenses of approximately $683,000 related to the abandonment of
excess equipment, expenses of approximately $356,000 for the abandonment of
excess leased facilities, and expenses of approximately $133,000 for various
other related charges. At September 30, 2003, 37 of the 44 employees had been
terminated.

Remaining cash expenditures relating to workforce reduction will be paid during
2003. Amounts related to the abandonment of excess leased facilities will be
paid as the lease payments are due through the remainder of the lease terms
through 2004. A summary of the restructuring activity is as follows (in
thousands):

|                                        |  |             |       |         |  |          |      |                   |  |          |      |               |  |         |     |  |  |   |      |                  |  |   |     | 
|--------------------------------------- |  | ----------- | ----- | ------- |  | -------- | ---- | ----------------- |  | -------- | ---- | ------------- |  | ------- | --- |  |  | - | ---- | ---------------- |  | - | --- | 
|                                        |  |             |       |         |  | 2002     |      | 2003             
|                                        |  |             |       |         |  |          |      |                  
|                                        |  |             |       |         |  |          |      |                   |  |          |      |               |  | Accrued |     |  |  |   |      | Restructuring at
|                                        |  | Charge in   |       | Noncash |  | Cash     |      | Restructuring at  |  | Cash     |      | September 30,
|                                        |  | August 2002 |       | Charges |  | Payments |      | December 31, 2002 |  | Payments |      | 2003         
|                                        |  |             |       |         |  |          |      |                   |  |          |      |              
|Workforce reductions                    |  | $           | 630   |         |  | $        |     |                   |  | $        | (212 | )             |  | $       | 418 |  |  | $ | (274 | )                |  | $ | 144 | 
|Abandonment of excess equipment         |  |             | 683   |         |  |          | (683 | )                 |  |          |     |               |  |         |    |  |  |   |     |                  |  |   |    | 
|Abandonment of excess leased
facilities |  |             | 356   |         |  |          |     |                   |  |          |     |               |  |         | 356 |  |  |   | (19  | )                |  |   | 337 | 
|Other                                   |  |             | 133   |         |  |          |     |                   |  |          | (30  | )             |  |         | 103 |  |  |   | (95  | )                |  |   | 8   | 
|                                        |  |             |       |         |  |          |      |                   |  |          |      |               |  |         |     |  |  |   |      |                  |  |   |     | 
|Total                                   |  | $           | 1,802 |         |  | $        | (683 | )                 |  | $        | (242 | )             |  | $       | 877 |  |  | $ | (388 | )                |  | $ | 489 | 
|                                        |  |             |       |         |  |          |      |                   |  |          |      |               |  |         |     |  |  |   |      |                  |  |   |     | 

NOTE 9  REALIZED GAIN ON THE SALE OF NET ASSETS

On July 30, 2003, the Company announced the sale of its HPLC business to the
Grace Vydac business unit of W.R. Grace & Co. The sale included the Genesis®
and ApexTM brands of HPLC columns and HPLC-related capital assets and
trademarks. The divestiture enables the Company to focus R&D and sales and
marketing efforts on core product areas providing consumable and instrument
products to the critical areas of drug development. The pretax gain on the
sale of net assets was approximately $460,000.




ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This quarterly report contains forward-looking statements for purposes of the
Private Securities Litigation Reform Act of 1995, and it is the Companys
intention that such statements be protected by the safe harbor created thereby.
Examples of such forward-looking statements include statements regarding
future revenues, expenses, losses and cash flows, the expected range of
earnings before interest, taxes and depreciation and amortization, research and

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development activities and sales and marketing initiatives such as our
plan to concentrate our efforts in those areas such as building our core
consumables business, possible future acquisitions, the anticipated effects of
the acquisition of Jones Group to our net sales performance and pre-tax
operating results, our plans to discontinue non-performing consumable products
and certain legacy instrument products, the anticipated effects of our recent
restructuring program and related accruals, values of our assets and
liabilities over their remaining useful lives and our testing for impairment of
goodwill, and our expectations as to the duration of our negative cash flows
from operations and the sufficiency of existing cash reserves for the next 12
months. Actual results may differ materially from those projected in such
forward-looking statements due to various known and unknown risks and
uncertainties, including the risk that a decline in the economy generally or
the market for our products will adversely affect our business, the risk that
the market for our products and services does not develop as anticipated, the
risk that we are unable to successfully integrate the product and service
offerings of the company we recently acquired and successfully capitalize on
anticipated synergies and growth opportunities, and the risk that our
restructuring programs do not proceed as planned and that we incur unexpected
expenses in connection with the implementation thereof. For a further
discussion of these and other risks and uncertainties related to our business
see Factors That May Affect Our Future
Results below.

Overview

Argonaut develops innovative products designed to help pharmaceutical and other
chemists engaged in the discovery and
development of new chemical entities increase their productivity and reduce
their operating costs without compromising the scientific integrity of their
research. Our products are designed to enable chemists to increase their
productivity, reduce their operating costs through automation and process
simplification, and cost effectively explore the increasing number of drug
targets available for drug development. We derive revenues primarily from the
sale of our chemistry consumable products, instrumentation products and
services. We commenced commercial shipment of our first generation instrument
in 1996, the Quest product line in 1997, the Trident product line in 1998,the
Surveyor and the Endeavor product lines in 2000, and the Advantage Series
product line in 2003. Revenue from sales of our instrument products and
integration services are recognized when delivery and installation of the
product is complete. We also derive revenues from the sale of reagents, and
other instrument related consumables and consumables products of Jones
Chromatography Limited (Jones Group), which we acquired on February 20, 2002.
Our expenses have consisted primarily of costs incurred in research and
development, manufacturing and general and administrative costs associated with
our operations, and our sales and marketing organization. Since our inception,
we have incurred significant losses and, as of September 30, 2003, we had an
accumulated deficit of $76.6 million.

Recent Developments

Impairment charges to goodwill and other purchased intangibles

During the third quarter ended
September 30, 2003 we performed an
interim test for goodwill impairment in light of lower than expected third quarter revenue.
Based on the discounted cash flows of our AGNT-Legacy reporting unit,
we recognized an impairment charge of $1.6 million
relating to the goodwill and intangible assets associated with ATSI.
Approximately $763,000 of the impairment charge was related to goodwill
associated with ATSI, and the remainder was related to completed technology
assets associated with the acquisition of ATSI.

Critical Accounting Policies

There have been no material changes to the Companys critical accounting
policies that are included/described in our Form 10-K for the year ended
December 31, 2002 filed with the Securities and Exchange Commission on March
31, 2003.

RESULTS OF OPERATIONS FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30,
2003

Operating results for the three-and nine-month periods ended September 30, 2002
include the Jones Group since February 21, 2002.

Net sales

Net sales in the three-month period ended September 30, 2003 were $5.2 million
compared to $7.3 million for the same period in 2002, a decrease of 29%. For
the third quarter of 2003, instrument sales comprised approximately 28% of net
sales, chemistry consumables sales comprised approximately 52% of net sales,
and service, integration services and contract research and development (R&D)
together comprised approximately 20% of net sales. Instrument sales were $1.5
million

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in the third quarter of 2003 versus $2.6 million for the same period in 2002, a
decrease of 44%. The decrease was caused by slower than anticipated growth of
new instrument product sales combined with the transition away from
discontinued legacy instrument products, begun in 2002, which accounted for
$1.4 million of instrument sales in the third quarter of 2002
compared to $0.3 million in the three-month period ended
September 30, 2003. Chemistry
consumables sales were $2.7 million in the third quarter of 2003
versus $3.5 million in the same period of 2002, a decrease of
23%. The decrease was primarily due to the impact of the HPLC
business divestiture
and lower resin product sales. The recently divested HPLC business
contributed approximately $0.2 million to chemistry consumables sales in the
third quarter of 2003 versus $0.7 million in the same period of
2002. For the
nine-month period ended September 30, 2003, net sales totaled $18.3 million
compared to $18.8 million for the same quarter in 2002, a decrease of 2%. For
the nine-month period ending September 30, 2003, instrument sales were $5.9
million, or 32% of total net sales, versus $7.2 million, or 38% of total net
sales, as compared to the same period in 2002, due primarily to the effects of
product transitions and discontinuance of legacy instrument products.
Chemistry consumable sales for the nine-month period ended September 30, 2003
were $8.9 million versus $8.1 million in the same period in 2002, an increase
of 10%, due primarily to the acquisition of the Jones Group.

Cost of sales

Cost of sales, comprised of cost of products and cost of services and cost of
sales-special charges was $2.6 million in the three-month period ended
September 30, 2003 versus $4.8 million for the same period in 2002, a decrease
of 46%, due
primarily to lower sales volume and the inclusion of $0.8 million of special
charges in 2002 related to the write-off of excess and obsolete inventory
recorded based on the Companys decision to discontinue active selling of those
products as a component of a broader restructuring plan. Gross margin as a
percent of sales was 50.5 % for the third quarter of 2003 compared to 34.3% for
the third quarter of 2002. Product gross margin as a percent of sales
increased to 50.5% for the quarter ended September 30, 2003 as compared to
44.0% for the same period in 2002. The gross margin as a percent of sales for
the quarterly period ended September 30, 2003 includes the favorable impact of
approximately $66,000 related to the sale of discontinued products previously
charged to cost of sales as excess inventory in the third quarter of 2002. For
the nine-month period ended September 30, 2003, cost of sales was $9.9 million
versus $10.9 million for the same period in 2002. Gross margin as a percent of
sales for products was 48.6% for the nine-month period ended September 30,
2003, as compared to 41.9% for the same period in 2002. The gross margin as a
percent of sales for the nine-month period ended September 30, 2003 includes
the favorable impact of approximately $459,000 related to the sale of
discontinued products previously charged to cost of sales as excess inventory
in the third quarter of 2002.

Research and development expenses

Research and development expenses were $1.1 million for the three-month period
ended September 30, 2003 compared to $1.5 million for the same period in 2002,
a decrease of 28%. These expenses include salaries and related costs of
research and development personnel, fees paid to consultants and outside
service providers, the costs of facilities and related expenses, non-recurring
engineering charges and prototype costs related to the design, development
testing, pre-manufacturing and significant improvement of our products. The
decrease was primarily attributable to lower personnel costs resulting from the
effects of the restructuring program initiated in the third quarter of 2002 and
reduced stock-based compensation expenses. Stock-based compensation expenses
related to research and development decreased by $28,000 for the third quarter
of 2003 as compared to the same period in 2002. For the nine-month period
ended September 30, 2003, research and development expenses decreased to $3.4
million as compared to $4.3 million for the same period in 2002, a decrease of
21%, due primarily to lower personnel costs resulting from the third quarter
2002 restructuring program. Stock-based compensation expenses related to
research and development decreased by $132,000 for the nine-month period ended
September 30, 2003 as compared to the same period in 2002.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased to $2.8 million in the
three-month period ended September 30, 2003 from $4.5 million for the same
period in 2002, a decrease of 37%. These expenses consist primarily of
salaries and related costs for executive, sales and marketing, finance and
other administrative personnel, the cost of facilities and related spending,
and the costs associated with promotional and other marketing expenses. The
decrease was primarily attributable to the effects of the restructuring efforts
initiated in the third quarter of 2002. Selling, general and administrative
expenses decreased to $10.4 million for the nine-month period ended September
30, 2003 from $13.2 million for the same period in 2002, a decrease of 21%.
The decrease was primarily due to lower personnel costs resulting from the
third quarter 2002 restructuring program.

Amortization of purchased intangible assets

For the quarter ended September 30, 2003, the Company recorded amortization of
purchased intangibles of $202,000 compared to $209,000 in the same
period of 2002, a decrease of 3%, relating to the March 1, 2001
acquisition of ATSI, the February 20, 2002 acquisition of Jones
Group and other purchased intangibles. For the
nine-month period ended September 30, 2003, the Company recorded amortization
of purchased intangibles of $627,000 as compared to $524,000 for the same
period in 2002, an increase of 20%. The

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increase was due to the increased intangibles resulting from the acquisition of
the Jones Group. During the third quarter ended September 30, 2003 the Company
performed an interim test for goodwill impairment in light of lower
than expected third quarter
revenue. Based on the discounted cash
flows of the AGNT-Legacy reporting unit, the Company recognized an impairment charge of
$1.6 million relating to the goodwill and intangible assets associated with
ATSI. Approximately $763,000 of the impairment charge was related to goodwill
associated with ATSI, and the remainder was related to completed technology
assets associated with the acquisition of ATSI.

Restructuring charges

On August 8, 2002, the Company announced its intention to execute a
restructuring program focused on improving productivity, reducing operational
expenses in remote offices, and implementing a workforce reduction of
approximately 20% of the existing worldwide employees. As a result, the
Company recognized a charge of $1.8 million in the third quarter ended
September 30, 2002. The charge included termination benefits and related
expenses of approximately $630,000 related to the reduction of our workforce by
44 employees, expenses of approximately $683,000 related to the abandonment of
excess equipment, expenses of approximately $356,000 for the abandonment of
excess leased facilities, and expenses of
approximately $133,000 for various related charges. The restructuring program
is estimated to result in annualized savings of approximately $3.0 million
beginning in fiscal 2003, realized primarily in reduced operating costs as a
result of reduced employee-related costs. As of September 30, 2003, 37 of the
44 employees had been terminated and the accrued restructuring liability was
$489,000. For the three- and nine-month periods ended September 30, 2003, cash
payments related to the restructuring program were $45,000 and $388,000,
respectively. Remaining cash expenditures relating to workforce reduction and
other related charges will be paid during 2003. Amounts related to the
abandonment of excess leased facilities will be paid as the lease payments are
due over the remainder of the lease terms through 2004.

Other income (expenses)

Interest and other income decreased by
42% to $172,000 for the three-month period
ended September 30, 2003 as compared to $294,000 for the same period in 2002,
primarily because of lower average balances of invested cash, cash equivalents,
and short-term investments and reduced interest rates consistent with the
overall interest rate decline of high quality short-term investments. Interest
and other expense was $173,000 for the third quarter of 2003 compared to
$173,000 in the same period in 2002. For the nine-month period ended September
30, 2003, interest and other income decreased by 28% to $704,000 as compared to
$977,000 for the same period in 2002, due to the same factors driving the third
quarter results. Interest and other expense was $499,000 for the first nine
months of 2003 as compared to $422,000 for the same period of 2002 primarily
due to the full year of interest associated with the notes payable for the
Jones Group acquisition.

On July 30, 2003, the Company announced the sale of its HPLC business to the
Grace Vydac business unit of W.R. Grace & Co. The sale included the Genesis®
and ApexTM brands of HPLC columns and HPLC-related capital assets and
trademarks. The divestiture enables the Company to focus R&D and sales and
marketing efforts on core product areas providing consumable and instrument
products to the critical areas of drug development. The pretax gain on the
sale of net assets was approximately $460,000 for the three and nine-month
period ended September 30, 2003.

Provision for income taxes

The Company recorded a provision for income taxes of approximately $420,000 to
record the UK corporate tax liability of Jones Group for the three-month period
ended September 30, 2003 as compared to zero recorded for the same period in
2002. The increase is due to the combination of higher UK net income and tax
on the gain related to the sale of the HPLC business to the Grace Vydac
business unit of W.R. Grace & Co. completed in July. For the first nine months
of 2003 and 2002, the Company recorded tax provisions of approximately $531,000
and $200,000, respectively.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2003, the Company had cash, cash equivalents, short-term
investments and restricted cash of $30.9 million compared to $39.2 million at
December 31, 2002. The decrease was primarily due to the use of
$7.9 million in
general operating activities, approximately $928,000 used for capital
expenditures, approximately $388,000 in cash payments related to restructuring
activities initiated in the third quarter of 2002, and approximately $1.3
million in cash used for principal payments on notes payable and capital lease
obligations.

The restricted cash amount of $11.4 million at September 30, 2003 is
denominated in British Pounds Sterling and represents the cash used to secure
the notes payable of £7,650,000 as purchase consideration in the acquisition of
the Jones Group. The notes are payable over two years carrying an initial
interest rate of 3.9% per annum for the twelve month period commencing on the
date of note issuance, payable quarterly. Following the initial twelve-month
period, the interest rate on the notes is set

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to the Barclays Bank base rate on the business day immediately preceding each
quarterly interest period. At September 30, 2003, approximately £822,000 of
the note principal had been paid, with the remainder payable at April 30, 2004.

Net cash used to support operating activities has historically fluctuated based
on the timing of payments of accounts payable balances, receipts of customer
deposits, receipt of payments of accounts receivable balances, changes in
inventory balances resulting from varying levels of manufacturing activities,
the timing of research and development projects, the timing and scope of our
sales and marketing initiatives and fluctuations in the Companys net loss.

On August 8, 2002, the Company announced the approval by its Board of Directors
of a stock repurchase program pursuant to which shares of its outstanding
common stock having an aggregate value of up to $500,000 may be repurchased
through open market transactions at prices deemed appropriate by the Company.
The duration of the stock repurchase program is open-ended. The timing and
amount of repurchase transactions under this program will depend on market
conditions,
corporate and regulatory considerations, and will be funded from available
working capital. Through September 30, 2003, the Company had repurchased
50,000 shares of outstanding common stock at an average purchase price of per
share of $0.93.

The Company expects to have negative cash flows from operations through the
fourth quarter of 2003. We may also use cash resources and raise additional
funds to fund additional collaborative or strategic relationships, acquisitions
or investments in other businesses, technologies or product lines. Our future
capital requirements depend on a number of factors, including market acceptance
of our products, the resources we devote to developing and supporting our
products, continued progress of our research and development of potential
products, the need to acquire licenses to new technology and the availability
of other financing on acceptable terms. We believe that our current cash
balances will be sufficient to fund our operations through at least the next 12
months. To the extent that our capital resources are insufficient to meet
future capital requirements, we will need to raise additional capital or incur
indebtedness to fund our operations. There can be no assurance that additional
debt or equity financing will be available on acceptable terms, if at all. If
adequate funds are not available, we may be required to delay, reduce the scope
of, or eliminate, our operations. We may be required to obtain funds through
arrangements with collaborative or strategic partners or others that may
require us to relinquish rights to certain technologies or products that we
might otherwise seek to retain.

The Company expects that for the fourth quarter of 2003 earnings before
interest, taxes and depreciation and amortization will be in a range of
slightly positive by $200,000 to slightly negative by $200,000. These
estimates are based on expectations of increased sales volume relative to the
third quarter and continued progress in the reduction of operating expenses.

The following summarizes the Companys contractual cash obligations at
September 30, 2003, and the effect such obligations are expected to have on our
liquidity and cash flows in future periods (in thousands):

|                                   |  |                         |        |        |  |           |        |        |  |        |    |  |  |   |   | 
|---------------------------------- |  | ----------------------- | ------ | ------ |  | --------- | ------ | ------ |  | ------ | -- |  |  | - | - | 
|                                   |  | Payments due by period:
|                                   |  |                        
|                                   |  |                         |        |        |  | Less than |        | 1 to 3 |  | 4 to 5
|Contractual Obligations            |  | Total                   |        | 1 year |  | years     |        | years 
|                                   |  |                         |        |        |  |           |        |       
|Notes payable (Jones Group)        |  | $                       | 11,304 |        |  | $         | 11,304 |        |  | $      |   |  |  | $ |  | 
|Capital lease obligations          |  |                         |       |        |  |           |       |        |  |        |   |  |  |   |  | 
|Operating lease obligations        |  |                         | 914    |        |  |           | 847    |        |  |        | 67 |  |  |   |  | 
|                                   |  |                         |        |        |  |           |        |        |  |        |    |  |  |   |   | 
|Total contractual cash obligations |  | $                       | 12,218 |        |  | $         | 12,151 |        |  | $      | 67 |  |  | $ |  | 
|                                   |  |                         |        |        |  |           |        |        |  |        |    |  |  |   |   | 

NEW ACCOUNTING STANDARDS

In November of 2002, the EITF reached a consensus on Issue No. 00-21, Revenue
Arrangements with Multiple Deliverables. EITF Issue No. 00-21 provides
guidance on how to account for arrangements that involve the delivery or
performance of multiple products, services and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue arrangements entered
into in fiscal periods beginning after June 15, 2003. The effect of adopting
EITF Issue No. 00-21 did not and is not expected to have a material impact on
the Companys financial condition or results of operations.

In January of 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities. FIN No. 46 requires a variable interest entity (VIE) to
be consolidated by a company if that company is considered to be the primary
beneficiary in a VIE. Primary beneficiary is the party subject to a majority
of the risk of loss from the variable interest entitys activities

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or entitled to receive a majority of the entitys residual returns or
both. The requirements of FIN No. 46 apply immediately to VIEs created after
January 31, 2003. The consolidation requirements apply to older entities in the
first fiscal year or interim period ending after December 15, 2003. The
Company does not currently have any investments in variable interest entities,
therefore the adoption of FIN 46 did not and is not expected to have a material
impact on the Companys financial condition or results of operations.

In May of 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments With Characteristics of both Liabilities and Equity which requires
freestanding financial instruments such as mandatory redeemable shares, forward
purchase contracts and written put options to be reported as liabilities by
their issuers as well as related new disclosure requirements. The provisions
of SFAS No. 150 are effective for instruments entered into or modified after
May 31, 2003 and pre-existing instruments as of the beginning of the first
interim period that commences after June 15, 2003. The effect of adopting SFAS
No. 150 did not have a material impact on the Companys financial condition or
results of operations.

FACTORS THAT MAY AFFECT OUR FUTURE RESULTS

We have a history of operating losses and we may never achieve or sustain
profitability and may be required to raise additional funds if losses continue.

We have incurred operating losses and negative cash flows from operations since
our inception. As of September 30, 2003, we had an accumulated deficit of
$76.6 million and we recorded net losses of $7.5 million for the nine-month
period ended September 30, 2003. We expect to continue to incur operating and
net losses through at least the fourth quarter of 2003 and we may never generate positive cash flows.

To the extent our capital resources are insufficient to meet our future capital
requirements, we will have to raise additional funds to continue the
development and commercialization of our products. Funds may not be available
on favorable terms, if at all. To the extent that we raise additional capital
through the sale of equity, the issuance of those securities will result in
dilution to our stockholders.

If our products do not become widely used in the pharmaceutical, biotechnology,
life sciences and chemical industries, it is unlikely that we will ever become
profitable.

Pharmaceutical, biotechnology, life sciences and chemical organizations have
historically performed chemistry development using traditional laboratory
methods. To date, our products have not been widely adopted by these
industries. The commercial success of our products will depend upon the
adoption of these products as a method to develop chemical compounds for these
industries. In order to be successful, our products must meet the performance
and pricing requirements for chemistry development within the pharmaceutical,
biotechnology, life sciences and chemical industries. Market acceptance will
depend on many factors, including our ability to:



| |  | Convince prospective customers that our products are a cost-effective alternative to
traditional methods and other technologies that may be introduced for chemistry development.        
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Convince prospective customers that our products provide the same or enhanced quality and
accuracy as compared with traditional methods and other new technologies that may be developed.
| 
| |  | Manufacture products in sufficient quantities with acceptable quality and at an acceptable cost.                                                                                         
| 
| |  | Install and service sufficient numbers of our instruments, particularly new instruments such as
the Advantage Series 3400 process chemistry workstation.                                

If we cannot achieve these objectives, our products will not gain market
acceptance.

We face risks associated with past and future acquisitions.

Our success depends in part on our ability to continually enhance and broaden
our product offerings in response to changing technologies, customer demands
and competitive pressures. To meet these challenges, we have acquired
complementary businesses and may choose to acquire others in the future. We
completed our acquisition of ATSI in March 2001 and Jones Group in February
2002. During 2002 and the first nine months of 2003, we made significant
progress integrating the Jones Group business; however, we continue to have
remaining integration activities and projects. Our failure to completely and

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successfully integrate this business may materially affect our business going
forward.

We do not know if we will be able to complete any future acquisitions, or
whether we will be able to successfully integrate any acquired business,
operate it profitably or retain its key employees. Integrating any business,
product or technology we acquire could be expensive and time consuming, and may
disrupt our ongoing business and distract our management. If we are unable to
effectively integrate any acquired entities, products or technologies, our
business may suffer. In addition, any amortization of goodwill or other assets
or charges resulting from the costs of acquisitions could negatively impact our
operating results. Our available cash and securities may be used to buy or
invest in companies or products, possibly resulting
in significant acquisition-related charges to earnings and dilution to our
stockholders. Due to volatile market conditions, the value of long live assets
maybe negatively impacted, which may result in future, additional impairment
charges. Moreover, if we buy a company, we may have to incur or assume that
companys liabilities, including liabilities that are unknown at the time of
acquisition.

Our product development efforts may not produce commercially viable products.

We continue to devote significant personnel and financial resources to research
and development activities to develop new products. We may not be successful
in developing new products, and we may never realize any benefits from such
research and development activities, including both our current research
collaboration with Pfizer and GSK, which may not produce commercially viable
products. Our ability to increase our revenues and achieve and sustain
profitability is dependent upon our ability to successfully develop new and
commercially viable products. During the first half of 2003, we launched a new
product from the Pfizer and ICI consortium, the Advantage Series 3400
workstation, and this product is important to our ability to increase revenues
in 2003 and beyond. Our failure to achieve our anticipated levels of revenues
for this product will harm our ability to achieve our financial goals during
2003.

Our instrument products have lengthy sales cycles, which could cause our
operating results to fluctuate significantly from quarter to quarter.

Our ability to obtain customers for our instrument products depends, in
significant part, upon the perception that our products can help accelerate
efforts in chemical development. The sale of many of our instrument products
typically involves a significant technical evaluation and commitment of capital
by customers. Accordingly, the sales cycles of many of our instrument products
are lengthy and subject to a number of risks that are beyond our control,
including customers budgetary constraints and internal acceptance reviews.
Our revenues could fluctuate significantly from quarter to quarter, due to this
lengthy and unpredictable sales cycle. A large portion of our expenses,
including expenses for facilities, equipment and personnel, are relatively
fixed. Accordingly, if our revenues decline or do not grow as we anticipate,
we might not be able to correspondingly reduce our operating expenses. Our
failure to achieve our anticipated levels of revenues could significantly harm
our operating results for a particular fiscal period. Due to the possibility
of fluctuations in our operating results, we believe that quarter-to-quarter
comparisons of our operating results are not always a good indication of our
future performance.

The capital spending policies of pharmaceutical, biotechnology, life sciences
and other chemical research organizations have a significant effect on the
demand for our instruments.

We market our products to and receive our revenues principally from
pharmaceutical, biotechnology, life sciences and other chemical research
organizations, and the capital spending policies of these entities can have a
significant effect on the demand for our instruments. These policies are based
on a wide variety of factors, including the resources available for purchasing
research equipment, the spending priorities among various types of research
equipment and the policies regarding capital expenditures. In particular, the
volatility of the public stock market for biotechnology and related companies
has at certain times significantly impacted their ability to raise capital,
which has directly affected their capital spending budgets. In addition,
continued consolidation within these industries will likely delay and may
potentially reduce capital spending by pharmaceutical companies involved in
such consolidations. Any decrease or delay in capital spending by life
sciences companies could cause our revenues to decline and harm our
profitability.

In order to be successful, we must recruit, retain and motivate key employees,
and failure to do so could seriously harm us.

In order to be successful, we must recruit, retain and motivate executives and
other key employees, including those in managerial, technical, marketing and
sales positions. In particular, our product generation efforts depend on
hiring and retaining qualified technical personnel. Attracting and retaining
qualified sales representatives is also critical to our future.

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Experienced management and technical, marketing and support
personnel in the chemistry instrumentation and consumables industry are in high
demand and competition for their talents is intense, although current economic
conditions have moderated this demand and competition for talent. The loss of
key employees could have a significant impact on our operations. We also must
continue to motivate employees and keep them focused on Argonauts strategies
and goals, which may be particularly difficult due to morale challenges posed
by workforce reductions and general uncertainty. Changes in management may be
disruptive to our business and may result in the departure of existing
employees, customers and/or research collaborators. It may take significant
time to locate, retain and integrate qualified management personnel.

Our direct worldwide sales force and network of distributors may not be
sufficient to successfully address the market for our products.

We sell a major portion of our products through our own sales force. We may
not be able to build an efficient and effective sales and marketing force and
continue to expand our network of distributors. Our failure to build an
efficient and effective sales and marketing force could negatively impact sales
of our products, thus reducing our revenues and profitability.

Because we outsource our instrument component, chemical intermediates and
product manufacturing, our ability to produce and supply our products could be
impaired.

We outsource most of the production of components of our instruments to
vendors. We also outsource significant quantities of our high volume chemical
intermediates for our consumables products. Our reliance on our outside
vendors exposes us to risks including:



| |  | the possibility that one or more of our vendors could terminate their services at any time without notice;                 
|- |  | ---------------------------------------------------------------------------------------------------------------------------
| 
| |  | reduced control over pricing, quality and timely delivery, due to the difficulties in switching to alternative vendors; and
| 
| |  | the potential delays and expenses of seeking alternative sources of manufacturing services.                                

Consequently, in the event that components from our suppliers or work performed
by our vendors are delayed or interrupted for any reason, our ability to
produce and deliver our products in sufficient quantities and at acceptable
costs would decline.
Additionally, certain components are provided by a single source. The effect
of a disruption of delivery of those single source components could impact our
ability to deliver product to our customers.

We are exposed to fluctuations in the exchange rates of foreign currency and
the US dollar.

As a global concern, we face exposure to adverse movements in foreign currency
and US dollar exchange rates. Approximately 52% of our net sales are exposed
to foreign currency risk. Approximately 27% of our operating expenses are
exposed to foreign currency risk. These exposures may change over time as
business practices evolve and could have a material adverse impact on our
financial results. We will monitor our exposure and may hedge against this and
any other emerging market currencies as necessary.

We are exposed to the credit risk of some of our customers.

Due to the current slowdown in the economy, the credit risks relating to our
customers have increased. Although we have programs in place to monitor and
mitigate the associated risk, there can be no assurance that such programs will
be effective in reducing our credit risks. We have experienced losses due to
customers failing to meet their obligations. Although these losses have not
been significant, future losses, if incurred, could harm our business and have
a material adverse effect on our operating results and financial conditions.

Our business is subject to risks from international operations.

We conduct business globally. Accordingly, our future results could be
materially adversely affected by a variety of uncontrollable and changing
factors including, among others, foreign currency exchange rates; regulatory,
political, or economic conditions in a specific country or region; trade
protection measures and other regulatory requirements; and natural disasters.
Any or all of these factors could have a material adverse impact on our future
international business.

Our business is subject to the effects of general global economic conditions,
and particularly economic conditions in the United States and the United
Kingdom. Specifically, our business is subject to the effects of market
conditions in the pharmaceutical, biotechnology, life sciences and chemical
industries. In recent quarters, our operating results have been

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adversely affected as a result of unfavorable economic conditions and reduced
capital spending in the United States, Europe, and Asia. If the economic
conditions in the United States and globally do not improve, or if we
experience a worsening in the global economic slowdown, we may continue to
experience material adverse impacts on our business, operating results, and
financial condition.

The life sciences industry is highly competitive and subject to rapid
technological change, and we may not have the resources necessary to
successfully compete.

We compete with companies worldwide that are engaged in the development and
production of similar products. We face competition primarily from the
following three sectors:



| |  | pharmaceutical companies developing their own instruments;                                                                                                                            
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | companies marketing products based upon parallel synthesis and other
non-traditional technologies, such as Mettler-Toledo AG and several
smaller instrument and reagent companies; and
| 
| |  | companies marketing conventional products based on traditional
chemistry methodologies, such as Biotage (a subsidiary of Dyax Corp.)
and Isco, Inc.                                   

Many of our competitors have access to greater financial, technical, research,
marketing, sales, distribution, service and other resources than we do. We
face, and will continue to face, intense competition from organizations serving
the life sciences industry that are developing or marketing competing products
and technologies. These organizations may develop products or technologies
that are superior to our products or technologies in terms of performance, cost
or both. These organizations may offer price discounts or other concessions as
a competitive tactic that we may not be in a position to match.

We will need to develop new applications for our products to remain
competitive. Our present or future products could be rendered obsolete or
uneconomical by technological advances of one or more of our current or future
competitors. In addition, the introduction or announcement of new products by
us or by others could result in a delay of or decrease in sales of existing
products, as customers evaluate these new products. Our future success will
depend on our ability to compete effectively against current technology as well
as to respond effectively to technological advances.

If we infringe on or misappropriate the proprietary rights of others or we are
unable to protect our own intellectual property rights our revenues could be
harmed.

We may be sued for infringing on the intellectual property rights of others.
Intellectual property litigation is costly, and, even if we prevail, the cost
of such litigation could affect our profitability. In addition, litigation is
time consuming and could
divert management attention and resources away from our business. If we do not
prevail in any litigation, in addition to any damages we might have to pay, we
could be required to stop the infringing activity or obtain a license. We may
not be able to obtain required licenses on acceptable terms, or at all. In
addition, some licenses may be nonexclusive, and therefore, our competitors may
have access to the technology licensed to us. If we fail to obtain a required
license or are unable to design around a patent, we may be unable to sell some
of our products, which could harm our ability to compete and result in a
decline in our revenues.

Our success may depend on our ability to obtain and enforce patents on our
technology and to protect our trade secrets. Any patents we own may not afford
meaningful protection for our technology and products. Others may challenge
our patents and, as a result, our patents could be narrowed, invalidated or
rendered unenforceable. In addition, our current and future patent
applications may not result in the issuance of patents to us in the United
States or foreign countries. Moreover, competitors may develop products
similar to ours that are not covered by our patents.

We try to protect our non-patented trade secrets by requiring our employees,
consultants and advisors to execute confidentiality agreements. However, we
cannot guarantee that these agreements will provide us with adequate protection
against improper use or disclosure of our trade secrets. Further, others may
independently develop substantially equivalent proprietary information and
techniques. If we are unable to protect our proprietary information and
techniques, our ability to exclude certain competitors from the market will be
limited.

There may not be an active, liquid trading market for our common stock.

We are listed on the NASDAQ National Market. There is no guarantee that an
active trading market for our Common Stock will be maintained on the NASDAQ
National Market. You may not be able to sell your shares quickly or at the
market price if trading in our stock is not active. If we fail to comply with
the continued listing requirements of the NASDAQ National

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Market, we may be de-listed from trading on such market, and thereafter trading
in our common stock, if any, would likely be conducted through the NASDAQ
SmallCap Market, the over-the-counter market or on the Electronic Bulletin
Board of the National Association of Securities Dealers, Inc.

Our stock price has been highly volatile, and your investment could suffer a
further decline in value.

The trading price of our common stock has been highly volatile and ranged in
2003 from a per-share high of $1.61 to a low of $0.81 and could continue to be
subject to wide fluctuations in price in response to various factors, many of
which are beyond our control, including;



| |  | actual or anticipated variations in quarterly operating results;                                                                                
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | failure to achieve, or changes in, financial estimates by securities analysts;                                                                  
| 
| |  | announcements of new products or services or technological innovations by us or our competitors;                                                
| 
| |  | conditions or trends in the pharmaceutical, biotechnology, life sciences and chemical industries;                                               
| 
| |  | announcements by us of significant acquisitions, strategic partnerships, joint ventures or capital commitments;                                 
| 
| |  | additions or departures of key personnel, including any directors;                                                                              
| 
| |  | developments in the application or interpretation of new or existing accounting pronouncements and reporting obligations                        
| 
| |  | purchases or sales of our common stock, including any repurchases of our common stock under the existing or future
stock repurchase program; and
| 
| |  | developments regarding our patents or other intellectual property or that of our competitors.                                                   

In addition, the stock market in general, and the NASDAQ Stock Markets
National Market and SmallCap Market and the market for technology companies in
particular, have experienced significant price and volume fluctuations that
have often been unrelated or disproportionate to the operating performance of
those companies. Further, there has been particular volatility in the market
prices of securities of life science companies. These broad market and
industry factors may negatively impact the market price of our common stock,
regardless of our operating performance. In the past, following periods of
volatility in the market price of a companys securities, securities class
action litigation has often been instituted. A securities class action suit
against us could result in substantial costs, potential liabilities and the
diversion of managements attention and resources.

Our principal stockholders, directors and executive officers beneficially own
approximately 51% of our common stock, which may prevent new investors from
influencing corporate decisions.

Our principal stockholders, defined as those who currently own 5% or greater of
our common stock, together with our
directors and executive officers beneficially own approximately 51% of our
outstanding common stock. They will be able to exercise significant influence
over all matters requiring stockholder approval, including the election of
directors and the approval of significant corporate transactions. This
concentration of ownership may also delay or prevent a change in control of us
even if beneficial to our other stockholders.

Sales of large numbers of shares of our common stock could cause our stock
price to decline.

The market price of our common stock could decline as a result of sales of
substantial amounts of our common stock in the public market, or the perception
that these sales could occur. In addition, these factors could make it more
difficult for us to raise funds through future offerings of common stock. All
of the shares sold in our initial public offering are now freely transferable
without restriction or further registration under the Securities Act, except
for any shares purchased by our affiliates, as defined in Rule 144 of the
Securities Act. The remaining shares of common stock outstanding are
restricted securities as defined in Rule 144. These shares may be sold in the
future without registration under the Securities Act, to the extent permitted
by Rule 144 or other exemptions under the Securities Act.

On March 1, 2001, we issued 666,667 shares of unregistered common stock in
connection with the acquisition of ATSI.

On February 5, 2002, we registered 2,628,618 shares of common stock that are
reserved for issuance upon exercise of options granted under our stock option
and employee stock purchase plans. These shares can be sold in the public
market upon issuance, subject to restrictions under the securities laws
applicable to resales by affiliates.

On February 20, 2002, we issued 572,152 shares of unregistered common stock in
connection with the acquisition of Jones Group.

| |  |              
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Anti-takeover provisions in our charter and bylaws and under Delaware law could
make a third-party acquisition of us difficult.

Pursuant to our charter, our board of directors has the authority to issue up
to 10,000,000 shares of preferred stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote of action by our stockholders. The issuance of
preferred stock could have the effect of making it more difficult for a third
party to acquire a majority of our outstanding voting stock. Our certificate
of incorporation and bylaws contain other provisions that could make it more
difficult for a third party to acquire us, even if doing so might be deemed
beneficial by our stockholders. These provisions could limit the price that
investors might be willing to pay in the future for shares of our common stock.
We are also subject to certain provisions of Delaware law that could delay,
deter or prevent a change in control of us.

Recently Enacted and Proposed Changes in Securities Laws and Regulations are
Likely to Increase Our Costs

The Sarbanes-Oxley Act of 2002 that became law in July 2002 requires changes in
some of our corporate governance and securities disclosure or compliance
practices. That Act also requires the SEC to promulgate new rules on a variety
of subjects, in addition to rule proposals already made, and Nasdaq has
proposed revisions to its requirements for companies that are Nasdaq-listed.
We expect these developments to increase our legal compliance costs, and to
make some activities more time-consuming. We are presently evaluating and
monitoring regulatory developments and cannot estimate the timing or magnitude
of additional costs we may incur as a result.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risk disclosures have not changed significantly from those set forth
in the Managements Discussion and Analysis of Financial Condition and Results
of Operations in our Form 10-K for the year ended December 31, 2002 filed with
the Securities and Exchange Commission on March 31, 2003.




ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.Our management
evaluated, with the participation of our Chief Executive Officer and our Chief
Financial Officer, the effectiveness of our disclosure controls and procedures
as of the end of the period covered by this Quarterly Report on Form 10-Q.
Based on this evaluation, our Chief Executive Officer and our Chief Financial
Officer have concluded that our disclosure controls and procedures are
effective to ensure that information we are required to disclose in reports
that we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in
Securities and Exchange Commission rules and forms.

Changes in internal control over financial reporting.There was no change
in our internal control over financial reporting that occurred during the
period covered by this Quarterly Report on Form 10-Q that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.

| |  |              
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##### Table of Contents






PART II. OTHER INFORMATION




ITEM 1: LEGAL PROCEEDINGS

The Company is not currently involved in any material legal proceedings.




ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS

On August 8, 2002, the Company announced the approval by its Board of Directors
of a stock repurchase program pursuant to which shares of its outstanding
common stock having an aggregate value of up to $500,000 may be repurchased
through open market transactions at prices deemed appropriate by the Company.
The duration of the stock repurchase program is open-ended. The timing and
amount of repurchase transactions under this program will depend on market
conditions, corporate and regulatory considerations, and will be funded from
available working capital. At September 30, 2003, the Company had repurchased
50,000 shares of outstanding common stock at an average purchase price per
share of $0.93.




ITEM 3: DEFAULTS UPON SENIOR SECURITIES

None.




ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None




ITEM 5: OTHER INFORMATION

None.




ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K



|(a) |  | Exhibits.                                               
|--- |  | --------------------------------------------------------
|   
|    |  | The following exhibits have been filed with this report.

| |               |  |                                                                                                                                                                                                      
| | ------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Number        |  | Description of Document                                                                                                                                                                              
| |               |  |                                                                                                                                                                                                      
| | 2.1(c)        |  | Agreement and Plan of Merger dated January 31, 2001, by and among the Registrant, CPL Acquisition
Corp. and Camile Products, LLC.                                                                    
| |               |  |                                                                                                                                                                                                      
| | 2.2(d)        |  | Agreement for the sale and purchase of the entire issued share capital of Jones Chromatography
Limited, dated February 11, 2002, by and among the Registrant and the former Jones Group
shareholders.
| |               |  |                                                                                                                                                                                                      
| | 3.1(a)        |  | Amended and Restated Certificate of Incorporation of the Registrant.                                                                                                                                 
| |               |  |                                                                                                                                                                                                      
| | 3.2(g)        |  | Amendment to the Bylaws of Registrant.                                                                                                                                                               
| |               |  |                                                                                                                                                                                                      
| | 4.3(c)        |  | Registration Rights Agreement dated March 1, 2001, by and among the Registrant and the members of
Camile Products, LLC.                                                                              
| |               |  |                                                                                                                                                                                                      
| | 4.4(d)        |  | Registration Rights Agreement dated February 20, 2002, by and among the Registrant and the former
Jones Group shareholders.                                                                          
| |               |  |                                                                                                                                                                                                      
| | 4.5(d)        |  | £7,650,000 Loan Note Instrument Creating Principal Amount Guaranteed Loan Notes 2004 guaranteed by
Barclays Bank PLC dated February 20, 2002.                                                        
| |               |  |                                                                                                                                                                                                      
| | 10.1(a)       |  | Amended and Restated Stockholder Rights Agreement, dated May 21, 1999.                                                                                                                               
| |               |  |                                                                                                                                                                                                      
| | 10.2(a)       |  | Offer Letter, dated October 29, 1996, from Registrant to David P. Binkley, Ph.D.                                                                                                                     
| |               |  |                                                                                                                                                                                                      
| | 10.3(a)       |  | Promissory Note Secured by Deed of Trust between the Registrant and David P. Binkley, dated December
17, 1996.                                                                                       
| |               |  |                                                                                                                                                                                                      
| | Page 21 of 25





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| |          |  |                                                                                                                                                                                                                                                                                                                            
| | -------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Number   |  | Description of Document                                                                                                                                                                                                                                                                                                    
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 10.4(a)  |  | Lease Agreement between the Registrant and Tanklage Family Partnership, dated July 9, 1999.                                                                                                                                                                                                                                
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 10.5(a)  |  | Lease Agreement between the Registrant and MK Kojimachi Building Co., Ltd., dated September 16, 1997,
as amended.                                                                                                                                                                                                          
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 10.6(a)  |  | Lease Agreement between the Registrant and Personalvorsorgestiftung Rapp AG, dated April 16, 1997.                                                                                                                                                                                                                         
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 10.7(a)  |  | License and Supply Agreement between the Registrant and Symyx Technologies, Inc., dated August 6,
1999.                                                                                                                                                                                                                    
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 10.9(a)  |  | Form of Indemnification Agreement between the Registrant and each of its directors and officers.                                                                                                                                                                                                                           
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 10.10(a) |  | 1995 Stock Plan.                                                                                                                                                                                                                                                                                                           
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 10.11(a) |  | 1995 Stock Plan Form of Stock Option Agreement.                                                                                                                                                                                                                                                                            
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 10.12(g) |  | 2000 Incentive Stock Plan, as amended.                                                                                                                                                                                                                                                                                     
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 10.13(g) |  | 2000 Employee Stock Purchase Plan, as amended.                                                                                                                                                                                                                                                                             
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 10.14(b) |  | Amendment to License and Supply Agreement between the Registrant and Symyx Technologies, Inc., dated
January 1, 2002.                                                                                                                                                                                                      
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 10.15(b) |  | Agreement between the Registrant and David P. Binkley dated December 5, 2001.                                                                                                                                                                                                                                              
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 10.16(b) |  | Agreement between the Registrant and John T. Supan dated January 10, 2002.                                                                                                                                                                                                                                                 
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 10.17(e) |  | License Agreement between Argonaut Technologies, Inc. and Symyx Technologies, Inc. dated August 21,
2002.                                                                                                                                                                                                                  
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 10.18(f) |  | Agreement between the Registrant and Jan K. Hughes dated December 9, 2002.                                                                                                                                                                                                                                                 
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 31.1     |  | Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                     
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 31.2     |  | Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                     
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | 32       |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                             
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | (a)      |  | Incorporated by reference from our registration statement on Form S-1, registration number 333-35782,
declared effective by the Securities and Exchange Commission on July 18, 2000.                                                                                                                                       
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | (b)      |  | Incorporated by reference from our Form 10-K filed with the Securities and Exchange Commission on
April 1, 2002.                                                                                                                                                                                                           
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | (c)      |  | Incorporated by reference from our Form 8-K filed with the Securities and Exchange Commission on
March 16, 2001.                                                                                                                                                                                                           
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | (d)      |  | Incorporated by reference from our Form 8-K filed with the Securities and Exchange Commission on
March 6, 2002.                                                                                                                                                                                                            
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | (e)      |  | Incorporated by reference from our Form 10-Q filed with the Securities and Exchange Commission on
September 30, 2002. Certain portions of this exhibit have been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested with respect to such
omitted portions.
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | (f)      |  | Incorporated by reference from our Form 10-K filed with the Securities and Exchange Commission on
March 31, 2003.                                                                                                                                                                                                          
| |          |  |                                                                                                                                                                                                                                                                                                                            
| | (g)      |  | Incorporated by reference from our Form 8-K filed with the Securities and Exchange Commission on May
14, 2003.                                                                                                                                                                                                             



|(b) |  | Reports on Form 8-K.                                                                                                                                                                          
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | On July 30, 2003, the Company filed a report on Form 8-K providing the
contents of a press release issued by the Company announcing its financial
results for the quarter ended June 30, 2003.
|   
|    |  | The Company filed no other reports on Form 8-K during the period ended
September 30, 2003.                                                                                                    

| |  |              
| |  | -------------
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##### Table of Contents






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.

|                        |  |                             |                                                               
|----------------------- |  | --------------------------- | --------------------------------------------------------------
|Date: November 13, 2003 |  | ARGONAUT TECHNOLOGIES, INC.
|                        |  |                             |                                                               
|                        |  | By:                         | /s/ LISSA A. GOLDENSTEIN                                      
|                        |  |                             |                                                               
|                        |  |                             | Lissa A. Goldenstein
President and Chief Executive Officer    
|                        |  |                             |                                                               
|                        |  | By:                         | /s/ DAVID J. FOSTER                                           
|                        |  |                             |                                                               
|                        |  |                             | David J. Foster
Sr. Vice President and Chief Financial Officer

| |  |              
| |  | -------------
| |  | Page 23 of 25





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##### Table of Contents






ARGONAUT TECHNOLOGIES, INC.
Form 10-Q
Quarterly Period Ended September 30, 2003

EXHIBIT INDEX

|         |               |                                                                                                                                                                                                      
|-------- | ------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number   |               | Description of Document                                                                                                                                                                              
|         |               |                                                                                                                                                                                                      
|2.1(c)   |               | Agreement and Plan of Merger dated January 31, 2001, by and among the Registrant, CPL Acquisition
Corp. and Camile Products, LLC.                                                                    
|         |               |                                                                                                                                                                                                      
|2.2(d)   |               | Agreement for the sale and purchase of the entire issued share capital of Jones Chromatography
Limited, dated February 11, 2002, by and among the Registrant and the former Jones Group
shareholders.
|         |               |                                                                                                                                                                                                      
|3.1(a)   |               | Amended and Restated Certificate of Incorporation of the Registrant.                                                                                                                                 
|         |               |                                                                                                                                                                                                      
|3.2(g)   |               | Amendment to the Bylaws of Registrant.                                                                                                                                                               
|         |               |                                                                                                                                                                                                      
|4.3(c)   |               | Registration Rights Agreement dated March 1, 2001, by and among the Registrant and the members of
Camile Products, LLC.                                                                              
|         |               |                                                                                                                                                                                                      
|4.4(d)   |               | Registration Rights Agreement dated February 20, 2002, by and among the Registrant and the former
Jones Group shareholders.                                                                          
|         |               |                                                                                                                                                                                                      
|4.5(d)   |               | £7,650,000 Loan Note Instrument Creating Principal Amount Guaranteed Loan Notes 2004 guaranteed by
Barclays Bank PLC dated February 20, 2002.                                                        
|         |               |                                                                                                                                                                                                      
|10.1(a)  |               | Amended and Restated Stockholder Rights Agreement, dated May 21, 1999.                                                                                                                               
|         |               |                                                                                                                                                                                                      
|10.2(a)  |               | Offer Letter, dated October 29, 1996, from Registrant to David P. Binkley, Ph.D.                                                                                                                     
|         |               |                                                                                                                                                                                                      
|10.3(a)  |               | Promissory Note Secured by Deed of Trust between the Registrant and David P. Binkley, dated December
17, 1996.                                                                                       
|         |               |                                                                                                                                                                                                      
|10.4(a)  |               | Lease Agreement between the Registrant and Tanklage Family Partnership, dated July 9, 1999.                                                                                                          
|         |               |                                                                                                                                                                                                      
|10.5(a)  |               | Lease Agreement between the Registrant and MK Kojimachi Building Co., Ltd., dated September 16, 1997,
as amended.                                                                                    
|         |               |                                                                                                                                                                                                      
|10.6(a)  |               | Lease Agreement between the Registrant and Personalvorsorgestiftung Rapp AG, dated April 16, 1997.                                                                                                   
|         |               |                                                                                                                                                                                                      
|10.7(a)  |               | License and Supply Agreement between the Registrant and Symyx Technologies, Inc., dated August 6,
1999.                                                                                              
|         |               |                                                                                                                                                                                                      
|10.9(a)  |               | Form of Indemnification Agreement between the Registrant and each of its directors and officers.                                                                                                     
|         |               |                                                                                                                                                                                                      
|10.10(a) |               | 1995 Stock Plan.                                                                                                                                                                                     
|         |               |                                                                                                                                                                                                      
|10.11(a) |               | 1995 Stock Plan Form of Stock Option Agreement.                                                                                                                                                      
|         |               |                                                                                                                                                                                                      
|10.12(g) |               | 2000 Incentive Stock Plan, as amended.                                                                                                                                                               
|         |               |                                                                                                                                                                                                      
|10.13(g) |               | 2000 Employee Stock Purchase Plan, as amended.                                                                                                                                                       
|         |               |                                                                                                                                                                                                      
|10.14(b) |               | Amendment to License and Supply Agreement between the Registrant and Symyx Technologies, Inc., dated
January 1, 2002.                                                                                
|         |               |                                                                                                                                                                                                      
|10.15(b) |               | Agreement between the Registrant and David P. Binkley dated December 5, 2001.                                                                                                                        
|         |               |                                                                                                                                                                                                      
|10.16(b) |               | Agreement between the Registrant and John T. Supan dated January 10, 2002.                                                                                                                           
|         |               |                                                                                                                                                                                                      
|10.17(e) |               | License Agreement between Argonaut Technologies, Inc. and Symyx Technologies, Inc. dated August 21,
2002.                                                                                            
|         |               |                                                                                                                                                                                                      
|10.18(f) |               | Agreement between the Registrant and Jan K. Hughes dated December 9, 2002.                                                                                                                           
|         |               |                                                                                                                                                                                                      
|31.1     |               | Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.                                                                                               
|         |               |                                                                                                                                                                                                      
|31.2     |               | Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.                                                                                               
|         |               |                                                                                                                                                                                                      
|32       |               | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                       
|         |               |                                                                                                                                                                                                      
|(a)      |               | Incorporated by reference from our registration statement on Form S-1, registration number 333-35782,
declared effective by the Securities and Exchange Commission on July 18, 2000.                 
|         |               |                                                                                                                                                                                                      
|(b)      |               | Incorporated by reference from our Form 10-K filed with the Securities and Exchange Commission on
April 1, 2002.                                                                                     
|         |               |                                                                                                                                                                                                      
|(c)      |               | Incorporated by reference from our Form 8-K filed with the Securities and Exchange Commission on
March 16, 2001.                                                                                     
|         |               |                                                                                                                                                                                                      
|(d)      |               | Incorporated by reference from our Form 8-K filed with the Securities and Exchange Commission on
March 6, 2002.                                                                                      
|         |               |                                                                                                                                                                                                      
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|       |               |                                                                                                                                                                                                                                                                                                                            
|------ | ------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |               | Description of Document                                                                                                                                                                                                                                                                                                    
|       |               |                                                                                                                                                                                                                                                                                                                            
|(e)    |               | Incorporated by reference from our Form 10-Q filed with the Securities and Exchange Commission on
September 30, 2002. Certain portions of this exhibit have been omitted and filed separately with the
Securities and Exchange Commission. Confidential treatment has been requested with respect to such
omitted portions.
|       |               |                                                                                                                                                                                                                                                                                                                            
|(f)    |               | Incorporated by reference from our Form 10-K filed with the Securities and Exchange Commission on
March 31, 2003.                                                                                                                                                                                                          
|       |               |                                                                                                                                                                                                                                                                                                                            
|(g)    |               | Incorporated by reference from our Form 8-K filed with the Securities and Exchange Commission on May
14, 2003.                                                                                                                                                                                                             
|       |               |                                                                                                                                                                                                                                                                                                                            
|       | Page 25 of 25