<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                       ----------------------------------

                                    FORM 10-Q

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

                           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 94404

                    (Address of principal executive offices)

                    ----------------------------------------

                                 (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 [ ]

As of October 31, 2001, 19,276,158 shares of the Registrant's Common Stock,
$0.0001 par value, were issued and outstanding.


<PAGE>

--------------------------------------------------------------------------------
Argonaut Technologies, Inc.
INDEX
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
ITEM NO.                                                                    PAGE

<S>                                                                         <C>
PART I.        FINANCIAL INFORMATION

Item 1.        Condensed Consolidated Financial Statements
               (Unaudited) ..............................................     3

               Condensed Consolidated Balance Sheets as of
               September 30, 2001 (Unaudited) and December 31, 2000......     3

               Condensed Consolidated Statement of Operations for
               the Three- and Nine-Month Periods Ended September 30, 2001
               and 2000 (Unaudited)......................................     4

               Condensed Consolidated Statement of Cash Flows for
               the Nine-Month Periods Ended September 30, 2001 and
               2000 (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..............................................     19


PART II.       OTHER INFORMATION

Item 1.        Legal Proceedings........................................     20

Item 2.        Changes in Securities and Use of Proceeds................     20

Item 3.        Defaults Upon Senior Securities..........................     20

Item 4.        Submission of Matters to a Vote of Security
               Holders..................................................     20

Item 5.        Other Information........................................     20

Item 6.        Exhibits and Reports on Form 8-K.........................     20

Signatures..............................................................     21
</TABLE>

                                                                          Page 2
<PAGE>

--------------------------------------------------------------------------------
PART I: FINANCIAL INFORMATION
--------------------------------------------------------------------------------

ITEM 1.        CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



                           ARGONAUT TECHNOLOGIES, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)


<TABLE>
<CAPTION>
                                                          September 30,      December 31,
                                                              2001             2000
                                                          -------------      ------------
                                                           (unaudited)          (1)
<S>                                                       <C>                <C>
ASSETS

Current assets:

   Cash and cash equivalents .........................      $  35,286           $ 39,147
   Short-term investments ............................         23,179             34,225
   Accounts receivable, net ..........................          3,434              4,088
   Inventories .......................................          4,621              2,782
   Prepaid expenses and other current assets .........          1,474              1,021
                                                            ---------           --------
     Total current assets ............................         67,994             81,263

Property and equipment, net ..........................          2,462              1,743
Goodwill and other intangible assets, net ............          8,037                 --
Other assets .........................................            141                 26
                                                            ---------           --------
                                                            $  78,634           $ 83,032
                                                            =========           ========


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Accounts payable ..................................      $   1,232           $  1,004
   Accrued compensation ..............................          1,142              1,097
   Other accrued liabilities .........................          1,313              1,209
   Deferred revenue ..................................          1,070              1,534
   Current portion of capital lease obligations ......            149                288
                                                             --------           --------
     Total current liabilities .......................          4,906              5,132

Noncurrent portion of capital lease obligations ......             71                180
Other long-term liabilities ..........................            112                 --
Stockholders' equity:
   Common stock ......................................              2                  2
   Additional paid-in capital ........................        120,391            115,283
   Deferred stock compensation .......................         (1,579)            (3,055)
   Accumulated other comprehensive gain/(loss) .......             78                (71)
   Accumulated deficit ...............................        (45,347)           (34,439)
                                                             --------           --------
     Total stockholders' equity ......................         73,545             77,720
                                                             --------           --------
                                                             $ 78,634           $ 83,032
                                                             ========           ========
</TABLE>

(1) The condensed consolidated balance sheet at December 31, 2000 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.

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


                                                                          Page 3

<PAGE>

                           ARGONAUT TECHNOLOGIES, INC.

                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                      (In thousands, except per share data)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                            Three Months Ended            Nine Months Ended
                                                                 September 30,               September 30,
                                                          -----------------------       ------------------------
                                                            2001           2000           2001           2000
                                                          --------       --------       --------        --------
<S>                                                       <C>            <C>            <C>             <C>
Net sales ..........................................      $  3,583       $  4,532       $ 11,445        $12,159

Costs and expenses:
  Cost of sales ....................................         1,964          2,158          6,128          5,421
  Research and development (Note 1) ................         1,530          1,280          5,035          3,791
  Selling, general & administrative (Note 1) .......         4,178          3,462         12,552         10,012
  Amortization of purchased intangibles ............           216             --            504             --
  Acquired in-process research and development
   expense .........................................            --             --            270             --
                                                          --------       --------       --------       --------
Total costs and expenses ...........................         7,888          6,900         24,489         19,224
                                                          --------       --------       --------       --------

Loss from operations ...............................        (4,305)        (2,368)       (13,044)        (7,065)
Other income (expense):
  Interest and other income ........................           593            899          2,347          1,204
  Interest and other expense .......................           (10)          (126)          (211)          (466)

                                                          --------       --------       --------       --------
Net loss ...........................................      $ (3,722)      $ (1,595)      $(10,908)      $ (6,327)
                                                          ========       ========       ========       ========

Net loss per common share, basic and diluted .......      $  (0.19)      $  (0.11)      $  (0.57)      $  (0.95)
                                                          ========       ========       ========       ========

Weighted-average shares used in computing
  net loss per common share, basic and diluted .....        19,199         14,987         18,975          6,665
                                                          ========       ========       ========       ========

Note 1: Research and development expenses and selling, general and administrative expenses include charges for stock-
based compensation as follows:

Research and development ...........................      $    112       $    394      $     531       $  1,030
Selling, general and administrative ................           285            570          1,032          1,704
                                                          --------       --------       --------       --------
                                                          $    397       $    964       $  1,563       $  2,734
                                                          ========       ========       ========       ========
</TABLE>

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

                                                                          Page 4
<PAGE>

                           ARGONAUT TECHNOLOGIES, INC.

                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (In thousands)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                            Nine Months Ended
                                                                                               September 30,
                                                                                        ---------------------------
                                                                                           2001             2000
                                                                                        ----------       ----------
<S>                                                                                      <C>             <C>
Cash flows from operating activities:
   Net loss ......................................................................       $ (10,908)      $(6,327)
   Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization ...............................................             908           542
     Stock compensation ..........................................................           1,476         2,060
     Issuance of equity for noncash benefits .....................................              87           674
     Acquired in-process research and development ................................             270            --
     Other .......................................................................             (55)          (62)
     Changes in assets and liabilities:
       Accounts receivable .......................................................           1,110         1,425
       Inventories ...............................................................          (1,151)         (639)
       Prepaid expenses and other current assets .................................            (407)          (78)
       Other assets, long term ...................................................              23            --
       Accounts payable ..........................................................             (85)          172
       Accrued compensation ......................................................              45           103
       Other accrued liabilities .................................................            (247)          180
       Deferred revenue ..........................................................            (883)       (1,643)
                                                                                         ---------       -------
Net cash used in operating activities ............................................          (9,817)       (3,593)
                                                                                         ---------       -------
Cash flows from investing activities:
   Capital expenditures, net .....................................................            (894)         (589)
   Proceeds from the sale of short-term investments ..............................              --         1,790
   Proceeds from the maturities of short-term investments ........................          43,036         5,271
   Purchase of short-term investments ............................................         (31,786)       (1,859)
   Purchase of Camile Products, LLC (net of cash received) .......................          (3,964)           --
                                                                                         ---------       -------
         Net cash provided by investing activities ...............................           6,392         4,613
                                                                                         ---------       -------
Cash flows from financing activities:
   Repayments of long-term debt ..................................................            (542)       (4,375)
   Principal payments on capital lease obligations ...............................            (248)         (225)
   Proceeds from issuance of common stock, net ...................................             354        72,768
                                                                                         ---------       -------
         Net cash (used in) provided by financing activities ....................             (436)       68,168
                                                                                         ---------       -------
Net increase (decrease) in cash and cash equivalents .............................          (3,861)       69,188
Cash and cash equivalents at beginning of period .................................          39,147         4,946
                                                                                         ---------       -------
Cash and cash equivalents at end of period .......................................       $  35,286       $74,134
                                                                                         =========       =======

Cash flow for acquisition of Camile Product, LLC:
   Tangible assets acquired (excluding $36 cash received) ........................       $   1,557
   Acquired in-process research and development .................................              270
   Goodwill and other intangible assets acquired .................................           8,541
   Acquisition costs incurred ....................................................            (253)
   Liabilities assumed ...........................................................          (1,484)
   Common stock issued ...........................................................          (4,667)
                                                                                         ---------
      Cash paid for acquisition (net of $36 cash received) .......................       $   3,964
                                                                                         =========
</TABLE>

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

                                                                          Page 5
<PAGE>

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

NOTE 1 - BASIS OF PRESENTATION

     In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments, consisting only of
normal recurring adjustments, which the Company considers necessary to present
fairly the financial information included herein. This Quarterly Report on Form
10-Q should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Form 10-K, as amended, for the year
ended December 31, 2000 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, 2001, or any other future period.

     The Company recognizes revenue from product sales upon transfer of title,
after collectibility is assured and fees are fixed and determinable. For
products with no future obligation, revenue is recognized upon shipment when the
recognition criteria have been met. For those products where the Company has
obligations to provide installation services, revenue is recognized upon
installation when the recognition criteria have been met. Sales that require
customer acceptance or have rights of return are not recognized as revenue until
the requirements have been met or the rights of return have expired.

     The Company enters into arrangements for the sale of bundled hardware,
software and related services. For each arrangement, the Company determines
whether evidence of an arrangement exists, delivery has occurred, the price is
fixed or determinable, and collection is probable. If any of these criteria are
not met, revenue recognition is deferred until such time as all of the criteria
are met. For bundled sales including integration services, the Company applies
the multiple element approach to software revenue recognition consistent with
Statement of Financial Position No. 97-2 "Software Revenue Recognition". For
software and hardware systems bundled with integration services which include
customization or modification of the software, or where the software services
are considered essential to the functionality of the software, revenue is
recognized using contract accounting.

NOTE 2 - INVENTORIES

     Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                     September 30,     December 31,
                                                         2001             2000
                                                     ------------      ------------
<S>                                                  <C>               <C>
         Raw materials ..........................       $2,957            $1,693
         Work-in-process ........................          485               649
         Finished goods .........................        1,179               440
                                                        ------            ------
                                                        $4,621            $2,782
                                                        ======            ======
</TABLE>

NOTE 3 -- NET LOSS PER SHARE


                                                                          Page 6
<PAGE>


     Net loss per share has been computed according to Statement of Financial
Accounting Standards No. 128, "Earnings Per Share," which requires disclosure of
basic and diluted earning per share. Basic earnings per share excludes any
dilutive effects of options, shares subject to repurchase, warrants, and
convertible securities. Diluted earnings per share includes the impact of
potentially dilutive securities (calculated using the treasury stock and
as-if-converted method).

     Pro forma net loss per share includes shares issuable upon the conversion
of outstanding shares of preferred stock (using the as-if-converted method) from
the original date of issuance. All outstanding preferred stock was automatically
converted to common stock upon the close of the company's initial public
offering in July 2000.

     The following table presents the calculation of proforma basic and diluted
net loss per share (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                       Three Months Ended            Nine Months Ended
                                                          September 30,                September 30,
                                                      --------------------        ---------------------
                                                        2001          2000          2001          2000
                                                      -------       -------       -------       -------
<S>                                                 <C>             <C>           <C>           <C>
Basic and diluted:
  Weighted-average shares of common stock
  outstanding used in net loss per common share,
  basic and diluted ............................       19,199        14,987        18,975         6,665

Adjustments to reflect weighted-average
  effect of assumed conversion of preferred
  stock ........................................           --         1,973            --         7,310
                                                      -------       -------       -------       -------

Weighted-average shares used in proforma
  net loss per share, basic and diluted ........       19,199        16,960        18,975        13,975
                                                      =======       =======       =======       =======

Proforma net loss per share, basic and
  diluted ......................................      $ (0.19)      $ (0.09)      $ (0.57)      $ (0.45)
                                                      =======       =======       =======       =======
</TABLE>


NOTE 4 -- 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 months ended September 30, 2001 and 2000,
comprehensive loss is as follows (in thousands):


<TABLE>
<CAPTION>
                                              Three Months Ended              Nine Months Ended
                                                 September 30,                  September 30,
                                          -------------------------       -------------------------
                                            2001             2000            2001           2000
                                          ---------       ---------       ---------     ---------
<S>                                       <C>             <C>             <C>             <C>
Net loss ...........................      $  (3,722)      $  (1,595)      $(10,908)     $ (6,327)

Other comprehensive income (loss) ..            206             (25)           149           (62)
                                          ---------       ---------       ---------     --------

Comprehensive loss .................      $  (3,516)      $  (1,620)      $(10,759)     $ (6,389)
                                          =========       =========       =========     =========
</TABLE>


                                                                          Page 7
<PAGE>

NOTE 5 -- BUSINESS COMBINATION

     On March 1, 2001, the Company acquired all of the assets and certain
liabilities of Camile Products, LLC and renamed this subsidiary Argonaut
Technologies Systems, Inc. Argonaut Technologies Systems, Inc. markets software
solutions that allow pharmaceutical and chemical companies to automate and
precisely control chemical reactions. The transaction was accounted for using
the purchase accounting method and accordingly, the accompanying financial
statements include the results of operations of Argonaut Technologies Systems,
Inc. subsequent to the acquisition date. The transaction was valued at
approximately $8.9 million and was comprised of $4.0 million cash, 666,667
shares of the Company's common stock, and expenses related to the transaction.

     The total purchase cost of Argonaut Technologies Systems, Inc. is as
follows (in thousands):


<TABLE>
<S>                                                           <C>
        Cash ........................................         $4,000
        Fair value of securities issued .............          4,667
                                                              ------
                                                               8,667

        Estimated transaction costs and expenses ....            253
                                                              ------
                                                              $8,920
                                                              ======
</TABLE>


The Company preliminarily allocated the purchase price based on the estimated
fair value of the net tangible and intangible assets acquired. In performing
this allocation, the Company considered, among other factors, the technology
research and development projects in process at the date of acquisition. With
regard to the in-process research and development projects, the Company
considered factors such as the stage of development of the technology at the
acquisition, the importance of each project to the overall development plan,
alternative future uses of the technology and the projected incremental cash
flows from the projects when completed and any associated risks. The Company
will finalize the purchase price allocation subsequent to the receipt of the
final independent appraisal report and validation of its result by the Company.

     The preliminary purchase price allocation is as follows (in thousands):

<TABLE>
<S>                                                           <C>
     Net tangible assets ..................................      $  108
     Acquired in-process research and development .........         270
     Goodwill and other purchased intangible
       assets .............................................       8,542
                                                                 ------
                                                                 $8,920
                                                                 ======
</TABLE>

Goodwill and other purchased intangible assets are being amortized on a
straight-line basis over an estimated useful life of ten years. The Company will
reassess this upon finalization of the purchase price allocation.

The table below presents the pro forma consolidated results of operations and
earnings per share for the Company. The transaction is assumed to have been
completed on January 1, 2001 for the period ended September 30, 2001 and January
1, 2000 for the period ended September 30, 2000 and excludes charges for
acquired in-process research and development and goodwill amortization. No
effect has been given to cost reductions or operating synergies in this
presentation. These pro forma amounts do not purport to be indicative of the
results that would have actually been obtained if the acquisition had occurred
as of the beginning of the periods presented or that may be obtained in the
future.


                                                                          Page 8
<PAGE>

<TABLE>
<CAPTION>
                                      Nine Months Ended
                                          September 30,
                                  -------------------------
                                    2001            2000
                                  ---------       ---------
                                    (in thousands, except
                                       per share data)
<S>                               <C>             <C>
        Net revenue ........       $ 12,212        $ 14,387

        Net loss ...........        (10,565)         (7,142)

        Loss per share .....       $  (0.55)       $  (0.97)
</TABLE>


NOTE 6 - RECENT ACCOUNTING PRONOUNCEMENTS

In June, 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Financial Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 requires
the Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through net
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of the derivative are either offset against the change
in fair value of assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. SFAS 133, as amended, is effective for the first fiscal quarter in
fiscal years beginning after June 15, 2000. The Company adopted SFAS 133 on
January 1, 2001 and the adoption of SFAS 133 did not have a material impact the
results of its operations, as it does not currently hold or engage in hedging
activities.

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
141 "Business Combinations". SFAS 141 eliminates the use of the
pooling-of-interest method for business combinations initiated after June 30,
2001 and establishes new criteria for the recognition of intangible assets.

In June 2001, the FASB issued the Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets", which establishes new standards
for goodwill and other intangible assets, including the elimination of goodwill
amortization, to be replaced with periodic evaluations of goodwill for
impairment. SFAS 142 is effective for fiscal years ending after December 15,
2001 but any goodwill and intangible assets resulting from a business
combination after July 1, 2001 will be accounted for under SFAS 142. Goodwill
and intangible assets from business combinations before July 1, 2001 will
continue to be amortized until the adoption of SFAS 142.

The Company will adopt SFAS 142 on January 1, 2002. Upon the adoption of SFAS
142, the Company is required to evaluate its existing goodwill and intangible
assets from business combinations completed before July 1, 2001 and make any
necessary reclassifications in order to comply with the new criteria in SFAS 141
for recognition of intangible assets. The Company will then be required to
reassess the useful lives of all intangible assets acquired in purchase business
combinations, including those reclassified from goodwill, and make any necessary
amortization adjustments by the end of the first interim period after adoption.
To the extent that any intangible asset is identified as having an indefinite
useful life, SFAS 142 requires the Company to test the intangible asset for
impairment and recognize any impairment losses as a cumulative effect of change
in accounting principle in the first interim period.

At September 30, 2001, the Company had goodwill and total intangible assets of
$8.0 million. Amortization expense for goodwill and intangible assets amounted
to $504,000 for the nine months ended September 30, 2001. The Company is
currently evaluating the impact of adopting SFAS 141 and SFAS 142.


                                                                          Page 9
<PAGE>

In August 2001, Financial Accounting Standard Board issued Statement of
Financial Accounting Standards No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS 144) that is applicable to financial
statements issued for fiscal years beginning after December 15, 2001. These new
rules on asset impairment supersede FASB 121 and provide a single accounting
model for long-lived assets to be disposed of. SFAS 144 removes goodwill from
its scope, describes a profitability-weighted cash flow estimation approach to
deal with situations in which alternative courses of action to recover the
carrying amount of a long-lived asset are under consideration or a range is
estimated for the amount of possible future cash flows, establishes a
"primary-asset" approach to determine the cash flow estimation period for a
group of assets and liabilities that represents the unit of accounting for a
long-lived asset to be held and used. The Company will adopt SFAS 144 as of
January 1, 2002, and does not expect this pronouncement to materially impact the
results of its operations, financial position, or cash flows.

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 about future
revenues, expenses, losses and cash flows, statements about research and
development activities, statements about possible future acquisitions,
statements about sales and marketing efforts and statements about 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 these 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 an anticipated synergies and
growth opportunities. For a further discussion of these and other risks related
to our business see the discussion set forth herein under "Additional Factors
That May Affect Future Results," as well as the discussion of risk factors set
forth in our Form 10K, as amended, and our other filings with the Securities
Exchange Commission.

OVERVIEW

     On March 1, 2001, the Company completed the acquisition of Camile Products,
LLC and renamed this subsidiary Argonaut Technologies Systems, Inc. (ATS). The
acquisition was accounted for using the purchase accounting method. The
transaction was valued at approximately $8.9 million and was comprised of $4.0
million cash, 666,667 shares of the Company's common stock, and expenses related
to the transaction. ATS markets software solutions that allow pharmaceutical and
chemical companies to automate and precisely control chemical reactions in
process research and development.

     The Company markets nine instrument products including two instruments
launched in mid-2000, the Surveyor and the Endeavor. These two instruments were
developed specifically for synthesis requirements in clinical development. With
the addition of these instruments along with the integration of the software and
related products referred to above, Argonaut's products cover the complete range
of lead optimization, pre-clinical and clinical development for our discovery
and process development customers. Revenues from the sales of our instrument
products are recognized when delivery and installation of the product is
complete. The Company also derives revenues from the sale of reagents and other
instrument consumables as well as from service and integration.

     The Company recorded deferred stock compensation in connection with the
grant of stock options to employees prior to its initial public offering of
approximately $6.6 million. These amounts are recorded as a component of
stockholders' equity and are being amortized as charges to operations. As of
September 30, 2001, the Company had a total of $1.6 million to be amortized over
the remaining vesting period of the options. The Company also records stock
compensation for options granted to consultants that are periodically
re-measured as they vest, in accordance with SFAS


                                                                         Page 10
<PAGE>

123 and EITF 96-18. For the nine month period ended September 30, 2001 and 2000
the combined compensation charges to operations aggregated approximately $1.6
million and $2.7 million respectively.

     In September 2001, the Company relocated the headquarter operations from
the original location since inception to Foster City, CA. The relocation
provided the Company with more efficient base operations and an opportunity to
take advantage of the overall reduction in the Bay Area's real estate rental
rates.

RESULTS OF OPERATIONS

Net Sales

     Net sales decreased to $3.6 million for the three months ended September
30, 2001 from $4.5 million in the same period of 2000. This decrease was due to
reduced net sales of all instrument groups and related instrument disposable
products modestly offset by improved net sales of chemistry products and
service. Net sales for the nine month period ended September 30, 2001 were $11.4
million compared to $12.2 million for the same period of the prior year. This
decrease was primarily attributable to a decline in net sales of instruments
offset by improved net sales of consumable products, services and sales from our
acquired business.

Cost of sales

     Cost of sales decreased to $2.0 million in the third quarter of 2001 from
$2.2 million in the third quarter of 2000. This decrease was primarily
attributable to lower sales volume but was substantially offset by the
continuation of higher production costs for Surveyor and Endeavor. Cost of sales
for the nine month period ended September 30, 2001 was $6.1 million compared to
$5.4 million for the comparable period of 2000. This increase reflects
substantially similar cost factors as referenced above for the comparative
quarters.

Research and development expenses

     Research and development expenses increased to $1.5 million in the third
quarter of 2001 from $1.3 million in the third quarter of 2000. For the nine
months ended September 30, 2001 and 2000, research and development expenses were
$5.0 million and $3.8 million, respectively. These increases were primarily
attributable to additional expenses for ATS acquired in March 2001 and therefore
not reflected in the prior year, a product development process improvement
program introduced in the second quarter 2001, as well as new product
initiatives including new chemistry product development. Other personnel levels
and related costs not related to our acquisition of ATS remained relatively
constant in 2001 and 2000. Stock based compensation charges decreased by
$282,000 and $499,000 for the three and nine month periods ended September 30,
2001, respectively, compared to the same periods of 2000.

Selling, general and administrative expenses

     Selling, general and administrative expenses increased to $4.2 million in
the third quarter of 2001 from $3.5 million in the same period of 2000 and
increased to $12.6 million from $10.0 million for the nine month period ended
September 30, 2001 and 2000, respectively. These expenses consist primarily of
salaries and related costs for executive, sales and marketing, finance and other
administrative personnel and the cost of facilities. The increase was
attributable to the further expansion of our direct sales force, the additional
costs of being a public company not reflected in the prior period and additional
expenses for 2001 related to ATS since the acquisition in March 2001. Stock
based compensation charges decreased by $285,000 and $672,000 for the three and
nine month periods ended September 30, 2001, respectively, compared to the same
periods of 2000.

Amortization of purchased intangibles and acquired in-process research &
development expense

     For the three and nine month periods ended September 30, 2001, the Company
recorded amortization of purchased intangibles of $216,000 and $504,000,
respectively, related to the March 1, 2001 acquisition of Camile Products, LLC
(now


                                                                         Page 11
<PAGE>

ATS). For the nine month period ended September 30, 2001, the Company recorded a
one-time charge of $270,000 for acquired in-process research and development
expense. The Company allocated the purchase price based on the fair value of the
net tangible and intangible assets acquired, using a preliminary independent
appraisal, which is subject to change. In performing this allocation, the
Company considered, among other factors, the technology research and development
projects in process at the date of acquisition. With regard to the in-process
research and development projects, the Company considered factors such as the
stage of development of the technology at the acquisition, the importance of
each project to the overall development plan, alternative future uses of the
technology and the projected incremental cash flows from the projects when
completed and any associated risks. The Company will finalize the purchase price
allocation subsequent to the receipt of the final independent appraisal report
and validation of its result by the Company.

Interest and other income

     Interest and other income decreased for the three month periods ended
September 30, 2001 as compared to the three months ended September 30, 2000
primarily because of lower levels of funds available for investments. Funds
available for investment in the third quarter of 2000 were higher due to the
Company's initial public offering being completed in the early part of that
quarter. The comparison for the nine month period ending September 30, 2001
reflects the increased funds available for investments throughout the entire
period.

Interest and other expense

     Interest and other expense was reduced during the three and nine months
periods ended September 30, 2001 as compared to the comparable periods of the
prior year due to the continuing pay down of debt obligations.

LIQUIDITY AND CAPITAL RESOURCES

     As of September 30, 2001, the Company had cash, cash equivalents and
short-term investments of $58.5 million compared to $73.4 million at December
31, 2000. The decrease was primarily due to the use of $4.0 million in
connection with the purchase of Camile Products, LLC (now ATS) and related
expenses as well as cash used in operating activities of approximately $9.8
million.

     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, expansion of our sales and
marketing organization and fluctuations in the Company's net loss.

     Net cash provided by investing activities totaled $6.4 million and $4.6
million for the nine month periods ended September 30, 2001 and 2000,
respectively. This net increase in 2001 was primarily attributable to proceeds
in connection with the maturity of short-term investments to provide cash to
fund the Company's ongoing operating activities offset by the use of $4.0
million of cash in connection with the purchase of Camile Products, LLC (now
ATS).

     Net cash used in financing activities was $0.4 million versus net cash
provided of $68.2 million for the nine month periods ended September 30, 2001
and 2000, respectively. The change was due to the Company's initial public stock
offering being completed in the third quarter of 2000.

     The Company expects to have negative cash flows from operations through at
least the end of 2002. In addition, we expect to incur increasing development
expenses, as well as expenses for additional personnel for production and
commercialization efforts. We may also use cash resources to fund additional
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. 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


                                                                         Page 12
<PAGE>

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 or obtain funds through
arrangements with collaborative partners or others that may require us to
relinquish rights to certain technologies or products that we might otherwise
seek to retain.

ADDITIONAL FACTORS THAT MAY AFFECT 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, 2001, we had an accumulated deficit of
$45.3 million and we recorded net losses of $10.9 million for the nine month
period ended September 30, 2001. We expect to continue to incur operating and
net losses for the foreseeable future 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 LIFE SCIENCES INDUSTRY, IT IS
UNLIKELY THAT WE WILL EVER BECOME PROFITABLE.

     Pharmaceutical, biotechnology and life sciences companies have historically
performed chemistry development using traditional laboratory methods. To date,
our products have not been widely adopted by the life sciences industry. The
commercial success of our products will depend upon the adoption of these
products as a method to develop chemical compounds for the life sciences and
other industries. In order to be successful, our products must meet the
performance and pricing requirements for chemistry development within the life
sciences and other 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 which may be developed;

     -    manufacture products in sufficient quantities with acceptable quality
          and at an acceptable cost; and

     -    install and service sufficient quantities of our products.

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

OUR PRODUCT DEVELOPMENT EFFORTS MAY NOT PRODUCE COMMERCIALLY VIABLE PRODUCTS

     We intend 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. Our ability to increase our
revenues and achieve and sustain profitability is dependent upon our ability to
successfully develop new and commercially viable products.


                                                                         Page 13
<PAGE>

BECAUSE WE RECEIVE REVENUES PRINCIPALLY FROM LIFE SCIENCES AND CHEMICAL
COMPANIES, THE CAPITAL SPENDING POLICIES OF THESE ENTITIES HAVE A SIGNIFICANT
EFFECT ON THE DEMAND FOR OUR PRODUCTS.

     We market our products to pharmaceutical, biotechnology, life sciences and
other chemical research companies, and the capital spending policies of these
entities can have a significant effect on the demand for our products. 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 the pharmaceutical
industry 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

OUR 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 products depends in significant
part upon the perception that our products can help accelerate efforts in drug
development. The sale of many of our products typically involves a significant
technical evaluation and commitment of capital by customers. Accordingly, the
sales cycles of many of our 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. In
particular, our operating results in the first and third quarters have
historically been depressed. 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.

IN CONNECTION WITH OUR RECENT ACQUISITION AND IF WE CHOOSE TO ACQUIRE ADDITIONAL
NEW AND COMPLEMENTARY BUSINESSES, PRODUCTS OR TECHNOLOGIES INSTEAD OF DEVELOPING
THEM OURSELVES, WE MAY BE UNABLE TO COMPLETE THESE ACQUISITIONS OR MAY NOT BE
ABLE TO SUCCESSFULLY INTEGRATE AN ACQUIRED BUSINESS OR TECHNOLOGY IN A
COST-EFFECTIVE AND NON-DISRUPTIVE MANNER.

     Our success depends 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 recently acquired a
complementary business and may choose to acquire others in the future. We do not
know if we will be able to complete any 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 integrate any acquired
entities, products or technologies effectively, 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 DIRECT SALES FORCE MAY NOT BE SUFFICIENTLY LARGE TO SUCCESSFULLY ADDRESS THE
MARKET FOR OUR PRODUCTS.

     We sell a major portion of our products through our own sales force. We
believe that we will need to expand our direct sales and marketing force to
successfully address the market for our products. We may not be able to build an
efficient and effective sales and marketing force. Our failure to build an
efficient and effective


                                                                         Page 14
<PAGE>

sales and marketing force could negatively impact sales of our products, thus
reducing our revenues and profitability.

FAILURE TO EXPAND OUR INTERNATIONAL SALES AS WE INTEND WOULD REDUCE OUR ABILITY
TO BECOME PROFITABLE.

     We will need to sell a significant number of our products outside of the
United States to achieve our sales objectives. To be successful in our
international efforts, we will need to expand our direct sales force to conduct
international operations and develop relationships with international dealers
and distributors. We may not be able to expand our sales force or identify,
attract or retain suitable international dealers and distributors. As a result,
we may be unsuccessful in our international expansion efforts. We must continue
to establish and expand foreign operations and hire additional personnel to run
these operations, in order to expand our presence into international markets.

     International operations involve a number of risks and burdens not
typically present in domestic operations, including:

     -    preferences of certain customers to purchase goods manufactured in
          their own country or geographic market;

     -    difficulties in staffing and managing foreign operations;

     -    reliance on distributors in countries where we do not have a physical
          presence;

     -    licenses, tariffs and other trade barriers;

     -    changes in regulatory requirements;

     -    potentially adverse tax consequences, and;

     -    political and economic instability.

     In addition, we conduct a portion of our business in Japanese yen and other
non-U.S. dollar currencies. As a result, currency fluctuations between the U.S.
dollar and the currencies in which we do business will cause us to incur foreign
currency translation gains and losses. To date, our foreign currency translation
gains and losses have not been substantial. Our international operations will
also be subject to the risks associated with the imposition of legislation and
regulations relating to the import or export of high technology products. We
cannot predict whether tariffs or restrictions upon the exportation of our
products will be implemented by the United Sates or other countries.

IF WE LOSE OUR EXCLUSIVE LICENSE TO PROPRIETARY TECHNOLOGY INCORPORATED INTO OUR
PRODUCTS WE MAY BE UNABLE TO CONTINUE SELLING THOSE PRODUCTS.

     We have developed some of our products based on proprietary technology
originally developed by third parties. We currently have exclusive licenses to
use such technology in our products that are subject to termination in certain
events. In particular, our license to proprietary technology belonging to Symyx,
which is incorporated into our Endeavor product, is subject to termination at
Symyx's or our option upon six months prior notice. Our sales of this product
constitute an increasingly significant portion of our revenue. We estimate that
sales of this product will constitute approximately 10 to 15% of our revenues
this year. This estimate depends on a variety of factors, including increased
demand, and we cannot be certain that this estimate will be accurate. If
licensors terminate our licenses to any such technology, our revenues will
decline.

IF WE HAVE DIFFICULTY MANAGING OUR GROWTH, OUR ABILITY TO INCREASE OUR REVENUES
AND BECOME PROFITABLE WOULD BE DAMAGED.

     Our growth has placed significant demands on our management and other
resources. Our future success will depend on our ability to manage our growth,
including:


                                                                         Page 15
<PAGE>

     -    continuing to train, motivate, manage and retain our existing
          employees and to attract and assimilate new employees;

     -    manufacturing on a timely basis increasing quantities of current
          products and new products under development while maintaining product
          quality;

     -    expanding and improving our domestic and international sales and
          marketing capabilities; and

     -    developing and improving our operational, financial, accounting and
          other internal systems and controls consistent with our pace of
          growth; and,

     -    integrating and successfully managing operations at Argonaut
          Technologies Systems and any other businesses that we may acquire in
          the future.

     If we are unable to manage our growth successfully, our operations will
suffer.

IF WE ARE UNABLE TO RETAIN THE PRINCIPAL MEMBERS OF OUR MANAGEMENT TEAM AND
OTHER KEY EMPLOYEES OR TO RECRUIT SALES, SUPPORT AND OTHER ADDITIONAL PERSONNEL,
OUR OPERATING RESULTS COULD SUFFER.

     We are highly dependent on the principal members of our management team and
scientific staff and the loss of their services could delay or reduce our
product development and commercialization efforts. None of the principal members
of our management team and scientific staff have entered into employment
agreements with us nor do we have any key person life insurance on such
individuals. We believe that we will need to recruit additional sales and
customer support personnel with the requisite backgrounds and expertise. Hiring
such personnel is very competitive in our industry. In addition, we will require
additional personnel in the areas of chemistry research, product development,
manufacturing, finance and administration. In particular, it is difficult to
attract and retain qualified individuals with the requisite experience in
chemistry. We may not be able to attract and retain the requisite personnel,
which could seriously harm our ability to manage business.

BECAUSE WE OUTSOURCE OUR PRODUCT ASSEMBLY, OUR ABILITY TO PRODUCE AND SUPPLY OUR
PRODUCTS COULD BE IMPAIRED.

     We outsource most of the assembly of our products to vendors. 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 would decline.

THE LIFE SCIENCES INDUSTRY IS HIGHLY COMPETITIVE AND SUBJECT TO RAPID
TECHNOLOGICAL CHANGE, AND WE MAY NOT HAVE THE RESOURCES NECESSARY TO
SUCCESSFULLY COMPETE.


                                                                         Page 16
<PAGE>

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

     -    companies marketing conventional products based on traditional
          chemistry methodologies;

     -    pharmaceutical companies developing their own instruments; and

     -    companies marketing products based upon parallel synthesis and other
          innovative technologies, such as Mettler-Toledo AG and several smaller
          instrument and reagent companies

     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 may 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 will 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 unpatented 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.

RISKS RELATED TO OUR COMMON STOCK


                                                                         Page 17
<PAGE>

OUR STOCK PRICE HAS BEEN HIGHLY VOLATILE, AND YOUR INVESTMENT COULD SUFFER A
DECLINE IN VALUE.

     The trading price of our common stock has been highly volatile 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 and life
          sciences industries;

     -    announcements by us of significant acquisitions, strategic
          partnerships, joint ventures or capital commitments;

     -    additions or departures of key personnel;

     -    sales of our common stock; 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 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 seriously
harm 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.

THERE MAY NOT BE AN ACTIVE, LIQUID TRADING MARKET FOR OUR COMMON STOCK.

     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.

OUR PRINCIPAL STOCKHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS OWN APPROXIMATELY
50% OF OUR COMMON STOCK, WHICH MAY PREVENT NEW INVESTORS FROM INFLUENCING
CORPORATE DECISIONS.

     Our principal stockholders who currently own over 5% of our common stock
and our directors and executive officers who beneficially own approximately 50%
of our outstanding common stock, 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


                                                                         Page 18
<PAGE>

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 September 22, 2000, we registered 4,059,147 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.

ANTI-TAKEOVER PROVISIONS IN OUR CHARTER AND BYLAWS AND UNDER DELAWARE LAW COULD
MAKE A THIRD-PARTY ACQUISITION OF US DIFFICULT.

     Our certificate of incorporation and bylaws contain 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.

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, as amended, for the year ended December
31, 2000.


                                                                         Page 19
<PAGE>

--------------------------------------------------------------------------------
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

     Not applicable.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

     Not applicable.

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

     Not applicable.

ITEM 5: OTHER INFORMATION

     Not applicable.

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

     The following exhibits have been filed with this report:

     3.2*  Amended and Restated Certificate of Incorporation of the Company.

     3.4*  Amended and Restated Bylaws of the Company.

     4.1*  Form of the Company's Common Stock Certificate.

--------------------------------------------------------------------------------
* Incorporated by reference to exhibits (with same exhibit number) to the
  Company's Registration Statement on Form S-1 (File No. 333-35782) declared
  effective on July 19, 2000.

                                                                         Page 20
<PAGE>

--------------------------------------------------------------------------------
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.

                            ARGONAUT TECHNOLOGIES, INC.

Date: November 13, 2001     By: /s/ Lissa A. Goldenstein
                                ------------------------------------------------
                            Lissa A. Goldenstein
                            PRESIDENT AND CHIEF EXECUTIVE OFFICER
                            (DULY AUTHORIZED AND PRINCIPAL EXECUTIVE OFFICER)

                            By: /s/ John T. Supan
                                ------------------------------------------------
                            John T. Supan
                            VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL OFFICER
                            (DULY AUTHORIZED AND PRINCIPAL FINANCIAL OFFICER)

                                  -------------

                                                                         Page 21