##### Table of Contents



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 March 31, 2003

OR

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

For the transition period from                      to

Commission file number 000-31019

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ARGONAUT TECHNOLOGIES, INC.


(Exact name of registrant as specified in its charter)


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

1101 Chess Drive
Foster City, CA 94404
(Address of principal executive offices, including 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 20,035,183 shares of the registrants common stock outstanding on
April 30, 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 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                
|Certification                
|EXHIBIT 3.2                  
|EXHIBIT 10.12                
|EXHIBIT 10.13                
|EXHIBIT 99.1                 
|EXHIBIT 99.2                 



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##### Table of Contents



Argonaut Technologies, Inc.
Form 10-Q
Quarterly Period Ended March 31, 2003

TABLE OF CONTENTS

|               |  |                                                                                                                       |  |   
|-------------- |  | --------------------------------------------------------------------------------------------------------------------- |  | --
|PART I:        |  | FINANCIAL INFORMATION                                                                                                 |  |   
|Item 1.        |  | Financial Statements                                                                                                  |  | 3 
|               |  | Condensed Consolidated Balance Sheets as of March 31, 2003 (Unaudited) and December 31, 2002                          |  | 3 
|               |  | Condensed Consolidated Statements of Operations for the Three-Month Periods Ended
March 31, 2003 and 2002 (Unaudited) |  | 4 
|               |  | Condensed Consolidated Statements of Cash Flows for the Three-Month Periods Ended
March 31, 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                                                            |  | 18
|Item 4.        |  | Controls and Procedures                                                                                               |  | 18
|PART II:       |  | OTHER INFORMATION                                                                                                     |  |   
|Item 1.        |  | Legal Proceedings                                                                                                     |  | 19
|Item 2.        |  | Changes in Securities and Use of Proceeds                                                                             |  | 19
|Item 3.        |  | Defaults Upon Senior Securities                                                                                       |  | 19
|Item 4.        |  | Submission of Matters to a Vote of Security Holders                                                                   |  | 19
|Item 5.        |  | Other Information                                                                                                     |  | 19
|Item 6.        |  | Exhibits and Reports on Form 8-K                                                                                      |  | 19
|SIGNATURES     |  | 20                                                                                                                   
|EXHIBITS       |  | 21                                                                                                                   
|CERTIFICATIONS |  | 22                                                                                                                   

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PART I: FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




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

|                                     |                                              |                            |        |              |        |   |        |         |        | 
|------------------------------------ | -------------------------------------------- | -------------------------- | ------ | ------------ | ------ | - | ------ | ------- | ------ | 
|                                     |                                              | March 31,                  |        | December 31,
|                                     |                                              | 2003                       |        | 2002        
|                                     |                                              |                            |        |             
|                                     |                                              | (Unaudited)                |        | (Note 1)    
|ASSETS                               |                                              |                            |        |              |        |   |        |        
|Current assets:                      |                                              |                            |        |              |        |   |        |        
|                                     | Cash and cash equivalents                    |                            | $      | 18,941       |        |   | $      | 20,895  |       
|                                     | Short-term investments                       |                            |        | 4,550        |        |   |        | 5,999   |       
|                                     | Accounts receivable, net                     |                            |        | 4,279        |        |   |        | 4,389   |       
|                                     | Inventories                                  |                            |        | 6,565        |        |   |        | 6,280   |       
|                                     | Prepaid expenses & other current assets      |                            |        | 758          |        |   |        | 727     |       
|                                     | Notes receivable                             |                            |        | 231          |        |   |        | 237     |       
|                                     |                                              |                            |        |              |        |   |        |        
|                                     |                                              | Total current assets       |        |              | 35,324 |   |        |         | 38,527 | 
|Restricted cash                      |                                              |                            | 12,099 |              |        |   | 12,327 |        
|Property and equipment, net          |                                              |                            | 4,796  |              |        |   | 4,921  |        
|Goodwill                             |                                              |                            | 10,173 |              |        |   | 10,173 |        
|Other intangible assets, net         |                                              |                            | 6,234  |              |        |   | 6,425  |        
|                                     |                                              |                            |        |              |        |   |        |        
|                                     |                                              | $                          | 68,626 |              |        | $ | 72,373 |        
|                                     |                                              |                            |        |              |        |   |        |        
|LIABILITIES AND STOCKHOLDERS EQUITY |                                              |                            |        |              |        |   |        |        
|Current liabilities:                 |                                              |                            |        |              |        |   |        |        
|                                     | Accounts payable                             |                            | $      | 1,839        |        |   | $      | 1,873   |       
|                                     | Accrued compensation                         |                            |        | 1,065        |        |   |        | 1,087   |       
|                                     | Other accrued liabilities                    |                            |        | 2,001        |        |   |        | 2,506   |       
|                                     | Deferred revenue                             |                            |        | 1,557        |        |   |        | 1,972   |       
|                                     | Current portion of capital lease obligations |                            |        | 64           |        |   |        | 88      |       
|                                     |                                              |                            |        |              |        |   |        |        
|                                     |                                              | Total current liabilities  |        |              | 6,526  |   |        |         | 7,526  | 
|Long term debt                       |                                              |                            | 12,031 |              |        |   | 12,334 |        
|Stockholders equity:                |                                              |                            |        |              |        |   |        |        
|                                     | Common stock                                 |                            |        | 2            |        |   |        | 2       |       
|                                     | Additional paid-in capital                   |                            |        | 121,399      |        |   |        | 121,388 |       
|                                     | Deferred stock compensation                  |                            |        | (48          | )      |   |        | (74     | )     
|                                     | Accumulated other comprehensive income       |                            |        | 339          |        |   |        | 289     |       
|                                     | Accumulated deficit                          |                            |        | (71,623      | )      |   |        | (69,092 | )     
|                                     |                                              |                            |        |              |        |   |        |        
|                                     |                                              | Total stockholders equity |        |              | 50,069 |   |        |         | 52,513 | 
|                                     |                                              |                            |        |              |        |   |        |        
|                                     |                                              | $                          | 68,626 |              |        | $ | 72,373 |        
|                                     |                                              |                            |        |              |        |   |        |        

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 OPERATIONS
(In thousands, except per share data)
(Unaudited)

|                                                                                                                                                    |                                              |                 |        |                    |       |      |        |       |       | 
|--------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | --------------- | ------ | ------------------ | ----- | ---- | ------ | ----- | ----- | 
|                                                                                                                                                    |                                              |                 |        | Three Months Ended
|                                                                                                                                                    |                                              |                 |        | March 31,         
|                                                                                                                                                    |                                              |                 |        |                   
|                                                                                                                                                    |                                              |                 |        | 2003               |       | 2002
|                                                                                                                                                    |                                              |                 |        |                    |       |     
|Net sales:                                                                                                                                          |                                              |                 |        |                    |       |      |        |      
|                                                                                                                                                    | Products                                     |                 | $      | 5,244              |       |      | $      | 4,214 |      
|                                                                                                                                                    | Services                                     |                 |        | 1,009              |       |      |        | 543   |      
|                                                                                                                                                    |                                              |                 |        |                    |       |      |        |       |      
|                                                                                                                                                    |                                              | Total net sales |        |                    | 6,253 |      |        |       | 4,757 | 
|                                                                                                                                                    |                                              |                 |        |                    |       |      |        |      
|Costs
and expenses:                                                                                                                                 |                                              |                 |        |                    |       |      |        |      
|                                                                                                                                                    | Costs of products                            |                 |        | 2,836              |       |      |        | 2,318 |      
|                                                                                                                                                    | Costs of services                            |                 |        | 661                |       |      |        | 272   |      
|                                                                                                                                                    | Research and development (Note A)            |                 |        | 1,293              |       |      |        | 1,380 |      
|                                                                                                                                                    | Selling, general and administrative (Note A) |                 |        | 3,790              |       |      |        | 3,913 |      
|                                                                                                                                                    | Amortization of purchased intangibles        |                 |        | 211                |       |      |        | 119   |      
|                                                                                                                                                    |                                              |                 |        |                    |       |      |        |       |      
|Total costs and expenses                                                                                                                            |                                              |                 | 8,791  |                    |       |      | 8,002  |      
|                                                                                                                                                    |                                              |                 |        |                    |       |      |        |      
|Loss from operations                                                                                                                                |                                              |                 | (2,538 | )                  |       |      | (3,245 | )    
|Other income (expenses):                                                                                                                            |                                              |                 |        |                    |       |      |        |      
|                                                                                                                                                    | Interest and other income                    |                 |        | 243                |       |      |        | 304   |      
|                                                                                                                                                    | Interest and other expense                   |                 |        | (178               | )     |      |        | (139  | )    
|                                                                                                                                                    |                                              |                 |        |                    |       |      |        |       |      
|Net loss before provision for income taxes                                                                                                          |                                              |                 | (2,473 | )                  |       |      | (3,080 | )    
|Provision for income taxes                                                                                                                          |                                              |                 | (58    | )                  |       |      | (37    | )    
|                                                                                                                                                    |                                              |                 |        |                    |       |      |        |       |      
|Net loss                                                                                                                                            |                                              | $               | (2,531 | )                  |       | $    | (3,117 | )    
|                                                                                                                                                    |                                              |                 |        |                    |       |      |        |      
|Net loss per common share, basic and diluted                                                                                                        |                                              | $               | (0.13  | )                  |       | $    | (0.16  | )    
|                                                                                                                                                    |                                              |                 |        |                    |       |      |        |      
|Weighted-average shares used in
computing net loss per common share, basic and diluted                                                              |                                              |                 | 20,022 |                    |       |      | 19,564 |      
|                                                                                                                                                    |                                              |                 |        |                    |       |      |        |      
|Note A: Research and development expenses and selling,
general and administrative
expenses include charges for stock-based compensation
as follows: |                                              |                 |        |                    |       |      |        |      
|Research and development                                                                                                                            |                                              | $               | 13     |                    |       | $    | 81     |      
|Selling, general and administrative                                                                                                                 |                                              |                 | 18     |                    |       |      | 132    |      
|                                                                                                                                                    |                                              |                 |        |                    |       |      |        |       |      
|                                                                                                                                                    |                                              | $               | 31     |                    |       | $    | 213    |      
|                                                                                                                                                    |                                              |                 |        |                    |       |      |        |      

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)

|                                                 |                                                                             |                                                     |                                                     |                                       |     |                    |         |         |     |        |        |  
|------------------------------------------------ | --------------------------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------------------------------------- | --- | ------------------ | ------- | ------- | --- | ------ | ------ | -
|                                                 |                                                                             |                                                     |                                                     |                                       |     | Three Months Ended
|                                                 |                                                                             |                                                     |                                                     |                                       |     | March 31,         
|                                                 |                                                                             |                                                     |                                                     |                                       |     |                   
|                                                 |                                                                             |                                                     |                                                     |                                       |     | 2003               |         | 2002   
|                                                 |                                                                             |                                                     |                                                     |                                       |     |                    |         |        
|Cash flows from operating activities:            |                                                                             |                                                     |                                                     |                                       |     |                    |         |        
|                                                 | Net loss                                                                    |                                                     | $                                                   | (2,531                                | )   |                    | $       | (3,117  | )  
|                                                 | Adjustments to reconcile net loss to net cash used in operating activities: |                                                     |                                                     |                                       |     |                    |         |         |    
|                                                 |                                                                             | Depreciation and amortization                       |                                                     |                                       | 346 |                    |         |         | 297 |       
|                                                 |                                                                             | Amortization of other purchased intangibles         |                                                     |                                       | 226 |                    |         |         | 119 |       
|                                                 |                                                                             | Disposal of fixed assets                            |                                                     |                                       | 35  |                    |         |         |    |       
|                                                 |                                                                             | Stock-based compensation                            |                                                     |                                       | 31  |                    |         |         | 213 |       
|                                                 |                                                                             | Change in cumulative translation adjustment         |                                                     |                                       | 63  |                    |         |         | (10 | )     
|                                                 |                                                                             | Changes in assets and liabilities:                  |                                                     |                                       |     |                    |         |         |     |       
|                                                 |                                                                             |                                                     | Accounts receivable                                 |                                       |     | 212                |         |         |     | 1,612  |       
|                                                 |                                                                             |                                                     | Inventories                                         |                                       |     | (265               | )       |         |     | 329    |       
|                                                 |                                                                             |                                                     | Prepaid expenses and other current assets           |                                       |     | (30                | )       |         |     | 254    |       
|                                                 |                                                                             |                                                     | Accounts payable                                    |                                       |     | (34                | )       |         |     | (1,703 | )     
|                                                 |                                                                             |                                                     | Accrued compensation                                |                                       |     | (22                | )       |         |     | (591   | )     
|                                                 |                                                                             |                                                     | Other accrued liabilities                           |                                       |     | (505               | )       |         |     | (1,035 | )     
|                                                 |                                                                             |                                                     | Deferred revenue                                    |                                       |     | (415               | )       |         |     | (753   | )     
|                                                 |                                                                             |                                                     |                                                     |                                       |     |                    |         |         |    
|                                                 |                                                                             |                                                     |                                                     | Net cash used in operating activities |     |                    | (2,889  | )       |     |        | (4,385 | )
|                                                 |                                                                             |                                                     |                                                     |                                       |     |                    |         |        
|Cash flows from investing activities:            |                                                                             |                                                     |                                                     |                                       |     |                    |         |        
|                                                 | Capital expenditures                                                        |                                                     |                                                     | (378                                  | )   |                    |         | (183    | )  
|                                                 | Business acquisition (net of cash received)                                 |                                                     |                                                     |                                      |     |                    |         | (5,404  | )  
|                                                 | Purchase of short-term investments                                          |                                                     |                                                     | (3,179                                | )   |                    |         | (2,671  | )  
|                                                 | Proceeds from the sales of short-term investments                           |                                                     |                                                     | 4,622                                 |     |                    |         | 4,510   |    
|                                                 | Proceeds from the maturities of short-term investments                      |                                                     |                                                     |                                      |     |                    |         | 6,774   |    
|                                                 | Purchase of licenses                                                        |                                                     |                                                     | (35                                   | )   |                    |         |        |    
|                                                 | Restricted cash                                                             |                                                     |                                                     |                                      |     |                    |         | (10,863 | )  
|                                                 |                                                                             |                                                     |                                                     |                                       |     |                    |         |         |    
|                                                 |                                                                             |                                                     | Net cash provided by (used in) investing activities |                                       |     | 1,030              |         |         |     | (7,837 | )     
|                                                 |                                                                             |                                                     |                                                     |                                       |     |                    |         |        
|Cash flows from financing activities:            |                                                                             |                                                     |                                                     |                                       |     |                    |         |        
|                                                 | Principal payments on capital lease obligations                             |                                                     |                                                     | (30                                   | )   |                    |         | (35     | )  
|                                                 | Repayment of long term debt                                                 |                                                     |                                                     | (71                                   | )   |                    |         |        |    
|                                                 | Net proceeds from issuances of common stock                                 |                                                     |                                                     | 6                                     |     |                    |         | 60      |    
|                                                 |                                                                             |                                                     |                                                     |                                       |     |                    |         |         |    
|                                                 |                                                                             | Net cash provided by (used in) financing activities |                                                     |                                       | (95 | )                  |         |         | 25  |       
|                                                 |                                                                             |                                                     |                                                     |                                       |     |                    |         |        
|Net decrease in cash and cash equivalents        |                                                                             |                                                     | (1,954                                              | )                                     |     |                    | (12,197 | )      
|Cash and cash equivalents at beginning of period |                                                                             |                                                     | 20,895                                              |                                       |     |                    | 17,996  |        
|                                                 |                                                                             |                                                     |                                                     |                                       |     |                    |         |        
|Cash and cash equivalents at end of period       |                                                                             | $                                                   | 18,941                                              |                                       |     | $                  | 5,799   |        
|                                                 |                                                                             |                                                     |                                                     |                                       |     |                    |         |        

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

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ARGONAUT TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1  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.

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

|                                |  |                              |    |      |  |  |         | 
|------------------------------- |  | ---------------------------- | -- | ---- |  |  | ------- | 
|                                |  | Three Months Ended March 31,
|                                |  |                             
|                                |  | 2003                         |    | 2002
|                                |  |                              |    |     
|Risk-free
interest rate         |  |                              | NA |      |  |  | 3.95%   | 
|Dividend
yield                  |  |                              | NA |      |  |  |        | 
|Weighted
-average expected life |  |                              | NA |      |  |  | 4 years | 
|Volatility                      |  |                              | NA |      |  |  | 0.94    | 

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

|                                                                                                         |  |                              |        |      |  |   |        |  
|-------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | ---- |  | - | ------ | -
|                                                                                                         |  | Three Months Ended March 31,
|                                                                                                         |  |                             
|                                                                                                         |  | 2003                         |        | 2002
|                                                                                                         |  |                              |        |     
|Net loss, as reported                                                                                    |  | $                            | (2,531 | )    |  | $ | (3,117 | )
|Stock-based employee compensation expense included in
reported net loss                                  |  |                              | 26     |      |  |   | 188    |  
|Total stock-based employee compensation expense
determined under fair value based methods for all awards |  |                              | (372   | )    |  |   | 4      |  
|                                                                                                         |  |                              |        |      |  |   |        |  
|Pro forma net loss                                                                                       |  | $                            | (2,877 | )    |  | $ | (2,925 | )
|                                                                                                         |  |                              |        |      |  |   |        |  
|Basic and diluted net loss per common share, as reported                                                 |  | $                            | (0.13  | )    |  | $ | (0.16  | )
|                                                                                                         |  |                              |        |      |  |   |        |  
|Pro forma basic and diluted net loss per common share                                                    |  | $                            | (0.14  | )    |  | $ | (0.15  | )
|                                                                                                         |  |                              |        |      |  |   |        |  

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.

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NOTE 3  INVENTORIES

Inventories consist of the following (in thousands):

|                |  |           |       |              |  |   |       | 
|--------------- |  | --------- | ----- | ------------ |  | - | ----- | 
|                |  | March 31, |       | December 31,
|                |  | 2003      |       | 2002        
|                |  |           |       |             
|Raw materials   |  | $         | 4,816 |              |  | $ | 4,514 | 
|Work in process |  |           | 743   |              |  |   | 709   | 
|Finished goods  |  |           | 1,006 |              |  |   | 1,057 | 
|                |  |           |       |              |  |   |       | 
|                |  | $         | 6,565 |              |  | $ | 6,280 | 
|                |  |           |       |              |  |   |       | 

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 3,932,216 and 3,051,612 shares of
common stock were outstanding at March 31, 2003 and March 31, 2002,
respectively, and warrants to purchase 80,665 shares of common stock were
outstanding at March 31, 2003 and March 31, 2002, but were not 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-month periods ended March 31, 2003 and 2002, comprehensive loss
is as follows (in thousands):

|                                  |  |                    |        |      |  |   |        |  
|--------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | -
|                                  |  | Three Months Ended
|                                  |  | March 31,         
|                                  |  |                   
|                                  |  | 2003               |        | 2002
|                                  |  |                    |        |     
|Net loss                          |  | $                  | (2,531 | )    |  | $ | (3,117 | )
|Unrealized gain (loss)            |  |                    | (6     | )    |  |   | (147   | )
|Cumulative translation adjustment |  |                    | 56     |      |  |   | (10    | )
|                                  |  |                    |        |      |  |   |        |  
|Comprehensive loss                |  | $                  | (2,481 | )    |  | $ | (3,274 | )
|                                  |  |                    |        |      |  |   |        |  

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 creates a combined company serving as
a global provider of solutions for chemistry

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development. The addition of Jones Group to Argonaut strengthens and expands
the Companys position in chemistry consumables sales, and increases 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. The notes payable, which are
redeemable for cash over a two-year period following the closing date, are
guaranteed by Barclays Bank PLC. In addition, certain employees of the Jones
Group that remained as employees after the transaction have received stock
options to purchase an aggregate 349,800 shares of Argonauts Common Stock.

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 National Market System 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 March 31, 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):

|                                                |                      |   |        |       | 
|----------------------------------------------- | -------------------- | - | ------ | ----- | 
|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.

|                   |  |                       |        |  
|------------------ |  | --------------------- | ------ | -
|                   |  | Three Months         
|                   |  | Ended                
|                   |  | March 31, 2002       
|                   |  |                      
|                   |  | (In thousands, except
|                   |  | per share data)      
|Total net sales    |  | $                     | 6,513  |  
|Net loss           |  |                       | (2,974 | )
|Net loss per share |  |                       | (0.15  | )

NOTE 7  GOODWILL AND OTHER PURCHASED INTANGIBLES

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Goodwill and other purchased intangible assets with indefinite lives 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).

The amortization expense relating to the intangible assets for the three-month
period ended March 31, 2003 was $226,000. The following represents the gross
carrying amounts and accumulated amortization of amortized intangible assets at
March 31, 2003:

|                             |                      |       |   |          |       |              |   |      |      |  
|---------------------------- | -------------------- | ----- | - | -------- | ----- | ------------ | - | ---- | ---- | -
|                             |                      |       |   | Gross    |       |              |   |     
|                             |                      |       |   | Carrying |       | Accumulated 
|                             |                      |       |   | Amount   |       | Amortization
|                             |                      |       |   |          |       |             
|Amortized intangible assets: |                      |       |   |          |       |              |   |     
|                             | Completed technology |       | $ | 5,539    |       |              | $ | (883 | )   
|                             | Licenses             |       |   | 1,435    |       |              |   | (77  | )   
|                             | Tradenames           |       |   | 250      |       |              |   | (30  | )   
|                             |                      |       |   |          |       |              |   |      |     
|                             |                      | Total |   | $        | 7,224 |              |   | $    | (990 | )
|                             |                      |       |   |          |       |              |   |     

NOTE 8  RECENT ACCOUNTING PRONOUNCEMENTS

In June 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 146 Accounting for Costs
Associated with Exit or Disposal Activities (SFAS 146), effective for exit
or disposal activities that are initiated after December 31, 2002, with early
application encouraged. Under SFAS 146, a liability for the cost associated
with an exit or disposal activity is recognized when the liability is incurred.
Under prior guidance, a liability for such costs could be recognized at the
date of commitment to an exit plan. The effect of adoption of SFAS 146 is
dependent on the Companys related activities subsequent to the date of
adoption.

In November 2002, the FASB issued Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 elaborates on the
existing disclosure requirements for most guarantees, including residual value
guarantees issued in conjunction with operating lease agreements. It also
clarifies that at the time a company issues a guarantee, the company must
recognize an initial liability for the fair value of the obligation it assumes
under that guarantee and must disclose that information in its interim and
annual financial statements. The initial recognition and initial measurement
provisions apply on a prospective basis to guarantees issued or modified after
December 31, 2002. The disclosure requirements are effective for financial
statements of interim or annual periods ending after December 15, 2002. The
Companys adoption of FIN 45 did not have a material impact on its consolidated
results of operations and financial position.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities, an Interpretation of ARB No. 51 (FIN46). FIN 46
requires certain variable interest entities to be consolidated by the primary
beneficiary of the entity if the equity investors in the entity do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective for all
new variable interest entities created or acquired after January 31, 2003. The
Company does not believe it has any investments in variable interest entities
and the adoption of this interpretation did not have a material impact on its
consolidated results of operations and financial position.

NOTE 9  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 March 31, 2003, 23 of the 44 employees had been
terminated.

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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 |     |  |  |   |      | Accrued
|                                        |  | Charge in   |       | Noncash |  | Cash     |      | Restructuring at  |  | Cash     |      | Restructuring at
|                                        |  | August 2002 |       | Charges |  | Payments |      | December 31, 2002 |  | Payments |      | March 31, 2003  
|                                        |  |             |       |         |  |          |      |                   |  |          |      |                 
|Workforce reductions                    |  | $           | 630   |         |  | $        |     |                   |  | $        | (212 | )                |  | $       | 418 |  |  | $ | (170 | )       |  | $ | 248 | 
|Abandonment of excess equipment         |  |             | 683   |         |  |          | (683 | )                 |  |          |     |                  |  |         |    |  |  |   |     |         |  |   |    | 
|Abandonment of excess leased
facilities |  |             | 356   |         |  |          |     |                   |  |          |     |                  |  |         | 356 |  |  |   |     |         |  |   | 356 | 
|Other                                   |  |             | 133   |         |  |          |     |                   |  |          | (30  | )                |  |         | 103 |  |  |   | (28  | )       |  |   | 75  | 
|                                        |  |             |       |         |  |          |      |                   |  |          |      |                  |  |         |     |  |  |   |      |         |  |   |     | 
|Total                                   |  | $           | 1,802 |         |  | $        | (683 | )                 |  | $        | (242 | )                |  | $       | 877 |  |  | $ | (198 | )       |  | $ | 679 | 
|                                        |  |             |       |         |  |          |      |                   |  |          |      |                  |  |         |     |  |  |   |      |         |  |   |     | 




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, our ability to be cash flow
positive in the fourth quarter of 2003, research and 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 the discussion set forth herein under Factors That May Affect Our
Future Results.

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 and the Surveyor and the
Endeavor product lines in 2000. 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 March 31, 2003, we had an
accumulated deficit of $71.6 million.

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Recent Developments

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 ending
September 30, 2002. The charge includes 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 March 31, 2003, 23 of the 44 employees had been
terminated and the accrued restructuring liability was $679,000. For the
quarterly period ended March 31, 2003, cash payments related to the
restructuring program were $198,000. Remaining cash expenditures relating to
workforce reduction and other related charges will be paid during fiscal 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.

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-MONTH PERIOD ENDED MARCH 31, 2003

Operating results for the three-month period ended March 31, 2002 include the
Jones Group since February 21, 2002.

Net Sales

Net sales in the three-month period ended March 31, 2003 were $6.3 million
compared to $4.8 million for the same period in 2002, a growth of 31%. For the
first quarter of 2003, instrument sales comprised approximately 29% of net
sales, chemistry consumables sales comprised approximately 54% of net sales,
and service, integration services and contract research and development (R&D)
together comprised approximately 17% of net sales. Instrument sales were $1.8
million in the first quarter of 2003 versus $2.6 million for the same period in
2002, due primarily to the effects of product transitions and discontinuance of
legacy instrument products. Chemistry consumables sales were $3.4 million in
the first quarter of 2003 versus $1.6 million in the same period of 2002, a
growth of 106%. The substantial growth in chemistry consumables products is
primarily attributable to the acquisition of the Jones Group.

Cost of sales

Cost of sales, comprised of cost of products and cost of services was $3.5
million in the three-month period ended March 31, 2003 versus $2.6 million for
the same period in 2002, an increase of 35%. The increase in cost of sales is
primarily due to the higher sales volume relative to the same period in the
prior year. Gross margin as a percent of sales was 44.1% for the first quarter
of 2003 compared to 45.6% for the first quarter of 2002. Consistent
with expectations, lower margin
performance was primarily due to a combination of lower instrument sales volume
and product mix. The gross margin as a percent of sales for the quarterly
period ended March 31, 2003 includes the favorable impact of approximately
$247,000 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 decreased to $1.3 million for the three-month
period ended March 31, 2003 compared to $1.4 million for the same period in
2002, a decrease of 6%. 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, offset by approximately $50,000 due
to the full quarter effect of the addition of the Jones Group. Stock-based
compensation expenses related to research and development decreased by $68,000
for the first quarter of 2003 as compared to the same period in 2002.

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Selling, general and administrative expenses

Selling, general and administrative expenses decreased to $3.8 million in the
three-month period ended March 31, 2003 from $3.9 million for the same period
in 2002, a decrease of 3%. 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 and reduced stock-based compensation
charges, offset by approximately $481,000 due to the full quarter effect of the
Jones Group. Stock-based compensation expenses related to selling, general and
administration decreased by $114,000 for the first quarter of 2003, as compared
to the first quarter of 2002.

Amortization of purchased intangible assets and acquired in-process research &
development

For the quarter ended March 31, 2003, the Company recorded amortization of
purchased intangibles of $211,000 related to the March 1, 2001 acquisition of
ATSI and the
February 20, 2002 acquisition of Jones Group compared to $119,000 in the same
period of 2002. The increase in amortization expense is due to the full
quarter effect of the Jones Group.

Interest and Other Income (Expense), net

Interest and other income decreased to $243,000 for the three-month period
ended March 31, 2003 as compared to $304,000 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 $178,000 for the first quarter of 2003 compared to
$139,000 in the same period in 2002 primarily due to the interest associated
with the notes payable for the Jones Group acquisition.

Provision for Income Taxes

The Company recorded a provision for income taxes of approximately $58,000 to
record the UK corporate tax liability of Jones Group for the three-month period
ended March 31, 2003 as compared to approximately $37,000 for the same period
in 2002.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2003, the Company had cash, cash equivalents, short-term
investments and restricted cash of $35.6 million compared to $39.2 million at
December 31, 2002. The decrease was primarily due to the use of $2.7 million in
general operating activities, approximately $378,000 used for capital
expenditures, approximately $198,000 in cash payments related to restructuring
activities initiated in the third quarter of 2002, and approximately
$101,000
in cash used for principal payments on notes payable and capital lease
obligations.

The restricted cash amount is denominated in British Pounds Sterling and
represents the cash used to secure the notes payable of £7,650,000
(approximately $10.9 million) 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 to the Barclays Bank base rate on
the business day immediately preceding each quarterly interest period.

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 March 31, 2003, the Company had repurchased
50,000 shares of outstanding common stock at an average price of $0.93 per
share.

The Company expects to have negative cash flows from operations through at
least the first three quarters of 2003. We may also use cash resources to fund additional
collaborative or strategic relationships, acquisitions or investments in other
businesses,

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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 following summarizes the Companys contractual cash obligations at March
31, 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)        |  | $                       | 12,031 |        |  | $         |      |        |  | $      | 12,031 |  |  | $ |  | 
|Capital lease obligations          |  |                         | 64     |        |  |           | 64    |        |  |        |       |  |  |   |  | 
|Operating lease obligations        |  |                         | 1,340  |        |  |           | 996   |        |  |        | 344    |  |  |   |  | 
|                                   |  |                         |        |        |  |           |       |        |  |        |        |  |  |   |   | 
|Total contractual cash obligations |  | $                       | 13,435 |        |  | $         | 1,060 |        |  | $      | 12,375 |  |  | $ |  | 
|                                   |  |                         |        |        |  |           |       |        |  |        |        |  |  |   |   | 

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 March 31, 2003, we had an accumulated
deficit of $71.6 million and we recorded net losses of
$2.5 million for the three-month period
ended March 31, 2003. Although we expect to become cash flow positive in
the fourth quarter of 2003, we expect to continue to incur operating and net
losses during 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.

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| |  | 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, we made significant progress integrating the Jones Group
business; however, we continue to have remaining integration activities and
projects. Our failure to completely and 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 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 quarter 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 instrument 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. Since instruments represented 45% of
total revenue in 2002, 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

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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. 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 the slowing economic situation during 2002
has moderated somewhat 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.

As a global concern, we face exposure to adverse movements in foreign currency
exchange rates. Approximately 48% of our net sales are exposed to foreign
currency risk. Approximately 21% 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. The use of the Euro as a common currency for members of the European
Union could impact our foreign exchange exposure. 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

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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 economic conditions in the
United States, the United Kingdom and globally, and, in particular, market
conditions in the pharmaceutical, biotechnology, life sciences and chemical
industries. In recent quarters, our operating results have been 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.

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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.

During the fourth quarter of 2002 we transferred from the NASDAQ National
Market to the NASDAQ SmallCap Market. There is no guarantee that an active
trading market for our Common Stock will be maintained on the NASDAQ SmallCap

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 SmallCap Market, we may be de-listed from
trading on such market, and thereafter trading in our common stock, if any,
would be conducted through 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
2002 from a per-share high of $4.22 to a low of $0.51 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, 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

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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.

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

Within the 90 days prior to the filing of this report, the Company carried out
an evaluation, under the supervision and with the participation of its Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of its disclosure controls and procedures. Based on this
evaluation, the Companys Chief Executive Officer and Chief Financial Officer
concluded that the Companys disclosure controls and procedures as defined in
Rules 13(a)-14(c) under the Securities Exchange Act of 1934 (Exchange Act)
are effective to ensure that information required to be disclosed by the
Company in this report and other reports that it files under the Exchange Act
is recorded, processed, summarized and reported within the periods specified in
SEC rules and forms. It should be noted that the design of any system of
controls is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions, regardless of
how remote.

There have been no significant changes in the Companys internal controls or in
other factors that could significantly affect internal controls subsequent to
the date the Company carried out this evaluation.




PART II. OTHER INFORMATION

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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 March 31, 2003, the Company had repurchased
50,000 shares of outstanding common stock at an average price of $0.93 per
share.

We amended our Bylaws to allow a special meeting of the stockholders to be called by one or more
stockholders holding shares in the aggregate entitled to cast not less than ten percent (10%) of the votes at that meeting.




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 exhibits listed in the accompanying Exhibit Index are filed or
incorporated by reference as part of this Report on Form 10-Q.
|   
|(b) |  | Reports on Form 8-K.                                                                                                             
|   
|    |  | The Company filed no reports on Form 8-K during the quarter ended March
31, 2003.                                                

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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: |  | May 14, 2003 |  | ARGONAUT TECHNOLOGIES, INC.

By:
    
    /s/ LISSA A. GOLDENSTEINLissa A. GoldensteinPresident and Chief Executive Officer


By:
    
    /s/ DAVID J. FOSTERDavid J. FosterSr. Vice President and Chief Financial Officer


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ARGONAUT TECHNOLOGIES, INC.
Form 10-Q
Quarterly Period Ended March 31, 2003




EXHIBIT INDEX

|            |  |                                                                                                                                                                                                      
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number      |  | Description of Document                                                                                                                                                                              
|            |  |                                                                                                                                                                                                      
|2.1***      |  | Agreement and Plan of Merger dated January 31, 2001, by and among the Registrant, CPL Acquisition
Corp. and Camile Products, LLC.                                                                    
|            |  |                                                                                                                                                                                                      
|2.2****     |  | 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*        |  | Amended and Restated Certificate of Incorporation of the Registrant.                                                                                                                                 
|            |  |                                                                                                                                                                                                      
|3.2         |  | Amended and Restated Bylaws of Registrant, adopted March 17, 2003.                                                                                                                                   
|            |  |                                                                                                                                                                                                      
|4.3***      |  | Registration Rights Agreement dated March 1, 2001, by and among the Registrant and the members of
Camile Products, LLC.                                                                              
|            |  |                                                                                                                                                                                                      
|4.4****     |  | Registration Rights Agreement dated February 20, 2002, by and among the Registrant and the former
Jones Group shareholders.                                                                          
|            |  |                                                                                                                                                                                                      
|4.5****     |  | £7,650,000 Loan Note Instrument Creating Principal Amount Guaranteed Loan Notes 2004 guaranteed by
Barclays Bank PLC dated February 20, 2002.                                                        
|            |  |                                                                                                                                                                                                      
|10.1*       |  | Amended and Restated Stockholder Rights Agreement, dated May 21, 1999.                                                                                                                               
|            |  |                                                                                                                                                                                                      
|10.2*       |  | Offer Letter, dated October 29, 1996, from Registrant to David P. Binkley, Ph.D.                                                                                                                     
|            |  |                                                                                                                                                                                                      
|10.3*       |  | Promissory Note Secured by Deed of Trust between the Registrant and David P. Binkley, dated December
17, 1996.                                                                                       
|            |  |                                                                                                                                                                                                      
|10.4*       |  | Lease Agreement between the Registrant and Tanklage Family Partnership, dated July 9, 1999.                                                                                                          
|            |  |                                                                                                                                                                                                      
|10.5*       |  | Lease Agreement between the Registrant and MK Kojimachi Building Co., Ltd., dated September 16, 1997,
as amended.                                                                                    
|            |  |                                                                                                                                                                                                      
|10.6*       |  | Lease Agreement between the Registrant and Personalvorsorgestiftung Rapp AG, dated April 16, 1997.                                                                                                   
|            |  |                                                                                                                                                                                                      
|10.7*       |  | License and Supply Agreement between the Registrant and Symyx Technologies, Inc., dated August 6, 1999.                                                                                              
|            |  |                                                                                                                                                                                                      
|10.8*       |  | Manufacturing Agreement between the Registrant and Merck, Inc. dated June 24, 1997, as amended.                                                                                                      
|            |  |                                                                                                                                                                                                      
|10.9*       |  | Form of Indemnification Agreement between the Registrant and each of its directors and officers.                                                                                                     
|            |  |                                                                                                                                                                                                      
|10.10*      |  | 1995 Stock Plan.                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                      
|10.11*      |  | 1995 Stock Plan Form of Stock Option Agreement.                                                                                                                                                      
|            |  |                                                                                                                                                                                                      
|10.12       |  | 2000 Incentive Stock Plan, as amended, March 17, 2003.                                                                                                                                               
|            |  |                                                                                                                                                                                                      
|10.13       |  | 2000 Employee Stock Purchase Plan, as amended, March 17, 2003.                                                                                                                                       
|            |  |                                                                                                                                                                                                      
|10.14**     |  | Amendment to License and Supply Agreement between the Registrant and Symyx Technologies, Inc., dated
January 1, 2002.                                                                                
|            |  |                                                                                                                                                                                                      
|10.15**     |  | Agreement between the Registrant and David P. Binkley dated December 5, 2001.                                                                                                                        
|            |  |                                                                                                                                                                                                      
|10.16**     |  | Agreement between the Registrant and John T. Supan dated January 10, 2002.                                                                                                                           
|            |  |                                                                                                                                                                                                      
|10.17*****  |  | License Agreement between Argonaut Technologies, Inc. and Symyx Technologies, Inc. dated August 21,
2002.                                                                                            
|            |  |                                                                                                                                                                                                      
|10.18****** |  | Agreement between the Registrant and Jan K. Hughes dated December 9, 2002.                                                                                                                           
|            |  |                                                                                                                                                                                                      
|99.1        |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                   
|            |  |                                                                                                                                                                                                      
|99.2        |  | Certification of
Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                   



|*      |  | 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.                                                                                                                                       
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      
|**     |  | Incorporated by reference from our Form 10-K filed with the Securities and Exchange Commission on April 1, 2002.                                                                                                                                                                                                           
|      
|***    |  | Incorporated by reference from our Form 8-K filed with the Securities and Exchange Commission on March 16, 2001.                                                                                                                                                                                                           
|      
|****   |  | Incorporated by reference from our
Form 8-K filed with the Securities and Exchange Commission on March 6, 2002.                                                                                                                                                                                                            
|      
|*****  |  | 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.
|      
|****** |  | Incorporated by reference from our
Form 10-K filed with the Securities and Exchange Commission on
March 31, 2003.                                                                                                                                                                                                          

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Certification under Section 302(a) of the Sarbanes-Oxley Act of 2002

I, Lissa A. Goldenstein, President and Chief Executive Officer of Argonaut
Technologies, Inc., certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Argonaut Technologies,
Inc.;                                                                                                                                                                                                                                            
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this
quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 14, 2003

/s/ LISSA A.
GOLDENSTEINLissa A. GoldensteinPresident and Chief Executive Officer


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##### Table of Contents



I, David J. Foster, Chief Financial Officer of Argonaut Technologies, Inc.,
certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Argonaut Technologies,
Inc.;                                                                                                                                                                                                                                            
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this quarterly
report;                   
|  
|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                     



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 14, 2003

/s/ DAVID J.
FOSTERDavid J. FosterSr. Vice President and Chief Financial Officer


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