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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
                        COMMISSION FILE NUMBER 000-21930


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

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

                   542 FLYNN ROAD, CAMARILLO, CALIFORNIA 93012
                    (Address of principal executive offices)

       Registrant's telephone number, including area code: (805) 987-0086


      Securities registered pursuant to Section 12(b) of the Exchange Act:

                                      None

      Securities registered pursuant to Section 12(g) of the Exchange Act:

                         Common Stock, $0.001 par value
                         Preferred Stock purchase rights


       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  periods  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 if no disclosure of delinquent  filers in response
to Item 405 of Regulation S-K is contained herein, and will not be contained, to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in  Part  III of the  Form  10-K or any
amendment to this Form 10-K . [_]

       Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [_] No [X].


       The  aggregate  market  value of the voting stock (based on the last sale
price of such  stock as  reported  by the  National  Association  of  Securities
Dealers  Automated  Quotation  National Market System) held by non-affiliates of
the registrant as of June 30, 2003 was $63,130,558

       The number of shares of the Registrant's  common stock  outstanding as of
March 15, 2004 was 9,402,618.

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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

The following  discussion  should be read in conjunction  with our  consolidated
financial  statements  provided  under Part II, Item 8 of this annual  report on
Form 10-K.  Certain statements  contained herein may constitute  forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995.  These  statements  involve  a number of  risks,  uncertainties  and other
factors that could cause actual results to differ materially,  as discussed more
fully herein.

The forward-looking  information set forth in this annual report on Form 10-K is
as of March 15,  2004,  and we  undertake  no duty to update  this  information.
Should  events  occur  subsequent  to March 15, 2004 that make it  necessary  to
update the forward-looking  information contained in this Form 10-K, the updated
forward-looking  information  will be filed  with the  Securities  and  Exchange
Commission in a quarterly report on Form 10-Q or as an earnings release included
as an exhibit to a Form 8-K,  each of which will be available at the  Securities
and  Exchange  Commission's  website  at  www.sec.gov.  More  information  about
potential  factors  that could  affect our  business  and  financial  results is
included in the section  entitled  "Risk  Factors"  beginning on page 26 of this
Form 10-K.

OVERVIEW

The Company  manufactures  markets and  distributes  products used  worldwide in
biomedical  research  that  are  instrumental  in the  development  of new  drug
therapies and medical  diagnostic  methods.  Our products enable  scientists and
biomedical  researchers to better  understand the  biochemistry,  immunology and
cell biology of the human body, as well as disease processes. The Company offers
over 3,600 products that are grouped into the following  product lines:  Assays;
Biologicals  (Antibodies,  Bioactive Proteins and Peptides and Oligonucleotides)
and Serum & Media. We believe we offer a unique  combination of skills resulting
in a focused  range of products  and  services  for the  worldwide  academic and
government research, pharmaceutical and biotechnology industries.

The Company believes it has a strong scientific  research staff, a broad product
line and an established trade name, giving it a solid presence in the biomedical
research  market.  We intend to continue  our focus on new product  development,
particularly  assay kits,  as the driver of growth for the Company.  We may also
seek to acquire  businesses,  products  and  technologies  complementary  to our
current business through acquisitions, licensing or joint ventures.

The Company was originally  incorporated as a California  corporation in October
1989,  and  was  reincorporated  as a  Delaware  corporation  in May  1993.  The
Company's executive offices are located at 542 Flynn Road, Camarillo, California
93012, and its telephone number is (805) 987-0086. The Company's common stock is
traded on the NASDAQ National Market under the ticker symbol "BIOI." Information
on the Company's  website,  www.biosource.com,  does not constitute part of this
annual report.

INDUSTRY OVERVIEW

The  biomedical   research  industry  has  seen  significant   advances  in  the
understanding  of  physiological  processes at the cellular and molecular level.
The  sequencing  of the human  genome has  accelerated  the need for methods and
products to research and identify  thousands of previously unknown proteins that
potentially play key roles in cell function, normal and diseased. These proteins
are of significant  interest to the pharmaceutical  industry,  since they can be
used as the  basis  of new  therapeutic  discovery  and  development.  The  core
competencies  the company has  developed  in  molecular  and  cellular  biology,
immunology  and  custom  biological  services  address  this  need.   Biomedical
researchers  around the world are  constantly  in search of  specialty  research
products and  services,  which are  necessary to conduct both basic and clinical
research.  This research is conducted in settings that range from university and
medical school  laboratories to pharmaceutical  and  biotechnology  research and
development  groups.  The  success  of this type of  research  depends  upon the
availability of high quality biological reagents and custom services,  including
the serum & media,  assay  kits and the  related  biologicals  that the  Company
develops, manufactures and sells.


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STRATEGY

The  Company's  basic  strategy is to increase  its organic  growth rate through
focused research and development and sales and marketing investments in cellular
communication pathway markets with high growth potential. Cellular communication
pathway  markets  include  both   extracellular   signaling  products  (such  as
cytokines) and intracellular  signaling products (such as signal  transduction).
BioSource  will  exploit  unique  corporate  and product  capabilities  to drive
product  growth in these select markets with  particular  emphasis on developing
and selling assay kits. In addition, strong emphasis is placed on developing the
network and systems to provide uncompromising  customer support. As a complement
to the core organic  growth  strategy,  we may also seek to acquire  businesses,
products  and  technologies   complementary  to  our  current  business  through
acquisitions,  licensing  or joint  ventures.  In order to  facilitate  the core
strategy, the Company is:

o    Applying a focused investment strategy in research and development. In 2003
     the Company spent 16% of net sales on research and development. In previous
     years,  internal  research and  development  spending was directed  towards
     creating a high volume of new  products  with  emphasis on building a broad
     range or menu of key  biologicals for the study of cellular  pathways.  Now
     that the broad menu has been developed,  research and development  spending
     in 2004 is being  focused  upon the  development  of new,  high  volume and
     greater  profit assay kits and their  directly  related  biologicals.  As a
     result,  the  Company is not  necessarily  focused on a high  number of new
     products as a goal,  but on the  specific  type of new  product,  and their
     complementary  biologicals  that  provide  greater  sales  potential in the
     marketplace.  Research and  Development  spending for the next few years is
     projected  to stay in the range of 14-16%  of  sales.  We expect  this more
     focused investment to result in a higher rate of return on our research and
     development spending.

o    Continuing to invest in a customer support infrastructure.  The Company has
     made significant investments in its sales and marketing activities over the
     past few years and believes it must  continue to do so in the future.  This
     investment is necessary to access and to support the large,  $1.5B cellular
     communication  pathway research market. The company has its own sales force
     and sells direct in the United  States and certain major markets in Europe.
     The  remainder  of the  world  is  serviced  through  a  network  of  local
     distributors comprising approximately 25% of the Company's 2003 revenues. A
     key  strategy  of the  Company  is to  differentiate  itself  by  providing
     personalized,    uncompromising    logistical   and   scientific   support.
     Consequently,  continued  strong  investments  in sales and  marketing  are
     anticipated.

o    Accelerating  critical external business development efforts to support the
     Company's  more focused assay kit strategy.  We anticipate  this focus will
     result in additional  relationships  in the areas of  licensing,  strategic
     partnerships,   OEM  relationships   and,   possibly,   acquisitions  as  a
     complementary  strategy to enable our assay  development and  manufacturing
     expertise to be more readily exploited in novel platforms and technologies.
     The Company feels that this business  development  strategy will complement
     its existing core  competencies and further  strengthen its position in the
     proteomics markets of cellular communication pathways.

PRODUCTS

BioSource currently offers over 3,600 products.  Our strategy is to place a more
focused effort on selling assays and their directly related  biological and cell
growth  product  lines.  Assay kits are typically sold in higher volume and at a
higher gross margin than our other product  lines.  In 2003,  assay kits made up
approximately  50% of our total sales.  Our goal is to continue to increase this
percentage  in 2004 and beyond.  We group our  products  into three  categories:
Assays or Assay Kits, Biologicals and Serum & Media.

ASSAYS

"Assays" or "Assay Kits" are a collection of reagents, buffers,  calibrators and
active  biologicals that are standardized,  validated and assembled into a ready
to use package of products. Researchers use these assay kits to measure specific
responses in animal  disease models or humans.  There are numerous  hardware and
software  systems (not  marketed by  BioSource)  used by a researcher to perform
these tests.  The majority of these test  systems are "open  platforms"  in that
they  allow  the use of third  party  providers  of assay  kits.  BioSource  has


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targeted the open platform  market.  Below is described  some of the more common
BioSource assay technologies.

ENZYME-LINKED  IMMUNOSORBENT  ASSAY ("ELISA") TEST KITS. In a typical ELISA test
kit, an antibody is  immobilized  or "bound" on a  microtiter  well of the kit's
test plate.  A sample  containing the antigen that is to be measured is added by
the researcher and allowed to react with the bound  antibody.  After the well is
washed, a second antibody with a specific  enzymatic tag is added and allowed to
react with the bound  antigen.  After washing away any remaining  free antibody,
the researcher adds a substrate that produces a colored reaction.  The amount of
color is proportional and thereby indicates the amount of antigen present, which
can  be  measured  even  in  minute  concentrations,   using  common  laboratory
instruments.  This  method  of  quantitation  of these  antigens  has  become an
integral  tool both in research  and  diagnostic  applications  as it provides a
relatively  inexpensive,  accurate and rapid method for the evaluation of immune
status.

BioSource ELISA test kits are a combination of cytokines,  their  antibodies and
other chemical  reagents,  and are used to measure the presence or quantity of a
particular  bioactive protein in serum,  plasma or other biological  sample. The
quantitation of these cytokines and chemokines has been shown to be an excellent
way for  scientists to determine  the  functional  status of the immune  system.
Since many of the current targets of pharmaceutical intervention are designed to
modulate the immune system, quantitation of these markers as a means for gauging
the effectiveness of treatment is becoming increasingly necessary.

Our ELISA tests produce  results in a few hours,  compared to days or even weeks
with bioassays.  We offer kits for human, mouse, rat, monkey and swine proteins.
The  diversity  of species is  important  to allow  investigators  to  establish
numerous  measurements in pre-clinical  animal model systems.  We offer over 350
types of ELISA kits and we believe we are the leader in sales of rat, monkey and
swine cytokine ELISA kits. Detection of fluctuations in cytokine levels by ELISA
tests;  whether  in an invitro  cell  culture  experiment  of a new drug or in a
patient's serum, provide researchers and scientists with valuable information in
understanding disease progression, therapy and diagnosis.

An alternative  method to our ELISA test kits are our Muliplex Antibody kits for
use in instrument systems  manufactured by Luminex  Corporation,  a third party,
which allow  measurement of several proteins  simultaneously in a single sample,
saving  time and effort as well as the  precious  sample.  Our menu for  Luminex
assays has rapidly expanded to include kits for the measurement of human,  mouse
and rat  cytokines,  chemokines,  growth factors and cell biology  markers.  The
multiplex kits allow for investigators to establish screens for drug targets and
inhibitors  in cell culture  samples or to determine the  diagnostic  value of a
panel of proteins in human patient serum or plasma samples.

Of the more than 350 assay kits we offer, the following table  illustrates a few
of the more common applications of our ELISA test kits:


  TEST KIT                            CHARACTERISTICS/APPLICATION
------------      --------------------------------------------------------------

     Tau          This  kit   detects   and   quantitates   the   presence   and
                  phosphorylation state of an important brain protein thought to
                  be involved in the  development of Alzheimer's  disease.  When
                  this  protein  is  modified  in the  cell by the  addition  of
                  phosphate  groups at specific amino acid sites, the biological
                  activity of the protein  changes.  In certain  disease states,
                  abnormally high levels of  phosphorylation  occur, which cause
                  the protein  structures to destabilize,  ultimately leading to
                  neuronal  degeneration.   Deposition  of  filamentous  tau  is
                  implicated  in  other  neurodegenerative   diseases  including
                  cortical basal degeneration  (CBD),  progressive  supranuclear
                  palsy (PSP), Pick's disease,  and certain forms of Parkinson's
                  disease.  Pharmaceutical  companies  are keenly  interested in
                  developing   drugs  that  can  halt   specific   patterns   of
                  phosphorylation  without  hampering normal cell activity.  The
                  ability to quantitate  the  phosphorylation  state at specific
                  sites will assist this effort.


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<PAGE>


     Rb           This  kit   detects   and   quantitates   the   presence   and
                  phosphorylation  state  of an  important  cellular  regulation
                  protein associated with cell division.  This protein, known as
                  Retinoblastoma  protein  or Rb,  is one  focus of  efforts  to
                  develop anti-cancer drugs. The activity of Rb is controlled by
                  phosphorylation  of the protein at  specific  amino acids by a
                  select  group of  protein  kinases  called  cdks.  If too much
                  phosphorylation  of  Rb  occurs,  its  ability  to  halt  cell
                  division is hampered,  as is the case in malignant  cells. The
                  ability   to    specifically    quantitate    the   level   of
                  phosphorylation  of this  protein by kinases and the impact of
                  kinase inhibitors on normal and abnormal  phosphorylation is a
                  key development in the drug development process.

      IL-6        This kit detects and  quantitates a cytokine that is extremely
                  important in the study of inflammation.  IL-6 is produced by a
                  number  of  cells in the body  and its  actions  regulate  the
                  growth  and  differentiation  of  various  cells of the immune
                  system.  IL-6 induces a variety of  important  proteins in the
                  body in response to  inflammation  or tissue injury.  Although
                  most healthy  individuals have undetectable  levels of IL-6 in
                  their serum,  huge  quantities  of IL-6 are detected in severe
                  inflammatory  situations such as septicemia.  The elevation of
                  serum IL-6 precedes that of acute phase  proteins,  e.g., in a
                  postoperative  phenomenon,  and may thus be a sensitive  early
                  parameter to investigate inflammatory conditions. Serum levels
                  of IL-6 are used in studies of  surgical or  traumatic  tissue
                  injuries, infectious diseases,  auto-immune diseases including
                  arthritis,   graft   rejection,   alcoholic  liver  cirrhosis,
                  malignancies, etc.

RADIOIMMUNO-ASSAYS   ("RIA").  We  produce  and  market  RIAs,  which  are  used
internationally  in large volume  clinical  laboratories  for the measurement of
hormones and proteins  important in growth,  reproductive  and thyroid  disease.
These  assays  utilize  radioisotopically  labeled  molecules  to  compete  with
non-isotopically  labeled molecules for sites on known antibody  concentrations.
RIA is a  mature  technology  used  primarily  in  European  and  other  foreign
countries and is no longer widely used in the United States.

OTHER ASSAYS.  We have combined our  oligonucleotide  and ELISA  technologies to
develop a portfolio  of other assay kits that  measure the quantity of messenger
RNA, the type of RNA that serves as a template for protein  synthesis of various
cytokines  in blood,  cultured  cells or tissues.  Our  molecular  analysis  kit
product  line permits  detection of the  individual  genes and  quantitates  the
amount of the gene that encodes for a specific  protein.  We also have developed
kits that allow  researchers  to measure  multiple genes at the same time from a
single sample.

BIOLOGICALS:  We define a "biological" as a naturally occurring or synthetically
produced  animal or human based  nucleic acid or protein.  Nucleic acids are the
basic building blocks of the genetic structure of all living things. The genetic
structure directs the synthesis of proteins.  Proteins control the structure and
function of all living organisms.

Biologicals  are the essential  active  components to our assay kits.  These may
include monoclonal or polyclonal  antibodies,  bioactive  recombinant  proteins,
synthetic  peptides or synthetic  oligonecliotides.  In addition to use in assay
test kits, these  biologicals are sold  individually as either a catalog or as a
custom  produced  product.  The Company's  expertise in selecting,  creating and
purifying these biologicals is a  differentiating  core competency that provides
the high level of sensitivity and specificity to its cellular  pathway  research
products.

ANTIBODIES

Antibodies  are used in the  Company's  assay  kits as  detector  systems in the
research of normal and abnormal  proteins.  Antibodies are proteins generated by
immune  cells in  response  to foreign  substances,  which are called  antigens.
Antibodies have specific amino acid sequences, which cause them to interact only
with the antigen that induced their creation.  Antibodies circulate in the blood
and  assist  the body's  immune  system by  searching  out and  neutralizing  or
eliminating  antigens.  Antibodies  are  used by  researchers  in a  variety  of
applications,  including  neutralization studies in bioassay systems, as capture
and   detection   molecules   for   protein   quantitation   and  for   cellular
differentiation. Antibodies used in research are generally produced by injecting
an antigen into  animals,  which cause the animals'  immune system to produce an
antibody specific to that antigen.


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In addition to use in the Company's  assay kits, this broad  biological  product
line provides  researchers  and  biotechnology  companies  with an array of high
quality  reagents  used to develop  analytical  signals in  various  assays.  In
addition,  other companies use our secondary  antibodies as a component of their
test kits.

We also have developed a significant  catalog of innovative signal  transduction
tools that enable  customers to more  readily  understand  the complex  signals,
which  control  cellular  processes.  Many of these  tools are  antibodies  that
recognize specific, activated or inactivated forms of proteins containing one or
more  molecules of phosphate  at specific  sites.  Such an addition of phosphate
molecules,  which is referred  to as  phosphorylation,  or removal of  phosphate
molecules,  which  is  referred  to as  dephosphorylation,  control  most of the
signaling within and between cells.  Diseases such as cancer,  heart disease and
Alzheimer's have been shown to be at least in part due to the  malfunctioning of
key molecules  within cells,  in many cases due to alterations in their activity
through altered phosphorylation.

We offer over 1,640 antibody  products.  The following table illustrates some of
the uses for the antibodies we offer:

      USES                                      DESCRIPTION
----------------           -----------------------------------------------------

ELISA                      Test Kits  Antibodies are used in our ELISA test kits
                           to detect and measure proteins in biological  fluids.
                           An antibody is coupled  with an enzyme  which  reacts
                           with  a  colorless  substrate  in the  presence  of a
                           sample containing the antigen of interest to generate
                           a colored  reaction  product.  The color  produced is
                           proportional to, and thereby indicates the amount of,
                           antigen present in the sample.

Flow                       Cytometry In order to identify specific cell types by
                           the  nature  of  the  antigens   expressed  on  their
                           surface, antibodies are bound to cells and visualized
                           by labeling the antibody molecules with a fluorescent
                           dye or "fluorochrome." The result is examined with an
                           instrument known as a flow cytometer.

High                       Throughput  High  throughput  screening  permits  the
                           researcher   to  screen   test   thousands   of  drug
                           candidates in a short period of time for their effect
                           on  target  molecules.  In  order  to be used in this
                           manner, we conjugate our antibodies to different dyes
                           or enzymes.

Immunoblotting             Immunoblotting uses antibodies to identify a specific
                           protein  in a complex  mixture.  In this  process,  a
                           protein of interest is separated by molecular  weight
                           using gel  electrophoresis.  A specific  antibody  is
                           then passed over the  mixture,  and any protein  that
                           binds to the antibody is visibly detected.

The research  conducted by our  customers  often  requires  that we  manufacture
unique, specific peptides or antibodies for custom research projects. Previously
unidentified  genes and proteins  are being  identified  at a rapid rate,  which
often precedes the  introduction  of catalog  offerings by many months to years.
Through our Massachusetts  facility we engage in the manufacture of these custom
peptides and antibodies  thus allowing  customers to perform timely  research on
these new or proprietary  targets.  The  capabilities to provide custom peptides
and antibodies as well as innovative  catalog products  further  strengthens our
strategic relationships with our customers and has led to the development of new
catalog products and expanded sales opportunities.

BIOACTIVE PROTEINS AND PEPTIDES

Proteins,  which are chains of amino acids in  particular  sequences,  and their
interactions are responsible for all of the biochemical and physical  properties
of a cell, as well as variations  among different types of cells.  Proteins take
various forms, including enzymes, hormones, antibodies, receptors, cytokines and
chemokines.  Proteins  are  ideal  for use in basic  research,  drug  discovery,
enzymology, high throughput screening, in vivo studies, x-ray crystallography or
as antigens for antibody production.  Our primary protein products are cytokines
and  chemokines,   which  are  regulatory  molecules  that  control  growth  and
differentiation of cells.


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CYTOKINES.  The  development of an effective  immune response  involves  complex
cell-to-cell communications, which are mediated by a group of small hormone-like
soluble secreted proteins collectively called cytokines.  Cytokines, like growth
factors,  interact with specialized target receptors on the surface of the cells
and stimulate a chain of secondary  messengers leading to a biological response.
These  responses  result from  changes in both the  molecular  capabilities  and
behaviors of cells.  For example,  cytokines can activate cells to recognize and
eliminate  harmful bacteria and viruses.  They carry vital signals to the cell's
genetic  machinery  that can trigger it to grow or stop  growing.  Cytokines can
also signal a cell to differentiate,  that is, to acquire the features necessary
for it to take on more specialized tasks.  Specific cytokines play a key role in
stimulating  cells surrounding a wound to grow and divide and also in attracting
migratory  cells to the site.  Some  cytokines have a regulatory  function,  and
other cytokines exert direct effects of their own.

Cytokines  are  extracted  from  natural  sources,  such  as  human  and  animal
platelets,  white blood  cells and  lymphatic  cells,  or are  produced  through
genetic  engineering,  also  known  as  recombinant  DNA  technology.  Cytokines
coordinate and  orchestrate  the proper  functioning  of the immune  system.  In
addition to  producing  the human  cytokines,  we also  produce  the  equivalent
proteins  from  mice,  rats,  swine  and  monkeys.   Many  cytokines  are  being
investigated for their ability to activate or suppress host immunity.  Cytokines
and other similar growth factors and adhesion  molecules are instrumental in the
body's defense against cancer, AIDS and other life- threatening disorders.

CHEMOKINES.  Chemokines are specific  proteins that regulate the recruitment and
activation  of white  blood cells and other  sites of  inflammation.  Chemokines
function by binding to  receptors on the surface of affected  cells.  Tremendous
interest in chemokines exists due to recent studies linking chemokines and their
receptors to the development of HIV.

OTHER  PROTEINS.  To date we have focused on  cytokines,  chemokines  and growth
factors;  however,  with the  progress  of the  human  genome  project,  protein
discoveries will expand beyond these proteins.  Signal transduction proteins, of
which it is  hypothesized  that only a fraction  have been  discovered,  will be
important in high  throughput  screens of drug  candidates  since the  irregular
functioning  of these  proteins  is  involved  in  substantially  all  diseases.
Additionally,   researchers   will  want  reagents  to  the  nuclear   proteins,
cytoskeletal  proteins and others that will be discovered to study their role in
various  diseases.  Reagents  to these  markers  can be  created  using our core
competencies.

We offer over 390  protein  products.  The  following  table  shows  examples of
different cytokines, growth factors and kinases we produce and use:

 PROTEIN                                 RESEARCH USES
---------         --------------------------------------------------------------

   IL-4           Interleukin  4 is a  protein  that has been  observed  to have
                  direct   growth-suppressive   activity   on   a   variety   of
                  malignancies. IL-4 is used in cancer research.

   VEGF           Vascular Endothelial Growth Factor regulates angiogenesis, the
                  process  of new  blood  vessel  growth.  VEGF  is used in drug
                  development,  cancer  research  and  as a  growth  factor  for
                  endothelial cells.

   TNF            Tumor Necrosis  Factor is a protein that plays a vital role in
                  the  regulation  of the  immune  system.  TNF is used to study
                  immunological  processes,   cancer,  inflammation  and  septic
                  shock.

   c-Src          Rous  Sarcoma  Virus  kinase is one  of the  most  extensively
                  studied kinase oncogenes in academia and industry for its role
                  in human cancer and leukemia.

PEPTIDES.  Bioactive peptides are subsections of proteins or small proteins that
are  synthetically  created.  These peptides  represent the active or inhibitory
site of a  particular  protein,  and are used to study the  activity  of various
proteins.  Some bioactive  peptides,  such as beta amyloid  peptides,  have been
shown to play a major role in the development of Alzheimer's Disease.


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<PAGE>


OLIGONUCLEOTIDES

The  production  of   oligonucleotides  is  a  custom  service  we  provide  for
researchers  engaged in molecular  biology.  An oligonucleotide is a synthesized
polymer  made  up  of  the  same  building  blocks  that  form  DNA.   Synthetic
oligonucleotides  have been used in  molecular  biology for over  twenty  years,
essentially  as  templates  for  nucleic  acid and protein  synthesis,  and more
recently,  as the therapeutic agents for the inhibition of gene expression or as
a diagnostic agent to identify  disease.  DNA is used by almost every discipline
in  biomedical  research  in  both  academic  and  commercial  areas,  including
molecular  biology  and  cell  biology  departments  of major  universities  and
biomedical  companies  developing gene therapy  products.  These researchers use
synthetic  oligonucleotides  to determine  the exact  sequence of a gene,  or to
perform  experiments  leading to the  potential  development  of  pharmaceutical
drugs.  The primary use of the  oligonucleotides  we develop and sell is for DNA
sequencing and polymerase chain reaction, or PCR, priming.

In  DNA  sequencing,   we  synthesize   oligonucleotides  pursuant  to  customer
specifications, which they use to initiate a process of sequencing a DNA strand.
DNA sequencing is used in a wide range of biomedical  research  applications  to
identify the makeup of particular strands of DNA.

In PCR priming,  our synthesized  oligonucleotides  are used by our customers in
combination with other reagents to amplify a specific genetic sequence  isolated
from a cell sample.  After PCR  amplification,  gel  electrophoresis  is used to
identify and even to quantitate a specific DNA or RNA sequence from that sample.
PCR is an extremely  powerful tool in molecular  biology research because it can
amplify  genetic  information  from a  single  copy  of DNA or  RNA.  Using  PCR
technology,  the presence of the genetic message used to code for the production
of protein can be identified,  thereby  offering  numerous  possibilities in the
detection  of  genetic  disorders,   monitoring  disease  progression,   and  in
understanding cellular functions.

Genomics research requires large quantities of oligonucleotides.  DNA arrays for
expression  profiling and single nucleotide  polymorphism,  or SNP, analysis all
require the use of synthetic DNA oligonucleotides.  In addition, high throughput
screening  techniques,  used  in drug  discovery  are  incorporating  the use of
fluorescent  modified DNA  oligonucleotide  probes to detect and quantify target
gene  expression.   We  have  developed  technologies  to  rapidly  produce  and
manufacture  large  number of high  quality DNA  oligonucleotides  for DNA array
construction and developed proprietary processes to produce fluorescent probes.

The following  table  illustrates  some of the uses for the DNA  oligonucleotide
services we offer:

  USES                                  APPLICATIONS
-------       ------------------------------------------------------------------

Primers       Oligonucleotides are used in the initiation of the PCR process.
Probes        DNA oligonucleotides  are used in hybridization  reactions for the
              Real Time PCR  quantitation.  Probes are duel labeled  fluorescent
              probes used in real time PCR quantitation and molecular diagnostic
              analysis.  We offer three different  styles of FRET probes for our
              customers.
Arrays        Oligonucleotides  are  used  on a solid  matrix  to  profile  gene
              expression  or to identify  single  nucleotide  polymorphisms,  or
              SNP's.

SERUM, BUFFERS AND MEDIA

Much of the disease  research our customers  pursue is performed in a laboratory
on human or animal cells.  These cells function as the disease model.  Serum and
media support the growth,  maintenance  and  experimental  manipulation of these
cell-based  disease models.  The Company's broad serum and media product line of
over 200 products is manufactured in Maryland under rigorous  quality  standards
to provide the  researcher  with a highly  consistent,  viable and  reproducible
disease model. We manufacture and offer in our catalog over 245 serum, media and
buffer  products.   We  also  offer  custom  formulation   services  for  unique
applications.


                                       8
<PAGE>


CUSTOMERS

BioSource has over 6,000 customers  worldwide.  No single customer accounted for
more than 10% of our total  revenue  during any of the last three  years and our
top 20 customers made up approximately  30% of our  consolidated  sales in 2003.
Our customers include:


    PHARMACEUTICAL            BIOTECHNOLOGY                UNIVERSITIES
    --------------            -------------                ------------

     Astra Zeneca                 Amgen            Brigham and Women's Hospital
Aventis Pharmaceuticals           Biogen            Baylor College of Medicine
 Bristol Myers Squibb            Exelixis               Columbia University
       Eli Lilly                Genentech             John Hopkins University
   Glaxo SmithKline       Human Genome Sciences                UCLA
    Merck & Company               Nuvelo                 UC San Francisco
        Pfizer                  Millennium          University of Pennsylvania
    Schering-Plough          Pharmaceuticals           University of Texas
     Wyeth-Ayerst         Rigel Pharmaceuticals         MD Anderson Cancer
                                 Tularik                 Research Center
                               Zymogenetics          University of Washington
                                                          at St. Louis


           GOVERNMENT
           ----------

   Centers for Disease Control
  Food and Drug Administration
    National Cancer Institute
  National Institutes of Health
       VA Medical Centers
  U.S. Army Research Institute


RESEARCH AND DEVELOPMENT

As a life  sciences  company with  significant  internal  R&D and  manufacturing
capability,  BioSource strives to produce uniquely capable test kits and related
biologicals  for  cellular  communication  pathway  research in the  government,
academic and bio/pharma communities.  BioSource has been predominantly known for
its products for extra cellular  signaling  research,  in this respect,  for its
work in cytokines, chemokines and growth factors. These proteins act as chemical
communicators especially in the immune system and are critical to the maturation
and function of normal cells.  These proteins continue to play an important role
as indicators of the health of the immune system and are thus indicators of some
critical  disease  processes.  We will continue to leverage  this  immunological
expertise to  appropriately  expand our product  offerings in this area. We have
also  achieved  success  in  extending  our  product  lines  into  intracellular
signaling, more commonly known as signal transduction.  Signal transduction is a
market that is growing in importance  as  researchers  begin to  understand  its
central role in disease and its  significance  as targets for drug  therapy.  In
2001, BioSource  introduced the first in its line of phosphoELISA(TM)  kits that
has allowed the quantitative  measurement of sequence  specific  phosphorylation
events on proteins.  We have  expanded this line to now include over 50 kits and
will  continue  to  expand  and  dominate  this  field of study.  To expand  the
application of this technology, we have invested in developing assays for use in
high  content  instrument  platforms  that  exploit  the  increasing  demand for
quantitatively profiling various proteins. These platforms,  such as microarrays
and Luminex bead assays enable  pharmaceutical  and  biotechnology  companies to
fully  realize the  opportunities  represented  by the  sequencing  of the human
genome.

Our current  research and  development  activities  are focused in the following
areas:

o    Selective  addition of new cytokine,  chemokine  and growth  factors to our
     existing product offerings.

o    Development of new signal transduction  reagents,  assays and platforms for
     measuring signal transduction proteins.

o    Development of reagents for new detection  technologies and assay platforms
     for the growing high-content screening markets.

As of March 1,  2003,  we  employed  49  research  scientists,  14 of whom  hold
Ph.D.'s.  Among these professionals are experts in peptide chemistry,  molecular
biology, immunology and signal transduction.  In particular,  their knowledge is
fundamental  to  the  development  of  peptides,   oligonucleotides,   proteins,
antibodies and assay kits. Our research  laboratories  are located in Camarillo,
California;  Hopkinton,  Massachusetts; and Nivelles, Belgium. In the year ended
December 31, 2003,  we  introduced  over 200 new  products.  In addition,  as of
February 4, 2004, we had approximately 150 products under development.  We spent
approximately $7,007,000


                                       9
<PAGE>


$6,187,000,  and $3,986,000 on research and development in 2003, 2002, and 2001,
respectively.  Research and development spending represented  approximately 16%,
15% and 11% of net sales in 2003,  2002,  and 2001  respectively.  In 2004,  our
research and  development  spending is projected to be similar  dollar levels to
those  incurred in 2003,  or  approximately  14% of sales.  The spending will be
focused on programs  that  accentuate  our  investment  in high value assays and
supporting reagents.

MANUFACTURING

Our largest  production  facility is located in our  corporate  headquarters  in
Camarillo,  California.  Here we manufacture  the majority of our assay kits. We
manufacture our custom and catalog  oligonucleotides at our facilities in Foster
City,  California.  Our custom peptides and antibodies and other  antibodies are
manufactured at our facilities in Hopkinton,  Massachusetts. Our serum and media
are manufactured at our facilities in Rockville,  Maryland.  We also manufacture
antibodies  and assay kits at our  European  facility in Nivelles,  Belgium.  We
currently  manufacture  products for inventory  and ship products  shortly after
receipt of orders and  anticipate  that we will continue to do so in the future.
Accordingly,  we have not developed a significant backlog of products and do not
anticipate we will develop a material backlog of products in the future.

Labeling,  packaging,  and  shipping  are  carried  out  independently  at  each
facility. We purchase our packaging components from outside suppliers who follow
our own custom  packaging  designs.  We have an internal graphic arts department
located at our  Camarillo,  California  facility  that designs our packaging and
marketing  materials.  We believe there are numerous available suppliers for our
packaging components.

We believe that we have  adequate  supplies of raw materials on hand to continue
to  manufacture  almost all of our products and meet customer  demand,  and that
those  materials that we do not produce  internally  are readily  available from
multiple sources.

SALES AND MARKETING

BioSource employs 65 sales and marketing professionals  worldwide. The principal
markets for our products are in the United States,  Western Europe and Japan. We
have a direct sales force  strategically  located in major metropolitan areas in
the United  States.  We  advertise  in various  scientific  trade  journals  and
distribute  our own  product  catalog  to all  current  and  selected  potential
customers.  We sell to our  international  markets directly through our European
subsidiary that employs 19 of our 65 sales and marketing personnel.  We also use
international  distributors  that  specifically  target  selected  foreign  life
science markets.

Our sales people hold a minimum of a biological  sciences  undergraduate  degree
and undergo  training in the nature and  application  of our products and proven
selling  techniques.  We believe that by investing in the scientific training of
our sales  force we are better  able to  satisfy  the needs of  researchers  and
scientists in the biomedical community.  Our sales force is also used to provide
valuable feedback for product  development.  Each  representative is responsible
for the  maintenance  of  existing  accounts  as well as the  generation  of new
business.   Representatives  are  paid  a  base  salary  and  commissions.   The
commissions are based upon sales growth over previous years' sales levels.

In  addition to the United  States,  we sell  directly  into  Germany,  Belgium,
Holland,  Denmark, Sweden, Norway, Finland and the United Kingdom. We also use a
network of  international  distributors  covering  over 40 other  countries.  We
utilize  a  network   of  both   exclusive   and   non-exclusive   international
distributors,  but we generally grant exclusive  distribution  rights only where
the distributor  maintains  direct field  representatives  proportionate  to the
potential for sales of our products in a defined  geographical area. In order to
serve as our  distributor,  the  distributor  must agree to and meet  acceptable
annual sales goals. We offer all of our distributors' annual training to enhance
their  knowledge of our products.  In 2003,  25% of the Company's  revenues were
through distributors.

SEGMENT INFORMATION

The  Company  operates  primarily  in  one  industry  segment,   the  licensing,
development,  manufacture, marketing and distribution of biological reagents and
assays used in life sciences. For information regarding the revenues


                                       10
<PAGE>


and assets associated with the Company's geographic segments, see Note 10 of the
Notes to the Company's  Consolidated  Financial Statements included elsewhere in
this filing.

COMPETITION

We are  engaged  in a segment of the life  sciences  products  industry  that is
highly  competitive.  Our primary  competitors  include companies such as Techne
Corporation,  BD BioSciences,  Cell Signaling Technologies,  BioRad Laboratories
and Invitrogen.  Many of our competitors have been involved in the life sciences
industry  significantly  longer  than we have  and  benefit  from  greater  name
recognition.  In addition,  many of our  competitors  have greater  resources to
devote to research and development,  sales and marketing and occasionally engage
in price  cutting  measures to achieve  leadership in their field.  However,  we
believe that by offering a focused cellular pathway assay menu complemented with
associated  key  custom  biologicals  and serum & media,  we gain a  competitive
advantage.

PATENTS AND TRADEMARKS

We are  currently  seeking  and  intend to seek  patent  protection  on  certain
proprietary  technologies.  Although  our intent is to protect our  interests in
select  technologies,  there is no guarantee that these patents will be granted,
or if granted,  be effective in fully protecting the use of these  technologies.
We also seek to protect our  interests  by  treating  certain  technologies  and
know-how as trade  secrets and by requiring all  employees  and  contractors  to
execute   invention   and   assignment   agreements   with  us,  which   include
confidentiality provisions.

"PhosphoELISA,"  "BGB,"  "Messagescreen,"   "TAGOImmunologicals,"  "Cytoscreen,"
"Primescreen,"  "Cytosets" and "Cartesian" are unregistered  product  trademarks
used  for  some of our  products,  but are  only of  limited  importance  to our
business.  "Biofluids" is also a registered trademark we acquired as part of our
acquisition of Biofluids in December 1998.

GOVERNMENT AND ENVIRONMENTAL REGULATION

Except as we indicate in the following paragraph,  approval by the Food and Drug
Administration is not required for the sale of any of our products in the United
States  because  our  products  are  marketed  and sold for  research  use only.
Research  products  are not  currently  required  to comply with the lengthy FDA
approval  process  associated  with diagnostic or therapeutic  products.  In the
event we  develop  products  directly  for the  diagnostic  market in the United
States,  we will be required to obtain FDA approval prior to selling them.  This
approval, if required, could be time consuming and costly.

Some of our  products,  however,  are used by our  customers as raw materials or
intermediates  in the  production of diagnostic  products.  As such, we received
clearance  by  the  State  of  California  and  the  FDA  to   manufacture   our
TAGOImmunologics  product line as Analyte Specific Reagents.  These reagents are
classified as Class I biologics  that are  manufactured  in compliance  with the
FDA's Quality System Regulation, also known as cGMP. This registration allows us
to market these products to clinical  laboratories and manufacturers of in vitro
diagnostic products.

We believe that we are materially in compliance with the Occupational Safety and
Health Act, the Environmental  Protection Act, the Toxic Substances Control Act,
and other similar laws of general application.

Our European subsidiary's clinical products are produced in facilities that have
achieved  ISO 9001  certification,  and are  eligible  to be used in Europe  for
clinical  diagnostics.   In  all  of  the  markets  in  which  we  sell  through
distributors, our distributors are contractually responsible for compliance with
the applicable governmental regulations.

Except  as we  indicated  above,  we are  not  subject  to  direct  governmental
regulation  other  than  the  laws  and  regulations   generally  applicable  to
businesses in the  jurisdictions in which we operate,  including those governing
the handling and disposal of hazardous wastes and other  environmental  matters.
Our research and  development  activities  involve the  controlled  use of small
amounts of hazardous materials,  chemical and radioactive compounds. Although we
believe that our safety  procedures for handling and disposing of such materials
comply with  applicable  regulations,  the risk of accidental  contamination  or
injury from these materials cannot be


                                       11
<PAGE>


completely eliminated. In the event of such an accident, we could be held liable
for resulting  damages.  This liability could have a material  adverse effect on
us.

EMPLOYEES

As of March 1, 2004,  we employed 271  individuals,  267 of whom were  full-time
employees. Twenty-one of our employees at that date had doctoral degrees.

None of our employees in the United States are  represented by a labor union. As
of March 1, 2004, 61 of our 271 employees worked for our Europeon  subsidiary in
Belgium.  As is  customary  under  Belgian  labor law,  employees of our Belgian
subsidiary,  BioSource  Europe S.A., are  represented by two national unions who
represent  employee  interests  to  the  national  chemistry  industry  employer
organization.  We  believe  we  are  in  compliance  with  these  Belgium  legal
restrictions.  We consider  our current  Belgium  subsidiary  employee and labor
relations to be good.

Pursuant  to  Belgian  law,  we have in the  past  been  subject  to  heightened
restrictions  related  to union  representation  for work  and  safety  councils
applicable to companies  with more than 50  employees.  Because we employed less
than 50 employees at our Nivelles,  Belgian  facility in 2000,  these heightened
restrictions  terminated  in April  2000.  Since  we  currently  employ  over 50
employees  at our Belgian  facility,  and since the next  election  for work and
safety councils is in 2004, the heightened  restrictions  for certain  employees
are again applicable to us.

ITEM 2.  PROPERTIES

In March 2000, the Company  entered into a lease for a new facility at 542 Flynn
Road  in  Camarillo,   California,   and  relocated  its  previous  offices  and
laboratories  to this new  location  in July  2000.  The new  building  contains
approximately  51,821  square  feet  and  is  situated  in  an  industrial  park
approximately  two blocks from the previous  corporate  headquarters.  The lease
commenced  on May 1, 2000 and runs  through  June 30,  2005,  with the option to
continue the lease for two additional five-year terms. Monthly lease payments in
2004 are approximately  $31,000.  The new facility has several laboratory areas,
including  molecular biology facilities,  a protein  purification  facility,  an
oligonucleotide  facility, and an assay development and manufacturing  facility,
as well as ELISA  development  and  manufacturing  space and cold storage  rooms
sufficient to accommodate our current and anticipated future needs.

For our  oligonucleotide  laboratory,  we lease a 6600 square  feet  facility in
Foster City,  California,  approximately  20 miles south of San Francisco.  This
lease  expires in May 2006.  Monthly  lease  payments in 2004 are  approximately
$15,000.

We lease two facilities in Hopkinton, Massachusetts, approximately 25 miles west
of  Boston.  Our  first  facility  consists  of  11,500  square  feet,  of which
approximately  7,000 square feet is  laboratory  space.  In February  2001,  the
Company amended its lease to this facility,  extending the term of the lease for
five  additional  years,  through May 2006.  Monthly lease  payments in 2004 are
approximately  $11,000.  In  January  2002,  the  Company  leased an  additional
facility in Hopkinton,  Massachusetts,  which consists of 10,500 square feet, of
which  approximately  7,000 is laboratory  space,  under a lease that expires in
January, 2007. Monthly lease payments in 2004 are approximately $16,000.

We lease a facility in  Rockville,  Maryland,  which  consists of  approximately
11,500 square feet of warehouse,  manufacturing, and office space, under a lease
that  expires  in  May  2004.  Monthly  lease  payments  through  May  2004  are
approximately $14,000.

Our European subsidiary leases facilities in Nivelles, Belgium, which consist of
approximately 45,500 square feet of manufacturing,  laboratory and office space,
under a lease that  expires in March 2007.  Monthly  lease  payments in 2004 are
approximately $22,000.

Additional satellite sales offices are located in Germany and Holland.


                                       12
<PAGE>


We believe that all of our  facilities  are in good  condition,  are  adequately
covered  by  insurance  and will be  adequate  for our  occupancy  needs for the
foreseeable future.

The Company's  lease  commitments  for the above  referenced  properties make up
substantially  all of the  Company's  total lease  commitments.  At December 31,
2003,  total future minimum  payments  under all of the Company's  leases are as
follows (in thousands):


     2004........................................   $  1,474
     2005........................................      1,192
     2006........................................        644
     2007........................................        593
     Thereafter..................................         --
                                                    --------

                                                    $  3,369

ITEM 3.  LEGAL PROCEEDINGS

The  Company is  involved  in  various  claims and  lawsuits  incidental  to its
business. In the opinion of management,  these claims and suits in the aggregate
will not  materially  affect the  financial  position,  results of operations or
liquidity of the Company.

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

No matter was  submitted  to a vote of our  security  holders  during the fourth
quarter of our last fiscal year.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our  common  stock is traded on the  Nasdaq  National  Market  under the  symbol
"BIOI." The following table sets forth, for the periods indicated,  the high and
low closing  sales price per share of our common stock as reported on the Nasdaq
National Market.
                                                     HIGH           LOW
                                                     ----           ---
     2002 Fiscal Year
         First Quarter                              $ 8.20        $ 5.19
         Second Quarter                               6.16          5.86
         Third Quarter                                6.08          4.89
         Fourth Quarter                               6.31          5.50
     2003 Fiscal Year
         First Quarter                              $ 6.95        $ 5.83
         Second Quarter                               6.92          5.00
         Third Quarter                                7.97          6.15
         Fourth Quarter                               7.87          6.33
     2004 Fiscal Year
         First Quarter, through March 15, 2004      $ 6.84        $ 8.09

On March 15,  2004,  the  closing  sale price of our common  stock on the Nasdaq
National Market was $7.83. As of March 15, 2004,  there were 9,402,618 shares of
our common stock outstanding held by approximately 323 holders of record.


                                       13
<PAGE>


EQUITY  COMPENSATION  PLAN  INFORMATION - The following table sets forth certain
information regarding the Company's equity compensation plans as of December 31,
2003.

<TABLE>
<CAPTION>
                               NUMBER OF SECURITIES       WEIGHTED-AVERAGE     NUMBER OF SECURITIES
                                 TO BE ISSUED UPON       EXERCISE PRICE OF    REMAINING AVAILABLE OR
                                    EXERCISE OF             OUTSTANDING        FUTURE ISSUANCE UNDER
                               OUTSTANDING OPTIONS,      OPTIONS, WARRANTS      EQUITY COMPENSATION
                                WARRANTS AND RIGHTS          AND RIGHTS                PLANS
                               ----------------------    -----------------    ----------------------
<S>                                 <C>                      <C>                    <C>
Equity compensation plans
approved by security
holders.....................          495,496                $4.95                     0
Equity compensation plans
not approved by security
holders.....................        2,988,852 (1)            $7.81                  562,979

Total.......................        3,484,348                $7.40                  562,979
                                    =========                =====                  =======
<FN>
(1)  Includes  1,287,000  warrants pursuant to a securities  purchase  agreement
     dated January 10, 2000 with Genstar Capital Partners II L.P. and Stargen II
     LLC. These warrants have a five year life and expire in January 2005.
</FN>
</TABLE>

In January 2000, the compensation  committee of the Company's Board of Directors
approved the 2000 BioSource International,  Inc. Non-Qualified Stock Option Plan
(the  "2000  Plan").  The 2000  Plan was not  approved  by  shareholders  of the
Company.  Under the 2000 Plan,  non-qualified  stock  options  may be granted to
full-time  employees,  part-time  employees,  directors and  consultants  of the
Company to purchase a maximum of 2,000,000 shares of the company's common stock.
Options  granted under the 2000 Plan vest and are generally  exercisable  at the
rate of 25% each  year  beginning  one year  from the date of  grant.  The stock
options  generally  expire  ten  years  from the date of  grant.  Stock  options
outstanding under the 2000 Plan as of December 31, 2003 were 1,421,852. See note
6 of the accompanying audited consolidated financial statements.

In 1993, the compensation committee of the Company's Board of Directors approved
the 1993 BioSource  International,  Inc.  Stock  Incentive Plan (the "1993 Stock
Option  Plan").  On December  31,  2003,  the 1993 Stock  Option  Plan  expired.
Therefore, the Company will no longer grant stock options under that plan.

The Company  also has stock  option  agreements  that are outside the 2000 Plan.
Those agreements are only for the purchase of non-qualified stock options.

The Compensation  Committee of our Board of Directors currently  administers our
stock option plans.



                                 DIVIDEND POLICY

BioSource  has  never  paid  cash  dividends  on its  common  stock and does not
currently  anticipate that it will do so in the foreseeable  future. The Company
plans to retain earnings to finance our operations.

ITEM 6.       SELECTED FINANCIAL DATA

The selected data presented below under the captions "Consolidated  Statement of
Operations Data" and "Consolidated Balance Sheet Data" for, and as of the end of
each of the years in the five-year  period ended  December 31, 2003, are derived
from the audited consolidated financial statements of the Company. The following
selected  data should be read in  conjunction  with the  Company's  consolidated
financial  statements and notes thereto,  as well as the section included herein
entitled  "Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations."


                                       14
<PAGE>


<TABLE>
<CAPTION>
                                                      YEARS ENDED DECEMBER 31,
                                    --------------------------------------------------------
                                      2003        2002        2001        2000        1999
                                    --------    --------    --------    --------    --------
                                               (in thousands, except per share data)
<S>                                 <C>         <C>         <C>         <C>         <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales .......................   $ 44,094    $ 40,055    $ 35,175    $ 32,210    $ 29,257
Cost of sales ...................     21,900      17,689      15,540      13,600      11,071
                                    --------    --------    --------    --------    --------

Gross profit ....................     22,194      22,366      19,635      18,610      18,186
Operating expenses:
  Research and development ......      7,007       6,187       3,986       3,575       3,315
  Sales and marketing ...........      9,298       8,339       7,395       5,682       4,737
  General and administrative ....      6,851       5,916       6,945       9,071       4,460
  Long-lived asset impairment ...        341        --          --          --          --
  Amortization of intangibles ...        575         641       1,098       1,093       1,061
                                    --------    --------    --------    --------    --------

Operating income (loss) .........     (1,878)      1,283         211        (811)      4,613
Interest and other income
   (expense), net ...............        (76)        123         460          72      (1,106)
                                    --------    --------    --------    --------    --------

Income (loss) before income
   tax expense (benefit) ........     (1,954)      1,406         671        (739)      3,597
Income tax expense (benefit) ....       (884)         11         (70)       (573)         20
                                    --------    --------    --------    --------    --------

Income (loss) before redeemable
   preferred stock dividend and
   beneficial conversion ........     (1,070)      1,395         741        (166)      3,577
Redeemable preferred stock
   dividend and accretion of
   beneficial  conversion feature       --          --          --        (3,853)       --
                                    --------    --------    --------    --------    --------

Income (loss) before cumulative
   effect of accounting change ..     (1,070)      1,395         741      (4,019)      3,577

Cumulative effect of accounting
   change (net of applicable
   income taxes of $1,500) ......       --        (2,447)       --          --          --
                                    --------    --------    --------    --------    --------

Net income (loss) available to
   common shareholders ..........   $ (1,070)   $ (1,052)   $    741    $ (4,019)   $  3,577
                                    ========    ========    ========    ========    ========

Net income (loss) per share
   before accounting change:
   Basic ........................   $  (0.11)   $   0.14    $   0.07    $  (0.47)   $   0.49
                                    ========    ========    ========    ========    ========

   Diluted ......................   $  (0.11)   $   0.14    $   0.07    $  (0.47)   $   0.46
                                    ========    ========    ========    ========    ========

Net income (loss) per share:
   Basic ........................   $  (0.11)   $  (0.11)   $   0.07    $  (0.47)   $   0.49
                                    ========    ========    ========    ========    ========

   Diluted ......................   $  (0.11)   $  (0.11)   $   0.07    $  (0.47)   $   0.46
                                    ========    ========    ========    ========    ========

Shares used to compute per share
   amounts:
   Basic ........................      9,403       9,787      10,398       8,584       7,235
                                    ========    ========    ========    ========    ========

   Diluted ......................      9,403      10,189      10,965       8,584       7,833
                                    ========    ========    ========    ========    ========
</TABLE>



                                                AS OF DECEMBER 31,
                                 -----------------------------------------------
                                  2003      2002      2001      2000      1999
                                 -------   -------   -------   -------   -------
                                                 (in thousands)

CONSOLIDATED BALANCE SHEET
   DATA:
Current assets ...............   $21,694   $23,389   $24,963   $26,420   $18,325

Total assets .................    44,333    46,506    49,841    50,364    40,222
Current liabilities ..........     6,031     6,793     5,963     6,318     7,340
Long-term debt, less current
   portion ...................      --        --        --        --      11,459

Total stockholders' equity ...    38,302    39,713    43,878    44,046    21,422


                                       15
<PAGE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS OVERVIEW -

BioSource develops, manufactures,  markets and distributes products and services
that are widely used in biomedical  research.  Its products and services  enable
scientists to better understand the biochemistry, immunology and cell biology of
the human body, aging and certain  diseases such as cancer,  arthritis and other
inflammatory  diseases,  AIDS and certain other infectious diseases. The Company
has a wide  variety  of  products,  including  immunoassay  and ELISA test kits,
immunological reagents, including bioactive proteins (cytokines,  growth factors
and  adhesion  molecules),   oligonucleotides,  and  monoclonal  and  polyclonal
antibodies.  The Company also manufactures and markets custom  oligonucleotides,
peptides  and  antibodies  to the  specifications  of  its  customers.  It  uses
recombinant  DNA  technology  to produce  cytokines  and other  proteins and has
registered its analyte specific  reagents with the FDA for which it has received
a license to sell such products as Class I Medical Devices.  The Company markets
these  products to in vitro  diagnostic  manufacturers  and  clinical  reference
laboratories  as "active  ingredients"  in the tests  those  parties  produce to
identify specific  diseases or conditions.  In order to market these products as
medical  devices,  BioSource  is  required  to be in  compliance  with the FDA's
Current Good  Manufacturing  Practices and Regulations.  The Company believes it
offers a unique  combination  of  technological,  production,  and  research and
development  skills  resulting  in a spectrum of products  and  services for the
worldwide pharmaceutical and biotechnology industries.

The Company  manufactures  products for inventory and typically  ships  products
shortly after receipt of orders and  anticipates  that it will continue to do so
in the future. Accordingly,  the Company has not developed a significant backlog
of  products  and does not  anticipate  it will  develop a  material  backlog of
products in the future.

During 2003, to better drive sales and profitability growth, and to focus on key
market opportunities, the Company began analyzing its business as three separate
product categories,  or Strategic Business Units,  "SBUs." These SBUs consist of
Signal Transduction  Products,  Cytokine Products,  and Custom Products.  Signal
Transduction  Products  consist of the  proteins,  antibodies,  assays and other
reagents  used  to  study  internal  cellular  processes.   Our  phosphospecific
antibodies and  phosphoELISA(TM)s  are included in this SBU.  Cytokine  Products
include the  proteins,  antibodies,  assays and other  reagents that are used to
study the processes by which cells communicate.  Interleukin,  growth factor and
other biological  response modifier products are included in this group.  Custom
Products includes oligonucleotides, custom peptides and antibodies, cell culture
and diagnostics and other reagents not specifically categorized.

In November  2003, the Company hired Terrance J. Bieker as its new President and
Chief Executive Officer. With Mr. Bieker's leadership, during the fourth quarter
of 2003,  the Company  developed and  implemented a business plan that clarifies
the Company's strategic focus for the future. This fundamental shift in strategy
is to focus the  Company's  time,  effort and  financial  resources  on its core
strengths as an assay company.  These assay products are higher margin  products
and generally fall into two categories,  Cytokine and Signal Processing  Assays.
The Company will be placing a more direct focus in the sales of cytokine  assays
and their directly related products and the sales of signal  transduction assays
and their directly  related  products.  This strategic plan is designed to allow
BioSource  to penetrate  and  increase  its market  share in the cytokine  assay
market and continue to maintain a strong  leadership  position in the  signaling
market,  which includes the trademarked Phospho ELISA assays. This strategy will
focus the Company's direction on these high margin products and allow it to more
effectively market their complimentary product lines, including our Phospho Site
Specific  Antibodies,  or  PSSA's,  including  its sera and media and its custom
products: peptides, antibodies and oligonucleotides.

As a result of this new  strategic  direction,  certain  assumptions  related to
fixed, working and human assets were evaluated and revised.  With a more focused
approach  on  assay  kits  and  the  directly   related  product  lines,   other
non-strategic products were discontinued.  These non-strategic products included
outsourced  cell surface marker and secondary  antibodies and certain  peptides,
and were analyzed for profitability and overall marketability. After its review,
the Company  realized  these  products did not possess the  characteristics  for
significant  growth or  adequate  profit  margins  in order for the  Company  to
continue to provide such products.  This strategic  shift has caused the Company
to review its existing product line and certain  inventory levels and values. In
the fourth


                                       16
<PAGE>


quarter of 2003, $1.3 million of the Company's  currently  inventoried  products
were discontinued,  scrapped or fully reserved.  For a detailed discussion,  see
the discussion on the consolidated results of operations below.

The  implementation of the new strategy is intended to bring continued  positive
organic  growth  to the  Company's  sales  for 2004 and  beyond.  The  increased
investment  in sales and  marketing,  in  conjunction  with our new  strategy is
designed to bring a more focused  approach to promoting  and selling  assays and
their directly related products.  In addition,  we have incorporated a corporate
account  strategy into our selling  approach  which we believe will help support
our organic sales growth. As a result of its new strategy,  the Company believes
overall  gross profit and gross product  margins  should  improve in 2004,  when
compared to 2003 due to its more focused  approach on selling  assays,  a higher
margin  product  than  many of its other  products.  As a  result,  the  Company
believes  operating  results  should  also  improve  in 2004  compared  to 2003.
Management's  longer term financial  objective is to generate  increasing annual
operating profits to the Company.

The following  discussion  should be read in conjunction  with our  consolidated
financial  statements  provided  under Part II, Item 8 of this annual  report on
Form 10-K.  Certain statements  contained herein may constitute  forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995.  These  statements  involve  a number of  risks,  uncertainties  and other
factors that could cause actual results to differ materially,  as discussed more
fully herein.

The forward-looking  information set forth in this annual report on Form 10-K is
as of  March  15,  2004,  and the  Company  undertakes  no duty to  update  this
information.  Should  events  occur  subsequent  to March 15,  2004 that make it
necessary to update the forward-looking information contained in this Form 10-K,
the updated  forward-looking  information  will be filed with the Securities and
Exchange Commission in a quarterly report on Form 10-Q or as an earnings release
included  as an exhibit to a Form 8-K,  each of which will be  available  at the
Securities and Exchange  Commission's  website at www.sec.gov.  More information
about potential  factors that could affect our business and financial results is
included in the section  entitled  "Risk  Factors"  beginning on page 26 of this
Form 10-K.

CRITICAL ACCOUNTING POLICIES

General

Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated  financial statements,  which have been prepared
in  accordance  with  accounting  principles  generally  accepted  in the United
States.  The  preparation  of these  financial  statements  requires  us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues  and  expenses,   and  related  disclosure  of  contingent  assets  and
liabilities.  On an on-going  basis,  the Company  evaluates its estimates.  The
Company  bases its  estimates  on  historical  experience  and on various  other
assumptions  that are believed to be  reasonable  under the  circumstances,  the
results of which form the basis for making  judgments  about the carrying values
of assets and  liabilities  that are not readily  apparent  from other  sources.
Actual results may differ from these estimates  under  different  assumptions or
conditions. Specifically, management must make estimates in the following areas:

         ALLOWANCE FOR DOUBTFUL  ACCOUNTS.  The Company has  $6,566,000 in gross
         trade  accounts  receivable  and  $258,000 in  allowance  for  doubtful
         accounts on the  consolidated  balance sheet at December 31, 2003.  The
         Company  has  procedures  in  place to  adequately  review  the  credit
         worthiness  of new  customers  and also to properly  review orders from
         existing  customers  to  determine  if a  change  in  credit  terms  is
         warranted.  A review of our  allowance  for  doubtful  accounts is done
         timely and  consistently  throughout  the year.  The Company  does have
         accounts  receivable  amounts from certain customers as of December 31,
         2003  such  that  if  their  financial  condition  deteriorated  and  a
         significant  allowance was needed, the amount of allowance could have a
         material adverse effect on the Company's financial results for 2004.

         INVENTORY  ADJUSTMENTS.  The  Company  reviews  the  components  of its
         inventory  on  a  regular  basis  for  excess,  obsolete  and  impaired
         inventory  based on estimated  future usage and sales.  In  conjunction
         with the new  strategic  direction  the Company  has taken,  it may see
         material   write   downs   of   inventory   due  to   obsolescence   or
         discontinuation  of certain  product  lines in the future.  The Company
         will be evaluating product lines on an ongoing basis.


                                       17
<PAGE>


         The  manufacturing  process  for  antibodies  has and may  continue  to
         produce quantities substantially in excess of forecasted usage, if any,
         and  anticipated  antibody  sales  volumes  are  highly  uncertain  and
         realization of individual  product cost may not occur. As a result, the
         Company reserves its entire manufactured  antibody inventory at 100% of
         its value.  As of December  31,  2003,  the Company had  $5,347,000  of
         manufactured  antibodies  in its  inventory  and a  reserve  for  these
         antibodies  totaling  $5,347,000.  The Company will continue to monitor
         its  antibody  inventory  and the  continued  need for a 100%  reserve.
         Additionally, material inventory write-downs in our inventory can occur
         if competitive conditions or new product introductions by our customers
         or us vary from our current expectations.

         DEFERRED  TAX  ASSETS  AND  DEFERRED  INCOME  TAXES.  The  Company  has
         $12,441,000 in deferred income tax assets on its  consolidated  balance
         sheet as of December 31, 2003. See note 8 to the consolidated financial
         statements  included  in this Form 10-K for a listing  of the  specific
         components.  A large component of the Company's  deferred tax assets is
         its net operating  losses.  As of December 31, 2003,  the Company has a
         net operating loss (NOL)  carryforward  of  approximately  $11,540,000,
         $14,152,000  and $1,443,000  for Federal,  State and foreign income tax
         purposes,  respectively.  The  federal  NOL's are  available  to offset
         future taxable  income,  if any,  through 2020 to 2023. The state NOL's
         are available to offset future taxable income,  if any, through 2006 to
         2023.

         As of December 31, 2003, the Company  determined it is necessary to set
         up a valuation allowance of $393,000 for deferred tax assets related to
         net operating losses it has accumulated for the State of Massachusetts.
         This  allowance  is  included  in the net  deferred  tax  assets on its
         balance sheet as of December 31, 2003. The ability to realize these net
         deferred tax assets depends entirely on the Company  generating taxable
         income in the future.  The Company has used  historical  information as
         well  as a  projected  financial  outlook  to  project  taxable  income
         amounts.  The  Company  believes,  except for the  valuation  allowance
         previously discussed, it is more likely than not that they will be able
         to realize the current value of net benefits in the future.  A material
         change in our expected  realization  of these assets would occur if the
         ability to deduct tax loss carryforwards  against future taxable income
         is altered.  If our  projections  involving  tax planning and operating
         strategies do not  materialize  or if  significant  changes in tax laws
         occur  within the various  tax  jurisdictions  in which we operate,  we
         would have to set up a valuation  allowance  against our  deferred  tax
         assets that could  materially  affect our tax expense and our financial
         results.

         ADVERTISING  COSTS.  For the year ended  December 31, 2003, the Company
         capitalized  its annual  catalog  production  costs and  expensed  them
         evenly  throughout  the year.  In the past,  the Company  has  expensed
         catalog production costs as incurred,  which was primarily in the first
         quarter of its fiscal year.  During 2002,  and after  production of the
         2002 catalog,  the Company put  substantial  effort into increasing the
         number of customers in its customer  database and in  conjunction  with
         that increased its dependence on its catalog to attract more customers.
         As a result,  the Company  believes  that its 2003  catalog is a direct
         response  advertisement  whose  primary  purpose is to elicit  sales to
         customers who respond specifically to the catalog resulting in probable
         future economic benefit. Accordingly, beginning in 2003, the Company is
         capitalizing  its catalog  production  costs and expensing  them evenly
         throughout the fiscal year in accordance with the AICPA's  Statement of
         Position  93-07.  For the year ended  December  31,  2003,  the Company
         expensed  approximately  $560,000 of catalog costs compared to $529,000
         and  $419,000   for  the  years  ended   December  31,  2002  and  2001
         respectively.

The Company believes the following critical  accounting policies affect its more
significant  judgments and estimates  used in  preparation  of our  consolidated
financial statements.

         REVENUE  RECOGNITION.  The Company's revenue is generated from the sale
         of products primarily manufactured internally.  The Company does have a
         small amount of products that are sold on an outside  equipment ("OEM")
         basis.  The Company sells standard and custom products  directly to end
         users and distributors and recognizes revenue upon transfer of title to
         the  customer,  which occurs upon  shipment.  General sales and payment
         terms  to  distributors  are  similar  to  those  granted  to end  user
         customers.  Certain end user  customers  prepay for product and request
         shipment  of the  product  at  future  dates,  primarily  sera or media
         products.  The Company  records  deferred  revenue until such time as a
         product is shipped to a customer.  Approximately  25% of the  Company's
         2003  net  sales  were  to


                                       18
<PAGE>


         distributors.  The Company's  distribution  agreements do not provide a
         general right of return. The amount of the Company's  inventory held by
         distributors is not believed to be substantial.

         LONG-LIVED ASSETS. In October,  2001 the Financial Accounting Standards
         Board  ("FASB")  issued  Statement  on Financial  Accounting  Standards
         ("SFAS")  No.  144,  "Accounting  for the  Impairment  or  Disposal  of
         Long-Lived Assets," which addresses financial  accounting and reporting
         for the impairment or disposal of long-lived assets. While SFAS No. 144
         supersedes  SFAS No.121,  "Accounting  for the Impairment of Long-Lived
         Assets and for Long-Lived Assets to be Disposed Of," it retains many of
         the fundamental provisions of that statement. The standard is effective
         for fiscal years  beginning  after December 15, 2001. It is our policy,
         and in accordance with SFAS No. 144, to account for long-lived  assets,
         including intangibles,  at amortized cost. As part of an ongoing review
         of the valuation and  amortization  of  long-lived  assets,  management
         assesses the carrying  value of such assets if facts and  circumstances
         suggest  that  they may be  impaired.  If this  review  indicates  that
         long-lived  assets  will  not  be  recoverable,   as  determined  by  a
         non-discounted  cash  flow  analysis  over the  remaining  amortization
         period, the carrying value of the Company's  long-lived assets would be
         reduced to its estimated fair value based on discounted  cash flows. In
         the quarter ended December 31, 2003, the Company  incurred a long-lived
         asset impairment  charge of $341,000 related to the sale or disposition
         of  certain   fixed   assets   primarily   related  to  the   Company's
         oligonucleotide  division.  The  Company  has  determined  that all its
         remaining  long-lived  assets are not impaired as of December 31, 2003.
         The  Company's  long-lived  assets were not impaired as of December 31,
         2002.

CONSOLIDATED RESULTS OF OPERATIONS

The selected data presented below under the caption  "Consolidated  Statement of
Operations  Data Presented as a Percentage of Sales" for each of the years ended
December  31,  2003,  2002 and 2001 are derived  from the  audited  consolidated
financial  statements of the Company. The following selected data should be read
in conjunction with the Company's  consolidated  financial  statements and notes
thereto,  as  well  as  the  data  and  information   included  herein  entitled
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations."

CONSOLIDATED STATEMENT OF OPERATIONS DATA               YEARS ENDED DECEMBER 31,
PRESENTED AS A PERCENTAGE OF SALES                      2003      2002      2001
                                                        ----      ----      ----

Net sales ........................................      100%      100%      100%
Cost of sales ....................................       50%       44%       44%
                                                        ----      ----      ----
    Gross profit .................................       50%       56%       56%
Operating expenses:
    Research and development .....................       16%       15%       11%
    Sales and marketing ..........................       21%       21%       21%
    General and administrative ...................       16%       15%       20%
    Long-lived asset impairment ..................        1%        0%        0%
    Amortization of intangibles ..................        1%        2%        3%
                                                        ----      ----      ----
         Total operating expenses ................       54%       53%       55%
                                                        ----      ----      ----
Operating income (loss) ..........................      -4%         3%        1%

Interest income ..................................        0%        0%        1%
Interest expense .................................        0%        0%        0%
Other income, net ................................        0%        0%        0%
                                                        ----      ----      ----
Income (loss) before income tax (benefit) ........      -4%         3%        2%
Income tax expense (benefit) .....................        2%        0%        0%
                                                        ----      ----      ----
         Income (loss) before cumulative
            effect of accounting change ..........       -2%        3%        2%
Cumulative effect of accounting change ...........        0%       -6%        0%
                                                        ----      ----      ----
Net income (loss) available to common
    stockholders .................................       -2%       -3%        2%
                                                        ====      ====      ====


                                       19
<PAGE>


YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

NET SALES.  Net sales for the year ended  December  31, 2003 were a record $44.1
million,  an  increase  of $4 million or 10%  compared to net sales for the year
ended  December  31,  2002.  In 2003,  the  Company's  revenues  benefited  by a
$2,082,000 positive impact of foreign exchange when compared to 2002.

For the year ended December 31, 2003, sales of the Company's  signaling  product
lines grew 31% compared to the comparable prior year period,  from $6,900,000 to
$9,100,000.  The  Company  believes  its  volume of  transactions  in the signal
transduction  market is growing and has opportunities for continued  significant
growth in this market.  The Company's sales growth in its cytokine product lines
for the year ending  December  31, 2003 was 10%,  growing  from  $18,200,000  to
$20,100,000.  The cytokine market is a mature market which the Company  believes
continues to have  opportunities  for sales  growth  through  focused  sales and
marketing efforts and through targeted research and development activities.  The
Company's  sales in its custom  product  lines  remained  flat  compared  to the
comparable prior year period at $14,900,000.

North American sales  represented 56% of consolidated net sales in 2003 and grew
2% as compared to the twelve  months ended  December 31,  2002.  North  American
sales grew primarily due to increases in cytokine and signaling  products offset
by lower sales in our custom products,  particularly our oligonucleotide product
line.  European sales represented 31% of consolidated net sales in 2003 and grew
23% (9% in local  currency),  as compared to the  comparable  prior year period.
European sales growth was primarily due to our signaling products, including our
Phospho ELISA's and our diagnostic  product line. Sales in Japan and the rest of
the world, representing 13% of consolidated net sales, increased 18% compared to
2002.  Sales  growth in Japan and the rest of the  world  was  primarily  due to
increases in our signaling  product lines and continued  penetration of products
into countries  outside of Europe and North America.  When compared to 2002, our
2003  sales  in  Europe  and  Japan  have  increased  as a  percentage  of total
consolidated  sales while North American sales have decreased as a percentage of
total  consolidated  sales. The Company does not believe this is indicative of a
long  term  trend  and that it will see  fluctuations  of its  sales in  various
geographical regions in the future.

The Company  experienced a slowdown in sales in the third and fourth quarters of
2003 when compared to its internal operating expectations.  The Company believes
this  was  attributable  in part to a  slowdown  in  spending  by the  major  US
pharmaceutical  and biotech companies during this time and to a delay in funding
to the National  Institutes  of Health,  which funds many  academic life science
research projects throughout the United States.

GROSS PROFIT.  Gross profit margin was 50% for the year ended  December 31, 2003
and 56% for the year ended December 31, 2002. The Company's  margin decreased 6%
due in part to the change in  strategic  direction  discussed  above.  With this
change  in  strategic   direction,   various  assumptions  related  to  specific
inventoried  items were evaluated and revised.  With a more focused  approach on
assay kits and the directly related product lines, other non-strategic  products
were  discontinued.  The Company reviewed its catalog of products and eliminated
over 400  non-strategic  products.  Accordingly,  in the fourth quarter of 2003,
approximately  $250,000 of catalog products were  discontinued and $1 million of
inventoried products were evaluated and scrapped or fully reserved.  The Company
continues to evaluate catalog products on an ongoing basis.  While the impact to
our financial  results from our  continuing  evaluation  of catalog  products is
unknown at this time,  any such  evaluation  could be material to the  operating
results of the Company.

General  increases in the Company's scrap and  obsolescence  contributed to this
margin decrease.  Also contributing to this full year margin decrease were lower
margins in the Company's custom product lines,  specifically our oligonucleotide
and custom peptide  product  lines.  Steps have been taken to reduce our cost of
manufacturing  in the  custom  product  lines  and we are  projecting  to see an
improvement in consolidated gross profit margin in 2004.

RESEARCH AND  DEVELOPMENT.  Research and development  expense for the year ended
December 31, 2003 and 2002 was $7.0 million and $6.2 million and represented 16%
and 15% of  sales,  respectively.  The  increase  in  research  and  development
expenses for the year ended  December  31, 2003 when  compared to the prior year
period reflects the Company's  increased  expenses for additional  personnel and
materials in the cytokine and signal transduction  research areas. For the year,
the  Company  increased  R & D spending  by 13% and  expects,  with the focus on
cellular pathway assays and related  biologicals,  to keep 2004 spending in line
with 2003 spending


                                       20
<PAGE>


levels.  This  total  investment  in the  Company's  research  capabilities  has
resulted in the  commercialization  of high quality,  novel  products which have
produced increased sales in both the Cytokine and Signaling product lines.

SALES AND MARKETING.  Sales and marketing  expenses were $9,298,000 for the year
ended  December 31, 2003 and  $8,339,000  for the year ended  December 31, 2002,
representing  21% of sales for each of the years  2003 and 2002.  In the  twelve
months ended  December 31, 2003, the Company's  sales and marketing  payroll and
related expenses increased  $900,000 from 2002 due to increased  commissions and
the hiring of certain sales and marketing  positions in late 2002 and a new Vice
President of Sales in December  2002.  Marketing  expenses  including  catalogs,
advertising,  and trade shows decreased $95,000 in 2003 compared to 2002. Travel
expenses  increased $170,000 due to increased costs related primarily to selling
activities.  The Company  anticipates  a continued  increased  investment in its
sales and marketing,  but will manage this  investment in line with  anticipated
2004 revenue growth.

For the year  ended  December  31,  2003,  the  Company  expensed  approximately
$560,000 of catalog costs  compared to $529,000 for the year ended  December 31,
2002.

GENERAL AND ADMINISTRATIVE.  General and administrative expenses were $6,851,000
and $5,916,000 for the years ended December 31, 2003 and 2002,  representing 16%
and 15% of  sales  for  each of the  years  2003 and  2002,  respectively.  This
represents  an increase of G & A expenses in 2003 of $935,000  compared to 2002.
Included in the 2003 G & A number is $560,000 of severance  and sign on expenses
related to the  resignation of our previous CEO in September 2003 and the hiring
of our new CEO in November  2003.  Additional  severance  costs related to other
employee  terminations  in 2003 totaled  $130,000.  Excluding  this  $690,000 of
costs, 2003 general and  administrative  expenses increased by $375,000 compared
to 2002 and  represented  14% of  sales.  This  increase  was due  primarily  to
increases in our reserve for doubtful accounts, travel expenses,  consulting and
accounting  fees.  These  increases  in  expenses  were  offset by a decrease in
certain  benefit and  incentive  costs due to the lower than  planned  operating
performance in 2003, and thus lower  incentives being accrued for the Company in
2003 compared to 2002.

AMORTIZATION OF INTANGIBLES.  In July 2001, the Financial  Accounting  Standards
Board ("FASB") issued Statement of Financial  Accounting  Standards  ("FAS") No.
142,  "Accounting For Goodwill and Other Intangible Assets." The amortization of
goodwill and intangible assets was  approximately  $575,000 and $641,000 for the
years ended December 31, 2003 and 2002, respectively. Effective January 1, 2002,
the Company's  goodwill and other intangible  assets are accounted for under FAS
No. 142 "Goodwill and Other Intangible Assets." See discussion in the cumulative
effect of accounting change section below.

NET INTEREST INCOME. Interest income was $31,000 in 2003 compared to $113,000 in
2002. This interest income was derived from the interest income on cash invested
in  short-term  securities.  Interest  income  in 2003 was  offset  by $4,000 of
interest  expense  related  to  miscellaneous  interest  charges  and fees.  The
decrease in  interest  income was the result of lower cash  amounts  invested in
short-term interest bearing accounts in 2003 compared to 2002.

OTHER INCOME (EXPENSE), NET. Other expense, net was $103,000 in 2003 compared to
net other income $10,000 in 2002. These net amounts consisted primarily from net
gains and losses realized on foreign currency transactions.

INCOME TAX EXPENSE  (BENEFIT).  The Company is recognizing an income tax benefit
of $884,000 for the year ended  December 31, 2003.  The  Company's  income taxes
have and may  continue  to  fluctuate  in the  future  depending  on a number of
factors, including the ability to use its net deferred tax assets as of December
31, 2003.  The Company  believes it is more likely than not that it will be able
to use those assets.  In addition,  the Company  continues to benefit from R & D
and other tax  credits  which,  when  applied to income  levels for the  periods
presented, is resulting in effective tax rates lower than the current applicable
federal and state statutory rates.

CUMULATIVE EFFECT OF ACCOUNTING  CHANGE. In July 2001, the Financial  Accounting
Standards  Board ("FASB")  issued  Statement of Financial  Accounting  Standards
("FAS")  No.141,  "Accounting  For  Business


                                       21
<PAGE>


Combinations,"  and FAS No. 142,  "Accounting For Goodwill and Other  Intangible
Assets." FAS No. 141 requires that the purchase method of accounting be used for
all business  combinations  initiated  after June 30, 2001. FAS No. 142 requires
that goodwill and intangible  assets with  indefinite  useful lives no longer be
amortized to earnings, but instead be reviewed for impairment in accordance with
FAS  No.  142.  The   amortization   of  goodwill  and  intangible   assets  was
approximately  $575,000,  $641,000,  and  $1,098,000,  for  fiscal  years  ended
December 31, 2003, 2002, and 2001, respectively.  Effective January 1, 2002, the
Company's  goodwill and other intangible  assets are accounted for under FAS No.
141  "Business  Combinations"  and FAS No. 142  "Goodwill  and Other  Intangible
Assets." In 2002, the Company  recognized a non-cash  charge,  net of applicable
income taxes, of $2,447,000  representing  the cumulative  effect of a change in
accounting  principle  resulting from the implementation of FAS 142. This amount
is shown in the accompanying condensed consolidated statement of operations as a
cumulative effect of an accounting change.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

NET  SALES.  Net  sales for the  twelve  months  ended  December  31,  2002 were
$40,055,000,  an increase of  $4,880,000,  or 14%,  (13% after  eliminating  the
$476,000  positive  impact of foreign  exchange)  compared  to net sales for the
twelve months ended December 31, 2001.  North America sales,  which  represented
61% of consolidated net sales in 2002, grew $2,243,000 or 10% as compared to the
twelve months ended December 31, 2001.  European  sales,  which represent 27% of
consolidated  net sales in 2002, grew $2,090,000 or 24% (18% in local currency),
as compared to the comparable prior year period.  Sales in Japan and the rest of
the world, representing 12% of consolidated net sales, increased 13% compared to
2001.  North  American  sales grew 10%  primarily due to an increase in sales of
assays, proteins,  serum and media and signal transduction antibodies.  European
sales grew 18% in local currency primarily due to assays,  proteins,  antibodies
and  diagnostic  products.  Sales in Japan  and the rest of the  world  grew 13%
primarily  due to a full year  distributor  agreement in place with our Japanese
distributor  and continued  penetration  of products into  countries  outside of
Europe and North America.

GROSS PROFIT. Gross profit for the year ended December 31, 2002 was $22,366,000,
resulting in a gross margin of 56%,  compared to a gross profit of  $19,635,000,
and a gross margin of 56% for the year ended  December 31, 2001.  The  Company's
margins remained constant in part due to the continued  investment in production
and planning related areas within the Company.  The Company's 2002  consolidated
margin of 56% was impacted by lower  oligonucleotides  sales in 2002 compared to
2001. These lower sales resulted in excess fixed costs being charged directly to
cost of sales.

RESEARCH AND DEVELOPMENT. Research and development expense for the twelve months
ended December 31, 2002 and 2001 was  $6,187,000 and $3,986,000 and  represented
15% and 11% of sales  respectively.  The  increase in research  and  development
expenses  for the twelve  months ended  December  31, 2002 when  compared to the
comparable  prior year period  reflected the Company's  investment in additional
personnel and materials in the cytokine and signal  transduction  research areas
with the goal of  producing  additional  novel  and  proprietary  products.  The
Company  incrementally  hired 18 additional  research and development  personnel
during 2002 and more than doubled its core product  introduction  rate from 2001
to 2002.

SALES AND MARKETING. Sales and marketing expenses were $8,339,000 for the twelve
months  ended  December  31, 2002 and  $7,395,000  for the twelve  months  ended
December  31,  2001,  representing  21% of sales for each of the years  2002 and
2001. In the twelve  months ended  December 31, 2002,  the  Company's  sales and
marketing  expenses in personnel and marketing  programs increased $806,000 from
the comparable prior year period. During 2002, the Company incrementally hired 8
additional  employees in sales and marketing,  including people in our technical
service and sales departments.

GENERAL AND ADMINISTRATIVE.  General and administrative expenses were $5,916,000
and $6,945,000 for the years ended December 31, 2002 and 2001,  representing 15%
and 20% of  sales  for  each of the  years  2002 and  2001,  respectively.  This
represented a decrease of $1,029,000, or 15% in 2002 compared to 2001. Excluding
$1,406,000 of net general and  administrative  charges in 2001 that were related
to non-recurring  employee and legal matters,  the Company decreased its general
and  administrative  expenses,  as a percentage of sales,  from 16% for the year
ended December 31, 2001 to 15% for the year ended December 31, 2002.


                                       22
<PAGE>


AMORTIZATION OF INTANGIBLES.  In July 2001, the Financial  Accounting  Standards
Board ("FASB") issued Statement of Financial  Accounting  Standards  ("FAS") No.
142,  "Accounting For Goodwill and Other Intangible Assets." The amortization of
goodwill and intangible assets was approximately $641,000 and $1,098,000 for the
years ended December 31, 2002 and 2001, respectively. Effective January 1, 2002,
the Company's  goodwill and other intangible  assets are accounted for under FAS
No. 142 "Goodwill and Other Intangible Assets." See discussion in the cumulative
effect of accounting change section below.

INTEREST  INCOME.  Interest  income was $113,000 in 2002 compared to $376,000 in
2001. This interest income was derived from the interest income on cash invested
in  short-term  securities.  The  decrease in interest  income was the result of
lower cash amounts  invested in  short-term  interest  bearing  accounts in 2002
compared to 2001 and lower average short-term interest rates in 2002 compared to
2001.

OTHER INCOME,  NET. Other income, net was $10,000 in 2002 compared to $86,000 in
2001.  The net other  income in 2002 and 2001  consisted  primarily  from  gains
realized on foreign currency transactions.

INCOME TAX  EXPENSE  (BENEFIT).  The  effective  tax rate for the twelve  months
ending  December  31, 2002 and 2001 was 1% and (10%)  respectively.  The Company
benefited  from R & D and other tax credits  which when applied to income levels
for the periods presented resulted in effective tax rates lower than the current
applicable federal and state statutory rates. In the fourth quarter of 2002, the
Company elected to utilize the Extraterritorial Income Exclusion ("EIE") federal
tax credit, which, along with other tax credits,  reduced its effective tax rate
for 2002 to 1%.

CUMULATIVE EFFECT OF ACCOUNTING  CHANGE. In July 2001, the Financial  Accounting
Standards  Board ("FASB")  issued  Statement of Financial  Accounting  Standards
("FAS")  No.141,  "Accounting  For  Business  Combinations,"  and FAS  No.  142,
"Accounting For Goodwill and Other Intangible Assets." FAS No. 141 requires that
the  purchase  method  of  accounting  be  used  for all  business  combinations
initiated after June 30, 2001. FAS No. 142 requires that goodwill and intangible
assets with  indefinite  useful lives no longer be  amortized  to earnings,  but
instead  be  reviewed  for  impairment  in  accordance  with  FAS No.  142.  The
amortization  of goodwill  and  intangible  assets was  approximately  $641,000,
$1,098,000,  and $1,093,000, for fiscal years ended December 31, 2002, 2001, and
2000, respectively.  Effective January 1, 2002, the Company's goodwill and other
intangible   assets  have  been  accounted  for  under  FAS  No.  141  "Business
Combinations" and FAS No. 142 "Goodwill and Other Intangible Assets."


                                       23
<PAGE>


                                QUARTERLY RESULTS

The following  table sets forth various  unaudited  statement of operations data
for the last eight  quarters,  which has been  prepared on the same basis as the
annual  information  and, in  management's  opinion,  includes  all  adjustments
necessary to present fairly the information for each of the quarters below.

<TABLE>
<CAPTION>
                                  Dec. 31,    Sept. 30,   June 30,    March 31,   Dec. 31,    Sept. 30,   June 30,    March 31,
                                    2003        2003        2003        2003        2002        2002        2002        2002
                                  --------    --------    --------    --------    --------    --------    --------    --------
                                                                        (in thousands)

<S>                               <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Net sales .....................   $ 10,717    $ 10,744    $ 11,734    $ 10,899    $  9,881    $ 10,101    $ 10,292    $  9,781
Cost of goods sold ............      6,740       5,079       5,391       4,690       4,580       4,365       4,548       4,196
                                  --------    --------    --------    --------    --------    --------    --------    --------

Gross profit ..................      3,977       5,665       6,343       6,209       5,301       5,736       5,744       5,585
Research and development ......      1,478       1,687       1,863       1,979       1,825       1,557       1,512       1,293
Sales and marketing ...........      2,234       2,188       2,488       2,388       2,100       1,961       2,013       2,266
General and administrative ....      2,187       1,729       1,359       1,576       1,590       1,394       1,471       1,460
Impairment of long-lived assets        341        --          --          --          --          --          --          --
Amortization of intangibles ...        140         145         145         145         160         160         160         160
                                  --------    --------    --------    --------    --------    --------    --------    --------

Income (loss) from operations .     (2,403)        (84)        488         121        (374)        664         588         406
Interest income, net ..........          2          (2)         16          11          31          21          20          40
Other income (expense), net ...         (3)        (19)        (63)        (18)         19          (8)        (31)         30
                                  --------    --------    --------    --------    --------    --------    --------    --------

Income (loss) before income
   taxes (benefit) ............     (2,404)       (105)        441         114        (324)        677         577         476
Income tax expense (benefit) ..       (987)        (24)        116          11        (370)        149         127         105
                                  --------    --------    --------    --------    --------    --------    --------    --------

Income (loss) before cumulative
   effect of accounting change      (1,417)        (81)        325         103          46         528         450         371

Cumulative effect of change in
   accounting change ..........       --          --          --          --          --           423        --        (2,870)
                                  --------    --------    --------    --------    --------    --------    --------    --------


Net income (loss) .............   $ (1,417)   $    (81)   $    325    $    103    $     46    $    951    $    450    $ (2,499)
                                  ========    ========    ========    ========    ========    ========    ========    ========

Net income (loss) per diluted
   share ......................   $  (0.15)   $  (0.01)   $   0.03    $    .01    $  (0.00)   $   0.09    $   0.04    $  (0.23)
                                  ========    ========    ========    ========    ========    ========    ========    ========

Diluted shares used to compute
   per share amounts ..........      9,359       9,181       9,885      10,026      10,052      10,029      10,101      10,727
                                  ========    ========    ========    ========    ========    ========    ========    ========
</TABLE>


LIQUIDITY AND CAPITAL RESOURCES

Cash and cash  equivalents  as of December 31, 2003 of  $3,297,000  decreased by
$2,644,000,  or 45%, from $5,941,000 at December 31, 2002. In 2003,  $875,000 of
cash was provided by operating  activities,  $1,068,000 and $2,403,000 were used
in investing and financing activities, respectively.

The $583,000 of cash provided from  operations  was derived  primarily  from the
2003  net  loss  of  $1,070,000   offset  by  $2,620,000  of  depreciation   and
amortization, a $341,000 long-lived asset impairment charge, which was offset by
the decrease in cash due to the net increase in other working capital components
of $1,846,000.

Net cash used in investing  activities in 2003 was $1,068,000 and was related to
the cash outlay for capital expenditures,  which were primarily for the purchase
of laboratory and manufacturing equipment, offset by the proceeds from the sales
of certain equipment.  The Company anticipates capital spending in 2004 to be at
higher levels than incurred in 2003.

Net cash used in financing activities in 2003 was $2,403,000 of which $1,075,000
was provided from the exercise of employee stock options and $3,478,000 was used
in the repurchase of the Company's  common stock pursuant to a stock  repurchase
program effective  October 30, 2001. The repurchase  program allows for spending
up to  $15,000,000 on the  repurchase of the Company's  common stock.  The stock
repurchase program expires on June 30, 2004. Through March 15, 2004, the Company
had spent a total $8,734,000 and may


                                       24
<PAGE>


continue to  repurchase  its common stock until the  $15,000,000  limit is used;
however no  repurchases  were  conducted by the Company in the fourth quarter of
2003.

The Company has never paid  dividends  on common stock and has no plans to do so
in fiscal 2004. Our earnings will be retained for reinvestment in the business.

The Company has entered  into  various  leases  involving  facility  properties,
copiers  and   automobiles.   Lease  expense  for  2004  will  be  approximately
$1,474,000.

At December 31, 2003, we had the following cash commitments:


                                                  PAYMENT DUE BY PERIOD

                                                LESS
                                                THAN     2-3      4-5     AFTER
CONTRACTUAL OBLIGATIONS                TOTAL   1 YEAR   YEARS    YEARS   5 YEARS
-----------------------               ------   ------   ------   ------   ------

Long-Term Debt Obligations ........   $    0   $    0   $    0   $    0   $    0
Operating Lease Obligations .......    3,369    1,474    1,836       59        0
Purchase obligations ..............    2,621    2,621        0        0        0
                                      ------   ------   ------   ------   ------
Total .............................   $5,990   $4,095   $1,836   $   59   $    0
                                      ======   ======   ======   ======   ======


In  June  2003,  the  Company  established  a  one-year  revolving  loan  with a
commercial  bank that allows the Company to withdraw  from time to time  amounts
that in the aggregate are not to exceed $2,500,000. The loan was established for
working capital and stock repurchase needs, when and as necessary. The principal
terms of the revolving  loan include an interest rate of 2.75% on borrowed funds
and a quarterly  unused balance fee of .375%.  The principal  covenants  include
maintaining quarterly  profitability,  a maximum liability to tangible net worth
ratio of 1.0 to 1.0,  and a minimum  cash  balance of  $750,000 as of the end of
each fiscal quarter.  The Company received a waiver from its commercial bank for
the three months ended  September 30, 2003 and December 31, 2003 with respect to
the profitability  covenant it maintains on this one-year  revolving loan. As of
December 31, 2003 and from January 1, 2004 through  March 15, 2004,  the Company
had no borrowings  under the revolving loan. The Company  currently  anticipates
maintaining  the  revolving  loan until such time that  management  or the Board
believes that working capital and stock  repurchase  needs no longer require its
availability.

Notwithstanding its new strategic objectives,  the Company expects to be able to
meet its future cash and working capital requirements for operations and capital
additions through currently available funds and cash generated from operations.

RECENTLY ISSUED ACCOUNTING STANDARDS

In August 2001, the Financial  Accounting  Standards Board issued  Statement No.
143,  "Accounting  for Asset  Retirement  Obligations"  (SFAS No. 143). This new
pronouncement  establishes  financial  accounting  and  reporting  standards for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The provisions of SFAS No. 143 apply to legal
obligations associated with the retirement of long-lived assets that result from
the  acquisition,  construction,  development  and/or the normal  operation of a
long-lived asset, except for obligations of lessees.  The standard was effective
for financial  statements issued for fiscal years beginning after June 15, 2002.
We adopted this standard effective January 1, 2003.

In November  2002,  the EITF  reached a consensus  on Issue No.  00-21,  Revenue
Arrangements  with Multiple  Deliverables."  EITF 00-21 addresses the accounting
for  contractual  arrangements  in  which   revenue-generating   activities  are
performed.  In some  situations,  the  different  revenue-generating  activities
(deliverables) are sufficiently  separable and there exists sufficient  evidence
for fair values to account  separately for the different  deliverables (that is,
there are separate units of accounting). In other situations, some or all of the
different  deliverables  are  closely  interrelated  or there is not  sufficient
evidence of fair value to account separately for the different


                                       25
<PAGE>


deliverables. EITF 00-21 addresses when and, if so, how an arrangement involving
multiple deliverables should be divided into separate units of accounting.  EITF
00-21 is  effective  for interim  periods  beginning  after June 30,  2003.  The
adoption of EITF 00-21 did not have a material effect on the Company's financial
statements.

In  December  2002,  the FASB issued SFAS No. 148  "Accounting  for  Stock-Based
Compensation-Transition and Disclosure," an amendment of FASB Statement No. 123,
which  provides  guidance  for  transition  to the fair  value  based  method of
accounting for  stock-based  employee  compensation  and the required  financial
statement  disclosure.  The adoption of SFAS No. 148 expanded the  disclosure in
our interim financial  statements,  and does not significantly impact our annual
disclosures  of  stock-based   compensation   in  our   consolidated   financial
statements.

In  January  2003,  the  FASB  issued  FASB   Interpretation   ("FIN")  No.  45,
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect  Guarantees and  Indebtedness of Others." FIN No. 45 requires a company
to  recognize a  liability  for the  obligations  it has  undertaken  to issue a
guarantee.  This  liability  would be recorded at the inception of the guarantee
and  would  be  measured  at fair  value.  The  measurement  provisions  of this
statement apply  prospectively  to guarantees  issued or modified after December
31,  2002.  The  disclosure  provisions  of the  statement  apply  to  financial
statements  for periods  ending after December 15, 2002. The adoption of FIN No.
45 does not have a  material  impact on the  financial  position  or  results of
operations.

In  January  2003,  the  Financial   Accounting   Standards  Board  issued  FASB
Interpretation  No. 46,  "Consolidation of Variable Interest Entities" (FIN 46).
This  interpretation  clarifies the application of Accounting  Research Bulletin
No. 51, "Consolidated  Financial Statements" (ARB 51), and requires companies to
evaluate variable interest  entities for specific  characteristics  to determine
whether  additional   consolidation  and  disclosure  requirements  apply.  This
interpretation is immediately  applicable for variable interest entities created
after January 31, 2003,  and applies to the first fiscal year or interim  period
beginning after June 15, 2003 for variable  interest  entities acquired prior to
February 1, 2003. The adoption of this interpretation did not have any impact on
our financial  position or results of  operations.  In December  2003,  the FASB
revised FIN 46 to exempt certain  entities from its  requirements and to clarify
certain issues arising during the  implementation of FIN 4. The adoption of this
revised  interpretation in the first quarter of 2004 is not expected to have any
impact on our consolidated financial statements.

In May 2003, the Financial  Accounting Standards Board issued Statement No. 150,
"Accounting  for Certain  Financial  Instruments  with  Characteristics  of both
Liabilities and Equity." The Statement  establishes  standards for how an issuer
classifies and measures certain financial  instruments with  characteristics  of
both  liabilities  and equity.  It requires that an issuer  classify a financial
instrument  that is  within  its  scope  as a  liability  (or an  asset  in some
circumstances).  It is  effective  for  financial  instruments  entered  into or
modified  after May 31, 2003, and otherwise is effective at the beginning of the
first  interim  period  beginning  after June 15, 2003. We adopted this standard
effective  July  1,  2003,  and  it  did  not  have  a  material  effect  on our
consolidated financial statements.


                                  RISK FACTORS

You  should  carefully  consider  the  following  risk  factors  and  all  other
information  contained  in this report  before  purchasing  shares of our common
stock.  Investing in our common stock  involves a high degree of risk. If any of
the  following  events or outcomes  actually  occurs,  our  business,  operating
results and financial  condition would likely suffer.  As a result,  the trading
price of our common  stock  could  decline,  and you may lose all or part of the
money you paid to purchase our common stock.

RISKS RELATED TO OUR BUSINESS

FAILURE TO EXECUTE ON OUR NEWLY ADOPTED  LONG-TERM  STRATEGIC  PLAN COULD IMPAIR
OUR BUSINESS.

The  Company  historically  has sought to increase  its sales and  profitability
primarily through the acquisition or internal  development of new product lines,
additional  customers  and new  businesses.  Our  historical  revenue


                                       26
<PAGE>


growth is primarily attributable to our acquisitions and new product development
and, to a lesser extent, to increased  revenues from our existing  products.  In
the quarter ended December 31, 2003, we adopted a fundamental  shift in strategy
to focus our time,  effort and financial  resources on our core  strengths as an
assay  company.  We have built a strategic  plan to continue  to  penetrate  and
increase our market share in the cytokine  assay market and continue to maintain
a strong  leadership  position in the Phospho ELISA assay market.  This strategy
will focus our  energies  on these  high  margin  products  and allow us to pull
through our  complimentary  product  lines,  including our Phospho Site Specific
Antibodies,  or  PSSA's,  sera and  media  and our  custom  products,  peptides,
antibodies and oligonucleotides.

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

o        the market's continuing acceptance of our assay products;
o        our ability to internally develop new products;
o        our ability to acquire products or licenses to necessary technologies;
o        our ability to facilitate transactions with strategic partners;
o        establishment   of  new   relationships   or   expansion   of  existing
         relationships with customers and suppliers; and
o        availability of capital.

Additionally,   our  shift  in  strategy   has  caused  us  to  evaluate   other
non-strategic  products,  such as outsourced cell surface marker  antibodies and
discontinue  them.  The Company  reviewed its catalog of products and eliminated
over 400  non-strategic  products.  Accordingly,  in the fourth quarter of 2003,
approximately  $250,000 of catalog products were  discontinued and $1 million of
inventoried  products  were  evaluated  and  scrapped  or fully  reserved.  This
evaluation of catalog products is expected to continue in the future.  While the
impact to our  financial  results  from our  continuing  evaluation  of  catalog
products is unknown at this time, any such  evaluation  could be material to the
operating results of the Company.

If our  management is unable to manage this  strategic  shift  effectively,  our
operating  results  could  be  adversely  affected.  Moreover,  there  can be no
assurance that our historic rate of growth will continue  through this strategic
shift, that we will continue to successfully  expand or that growth or expansion
will result in profitability.

WE CANNOT GUARANTEE THAT OUR FUTURE ACQUISITIONS WILL BE SUCCESSFUL.

The Company competes for acquisition and expansion  opportunities with companies
which have  significantly  greater  financial and management  resources than us.
There can be no assurance that suitable acquisition or investment  opportunities
will be identified,  that any of these transactions can be consummated, or that,
if acquired,  these new businesses can be integrated successfully and profitably
into our  operations.  These  acquisitions  and  investments  may also require a
significant  allocation of resources,  which will reduce our ability to focus on
the other portions of our business,  including many of the factors listed in the
prior risk factor.

REDUCTION  OR DELAYS IN  RESEARCH  AND  DEVELOPMENT  BUDGETS  AND IN  GOVERNMENT
FUNDING MAY NEGATIVELY IMPACT OUR SALES.

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

A  significant  portion  of our  sales  has been to  researchers,  universities,
government  laboratories and private foundations whose funding is dependent upon
grants from government  agencies such as the U.S. National  Institutes of Health
and similar domestic and international agencies.  Although the level of research
funding has increased  during the past several years, we cannot assure that this
trend will continue.  Government  funding of research and development is subject
to the political  process,  which is  inherently  fluid and  unpredictable.  Our
revenues may be adversely  affected if our customers delay purchases as a result
of uncertainties surrounding the


                                       27
<PAGE>


approval of government budget proposals. Also, government proposals to reduce or
eliminate  budgetary deficits have sometimes included reduced allocations to the
NIH and other government agencies that fund research and development activities.
A  reduction  in  government  funding for the NIH or other  government  research
agencies could seriously damage our business.

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

WE RELY ON RAW MATERIALS AND SPECIALIZED EQUIPMENT FOR OUR MANUFACTURING,  WHICH
WE MAY NOT ALWAYS BE ABLE TO OBTAIN ON FAVORABLE TERMS.

Our manufacturing  process relies on the continued  availability of high-quality
raw  materials  and  specialized  equipment.  It is  possible  that a change  in
vendors,  or in the quality of the raw  materials  supplied to us, could have an
adverse impact on our manufacturing process and, ultimately,  on the sale of our
finished  products.  We have from time to time  experienced  a disruption in the
quality or availability of key raw materials,  which has created minor delays in
our ability to fill orders for specific test kits. This could occur again in the
future,  resulting in significant delays, and could have a detrimental impact on
the sale of our products and our results of operations.  In addition, we rely on
highly  specialized  manufacturing  equipment  that if damaged or disabled could
adversely   affect  our  ability  to  manufacture  our  products  and  therefore
negatively  impact  our  business.  We  rely  on  the  timely  transport  of raw
materials. Any disruption in transportation systems could have an adverse impact
on our ability to manufacture and supply products.

OUR ABILITY TO RAISE THE CAPITAL  NECESSARY  TO EXPAND OUR BUSINESS OR OTHERWISE
ACHIEVE OUR LONG-TERM OBJECTIVES IS UNCERTAIN.

In the future,  in order to expand our business through internal  development or
acquisitions or to otherwise  achieve our long-term  objectives,  we may need to
raise substantial  additional funds through equity or debt financings,  research
and  development  financings  or  collaborative  relationships.   However,  this
additional  funding  may  not be  available  or,  if  available,  it may  not be
available on economically  reasonable terms. In addition, any additional funding
may result in significant dilution to existing  stockholders.  If adequate funds
are not available,  we may be required to curtail our operations or obtain funds
through collaborative partners that may require us to release material rights to
our products.

OUR RESEARCH AND DEVELOPMENT EFFORTS FOR NEW PRODUCTS MAY BE UNSUCCESSFUL.

We incur significant  research and development  expenses to develop new products
and  technologies.  There  can be no  assurance  that any of these  products  or
technologies  will be  successfully  developed  or that  if  developed,  will be
commercially   successful.   In  the  event   that  we  are  unable  to  develop
commercialized  products  from our  research and  development  efforts or we are
unable or  unwilling  to  allocate  amounts  beyond  our  currently  anticipated
research and  development  investment,  we could lose our entire  investment  in
these new  products  and  technologies.  Any failure to  translate  research and
development expenditures into successful new product introductions could have an
adverse effect on our business.

FAILURE TO LICENSE NEW TECHNOLOGIES COULD IMPAIR OUR NEW PRODUCT DEVELOPMENT.

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

In  addition,  from time to time we are notified or become aware of patents held
by third parties that are related to  technologies we are selling or may sell in
the future. After a review of these patents, we may decide to obtain a


                                       28
<PAGE>


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

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

OUR FUTURE SUCCESS  DEPENDS ON THE TIMELY  INTRODUCTION  OF NEW PRODUCTS AND THE
ACCEPTANCE OF THESE NEW PRODUCTS IN THE MARKETPLACE.

Our ability to gain access to technologies  needed for new products and services
also  depends  in  part  on  our  ability  to  convince  licensors  that  we can
successfully  commercialize  their inventions.  We cannot assure that we will be
able to continue to identify new  technologies  developed by others.  Even if we
are  able  to  identify  new  technologies  of  interest,  we may not be able to
negotiate a license on favorable terms, or at all.

IF WE FAIL TO INTRODUCE  NEW  PRODUCTS,  OR OUR NEW PRODUCTS ARE NOT ACCEPTED BY
POTENTIAL CUSTOMERS, WE MAY LOSE MARKET SHARE.

Rapid  technological  change and frequent new product  introductions are typical
for the markets we serve.  Our future success will depend in part on continuous,
timely development and introduction of new products that address evolving market
requirements.   We  believe  successful  new  product  introductions  provide  a
significant  competitive  advantage because customers make an investment of time
in  selecting  and  learning to use a new  product,  and then are  reluctant  to
switch. To the extent we fail to introduce new and innovative  products,  we may
lose market share to our  competitors,  which will be difficult or impossible to
regain.  Any inability,  for  technological  or other reasons,  to  successfully
develop and  introduce  new products  could reduce our growth rate or damage our
business.

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

o        availability, quality and price relative to competitive products;

o        the timing of  introduction  of the  product  relative  to  competitive
         products;

o        customers' opinion of the products utility;

o        ease of use;

o        consistency with prior practices;

o        scientists' opinion of the product's usefulness;

o        citation of the product in published research; and


                                       29
<PAGE>


o        general trends in life sciences research.

The  expenses  or  losses  associated  with  unsuccessful   product  development
activities  or lack of market  acceptance of our new products  could  materially
adversely affect our business, operating results and financial condition.

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

FAILURE TO ATTRACT AND RETAIN  QUALIFIED  SCIENTIFIC OR PRODUCTION  PERSONNEL OR
LOSS OF KEY MANAGEMENT OR KEY PERSONNEL COULD HURT OUR BUSINESS.

Recruiting  and  retaining  qualified  scientific  and  production  personnel to
perform research and development work and product  manufacturing are critical to
our success.  Because the industry in which we compete is very  competitive,  we
face significant  challenges  attracting and retaining this qualified  personnel
base.  Although  we believe we have been and will be able to attract  and retain
these  personnel,  there can be no assurance that we will be able to continue to
successfully  attract qualified personnel.  In addition,  our anticipated growth
and expansion into areas and activities requiring additional expertise,  such as
clinical testing,  government approvals,  production and marketing, will require
the addition of new  management  personnel  and the  development  of  additional
expertise by existing  management  personnel.  The failure to attract and retain
these personnel or,  alternatively,  to develop this expertise  internally would
adversely  affect  our  business.  We  generally  do not enter  into  employment
agreements  requiring  these  employees  to continue in our  employment  for any
period of time.

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

MANY OF OUR  CUSTOMERS  ARE  OBTAINING  OUR  PRODUCTS  THROUGH NEW  DISTRIBUTION
CHANNELS AND METHODS THAT MAY  ADVERSELY  IMPACT OUR RESULTS OF  OPERATIONS  AND
FINANCIAL CONDITION.

A number of our customers  have developed  purchasing  initiatives to reduce the
number of vendors they purchase  from in order to lower their supply  costs.  In
some cases, these customers have established  agreements with large distributors
which  include  discounts  and the  distributors'  direct  involvement  with the
purchasing process.  For similar reasons,  many larger customers,  including the
federal  government,  have  special  pricing  arrangements,   including  blanket
purchase  agreements.  These  agreements may limit our pricing  flexibility with
respect to our products,  which could adversely  impact our business,  financial
condition and results of operations. In addition, although we accept and process
some orders  through our Internet  website,  we also  implement  sales through a
third  party  Internet  vendor.   Internet  sales  through  third  parties  will
negatively  impact our gross margins because we pay commission on these Internet
sales. On the other hand, if we do not enter into  arrangements with third-party
e-commerce  providers,  we may lose  customers  who prefer to purchase  products
using these Web sites. Our business may be harmed as a result of these Web sites
or other sales methods which may be developed in the future.

WE RELY ON AIR TRANSPORT TO SHIP PRODUCTS TO OUR CUSTOMERS

Any disruption in standard air transport systems could have an adverse effect on
our business.

WE RELY ON INTERNATIONAL SALES, WHICH ARE SUBJECT TO ADDITIONAL RISKS.

International sales accounted for approximately 46% of our revenues in 2003, 41%
of our revenues in 2002,  and 40% of our revenues in 2001.  International  sales
can be subject to many inherent risks that are difficult or impossible for us to
predict or control, including:

o        unexpected changes in regulatory requirements and tariffs;


                                       30
<PAGE>


o        difficulties and costs associated with in staffing and managing foreign
         operations, including foreign distributor relationships;

o        longer  accounts  receivable   collection  cycles  in  certain  foreign
         countries; adverse economic or political changes;

o        unexpected changes in regulatory requirements;

o        more limited protection for intellectual property in some countries;

o        changes in our  international  distribution  network  and direct  sales
         force;

o        potential trade  restrictions,  exchange controls and import and export
         licensing requirements;

o        problems in collecting accounts receivable; and

o        potentially adverse tax consequences of overlapping tax structure.

IMPAIRMENT OF THE ABILITY TO TRANSPORT GOODS INTERNATIONALLY.

We intend to continue to generate  revenues  from sales outside North America in
the future.  Future  distribution of our products outside North America also may
be subject to greater governmental regulation. These regulations,  which include
requirements for approvals or clearance to market,  additional time required for
regulatory  review and sanctions  imposed for  violations,  as well as the other
risks indicated in the bullets listed above, vary by country. We may not be able
to obtain  regulatory  approvals in the countries in which we currently sell our
products  or in  countries  where we may sell our  products  in the  future.  In
addition,  we may be required to incur significant costs in obtaining  necessary
regulatory  approvals.  Failure to obtain necessary  regulatory approvals or any
other failure to comply with regulatory  requirements could result in a material
reduction in our revenues and earnings.

We also  depend  on  third-party  distributors  for a  material  portion  of our
international sales. If we lose or suffer any significant  reduction in sales to
any material distributor, our business could be materially adversely affected.

In  addition,  approximately  31% of our sales are made in  foreign  currencies,
primarily  Euros and  British  pounds.  A  significant  portion  of the  foreign
currencies in which we conduct our business is currently  denominated  in Euros.
The  Company  is not  certain  about  the  effect  of the Euro on our  business,
financial  condition or results of operations.  In the past, gains and losses on
the collection of our accounts receivable arising from international  operations
have  contributed  to negative  fluctuations  in our results of  operations.  In
general,  increases in the exchange  rate of the United States dollar to foreign
currencies  cause our products to become  relatively more expensive to customers
in those  countries,  leading to a reduction in sales or  profitability  in some
cases.  We  historically   have  not,  and  currently  are  not,  using  hedging
transactions  or other means to reduce our exposure to fluctuations in the value
of the United States dollar as compared to the foreign  currencies in which many
of our sales are made.

OUR OPERATING RESULTS MAY FLUCTUATE.

Our operating results may vary significantly quarter to quarter and from year to
year as a result of a variety of factors. These factors include:

o        level of demand for our products;

o        changes in our customer and product mix;

o        timing of acquisitions and investments in infrastructure;


                                       31
<PAGE>


o        competitive conditions;

o        timing and extent of intellectual property litigation;

o        exchange rate fluctuations; and

o        general economic and political conditions.

We  believe  that  quarterly  comparisons  of  our  financial  results  may  not
necessarily  be  meaningful  and should not be relied upon as an  indication  of
future  performance.  Additionally,  if our  operating  results  in one or  more
quarters do not meet the expectations of security analysts or others,  the price
of our common stock could be materially adversely affected.

Our  continued  investment  in product  development  and sales and marketing are
significantly ongoing expenses. If revenue in a particular period falls short of
expectations,  we may not be able to reduce  significantly  our expenditures for
that period,  which would materially  adversely affect the operating results for
that period.

WE MAY BE UNABLE TO PROTECT OUR TRADEMARKS, TRADE SECRETS AND OTHER INTELLECTUAL
PROPERTY RIGHTS THAT ARE IMPORTANT TO OUR BUSINESS.

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

INTELLECTUAL PROPERTY OR OTHER LITIGATION COULD HARM OUR BUSINESS.

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

In the event of an intellectual  property dispute, we may be forced to litigate.
This  litigation  could  involve  proceedings  declared  by the U.S.  Patent and
Trademark Office or the International  Trade Commission,  as well as proceedings
brought directly by affected third parties. Intellectual property litigation can
be extremely expensive,  and these expenses,  as well as the consequences should
we not prevail, could seriously harm our business.

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

In addition to intellectual property litigation,  other substantial,  complex or
extended  litigation could result in large expenditures by us and distraction of
our management. For example, lawsuits by employees, stockholders,  collaborators
or  distributors  could be very costly and  substantially  disrupt our business.
Disputes from time to time with companies or individuals are not uncommon in our
industry,  and we cannot  assure you that we will always be able to resolve them
out of court.


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<PAGE>


ACCIDENTS RELATED TO HAZARDOUS MATERIALS COULD ADVERSELY AFFECT OUR BUSINESS.

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

OUR SALES ARE SUBJECT TO  SEASONALITY,  WHICH MEANS THAT WE HAVE LESS REVENUE IN
SOME MONTHS.

We  experience  a slowing  of sales in  Europe  during  the  summer  months  and
worldwide during the Christmas holidays.  Generally, our fourth quarter revenues
are lower than our revenues in each of the first three  quarters of the year. We
believe  that  period to period  comparisons  of our  operating  results may not
necessarily be reliable indicators of our future performance.  It is likely that
in some future period our operating  results will not meet expectations or those
of public market analysts,  which could result in reductions in the market price
of our common stock.

POTENTIAL  PRODUCT  LIABILITY  CLAIMS COULD  AFFECT OUR  EARNINGS AND  FINANCIAL
CONDITION.

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

THE  LABOR  LAWS  APPLICABLE  TO  OUR  EMPLOYEES  IN  EUROPE  MAY  RESTRICT  THE
FLEXIBILITY OF OUR MANAGEMENT.

As of March 1, 2004,  61 of our 271 employees  worked for our  BioSource  Europe
subsidiary,  which is located in Nivelles, Belgium. As a result of Belgian labor
laws,  we are  required  to make  specified  severance  payments in the event we
terminate a European employee. Accordingly, our management may be limited by the
application of the Belgian labor laws in the  determination  of staffing levels,
and may have less flexibility in making such determinations than our competitors
whose employees are not subject to similar labor laws.

                       RISKS ASSOCIATED WITH OUR INDUSTRY

THE BIOMEDICAL  RESEARCH PRODUCTS  INDUSTRY IS VERY  COMPETITIVE,  AND WE MAY BE
UNABLE TO CONTINUE TO COMPETE EFFECTIVELY IN THIS INDUSTRY IN THE FUTURE.

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

o        product performance, features and liability;

o        price;

o        timing of product introductions;

o        ability to develop,  maintain  and  protect  proprietary  products  and
         technologies;

o        sales and distribution capabilities;


                                       33
<PAGE>


o        technical support and service;

o        brand royalty;

o        applications support; and

o        breadth of product line.

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

Our  competitors  have in the past and may in the  future  compete  by  lowering
prices.  Our failure to anticipate and respond to price competition could reduce
our revenues and profits, and may damage our market share.

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

AS A  RESULT  OF  CONSOLIDATION  IN THE  PHARMACEUTICAL  INDUSTRY,  WE MAY  LOSE
EXISTING CUSTOMERS OR HAVE GREATER DIFFICULTY OBTAINING NEW CUSTOMERS.

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

WE ARE CURRENTLY SUBJECT TO GOVERNMENT REGULATION.

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

                     RISKS ASSOCIATED WITH OUR COMMON STOCK

OUR STOCK PRICE HAS BEEN VOLATILE.

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

o        fluctuations in our quarterly operating and earnings per share results;

o        the gain or loss of significant contracts;

o        loss of key personnel;

o        announcements of technological innovations or new products by us or our
         competitors;

o        delays in the development and introduction of new products;


                                       34
<PAGE>


o        legislative or regulatory changes;

o        general trends in the industry;

o        recommendations  and/or  changes  in  estimates  by equity  and  market
         research analysts;

o        biological or medical discoveries;

o        disputes  and/or   developments   concerning   intellectual   property,
         including patents and litigation matters;

o        public concern as to the safety of new technologies;

o        sales of common stock of existing holders;

o        securities class action or other litigation;

o        developments in our relationships  with current or future customers and
         suppliers; and

o        general economic conditions, both in the United States and abroad.

As a result of these factors,  and  potentially  others,  the sales price of our
common  stock has ranged  from  $4.89 to $13.69  per share from  January 1, 2001
through  March 15,  2004 and from $6.40 to $8.09 per share from  January 1, 2004
through March 15, 2004. For additional  information regarding the price range of
our common stock, see "Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters."

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

In the past,  following periods of volatility in the market price of a company's
stock,  securities  class action  litigation  has  occurred  against the issuing
company.  If we were subject to this type of litigation in the future,  we could
incur  substantial  costs and a  diversion  of our  management's  attention  and
resources, each of which could have a material adverse effect on our revenue and
earnings.  Any  adverse  determination  in this type of  litigation  could  also
subject us to significant liabilities.

ANTI-TAKEOVER  PROVISIONS IN OUR GOVERNING  DOCUMENTS AND UNDER  APPLICABLE  LAW
COULD IMPAIR THE ABILITY OF A THIRD PARTY TO TAKE OVER OUR COMPANY.

We are subject to various  legal and  contractual  provisions  that may impede a
change in our control, including the following:

o        our adoption of a stockholders'  rights plan, which could result in the
         significant dilution of the proportionate  ownership of any person that
         engages in an unsolicited attempt to take over our company; and

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

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

Our principal  stockholders  and management own a significant  percentage of our
capital  stock  and  will be able to  exercise  significant  influence  over our
affairs.  Our executive  officers,  directors and  principal  stockholders  will
continue to beneficially own 33.5% of our outstanding  common stock,  based upon
the beneficial  ownership of our common stock as of March 15, 2004. In addition,
these same persons also hold options to acquire additional


                                       35
<PAGE>


shares of our common stock, which may increase their percentage ownership of the
common stock further in the future. Accordingly, these stockholders:

o        will be able to significantly influence the composition of our board of
         directors;

o        will   significantly   influence  all  matters  requiring   stockholder
         approval, including change of control transactions; and

o        will continue to have significant influence over our business.

This  concentration  of  ownership  of our common stock could have the effect of
delaying or  preventing  a change of control of us or otherwise  discouraging  a
potential  acquirer from  attempting to obtain control of us. This in turn could
have a negative  effect on the market price of our common  stock.  It could also
prevent our  stockholders  from  realizing a premium over the market  prices for
their shares of common stock.

OUR PRINCIPAL  STOCKHOLDERS  AND MANAGEMENT OWN A SIGNIFICANT  PERCENTAGE OF OUR
CAPITAL  STOCK  AND  WILL BE ABLE TO  EXERCISE  SIGNIFICANT  INFLUENCE  OVER OUR
AFFAIRS.

Our executive officers,  directors and principal  stockholders  beneficially own
approximately  33.5% of our outstanding  common stock, based upon the beneficial
ownership  of our  common  stock  as of  March  15,  2004.  As a  result,  these
stockholders,  if they act  together,  could exert  substantial  influence  over
matters requiring stockholder approval,  including the election of directors and
approval of mergers and other  significant  corporate  transactions.  The voting
power of such persons may have the effect of delaying, preventing or deterring a
change in control, and could affect the market price of our common stock.

ABSENCE OF DIVIDENDS COULD REDUCE OUR ATTRACTIVENESS TO YOU.

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

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We conduct business in various foreign  currencies,  including Euros and British
pounds,  and are therefore subject to the transaction  exposures that arise from
foreign  exchange  rate  movements  between  the  dates  that  foreign  currency
transactions  are initiated and the dates that they are  converted.  We are also
subject  to  exchange  rate   exposures   arising  from  the   translation   and
consolidation of the financial results of our foreign  subsidiaries.  Although a
significant  portion of the foreign  currencies in which we conduct our business
is currently,  or is anticipated in the future to be,  denominated in Euros as a
result of the European  Monetary  Union,  we are not certain about the effect of
the Euro on our business,  financial  condition or results of operations.  We do
not currently hedge either our translation  risk or our economic risk associated
with the  exchange  of foreign  currencies  into U.S.  dollars.  There can be no
assurances  that  future  changes  in  currency  exchange  rates will not have a
material impact on our future cash collections and operating results.

Our exposure to market risks for changes in interest rates relates  primarily to
outstanding  commercial  debt.  Due to the pay down of our  commercial  debt, we
anticipate  no material  market  risk  exposure  for changes in interest  rates.
Accordingly, we have not included quantitative tabular disclosures.


                                       36
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                                                            PAGE
                                                                            ----

Independent Auditors' Report..............................................  F-2

Consolidated Balance Sheets at December 31, 2003 and
   December 31, 2002......................................................  F-3

Consolidated Statements of Operations for the years
   ended December 31, 2003, 2002 and 2001.................................  F-4

Consolidated Statements of Stockholders' Equity and
   Comprehensive Income (Loss) for the years ended
   December 31, 2003, 2002 and 2001.......................................  F-5

Consolidated Statements of Cash Flows for the years
   ended December 31, 2003, 2002 and 2001.................................  F-6

Notes to Consolidated Financial Statements as of
   December 31, 2003 and 2002 and for the years ended
   December 31, 2003, 2002 and 2001 ......................................  F-7

Financial Statement Schedule--Valuation and Qualifying Account ...........  F-23


ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

As of December 31, 2003, the end of the period covered by this report, under the
supervision  and with the  participation  of  management,  including  our  Chief
Executive  Officer  and our  Chief  Financial  Officer,  we have  evaluated  the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures  pursuant to Exchange  Act Rules  13a-15 and 15d-15.  Based upon that
evaluation,  our Chief Executive  Officer and our Chief  Financial  Officer have
concluded that our  disclosure  controls and procedures are effective in causing
material information to be recorded,  processed,  summarized and reported by our
management  on a timely basis and to ensure that the quality and  timeliness  of
our public  disclosures  complies with its  Securities  and Exchange  Commission
disclosure obligations.

As of December  31,  2003,  there have been no material  changes in our internal
controls or in other factors that could materially affect internal controls.


                                       37
<PAGE>


                                    PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

INFORMATION WITH RESPECT TO DIRECTORS AND EXECUTIVE OFFICERS

The  following  table  sets forth  information  with  respect to our  directors,
executive officers and key employees as of March 15, 2004:

NAME                            AGE      POSITION
----                            ---      --------
Terrance J. Bieker               58      President and Chief Executive Officer,
                                         Director

Charles C. Best                  44      Chief Financial Officer, Executive
                                         Vice President, Finance

Kevin J. Reagan, Ph.D.           52      Executive Vice President, Technical
                                         Operations

Jozef Vangenechten, Ph.D.        49      General Manager, BioSource Europe, S.A.

Rocco R. Raduazo                 44      Vice President of Sales

Valerie Bressler-Hill            39      Vice President of Marketing

Jean-Pierre L. Conte*            40      Director

David J. Moffa, Ph.D.*  **       61      Director

John R. Overturf, Jr.**          43      Director

Robert J. Weltman                38      Director

John L. Zabriskie, Ph.D.* **     64      Director
----------
*   Member of the Compensation Committee.
**  Member of the Audit Committee.

Terrance J. Bieker,  President and Chief Executive Officer,  joined BioSource on
November 1, 2003.  From April 2003 to October  2003,  Mr. Bieker served as Chief
Executive Officer of Axya Medical,  Inc. a medical devise company engaged in the
sales of orthopedic surgical devices.  From 2000 through 2002, Mr. Bieker served
as President and Chief Executive Officer of MedSafe,  Inc. a medical  regulatory
consulting company. Mr. Bieker was President and CEO of Transfusion Technologies
Corporation,  a medical device company from 1999 to 2000. From 1997 to 1999, Mr.
Bieker  served as  Executive  Vice  President  and Chief  Operating  Officer  of
Safeskin Corporation, a manufacturer of disposable gloveware. From 1989 to 1997,
Mr. Bieker served as Chairman,  CEO and President of Sanofi Diagnostics Pasteur,
Inc., a clinical diagnostic division of Sanofi, SA, a French  pharmaceutical and
healthcare company.  Prior to these  appointments,  Mr. Bieker served as General
Manager of  Genetic  Systems  Corporation.  His early  career  was with  various
divisions  of American  Hospital  Supply  Corporation.  Mr.  Bieker holds a B.S.
degree in Economics from the University of Minnesota.

Charles C. Best joined  BioSource in December 1999 as Chief  Financial  Officer.
Prior to his  employment at BioSource,  Mr. Best served four and a half years as
Vice President and Chief Financial Officer of Cogent Light Technologies, Inc., a
company engaged in the manufacture of surgical lighting  instruments.  From 1989
to 1995, Mr. Best worked in various positions including Corporate Controller for
3D Systems,  Inc., a company  engaged in the  manufacture  and sale of high tech
rapid prototyping  equipment.  Mr. Best is a CPA and holds a Bachelor of Science
degree  in  Business   Administration   and  Accounting  from  San  Diego  State
University.


                                       38
<PAGE>


Kevin J. Reagan,  Ph.D. became Executive Vice President of Technical  Operations
in  February  of 2004 and was Vice  President,  Immunology  from  December  1996
through January 2004. From 1991 to December 1996, Dr. Reagan served as the first
Director  of  Development  Laboratories  and  then  Vice  President,  Laboratory
Operations at Specialty Laboratories,  Inc., a clinical reference lab. From 1990
to 1991, Dr. Reagan was the Associate  Director of  AIDS/Hepatitis  R&D at Ortho
Diagnostics, Inc., a Johnson & Johnson Company. Dr. Reagan received his Bachelor
of Arts in  Biological  Sciences  from the  University  of Delaware.  Dr. Reagan
received both his Masters and Ph.D.  degrees in Microbiology and Immunology from
Hahnemann Medical College.

Jozef  Vangenechten,  Ph.D. became Managing  Director of BioSource Europe,  S.A.
from February  1998.  From 1988 to February 1998,  Dr.  Vangenechten  worked for
Societe   Generale  de  Surveillance,   n.v.,  an   international   provider  of
environmental  compliance services,  most recently as Managing Director of SGS's
EcoCare Environmental Services division.

Rocco R. Raduazo  joined  BioSource in December 2002 as Vice President of Sales.
From 1996 up to his  employment at BioSource,  Mr. Raduazo served in a number of
positions at BD  Biosciences  Clontech  including  Vice  President of Sales.  BD
Biosciences  Clontech is a company  engaged in the  manufacture of genomic based
products.  From 1990 to 1995, Mr.  Raduazo  worked in various  positions at Life
Technologies,  Inc., a company engaged in the manufacture and sale of biological
reagents.  Mr. Raduazo holds a Bachelor of Science degree in  Biochemsitry  from
the University of New Hampshire,  performed  various graduate work at Ohio State
University and holds an MBA in Finance from the American University.

Valerie Bressler-Hill,  Ph.D. became Vice President,  Marketing in January 2000,
having  served as  Director of  Marketing  since  1999.  From 1994 to 1998,  Dr.
Bressler-Hill  served in the Research and Development  group of the Company as a
scientist and Associate Director. Dr. Bressler-Hill received her Ph.D. degree in
Physical Chemistry from University of California at Santa Barbara.

Jean-Pierre L. Conte has served as a director of BioSource  since February 2000.
Mr.  Conte is a Managing  Director  of Genstar  Capital  LLC,  which is the sole
general partner of Genstar  Capital  Partners II, L.P.; a private equity limited
partnership and Chairman and Managing Director of Genstar Capital, L.P. which is
the sole general partner of Genstar  Capital  Partners III L.P. Prior to joining
Genstar in 1995,  he was a  principal  for six years at the NTC Group,  Inc.,  a
private  equity  investment  firm.  Mr. Conte is currently a director of several
private companies and is also a Director of North American Energy Partners, Inc.
Mr. Conte earned a Masters of Business  Administration  from Harvard  University
Graduate School of Business and a Bachelor of Arts from Colgate University.

David J. Moffa,  Ph.D.  has been a director of BioSource  since April 1995.  Dr.
Moffa serves as the Regional  Director and as Special Projects  Director for Lab
Corporation of America,  Inc. located in Fairmont,  West Virginia,  positions he
has held  since  1982 and 1984,  respectively,  and as  director  of  LabCorp in
Pittsburgh  Pennsylvania,  a  position  held since  1985.  Dr.  Moffa  serves as
Chairman  of  ClinServices,  LLC and as an  advisor  and  consultant  to various
diagnostic,  scientific and health care  facilities.  Dr. Moffa also serves on a
number of committees and boards of directors of various privately held companies
and  governmental  offices,  including  BB&T,  Inc. He was past owner and CEO of
BioPreps  Laboratories,  Inc. Dr. Moffa has completed a post doctoral fellowship
in Clinical  Biochemistry at the West Virginia University National Institutes of
Health,  holds a Ph.D. in Medical  Biochemistry from the West Virginia School of
Medicine,  a Masters  of  Science  degree  in  Biochemistry  from West  Virginia
University  and a Bachelor of Arts  degree in  Pre-Medicine  from West  Virginia
University.

John R. Overturf, Jr. has been a director of BioSource since September 1993. Mr.
Overturf serves as the President of R.O.I.,  Inc., a private investment company,
a  position  he has held since July 1993.  He also  serves as  President  of the
Combined Penny Stock Fund,  Inc., a closed-end  stock market fund, a position he
has held since  August 1996.  From  September  1993 until  September  1996,  Mr.
Overturf served as Vice President of the Rockies Fund,  Inc., a closed-end stock
market fund. Mr. Overturf holds a Bachelor of Science degree in Finance from the
University of Northern Colorado.

Robert J. Weltman has served as a director of BioSource  since February 2000. He
is  currently  a Managing  Director  of Genstar  Capital,  LP, the sole  general
partner  of  Genstar  Capital  Partners  II,  L.P.,  a  private  equity


                                       39
<PAGE>


limited partnership. Mr. Weltman joined Genstar in August 1995. Prior to joining
Genstar,  from  July  1993 to July  1995,  Mr.  Weltman  was an  Associate  with
Robertson,  Stephens & Company, an investment banking firm. Mr. Weltman holds an
A.B.  degree in  chemistry  from  Princeton  University.  Mr.  Weltman  has been
appointed to the Board of  Directors  pursuant to an investor  rights  agreement
among  Genstar,  Stargen and the  Company,  which is  described  under "Item 13.
Certain Relationships and Related Transactions."

John L.  Zabriskie,  Ph.D., is Co-founder and has served as Director of Puretech
Ventures, a venture creation company since 2001. From 1997 to 2000 Dr. Zabriskie
was Chairman and Chief Executive Officer of NEN Life Science  Products,  Inc., a
leading  supplier of kits for labeling and  detection of DNA. From 1995 to 1997,
Dr. Zabriskie was President and Chief Executive Officer of Pharmacia and Upjohn,
Inc., a Fortune 500 pharmaceutical  company formed by the merger of Pharmacia AB
of Sweden and the Upjohn Company of Kalamazoo, Michigan. From 1965 until joining
Upjohn in 1994,  Dr.  Zabriskie was employed by Merck and Co., Inc. He began his
career  at Merck as a  chemist  in 1965 and  held  various  positions  including
President of Merck Sharp & Dohme and Executive  Vice President of Merck and Co.,
Inc.  He has  served  on a  number  of  boards  for  health  care  and  academic
institutions  and  currently  serves on the Board of  Directors  of Kellogg Co.,
Array BioPharma,  and MacroChem Corp. Dr. Zabriskie  received his A.B. degree in
chemistry  from  Dartmouth  College  (N.H.)  in 1961 and his  Ph.D.  in  organic
chemistry from the University of Rochester (N.Y.) in 1965.

CODE OF ETHICAL CONDUCT

Our Board of Directors  recently adopted a Code of Ethical Conduct (the "Code of
Conduct"). We require all employees, directors and officers, including our Chief
Executive Officer and Chief Financial Officer,  to adhere to the Code of Conduct
in addressing legal and ethical issues encountered in conducting their work. The
Code of Conduct  requires that these  individuals  avoid  conflicts of interest,
comply with all laws and other legal requirements, conduct business in an honest
and ethical  manner and otherwise act with  integrity and in our best  interest.
The Code of Conduct contains  additional  provisions that apply  specifically to
our Chief Financial  Officer and other  financial  officers with respect to full
and  accurate  reporting.  The Code of Conduct is  available  on our  website at
www.biosource.com.

IDENTIFICATION OF AUDIT COMMITTEE

Our Board of Directors  has a separately  standing  Audit  Committee.  The Audit
Committee currently consists of Messrs.  David J. Moffa, PhD., John R. Overturf,
Jr.,  and John L.  Zabriskie,  PhD.  Mr.  Overturf  serves  as  Chairman  of the
Committee.  Messrs.  Moffa,  Overturf and Zabriskie are "independent  directors"
within the meaning of Rule 10A-3 promulgated  under the Securities  Exchange Act
of 1934, as amended,  and the NASDAQ  Marketplace  Rules. The Audit  Committee's
primary  duties and  responsibilities  include  appointment  of the  independent
auditors,  evaluation of the performance  and  independence of such auditors and
review of the annual audited  financial  statements and the quarterly  financial
statements, as well as the adequacy of our internal controls.

AUDIT COMMITTEE FINANCIAL EXPERT

Our Board of Directors has determined that each of the members of its separately
standing Audit Committee,  Messrs. Moffa, Overturf and Zabriskie,  are an "audit
committee financial expert" as defined in Item 401(h) of Regulation S-K. Messrs.
Moffa, Overturf and Zabriskie are "independent" for purposes of Rule 4200(a)(15)
of the Nasdaq Marketplace Rules.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE -

Section  16(a) of the  Securities  Exchange Act of 1934,  requires our executive
officers,  directors,  and persons who own more than ten percent of a registered
class of our equity  securities  to file  reports of  ownership  and  changes in
ownership  with the Securities and Exchange  Commission  (the "SEC").  Executive
officers,  directors and  greater-than-ten  percent stockholders are required by
SEC  regulations  to furnish us with all Section  16(a)  forms they file.  Based
solely on our  review of the  copies of the  forms  received  by us and  written
representations  from certain reporting persons that they have complied with the
relevant filing  requirements,  we believe that,  during the year ended December
31, 2003, all our executive  officers,  directors and  greater-than-ten  percent
stockholders


                                       40
<PAGE>


complied with all Section 16(a) filing  requirements,  except for the following;
Robert D. Weist filed two late Form 4s, each reporting late one transaction that
occurred in November 2002 and December 2002,  respectively;  and each of John R.
Overturf, Jr., David J. Moffa, Jean-Pierre L. Conte, and Robert J. Weltman filed
one late Form 4, each reporting late one  transaction  that occurred for each in
December 2002.

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth, as to the Chief Executive Officer and as to each
of the other four most highly compensated executive officers who were serving as
executive  officers at the end of the last  fiscal  year and whose  compensation
exceeded $100,000 during the last fiscal year (the "Named Executive  Officers"),
information  concerning  all  compensation  paid  for  services  to  us  in  all
capacities for each of the three years ended December 31 indicated below.

<TABLE>
                           SUMMARY COMPENSATION TABLE

<CAPTION>
                                             -------------------------------------    -----------------------
                                                      ANNUAL COMPENSATION             LONG TERM COMPENSATION
                                             -------------------------------------    -----------------------
                                                                          OTHER       NUMBER OF
                                 YEAR ENDED                               ANNUAL      SECURITIES   ALL OTHER
NAME AND                          DECEMBER                                COMPEN-     UNDERLYING    COMPEN-
PRINCIPAL POSITION (1)               31,        SALARY       BONUS        SATION        OPTIONS     SATION
------------------------------      ----     ----------    ---------     ---------      -------    ---------
<S>                                 <C>      <C>           <C>           <C>            <C>            <C>
Terrance J. Bieker............      2003     $ 40,105(2)   $325,000(3)   $     0              0        0
Chief Executive Officer and
President

Leonard M. Hendrickson........      2003     $187,500      $      0      $52,083(5)           0        0
Chief Executive Officer and         2002      250,000        99,650        1,548(7)           0        0
President (4)                       2001       49,000(6)     90,000          173(7)     280,000        0

Robert Weltman................      2003     $      0      $      0       $6,000(9)           0        0
Interim Chief Executive
Officer(8)

Charles C. Best...............      2003     $176,800      $      0          337(7)           0        0
Chief Financial Officer             2002      166,400        59,023          324(7)           0        0
and Executive Vice President        2001      160,000        23,500          325(7)      87,500        0

----------
<FN>
(1)      For a description of employment  agreements  between certain  executive
         officers and the Company,  see  "Employment  Agreements  with Executive
         Officers" below.
(2)      Mr.  Bieker joined the Company on November 1, 2003.  Represents  salary
         from November 1, 2003 through December 31, 2003.
(3)      Amount  consists of a $90,000 signing bonus and $235,000 bonus with its
         intended use for relocation costs.
(4)      Mr. Hendrickson resigned from the Company on September 29, 2003.
(5)      Represents  payments made under a severance and release agreement.  See
         "Employment Agreements with Executive Officers" below.
(6)      Represents salary paid from date of hire through December 31, 2001.
(7)      Consists of group life insurance premiums paid by the Company.
(8)      Mr.  Weltman  served  as  our  Interim  Chief  Executive  Officer  from
         September  30, 2003  through  October  31,  2003.  Mr.  Weltman did not
         receive any additional  compensation  for his services as Interim Chief
         Executive officer.
(9)      The  compensation  identified  above was received by Mr. Weltman in his
         capacity as a Director of the Company.
</FN>
</TABLE>


                                       41
<PAGE>


OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information  regarding the grant of stock
options  made  during  the  fiscal  year ended  December  31,  2003 to the Named
Executive Officers.

<TABLE>
                        OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>

                            NUMBER OF       PERCENT OF       AVG.
                            SECURITIES    TOTAL OPTIONS    EXERCISE                POTENTIAL REALIZABLE VALUE
                            UNDERLYING      GRANTED TO     OF BASE                 OF ASSUMED ANNUAL RATES OF
                             OPTIONS       EMPLOYEES IN     PRICE     EXPIRATION   STOCK PRICE APPRECIATION
NAME                        GRANTED(1)    FISCAL YEAR(2)  ($/SH.)(3)     DATE        FOR OPTION TERM (1)
------------------------    ----------    --------------  ----------  ----------   -------------------------
                                                                                      5%($)         10%($)
                                                                                      -----         ------
<S>                           <C>              <C>           <C>         <C>       <C>            <C>

Terrance J. Bieker......      285,000          94%           7.18        2013      $1,286,907     $2,778,768
Leonard M. Hendrickson..         0              0%            --          --           $ 0           $ 0
Robert Weltman..........         0              0%            --          --           $ 0           $ 0
Charles C. Best.........         0              0%            --          --           $ 0           $ 0

----------
<FN>
(1)      Options  granted in 2003 vest over  various  periods.  The options were
         granted for a term of 10 years.
(2)      Options  covering  an  aggregate  of  303,000  shares  were  granted to
         employees  of the  Company  and its  subsidiary  during  the year ended
         December 31, 2003.
(3)      The  exercise  price and the tax  withholding  obligations  related  to
         exercise may be paid by delivery of already owned shares held a minimum
         of six months, subject to certain conditions.
</FN>
</TABLE>


OPTION EXERCISES AND STOCK OPTIONS HELD AT FISCAL YEAR END

The  following  table sets forth,  for those Named  Executive  Officers who held
stock  options  at  fiscal  year  end,  certain  information  regarding  options
exercised in fiscal year 2003,  the number of shares of common stock  underlying
stock  options  held and the value of options held at fiscal year end based upon
the last  reported  sales  price of the  common  stock on the  NASDAQ  market on
December 31, 2003 ($6.77 per share).

<TABLE>
          AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
                           SHARES                 NUMBER OF SECURITIES
                          ACQUIRED               UNDERLYING UNEXERCISED       VALUE OF UNEXERCISED
                             ON      VALUE             OPTIONS AT            IN-THE-MONEY OPTIONS AT
NAME                      EXERCISE  REALIZED       DECEMBER 31, 2003           DECEMBER 31, 2003
------------------------  --------  --------       -----------------           -----------------
                            (#)       ($)       EXERCISABLE  UNEXERCISABLE   EXERCISABLE  UNEXERCISABLE
                            ---       ---       -----------  -------------   -----------  -------------
<S>                       <C>      <C>           <C>           <C>             <C>           <C>
Terrance J. Bieker......      --       --             --       285,000         $      0      $      0
Leonard M. Hendrickson.   12,000   54,720        228,165             0         $423,531      $      0
Robert Weltman..........      --       --         16,000             0         $  4,840      $      0
Charles C. Best.........      --       --        102,643        31,357         $ 88,245      $      0

----------
</TABLE>

COMPENSATION OF DIRECTORS

Our non-employee  corporate  directors  currently are paid $2,000 for each board
meeting attended, and $1,000 per year for service on a board committee.  We also
pay out of pocket  expenses  incurred by our directors in connection  with their
attendance. In addition,  non-employee directors,  excluding Dr. Zabriskie, have
received an annual grant of 4,000  non-statutory  stock options,  exercisable at
the fair market value of our common stock on the date of grant,  and which fully
vest on the date of grant. Dr. Zabriskie, who was appointed as a board member in
July 2002,  received a grant of 55,000  stock  options on July 17, 2002 of which
20,000 vested  immediately and 50% of the remaining  35,000 shares vest annually
over the next two year period.


                                       42
<PAGE>


EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS

We have entered into an executive  employment  agreement with Terrance J. Bieker
to serve as our President and Chief Executive Officer,  effective as of November
1, 2003.  Pursuant to this agreement,  Mr. Bieker receives an annual base salary
of  $275,000,  which  the  Board  may  increase  at the end of each  year of his
employment. In addition to the base salary to be paid to Mr. Bieker, the Company
paid  Mr.  Bieker a one  time  signing  bonus in the  amount  of  $90,000,  upon
commencement  of his  employment.  In addition,  Mr. Bieker  received a one time
payment  of  $235,000  the  intent of which was to be  applied  to the costs and
expenses  incurred by him in connection  with his relocation to California.  Mr.
Bieker  is also  eligible  to  receive  an  annual  bonus  under  the  Company's
management  incentive plan to be agreed upon between Mr. Bieker and the Board on
an annual basis. The management incentive plan will provide for the payment of a
bonus equal to fifty percent (50%) of Mr. Bieker's then-current base salary upon
achieving  specified  target  objectives set forth in the  management  incentive
plan, and payments of such lesser or greater amounts upon achieving results less
than or greater than the  specified  target  objectives as shall be contained in
the management incentive plan. The agreement terminates on December 31, 2007. In
the event that Mr.  Bieker's  employment is terminated  without cause during the
term of the agreement,  the Company is obligated to continue to pay Mr. Bieker's
then-current  base salary for a period of 12 months following the effective date
of such  termination.  In connection  with his  employment,  Mr. Bieker was also
granted stock options to purchase  285,000 shares of Common Stock of the Company
at an  exercise  price equal to the fair market  value of the  Company's  Common
Stock on the date of grant, or $7.18 per share. In certain instances involving a
"change of control,"  all stock  options  which have been granted to Mr.  Bieker
that are  unvested  at the time of such  change of  control  become  immediately
vested  and  exercisable.  A  "change  of  control,"  as  defined  in  our  2000
Non-Qualified  Stock Option Plan, which governs Mr. Bieker's stock option grant,
means (i) the  consummation of a merger or  consolidation of the Company with or
into another entity or any other corporate  reorganization,  if more than 50% of
the combined  voting power of the  continuing or surviving  entity's  securities
outstanding immediately after such merger, consolidation or other reorganization
is owned,  directly or indirectly,  by persons who were not  shareholders of the
Company immediately prior to such merger, consolidation or other reorganization;
or (ii) the sale,  transfer or other  disposition of all or substantially all of
the Company's assets.

We entered into an employment  agreement with Leonard M. Hendrickson to serve as
our President  and Chief  Executive  Officer,  effective as of October 15, 2001.
Pursuant to that  agreement  Mr.  Hendrickson  received an annual base salary of
$250,000.  In addition to the base salary paid to Mr.  Hendrickson,  the Company
paid Mr.  Hendrickson  a one time signing  bonus in the amount of $90,000,  upon
commencement of his  employment.  In addition,  Mr.  Hendrickson was eligible to
receive  annual  bonuses  under the Company's  management  incentive  plan.  The
agreement was intended to terminate on December 31, 2004. In connection with Mr.
Hendrickson's  indefinite medical disability leave of absence in September 2003,
we entered into a Separation and Release Agreement with him which is dated as of
September 29, 2003 (the  "Separation  Agreement").  In connection  with entering
into the  Separation  Agreement,  Mr.  Hendrickson  resigned  his  positions  as
President  and Chief  Executive  Officer of the Company,  and as a member of the
Board of Directors,  and commenced a disability leave of absence effective as of
the date of that agreement and continuing  through December 31, 2004 (the "Leave
Period").  Additionally,  pursuant to the terms of that Separation Agreement, in
consideration for a full release of any and all claims Mr.  Hendrickson may have
had against the Company,  from September 29, 2003 through December 31, 2003, the
Company  continued  to pay or  otherwise  provide  to Mr.  Hendrickson  (i)  the
difference  between his then current base salary and any amount  received by him
under our disability insurance plans and pursuant to any governmental disability
benefits,  and (ii) our  portion  of the  health  insurance  and life  insurance
benefits  previously  provided to him, which we will continue to provide through
March 31, 2004.  The Separation  Agreement  also provides that,  from January 1,
2004  through  December  31,  2004,  we will  pay or  otherwise  provide  to Mr.
Hendrickson  (i) the difference  between sixty percent (60%) of his then current
base salary and any amount received by him under our disability  insurance plans
and pursuant to any  governmental  disability  benefits,  and (ii) various other
health and life  insurance  benefits,  including  portions  of any amounts he is
permitted  to pay through the  provisions  of the  Consolidated  Omnibus  Budget
Reconciliation  Act of 1985 ("COBRA"),  provided,  however,  although he will be
entitled to receive these benefits beyond 2004, Mr. Hendrickson will be required
to assume the  responsibility  for portions,  or all, of these payments over the
course of 2004 and in 2005,  respectively.  With  respect  to any stock  options
previously granted to Mr. Hendrickson,  to the extent they were not fully vested
on the date of the Separation Agreement, they continued to vest through December
31, 2003. On December 31, 2003, a "special  terminating  event," as that term is
defined in Mr.


                                       43
<PAGE>


Hendrickson's Stock Option Agreements,  was deemed to have occurred with respect
to all stock options granted to him, and therefore any stock options  previously
granted to Mr. Hendrickson,  to the extent not fully vested on that date, ceased
to vest and became exercisable pursuant to their terms for a period of one year.

Effective as of December 17, 1999, Charles C. Best, our Chief Financial Officer,
entered  into a  separation  agreement  with us.  In the event we  experience  a
"change of control," and the  employment  of Mr. Best is  terminated  within one
year of the "change of  control,"  we are  obligated to continue to pay Mr. Best
his  then-current  base salary for a period of 12 months following the effective
date of such  termination.  For purposes of Mr. Best's separation  agreement,  a
"change of  control"  includes  (i) the  acquisition  by any person or entity of
shares of our capital stock entitled to exercise 35% or more of the total voting
power  of  our  stockholders,  (ii)  the  sale  or  transfer  by  us of  all  or
substantially  all of our assets or a merger,  consolidation  or  reorganization
with any other  corporation  or  entity,  which  results in less than 75% of the
total voting power represented by the capital stock or other equity interests of
the  corporation  or entity  to which  our  assets  are sold or  transferred  or
surviving such merger, consolidation or reorganization being held by the persons
and  entities who were  holders of our common  stock  immediately  prior to such
agreement,  (iii) the  issuance by us,  otherwise  than on a pro rata basis,  of
additional  shares of capital  stock  representing  (after giving effect to such
issuance) more than 35% of the total voting power of our  stockholders,  or (iv)
the persons who were our  directors as of the date of the  separation  agreement
ceasing to comprise a majority of our Board of Directors.

We have also entered into an executive employment agreement with Kevin Reagan to
serve as our Executive  Vice President - Technical  Operations,  effective as of
February 15, 2004.  Dr. Reagan served as our Vice  President,  Immunology  since
December 1996.  Pursuant to his  employment  agreement,  Dr. Reagan  receives an
annual base salary of $190,000,  which the  President may increase at the end of
each year of Dr. Reagan's employment.  Dr. Reagan is also eligible to receive an
annual bonus under the  Company's  management  incentive  plan.  The  management
incentive  plan will provide for the payment of a bonus equal to thirty  percent
(30%) of Dr. Reagan's  then-current base salary upon achieving  specified target
objectives  set forth in the  management  incentive  plan,  and payments of such
lesser or greater  amounts upon achieving  results less than or greater than the
specified  target  objectives as shall be contained in the management  incentive
plan.  The  agreement  terminates  on December 31,  2007.  In the event that Dr.
Reagan's  employment  is  terminated  without  cause  during  the  term  of  the
agreement, the Company is obligated to continue to pay Dr. Reagan's then-current
base  salary  for a period  of 9 months  following  the  effective  date of such
termination.  In  connection  with his  employment,  Dr. Reagan was also granted
stock  options to purchase  30,000  shares of Common  Stock of the Company at an
exercise  price equal to the fair market value of the Company's  Common Stock on
the date of grant, or $6.99 per share.

STOCK OPTION PLANS

We adopted a Stock  Option  Plan (the "1993  Plan") in 1993.  The purpose of the
1993 Plan is to attract,  retain and  motivate  certain of our key  employees by
giving them  incentives  which are linked  directly to increases in the value of
our common  stock.  Each of our  officers,  directors  and  employees  and under
certain  circumstances,  our  consultants  are eligible to be considered for the
grant of awards  under the 1993  Plan.  The  maximum  number of shares of common
stock  that may be  issued  pursuant  to awards  granted  under the 1993 Plan is
2,000,000,  subject to certain  adjustments to prevent  dilution.  Any shares of
common stock  subject to an award,  which for any reason  expires or  terminates
unexercised are again available for issuance under the 1993 Plan.

The 1993 Plan  authorizes the  Compensation  Committee to enter into any type of
arrangement  with an eligible  employee  that,  by its terms,  involves or might
involve the issuance of (1) shares of our common stock, (2) an option,  warrant,
convertible security, stock appreciation right or similar right with an exercise
or conversion privilege at a price related to our common stock, or (3) any other
security or benefit with a value derived from the value of our common stock. Any
stock  option  granted may be an incentive  stock  option  within the meaning of
Section 422 of the Internal  Revenue Code of 1986,  as amended (the "Code") or a
nonqualified stock option.

As of  December  31,  2003,  the Board had granted  options  under the 1993 Plan
covering an  aggregate  of  2,000,000  shares of common  stock to certain of our
directors,  officers and employees,  of which options to purchase 677,484 shares
were  outstanding.  On  December  31,  2003,  the 1993  Plan was  terminated  in
accordance


                                       44
<PAGE>


with its specified terms. Options granted under the 1993 Plan remain outstanding
pursuant to the terms of each individual  grant.  However,  the Company will not
grant additional stock options under the 1993 Plan.

In  January  2000,   our  Board  of  Directors   approved  the  2000   BioSource
International, Inc. non-qualified stock option plan (the "2000 Plan"). Under the
2000 Plan,  non-qualified  stock options may be granted to full-time  employees,
part-time  employees,  directors  and  consultants  of the Company to purchase a
maximum of 2,000,000 shares of the company's common stock. Options granted under
the 2000 Plan are generally  exercisable  at the rate of 25% each year beginning
one year from the date of grant.  The stock options  generally  expire ten years
from the date of  grant.  Stock  options  outstanding  under the 2000 Plan as of
December  31,  2003  were  1,421,852.  See  note 8 of the  accompanying  audited
consolidated financial statements.

The Compensation  Committee of our Board of Directors currently  administers our
stock option plans.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER TRADING PARTICIPATION

Compensation Committee currently consists of Messrs. Zabriskie, Moffa and Conte.
The   Compensation   Committee  is  responsible   for   considering  and  making
recommendations to the Board of Directors regarding  executive  compensation and
is  responsible  for  administrating  our stock option and  executive  incentive
compensation  plans.  None of the  members of the  compensation  committee  is a
current  officer or employee of the Company.  None of our executive  officers or
Directors  served as a member of the board of  directors  of any other entity of
which an executive officer or Director served on our Board of Directors.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL STOCKHOLDERS

The following table sets forth as of March 15, 2004 certain information relating
to the  ownership  of our common  stock by (i) each person known by us to be the
beneficial  owner of more than five  percent  of the  outstanding  shares of our
common stock, (ii) each of our directors,  (iii) each of our executive officers,
and (iv) all of our executive  officers and directors as a group.  Except as may
be indicated in the footnotes to the table and subject to  applicable  community
property laws,  each such person has the sole voting and  investment  power with
respect to the shares owned.  Unless  otherwise  indicated,  the address of each
person  listed is in care of  BioSource  International,  Inc.,  542 Flynn  Road,
Camarillo,  California  93012,  and the  address of Messrs.  Conte,  Weltman and
Genstar  Capital LLC is Four  Embarcadero  Center,  Suite 1900,  San  Francisco,
California 94111.

                                              NUMBER OF SHARES
                                              OF COMMON STOCK
                                                BENEFICIALLY
             NAME AND ADDRESS                     OWNED (1)        PERCENT (1,2)
             ----------------                 ----------------     -------------

Genstar Capital LLC (3) ....................      3,452,856           32.2%
Jean-Pierre L. Conte (3) ...................      3,400,189           31.8%
Kennedy Capital Management, Inc. (4) .......        793,228            8.4%
Royce & Associates LLC (5) .................        684,200            7.3%
Dimensional Funds Advisors Inc. (6) ........        513,700            5.5%
Leonard M. Hendrickson (7) .................        291,831            3.0%
Charles C. Best (8) ........................        107,122             *
John L. Zabriskie, Ph.D. (9) ...............         52,500             *
David J. Moffa, Ph.D. (10) .................         47,900             *
John R. Overturf, Jr. (11) .................         34,600             *
Robert J. Weltman (12) .....................         19,333             *
Terrance J. Bieker (13) ....................              0             *
All of the directors and executive
   officers as a group (seven persons) (13)       3,661,644           33.5%

----------
* Less than one percent.


                                       45
<PAGE>


(1)      Under Rule 13d-3, certain shares may be deemed to be beneficially owned
         by more than one person (if,  for example,  persons  share the power to
         vote or the power to dispose of the shares).  In  addition,  shares are
         deemed to be beneficially owned by a person if the person has the right
         to acquire the shares (for example,  upon exercise of an option) within
         60 days  of the  date as of  which  the  information  is  provided.  In
         computing the percentage  ownership of any person, the amount of shares
         outstanding  is deemed to  include  the  amount of shares  beneficially
         owned  by such  person  (and  only  such  person)  by  reason  of these
         acquisition  rights. As a result,  the percentage of outstanding shares
         of any person as shown in this table does not  necessarily  reflect the
         person's actual ownership or voting power with respect to the number of
         shares of common stock actually outstanding at March 21, 2000.
(2)      Percentage  ownership  is based on  9,402,618  shares of  common  stock
         outstanding as of March 15, 2004.
(3)      Genstar  Capital  Partners II, L.P.  holds  2,032,809  shares of common
         stock and  1,262,542  shares of common stock  issuable upon exercise of
         warrants  and Stargen II LLC holds  34,380  shares of common  stock and
         24,458 shares of common stock  issuable upon exercise of warrants,  all
         of which are currently  convertible  or  exercisable.  Includes  16,000
         stock  options held by Mr.  Conte and 16,000 stock  options held by Mr.
         Weltman.  In addition,  Mr. Conte holds 30,000  shares of common stock,
         Richard F. Hoskins  holds 16,667 shares of common  stock,  Mr.  Weltman
         holds  3,333  shares of common  stock,  and Richard D.  Paterson  holds
         16,667  shares of common  stock.  Genstar  Capital  LLC is the  general
         partner of Genstar Capital Partners II, L.P. Mr. Conte, Mr. Hoskins and
         Mr. Paterson are the managers and managing directors of Genstar Capital
         LLC and are members of Stargen,  and Mr. Paterson is the Administrative
         Member of  Stargen.  In such  capacities  Messrs.  Conte,  Hoskins  and
         Paterson  may be  deemed to  beneficially  own  shares of common  stock
         beneficially held by Genstar Capital Partners and Stargen, but disclaim
         such  beneficial  ownership,  except to the  extent  of their  economic
         interest in these shares.  Messrs.  Conte, Hoskins,  Paterson,  Genstar
         Capital LLC,  Genstar Capital  Partners II, L.P. and Stargen II LLC may
         be  deemed  to be acting  as a group in  relation  to their  respective
         holdings  in  BioSource  but do not  affirm the  existence  of any such
         group.
(4)      As disclosed in the Schedule 13G filed with the Securities and Exchange
         Commission on February 13, 2004 by Kennedy Capital Management, Inc.
(5)      As disclosed in the Schedule 13G filed with the Securities and Exchange
         Commission on January 28, 2004 by Royce & Associates LLC.
(6)      As disclosed in the Schedule 13G filed with the Securities and Exchange
         Commission on February 6, 2004 by Dimensional Fund Advisors, Inc.
(7)      Includes  239,831  shares of common stock  reserved  for issuance  upon
         exercise  of  stock  options  that  are  currently  exercisable  or are
         exercisable  within 60 days of March 15, 2004.  On December 31, 2003, a
         "special   terminating   event,"   as  that  term  is  defined  in  Mr.
         Hendrickson's Stock Option Agreements, was deemed to have occurred with
         respect to all stock  options  granted to him, and  therefore any stock
         options previously granted to Mr. Hendrickson,  to the extent not fully
         vested on that date, ceased to vest and became exercisable  pursuant to
         their terms for a period of one year,  until  December 31,  2004.  Also
         includes (i) 48,000 shares of common stock owned;  (ii) 4,000 shares of
         common stock held of record by two of Mr. Hendrickson's minor children.
(8)      Includes  107,122  shares of common stock  reserved  for issuance  upon
         exercise  of  stock  options  that  are  currently  exercisable  or are
         exercisable within 60 days of March 15, 2004.
(9)      Includes (i) 37,500  shares of common stock  reserved for issuance upon
         exercise  of  stock  options  that  are  currently  exercisable  or are
         exercisable within 60 days of March 15, 2004; and (ii) 15,000 shares of
         common stock owned.
(10)     Includes (i) 40,500  shares of common stock  reserved for issuance upon
         exercise  of  stock  options  that  are  currently  exercisable  or are
         exercisable within 60 days of March 15, 2004; (ii) 550 shares of common
         stock held solely by Dr. Moffa's  spouse;  (iii) 4,000 shares of common
         stock held jointly with Dr.  Moffa's  spouse;  and (iv) 2,850 shares of
         common stock held directly.
(11)     Includes (i) 28,000  shares of common stock  reserved for issuance upon
         exercise  of  stock  options  that  are  currently  exercisable  or are
         exercisable  within 60 days of March 15, 2004; and (ii) 6,600 shares of
         common stock owned.
(12)     Includes (i) 3,333 shares of common  stock held  directly;  (ii) 16,000
         shares of common stock  reserved for  issuance  upon  exercise of stock
         options that are currently  exercisable  or are  exercisable  within 60
         days of March 15,  2004.  Mr.  Weltman is also a  Principal  of Genstar
         Capital LP and a member,  but not a managing member, of Stargen II LLC.
         Mr. Weltman does not have power to vote or dispose of, or to direct the
         voting or disposition of, any securities  beneficially owned by Genstar
         Capital LLC or Stargen II


                                       46
<PAGE>


         LLC. Mr.  Weltman  disclaims  that he  beneficially  owns any shares of
         common stock  beneficially  owned by Genstar  Capital LLC or Stargen II
         LLC,  except to the extent of his economic  interest in shares owned by
         Genstar Capital LLC or Stargen II LLC.
(13)     Mr.  Bieker  joined the  Company on  November  1, 2003 and was  granted
         285,000 stock options  whose initial  vesting  occurs one year from the
         date of grant. Mr. Bieker owns no shares directly.
(14)     Includes (i) 245,122  shares of common stock reserved for issuance upon
         exercise  of  stock  options  that  are  currently  exercisable  or are
         exercisable  within 60 days of March 15, 2004; (ii) 1,287,000 shares of
         common stock  reserved  for issuance  upon the exercise of warrants and
         (iii) includes 2,129,522 shares of common stock owned.

EQUITY PLAN COMPENSATION INFORMATION

The Equity Plan Compensation  Information identified in Part II, Item 5 above is
incorporated into this Part III, Item 12 by this reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

AUDIT FEES

KPMG  LLP,  our  independent  accountants  ("KPMG")  billed us an  aggregate  of
approximately  $191,000 and $160,000 for professional  services rendered for the
audit of our annual financial statements for the fiscal years ended December 31,
2003 and  December  31,  2002,  respectively,  and the reviews of the  financial
statements included in our Form 10-Q's for fiscal 2003 and 2002.

AUDIT-RELATED FEES

KPMG  billed us an  aggregate  of  approximately  $0 in fees for  assurance  and
related services related to the audit of our annual financial statements for the
fiscal years ended December 31, 2003 and 2002, respectively.

TAX FEES

KPMG billed us an  aggregate of  approximately  $97,000 and $109,000 in fees for
tax compliance, tax advice, and tax planning services for the fiscal years ended
December 31, 2003 and 2002.

ALL OTHER FEES

KPMG billed us an aggregate of approximately $0 for all other services performed
in fiscal 2003 and 2002, respectively.

Our Audit Committee is directly  responsible for  interviewing and retaining our
independent  accountant,  considering  the accounting  firm's  independence  and
effectiveness,  and pre-approving the engagement fees and other  compensation to
be paid to, and the services to be conducted by, the independent accountant. The
Audit  Committee  does not delegate these  responsibilities.  During each of the
fiscal years ended December 31, 2003 and 2002, respectively, our Audit Committee
pre-approved 100% of the services described above.


                                       47
<PAGE>


ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

         (a)(1)   The financial  statements listed below are included as part of
                  this report:

                  Independent Auditors' Report

                  Consolidated Balance Sheets at December 31, 2002 and 2001

                  Consolidated  Statements  of  Operations  for the Years  ended
                  December 31, 2002, 2001, and 2000

                  Consolidated    Statements   of   Stockholders'   Equity   and
                  Comprehensive  Income (Loss) for the Years ended  December 31,
                  2003, 2002 and 2001

                  Consolidated  Statements  of Cash  Flows for the  Years  ended
                  December 31, 2002, 2001, and 2000

                  Notes to Consolidated Financial Statements

         (a)(2)   The following schedule supporting the financial  statements of
                  the Company is included herein:

                  Financial   Statement   Schedule--Valuation   and   Qualifying
                  Accounts All other  schedules are omitted because they are not
                  applicable,  not required or because the required  information
                  is included in the consolidated  financial statements or notes
                  thereto.

         (a)(3)   Exhibits

                  See Exhibit Index immediately following signature page.

         (b)      Reports on Form 8-K:

                  Current  Report on Form 8-K dated October 20, 2003,  reporting
                  Items 7 and 5 and  filed  with  the  Securities  and  Exchange
                  Commission on October 20, 2003.

                  Current Report on Form 8-K dated  November 7, 2003,  reporting
                  Items  7 and  12,  filed  with  the  Securities  and  Exchange
                  Commission on November 7, 2003.


                                       48
<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                      BioSource International, Inc

         Date:  March 29, 2004        By:  /S/  CHARLES C. BEST
                                           -----------------------------------
                                           Charles C. Best
                                           Chief Financial Officer

         Date:  March 29, 2004        By:  /S/  TERRANCE J. BIEKER
                                           -----------------------------------
                                           Terrance J. Bieker
                                           President and Chief Executive Officer


                                POWER OF ATTORNEY
Each person whose signature  appears below  constitutes and appoints Terrance J.
Bieker  and  Charles   Best,   and  each  of  them,   as  his  true  and  lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for him and his name, place and stead, in any and all capacities, to sign any or
all amendments to this Annual Report on Form 10-K and to file the same, with all
exhibits  thereto,  and  other  documents  in  connection  therewith,  with  the
Securities and Exchange  Commission,  granting unto said  attorneys-in-fact  and
agents,  and each of them,  full power and  authority to do and perform each and
every  act and  thing  requisite  and  necessary  to be done  in and  about  the
foregoing,  as  fully to all  intents  and  purposes  as he might or could do in
person,  hereby  ratifying and  confirming all that said  attorneys-in-fact  and
agents, or either of them, or their substitutes,  may lawfully do or cause to be
done by virtue hereof.


In  accordance  with the Exchange  Act, this report has been signed below by the
following  person on behalf of the  registrant  and in the capacities and on the
date indicated:

           SIGNATURE                          TITLE                    DATE
           ---------                          -----                    ----

/S/  TERRANCE J. BIEKER             President, Chief Executive    March 29, 2004
------------------------------
     Terrance J. Bieker             Officer and Director

/S/  DAVID J. MOFFA, PH.D.          Director                      March 29, 2004
------------------------------
     David J. Moffa, Ph.D.

/S/  JOHN R. OVERTURF, JR.          Director                      March 29, 2004
------------------------------
     John R. Overturf, Jr.

/S/  JEAN-PIERRE L. CONTE           Director                      March 29, 2004
------------------------------
     Jean-Pierre L. Conte

/S/  ROBERT J. WELTMAN              Director                      March 29, 2004
------------------------------
     Robert J. Weltman

/S/  JOHN L. ZABRISKIE PH. D.       Director                      March 29, 2004
------------------------------
     John L. Zabriskie Ph.D


                                       49
<PAGE>


                                  EXHIBIT INDEX
               FOR FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2003

EXHIBIT
NUMBER                                DESCRIPTION
-------     --------------------------------------------------------------------

3.1         Certificate of Incorporation of Registrant (1)

3.2         Bylaws of Registrant (1)

4.1         Specimen Stock Certificate of Common Stock of Registrant (1)

4.2         Certificate of Designation of Series A Preferred Stock (9)

4.3         Certificate of Designation of Series B Preferred Stock (11)

4.4         Rights Agreement,  dated as of February 25, 1999, between Registrant
            and U.S. Stock Transfer and Trust Corporation, as Rights Agent (9)

4.5         Amendment to Rights Agreement, dated as of January 10, 2000, between
            Registrant and U.S. Stock Transfer and Trust Corporation (13)

4.6         Second  Amendment to Rights  Agreement,  dated  September  28, 2000,
            between  Registrant and U.S.  Stock  Transfer and Trust  Corporation
            (13)

4.7         Form of Right Certificate (9)

4.8         Summary of Share Purchase Rights (9)

4.9         Investor  Rights  Agreement  dated  February 15, 2000,  by and among
            Registrant, Genstar Partners II, L.P. and Stargen II LLC (12)

4.10        Amendment to Investor  Rights  Agreement  dated  September 18, 2000,
            among Registrant, Genstar Capital Partners II, L.P., Stargen II LLC,
            Russell D. Hays and George Uveges (13)

4.11        Second Amendment to Investor Rights  Agreement,  dated September 28,
            2000, among Registrant,  Genstar Capital Partners II, L.P.,  Stargen
            II LLC, Russell D. Hays, George Uveges,  Jean-Pierre Conte,  Richard
            Hoskins, Richard Paterson and Robert Weltman (13)

4.12        Warrant to Purchase  Common  Stock of  Registrant  issued to Genstar
            Capital Partners II, L.P. on February 15, 2000 (12)

4.13        Warrant to Purchase Common Stock of Registrant  issued to Stargen II
            LLC on February 15, 2000 (12)

10.1        Registrant's 1993 Stock Incentive Plan (4)

10.2        Licensing Agreement dated May 1, 1990, by and between TAGO, Inc., as
            licensee, and St. Jude's Children's Hospital, as licenser (1)

10.3        License Agreement dated February 14, 1991, by and between Registrant
            and Schering Corporation (1)

10.4        License Agreement dated October 1, 1993, by and between  Registrant,
            as licensee, and Schering Corporation, as licensor (2)


                                       50
<PAGE>


                                  EXHIBIT INDEX
          FOR FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2003, CONTINUED

EXHIBIT
NUMBER                                DESCRIPTION
-------     --------------------------------------------------------------------

10.5        Separation and Consulting  Agreement between Registrant and James H.
            Chamberlain dated September 19, 2000 (15)

10.6        License Agreement dated February 7, 1994, by and between Registrant,
            as licensee and Fundacio Clinic (4)

10.7        Form  of  Indemnification  Agreement  for  Directors  and  Executive
            Officers (6)

10.8        List of Indemnities  relating to Form of  Indemnification  Agreement
            previously filed as Exhibit 10 (16)

10.9        Registrant's Employee Stock Purchase Plan (7)

10.10       Securities  Purchase  Agreement dated January 10, 2000, by and among
            Registrant,  Genstar  Capital  Partners II, L. P. and Stargen II LLC
            (15)

10.11       Securities  Purchase  Agreement,  effective  as of August  9,  2000,
            between the Registrant and Genstar Capital Partners II, L.P. (13)

10.12       Amendment to Securities  Purchase  Agreement,  dated as of September
            28, 2000,  among the Registrant,  Genstar Capital Partners II, L.P.,
            Jean-Pierre  Conte,  Richard  Hoskins,  Richard  Paterson and Robert
            Weltman (13)

10.13       Securities  Purchase  Agreement,  effective  as of August  9,  2000,
            between the Registrant and Russell D. Hays (13)

10.14       Securities  Purchase  Agreement,  effective as of September 5, 2000,
            between the Registrant and George Uveges (13)

10.15       Letter agreement regarding employment, dated August 2, 2000, between
            Registrant and Russell D. Hays (15)

10.16       Amendment to letter agreement regarding employment,  dated September
            18, 2000, between Registrant and Russell D. Hays (15)

10.17       Letter agreement regarding employment, dated August 18, 2000 between
            Registrant and George Uveges (15)

10.18       Amendment to letter agreement regarding employment,  dated September
            18, 2000, between Registrant and George Uveges (15)

10.19       Registrant's 2000 Non-Qualified Stock Option Plan (14)

10.20       Lease  Agreement  for 542 Flynn Road,  dated March 7, 2000,  between
            Registrant and Lincoln Ventura Technology Center (15)

10.21       Executive  Employment  Agreement  between  Registrant and Leonard M.
            Hendrickson, dated September 24, 2001(16)


                                       51
<PAGE>


                                  EXHIBIT INDEX
          FOR FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2003, CONTINUED

EXHIBIT
NUMBER                                DESCRIPTION
-------     --------------------------------------------------------------------

10.22       Separation  and Release  Agreement  dated as of September  29, 2003,
            between Registrant and Leonard Hendrickson.

10.23       Executive  Employment  Agreement between  Registrant and Terrance J.
            Bieker, dated as of October 8, 2003.

21          Subsidiaries of the Company

                                                              STATE/COUNTRY OF
                  NAME                                        INCORPORATION
                  ------------------------------------------------------------
                  Keystone Laboratories, Inc..................California
                  BioSource Europe S.A........................Belgium
                  BioSource B.V...............................Holland
                  BioSource GmbH..............................Germany
                  BioSource U.K., Ltd.........................U.K.
                  Quality Controlled Biochemicals, Inc........Massachusetts
                  Javelle, Inc................................Massachusetts

23.1        Consent of KPMG LLP, Independent Auditors

31.1        Certificate  of  Terrance  J.  Bieker,  Chief  Executive  Officer of
            BioSource  International,  Inc. pursuant to Rule 13a-14(a) under the
            Securities and Exchange Act of 1934, as amended.

31.2        Certificate of Charles C. Best, Chief Financial Officer of BioSource
            International,  Inc. pursuant to Rule 13a-14(a) under the Securities
            and Exchange Act of 1934, as amended.

32.1        Certificate  of  Terrance  J.  Bieker,  Chief  Executive  Officer of
            BioSource  International,  Inc. pursuant to Rule 13a-14(a) under the
            Securities and Exchange Act of 1934, as amended.

32.2        Certificate of Charles C. Best, Chief Financial Officer of BioSource
            International,  Inc. pursuant to Rule 13a-14(a) under the Securities
            and Exchange Act of 1934, as amended.

----------

 (1) Incorporated by reference to the Company's  Registration  Statement on Form
     S-4 as filed with the  Securities  and Exchange  Commission  on October 22,
     1992, as amended.
 (2) Incorporated  by reference to the  Company's  Form 10KSB for the year ended
     December 31, 1992.  (3)  Incorporated  by reference to the  Company's  Form
     10KSB for the year ended December 31, 1993. (4)  Incorporated  by reference
     to the  Company's  Form 10KSB for the year ended  December  31,  1994.  (5)
     Incorporated  by reference to the  Company's  Form 10KSB for the year ended
     December 31, 1995.
 (6) Incorporated by reference to the Company's  Registration  Statement on Form
     SB-2  (SEC  No.  333-3336)  as  filed  with  the  Securities  and  Exchange
     Commission on May 31, 1996, as amended.
 (7) Incorporated by reference to the Company's  Registration  Statement on Form
     S-8 (SEC No. 33-91838) as filed with the Securities and Exchange Commission
     on May 4, 1995.
 (8) Incorporated  by reference to the  Company's  Current  Report on Form 8-K/A
     filed with the Securities and Exchange Commission on February 19, 1999.
 (9) Incorporated by reference to the Company's Current Report on Form 8-A filed
     with the Securities and Exchange Commission on March 1, 1999.


                                       52
<PAGE>


(10) Incorporated  by  reference to the  Company's  Form 10-K for the year ended
     December 31, 1998.
(11) Incorporated by reference to the Company's  Registration  Statement on Form
     S-3 as filed with the Securities and Exchange Commission on March 16, 2000.
(12) Incorporated by reference to Amendment No. 1 to the Company's  Registration
     Statement on Form S-3 as filed with the Securities and Exchange  Commission
     on March 22, 2000.
(13) Incorporated  by reference to the Company's  Current  Report on Form 8-K as
     filed with the Securities and Exchange  Commission on October 26, 2000, and
     as amended on October 31, 2000.
(14) Incorporated  by reference to the Company's  definitive  proxy statement as
     filed with the Securities and Exchange Commission on May 16, 2000.
(15) Incorporated  by  reference to the  Company's Form 10-K  for the year ended
     December 31, 2000.
(16) Incorporated  by  reference to the  Company's Form 10-K  for the year ended
     December 31, 2001.


                                       53
<PAGE>


                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
                          FINANCIAL STATEMENT SCHEDULE



                                                                            PAGE
                                                                            ----

Independent Auditors' Report..............................................   F-2

Consolidated Balance Sheets at December 31, 2003 and 2002.................   F-3

Consolidated Statements of Operations for the years ended
December 31, 2003, 2002 and 2001..........................................   F-4

Consolidated Statements of Stockholders' Equity and
Comprehensive Income (Loss) for the years ended
December 31, 2003, 2002 and 2001..........................................   F-5

Consolidated Statements of Cash Flows for the years ended
December 31, 2003, 2002 and 2001..........................................   F-6

Notes to Consolidated Financial Statements as of
December 31, 2003 and 2002 and for the years ended
December 31, 2003, 2002 and 2001 .........................................   F-7

Financial Statement Schedule--Valuation and Qualifying Accounts...........  F-23


                                      F-1
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
BioSource International, Inc.:

We  have   audited  the   consolidated   financial   statements   of   BioSource
International,  Inc. and  subsidiaries as listed in the  accompanying  index. In
connection with our audits of the  consolidated  financial  statements,  we also
have  audited the  financial  statement  schedule as listed in the  accompanying
index. These consolidated  financial statements and financial statement schedule
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these  consolidated  financial  statements  and  financial
statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in  all  material   respects,   the  financial  position  of  BioSource
International,  Inc. and  subsidiaries  as of December 31, 2003 and 2002 and the
results  of their  operations  and their cash flows for each of the years in the
three-year  period  ended  December  31,  2003  in  conformity  with  accounting
principles  generally  accepted in the United  States of America.  Also,  in our
opinion,  the related financial statement schedule,  when considered in relation
to the  basic  consolidated  financial  statements  taken as a  whole,  presents
fairly, in all material respects, the information set forth therein.

As explained in Note 1 to the financial  statements,  effective January 1, 2002,
the Company  changed its method of accounting for the impairment of goodwill and
other intangibles.


                                        KPMG LLP

Los Angeles, California
February 9, 2004


                                      F-2
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                (Amounts in thousands, except for per share data)

                                                              DECEMBER 31,
                                                           2003          2002
                                                         --------      --------

         ASSETS
Current assets:
   Cash and cash equivalents .......................     $  3,297      $  5,941
   Accounts receivable, less allowance for
     doubtful accounts of $258 and $261 at
     December 31, 2003 and 2002 ....................        6,308         6,157
   Inventories, net (note 2) .......................        9,074         8,880
   Prepaid expenses and other current assets .......          652           538
   Deferred income taxes (note 8) ..................        2,363         1,873
                                                         --------      --------
         Total current assets ......................       21,694        23,389

Property and equipment, net (note 3) ...............        6,235         7,398
Intangible assets net of accumulated
   amortization of $3,230 and $2,655 at
   December 31, 2003 and 2002 (notes 1 and 4) ......        5,500         6,076
Goodwill ...........................................          307           307
Other assets .......................................          519           526
Deferred income taxes (note 8) .....................       10,078         8,810
                                                         --------      --------
                                                         $ 44,333      $ 46,506
                                                         ========      ========

         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable ................................     $  2,451      $  3,115
   Accrued expenses ................................        3,227         2,910
   Deferred revenue ................................          249           427
   Income tax payable ..............................          104           341
                                                         --------      --------
         Total current liabilities .................        6,031         6,793
                                                         --------      --------

Commitments and contingencies (note 11)

Stockholders' equity:
Common stock, $.001 par value. Authorized
   20,000,000 shares: issued and outstanding
   9,376,860and 9,676,931 shares at December
   31, 2003 and 2002 ...............................            9            10
Additional paid-in capital .........................       42,633        44,500
Accumulated deficit ................................       (4,452)       (3,382)
Accumulated other comprehensive gain (loss) ........          112        (1,415)
                                                         --------      --------
         Net stockholders' equity ..................       38,302        39,713
                                                         --------      --------
                                                         $ 44,333      $ 46,506
                                                         ========      ========


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


                                      F-3
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
                  (Amounts in thousands, except per share data)




                                             2003          2002          2001
                                           --------      --------      --------

Net sales ............................     $ 44,094      $ 40,055      $ 35,175
Cost of sales ........................       21,900        17,689        15,540
                                           --------      --------      --------
   Gross profit ......................       22,194        22,366        19,635

Operating expenses:
   Research and development ..........        7,007         6,187         3,986
   Sales and marketing ...............        9,298         8,339         7,395
   General and administrative ........        6,851         5,916         6,945
   Long-lived asset impairment .......          341          --            --
   Amortization of intangibles .......          575           641         1,098
                                           --------      --------      --------
     Total operating expenses ........       24,072        21,083        19,424
                                           --------      --------      --------
Operating income (loss) ..............       (1,878)        1,283           211

Interest income ......................           31           113           376
Interest expense .....................           (4)            0            (2)
Other income (expense), net ..........         (103)           10            86
                                           --------      --------      --------
Income (loss) before income tax
   expense (benefit) .................       (1,954)        1,406           671
Income tax expense (benefit) .........         (884)           11           (70)
                                           --------      --------      --------
     Income (loss) before
        cumulative effect of
        accounting change ............       (1,070)        1,395           741
Cumulative effect of accounting
   change (net of applicable
   income taxes of $1,500) ...........         --          (2,447)         --
                                           --------      --------      --------
Net income (loss) available to
   common stockholders ...............     $ (1,070)       (1,052)          741
                                           ========      ========      ========

Income (loss) per share before
   accounting change:
   Basic .............................     $  (0.11)         0.14          0.07
                                           ========      ========      ========
   Diluted ...........................     $  (0.11)         0.14          0.07
                                           ========      ========      ========

Net income (loss) per share:
   Basic .............................     $  (0.11)        (0.11)         0.07
                                           ========      ========      ========
   Diluted ...........................     $  (0.11)        (0.11)         0.07
                                           ========      ========      ========

Shares used to compute per
   share amounts:
   Basic .............................        9,403         9,787        10,398
                                           ========      ========      ========
   Diluted ...........................        9,403        10,189        10,965
                                           ========      ========      ========


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


                                      F-4
<PAGE>

<TABLE>
                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                         AND COMPREHENSIVE INCOME (LOSS)
                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
                             (Amounts in thousands)

<CAPTION>
                                                                                   RETAINED                               COMPRE-
                                                 COMMON STOCK       ADDITIONAL     EARNINGS    ACCUMULATED     NET        HENSIVE
                                           NUMBER OF                  PAID-IN    (ACCUMULATED  COMPREHEN-  STOCKHOLDERS'  INCOME
                                             SHARES       AMOUNT      CAPITAL      DEFICIT)     SIVE LOSS     EQUITY      (LOSS)
                                           --------------------------------------------------------------------------------------
<S>                                         <C>          <C>         <C>          <C>          <C>          <C>           <C>
Balance at December 31, 2000                10,327       $   10      $49,304      $(3,071)     $ (2,197)    $44,046

Exercise of stock options                      123            0          308           --            --         308
Purchase of Treasury Stock                     (96)                     (668)          --            --        (668)
Stock option compensation expense                            --         (388)          --            --        (388)
Income tax benefit from exercise of
   stock options                                --           --          205           --            --         205
Net income                                      --           --           --          741                       741       $   741
Foreign currency translation adjustments        --           --           --           --          (366)       (366)         (366)
                                                                                                                          --------
Total comprehensive loss                                                                                         --       $   375
                                           -------------------------------------------------------------------------      ========
Balance at December 31, 2001                10,354       $   10      $48,761      $(2,330)     $ (2,563)    $43,878
                                           -------------------------------------------------------------------------

Exercise of stock options                      105           --          291           --            --         291
Purchase of treasury stock                    (782)                   (4,608)          --            --      (4,608)
Income tax benefit from exercise of stock
   options                                                   --           56           --            --          56
Net income                                                                         (1,052)                   (1,052)      $(1,052)
Foreign currency translation adjustments                     --           --           --         1,148       1,148         1,148
                                                                                                                          --------
Total comprehensive income                                                                                       --       $    96
                                           -------------------------------------------------------------------------      ========
Balance at December 31, 2002                 9,677       $   10      $44,500      $(3,382)     $ (1,415)    $39,713
                                           ------------------------------------------------------------------------

Exercise of stock options                      358           --        1,075           --            --       1,075
Purchase of treasury stock                    (658)         (1)       (3,480)          --            --      (3,481)
Income tax benefit from exercise of stock
   options                                                   --          538           --            --         538
Net loss                                                                           (1,070)                   (1,070)      $(1,070)
Foreign currency translation adjustments                     --           --           --         1,527       1,527          1,527
                                                                                                                          ---------
Total comprehensive income                                                                                       --       $   457
                                           -------------------------------------------------------------------------      ========
Balance at December 31, 2003                 9,377       $    9      $42,633      $(4,452)     $    112     $38,302
                                           ========================================================================
</TABLE>



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


                                      F-5
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
                             (Amounts in thousands)

                                                    2003       2002       2001
                                                  -------    -------    -------
Cash flows from operating activities:
      Net income (loss) .......................   $(1,070)    (1,052)       741
      Adjustments to reconcile net income
         (loss) to net cash provided by
         operating activities:
           Depreciation and amortization ......     2,620      2,324      2,431
           Long-lived asset impairment ........       341       --         --
           Stock compensation .................      --         --         (388)
           Income tax benefit from the
              exercise of stock options .......       538         56        205
           Cumulative effect of accounting
              change ..........................      --        4,629       --
      Changes in assets and liabilities
           Accounts receivable ................       415        505       (753)
           Inventories ........................       622     (1,011)      (654)
           Prepaid expenses and other
              current assets ..................      (109)         9        716
           Deferred income taxes ..............    (1,758)    (1,774)       (31)
           Other assets .......................         7        (35)       245
           Accounts payable ...................      (890)       522       (748)
           Accrued expenses ...................        37        (63)        12
           Deferred income ....................      (177)        23         90
           Income taxes payable ...............         7       (384)       199
                                                  -------    -------    -------
              Net cash provided by
                 operating activities .........       583      3,749      2,065
                                                  -------    -------    -------
Cash flows from investing activities:
      Purchase of property and equipment ......    (1,321)    (3,481)    (2,559)
      Proceeds from sales of property and
         equipment ............................       253       --         --
                                                  -------    -------    -------
           Net cash used in investing
              activities ......................    (1,068)    (3,481)    (2,559)
                                                  -------    -------    -------
Cash flows from financing activities:
           Proceeds from the exercise of
              options .........................     1,075        291        308
           Payments to acquire treasury
              stock ...........................    (3,481)    (4,608)      (668)
                                                  -------    -------    -------
           Net cash used in financing
              activities ......................    (2,406)    (4,317)      (360)
                                                  -------    -------    -------

           Net decrease in cash and cash
              equivalents .....................    (2,891)    (4,049)      (854)
Effect of exchange rates on cash and cash
   equivalents ................................       247        519       (308)

Cash and cash equivalents at beginning of
   year .......................................     5,941      9,471     10,633
                                                  -------    -------    -------

Cash and cash equivalents at end of year ......   $ 3,297      5,941      9,471
                                                  =======    =======    =======

Supplemental disclosure of cash flow
   information: Cash paid during the
   year for:
           Interest ...........................   $     4         44          2
                                                  =======    =======    =======
           Income taxes .......................   $   738       --         --
                                                  =======    =======    =======



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


                                      F-6
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS
                     ENDED DECEMBER 31, 2003, 2002, AND 2001


1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

BioSource  International,  Inc. and  subsidiaries  (BioSource  or the  Company),
develops,  manufactures,  markets and  distributes  products  used  worldwide in
disease related biomedical research and clinical diagnostics, principally in the
fields of immunology  and molecular  biology.  Our products  include ELISA assay
test kits, clinical diagnostic kits, bioactive proteins,  antibodies,  bioactive
peptides,   oligonucleotides   and  related  products.   These  products  enable
scientists to better understand the biochemistry, immunology and cell biology of
the human body.  Some examples  would include  certain  diseases such as cancer,
aging,  arthritis  and  other  inflammatory  diseases,  AIDS and  certain  other
infectious diseases.

PRINCIPLES OF CONSOLIDATION

The  consolidated   financial  statements  include  the  accounts  of  BioSource
International,   Inc.  and  its  wholly  owned  subsidiaries.   All  significant
intercompany accounts and transactions have been eliminated.

CASH AND CASH EQUIVALENTS

Cash  and  cash  equivalents   include  all  cash  balances  and  highly  liquid
investments with original maturities of three months or less.

FINANCIAL INSTRUMENTS

The carrying value of financial  instruments such as cash and cash  equivalents,
trade  receivables,  and payables  approximates their fair value at December 31,
2003 and 2002 due to the short-term nature of these instruments.

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out) or market (net
realizable value).

DEPRECIATION AND AMORTIZATION

Property and  equipment are stated at cost.  Depreciation  and  amortization  of
property  and  equipment  and  identifiable  intangibles  is provided  using the
straight-line method over the estimated useful lives of the related assets which
generally  range  from  three  to  fifteen  years.  Leasehold  improvements  are
amortized using the  straight-line  method over their estimated  useful lives or
the lease term, whichever is shorter.

GOODWILL AND INTANGIBLE ASSETS

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards  ("FAS")  No.141,  "Accounting  For Business
Combinations,"  and FAS No. 142,  "Accounting For Goodwill and Other  Intangible
Assets." FAS No. 141 requires that the purchase method of accounting be used for
all business  combinations  initiated  after June 30, 2001. FAS No. 142 requires
that goodwill and intangible  assets with  indefinite  useful lives no longer be
amortized to earnings, but instead be reviewed for impairment in accordance with
FAS  No.  142.  The   amortization   of  goodwill  and  intangible   assets  was
approximately  $575,000,  $641,000,  and  $1,098,000,  for  fiscal  years  ended
December 31, 2003, 2002, and 2001, respectively.  Effective January 1, 2002, the
Company's  goodwill and other intangible  assets are accounted for under FAS No.
141  "Business  Combinations"  and FAS No. 142  "Goodwill  and Other  Intangible
Assets." The Company considers certain of its subsidiaries  including  BioSource
Europe S.A., Keystone Laboratories,  Inc., Quality Controlled Biochemicals, Inc.
and its Biofluids division reporting units as defined under FAS 142. The Company
used the


                                      F-7
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS
                     ENDED DECEMBER 31, 2003, 2002, AND 2001


present value method for determining  the fair value of its reporting  units. In
2002, the Company  recognized a non-cash charge, net of applicable income taxes,
of  $2,447,000  representing  the  cumulative  effect of a change in  accounting
principle  resulting from the implementation of FAS 142. This amount is shown in
the accompanying  condensed consolidated statement of operations as a cumulative
effect of an accounting change.

Prior to 2002,  the Company  accounted for its  intangible  assets under FAS No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to be  Disposed  Of." Under FAS 121,  Long-Lived  assets  and  intangible
assets are required to be reviewed for impairment  whenever events or changes in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable.  The Company  reviewed for  impairment  by  comparing  the carrying
amount of the asset to future cash flows expected to be generated by the asset.

The Company reviewed its remaining  goodwill for impairment in the third quarter
of 2003  using  FAS No.  142 and  determined  that the  carrying  value  was not
impaired.  Accordingly,  the Company  continues to carry the goodwill related to
its 1996  acquisition  of certain  assets and  assumed  liabilities  of Medgenix
Diagnostics,  SA, now BioSource Europe,  S.A., a wholly-owned  subsidiary of the
Company on its Consolidated Balance Sheets.

ADVERTISING, MARKETING AND PROMOTION COSTS

For the year ended December 31, 2003, the Company capitalized its annual catalog
production costs and expensed them evenly  throughout the year. In the past, the
Company has expensed catalog  production costs as incurred,  which was primarily
in the first quarter of its fiscal year.  During 2002,  and after  production of
the 2002 catalog,  the Company put substantial effort into increasing the number
of customers in its customer  database  increasing its dependence on its catalog
to attract  more  customers.  As a result,  the Company  believes  that its 2003
catalog is a direct response  advertisement,  the primary purpose of which is to
elicit sales to customers who respond  specifically to the catalog  resulting in
probable future economic benefit. Accordingly, beginning in 2003, the Company is
capitalizing its catalog  production costs and expensing them evenly  throughout
the fiscal year in accordance with the AICPA's  Statement of Position 93-07. For
the  years  ended  December  31,  2003,  2002 and  2001,  the  Company  expensed
approximately $560,000, $529,000 and $419,000 of catalog costs respectively.

LICENSE AGREEMENTS

License agreements  primarily for the use of antibodies are recorded at cost and
are amortized using the  straight-line  method over the shorter of the estimated
useful lives of the license or the license term  (generally  five to ten years).
These costs are  included  with other  assets in the  accompanying  consolidated
balance  sheets.  Accumulated  amortization  at  December  31, 2003 and 2002 was
approximately $447,000 and $396,000, respectively.

REVENUE RECOGNITION

The  Company's  revenue  is  generated  from  the  sale  of  products  primarily
manufactured  internally.  The Company does have a small amount of products that
are sold on an outside  equipment  ("OEM") basis. The Company sells standard and
custom products  directly to end users and distributors  and recognizes  revenue
upon  transfer of title to the  customer,  which occurs upon  shipment.  General
sales and payment terms to distributors are similar to those granted to end user
customers. Certain end user customers prepay for product and request shipment of
the  product at future  dates,  primarily  sera or media  products.  The Company
records  deferred revenue until such time as a product is shipped to a customer.
Approximately 25% of the Company's 2003 net sales were to distributors.


                                      F-8
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS
                     ENDED DECEMBER 31, 2003, 2002 AND 2001


The Company's distribution  agreements do not provide a general right of return.
The amount of the Company's inventory held by distributors is not believed to be
substantial.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are charged to expense as incurred.

INCOME TAXES

Income taxes are accounted for under the asset and  liability  method.  Deferred
tax assets  and  liabilities  are  recognized  for the  future tax  consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and  liabilities  and their  respective tax bases and operating
loss and tax credit  carryforwards.  Deferred  tax assets  and  liabilities  are
measured  using  enacted tax rates  expected  to apply to taxable  income in the
years in which those  temporary  differences  are  expected to be  recovered  or
settled.  The effect on deferred tax assets and  liabilities  of a change in tax
rates is recognized in income in the period that includes the enactment date.

The  Company  has not  provided  U.S.  federal or foreign  withholding  taxes on
foreign subsidiary  undistributed earnings as of December 31, 2003, because such
earnings are  intended to be  permanently  invested.  It is not  practicable  to
determine the U.S. Federal income tax liability, if any that would be payable if
such earnings were not reinvested indefinitely.

LONG-LIVED ASSETS

It is our policy to account for long-lived  assets (property,  plant,  equipment
and  intangible  assets) at amortized  cost. As part of an ongoing review of the
valuation  and  amortization  of  long-lived  assets,  management  assesses  the
carrying value of such assets if facts and  circumstances  suggest that they may
be  impaired.  If this  review  indicates  that  long-lived  assets  will not be
recoverable,  as  determined  by a  non-discounted  cash flow  analysis over the
remaining  amortization  period, the carrying value of the Company's  long-lived
assets would be reduced to its  estimated  fair value based on  discounted  cash
flows. As a result,  the Company has determined  that its long-lived  assets are
not impaired as of December 31, 2003 and 2002.  Effective January 1, 2002, other
long-lived  assets are  accounted  for under SFAS No. 144,  "Accounting  for the
Impairment  or  Disposal  of  Long-Lived   Assets,"  which  addresses  financial
accounting  and reporting for the  impairment or disposal of long-lived  assets.
While SFAS No. 144  supersedes  SFAS No.121,  "Accounting  for the Impairment of
Long-Lived  Assets and for Long-Lived Assets to be Disposed Of," it retains many
of the fundamental  provisions of that  statement.  The adoption of SFAS No. 144
did not have a  material  impact  on the  financial  position  or  results  from
operations.

COMPREHENSIVE INCOME (LOSS)

Comprehensive  income  (loss) is the total of net  income  (loss)  and all other
non-owner  changes in equity.  Except for net income (loss) and foreign currency
translation  adjustments,  the Company does not have any  transactions  or other
economic  events that qualify as  comprehensive  income  (loss) as defined under
SFAS No. 130.

BUSINESS SEGMENT REPORTING

Management of the Company has determined  its reportable  segments are strategic
business  units  that offer both sales to  external  customers  from  geographic
company  facilities  and  sales to  external  customers  in  certain  geographic
regions.  Significant  reportable  business  segments are the United  States and
European  facilities,  and sales to external  customers are  summarized as those
located in the United States,  Europe,  Japan and other.  Information related to
these segments is summarized in Note 10.


                                      F-9
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS
                     ENDED DECEMBER 31, 2003, 2002 AND 2001


RECENTLY ISSUED ACCOUNTING STANDARDS

In August 2001, the Financial  Accounting  Standards Board issued  Statement No.
143,  "Accounting  for Asset  Retirement  Obligations"  (SFAS No. 143). This new
pronouncement  establishes  financial  accounting  and  reporting  standards for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The provisions of SFAS No. 143 apply to legal
obligations associated with the retirement of long-lived assets that result from
the  acquisition,  construction,  development  and/or the normal  operation of a
long-lived asset, except for obligations of lessees.  The standard was effective
for financial  statements issued for fiscal years beginning after June 15, 2002.
The Company  adopted this  standard  effective  January 1, 2003 with no material
effect on the Company's financial position or results of operations.

In November  2002,  the EITF  reached a consensus  on Issue No.  00-21,  Revenue
Arrangements  with Multiple  Deliverables."  EITF 00-21 addresses the accounting
for  contractual  arrangements  in  which   revenue-generating   activities  are
performed.  In some  situations,  the  different  revenue-generating  activities
(deliverables) are sufficiently  separable and there exists sufficient  evidence
for fair values to account  separately for the different  deliverables (that is,
there are separate units of accounting). In other situations, some or all of the
different  deliverables  are  closely  interrelated  or there is not  sufficient
evidence of fair value to account  separately  for the  different  deliverables.
EITF 00-21  addresses  when and, if so, how an  arrangement  involving  multiple
deliverables should be divided into separate units of accounting.  EITF 00-21 is
effective for interim  periods  beginning  after June 30, 2003.  The adoption of
EITF 00-21 did not have a material effect on the Company's financial statements.

In  December  2002,  the FASB issued SFAS No. 148  "Accounting  for  Stock-Based
Compensation-Transition and Disclosure," an amendment of FASB Statement No. 123,
which  provides  guidance  for  transition  to the fair  value  based  method of
accounting for  stock-based  employee  compensation  and the required  financial
statement  disclosure.  The adoption of SFAS No. 148 expanded the  disclosure in
our interim financial  statements,  and does not significantly impact our annual
disclosures  of  stock-based   compensation   in  our   consolidated   financial
statements.

In  January  2003,  the  FASB  issued  FASB   Interpretation   ("FIN")  No.  45,
"Guarantor's  Accounting and Disclosure  Requirements for Guarantees,  Including
Indirect  Guarantees and  Indebtedness of Others." FIN No. 45 requires a company
to  recognize a  liability  for the  obligations  it has  undertaken  to issue a
guarantee.  This  liability  would be recorded at the inception of the guarantee
and  would  be  measured  at fair  value.  The  measurement  provisions  of this
statement apply  prospectively  to guarantees  issued or modified after December
31,  2002.  The  disclosure  provisions  of the  statement  apply  to  financial
statements  for periods  ending after December 15, 2002. The adoption of FIN No.
45 did not have a material impact on the Company's financial position or results
of operations.

In  January  2003,  the  Financial   Accounting   Standards  Board  issued  FASB
Interpretation  No. 46,  "Consolidation of Variable Interest Entities" (FIN 46).
This  interpretation  clarifies the application of Accounting  Research Bulletin
No. 51, "Consolidated  Financial Statements" (ARB 51), and requires companies to
evaluate variable interest  entities for specific  characteristics  to determine
whether  additional   consolidation  and  disclosure  requirements  apply.  This
interpretation is immediately  applicable for variable interest entities created
after January 31, 2003,  and applies to the first fiscal year or interim  period
beginning after June 15, 2003 for variable  interest  entities acquired prior to
February 1, 2003. The adoption of this interpretation did not have any impact on
the Company's financial position or results of operations. In December 2003, the
FASB revised FIN 46 to exempt  certain  entities  from its  requirements  and to
clarify certain issues arising during the  implementation of FIN 4. The adoption
of this revised  interpretation  in the first quarter of 2004 is not expected to
have any impact on the Company's consolidated financial statements.


                                      F-10
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS
                     ENDED DECEMBER 31, 2003, 2002 AND 2001


In May 2003, the Financial  Accounting Standards Board issued Statement No. 150,
"Accounting  for Certain  Financial  Instruments  with  Characteristics  of both
Liabilities and Equity." The Statement  establishes  standards for how an issuer
classifies and measures certain financial  instruments with  characteristics  of
both  liabilities  and equity.  It requires that an issuer  classify a financial
instrument  that is  within  its  scope  as a  liability  (or an  asset  in some
circumstances).  It is  effective  for  financial  instruments  entered  into or
modified  after May 31, 2003, and otherwise is effective at the beginning of the
first  interim  period  beginning  after June 15, 2003. We adopted this standard
effective  July  1,  2003,  and  it  did  not  have  a  material  effect  on our
consolidated financial statements.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.  Significant
areas  requiring  the use of  management  estimates  relate to the  valuation of
inventories,  accounts  receivable  allowances,  the useful  lives of assets for
depreciation and amortization,  evaluation of impairment,  restructuring expense
and accrual, litigation accruals and recoverability of deferred taxes.

CONCENTRATIONS OF CREDIT RISK

Financial  instruments,  which potentially subject the Company to concentrations
of credit  risk,  consist  primarily  of cash  equivalents  and  trade  accounts
receivable.  The credit risk  associated  with trade  accounts is mitigated by a
credit   evaluation   process,   reasonably   short  collection  terms  and  the
geographical dispersion of sales transactions.

FOREIGN CURRENCY TRANSLATION

The assets and liabilities of the Company's foreign subsidiary, whose functional
currency is Euros,  are  translated at the rate of exchange at the balance sheet
date, and related  revenues and expenses are translated at the average  exchange
rate in effect during the period. Resulting translation adjustments are recorded
as a component of stockholders'  equity.  Gains and losses from foreign currency
transactions are included in net income.  Foreign currency transaction gains and
losses were  insignificant to the operating results for each of the years in the
three-year period ended December 31, 2003.

STOCK OPTION PLAN

The Company applies the intrinsic-value-based method of accounting prescribed by
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees,  and related  interpretations  including FASB  Interpretation No. 44,
Accounting  for  Certain   Transactions   involving   Stock   Compensation,   an
interpretation  of APB  Opinion  No. 25, to  account  for its  fixed-plan  stock
options.  Under this  method,  compensation  expense is  recorded on the date of
grant only if the current  market  price of the  underlying  stock  exceeded the
exercise price. FASB Statement No. 123, Accounting for Stock-Based  Compensation
and FASB Statement No. 148, Accounting for Stock-Based Compensation - Transition
and Disclosure,  an amendment of FASB Statement No. 123, established  accounting
and disclosure  requirements using a  fair-value-based  method of accounting for
stock-based  employee  compensation  plans. As permitted by existing  accounting
standards,    the    Company    has   elected   to   continue   to   apply   the
intrinsic-value-based method of accounting described above, and has adopted only
the disclosure  requirements  of Statement 123, as amended.  The following table
illustrates  the  effect on net income if the  fair-value-based  method had been
applied to all outstanding and unvested awards in each period.


                                      F-11
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS
                     ENDED DECEMBER 31, 2003, 2002 AND 2001


                                               2003          2002        2001
                                            ----------    ---------    --------
                                           (in thousands, except per share data)

Net income (loss):
   As reported ..........................   $   (1,070)   $  (1,052)   $    741

      Add/deduct: Total stock-based
       employee compensation expense
       determined under intrinsic value
       based method for all awards,
       net of tax effects ...............         --           --          (233)

      Deduct: Total stock-based employee
       compensation expense determined
       under fair value based method for
       all awards, net of tax effects ...       (1,292)      (2,458)     (2,764)
                                            ----------    ---------    --------


   Pro forma net loss ...................   $   (2,362)   $  (3,510)   $ (2,256)
                                            ==========    =========    ========


Net income (loss) per share:
   Basic - as reported ..................   $    (0.11)   $   (0.11)   $   0.07
                                            ==========    =========    ========

   Basic - pro forma ....................   $    (0.25)   $   (0.36)   $  (0.22)
                                            ==========    =========    ========

   Diluted - as reported ................   $    (0.11)   $   (0.10)   $   0.07
                                            ==========    =========    ========

   Diluted - pro forma ..................   $    (0.25)   $   (0.36)   $  (0.22)
                                            ==========    =========    ========


2.       INVENTORIES

Inventories at December 31, 2003 and 2002 are summarized as follows (000's):


                                                   2003           2002
                                                  ------         ------

         Raw materials ..................         $3,193         $2,703
         Work in process ................            455            493
         Finished goods .................          5,426          5,684
                                                  ------         ------

                                                  $9,074         $8,880
                                                  ======         ======

In the  fourth  quarter  of 2003,  approximately  $1,250,000  of  inventory  was
discontinued, scrapped or fully reserved and was charged in cost of sales in the
accompanying consolidated statement of operations.


                                      F-12
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS
                     ENDED DECEMBER 31, 2003, 2002 AND 2001


3.       PROPERTY AND EQUIPMENT

Property and  equipment at December 31, 2003 and 2002 are  summarized as follows
(000's):

                                                   2003         2002
                                                 --------     --------

         Machinery and equipment ............    $  9,225     $  9,241
         Office furniture and equipment .....       4,270        3,708
         Leasehold improvements .............       1,874        1,530
                                                 --------     --------
                                                   15,369       14,479
         Less accumulated depreciation
            and amortization ................      (9,134)      (7,081)
                                                 --------     --------

                                                 $  6,235     $  7,398
                                                 ========     ========


4.       GOODWILL  AND  INTANGIBLE  ASSETS - ADOPTION  OF  FINANCIAL  ACCOUNTING
         STATEMENT 142

In  July  2001,  the  FASB  issued  FAS  No.  141,   "Accounting   For  Business
Combinations,"  and FAS.  142,  "Accounting  for Goodwill  and Other  Intangible
Assets."

The pro forma effects of  implementation of FAS 142 to prior periods would be as
follows: (amounts in thousands, except per share data):


                                               FOR YEARS ENDED DECEMBER 31,
                                        ----------------------------------------
                                           2003            2002           2001
                                        ---------       ---------      ---------

Reported income (loss)................  $  (1,070)         (1,052)           741
Add:
Impairment charge, net of tax.........         --           2,477             --
Goodwill Amortization, net of tax.....         --              --            283
                                        ---------       ---------      ---------
Adjusted net income (loss)............     (1,070)          1,425          1,024
                                        =========       =========      =========

Basic net income (loss) per share:
   Reported income (loss).............  $   (0.11)          (0.11)          0.07
   Impairment charge, net of tax......         --            0.25             --
   Goodwill Amortization, net of tax..         --              --           0.03
                                        ---------       ---------      ---------
   Adjusted net income (loss).........  $   (0.11)           0.15           0.10
                                        =========       =========      =========

Diluted net income (loss) per share:
   Reported income (loss).............  $   (0.11)          (0.10)          0.07
   Impairment charge, net of tax......         --            0.24             --
   Goodwill Amortization, net of tax..         --              --           0.03
                                        ---------       ---------      ---------
   Adjusted net income (loss).........  $   (0.11)           0.14           0.10
                                        =========       =========      =========


                                      F-13
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS
                     ENDED DECEMBER 31, 2003, 2002 AND 2001


Acquired Intangible assets are as follows (in thousands):

                              AS OF DECEMBER 31, 2003    AS OF DECEMBER 31, 2002
                             ------------------------   ------------------------
                                GROSS                      GROSS
                              CARRYING    ACCUMULATED    CARRYING    ACCUMULATED
                               AMOUNT    AMORTIZATION     AMOUNT    AMORTIZATION
                             ---------    ----------    ---------    ----------
Amortized intangible assets
  Developed Technology.....  $   7,656        (2,597)   $   7,656        (2,115)
  Core technology..........        665          (225)         665          (181)
  Tradename................        257          (256)         257          (206)
                             ---------    ----------    ---------    ----------
     Total.................  $   8,578        (3,078)   $   8,578        (2,502)
                             =========    ==========    =========    ==========

At  December  31,  2004,  estimated  amortization  expense  was as  follows  (in
thousands):

       2004...................... $  515
       2005...................... $  515
       2006...................... $  515
       2007...................... $  515
       2008...................... $  515

The changes in the carrying  amount of goodwill for the year ended  December 31,
2003, is as follows (in thousands):

                                                  UNITED STATES       EUROPEAN
                                                     SEGMENT           SEGMENT
                                                   -----------       -----------

Balance as of December 31, 2001..................  $    4,629               307
Goodwill acquired during the year................          --                --
Impairment losses................................      (4,629)               --
                                                   ----------        ----------
Balance as of December 31, 2002..................          --               307
Goodwill acquired during the year................          --                --
Impairment losses................................          --                --
                                                   ----------        ----------
Balance as of December 31, 2003..................  $       --               307
                                                   ==========        ==========

5.       COMMON STOCK AND TREASURY STOCK

The  Company  has a stock  repurchase  program  under  which  it is  allowed  to
repurchase up to $15 million of common stock, at managements discretion, through
June 30, 2004. As of December 31, 2003,  the Company had  repurchased  1,536,000
shares of common stock and incurred a cash outlay totaling $8,734,000.

6.       STOCK OPTIONS, PURCHASE PLANS AND WARRANTS

The Company currently has two stock option plans in place during 2003 - the 1993
Stock  Incentive  Plan (the "1993  Plan") and the 2000 BSI  non-qualified  stock
option  Plan (the "2000  Plan").  The  Company  also has  several  stock  option
agreements with certain officers in effect.

Under the 2000 Plan,  non-qualified  stock  options may be granted to  full-time
employees,  part-time  employees,  directors and  consultants  of the Company to
purchase a maximum of 2,000,000  shares of the company's  common stock.  Options
granted  under the 2000 Plan vest and are generally  exercisable  at the rate of
25% each  year  beginning  one year from the date of  grant.  The stock  options
generally expire ten years from the date of grant.


                                      F-14
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS
                     ENDED DECEMBER 31, 2003, 2002 AND 2001


Under the 1993 Plan, incentive and non-qualified stock options may be granted to
full-time  employees,  part-time  employees,  directors and  consultants  of the
Company to  purchase  a maximum of  2,000,000  shares of common  stock.  Options
granted  under the 1993 Plan vest and are generally  exercisable  at the rate of
25% each  year  beginning  one year from the date of  grant.  The stock  options
generally expire ten years from the date of grant.

The per share  weighted  average  market value of stock options  granted  during
2003, 2002 and 2001 was $7.14,  $6.20, and $6.00,  respectively,  on the date of
grant using the Black-Scholes  option-pricing  model with the following weighted
average assumptions:

                                                2003         2002         2001
--------------------------------------------------------------------------------

Expected dividend yield................          0.00%        0.00%        0.00%
Risk-free interest rate................          3.03%        3.82%        4.50%
Expected volatility....................        106.64%      106.42%       89.87%
Expected option life (years)...........          4.70         5.18         4.81


To the extent that  BioSource  derives a tax benefit from  options  exercised by
employees,  such benefit is credited to additional paid-in capital. Tax benefits
recognized totaling $538,000,  $56,000, and $205,000 were credited to additional
paid-in capital in fiscal 2003, 2002 and 2001, respectively.

The following  summarizes the stock option  transactions under the 1993 Plan and
the 2000 Plan during the periods presented:

                                                                    WEIGHTED
                                                                     AVERAGE
                                                  SHARES         EXERCISE PRICE
                                                  ------         --------------

Options outstanding at December 31, 2000...     2,064,823           $  12.67
Options granted............................       904,647               7.84
Options exercised..........................       (36,952)              2.50
Options canceled...........................      (885,166)             17.55
                                              -----------           --------

Options outstanding at December 31, 2001...     2,047,352               8.74
Options granted............................       474,300               6.12
Options exercised..........................       (76,514)              3.10
Options canceled...........................      (516,063)             13.14
                                              -----------           --------

Options outstanding at December 31, 2002...     1,929,075               7.14
Options granted............................       303,000               7.14
Options exercised..........................      (170,830)              3.07
Options canceled...........................      (138,071)              7.42
                                              -----------           --------

Options outstanding at December 31, 2003...     1,923,174           $   7.48
                                              ===========           ========


                                      F-15
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS
                     ENDED DECEMBER 31, 2003, 2002 AND 2001


At  December  31,  2003,  the range of  exercise  prices  and  weighted  average
remaining contractual life of outstanding options were as follows:

                 Weighted         Weighted                       Number of
                 Average          Average         Number of       Options
                 Exercise         Life of          Options       Currently
                  Price            Option        Outstanding    Exercisable
             ---------------------------------------------------------------

              $1.37 - $3.10        3.50            166,658         166,658
              $3.11 - $6.20        7.10            560,164         368,367
              $6.21 - $9.30        8.20            753,363         284,895
              $9.31 - $15.50       7.10            275,000         193,987
             $15.51 - $31.00       6.80            167,989         133,425
                                 -------        -----------     -----------
Total                              7.20          1,923,174       1,147,332
                                 =======        ===========     ===========

At December  31,  2003,  2002 and 2001,  the number of options  exercisable  was
1,147,332,  1,007,601,  and  777,836,  respectively,  and the  weighted  average
exercise price of those options was $7.41, $6.47, and $6.41, respectively.

The Company has a stock option agreement with Mr. Leonard Hendrickson,  a former
officer  of the  Company  that is  outside  the  1993  and the  2000  Plan.  The
outstanding  options expire on December 31, 2004 according to their terms at the
date of grant.

The following summarizes transactions outside the option plan during the periods
presented:

                                                                      WEIGHTED
                                                                       AVERAGE
                                                                      EXERCISE
                                                         SHARES         PRICE
                                                       --------       --------

Options outstanding at December 31, 2000............    290,000       $   2.89
Options granted.....................................    280,000           5.19
Options exercised...................................    (64,000)          2.61
Options canceled....................................        ---             --
                                                       --------       --------

Options outstanding at December 31, 2001............    506,000           4.19
Options granted.....................................         --            --
Options exercised...................................    (28,600)          2.00
Options canceled....................................         --             --
                                                       --------       --------

Options outstanding at December 31, 2002............    477,400       $   4.33

Options granted.....................................         --             --
Options exercised...................................   (187,400)          2.94
Options canceled....................................    (61,835)         6.44
                                                       --------       -------

Options outstanding at December 31, 2003............    228,165       $   5.19
                                                       ========       ========


                                      F-16
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS
                     ENDED DECEMBER 31, 2003, 2002 AND 2001


At  December  31,  2003,  the  exercise  price and  weighted  average  remaining
contractual  life  of  outstanding  options  under  certain  agreements  were as
follows:

                 Weighted          Weighted                         Number of
                 Average           Average        Number of          Options
                 Exercise          Life of         Options          Currently
                  Price            Option        Outstanding       Exercisable
                 --------          -------       -----------       -----------

                  $5.19             1.00           228,165           228,165
                                   -------       -----------       -----------
   Total                            1.00           228,165           228,165
                                   =======       ===========       ===========


At December  31,  2003,  2002 and 2001,  the number of  exercisable  options was
228,165, 279,000, and 226,000,  respectively,  and the weighted average exercise
price of those options was $5.19, $3.72, and $2.97, respectively.

During  2003,  2002 and  2001,  358,230  105,114,  and  100,952  stock  options,
respectively  were  exercised  for proceeds  totaling  $1,075,000,  $291,000 and
$308,000 of cash received by the company.

Effective  April 7, 1995, the Company adopted an Employee Stock Purchase Plan to
provide   substantially  all  full-time   employees,   excluding  officers,   an
opportunity to purchase shares of its common stock through  payroll  deductions.
In addition,  the Company provides a matching  contribution  equal to 50% of the
participant's  contribution.  All  contributions  are invested in the  Company's
common stock, which is purchased on the open market at prevailing market prices.
Participants  have a fully vested interest in the shares  purchased with payroll
deductions and become fully vested in the shares purchased with Company matching
contributions  after two years.  The  Company's  matching  expense for the years
ended December 31, 2003, 2002 and 2001 was approximately  $19,000,  $24,000, and
$19,000, respectively.

The Company has 1,287,000  detachable stock purchase warrants  outstanding.  The
warrants have a term of up five years from date of issuance and are exchangeable
for  1,287,000  shares of Common Stock at an exercise  price of $7.77 per share.
The warrants expire in January 2005.

7.       STOCKHOLDER RIGHTS PLAN

The Company has adopted a  stockholders'  rights plan to protect the Company and
its stockholders from unsolicited  attempts or inequitable offers to acquire the
Company's stock.  The rights plan has no immediate  dilutive effect and does not
diminish the  Company's  ability to accept an offer to purchase the Company that
is  approved  by the  board  of  directors.  The  stockholder  rights  plan  was
implemented  through a dividend of one preferred  share  purchase  right on each
outstanding  share of the Company's  common stock  outstanding on March 2, 1999.
Each right will entitle  stockholders  to buy one  one-thousandth  of a share of
Series A preferred stock at an exercise price of $24.50.  The rights will become
exercisable (with certain limited  exceptions  provided in the rights agreement)
following the 10th day after:  (a) a person or group announces an acquisition of
15% or more of the Company's  common stock,  (b) a person or group announces the
commencement  of a tender  offer  the  consummation  of which  would  result  in
ownership by the person or group of 15% or more of the  Company's  common stock,
(c) the filing of a registration statement for any such exchange offer under the
Securities Act of 1933, or (d) the Company's board of directors determining that
a person is an "adverse person," as defined in the rights plan. The buyer or any
"adverse person" would not be entitled to exercise rights under the rights plan.
The effect of the rights plan is to discourage  acquisitions of more than 15% of
the Company's  common stock  without  negotiations  with the Company's  Board of
Directors.  The  Company  can  redeem  the rights for $.001 per right at certain
times as  provided  in the rights  agreement.  The rights  expire on January 31,
2009.


                                      F-17
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS
                     ENDED DECEMBER 31, 2003, 2002 AND 2001


8.       INCOME TAXES

Income (loss) before  income taxes  (benefit) for 2003,  2002 and 2001 were from
the following sources (000's):

                                        2003         2002        2001
                                      -------      -------     -------

         Domestic .................   $(1,306)     $   723     $(1,203)
         Foreign ..................      (648)         683       1,874
                                      -------      -------     -------
                                      $(1,954)     $ 1,406     $   671
                                      =======      =======     =======

Income tax expense (benefit) is summarized as follows (000's):

                                            2003           2002           2001
                                          -------        -------        -------
Current:
     Federal ......................       $    99        $  (440)       $    95
     State and local ..............           109            401             42
     Foreign ......................           391            552             71
                                          -------        -------        -------
                                          $   599            513            208
                                          -------        -------        -------
Deferred:
     Federal ......................          (936)           307            (70)
     State and local ..............           (18)          (549)          (350)
     Foreign ......................          (529)          (260)           142
                                          -------        -------        -------
                                           (1,483)          (502)          (278)
                                          -------        -------        -------
                                          $  (884)       $    11        $   (70)
                                          =======        =======        =======


The Company has credited to  additional  paid-in-capital  tax benefits  totaling
$538,000,   $56,000,  and  $205,000  in  fiscal  years  2003,  2002,  and  2001,
respectively.

The primary  components  of  temporary  differences  which give rise to deferred
taxes at December 31, 2003 and 2002 are (000's):

                                                           2003           2002
                                                         --------       --------

Deferred tax assets:
  Reserves for inventory ..........................      $  1,960       $  1,517
  Purchased in-process technology/goodwill ........         2,385          3,046
  Net operating loss carryforwards ................         6,067          4,290
  Allowance for doubtful accounts .................            72             89
  R & D and AMT credit carryforwards ..............         2,107          1,570
  Other ...........................................           460            336
                                                         --------       --------
                                                           13,051         10,848
Less: Valuation Allowance .........................          (393)          --
                                                         --------       --------
Deferred Tax Assets ...............................        12,658         10,848
Deferred tax liability
  Depreciation ....................................           217            165
                                                         --------       --------

      Net deferred tax assets .....................      $ 12,441       $ 10,683
                                                         ========       ========


The  Company  believes,  except for the  valuation  allowance  of  $393,000  for
Massachusetts  net operating  losses disclosed above, it is more likely than not
that they will be able to realize the remaining current value of net benefits in
the future.


                                      F-18
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS
                     ENDED DECEMBER 31, 2003, 2002 AND 2001


Actual income tax expense  (benefit)  differs from that obtained by applying the
Federal  income tax rate of 34% to income (loss) before income taxes  (benefits)
as follows (000's):

                                                     2003       2002       2001
                                                    -----      -----      -----

Computed "expected" tax expense (benefit) .....     $(665)     $ 478      $ 228
Nondeductible items ...........................        52         24       --
State taxes (net of Federal benefit) ..........      (254)       (98)        21
Tax credits ...................................      (285)      (213)      (338)
Extraterritorial Income Exclusion .............      (139)      (244)      --
Effect of foreign operations ..................        25         50        (18)
Change in valuation allowance .................       393       --         --
Other .........................................       (11)        14         37
                                                    -----      -----      -----

       Total ..................................     $(884)     $  11      $ (70)
                                                    =====      =====      =====


The Company does not provide for U.S. federal income taxes on the  undistributed
earnings  of its  foreign  subsidiaries  since the  Company  intends to reinvest
indefinitely its earnings in such subsidiaries. It is not practical to determine
the U.S.  federal  income  tax  liability,  if any that would be payable if such
earnings were not reinvested indefinitely.

The Company has  $12,441,000 in deferred  income tax assets on its  consolidated
balance  sheet as of December  31,  2003.  A large  component  of the  Company's
deferred tax assets is its net operating  losses.  As of December 31, 2003,  the
Company  has  a  net  operating  loss  (NOL)   carryforward   of   approximately
$11,540,000,  $14,152,000  and $1,443,000 for Federal,  State and foreign income
tax  purposes,  respectively.  The federal  NOL's are available to offset future
taxable income,  if any,  through 2020 to 2023. The state NOL's are available to
offset future taxable income, if any, through 2006 to 2023.

9.   401(K) BENEFIT PLAN

The Company has a 401(k) profit  sharing plan,  which covers  substantially  all
domestic  employees  of  the  Company.  Plan  participants  may  make  voluntary
contributions  up to 20% of their earnings up to the statutory  limitation.  The
Company's  contribution  is $0.25 for each $1.00  contributed by employees up to
the first $2,000.  Company  contributions  have no vesting period. The Company's
contributions   were  $66,000,   $67,000,   $57,000  in  2003,  2001  and  2001,
respectively.

10.  BUSINESS SEGMENTS

The  Company  is  engaged  in a single  industry,  the  licensing,  development,
manufacture, marketing and distribution of immunological reagents, test kits and
oligonucleotides  used  in  biomedical  research  and  human  diagnostics.   Our
customers are not concentrated in any specific  geographic  region and no single
customer accounts for a significant amount of our sales.

Management of the Company has determined  its reportable  segments are strategic
business  units  that offer both sales to  external  customers  from  geographic
company  facilities  and  sales to  external  customers  in  certain  geographic
regions. The Company characterizes its product lines as Strategic Business Units
("SBU's") and these include Signal Transduction Products, Cytokine Products, and
Custom Products.  Significant reportable business segments are the United States
and European facilities, and sales to external customers are summarized as those
located in the United States,  Europe,  Japan and other. We evaluate performance
for  the  "Sales-from"  segments  on  net  revenue  and  profit  and  loss  from
operations.  Our SBU's are managed  separately  because each  business  requires
different  marketing  and  distribution  strategies.   Business  information  is
summarized as follows (000's):


                                      F-19
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS
                     ENDED DECEMBER 31, 2003, 2002 AND 2001


                                               2003         2002         2001
                                             --------     --------     --------
SALES - FROM SEGMENTS:
Net sales to external customers from:
     United States:
         Domestic .......................    $ 23,891     $ 23,574     $ 21,027
         Export .........................       4,546        4,082        4,623
                                             --------     --------     --------
                Total United States .....      28,437       27,656       25,650
     Europe .............................      15,657       12,399        9,525
                                             --------     --------     --------
                Consolidated ............    $ 44,094     $ 40,055     $ 35,175
                                             ========     ========     ========

Operating income (loss):
     United States ......................    $ (3,584)    $ (1,250)    $ (1,970)
     Europe .............................       1,706        2,533        2,181
                                             --------     --------     --------
                Consolidated ............    $ (1,878)    $  1,283     $    211
                                             ========     ========     ========


                                               2003         2002         2001
                                             --------     --------     --------
SALES - TO SEGMENTS:
Net sales to external customers in:
     United States ......................    $ 23,891     $ 23,574     $ 21,027
     Europe .............................       9,704       10,940        8,846
     Japan ..............................       3,448        3,319        3,085
     Other ..............................       7,051        2,222        2,217
                                             --------     --------     --------
                Consolidated ............    $ 44,094     $ 40,055     $ 35,175
                                             ========     ========     ========

SALES - BY PRODUCT GROUP:
Net sales by product group:
     Cytokine ...........................    $  9,083     $  6,910     $  4,734
     Signaling ..........................      20,107       18,207       16,647
     Custom .............................      14,904       14,938       13,794
                                             --------     --------     --------
                Consolidated ............    $ 44,094     $ 40,055     $ 35,175
                                             ========     ========     ========

IDENTIFIABLE ASSETS AT END OF YEAR:
     United States ......................    $ 33,959     $ 36,263     $ 42,420
     Europe .............................      10,374       10,243        7,421
                                             --------     --------     --------
                Consolidated ............    $ 44,333     $ 46,506     $ 49,841
                                             ========     ========     ========

NET INTEREST EXPENSE (INCOME):
     United States ......................    $   (151)    $    (92)    $   (363)
     Europe .............................         124          (21)         (11)
                                             --------     --------     --------
                Consolidated ............    $    (27)    $   (113)    $   (374)
                                             ========     ========     ========

DEPRECIATION AND AMORTIZATION:
     United States ......................    $  2,246     $  2,028     $  2,145
     Europe .............................         374          296          286
                                             --------     --------     --------
                Consolidated ............    $  2,620     $  2,324     $  2,431
                                             ========     ========     ========

CAPITAL EXPENDITURES:
     United States ......................    $    913     $  3,132     $  2,106
     Europe .............................         408          349          453
                                             --------     --------     --------
                Consolidated ............    $  1,321     $  3,481     $  2,559
                                             ========     ========     ========


                                      F-20
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS
                     ENDED DECEMBER 31, 2003, 2002 AND 2001


11.      COMMITMENTS AND CONTINGENCIES

At December 31, 2003, future minimum payments under the Company's non-cancelable
operating leases are as follows (in thousands):

         2004........................................  $   1,474
         2005........................................      1,192
         2006........................................        644
         2007........................................         59
         Thereafter..................................         --
                                                       ---------

                                                       $   3,369

Rent expense for 2003 totaled $1,441,000.

On January  14,  2002,  we settled a lawsuit  filed by a former  employee in the
United States Central  District Court of California for $275,000,  all which was
expensed in 2001.

On July 2, 2002,  we settled a AAA  arbitration  proceeding  filed by the former
shareholders of QCB, which settlement included a final settlement of all related
claims we maintained against those former shareholders,  in consideration of the
payment to us of $800,000 from escrowed funds held by us in connection  with the
acquisition  of QCB.  The  remaining  funds held in escrow were  released to the
former  shareholders of QCB. This settlement was considered to be a reduction of
the goodwill  originally  recorded in the  acquisition of QCB. That goodwill was
written off as a cumulative  effect of accounting change in the adoption of FASB
Statement No. 142 during the first quarter of 2002. The settlement was accounted
for as an adjustment to the  cumulative  effect of accounting  change during the
third quarter of 2002.

The Company is involved in various  other claims and lawsuits  incidental to its
business. In the opinion of management,  these claims and suits in the aggregate
will not  materially  affect the  financial  position,  results of operations or
liquidity of the Company.

12.      EARNINGS PER SHARE

The Company presents basic and diluted earnings (loss) per share ("EPS").  Basic
EPS is computed by dividing net income (loss)  available to common  stockholders
by the weighted  average  number of common  shares  outstanding  for the period.
Diluted EPS reflects the potential  dilution from securities that could share in
the earnings of the Company.


                                      F-21
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
               AS OF DECEMBER 31, 2003 AND 2002 AND FOR THE YEARS
                     ENDED DECEMBER 31, 2003, 2002 AND 2001


The reconciliation of basic to diluted weighted average shares is as follows:

                                                    Year ended December 31,
                                               2003          2002          2001
                                            ---------     ---------     --------
Income (loss) before cumulative
   effect of accounting change
   used for basic and diluted
   income (loss) per share .............    $  (1,070)    $  (1,395)    $    741
                                            =========     =========     ========

Net income (loss) used for basic
   and diluted income (loss) per
   share ...............................    $  (1,070)    $  (1,052)    $    741
                                            =========     =========     ========


Weighted average shares used in
   basic computation ...................        9,403         9,787       10,398
Dilutive stock options and warrants ....         --             402          567
                                            ---------     ---------     --------

Weighted average shares used for
   diluted computation .................        9,403        10,189       10,965
                                            =========     =========     ========


Income (loss) per share before
   accounting change:
   Basic ...............................    $   (0.11)    $    0.14     $   0.07
                                            =========     =========     ========
   Diluted .............................    $   (0.11)    $    0.14     $   0.07
                                            =========     =========     ========


Net income (loss) per share:
   Basic ...............................    $   (0.11)    $   (0.11)    $   0.07
                                            =========     =========     ========
   Diluted .............................    $   (0.11)    $   (0.11)    $   0.07
                                            =========     =========     ========


Options to purchase  913,946,  1,040,125,  and 793,332 shares of common stock at
prices ranging from $6.58 to $31.00,  $6.08 to $31.00,  and $8.00 to $31.00 were
outstanding during 2003, 2002 and 2001,  respectively,  but were not included in
the  computation  of diluted  earnings  (loss) per share  because  the  options'
exercise  price was greater than the average  market price of the common  shares
during the respective periods.

Warrants to purchase  1,287,000  shares at an exercise  price of $7.77 per share
were  outstanding  as of December 31, 2003 and 2002 but were not included in the
computation  of diluted  net  income per share  because  their  effect  would be
anti-dilutive.


                                      F-22
<PAGE>


                 BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNT
                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001



                               BALANCE AT   PROVISION   DEDUCTIONS    BALANCE AT
                                BEGINNING    CHARGED     ACCOUNTS       END OF
                                 OF YEAR    TO INCOME   WRITTEN OFF      YEAR
                                 -------    ---------   -----------      ----
                                                   (000's)

2001-allowance for
   doubtful accounts .......     $  143        125            7           261

2002-allowance for
   doubtful accounts .......     $  261        140          140           261

2003-allowance for
   doubtful accounts .......     $  261        164          167           258


                                      F-23
<PAGE>


                                  EXHIBIT INDEX
               FOR FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2003

EXHIBIT
NUMBER                                DESCRIPTION
-------     --------------------------------------------------------------------

3.1         Certificate of Incorporation of Registrant (1)

3.2         Bylaws of Registrant (1)

4.1         Specimen Stock Certificate of Common Stock of Registrant (1)

4.2         Certificate of Designation of Series A Preferred Stock (9)

4.3         Certificate of Designation of Series B Preferred Stock (11)

4.4         Rights Agreement,  dated as of February 25, 1999, between Registrant
            and U.S. Stock Transfer and Trust Corporation, as Rights Agent (9)

4.5         Amendment to Rights Agreement, dated as of January 10, 2000, between
            Registrant and U.S. Stock Transfer and Trust Corporation (13)

4.6         Second  Amendment to Rights  Agreement,  dated  September  28, 2000,
            between  Registrant and U.S.  Stock  Transfer and Trust  Corporation
            (13)

4.7         Form of Right Certificate (9)

4.8         Summary of Share Purchase Rights (9)

4.9         Investor  Rights  Agreement  dated  February 15, 2000,  by and among
            Registrant, Genstar Partners II, L.P. and Stargen II LLC (12)

4.10        Amendment to Investor  Rights  Agreement  dated  September 18, 2000,
            among Registrant, Genstar Capital Partners II, L.P., Stargen II LLC,
            Russell D. Hays and George Uveges (13)

4.11        Second Amendment to Investor Rights  Agreement,  dated September 28,
            2000, among Registrant,  Genstar Capital Partners II, L.P.,  Stargen
            II LLC, Russell D. Hays, George Uveges,  Jean-Pierre Conte,  Richard
            Hoskins, Richard Paterson and Robert Weltman (13)

4.12        Warrant to Purchase  Common  Stock of  Registrant  issued to Genstar
            Capital Partners II, L.P. on February 15, 2000 (12)

4.13        Warrant to Purchase Common Stock of Registrant  issued to Stargen II
            LLC on February 15, 2000 (12)

10.1        Registrant's 1993 Stock Incentive Plan (4)

10.2        Licensing Agreement dated May 1, 1990, by and between TAGO, Inc., as
            licensee, and St. Jude's Children's Hospital, as licenser (1)

10.3        License Agreement dated February 14, 1991, by and between Registrant
            and Schering Corporation (1)

10.4        License Agreement dated October 1, 1993, by and between  Registrant,
            as licensee, and Schering Corporation, as licensor (2)


<PAGE>


                                  EXHIBIT INDEX
          FOR FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2003, CONTINUED

EXHIBIT
NUMBER                                DESCRIPTION
-------     --------------------------------------------------------------------

10.5        Separation and Consulting  Agreement between Registrant and James H.
            Chamberlain dated September 19, 2000 (15)

10.6        License Agreement dated February 7, 1994, by and between Registrant,
            as licensee and Fundacio Clinic (4)

10.7        Form  of  Indemnification  Agreement  for  Directors  and  Executive
            Officers (6)

10.8        List of Indemnities  relating to Form of  Indemnification  Agreement
            previously filed as Exhibit 10 (16)

10.9        Registrant's Employee Stock Purchase Plan (7)

10.10       Securities  Purchase  Agreement dated January 10, 2000, by and among
            Registrant,  Genstar  Capital  Partners II, L. P. and Stargen II LLC
            (15)

10.11       Securities  Purchase  Agreement,  effective  as of August  9,  2000,
            between the Registrant and Genstar Capital Partners II, L.P. (13)

10.12       Amendment to Securities  Purchase  Agreement,  dated as of September
            28, 2000,  among the Registrant,  Genstar Capital Partners II, L.P.,
            Jean-Pierre  Conte,  Richard  Hoskins,  Richard  Paterson and Robert
            Weltman (13)

10.13       Securities  Purchase  Agreement,  effective  as of August  9,  2000,
            between the Registrant and Russell D. Hays (13)

10.14       Securities  Purchase  Agreement,  effective as of September 5, 2000,
            between the Registrant and George Uveges (13)

10.15       Letter agreement regarding employment, dated August 2, 2000, between
            Registrant and Russell D. Hays (15)

10.16       Amendment to letter agreement regarding employment,  dated September
            18, 2000, between Registrant and Russell D. Hays (15)

10.17       Letter agreement regarding employment, dated August 18, 2000 between
            Registrant and George Uveges (15)

10.18       Amendment to letter agreement regarding employment,  dated September
            18, 2000, between Registrant and George Uveges (15)

10.19       Registrant's 2000 Non-Qualified Stock Option Plan (14)

10.20       Lease  Agreement  for 542 Flynn Road,  dated March 7, 2000,  between
            Registrant and Lincoln Ventura Technology Center (15)

10.21       Executive  Employment  Agreement  between  Registrant and Leonard M.
            Hendrickson, dated September 24, 2001(16)


<PAGE>


                                  EXHIBIT INDEX
          FOR FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2003, CONTINUED

EXHIBIT
NUMBER                                DESCRIPTION
-------     --------------------------------------------------------------------

10.22       Separation  and Release  Agreement  dated as of September  29, 2003,
            between Registrant and Leonard Hendrickson.

10.23       Executive  Employment  Agreement between  Registrant and Terrance J.
            Bieker, dated as of October 8, 2003.

21          Subsidiaries of the Company

                                                              STATE/COUNTRY OF
                  NAME                                        INCORPORATION
                  ------------------------------------------------------------
                  Keystone Laboratories, Inc..................California
                  BioSource Europe S.A........................Belgium
                  BioSource B.V...............................Holland
                  BioSource GmbH..............................Germany
                  BioSource U.K., Ltd.........................U.K.
                  Quality Controlled Biochemicals, Inc........Massachusetts
                  Javelle, Inc................................Massachusetts

23.1        Consent of KPMG LLP, Independent Auditors

31.1        Certificate  of  Terrance  J.  Bieker,  Chief  Executive  Officer of
            BioSource  International,  Inc. pursuant to Rule 13a-14(a) under the
            Securities and Exchange Act of 1934, as amended.

31.2        Certificate of Charles C. Best, Chief Financial Officer of BioSource
            International,  Inc. pursuant to Rule 13a-14(a) under the Securities
            and Exchange Act of 1934, as amended.

32.1        Certificate  of  Terrance  J.  Bieker,  Chief  Executive  Officer of
            BioSource  International,  Inc. pursuant to Rule 13a-14(a) under the
            Securities and Exchange Act of 1934, as amended.

32.2        Certificate of Charles C. Best, Chief Financial Officer of BioSource
            International,  Inc. pursuant to Rule 13a-14(a) under the Securities
            and Exchange Act of 1934, as amended.

----------

 (1) Incorporated by reference to the Company's  Registration  Statement on Form
     S-4 as filed with the  Securities  and Exchange  Commission  on October 22,
     1992, as amended.
 (2) Incorporated  by reference to the  Company's  Form 10KSB for the year ended
     December 31, 1992.  (3)  Incorporated  by reference to the  Company's  Form
     10KSB for the year ended December 31, 1993. (4)  Incorporated  by reference
     to the  Company's  Form 10KSB for the year ended  December  31,  1994.  (5)
     Incorporated  by reference to the  Company's  Form 10KSB for the year ended
     December 31, 1995.
 (6) Incorporated by reference to the Company's  Registration  Statement on Form
     SB-2  (SEC  No.  333-3336)  as  filed  with  the  Securities  and  Exchange
     Commission on May 31, 1996, as amended.
 (7) Incorporated by reference to the Company's  Registration  Statement on Form
     S-8 (SEC No. 33-91838) as filed with the Securities and Exchange Commission
     on May 4, 1995.
 (8) Incorporated  by reference to the  Company's  Current  Report on Form 8-K/A
     filed with the Securities and Exchange Commission on February 19, 1999.
 (9) Incorporated by reference to the Company's Current Report on Form 8-A filed
     with the Securities and Exchange Commission on March 1, 1999.


<PAGE>


(10) Incorporated  by  reference to the  Company's  Form 10-K for the year ended
     December 31, 1998.
(11) Incorporated by reference to the Company's  Registration  Statement on Form
     S-3 as filed with the Securities and Exchange Commission on March 16, 2000.
(12) Incorporated by reference to Amendment No. 1 to the Company's  Registration
     Statement on Form S-3 as filed with the Securities and Exchange  Commission
     on March 22, 2000.
(13) Incorporated  by reference to the Company's  Current  Report on Form 8-K as
     filed with the Securities and Exchange  Commission on October 26, 2000, and
     as amended on October 31, 2000.
(14) Incorporated  by reference to the Company's  definitive  proxy statement as
     filed with the Securities and Exchange Commission on May 16, 2000.
(15) Incorporated  by  reference to the  Company's Form 10-K  for the year ended
     December 31, 2000.
(16) Incorporated  by  reference to the  Company's Form 10-K  for the year ended
     December 31, 2001.