SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004

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

Commission file number 1-11394

MEDTOX SCIENTIFIC, INC.
(Exact name of Registrant as specified in its charter)

Registrant’s telephone number, including area code: (651) 636-7466

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

Common Stock, par value $0.15 per share
(Title of Class)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not 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 this Form 10-K or any amendment to this Form 10-K. [X]

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

The aggregate market value of Common Stock of the Registrant, $0.15 par value (“Common Stock”), held by non-affiliates of the Registrant was approximately $45,932,000 as of the last business day of the Registrant’s most recently completed second fiscal quarter, based upon a price of $6.76, which price was equal to the closing price for the Common Stock on the American Stock Exchange.

The number of shares of Common Stock outstanding as of February 22, 2005, was 7,543,473.

Portions of the Registrant’s Proxy Statement for its 2005 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K.  

MEDTOX SCIENTIFIC, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2004

Table of Contents

2

PART I

CAUTIONARY STATEMENT IDENTIFYING IMPORTANT FACTORS
THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER
FROM THOSE PROJECTED IN FORWARD LOOKING STATEMENTS

        In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, readers of this document and any document incorporated by reference herein, are advised that this document and documents incorporated by reference into this document contain both statements of historical facts and forward looking statements. Forward looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those indicated by the forward looking statements. Examples of forward looking statements include, but are not limited to (i) projections of revenues, income or loss, earnings or loss per share, capital expenditures, dividends, capital structure and other financial items, (ii) statements of the plans and objectives of the Company or its management or Board of Directors, including the introduction of new products, or estimates or predictions of actions by customers, suppliers, competitors or regulatory authorities, (iii) statements of future economic performance, and (iv) statements of assumptions underlying other statements and statements about the Company or its business.

        This document and any documents incorporated by reference herein also identify important factors which could cause actual results to differ materially from those indicated by the forward looking statements. The factors that could affect our actual results include the following:

increased competition, including price competition

general economic and business conditions, both nationally and internationally

changes in business strategy or development plans

technological, evolving industry standards, or other problems that could delay the sale of our products

risks and uncertainties with respect to our patents and proprietary rights including:

lack of meaningful protection from claims of any patents issued to the Company

other companies challenging our patents

patents issued to other companies that may harm our ability to do business

other companies designing around technologies we have developed

our inability to obtain appropriate licenses from third parties

our inability to protect our trade secrets

risk of infringement upon the proprietary rights of others

our inability to prevent others from infringing on our proprietary rights

our inability to obtain sufficient financing to continue to expand operations

changes in demand for products and services by our customers

our failure to obtain and retain new customers and alliance partners, or a reduction in tests ordered or specimens submitted by existing customers

adverse results in litigation matters

our ability to attract and retain experienced and qualified personnel

losses due to bad debt

3

The cautionary statements made pursuant to the Private Securities Litigation Reform Act of 1995 above and elsewhere by the Company should not be construed as exhaustive or as any admission regarding the adequacy of disclosures made by the Company prior to the effective date of such Act. Forward looking statements are beyond the ability of the Company to control, and in many cases the Company cannot predict what factors would cause results to differ materially from those indicated by the forward looking statements.

4

ITEM 1.       BUSINESS.

            1.      General.

                     MEDTOX Scientific, Inc. (formerly EDITEK, Inc.), a Delaware corporation, was organized in September 1986. MEDTOX Scientific, Inc. and its subsidiaries, MEDTOX Laboratories, Inc., MEDTOX Diagnostics, Inc., and New Brighton Business Center, LLC are referred to herein as “the Company.” The Company is engaged primarily in two distinct, but very much related businesses. The business of forensic and clinical laboratory services is conducted by MEDTOX Laboratories, Inc. at its facility in St. Paul, Minnesota, and the business of manufacturing and distribution of diagnostic devices is executed by MEDTOX Diagnostics, Inc. from its facility in Burlington, North Carolina. For the year ended December 31, 2004, sales from the forensic and clinical laboratory services conducted by MEDTOX Laboratories, Inc. accounted for 76% of the Company’s revenues. Revenue from the manufacture and distribution of diagnostic devices and other similar products, including some contract manufacturing conducted by MEDTOX Diagnostics, Inc., accounted for 24% of total revenues of the Company in 2004.

            2.      Principal Services, Products, and Markets.

                     General.   The Company has two reportable segments: “Laboratory Services” conducted by the Company’s wholly owned subsidiaries, MEDTOX Laboratories, Inc. and New Brighton Business Center, LLC and “Product Sales” conducted by the Company’s wholly owned subsidiary MEDTOX Diagnostics, Inc. Laboratory Services include forensic toxicology, clinical toxicology, clinical testing for the pharmaceutical industry (central laboratory services, bioanalytical and pharmacokinetic testing), and analysis of heavy and trace metals. In addition, the Laboratory Services segment provides logistical support, data management and overall program management services. Product Sales include sales of a variety of on-site screening products and contract manufacturing. For financial information relating to the Company’s segments, see Note 2 of Notes to the Consolidated Financial Statements.

            Laboratory Services

                     A.        Workplace Drugs-of-Abuse Testing. The primary source of revenue for the Company is derived from the provision of laboratory testing services for the identification of drugs-of-abuse. These tests are conducted using methodologies that include various immunoassays, gas liquid chromatography, gas chromatography/mass spectrometry and high performance liquid chromatography with tandem mass spectrometry (LC/MS/MS). MEDTOX Laboratories, Inc. was one of the charter laboratories to be certified by the federal government to perform drug testing of employees covered by the Federal Workplace Drug Testing Guidelines. The Company pioneered security and chain of custody procedures, including sample bar coding and automated sample handling as well as specific confirmation methods that assist in maintaining specimen integrity and the accuracy and confidentiality of test results.

                     The Company’s customers for substance abuse testing include public and private corporations. In addition to public and private corporations, substance abuse testing is also conducted on behalf of service firms such as drug treatment counseling centers, occupational health clinics, third party administrators and hospitals.

                     B.        Other Specialty Laboratory Services

                     Clinical Toxicology.   The Company has a fully certified clinical toxicology reference laboratory specializing in esoteric therapeutic drug monitoring and emergency toxicology. The tests performed in the clinical laboratory are conducted using methodologies such as various immunoassays, gas liquid chromatography, high performance liquid chromatography, gas chromatography/mass spectrometry and tandem mass spectrometry. The Company performs analytical testing for a wide variety of drug classes including: analgesic, antianxiety, anticholinergic, anticoagulant, anticonvulsant, antidepressant, antidiabetic, antiemetic, antihistamine, antiinflammatory, antimicrobial, antipsychotic, bronchodilator, cardiovascular,

5

stimulant, decongestant, immunosuppressant, local anesthetic, muscle relaxant, narcotic analgesic, and sedative medications.

                     The Company’s clients for this market consist of hospitals, clinics and other laboratories. Laboratory specimens are delivered to the Company from clients throughout the country by the Company’s own couriers, contracted delivery services and commercial overnight couriers.

                     Clinical Testing for the Pharmaceutical Industry. The Company provides laboratory testing for Phase I-IV clinical trials, including general laboratory services, assay development, bio-analytical and pharmacokinetic testing. These tests are performed in the Company’s clinical and GLP (Good Laboratory Practices)-bioanalytical laboratories and are conducted using methodologies such as immunoassay, gas chromatography, high performance liquid chromatography, gas chromatography/mass spectrometry and tandem mass spectrometry.

                     The Company’s clients for this market are clinical trial sponsors (pharmaceutical and biotech Companies), clinical research organizations (CRO’s), site management organizations, and clinical trials sites.

                     Heavy Metal, Trace Element, and Solvent Analyses. The Company operates a laboratory in which blood and urine are tested for heavy metals, trace elements, and solvents. The tests are performed using methodologies such as inductively coupled plasma-mass spectrometry, and head space-gas chromatography.

                     The Company’s clients for this market are other laboratories, occupational health clinics, companies that are required to comply with OSHA (Occupational Safety and Health Administration) guidelines for monitoring occupational exposure to hazardous materials, and pediatricians who test children for exposure to lead.

                     Logistics, Data, and Program Management Services. The Company also provides services in the areas of logistics management, data management, and program management. These services support the Company’s underlying business of laboratory analysis and provide added value to its clients. Value-added services include courier services for medical specimen transportation, management programs for laboratory-based and on-site drug testing, coordination of specimen collection sites, and data collection/reporting services including the use of its WEBTOX^® internet-based reporting system.

            Product Sales

                     A.        Substance Abuse Testing Products. The Company has taken a leadership role in the development and distribution of diagnostic drug screening devices. The demand for fast, inexpensive screening technology that detects the presence of a number of substances in human urine, blood samples and other biological specimens continues to increase. The Company believes it has the most complete line of diagnostic screening devices available in the market.

                     The Company manufactures and distributes its PROFILE^®-II and PROFILE^®-II A product lines into the corporate, occupational health clinic and hospital laboratory markets. The PROFILE^®-II A device includes a patented on-board lateral flow adulteration test strip.

                     The Company manufactures and distributes the VERDICT®-II line of diagnostic drug screening products within the criminal justice, temporary service and drug rehabilitation markets. These devices are sold in multiple assay configurations, providing clients with flexibility in terms of drug panel options and potential cost savings.

                     The Company also manufactures and distributes the PROFILE-II ER® line of diagnostic drug screening products within the hospital and clinical markets. These products are also sold in multiple assay configurations.

6

                     B.        Contract Manufacturing Services and Other Diagnostic Products. In contract manufacturing services, the Company manufactures various types of coagulation market controls for various customers. In other diagnostics products, the Company distributes diagnostic tests for the detection of alcohol with the EZ-BAT^® Breath Alcohol Test. The test consists of a small tube containing chemically treated crystals that change color in the presence of alcohol.

            3.      Marketing and Sales.

                     The Company believes that the combined operations of the Laboratory Services business and the on-site test kits manufactured by the Product Sales segment have created synergy in the marketing of comprehensive, on-site and laboratory testing programs to a common customer base. The Company is in a position to offer a full line of products and services for the substance abuse testing and occupational medicine marketplace, including (1) on-site tests for the detection of substance of abuse drugs; (2) SAMHSA (Substance Abuse Mental Health Services Administration) certified laboratory testing (screening and confirmation); (3) biological monitoring of occupational toxins; (4) consultation; and (5) logistic, data management and program management services.

                     The Company has expanded its sales effort in the pharmaceutical market by offering testing services for Phase I — IV clinical trials and working with sponsors and CROs on assay development and bio-analytical and pharmacokinetic studies. In addition, the Company has begun to market clinical chemistry testing services to clinics, hospitals and physician offices on a regional basis. With the acquisition of Leadtech in October 2001, the Company expanded its presence in the pediatric lead testing market.

                     Major Customers. The Company had no single customer whose sales amounted to more than 10% of consolidated revenues during 2004, 2003, or 2002.

            4.      New Products, Research and Development.

                     Laboratory Services. The research and development group for Laboratory Services develops assays for new drugs and compounds, develops new assays for existing drugs and other toxins, and improves existing assays with the goal of improving assay robustness, sensitivity, accuracy, precision, specificity, and efficiency. This group also investigates and develops assays for commonly tested compounds in alternative matrices and novel formats. Numerous new laboratory-based assays were developed during 2004 using immunochemistry, liquid chromatography (LC), gas chromatography (GC), gas chromatography with mass spectrometry (GC/MS), inductively coupled plasma mass spectrometry (ICP/MS), and LC with tandem mass spectrometry (LC/MS/MS). These activities continue to enhance the Company’s test menu and realize efficiencies of new technologies. A significant effort in 2004 was invested in the development of new tests and markers for the pharmaceutical industry and clinical trials.

                     In 2004, the Company developed a hemoglobin test to its filter paper test menu. The Company can now screen pediatric patients for both lead and hemoglobin on a single test card.

                     Product Sales. The Company continues to develop new and innovative products and services while expanding its test menu to meet the demands of both the drug testing and clinical markets. In 2004, the Company increased the number of diagnostic product configurations from 56 of 77, and added new device configurations to the hospital, corporate and government markets.

                     Research and Development Expenses. The Company incurred costs of $1.7 million, $1.9 million, and $1.2 million for research and development activities in 2004, 2003, and 2002, respectively.

7

            5.      Raw Materials.

                     Laboratory Services. The raw materials required by the laboratory for urine drug testing consist primarily of two types: specimen collection supplies and reagents for laboratory analysis. The collection supplies include drug testing custody and control forms that identify the specimen and the client, as well as document the chain-of-custody. Collection supplies also consist of specimen bottles and shipping supplies. Reagents for drug testing are primarily immunoassay screening products and various chemicals used for confirmation testing. The Company believes all of these materials are available at competitive prices from numerous suppliers.

                     Product Sales. The primary raw materials required for the immunoassay-based test kits produced by the Company consist of antibodies, antigens and other reagents, plastic molded devices, wicking materials, filter materials, absorbent materials, and packaging materials. The Company maintains an inventory of raw materials which, to date, has been acquired primarily from third parties. Currently, most raw materials are available from several sources. The Company possesses the technical capability to produce its own antibodies and antigens. It has initiated production of antibodies and antigens for certain tests. If the Company were to change certain raw materials used in a specific test, additional development, validation, and accompanying costs may be required to adapt the alternate material to the specific diagnostic test.

            6.      Patents, Trademarks, Licensing and Other Proprietary Information.

                     Laboratory Services. The Company believes that the basic technologies requisite to the production of antibodies are in the public domain and are not patentable. The Company intends to rely upon trade secret protection of certain proprietary information, rather than patents, where it believes disclosure could cause the Company to be vulnerable to competitors that could successfully replicate the Company’s techniques and processes.

                     Product Sales. The Company was issued a second patent on the system that it developed which integrates on-site scientific analysis with state-of-the-art data collection and delivery. The system is currently being utilized with the Company’s PROFILE^®-II and VERDICT^®-II product lines.

                     The Company was issued a patent on a lateral flow test strip and the integration of adulteration strip testing into on-site devices. This is currently being utilized with the Company’s PROFILE^®-II A and VERDICT^®-II A product lines.

                     The Company holds eight additional United States issued patents. Seven of these patents generally form the basis for the EZ-SCREEN^® and one-step technologies, which include PROFILE^®-II and VERDICT^®-II product lines. The other patent relates to methods of utilizing whole blood as a sample medium on its immunoassay devices. Applications have also been made for additional patents.

                     Of the seven U.S. patents mentioned above which generally form the basis for the EZ-SCREEN^® and one-step technologies, one expires in 2005, five expire in 2007, and one expires in 2010. The patent relating to the methods of utilizing whole blood as a sample medium expires in 2012.

                     There can be no guarantee that there will not be a challenge to the validity of one or more of the patents. In the event of such a challenge, the Company might be required to spend significant funds to defend its patents, and there can be no assurance that the Company would be successful in any such action.

                     General.  As of December 31, 2004, the Company held 17 registered trade names and/or trademarks in reference to its products and corporate names. The trade names and/or trademarks of the Company range in duration from 10 years to 20 years with expiration dates ranging from 2005 to 2014. Applications have also been made for additional trade names.

8

            7.      Seasonality.

                     Laboratory Services. The Company believes that the laboratory testing business is subject to seasonal fluctuations in pre-employment screening. These seasonal fluctuations include reduced volume in the summer months, year-end holiday periods, and other major holidays. In addition, inclement weather may have a negative impact on volume thereby reducing net revenues and cash flow.

                     Product Sales. The Company does not believe that seasonality is a significant factor in the sale of its on-site immunoassay testing devices.

            8.      Backlog.

                     Laboratory Services. At December 31, 2004, MEDTOX Laboratories, Inc. did not have any significant backlog. The Company does not believe that sales backlog is a significant factor in the Laboratory Services segment of its business. However, the time from when an account becomes a client of the Company to the time the laboratory starts receiving specimens may be up to four months. The delay in receiving samples is primarily due to the necessity of establishing communication capabilities between the client and the Company, the requirement to ship out collection kits and forms, and the establishment of a collection site network. At December 31, 2004, the Company had several accounts, which were in the process of being set up where revenues are not expected to be realized until 2005.

                     Product Sales. At December 31, 2004, MEDTOX Diagnostics, Inc. did not have any significant backlog. The Company does not believe that sales backlog is a significant factor in the Product Sales segment of its business.

            9.      Competition.

                     Laboratory Services. As of December 31, 2004, 49 labs, including MEDTOX Laboratories, Inc., were certified by the Department of Health and Human Services as having met the standards for Subpart C of Mandatory Guidelines for Federal Workplace Drug Testing Programs (59 FR 29916, 29925). Competitors and potential competitors include forensic testing units of large clinical laboratories and other independent laboratories, specialized laboratories, and in-house testing facilities maintained by hospitals.

                     Competitive factors include reliability and accuracy of tests, price structure, service, transportation and collection networks and the ability to establish relationships with hospitals, physicians, and users of drug abuse testing programs. It should be recognized, however, that many of the competitors and potential competitors have substantially greater financial and other resources than the Company.

                     The industry in which the Company competes is characterized by service issues including: turn-around time of reporting results, price, the quality and reliability of results, and an absence of patents or other proprietary protection. In addition, since tests performed by the Company are not protected by patents or other proprietary rights, any of these tests could be performed by competitors. However, there are proprietary assay protocols for the more specialized testing that are unique to the Company.

                     The Company’s ability to successfully compete in the future and maintain its margins will be based on its ability to maintain its quality and customer service strength while maintaining efficiencies and low operating costs. There can be no assurance that price competitiveness will not increase in importance as a competitive factor in the laboratory testing business.

                     Product Sales. The diagnostics market has become highly competitive with respect to the price, quality and ease of use of various tests, and is characterized by rapid technological and regulatory changes. The Company has designed its on-site tests as inexpensive and for use by unskilled personnel, and has not endeavored to compete with laboratory-based systems. Numerous large companies with greater

9

research and development, marketing, financial, and other capabilities, as well as smaller research firms, are engaged in research, development and marketing of diagnostic assays for application in the areas for which the Company produces its products.

                     The Company has experienced increased competition with respect to its immunoassay tests from systems and products developed by others, many of whom compete solely on price. As the number of firms marketing diagnostic tests has grown, the Company has experienced increased price competition for certain diagnostic testing devices. A further increase in competition may have a material adverse effect on the business and future financial prospects of the Company.

            10.    Government Regulations.

                     The products and services of the Company are subject to the regulations of a number of governmental agencies as listed below. It is believed that the Company is currently in compliance with all regulatory authorities. The Company cannot predict whether future changes in governmental regulations might significantly increase compliance costs or adversely affect the time or cost required to develop and introduce new products.

                     A.        Substance Abuse and Mental Health Services Administration (SAMHSA). MEDTOX Laboratories, Inc. has been certified by SAMHSA since 1988. SAMHSA certifies laboratories meeting strict standards under Subpart C of Mandatory Guidelines for Federal Workplace Drug Testing Programs. Continued certification is accomplished through periodic inspection by SAMHSA to assure compliance with applicable regulations. Without ongoing certification in this program, the laboratory would not be permitted to conduct drug testing for Federal Workplace Drug Testing Programs. If we fail to maintain certification by SAMHSA, our ability to conduct drug testing for non-regulated clients could be impacted.

                     B.        United States Food and Drug Administration (FDA). Certain tests for human diagnostic purposes must be cleared by the FDA prior to their marketing for in vitro diagnostic use in the United States. The FDA regulated products produced by the Company are in vitro diagnostic products subject to FDA clearance through the 510(k) process which requires the submission of information and data to the FDA that demonstrates that the device to be marketed is substantially equivalent to a currently marketed device. This data is generated by performing clinical studies comparing the results obtained using the Company’s device to those obtained using an existing test product. Although no maximum statutory response time has been set for review of a 510(k) submission, as a matter of policy the FDA has attempted to complete review of 510(k) submissions within 90 days. To date, the Company has received 510(k) clearance for 18 different products. Products subject to 510(k) regulations may not be marketed for in vitro diagnostic use until the FDA issues a letter stating that a finding of substantial equivalence has been made.

                     As a registered manufacturer of FDA regulated products, the Company is subject to a variety of FDA regulations including the Good Manufacturing Practices (GMP) regulations which define the conditions under which FDA regulated products are to be produced. These regulations are enforced by the FDA and failure to comply with GMP or other FDA regulations can result in the delay of pre-market product reviews, fines, civil penalties, recalls, seizures, injunctions and criminal prosecution. With the exception of the forensic market, FDA clearance of our diagnostic products is required by our clients and regulatory agencies.

                     As an accredited laboratory performing testing for clinical trials, the laboratory is subject to FDA regulations including Good Laboratory Practices (GLP) and related requirements.

                     C.        Drug Enforcement Administration (DEA). Our primary business involves either testing for drugs-of-abuse or developing test kits for the detection of drugs/drug metabolites in urine. MEDTOX Laboratories, Inc. is registered with the DEA to conduct chemical analyses with controlled substances. The MEDTOX Diagnostics, Inc. facility in Burlington, North Carolina is registered by the DEA to manufacture and distribute controlled substances and to conduct research with controlled substances. Maintenance of these registrations requires that we comply with applicable DEA regulations.

10

                     D.        Canadian Medical Devices Conformity Assessment System (CMDCAS). MEDTOX Diagnostics, Inc. maintains a Quality System which satisfies the requirements for ensuring the safety and effectiveness of MEDTOX products and meeting the customer needs in accordance with FDA requirements as described in 21 CFR part 820 (Quality Systems), and that satisfies the requirements of the Canadian Medical Devices Regulations (CMDR) and CAN/CSA ISO 13485:1998 and ISO 9001:1994.

                     The policy on the Canadian Medical Devices Conformity Assessment System (CMDCAS) addresses the Quality System requirements found in the CMDR. To sell a medical device in Canada, manufacturers must meet the regulatory requirements as defined in the Medical Devices Regulations. The Quality System implemented by the manufacturer for design and manufacture of medical devices must satisfy the Quality System requirements of ISO 13485 and the manufacturer is required to have its Quality System registered by an approved CMDCAS Registrar. A CMDCAS approved Registrar audits the manufacturer’s Quality System to ISO 13485:1998 and ISO 9001:1994. MEDTOX Diagnostics, Inc. maintains a quality management system fulfilling the requirements of EN ISO 13485 and CMDCAS ISO 13485, Quality Systems – Medical Devices and ISO 9001:2000 — Quality Management Systems – Requirements. MEDTOX Diagnostics, Inc. has been issued the TUV Rheinland Product Safety GmbH quality system certificate to EN ISO 13485:2000 and the TUV Rheinland of North America Inc., quality system certificate to ISO 13485 under CMDCAS. If we fail to meet CMDCAS requirements, we would not be permitted to sell our diagnostic products to the Canadian market, which could reduce our revenue.

                     E.        Centers for Medicare and Medicaid Services (CMS). The Clinical Laboratory Improvement Act (CLIA) introduced in 1992 requires that all in vitro diagnostic products be categorized as to level of complexity. A request for CLIA categorization of any new clinical laboratory test system must be made simultaneously with FDA 510(k) submission. The EZ-SCREEN^®, PROFILE^®, PROFILE^®-II, VERDICT^® and VERDICT^®-II drugs-of-abuse tests currently marketed by MEDTOX Diagnostics, Inc. have been categorized as moderately complex. The complexity category to which a clinical laboratory test system is assigned may limit the number of laboratories qualified to use the test system thus impacting product sales. MEDTOX Laboratories, Inc. is a CLIA licensed high complexity laboratory and is accredited by the College of American Pathologists (CAP) Laboratory Accreditation Program.

                     F.        Health Insurance Portability and Accountability Act of 1996 (HIPAA). MEDTOX Laboratories, Inc. is committed to safeguarding the privacy and confidentiality of our patients’ protected health information. The Company’s policy to be in compliance with the requirements of federal and Minnesota state law related to protecting the privacy of health information, including the Standards for Privacy of Individually Identifiable Health Information (45 CFR, Parts 160 and 164 — commonly called the “HIPAA Final Privacy Rule”). MEDTOX Laboratories, Inc. has compiled several policies and procedures that outline the steps that will be taken to ensure compliance with the HIPAA privacy standards and Minnesota state laws related to protected health information. All employees receive appropriate training on these policies and procedures, and it is the responsibility of each individual to follow the policies and procedures in the performance of their jobs. The “Notice of Privacy Practices” and “HIPAA Privacy Policy” for MEDTOX Laboratories, Inc. are posted on the Company’s internet website (http://www.medtox.com).

                     G.        Additional Laboratory Regulations. The laboratories of MEDTOX Laboratories, Inc. and certain of its laboratory personnel are licensed or otherwise regulated by certain federal agencies, states, and localities in which it conducts business. Federal, state and local laws and regulations require MEDTOX Laboratories, Inc., among other things, to meet standards governing the qualifications of laboratory owners and personnel, as well as the maintenance of proper records, facilities, equipment, test materials, and quality control programs. In addition, the laboratories are subject to a number of other federal, state, and local requirements that provide for inspection of laboratory facilities and participation in proficiency testing, as well as govern the transportation, packaging, and labeling of specimens tested by either laboratory. The laboratories are also subject to laws and regulations prohibiting the unlawful rebate of fees and limiting the manner in which business may be solicited.

11

                     The laboratory receives and uses small quantities of hazardous chemicals and radioactive materials in its operations and is licensed to handle and dispose of such chemicals and materials. Any business handling or disposing of hazardous and radioactive waste is subject to potential liabilities under certain of these laws.

            11.    Product and Professional Liability.

                     Laboratory Services. The Company’s laboratory testing services are primarily diagnostic and expose the Company to the risk of liability claims. The Company’s laboratories have maintained continuous professional and general liability insurance since 1984. The insurance policy covers those amounts the Company is legally obligated to pay for damages resulting from a medical incident, which arises out of a failure to render professional services. To date, the Company has not paid any material amounts for claims of this type and no material professional service claims are currently pending.

                     Product Sales. Manufacturing and marketing of products by the Company entail a risk of product liability claims. Since 1993, the Company has maintained insurance coverage against the risk of product liability arising out of events after such date, but such insurance does not cover claims made after that date based on events that occurred prior to that date. The insurance policy covers damages that the Company is legally obligated to pay as a result from bodily injury and property damage. Consequently, for uncovered claims, the Company could be required to pay any and all costs associated with any product liability claims brought against it, the cost of defense whatever the outcome of the action, and possible settlement or damages if a court rendered a judgment in favor of any plaintiff asserting such a claim against the Company. Damages may include punitive damages, which may substantially exceed actual damages. The obligation to pay such damages could have a material adverse effect on the Company and exceed its ability to pay such damages. No product liability claims are pending.

            12.    Employees.

                     As of December 31, 2004, the Company had a total of 415 full-time employee equivalents as compared to 417 full-time employee equivalents at December 31, 2003. Of the 415 employees, 361 work for MEDTOX Laboratories, Inc., while the remaining 54 work for MEDTOX Diagnostics, Inc.

                     The Company’s employees are not covered by any collective bargaining agreements and the Company has not experienced any work stoppages. The Company believes that it maintains good relations with its employees.

            13.    Available Information.

                     The Company also makes available free of charge on or through its Internet website (http://www.medtox.com) the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after the Corporation electronically files such material with, or furnishes it to, the Securities and Exchange Commission.

ITEM 2.        PROPERTIES.

                     The administrative offices and laboratory operations for the Laboratory Services segment of the Company’s business are located primarily in a 53,576 square foot facility in St. Paul, Minnesota. Until March 16, 2001, the Company leased this space. On March 16, 2001 the Company purchased the entire three building complex with a total of 129,039 square feet, which included the 53,576 square feet utilized by the Company’s Laboratory Services segment. The purchasing entity was New Brighton Business Center, LLC, a wholly owned limited liability company, established by the Company for the sole purpose of purchasing the entire three building complex. The facility includes other commercial tenants that have individual leases that

12

range from ten years to less than one year in duration. In 2004, the annual rent paid by such third-party tenants, excluding their pro-rata share of operating expenses, was approximately $234,000.

                     In addition, effective September 1, 2001, the Laboratory Services segment entered into a seven-year lease for 30,000 square feet to be used in connection with its courier business and also as additional warehouse and shipping space. This building is a special purpose facility and enables the Company to store its vehicles indoors, when appropriate, and to perform routine maintenance of the vehicles. The annual base rent on this second facility, exclusive of operating expenses is currently $141,000 per year.

                     The operations for the Product Sales segment of the Company’s business are located in Burlington, North Carolina where the Company maintains the offices, research and development laboratories, production operations, and warehouse for MEDTOX Diagnostics, Inc. In March 2001, the Company entered into a 10-year lease of the entire building (approximately 39,500 square feet) for an annual base rent of $197,000, exclusive of operating expenses. In addition, under the lease $600,000 of tenant improvements made to the building by the Company are being amortized over the life of the lease as additional rent. Effective February 1, 2003, the Company entered into a month-to-month lease for an additional 30,000 square feet of space located in an adjacent building. The additional space is used for warehousing and distribution for a monthly base rent of $9,400, exclusive of operating expenses. In November 2003, the Company amended and restated these leases. Under the terms of the new lease, the original leases have been combined and the term of the new lease has been extended to March 31, 2016, for an annual base rent of $385,725, exclusive of operating expenses, effective January 2004, including amortization of the $600,000 of improvements.

                     The Burlington facilities have always been owned and leased to the Company by Dr. Samuel C. Powell, a member of the Board of Directors of the Company. The Company believes it is renting these facilities in Burlington on terms similar to those available from third parties for equivalent premises.

                     The Company believes that its existing facilities are adequate for the purposes being used to accommodate its product development, and manufacturing and laboratory testing requirements.

ITEM 3.       LEGAL PROCEEDINGS.

                     Not applicable.

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

                     No matter was submitted to a vote of the security holders during the fourth quarter of the fiscal year covered by this report.

13

PART II

ITEM 5.       MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED
                     STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
                     SECURITIES.

Common Stock

                     Since 1993, the Company’s common stock has been listed on the American Stock Exchange and is currently trading under the symbol “TOX”. As of February 22, 2005, the number of holders of record of the Common Stock was 1,234. The following tables set forth, for the calendar quarters indicated, the high, low, and closing prices per share for the common stock, as reported by the American Stock Exchange. The quotations shown represent inter dealer prices without adjustment for retail markups, markdowns or commissions, do not necessarily reflect actual transactions, and have been adjusted for the three-for-two stock split paid on August 20, 2004.

                 *Closing price as of the last day of the calendar quarter

Dividends

                     No cash dividends have been declared or paid by the Board of Directors of the Company since its inception and the Board of Directors of the Company has no plans to pay a cash dividend in the foreseeable future. The Company's financial covenants under its debt instrument may effectively preclude the Company from paying cash dividends without approval.

                     On July 29, 2004, the Board of Directors declared a three-for-two stock split on the Company's common stock, effected in the form of a 50% stock dividend, which was paid on August 20, 2004. All stock option, warrant, share and per share data included in the consolidated financial statements have been restated to reflect the stock split.

                     In September 1998, the Company's Board of Directors authorized and declared a dividend of one preferred share purchase right (Right) for each share of common stock then outstanding. Subsequent to that date the Company maintains a plan in which one Right exists for each common share of the Company. These Rights are exercisable only if a person or group acquires beneficial ownership of 20 percent or more of the Company's outstanding common stock.

14

Issuer Purchases of Equity Securities

(a)     Represents shares withheld from employees to satisfy tax withholding obligations that arose upon the vesting of restricted stock.

(b)     No cash was paid by the Company as shares were withheld from employees and surrendered upon the vesting of restricted stock to satisfy tax withholding obligations.

15

ITEM 6.       SELECTED FINANCIAL DATA.

                     The following selected financial data is derived from the consolidated financial statements of the Company and should be read in conjunction with the consolidated financial statements, related notes, and other financial information included elsewhere in this Form 10-K.

All share and per share amounts have been restated for the three-for-two stock split paid on August 20, 2004 and the 10% stock dividends paid on July 5, 2002 and November 9, 2001.

16

ITEM 7.        MANAGEMENT’S DISCUSSION AND ANALYSIS
                      OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

General

        MEDTOX Scientific, Inc. (formerly EDITEK, Inc.), a Delaware corporation, was organized in September 1986. MEDTOX Scientific, Inc. and its wholly owned subsidiaries, MEDTOX Laboratories, Inc., MEDTOX Diagnostics, Inc., and New Brighton Business Center, LLC are referred to herein as “the Company.” The Company is engaged primarily in two distinct, but very much related businesses. The business of forensic and clinical laboratory services is conducted by MEDTOX Laboratories, Inc. at its facility in St. Paul, Minnesota, and the business of manufacturing and distribution of diagnostic devices is executed by MEDTOX Diagnostics, Inc. from its facility in Burlington, North Carolina.

        The Company has two reportable segments: “Laboratory Services” conducted by the Company’s wholly owned subsidiaries, MEDTOX Laboratories, Inc. and New Brighton Business Center, LLC and “Product Sales” conducted by the Company’s wholly owned subsidiary MEDTOX Diagnostics, Inc. Laboratory Services include forensic toxicology (primarily workplace drugs-of-abuse testing) and Specialty Laboratory Services, including clinical toxicology, clinical testing for the pharmaceutical industry (central laboratory services, bioanalytical and pharmacokinetic testing), and analysis of heavy and trace metals. In addition, the Laboratory Services segment provides logistical support, data management and overall program management services. Product Sales include sales of a variety of on-site screening products and contract manufacturing. For the years ended December 31, 2004, 2003, and 2002, Laboratory Services revenue accounted for 76%, 77% and 76% of the Company’s revenues, respectively. Revenue from Product Sales accounted for 24%, 23% and 24% of the total revenues of the Company during 2004, 2003, and 2002, respectively.

Critical Accounting Policies

        The Company has identified the policies outlined below as critical to understanding its business and results of operations. The listing is not intended to be a comprehensive list of all accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States of America, with no need for management’s judgment in their application. The impact and any associated risks related to these policies on the Company’s business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations where such policies affect reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see Note 1 in the Notes to the Consolidated Financial Statements in Item 15 on Form 10-K, beginning on page 41. Note that the preparation of this Form 10-K requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.

The Company’s critical accounting policies are as follows:

Accounts Receivable:
        The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customers’ current credit worthiness, as determined by management’s review of their current credit information. The Company continuously monitors collections and payments from its customers and maintains a provision for estimated credit losses based upon the Company’s historical experience and any specific customer collection issues that have been identified. While such credit losses have generally been within the Company’s historical expectations and the provisions established, the Company cannot guarantee that it will continue to experience the same credit loss rates that have occurred in the past. The Company’s consolidated trade accounts receivable balance as of December 31, 2004 was $8.1 million, net of allowance for doubtful accounts of $0.7 million.

17

        Some of the Company’s Laboratory Services revenues for certain types of tests are billed to third-party payors including insurance companies, state Medicaid and Medicare agencies. These payors pay for such services at established amounts, which are typically lower than gross amounts billed by the Company. However, the tests are sometimes billed directly to patients or other parties and paid at the gross amount billed for these tests. In addition, billings for the tests are occasionally re-billed to alternative payors in situations where incorrect billing information was submitted to the Company by the customer. The Company estimates a discount on the billings for these tests, and recognizes revenue and related accounts receivable at a net amount, after discount, in order to state revenue and accounts receivable at the amount expected to be paid. While the Company believes that estimated discounts and the related net revenue and net accounts receivable from these testing services are materially correct, there can be differences in amounts ultimately paid compared to estimated amounts. These differences are recorded upon payment and may affect previously recorded amounts. The Company considers historical discounts when estimating future discounts on a monthly basis.

Off-Site Supplies Inventory:
        Off-site supplies represents collection kits and forms located at collections sites throughout the United States used by Laboratory Services’ customers to submit specimens for testing services. At December 31, 2004, off-site inventory was $0.8 million. The process for valuing off-site inventory involves significant assumptions regarding the average time that a collection site uses the inventory, as well as the amount of inventory expected to be scrapped.

Goodwill and Other Intangible Assets:
         The Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets” on January 1, 2002. SFAS No. 142 provides that goodwill and indefinite-lived intangible assets are no longer amortized, but are instead reviewed for impairment at least annually and between annual test dates in certain circumstances. The Company completed the necessary transition impairment review for goodwill and other intangible assets in 2002, and determined that there was no impairment. The Company performs its annual impairment test for goodwill and other intangible assets in the fourth quarter of each year. No impairments were indicated as a result of the annual impairment reviews for goodwill and other intangible assets in 2004, 2003 and 2002. In assessing the recoverability of goodwill and other intangible assets, projections regarding estimated future cash flows and other factors are made to determine the fair value of the respective assets. If these estimates or related projections change in the future, the Company may be required to record impairment charges for these assets in future periods.

Accounting for Income Taxes:
        As part of the process of preparing the consolidated financial statements, the Company is required to estimate income taxes in each of the jurisdictions in which it operates. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. The Company must then assess the likelihood that deferred tax assets will be recovered from future taxable income and tax planning strategies, and to the extent management believes that recovery is not likely, the Company must establish a valuation allowance. To the extent the Company increases or decreases the valuation allowance in a period, the Company must include an expense or benefit within the tax provision in the consolidated statement of operations.

18

        Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against net deferred tax assets. The Company’s deferred tax assets primarily consist of certain net operating losses (NOLs) carried forward. At December 31, 2004, the Company had a valuation allowance on deferred tax assets of $0.9 million, which represents the portion of its NOL carryforwards that will more likely than not expire unused in 2005 and future years. The valuation allowance is based on management’s estimate of future taxable income, the period over which NOLs will be recoverable, and tax planning strategies. In the future, subsequent revisions to the estimated net realizable value of these deferred tax assets could cause the provision for income taxes to vary significantly from period to period, although the Company’s cash payments would remain unaffected until the benefit of the NOLs is completely utilized or expires unused.

Results of Operations

Overview

        In 2004, the Company achieved record revenues driven by strong sample volume from both new and existing workplace and occupational health clients as well as strong sales of PROFILE^®-II products. Gross margin improved primarily due to increased revenue as well as operating efficiencies realized from the Company’s LEAN projects. The following table sets forth the percentages of total revenues represented by certain items reflected in the Company’s Consolidated Statements of Operations:

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Revenues

        Revenues increased 10% to $56.7 million in 2004, reflecting a $3.8 million, or 10% increase in Laboratory Services revenues and a $1.5 million, or 12% improvement in Product Sales revenues.

        In the Laboratory Services segment, revenues from workplace and occupational health clients grew 16% due to increased sample volume from both new and existing clients. The Company has been able to benefit from consolidation in the drugs-of-abuse market, leaving fewer competitors capable of providing the same level of testing. In addition, the Company has created value-added sales programs which have also generated new business opportunities. Revenues from the Company’s Specialty Laboratory Services were essentially flat with 2003.

19

        In the Product Sales segment, sales of point of collection (POC) on site testing products, which incorporates the PROFILE®-II, PROFILE-II ER^®, PROFILE^®-II A and VERDICT^®-II on-site test kits and other ancillary products for the detection of abused substances, increased 9% to $11.2 million in 2004. This growth reflects strong sales of PROFILE^®-II products, which grew 31% from 2003. However, sales within the VERDICT^®-II product line to government clients for probation, parole and rehabilitation were down 19% from 2003. In 2004, the Company continued the introduction of a proprietary value added service called DARS™ (Drug Abuse Recognition System) in the government workplace and has identified numerous state and county agencies interested in program implementation. The implementation of DARS™ to new clients helped offset additional revenue declines of VERDICT^®-II products caused by ongoing constraints on state budgets for drug testing services.

        Sales of contract manufacturing services, microbiological and associated products increased 40% to $2.0 million in 2004 and were positively impacted by the timing of orders from existing clients. Product sales from agricultural diagnostic products were down $47,000, or 14%, due to decreased purchases by the U.S. Department of Agriculture (USDA). The USDA’s needs for the Company’s products vary from year-to-year and sales to the USDA are expected to fluctuate accordingly.

Gross profit

        Consolidated gross margin increased to 42.0% of revenues in 2004 from 38.8% in 2003, driven by improvement in both Laboratory Services and Product Sales gross margins.

        Laboratory Services gross margin was 36.1% in 2004, up from 33.1% in 2003. The margin improvement was attributable to increased revenue spread over relatively stable fixed costs, as well as improved operating efficiencies realized from the implementation of LEAN in the drugs-of-abuse testing laboratory. The Company also initiated LEAN within Specialty Laboratory Services in 2004, with implementation expected in 2005. The Company’s LEAN initiatives are designed to improve quality and productivity, cut costs and increase throughput.

        Gross margin from Product Sales improved to 60.9% in 2004, from 57.1% in 2003, largely due to the impact of fixed-type costs on increased production levels. The Company also implemented LEAN initiatives across multiple areas of its diagnostics operation in 2004 which improved efficiency and productivity.

Selling, general and administrative expenses

        Selling, general and administrative expenses increased 7% to $17.8 million in 2004 from $16.7 million in 2003. The increase in spending was primarily associated with higher performance-based compensation such as bonuses and sales commissions based on the Company’s financial performance, increased depreciation expense related to capital improvements to improve operating efficiencies in connection with the Company’s LEAN initiatives, and increased spending in information technology. While the Company’s cost structure has been favorably impacted by the improved efficiencies generated from LEAN initiatives in 2003 and 2004, the Company continues to make investments to enhance the overall infrastructure and to pursue its overall business strategy.

Research and development expenses

        Research and development decreased $0.2 million, or 11%, to $1.7 million in 2004. In 2003, the Company incurred recruiting and hiring costs associated with the addition of a new Vice President of Technology, Research and Development at the Company’s Product Sales segment, as well as severance and other costs associated with the reorganization of the department.

20

Other expense

        Other income and expense consists primarily of interest expense and the net expenses associated with the Company’s building rental activities. These expenses decreased 16% to $1.4 million in 2004. The decrease was primarily due to a reduction in interest expense of $0.2 million, reflecting lower average debt levels. The decrease was also due to increased rental income as a result of lower vacancy rates.

Income taxes

        The Company recorded a tax provision for 2004 based upon an effective tax rate of 38%. The Company did not record a tax provision or benefit for 2003. At December 31, 2004, the Company had a valuation allowance on deferred tax assets of $0.9 million, which represents the portion of its net operating loss (NOL) carryforwards that will more likely than not expire unused in 2005 and future years. Should operating results for 2005 fail to meet expectations, the valuation allowance against the Company’s NOL carryforwards and the related deferred tax asset may require adjustment in future periods.

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Revenues

        Revenues decreased 1.1% to $51.5 million in 2003, reflecting a $0.3 million, or 2.4% decline in Product Sales revenues and a $0.2 million, or 0.6% decline in Laboratory Services revenues.

        Laboratory Services revenues were impacted by a decline in the average price per testing specimen for workplace drugs-of-abuse testing. The lower pricing was part of the Company’s strategy to attract new business to offset the impact of the reduced specimen volume experienced in the first half of 2003. For the full year, specimen volume from the Company’s occupational health and corporate clients increased 2.4%. This improvement reflects the Company’s continued success in acquiring new client relationships and gaining market share, despite the continued softness in new business employment. Revenues from the Company’s Specialty Laboratory Services remained strong, increasing 4.9% in 2003.

        In the Product Sales segment, sales of substance abuse testing products, which incorporates the PROFILE^®-II, PROFILE-II ER^®, PROFILE^®-II A and VERDICT^®-II on-site test kits and other ancillary products for the detection of abused substances, declined 3.3% to $10.3 million in 2003. The decline is primarily attributable to lower sales within the VERDICT^®-II product line to government clients for probation, parole and rehabilitation. The economic uncertainty and budget constraints that the Company’s government clients are experiencing resulted in lower purchasing levels among these clients. The Company anticipates that the government sector will continue to be a challenging environment, and will continue to pursue new sales efforts that the Company believes will improve this portion of its business going forward. Principally, during the second quarter of 2003, the Company introduced a proprietary value added service called DARS™ (Drug Abuse Recognition System) that it believes will increase sales in the government marketplace. Sales of PROFILE^®-II devices to existing workplace and occupational clients were also down from last year and continue to be impacted by the reduction in nationwide hiring. Additionally, some customers are alternatively purchasing the PROFILE^®-II A device, which screens for the same five drugs-of-abuse, but also includes a patented lateral flow test strip to screen for the five most common adulterants. Sales of the PROFILE^®-II A increased 74.1% in 2003. The PROFILE-II ER^® product, targeted at hospital laboratories for emergency response screening in drugs-of-abuse overdose situations, continues to grow, increasing 44.5% in 2003.

21

        Product sales from agricultural diagnostic products increased 23.0% to $0.3 million in 2003 primarily as a result of increased purchases from the U.S. Department of Agriculture (USDA) for the Company’s products. Sales of contract manufacturing services, microbiological and associated products of $1.4 million in 2003 were flat compared to 2002.

Gross profit

        Consolidated gross margin declined to 38.8% in 2003 compared to 39.5% in 2002. Gross margin from Product Sales declined to 57.1% in 2003, compared to 62.1% in 2002. This decline was largely due to the costs associated with the expansion and improvement of the production facility on lower than projected sales volume, as well as increased spending in quality control. Laboratory Services gross margin was 33.1% in 2003, up from 32.5% in 2002. The margin improvement was driven by labor savings associated with staffing reductions and improved operating efficiencies resulting from LEAN project initiatives. The increase in margin was partially offset by a decline in the average price per testing specimen.

Selling, general and administrative expenses

        Selling, general and administrative expenses were $16.7 million, or 32.5% of revenues, in 2003, compared to $16.3 million, or 31.4% of revenues, in 2002. The increase was primarily due to severance costs associated with staffing reductions and higher business insurance expenses. During the third and fourth quarters of 2003, selling, general and administrative expenses were 30.6% and 31.3% of sales, respectively. The improvement during the second half of 2003 reflects savings from steps taken earlier in the year to reduce expenses, including certain staffing reductions. In the second half of 2003, the Company also initiated three significant LEAN projects with the objective of further reducing expenses in the Laboratory Services segment in the first quarter of 2004. In the first quarter of 2004, the Company launched a LEAN initiative at the Product Sales segment to improve operating efficiencies and reduce expenses.

Research and development expenses

        Research and development increased 56.9%, or $0.7 million in 2003. The increase was driven primarily by increased development activity associated with new product configurations and assays and other new product research in the Product Sales segment. The increase was also due to recruiting and hiring costs associated with the addition of a new Vice President of Technology, Research and Development at the Company’s Product Sales segment, as well as severance and other costs associated with the reorganization of the department.

Other expense

        Other income and expense consists primarily of interest expense and the net expenses associated with the Company’s building rental activities. These expenses increased 14% to $1.6 million in 2003. The increase was primarily due to reduced rental income as a result of higher vacancy rates. While the Company is actively seeking additional tenants for the building, there can be no assurance it will be able to lower overall vacancy rates in 2004. This increase was partially offset by a reduction in interest expense due to lower average interest rates.

Income taxes

        The Company did not record a tax provision or benefit for 2003. At December 31, 2003, the Company has a valuation allowance on deferred tax assets of $0.9 million, which represents the portion of its net operating loss (NOL) carryforwards that will more likely than not expire unused in 2004 and future years. Should operating results for 2004 fail to meet expectations, the valuation allowance against the Company’s NOL carryforwards and the related deferred tax asset may require adjustment in future periods.

22

Liquidity and Capital Resources

        The working capital requirements of the Company have been funded primarily by various combinations of profitable operations, cash received from debt financing, and the sale of equity securities. Cash and cash equivalents at December 31, 2004 were $0.3 million, compared to $0.7 million at December 31, 2003.

        Net cash provided by operating activities was $6.5 million in 2004 compared to $3.2 million and $4.2 million in 2003 and 2002, respectively. The increase in 2004 was primarily due to an improvement in operating results as well as a smaller decrease in accounts payable and accrued expenses. Accounts payable and accrued expenses decreased $0.1 million in 2004 compared to a reduction of $1.6 million in 2003. The significant reduction in 2003 was primarily due to a high level of accounts payable as of December 31, 2002, with subsequent payments of such outstanding balances during the first few months of 2003.

        Net cash used in investing activities, consisting primarily of capital expenditures, was $4.0 million in 2004 compared to $2.6 million and $4.3 million in 2003 and 2002, respectively. The increased spending in 2004 from 2003 reflects equipment purchased and costs incurred in redesigning the laboratory operations to improve operating efficiencies in connection with the Company’s LEAN initiatives.

        The Company expects equipment and capital improvement expenditures to be between $3.0 million and $4.0 million in 2005. These expenditures are intended primarily to continue to improve efficiencies and reduce operating costs within the Laboratory Services and Product Sales businesses. Such expenditures are expected to be funded through borrowings under the Company’s credit facilities and cash provided by operating activities.

        Net cash used in financing activities was $2.9 million in 2004, compared to $0.3 million in 2003 and net cash provided by operating activities of $0.5 million in 2002. The increase in 2004 was primarily the result of payments on the revolving credit facility and a reduction in new financing activity.

        The Company has a Credit Security Agreement (the Wells Fargo Credit Agreement) with Wells Fargo Business Credit, Inc. (Wells Fargo). The Wells Fargo Credit Agreement, as amended, consists of (i) a revolving line of credit, payable on demand, of not more than $8.0 million or 85% of the Company’s eligible trade accounts receivable bearing interest at prime + 1%; and (ii) a capex note of up to $1.5 million for the purchase of capital equipment bearing interest at prime + 0.75%. According to the terms of the agreement, the capex note may be amended, supplemented or restated from time to time and is generally done so on an annual basis.

        The Wells Fargo Credit Agreement requires the Company to comply with certain financial covenants, including a minimum annual debt service coverage ratio and minimum quarterly pre-tax net income levels. It also sets a maximum level for capital expenditures, as well as a limitation on the year-over-year increase in compensation of any director, shareholder or consultant. At December 31, 2004, the Company was in compliance with the financial covenants of the Wells Fargo Credit Agreement.

        In 2003, the Company entered into a Credit and Security Agreement with Wells Fargo Equipment Finance, Inc. for the acquisition of various pieces of equipment. In connection with the agreement, the Company signed notes payable for $2.0 million, payable in monthly installments over 3.5 years. Interest is payable at a variable rate of 1.25% to 1.50% over prime. The note is secured by the equipment purchased with the proceeds of the loan.

23

        In connection with the Company’s private equity placements in July and August 2000, the Company issued warrants to acquire common shares at an exercise price of $6.75. At December 31, 2004, the Company had 1,115,808 warrants outstanding, which expire in July and August 2005. The Company would receive aggregate proceeds of approximately $7.5 million in the event of the exercise of all outstanding warrants.

        The Company is relying on expected positive cash flow from operations and its line of credit to fund its future working capital and asset purchases. The amount available on the revolving line of credit is based primarily on the receivables of the Company and, as such, varies with accounts receivable. As of December 31, 2004, the Company had total borrowing capacity of $6.0 million on its line of credit, of which $4.7 million was borrowed, leaving a net availability of $1.3 million. Cash at December 31, 2004 was $0.3 million.

        The Company believes that the aforementioned capital will be sufficient to fund the Company’s planned operations through 2005. While there can be no assurance that the available capital will be sufficient to fund the future operations of the Company beyond 2005, the Company believes that future profitable operations, as well as access to additional capital through debt or equity financings, will be the primary means for funding the operations of the Company for the long term.

        The Company continues to follow a plan which includes (i) aggressively monitoring and controlling costs, (ii) increasing revenue from sales of the Company’s existing products and services (iii) developing new products and services, as well as (iv) continuing to selectively pursue synergistic acquisitions to increase the Company’s critical mass. However, there can be no assurance that costs can be controlled, revenues can be increased, financing may be obtained, acquisitions successfully consummated, or that the Company will be profitable.

Disclosures about Contractual Obligations and Commercial Commitments

        The following table aggregates all contractual commitments and commercial obligations that affect the Company’s financial condition and liquidity position as of December 31, 2004:

(1)   Amounts include interest payments based upon contractual or prevailing interest rates.

24

Off-Balance Sheet Transactions

        The Company does not maintain any off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Impact of Inflation and Changing Prices

        The impact of inflation and changing prices on the Company has been primarily limited to salary, laboratory and operating supplies and rent increases and has historically not been material to the Company’s operations. In the future, the Company may not be able to increase the prices of laboratory testing by an amount sufficient to cover the cost of inflation, although the Company is responding to these concerns by refocusing the laboratory operations towards higher margin testing (including clinical and pharmaceutical trials) as well as emphasizing the marketing, sales and operations of the Product Sales business.

Impact of New Accounting Standards

        In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123(R), “Share-Based Payment” that will require compensation costs related to share-based payment transactions to be recognized in the Company’s statement of operations. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be re-measured each reporting period. Compensation cost will be recognized over the period that an employee provides service in exchange for the award. SFAS No. 123(R) replaces SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS No. 123(R) will be effective for the Company on July 1, 2005. The Company is currently in the process of evaluating the impact of the adoption of SFAS No. 123(R).

        In November 2004, the FASB issued SFAS No. 151, “Inventory Costs, an amendment of ARB No. 43, Chapter 4.” SFAS No. 151 requires that abnormal amounts of idle capacity and spoilage costs should be excluded from the cost of inventory and expensed when incurred. SFAS No. 151 will be effective for the Company on July 1, 2005. The Company does not expect the adoption of this statement to have a material impact of its results of operations or financial position.

        In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” as revised in December 2003 (FIN 46R).  FIN 46R addresses consolidation by business enterprises of variable interest entities and significantly changes the consolidation application of consolidation policies to variable interest entities and, thus improves comparability between enterprises engaged in similar activities when those activities are conducted through variable interest entities.  The consolidation requirements of FIN 46R apply to variable interest entities as of March 31, 2004. The Company does not hold an interest in any variable interest entities

ITEM 7A.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

        Market risk is the risk that the Company will incur losses due to adverse changes in interest rates or currency exchange rates and prices. The Company’s primary market risk exposures are to changes in interest rates. During 2004, 2003, and 2002, the Company did not have sales denominated in foreign currencies nor did it have any subsidiaries located in foreign countries. As such, the Company is not exposed to market risk associated with currency exchange rates and prices.

25

        At December 31, 2004, the Company had a $5.6 million mortgage loan payable to Principal Life Insurance Company at a fixed annual rate of 7.23% until March 1, 2006, at which time the rate will be renegotiated by the parties. At December 31, 2004, the Company had capital leases and several vehicle loans totaling $113,000 and $28,000, respectively, at various fixed rates. These fixed-rate financial instruments are subject to interest rate risk and will increase or decrease in value if market interest rates change. Changes in market interest rates would not impact the Company’s cash obligations under fixed rate debt.

        The Company had approximately $6.6 million and $8.5 million outstanding on its line of credit and long-term debt issued under the Wells Fargo Credit Agreement as of December 31, 2004 and 2003. The debt under the Wells Fargo Credit Agreement has variable interest rates. The Company has cash flow exposure on its committed and uncommitted line of credit and long-term debt due to its variable prime rate pricing. At December 31, 2004, a 1% change in the prime rate would increase or decrease interest expense or cash flows by less than $0.1 million.

        The Company does not enter into derivative or other financial instruments or hedging transactions for trading or speculative purposes.

26

ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Reference is made to the financial statements, financial statement schedule, and notes thereto included later in this report under Item 15.

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

None.

ITEM 9A.   CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls Procedures

As of the end of the period covered by this report, the Company conducted an evaluation under the supervision and with the participation of the company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rules 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information that is required to be disclosed by the Company in reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the rules of the Securities Exchange Commission.

Changes in Internal Controls

There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

27

PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The information required by this Item is incorporated by reference from the section labeled “Proposal 1- Election of Directors” that will appear in the Definitive Proxy Statement to be used in connection with the 2005 Annual Meeting of Stockholders of MEDTOX Scientific, Inc.

         The Company has adopted the MEDTOX Scientific, Inc. Code of Ethics for senior financial and executive officers (“Code of Ethics”). The Code of Ethics is available at no charge to anyone who sends a request for a paper copy to MEDTOX Scientific, Inc. 402 West County Road D, St. Paul, Minnesota, 55112. If the Company makes any substantive amendments to the Code of Ethics or grants any waiver, including any implicit waiver from a provision of the Code of Ethics to its directors or executive officers, the Company will disclose the nature of such amendments or waiver on its website or in a report on Form 8-K.

ITEM 11.    EXECUTIVE COMPENSATION.

         The information required by this Item is incorporated by reference from the sections labeled “Executive Compensation” and “Summary Compensation Table” that will appear in the Definitive Proxy Statement to be used in connection with the 2005 Annual Meeting of Stockholders of MEDTOX Scientific, Inc.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                     MANAGEMENT.

         The information required by this Item is incorporated by reference from the sections labeled “Common Stock Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” that will appear in the Definitive Proxy Statement to be used in connection with the 2005 Annual Meeting of Stockholdersof MEDTOX Scientific, Inc.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information required by this Item is incorporated by reference from the section labeled “Certain Relationships and Related Transactions” that will appear in the Definitive Proxy Statement to be used in connection with the 2005 Annual Meeting of Stockholders of MEDTOX Scientific, Inc.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES.

         The information required by this Item is incorporated by reference from the section labeled “Fees to Independent Registered Public Accounting Firm” that will appear in the Definitive Proxy Statement to be used in connection with the 2005 Annual Meeting of Stockholdersof MEDTOX Scientific, Inc.

28

PART IV

ITEM 15.     EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.

All other financial statement schedules normally required under Regulation S-X are omitted as the required information is inapplicable.

The exhibits included in the Report are set forth on the exhibit index and follow the signature page of this Annual Report on Form 10-K.

Bylaws of the Registrant (incorporated by reference to Exhibit 4.2 filed with the Registrant's Report on Form 10-Q for the quarter ended December 31, 1986).

Restated Certificate of Incorporation of the Registrant filed with the Delaware Secretary of State on July 29, 1994 (incorporated by reference to Exhibit 3.8 filed with the Registrant's Form 10-K for fiscal year ended December 31, 1994).

Certificate of Amendment of Certificate of Incorporation of the Registrant, filed with the Delaware Secretary of State on November 27, 1995 (incorporated by reference to Appendix A filed with the Registrant's Proxy Statement on September 29, 1995).

Amended Certificate of Designations of Preferred Stock (Series A Convertible Preferred Stock) of the Registrant, filed with the Delaware Secretary of State on January 29, 1996 (incorporated by reference to Exhibit 3.1 filed with the Registrant's report on Form 8-K dated January 30, 1996).

29

Certificate of Amendment of Certificate of Incorporation of MEDTOX Scientific, Inc. filed with Delaware Secretary of State on September 17, 1998 (incorporated by reference to Exhibit 3.5 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1998).

Certificate of Amendment of Certificate of Incorporation of MEDTOX Scientific, Inc. filed with Delaware Secretary of State on November 19, 1999 (incorporated by reference to Exhibit 3.6 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1999).

Form of Warrant accompanying the Stock Purchase Agreement dated July 31, 2000. (Incorporated by reference to Exhibit 4.3 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2000).

Rights Agreement dated September 18, 1998 between the Registrant and American Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.1 filed with the Registrant’s Report on Form 8-K dated September 21, 1998).

Second Amendment dated December 31, 1986 to Exclusive License Agreement amending and restating exclusive license granted by the Registrant to Disease Detection International, Inc. (incorporated by reference to Exhibit 10.25 filed with the Registration Statement on Form S-1 dated August 26, 1987, Commission File No. 33-15543).

Registrant’s Amended and Restated Qualified Employee Stock Purchase Plan (incorporated by reference to Exhibit 4 filed with the Registrant’s Registration Statement on Form S-8 dated November 11, 1993, Commission File No. 33-71596).

Agreement regarding rights to “MEDTOX” name dated as of January 30, 1996 between the Registrant and Harry G. McCoy. (Incorporated by reference to Exhibit 10.38 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1995.)**

Employment Agreement dated January 1, 2000 between the Registrant and Harry G. McCoy. (Incorporated by reference to Exhibit 10.45 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 1999.)**

Registrant’s Restated Equity Compensation Plan dated May 10, 2000. (Incorporated by reference to exhibit 10.46 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2000.)**

Form of Severance Agreement between the Registrant and James B. Lockhart, James A. Schoonover, B. Mitchell Owens, and Kevin J. Wiersma. (Incorporated by reference to exhibit 10.47 filed with the Registrant's Report on Form 10-K for the fiscal year ended December 31, 2000).**

Purchase and Sale Agreement dated July 27, 2000 by and between the Registrant and NMRO, Inc. (Incorporated by reference to exhibit 10.48 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2000).

30

Registration Rights Agreement dated July 31, 2000 among the Registrant, certain investors, and Miller, Johnson, & Kuehn, Inc. (“MJK”). (Incorporated by reference to exhibit 10.50 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2000).**

Stock Purchase Agreement dated July 31, 2000 between the Registrant and certain investors. (Incorporated by reference to exhibit 10.51 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2000).**

Purchase and Sale Agreement dated December 29, 2000 by and between MEDTOX Laboratories, Inc. and PHL-OPCO, LP. (Incorporated by reference to exhibit 10.52 filed with the Registrant's Report on Form 10-K for the fiscal year ended December 31, 2000).

Mortgage and Security Agreement dated March 16, 2001 by and between New Brighton Business Center LLC and Principal Life Insurance Company. (Incorporated by reference to exhibit 10.53 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2000).

Secured Promissory Note dated March 16, 2001 by and between New Brighton Business Center LLC and Principal Life Insurance Company. (Incorporated by reference to exhibit 10.54 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2000).

Nova Building Lease dated March 28, 2001 by and between Samuel C. Powell and Karen G. Powell and MEDTOX Diagnostics, Inc. (Incorporated by reference to exhibit 10.55 filed with the Registrant’s Report on Form 10-Q for the quarter ended March 31, 2001).

Amendment No. 1 to Nova Building Lease dated April 1, 2001 by and between Samuel C. Powell and Karen G. Powell and MEDTOX Diagnostics, Inc. (Incorporated by reference to exhibit 10.56 filed with the Registrant's Report on Form 10-Q for the quarter ended March 31, 2001).

Amended and Restated Credit and Security Agreement dated March 31, 2001 by and among MEDTOX Scientific, Inc., MEDTOX Laboratories, Inc., MEDTOX Diagnostics, Inc., Consolidated Medical Services, Inc. and Wells Fargo Business Credit, Inc. (Incorporated by reference to exhibit 10.57 filed with the Registrant's Report on Form 10-Q for the quarter ended March 31, 2001).

First Amendment dated October 24, 2001 to the Amended and Restated Credit and Security Agreement dated March 31, 2001 by and among MEDTOX Scientific, Inc., MEDTOX Laboratories, Inc., MEDTOX Diagnostics, Inc., Consolidated Medical Services, Inc. and Wells Fargo Business Credit, Inc. (Incorporated by reference to exhibit 10.58 filed with the Registrant's Report on Form 10-K for the fiscal year ended December 31, 2002).

Employment Agreement dated January 1, 2003, between the Registrant and Richard J. Braun. (Incorporated by reference to exhibit 10.59 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2002).**

31

Second Amendment to Amended and Restated Credit and Security Agreement dated May 1, 2002, by and among MEDTOX Scientific, Inc., MEDTOX Laboratories, Inc., MEDTOX Diagnostics, Inc., Consolidated Medical Services, Inc. and Wells Fargo Business Credit, Inc. (Incorporated by reference to exhibit 10.60 filed with the Registrant's Report on Form 10-K for the fiscal year ended December 31, 2002).

Security Agreement dated December 10, 2002, by and among MEDTOX Scientific, Inc., MEDTOX Laboratories, Inc., MEDTOX Diagnostics, Inc., and Wells Fargo Equipment Finance, Inc. (Incorporated by reference to exhibit 10.61 filed with the Registrant's Report on Form 10-K for the fiscal year ended December 31, 2002).

Secured Promissory Note dated December 10, 2002, by and among MEDTOX Scientific, Inc., MEDTOX Laboratories, Inc., MEDTOX Diagnostics, Inc., and Wells Fargo Equipment Finance, Inc. (Incorporated by reference to exhibit 10.62 filed with the Registrant's Report on Form 10-K for the fiscal year ended December 31, 2002).

Intercreditor Agreement dated December 16, 2002, by and between MEDTOX Scientific, Inc. and Wells Fargo Equipment Finance, Inc. (Incorporated by reference to exhibit 10.63 filed with the Registrant's Report on Form 10-K for the fiscal year ended December 31, 2002).

Amended and Restated Nova Building Lease dated November 1, 2003 by and between Powell Enterprises and MEDTOX Diagnostics, Inc. (Incorporated by reference to exhibit 10.23 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2003).

Non-Qualified Stock Option Agreement between the Registrant and Robert C. Bohannon dated December 3, 2003. (Incorporated by reference to exhibit 10.24 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2003).**

Restricted Stock Inducement Award Agreement between the Registrant and Robert C. Bohannon dated December 3, 2003. (Incorporated by reference to exhibit 10.25 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2003).**

Purchase and Sale Agreement dated July 1, 2003 by and between MEDTOX Laboratories, Inc. and CoxHealth. (Incorporated by reference to exhibit 10.26 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2003).

Third Amendment to Amended and Restated Credit and Security Agreement dated August 15, 2003, by and among MEDTOX Scientific, Inc., MEDTOX Laboratories, Inc., MEDTOX Diagnostics, Inc., Consolidated Medical Services, Inc. and Wells Fargo Business Credit, Inc. (Incorporated by reference to exhibit 10.27 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2003).

32

Secured Promissory Note dated January 22, 2003, by and among MEDTOX Scientific, Inc., MEDTOX Laboratories, Inc., MEDTOX Diagnostics, Inc., and Wells Fargo Equipment Finance, Inc. (Incorporated by reference to exhibit 10.28 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2003).

Secured Promissory Note dated June 6, 2003, by and among MEDTOX Scientific, Inc., MEDTOX Laboratories, Inc., MEDTOX Diagnostics, Inc., and Wells Fargo Equipment Finance, Inc. (Incorporated by reference to exhibit 10.29 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2003).

Fourth Amendment to Amended and Restated Credit and Security Agreement dated March 5, 2004, by and among MEDTOX Scientific, Inc., MEDTOX Laboratories, Inc., MEDTOX Diagnostics, Inc., Consolidated Medical Services, Inc. and Wells Fargo Business Credit, Inc. (Incorporated by reference to exhibit 10.30 filed with the Registrant’s Report on Form 10-K for the fiscal year ended December 31, 2003).

Fifth Amendment to Amended and Restated Credit and Security Agreement dated September 27, 2004, by and among MEDTOX Scientific, Inc., MEDTOX Laboratories, Inc., MEDTOX Diagnostics, Inc., Consolidated Medical Services, Inc. and Wells Fargo Business Credit, Inc. (Incorporated by reference to exhibit 10.1 filed with the Registrant’s Report on Form 8-K dated September 27, 2004).

Registrant’s Long-Term Incentive Plan dated December 21, 2004. (Incorporated by reference to exhibit 10.1 filed with the Registrant’s Report on Form 8-K dated December 22, 2004).**

Registrant’s Supplemental Executive Retirement Plan dated December 21, 2004. (Incorporated by reference to exhibit 10.2 filed with the Registrant’s Report on Form 8-K dated December 22, 2004).**

Subsidiaries of Registrant*

Consent of Deloitte & Touche LLP*

Section 302 Certification of Chief Executive Officer pursuant to the Sarbanes-Oxley Act of 2002.*

Section 302 Certification of Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002.*

Section 906 Certification of Chief Executive Officer pursuant to the Sarbanes-Oxley Act of 2002.*

Section 906 Certification of Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002.*

Filed herewith

Denotes a management contract or compensatory plan or arrangement

33

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized on the 17th of March, 2005.

        Pursuant to the requirements of the Securities Act of 1934, this Registration Statement has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

34

This page left intentionally blank

35

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors
MEDTOX Scientific, Inc.
Saint Paul, Minnesota

We have audited the accompanying consolidated balance sheets of MEDTOX Scientific, Inc. and subsidiaries (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2004. Our audits also included the financial statement schedule listed in the Index at Item 15.a. (ii). These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, such consolidated financial statements present fairly, in all material respects, the financial position of MEDTOX Scientific, Inc. and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such 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.

DELOITTE & TOUCHE LLP

Minneapolis, Minnesota
March 15, 2005

36

MEDTOX SCIENTIFIC, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2004 AND 2003
(In thousands, except share and per share data)

37

MEDTOX SCIENTIFIC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002
(In thousands, except share and per share data)

(1)  Share and per share amounts have been restated for the three-for-two stock split paid on August 20, 2004.

See notes to consolidated financial statements.

38

MEDTOX SCIENTIFIC, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002
(In thousands, except share data)