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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

COMMISSION FILE NUMBER 000-21930


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

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


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

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


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

None

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

Common Stock, $0.001 par value
Preferred Stock purchase rights


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

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

The aggregate market value of the voting stock (based on the last sale
price of such stock as reported by the National Association of Securities
Dealers Automated Quotation National Market System) held by non-affiliates of
the registrant as of March 21, 2002 was $58,625,000.

The number of shares of the Registrant's common stock outstanding as of
March 21, 2002 was 9,852,863.


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PART I

ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW

We develop, manufacture, market and distribute products used worldwide in
biomedical research that are instrumental in the development of new drug
therapies and medical diagnostic methods. Our products enable scientists and
biomedical researchers to better understand the biochemistry, immunology and
cell biology of the human body, as well as disease processes. We offer over
3,200 products that we group into the following product lines: Assays;
Antibodies; Bioactive Proteins and Peptides; Oligonucleotides; and Serum,
Buffers and Media. We believe we offer a unique combination of technological,
production, and research and development skills resulting in a full spectrum of
products and services for the worldwide pharmaceutical and biotechnology
industries.

We have a strong scientific research staff, a broad product line and an
established trade name, giving us a strong presence in the biomedical research
market. We intend to continue our focus on new product development, and to seek
to acquire businesses, products and technologies complementary to our current
business through acquisitions, licensing or joint ventures.

INDUSTRY OVERVIEW

The biomedical research industry has seen significant advances in the
understanding of physiological processes at the cellular and molecular level. In
particular, the biotechnology industry has seen a substantial amount of growth
over the last year as the sequencing of the human genetic structure, or genome,
has been completed. Researchers have identified thousands of previously unknown
genes that potentially play key roles in physiological systems in the human
body. These genes are of significant interest to the pharmaceutical industry,
since they can be used as the basis of new therapeutic discovery and
development. The increase in biomedical research resulting from the sequencing
of the human genome has resulted in the need for methods and products to
accelerate and assist this research. The core competencies we have developed in
molecular and cellular biology, immunology and custom services address this
need. Biomedical researchers around the world are constantly in search of
specialty research products and services, which are necessary to conduct both
basic and clinical research. This research is conducted in settings that range
from university and medical school laboratories to pharmaceutical and
biotechnology research and development groups. The success of this type of
research depends upon the availability of high quality biological reagents and
custom services, including the types of assay kits, antibodies, biologically
active proteins, molecular probes and serums that we develop, manufacture and
sell.

STRATEGY

Our strategy is to increase our organic growth rate through focused research and
development and sales and marketing investments in cellular communications
markets with high growth potential. Cellular communications markets include both
extracellular signaling products (such as cytokines) and intracellular signaling
products (such as signal transduction). BioSource will exploit unique corporate
and product capabilities to drive product growth in these select markets. As a
complement to this strategy, we may, as appropriate, acquire companies which
enhance our ability to compete in these markets. In order to facilitate this
strategy, the Company is:

o Investing more resources in research and development than in prior history.
The past three years have seen research and development spending at
approximately 11% of net sales. In 2002, our research and development
spending is projected to be approximately 16% - 18% of sales - a dollar
increase of approximately $2.5 million. We expect this investment to result
in a substantially higher rate of product introduction, increased levels of
novel products and transfer of existing products into novel platforms.

o Continuing to invest in sales and marketing infrastructure by increasing
our geographic coverage and marketing support. This effort began in 2000
and will continue in 2002. We expect this investment to result in new
market penetration, increased brand recognition and ultimately greater
organic sales growth.


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o Increasing business development efforts to support the Company's cellular
communications strategy. We anticipate this focus will result in additional
relationships in the areas of licensing and strategic partnerships. This
will enable our reagent development and manufacturing expertise to be more
easily exploited in novel platforms and technologies.

o Evaluating potential acquisition targets that will complement our existing
core competencies and further strengthen our position in core proteomics
markets.

PRODUCTS

We offer over 3,200 different products, which we group into the following
product lines:

o assays

o antibodies

o bioactive proteins and peptides

o oligonucleotides

o serum, buffers and media

ASSAYS

Enzyme-Linked ImmunoSorbent Assay test kits. We have developed reagents and
methodologies for the measurement of cytokines and chemokines in blood or other
biological samples. ELISA test kits are a combination of cytokines, their
antibodies and other chemical reagents, and are used to measure the presence or
quantity of a particular bioactive protein in serum, plasma or other biological
sample. The quantitation of these cytokines and chemokines has been shown to be
an excellent way for scientists to determine the functional status of the immune
system. Since many of the current targets of pharmaceutical intervention are
designed to modulate the immune system, using these quantitation markers as a
means for gauging the effectiveness of treatment is becoming a key monitor.

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

Our ELISA tests produce results in a few hours, compared to days or even weeks
with bioassays. We offer kits for human, mouse, rat, monkey and swine proteins.
The diversity of species is important to allow investigators to establish
numerous measurements in pre-clinical animal model systems. We offer over 328
types of ELISA kits and we believe we are the leader in sales of rat, monkey and
swine cytokine ELISA kits. Detection of fluctuations in cytokine levels by ELISA
tests, whether in an in-vitro cell culture experiment of a new drug or in a
patient's serum, provide researchers and scientists with valuable information in
understanding disease progression, therapy and diagnosis.


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Of the more than 325 kits we offer, the following table illustrates a few of the
more common applications of our ELISA test kits:

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

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

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

Radioimmuno-assays. We produce and market RIAs, which are used internationally
in clinical laboratories for the measurement of hormones and proteins important
in growth, reproductive and thyroid disease. These assays utilize
radioisotopically labeled molecules to compete with non-isotopically labeled
molecules for sites on known antibody concentrations. RIA is a mature technology
used primarily in European and other foreign countries and is not widely used in
the United States.

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

ANTIBODIES

Antibodies are used as detector systems in the research of normal and abnormal
proteins. Antibodies are proteins generated by immune cells in response to
foreign substances, which are called antigens. Antibodies have specific amino
acid sequences, which cause them to interact only with the antigen that induced
their creation. Antibodies circulate in the blood and assist the body's immune
system by searching out and neutralizing or eliminating antigens. Antibodies are
used by researchers in a variety of applications, including neutralization
studies in


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bioassay systems, as capture and detection molecules for protein quantitation
and for cellular differentiation. Antibodies used in research are generally
produced by injecting an antigen into animals, which cause the animals' immune
system to produce an antibody specific to that antigen.

Our secondary antibody product line provides researchers and biotechnology
companies with a broad array of high quality reagents used to develop analytical
signals in various assays. In addition, other companies use our secondary
antibodies as a component of their test kits.

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

We offer over 1,500 antibody products. The following table illustrates some of
the uses for the antibodies we offer:

Uses Description
- ---------------- ------------------------------------------------------------

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

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

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

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

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

BIOACTIVE PROTEINS AND PEPTIDES

Proteins, which are chains of amino acids in particular sequences, and their
interactions are responsible for all of the biochemical and physical properties
of a cell, as well as variations among different types of cells. Proteins take
various forms, including enzymes, hormones, antibodies, receptors, cytokines and
chemokines. Proteins are


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ideal for use in basic research, drug discovery, enzymology, high throughput
screening, in vivo studies, x-ray crystallography or as antigens for antibody
production. Our primary protein products are cytokines and chemokines, which are
regulatory molecules that control growth and differentiation of cells.

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

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

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

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

We offer over 350 protein products. The following table shows examples of
different cytokines we produce and use:

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

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

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

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


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OLIGONUCLEOTIDES

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

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

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

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

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

Uses Applications
- ---------- -----------------------------------------------------------------

Primers Oligonucleotides are used in the initiation of the PCR process.

Probes DNA oligonucleotides are used in hybridization reactions to
search and Energy Transfer, probes are fluorescent probes used in
real time PCR quantitation and diagnostic molecular analysis. We
offer both custom and standard FRET probes for our customers.

Arrays Oligonucleotides are used on a solid matrix to profile gene
expression or single nucleotide polymorphisms, or SNPS.

SERUM, BUFFERS AND MEDIA

We manufacture over 240 serum, media and buffer products in our catalog. We also
offer custom formulation services for unique applications. These products are
vital in growing specialized cell cultures. In most cases, cell cultures are a
primary testing method for the effectiveness of vaccines and drugs for a variety
of diseases.

CUSTOMERS

We have over 4,900 customers worldwide. No single customer accounted for 10% or
more of our total revenue during any of the last three years. Our customers
include:


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PHARMACEUTICAL BIOTECHNOLOGY UNIVERSITIES

Astra Zeneca Amgen Brigham and Women's Hospital
Aventis Pharmaceuticals Genentech Georgetown University
Bristol Myers Squibb Biogen Johns Hopkins University
Eli Lilly Human Genome Sciences UCLA
Glaxo Smithkline Hyseq UC San Francisco
Johnson & Johnson Icos University of Michigan
Merck & Company IDEC Pharmaceuticals University of Pennsylvania
Pfizer Rigel Pharmaceuticals University of Texas MD Anderson
Pharmacia Cancer Research Center
Schering-Plough

GOVERNMENT

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

RESEARCH AND DEVELOPMENT

As a reagent company with significant internal R&D and manufacturing capability,
BioSource strives to produce uniquely capable reagents to markers of interest
for the pharmaceutical and research community. Reflecting our strategy, we are
pursuing development in high-growth markets. Traditionally, we have focused our
research and development in the area of extracellular signaling molecules.
BioSource has been predominantly known, in this respect, for our work in
cytokines. Cytokines are soluble proteins that act as chemical communicators
between cells and continue to play an important role in disease processes. We
will continue to leverage this immunological expertise to appropriately expand
our product offerings in this area. We have also achieved success in extending
our product lines into intracellular signaling, more commonly known as signal
transduction. Signal transduction is a market that is growing in importance as
researchers begin to understand its central role in disease. We also plan to
exploit the increasing demand for new high-content and high-throughput platforms
that enable pharmaceutical and biotechnology companies to fully realize the
opportunities represented by the sequencing of the human genome.

Therefore, our current research and development activities are focused in the
following areas:

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

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

Currently we employ 39 research scientists, 21 of whom hold Ph.D.'s. Among these
professionals are experts in peptide chemistry, molecular biology, immunology
and signal transduction. In particular, their knowledge is fundamental to the
development of peptides, oligonucleotides, proteins, antibodies and assay kits.
Our research laboratories are located in Camarillo, California; Hopkinton,
Massachusetts; and Nivelles, Belgium. In the year ended December 31, 2001, we
introduced over 300 new products, of which approximately 80% were developed by
our scientists. In addition, as of February 22, 2002, we had approximately 243
products under development. We spent approximately $3,986,000, $3,575,000, and
$3,315,000 on research and development in 2001, 2000, and 1999 respectively.
These amounts represent approximately 11% of net sales in each year. In 2002,
our research and development spending is projected to be approximately 16% - 18%
of sales - a dollar increase of approximately $2.5 million. We expect this
investment to result in a substantially higher rate of product introduction,
increased levels of novel products and transfer of existing products into novel
platforms.

MANUFACTURING

Our reagent products and ELISA test kits are manufactured in Camarillo,
California. We manufacture oligonucleotides at our laboratories located at our
facilities in Camarillo and Foster City, California. Our custom antibodies are
manufactured at the laboratory facilities in Hopkinton, Massachusetts. Our
serum, buffers and media are manufactured at our facilities in Rockville,
Maryland. We also manufacture antibodies and assay kits at our European facility
in Nivelles, Belgium.


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

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

SALES AND MARKETING

We have 29 sales representatives worldwide. The principal markets for our
products are in the United States, Japan and Western Europe. We have a direct
sales force strategically located in major metropolitan areas in the United
States. The use of a direct sales force provides us with an opportunity to
discuss directly with researchers and scientists' new developments and trends in
the industry. We advertise in various scientific trade journals and distribute
our own product catalog to all current and selected potential customers. We sell
to our international markets directly through our European subsidiary, and we
use international distributors that specifically target selected foreign life
science markets.

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

Besides the United States, we sell directly to Germany, Belgium, Holland and the
United Kingdom, and use a network of international distributors covering over 40
other countries. We utilize a network of both exclusive and non-exclusive
international distributors, but we generally grant exclusive distribution rights
only where the distributor maintains direct field representatives proportionate
to the potential for sales of our products in a defined geographical area. In
order to serve as our distributor, the distributor must agree to and meet
acceptable annual sales goals. We offer all of our distributors annual training
to enhance their knowledge of our products as well as their respective
applications, solicit requests for new products and ultimately to increase
sales.

COMPETITION

We are engaged in a segment of the health care products industry that is highly
competitive. Our primary competitors include biotechnology companies such as
Techne Corporation, BD BioSciences, New England Biolabs, and Invitrogen. Many of
our competitors have been involved in the health care industry significantly
longer than we have and benefit from greater name recognition. In addition, many
of our competitors have greater resources to devote to research and development,
sales and marketing and occasionally engage in price cutting measures to achieve
leadership in their field. However, we believe that by offering a very broad and
complete product line that enables the end user to obtain many products from one
source we gain a competitive advantage. In addition, competition in our markets
generally focus on the following factors:

o quality

o speed of delivery

o application/customer support

o breadth of product offerings and

o price


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PATENTS AND TRADEMARKS

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

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

GOVERNMENT AND ENVIRONMENTAL REGULATION

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

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

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

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

Except as we indicated above, we are not subject to direct governmental
regulation other than the laws and regulations generally applicable to
businesses in the jurisdictions in which we operate, including those governing
the handling and disposal of hazardous wastes and other environmental matters.
Our research and development activities involve the controlled use of small
amounts of hazardous materials, chemical and radioactive compounds. Although we
believe that our safety procedures for handling and disposing of such materials
comply with applicable regulations, the risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of
such an accident, we could be held liable for resulting damages. This liability
could have a material adverse effect on us.

EMPLOYEES

As of March 1, 2002, we employed 257 individuals, 247 of who were full time
employees. Twenty-one of our employees at that date had doctoral degrees.

None of our employees in the United States is represented by a labor union. As
of March 21, 2001, 53 of our 257 employees worked for our Europeon subsidiary in
Belgium. As is customary under Belgian labor law, employees of our Belgian
subsidiary, BioSource Europe S.A., are represented by two national unions who
represent employee interests to the national chemistry industry employer
organization. We believe we are in compliance with these Belgium legal
restrictions. We consider our current Belgium subsidiary employee and labor
relations to be good.


10





Pursuant to Belgian law, we have in the past been subject to heightened
restrictions related to union representation for works councils and safety
councils applicable to companies with more than 50 employees. Because we
employed less than 50 employees at our Nivelles, Belgian facility in 2000, these
heightened restrictions terminated in April 2000. If we employ more than 50
employees as determined under Belgium law, then at the time of the next
elections for works councils and safety councils that will occur in 2004, the
heightened restrictions for certain employees will again be applicable to us.

ITEM 2. PROPERTIES

In June 1996, the Company secured financing from Heller Financial Corp. in order
to partially finance the purchase of its previous corporate headquarters. The
original loan principal was $745,000 and was secured by a first trust deed on
the property. The loan bore interest at a rate of 9.4% and had a 20-year term.
In addition, in June 1996, the Company obtained a loan from the Small Business
Administration in order to partially finance the purchase of the previous
corporate headquarters building. The original loan principal was $616,000 and
was secured by a second trust deed on the property. The loan bore interest at a
rate of 7.6% and had a 20-year term. Payments to both Heller Financial Corp. and
the Small Business Administration were guaranteed by the previous chairman of
the board of our Company.

In November 2000 the Company completed the sale of its previous corporate
headquarters. In conjunction with this sale, the Company paid the remaining
$672,100 balance due on the Heller Financial Corp. loan and the remaining
$543,600 due on the Small Business Administration loan. As a result of the sale
of the building, the Company recognized a loss of $99,300 in 2000, which is
shown in other income (expense) in the accompanying consolidated statement of
operations.

In March 2000 the Company entered into a lease for a new facility at 542 Flynn
Road in Camarillo, California, and relocated their previous offices and
laboratories to this new location in July, 2000. The new building contains
approximately 51,821 square feet and is situated in an industrial park
approximately two blocks from the previous corporate headquarters. The lease
commenced on May 1, 2000 and runs through June 30, 2005, with the option to
continue the lease for two additional five-year terms. Monthly lease payments in
2002 are approximately $29,000. The new facility has several laboratory areas,
including molecular biology facilities, a protein purification facility, an
oligonucleotide facility, and an assay development and manufacturing facility,
as well as ELISA development and manufacturing space and cold storage rooms
sufficient to accommodate our current and anticipated future needs.

We lease a facility in Foster City, California, approximately 20 miles south of
San Francisco, which consists of approximately 6,500 square feet, of which
approximately 6,000 square feet is our oligonucleotide laboratory, under a lease
that expires in May 2003. Monthly lease payments in 2002 are approximately
$13,000.

We also lease a facility in Hopkinton, Massachusetts, approximately 25 miles
west of Boston, which consists of approximately 11,500 square feet, of which
approximately 7,000 square feet is laboratory space, under a lease originally
expired in April 2001. In February 2001 the Company amended its current lease in
Hopkinton, Massachusetts. The amended lease extends the term of the lease for
five additional years. Monthly lease payments in 2002 are approximately $11,000.

In January 2002, the Company leased an additional facility in Hopkinton,
Massachusetts, which consists of approximately 10,500 square feet, of which
approximately 7,000 is laboratory space, under a lease that expires in January,
2007. Monthly lease payments in 2002 are approximately $16,000.

We lease a facility in Rockville, Maryland, which consists of approximately
11,500 square feet of warehouse, manufacturing, and office space, under a lease
that expires in May 2004. Monthly lease payments in 2002 are approximately
$14,000.

Our European subsidiary leases facilities in Nivelles, Belgium, which consists
of approximately 30,000 square feet of manufacturing, laboratory and office
space, under a lease that expires in March 2007. Monthly lease payments in 2002
are approximately $18,000.


11





Additional small sales offices are located in Germany and Holland.

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

The Company's lease commitments for the above referenced properties make up
substantially all of the Company's total lease commitments. At December 31,
2001, total future minimum payments under all of the Company's leases are as
follows (in thousands):

2002...................................$1,340
2003................................... 1,260
2004................................... 1,064
2005................................... 810
2006................................... 484
Thereafter............................. 36
------
$4,994
======

ITEM 3. LEGAL PROCEEDINGS

On June 14, 2000, one of our former employees, Jordan Fishman, Ph.D., filed a
legal action against us in the United States Central District Court of
California alleging breach of Dr. Fishman's Employment Agreement and a number of
other causes of action. BioSource filed a counter claim against Dr. Fishman, and
a number of pre-trial motions, the result of which was that only the breach of
contract claim and BioSource's counter claim remained for trial. On January 14,
2002, shortly before the scheduled trial date, plaintiff agreed to settle the
case and the DiSorbo Lawsuit discussed below for $275,000.

Dr. Fishman also sued Dennis DiSorbo, Ph.D., a Vice President of our QCB
division, in the Superior Court of Worcester, Massachusetts for wrongfully
interfering with his employment contract with BioSource (the "DiSorbo Lawsuit").
The DiSorbo Lawsuit was stayed pending the determination of the California
Lawsuit. The parties agreed to settle the DiSorbo Lawsuit as part of the
settlement of the California Lawsuit without additional consideration.

In June of 2000, the former shareholders of QCB commenced a AAA arbitration
proceeding against the Company seeking the recovery of escrowed funds from the
purchase of QCB that were being held by the Company to recover damages
management believes it has suffered in connection with inaccuracies in, and/or
breaches of the representations and warranties contained in the original Stock
Purchase Agreement for QCB executed on December 9, 1998. The Company has
counterclaimed against the former shareholders of QCB, including Dr. Fishman, in
the arbitration to recover those damages. The Company seeks to recover
$1,347,000 of escrowed funds for this claim. In addition, the Company also
brought a fraud claim against Dr. Fishman for the intentional misrepresentations
and/or omissions he made in connection with the Stock Purchase Agreement. In its
fraud claim, the Company seeks to recover the amount of its overpayment for the
purchase of QCB, the amount of lost profits that BioSource would reasonably have
anticipated and earned had QCB possessed the characteristics fraudulently
attributed to it, punitive damages, and attorneys' fees and costs. The parties
have selected a panel of three arbitrators who will hear the dispute. The
parties are in the process of conducting discovery in connection with the
arbitration. The arbitration is scheduled to begin on May 1, 2002. The Company
has not recorded an accrual for any potential gain realized upon a successful
recovery of any or all of the escrowed funds or recoverable damages. The Company
is expensing all legal fees as they are incurred.

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


12





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

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



PART II

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

Our common stock is traded on the Nasdaq National Market under the symbol
"BIOI." The following table sets forth, for the periods indicated, the high and
low closing sales price per share of our common stock as reported on the Nasdaq
National Market.

High Low
------ ------
2000 Fiscal Year
First Quarter $28.50 $ 6.50
Second Quarter 22.63 4.56
Third Quarter 31.00 15.13
Fourth Quarter 29.88 13.63

2001 Fiscal Year
First Quarter $13.69 $ 6.00
Second Quarter 10.45 6.00
Third Quarter 7.25 5.10
Fourth Quarter 8.30 5.00

2002 Fiscal Year
First Quarter, through March 21, 2002 $ 8.20 $ 5.19


On March 21, 2002, the last reported sale price of our common stock on the
Nasdaq National Market was $5.95. As of March 21, 2002, there were 9,852,863
shares of our common stock outstanding held by approximately 491 holders of
record.

On January 10, 2000, the company entered into a securities purchase agreement
with Genstar Capital Partners II, L.P. and Stargen II LLC, both of which are
accredited investors as such term is defined in Rule 501 of Regulation D of the
Securities Act of 1933. Pursuant to this agreement, the Company sold Genstar and
Stargen a total of 371,300 shares, including 364,244 to Genstar and 7,056 to
Stargen, of our $.001 Series B Redeemable Preferred Stock for $9,000,312 in the
aggregate. These shares were convertible into 1,485,200 shares, including
1,456,976 for Genstar and 28,244 to Stargen, of the Company's common stock. In
addition, we issued Genstar and Stargen warrants to purchase a total of
1,287,000 shares of common stock, including 1,262,542 to Genstar and 24,458 to
Stargen, exercisable at $7.77 per share. Under the investor rights agreement
among Genstar, Stargen and the Company, executed in connection with the
securities purchase agreement, Genstar and Stargen also have the right to
appoint two out of our seven directors to our board of directors as long as they
beneficially own, in the aggregate, at least 750,000 shares of common stock, or
one director if they beneficially own at least 495,000 shares. Pursuant to the
investor rights agreement, Jean-Pierre L. Conte, a Managing Director of Genstar
Capital LLC, and Robert J. Weltman, a Vice President of Genstar Capital LLC were
appointed to our board of directors. Genstar and Stargen also have the right of
first refusal to purchase additional shares and the right to require us to
register the shares of our common stock underlying the preferred stock and the
warrants. The consummation of the securities purchase agreement, including the
issuance of the shares of Series B Preferred Stock and the warrants, occurred on
February 15, 2000.


13





The Series B Redeemable Preferred Stock had an initial aggregate liquidation
value of $9,000,300. The Series B Redeemable Preferred Stock shares were
entitled to receive dividends at an annual rate of 8% of the original issue
price. Unless all dividends on the outstanding Series B Redeemable Preferred
Stock shares were paid, no dividends or other distributions were to be paid to
Common Stock shareholders. The Series B Redeemable Preferred Stock shareholders
had liquidation preference to the Common Stock shareholders. On September 20,
2000, pursuant to the terms of the Certificate of Designation of Preferences
Rights and Limitations of our Series B Redeemable Preferred Stock and $432,400
of redeemable preferred dividends were converted into 1,556,574 common shares at
$6.06 per common share or $9,432,700. Total non-cash preferred stock dividends
and effects of beneficial conversion related to the preferred stock totaled
$3,853,300.

In connection with the issuance of Series B Redeemable Preferred Stock the
holders received detachable stock purchase warrants. In addition, the holders
received a beneficial conversion with an estimated fair value of $995,100. The
warrants are exchangeable for 1,287,000 shares of Common Stock at an exercise
price of $7.77 per share. The Company allocated the net proceeds of $8,415,200
based on the relative fair value of the warrants ($1,840,700), the Series B
Redeemable Preferred Stock ($5,579,400) and the beneficial conversion
($995,100). The book value of the Series B Redeemable Preferred Stock of
$5,579,400 accreted to its liquidation value by $995,100 related to the
beneficial conversion feature and $1,840,700 upon conversion.

We entered into a Securities Purchase Agreement, effective as of August 9, 2000
with Genstar Capital partners II L.P, pursuant to which Genstar agreed to
purchase from the Company 300,000 shares of common stock at $15.00 per share.
Genstar subsequently assigned its rights to purchase 30,000 of these shares to
Jean-Pierre L. Conte and 3,333 of the shares to Robert Weltman. Both Mr. Conte
and Mr. Weltman currently serve on the Company's Board of directors. Genstar
assigned its right to purchase another 33,334 of these shares to certain other
individuals affiliated with Genstar. The Company also entered into a Securities
Purchase Agreement, effective as of August 9, 2000, with Russell D. Hays, former
President and Chief Executive Officer of the Company, pursuant to which Mr. Hays
agreed to purchase 40,000 shares of the Company's common stock at $15.00 per
share. The Company also entered a Securities Purchase agreement, effective as of
August 9, 2000, pursuant to which George Uveges, former Chief Operating Officer
of the Company agreed to purchase 11,428 shares of the company's common stock at
$21.875 per share. The closing of each of these transactions occurred on
September 28, 2000. These transactions were exempt from registration under Rule
506 of Regulation D of the Securities Act of 1933, and all of the purchasers in
these transactions are accredited investors as that term is defined in Rule 501
of Regulation D.

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

DIVIDEND POLICY

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

On February 16, 1999, our Board of Directors declared a dividend of one
preferred share purchase right for each share of common stock outstanding on
March 2, 1999. The purchase rights are subject to the terms and conditions of
the Rights Agreement dated February 25, 1999, filed with the Securities and
Exchange Commission on March 1, 1999, on Form 8-A. The purchase rights are not
represented by separate certificates, but, instead, initially will be evidenced
by the certificates representing our outstanding common stock.

ITEM 6. SELECTED FINANCIAL DATA

The selected data presented below under the captions "Consolidated Statement of
Operations Data" and "Consolidated Balance Sheet Data" for, and as of the end of
each of the years in the five-year period ended


14





December 31, 2001, are derived from the audited consolidated financial
statements of the Company. The following selected data should be read in
conjunction with the Company's consolidated financial statements and notes
thereto, as well as the section included herein entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations."




YEARS ENDED DECEMBER 31,
--------------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(in thousands, except per share data)


CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Net sales ........................... $ 35,175 $ 32,210 $ 29,257 $ 21,859 $ 20,572
Cost of sales ....................... 15,540 13,600 11,071 13,189 6,930
-------- -------- -------- -------- --------
Gross profit ........................ 19,635 18,610 18,186 8,670 13,642
Operating expenses:
Research and development .......... 3,986 3,575 3,315 2,648 2,078
Sales and marketing ............... 7,395 5,683 4,737 4,338 4,043
General and administrative ........ 6,945 9,071 4,460 4,469 3,552
Purchased in-process technology ... -- -- -- 4,222 --
Amortization of intangibles ....... 1,098 1,093 1,061 95 31
-------- -------- -------- -------- --------
Operating income (loss) ............ 211 (812) 4,613 (7,102) 3,938
Interest and other income
(expense), net ..................... 460 73 (1,016) 432 708
-------- -------- -------- -------- --------
Income (loss) before income taxes
(benefit) ......................... 671 (739) 3,597 (6,670) 4,646
Income tax expense (benefit) ....... (70) (573) 20 (1,534) 1,460
-------- -------- -------- -------- --------
Net income (loss) .................. 741 (166) 3,577 (5,136) 3,186
Redeemable preferred stock dividend
and accretion of beneficial
conversion feature ................. -- (3,853) -- -- --
-------- -------- -------- -------- --------
Net Income (loss) available to
common stockholders ................ $ 741 $ (4,019) $ 3,577 $ (5,136) $ 3,186
======== ======== ======== ======== ========

Net income (loss) per share available
to common stockholders:
Basic ............................. $ 0.07 $ (0.47) $ 0.49 $ (0.68) $ 0.38
Diluted ........................... $ 0.07 $ (0.47) $ 0.46 $ (0.68) $ 0.36

Shares used to compute net income
(loss) per share available to common
stockholders:
Basic ............................. 10,398 8,584 7,235 7,509 8,318
Diluted ........................... 10,965 8,584 7,833 7,509 8,965



AS OF DECEMBER 31,
--------------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(in thousands)


CONSOLIDATED BALANCE SHEET DATA:
Current assets ...................... $ 24,963 $ 26,420 $ 18,325 $ 18,278 $ 27,636
Total assets ........................ 49,841 50,364 40,222 41,400 33,157
Current liabilities ................. 5,963 6,318 7,340 10,039 3,206
Long term debt, less current
portion ............................ -- -- 11,459 13,666 1,292

Total stockholders' equity .......... 43,878 44,046 21,422 17,696 28,658



15





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

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

BioSource was originally incorporated as a California corporation in October
1989, and was reincorporated as a Delaware corporation in May 1993 in connection
with the acquisition of TAGO Immunologicals, Inc., a manufacturer of
immunological reagents derived from antibodies produced in goats and other
animals. In November 1995, we acquired Keystone Laboratories, Inc., a
manufacturer of oligonucleotides. In June 1996, we acquired assets and assumed
selected liabilities of Medgenix Diagnostics, S.A. located in Fleurus, Belgium.
The Medgenix assets consisted of diagnostic and research assay kits, and
included manufacturing and distribution facilities, research and development
laboratories, customer accounts and an existing employee base. In December 1998,
BioSource acquired Quality Controlled Biochemicals, Inc., a manufacturer of
peptides and antibodies. In December 1998, we also acquired substantially all
the assets and selected liabilities of Biofluids, Inc., a manufacturer of serum,
buffers and media.

In 2000, we incurred a net loss available to common stockholders of $4,019,000.
The loss was partially the result of a $3,853,000 charge for non-cash preferred
stock dividends and accretion related to a beneficial conversion feature (see
note 6 to the consolidated financial statements included in this Form 10-K) and
to $4,256,000 of general and administrative charges that were not indicative of
normal general and administrative operating expenses (see detailed explanation
below in the management discussion and analysis comparing the year ended
December 31, 2001 to the year ended December 31, 2000).

We currently manufacture products for inventory and ship products shortly after
receipt of orders and anticipate that we will continue to do so in the future.
Accordingly, we have not developed a significant backlog of products and do not
anticipate we will develop a material backlog of products in the future.

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

The forward-looking information set forth in this annual report on Form 10-K is
as of March 21, 2002, and we undertake no duty to update this information.
Should events occur subsequent to March 21, 2002 that make it necessary to
update the forward-looking information contained in this Form 10-K, the updated
forward-looking information will be filed with the Securities and Exchange
Commission in a quarterly report on Form 10-Q or as an earnings release included
as an exhibit to a Form 8-K, each of which will be available at the Securities
and Exchange Commission's website at www.sec.gov. More information about
potential factors that could affect our business and financial results is
included in the section entitled "Risk Factors" beginning on page 25 of this
Form 10-K.


16





CRITICAL ACCOUNTING POLICIES

General

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


Allowance for doubtful accounts. The Company has $6,445,000 in gross
trade accounts receivable and $261,000 in allowance for doubtful
accounts on the consolidated balance sheet at December 31, 2001. The
Company has procedures in place to adequately review the credit
worthiness of new customers and also to properly review orders from
existing customers to determine if a change in credit terms is
warranted. A review of our allowance for doubtful accounts is done
timely and consistently throughout the year. As of December 31, 2001,
we believe our allowance for doubtful accounts is fairly stated. We do
have accounts receivable amounts from certain customers as of December
31, 2001 that if their financial condition changed and a significant
allowance needed to be created, could have a material adverse effect on
the Company's financial results for 2002.


Inventory adjustments. We review the components of our inventory on a
regular basis for excess, obsolete and impaired inventory based on
estimated future usage and sales. The Company reserves its entire
antibody inventory at 100% of its value because the ability to sell its
antibody inventory is questionable. As of December 31, 2001, the
Company had $3,752,000 of antibodies in its inventory and a reserve for
these antibodies totaling $3,752,000. The Company will continue to
monitor its antibody reserve policy. Additionally, material inventory
write-downs in our inventory can occur if competitive conditions or new
product introductions by our customers or us vary from our current
expectations.


Deferred Tax Assets and Deferred Income Taxes. The Company has
$8,910,000 in deferred income taxes and deferred tax assets on its
consolidated balance sheet as of December 31, 2001. See note 10 to the
consolidated financial statements included in this Form 10-K for a
listing of the specific components. As of December 31, 2001, no
valuation allowance has been set up to offset any of the deferred tax
assets. The ability to realize these deferred tax assets depends
entirely on the Company generating taxable income in the future. The
Company has used historical information as well as a projected
financial outlook to project taxable income amounts. The Company
believes it is more likely than not that they will be able to realize
these benefits in the future. A material change in our expected
realization of these assets would occur if the ability to deduct tax
loss carryforwards against future taxable income is altered. If our
projections involving tax planning and operating strategies do not
materialize or if significant changes in tax laws occur within the
various tax jurisdictions in which we operate, we would have to set up
a valuation allowance against our deferred tax assets that could
materially effect our tax expense and our financial results.


We believe the following critical accounting policies affect our more
significant judgments and estimates used in preparation of our consolidated
financial statements.

REVENUE RECOGNITION. Our revenue is generated from the sale of products
primarily manufactured by us. We do have a small amount of products we
sell on an outside equipment manufactured ("OEM") basis. We recognize
revenue from all of our product sales upon transfer of title to the
customer, which occurs upon shipment. We typically ship to our
customers FOB shipping point. We do have customers who order and pay
for certain cell culture products and request that we store a portion
of the batch for them. In these instances, we record all payments as
deferred revenue in the consolidated balance sheets


17





and recognize revenue upon shipment of the product to the customer.
The Securities and Exchange Commission's Staff Accounting Bulletin No.
101, "Revenue Recognition," ("SAB 101") provides guidance on the
application of generally accepted accounting principles to selected
revenue recognition issues. We believe that our revenue recognition
policy is consistent with this guidance and in accordance with
generally accepted accounting principles. We do not anticipate any
changes to our revenue recognition and shipping policies in the
future.

LONG-LIVED ASSETS. In October, 2001 the Financial Accounting Standards
Board ("FASB") issued Statement on Financial Accounting Standards
("SFAS") No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," which addresses financial accounting and reporting
for the impairment or disposal of long-lived assets. While SFAS No. 144
supersedes SFAS No.121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," it retains many of
the fundamental provisions of that statement. The standard is effective
for fiscal years beginning after December 15, 2001. It is our policy,
and in accordance with SFAS No. 144, to account for long-lived assets,
including intangibles, at amortized cost. As part of an ongoing review
of the valuation and amortization of long-lived assets, management
assesses the carrying value of such assets if facts and circumstances
suggest that they may be impaired. If this review indicates that
long-lived assets will not be recoverable, as determined by a
non-discounted cash flow analysis over the remaining amortization
period, the carrying value of the Company's long-lived assets would be
reduced to its estimated fair value based on discounted cash flows. As
a result, we have determined that our long-lived assets are not
impaired as of December 31, 2001 and 2000.

GOODWILL. In July 2001, the FASB issued SFAS No.141, "Accounting For
Business Combinations", and SFAS No. 142, "Accounting For Goodwill and
Other Intangible Assets". SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated
after June 30, 2001. SFAS No. 142 requires that goodwill and
intangible assets with indefinite useful lives no longer be amortized
to earnings, but instead be reviewed for impairment in accordance with
SFAS No. 142. The amortization of goodwill and intangible assets with
indefinite lives was approximately $1,098,000, 1,093,000, and
1,061,000 for fiscal years ended December 31, 2001, 2000, and 1999,
respectively. Effective January 1, 2002, the Company's goodwill and
other intangible assets will be accounted for under SFAS No. 141
"Business Combinations" and SFAS No. 142 "Goodwill and Other
Intangible Assets." The Company is in the process of quantifying the
anticipated impact of adopting the provisions of SFAS No. 142, which
is expected to be significant. The impairment charge for goodwill or
intangible assets deemed to have an indefinite useful life resulting
from the adoption of SFAS 142 would be non-operational in nature and
reflected as a cumulative effect of an accounting change net of the
related tax impact.

CONSOLIDATED RESULTS OF OPERATIONS

The selected data presented below under the caption "Consolidated Statement of
Operations Data Presented as a Percentage of Sales" for each of the years ended
December 31, 2001, 2000 and 1999" are derived from the audited consolidated
financial statements of the Company. The following selected data should be read
in conjunction with the Company's consolidated financial statements and notes
thereto, as well as the data and information included herein entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."


18





CONSOLIDATED STATEMENT OF OPERATIONS DATA YEARS ENDED DECEMBER 31,
PRESENTED AS A PERCENTAGE OF SALES 2001 2000 1999
---- ---- ----

Net sales ..................................... 100% 100% 100%
Cost of sales ................................. 44% 42% 38%
---- ---- ----
Gross profit .............................. 56% 58% 62%

Operating expenses:
Research and development .................. 11% 11% 11%
Sales and marketing ....................... 21% 17% 16%
General and administrative ................ 20% 28% 15%
Amortization of intangibles ............... 3% 4% 4%
---- ---- ----
Total operating expenses ............. 55% 60% 46%
---- ---- ----
Operating income (loss) ...................... 1% -2% 16%

Interest income ............................... 1% 1% 1%
Interest expense .............................. 0% -1% -5%
Other income (expense), net ................... 0% 0% 0%
---- ---- ----
Income (loss) before income taxes (benefit) ... 2% -2% 12%
Income tax expense (benefit) .................. 0% 0% 0%
---- ---- ----
Net income (loss) ..................... 2% -2% 12%
Redeemable preferred stock dividend and
accretion of beneficial conversion .......... -- -12% 0%
---- ---- ----
Net income (loss) available to
common stockholders ......................... 2% -14% 12%
==== ==== ====

Year Ended December 31, 2001 Compared to Year Ended December 2000

Net Sales. Net sales were $35,175,000 in 2001 compared to $32,210,000 in 2000,
an increase of $2,965,000 or 9%. North American sales, which represented 63% of
consolidated net sales in 2001, grew $2,734,000 or 14% for the year, while
European sales, which represent 25% of consolidated net sales in 2001, increased
$662,000 or 8%. Sales from the rest of the world, representing 12% of total
consolidated net sales in 2001 decreased $431,000 or 9% over the prior year.
North American sales grew due to an increase number of sales personnel and
increased spending on marketing programs in 2001 compared to 2000 which resulted
in increased sales of oligonucleotides, proteins, peptides and products related
to signal transduction. In local currency, European sales grew $933,000 or 11%
compared to the prior year. European sales grew primarily due to increased sales
in assays and signal transduction products. Sales in the rest of the world
decreased from 2000 to 2001 due to the transition to a new major distributor in
the first quarter of 2001 and to a delayed renegotiation of a distributor
agreement in Japan.

Gross Profit. Gross profit for the year ended December 31, 2001 was $19,635,000,
resulting in a gross margin of 56%, compared to a gross profit of $18,610,000,
and a gross margin of 58% for the year ended December 31, 2000. The decrease in
gross margin for the year ended December 31, 2001 was due to in part to the
Company's relocation of its primary manufacturing and corporate headquarters in
May of 2000, moving from a previously owned 29,000 square foot building to a
leased 52,000 square foot building causing the 2001 gross margin to be affected
by a full year of higher on-going costs in the new facility compared to seven
months of higher on-going costs in 2000. Also, our serum and media gross margin,
which represents approximately 5% of our 2001 gross margin, was negatively
impacted by increased raw material costs due to a lower supply of certain
material in 2001 compared to 2000 which contributed to the lower gross margins
in 2001 compared to 2000. This trend may continue in 2002, which could result in
lower gross margins on our serum and media products in 2002 compared to 2001. In
addition, the product mix of sales in 2001 compared to 2000 contributed to our
gross margin reduction. Oligonucleotides, as a percentage of total sales
increased slightly from 2000 to 2001 and have traditionally had lower margins
than assays, which represent the largest portion of our sales and generate a
higher margin. New oligonuceotide products are now being discovered,
manufactured and accepted by customers that produce higher margins than
traditional oligonuceotides. Our oligonucleotide sales may fluctuate


19





materially from quarter to quarter in 2002 and beyond, and, depending on the
product mix, could have an effect on our gross margins.

Research and development. Research and development expense for the year ended
December 31, 2001 was $3,986,000 compared to $3,575,000 for the year ended
December 31, 2000, an increase of $411,000 or 11%. As a percentage of net sales,
research and development expense was 11% for each of the years ended December
31, 2001 and 2000. The Company introduced over 300 new products in 2001 compared
to over 400 new products in 2000 and had 39 research scientists as of December
31, 2001 and 2000. In 2002, the Company anticipates spending between 16% and 18%
of revenues on research and development activities. This upward spending trend
in research and development will continue into 2003 and is representative of the
Company's desire to increase the number of new, novel and proprietary products
it brings to market. This effort is focusing on the quality of new products
being developed not the quantity of new products developed.

Sales and marketing. Sales and marketing expense was $7,395,000 for the year
ended December 31, 2001 and $5,682,000 for the year ended December 31, 2000, an
increase of $1,713,000 or 30%. As a percentage of net sales, this represents 21%
and 18% of net sales for each of the years ended December 31, 2001 and 2000
respectively. This increase was primarily attributable to $1,169,000 in
increased salary and related sales expenses, including commissions and travel
expenses, due to an increased number of salesmen and two new sales and marketing
executives hired in November 2000 and $330,000 of increased advertising and
promotional expenses.

General and Administrative. General and administrative expense was $6,945,000
and $9,071,000 for the years ended December 31, 2001 and 2000 respectively. This
represents a decrease of $2,126,000, or 23% in 2001 compared to 2000. There were
$4,256,000 of charges incurred in 2000 that were not incurred in 2001 including
(i) a non-cash stock compensation charge of $946,000 related to the hiring of a
new Chief Executive Officer and Chief Operating Officer in September 2000; (ii)
$1.3 million of severance costs including the retirement of the Company's
previous Chief Executive and Chief Operating Officers; (iii) $745,000 of
professional fees related to abandoned acquisitions work and legal cost related
to an employee termination suit; (iv) $534,000 related to the transition to a
new senior management team; (v) $523,000 related to the withdrawal of the
Company's follow on stock offering; (vi) $120,000 increase in the reserve for
bad debt and allowances and (vii) a reserve of $88,000 for a customer dispute.
These charges were offset by charges totaling $2,006,000 incurred in 2001 that
were not incurred in 2000 including $1,406,000 in legal expenses related to an
employee termination, $600,000 of charges primarily related to an employee
termination and relocation and recruiting fees. The $1,406,000 of legal expenses
described above includes a $275,000 charge for payment related to the settlement
of the litigation in January 2002. SG&A expenses before the $4,256,000 in
charges described above occurring in 2000 and the $2,006,000 of charges
described above occurring in 2001 were $124,000 higher, or 3% for the twelve
months ended December 31, 2001 as compared to 2000.

Amortization of intangibles. Amortization of intangible assets was $1,098,000 in
2001 and $1,093,000 in 2000. These amounts represent amortization of intangible
assets acquired primarily in connection with the acquisitions of QCB and
Biofluids in December 1998. On January 1, 2002, the company adopted SFAS No. 141
"Accounting for Business Combinations" and SFAS No. 142 "Accounting for Goodwill
and Other Intangible Assets." The Company is in the process of quantifying the
anticipated impact of adopting the provisions of SFAS No. 142, which is expected
to be significant. The impairment charge for goodwill or intangible assets
deemed to have an indefinite useful life resulting from the adoption of SFAS 142
would be non-operational in nature and reflected as a cumulative effect of an
accounting change net of the related tax impact in the period in which SFAS is
adopted. The adoption of SFAS 142 will also result in amortization of intangible
assets no longer being amortized over a specific period of time, but evaluated
on a periodic basis and adjusted for any impairment, when appropriate.

Interest income. Interest income was $376,000 in 2001 compared to $266,000 in
2000. This interest income was derived from the interest income on cash invested
in short-term securities.

Interest expense. Interest expense was $2,000 in 2001 and $302,000 in 2000.
Interest expense in 2000 was related to the interest expense on the notes used
to finance the acquisition of QCB and Biofluids in December 1998. These notes
were paid in full in May 2000.


20





Other income and (expense) net. Other income, net was $86,000 in 2001 compared
to $108,000 in 2000. The net other income in 2001 and 2000 consisted primarily
from gains realized on foreign currency transactions.

Income tax benefit. Income tax benefit was $70,000 in 2001 and $573,000 in 2000.
The income tax benefits in 2001 and 2000 were the result of tax benefits from
research and experimentation and other permanent tax credits. In 2000, we
realized a large tax benefit of $5,037,000 from the exercise of stock options by
employees.

Redeemable preferred stock dividend and accretion of beneficial conversion. With
the conversion of preferred stock into common stock in September of 2000, the
Company incurred a $3,853,000 charge for non-cash preferred stock dividends and
accretion related to a beneficial conversion feature for the year ended December
31, 2000. We did not incur any similar charge in 2001 and do not expect any
similar charges in 2002 or subsequent years.

Year Ended December 31, 2000 Compared to Year Ended December 1999

Net Sales. Net sales were $32,210,000 in 2000 compared to $29,257,000 in 1999,
an increase of $2,953,000 or 10%. North American sales, which represented 60% of
consolidated net sales in 2000, grew $3,308,000 or 21% for the year, while
European sales, which represent 25% of consolidated net sales in 2000, declined
$930,000 or 10%. Sales from the rest of the world, representing 15% of total
consolidated net sales in 2000 grew $575,000 or 14% over the prior year. North
American sales grew due to increased sales of oligonucleotides, proteins and
products related to signal transduction. In local currency, European sales grew
$55,000 or 1% compared to the prior year. European research product sales,
excluding the impact of foreign exchange, decreased 6% while sales of European
clinical products, excluding the impact of foreign exchange, increased 3%. Sales
in the rest of the world increased due to the increase in sales of clinical
products.

Gross Profit. Gross profit for the year ended December 31, 2000 was $18,610,000,
resulting in a gross margin of 58%, compared to a gross profit of $18,186,000,
and a gross margin of 62% for the year ended December 31, 1999. The gross margin
of 58% for the year ended December 31, 2000 was negatively impacted by $663,000
or approximately 2% as a result of $571,00 of inventory write downs and $92,000
related to a sales allowance for a potential credit to a terminated distributor.
In addition, gross margin was impacted $70,000 or .2% for the year ended
December 31, 2000 due to the impact of foreign exchange. The Company also
relocated it's primary manufacturing and corporate headquarters in 2000, moving
from a previously owned 29,000 square foot building to a leased 52,000 square
foot building causing the 2000 gross margin to be effected by higher on-going
costs of the new facility. Our serum and media business, which represents
approximately 7% of our 2000 net sales was impacted by increased raw material
costs.

Research and development. Research and development expense for the year ended
December 31, 2000 was $3,575,000 compared to $3,315,000 for the year ended
December 31, 1999, an increase of $260,000 or 8%. As a percentage of net sales,
research and development expense was 11% for each of the years ended December
31, 2000 and 1999.

Sales and marketing. Sales and marketing expense was $5,682,000 for the year
ended December 31, 2000 and $4,737,000 for the year ended December 31, 1999, an
increase of $945,000 or 20%. As a percentage of net sales, this represents 18%
and 16% of net sales for each of the years ended December 31, 2000 and 1999
respectively. This increase was attributable primarily to $120,000 of increased
advertising and promotional expenses, $450,000 of increased sales expenses in
the United States, $322,000 increased expenses related to the addition of a
direct sales force in the United Kingdom which began operations in January 2000,
and $80,000 due to the hiring of two new senior sales and marketing executives
to the Company in November 2000.

General and administrative. General and administrative expense was $9,071,000
and $4,460,000 for the years ended December 31, 2000 and 1999 respectively. This
represents an increase of $4,610,000, or 103%. $4,256,000 of this increase was
related to various charges including: (i) a non-cash stock compensation charge
of $946,000 related to the hiring of a new Chief Executive Officer and Chief
Operating Officer in September 2000; (ii) $1.3 million of severance costs
including the retirement of the Company's previous Chief Executive and Chief
Operating Officers; (iii) $745,000 of professional fees related to merger and
acquisition work and legal cost related to an employee termination suit; (iv)
$534,000 related to the transition to a new senior management


21





team; (v) $523,000 related to the withdrawal of the Company's follow on stock
offering; (vi) $120,000 increase in the reserve for bad debt and allowances and
(vii) a reserve of $88,000 for a customer dispute. SG&A expenses before the
$4,256,000 charges described above were $354,000 higher for the twelve months
ended December 31, 2000 as compared to 1999, reflecting the Company's continued
investment in its infrastructure.

Amortization of intangibles. Amortization of intangible assets was $1,093,000 in
2000 and $1,061,000 in 1999. These amounts represent amortization of intangible
assets acquired primarily in connection with the acquisitions of QCB and
Biofluids in December 1998.

Interest income. Interest income was $266,000 in 2000 compared to $397,000 in
1999. This interest income was derived from the interest income on cash invested
in short-term securities.

Interest expense. Interest expense was $302,000 in 2000 and $1,367,000 in 1999.
Interest expense was related to the interest expense on the notes used to
finance the acquisition of QCB and Biofluids in December 1998. The decrease in
interest expense from 1999 to 2000 is the result of the pay off of notes payable
in March 2000.

Other income and (expense) net. Other income and (expense), net was $108,000 of
net other income in 2000 compared to ($46,000) of net expense in 1999. The
$108,000 of net income in 2000 consisted primarily of a gain of $82,000 from the
liquidation of two European subsidiaries and $104,000 of gains realized on
foreign currency transactions offset by a $99,000 loss on the sale of the
Company's previous headquarters in November 2000. The $46,000 net other expense
in 1999 was primarily losses realized on foreign currency transactions.

Income tax expense (benefit). Income tax benefit was $573,000 in 2000 and income
tax expense was $20,000 in 1999. The income tax benefit in 2000 was the result
of tax benefits from research and experimentation and other permanent tax
credits while the minimal income tax expense in 1999 was the result of the
utilization of prior year operating losses in the European subsidiaries in 1999
and R & E and other permanent tax credits.


22





QUARTERLY RESULTS

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




Dec. 31, Sep. 30, Jun. 30, Mar. 31, Dec. 31, Sep. 30, Jun. 30, Mar. 31,
2001 2001 2001 2001 2000 2000 2000 2000
-------- -------- -------- -------- -------- -------- -------- --------
(in thousands)


Net Sales ............... $ 9,171 $ 8,587 $ 8,760 $ 8,657 $ 7,719 $ 8,150 $ 8,449 $ 7,891
Cost of goods sold ...... 4,143 3,761 3,678 3,958 3,889 3,395 3.257 3,058
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit ......... 5,028 4,826 5,082 4,699 3,830 4,755 5,191 4,833
Research and development
..................... 1,056 1,051 925 954 982 872 899 822
Sales and marketing ..... 1,843 1,806 1,824 1,922 1,617 1,325 1,393 1,346
General and
administrative ........ 2,028 1,751 1,360 1,807 2,888 3,420 1,670 1,092
Amortization of
intangibles ........... 274 275 275 275 275 275 274 270
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) from
operations .......... (173) (57) 699 (258) (1,932) (1,137) 954 1,303
Interest income
(expense), net ........ 45 85 107 137 146 13 (11) (182)
Other income (expense),
net ................... 39 (28) 26 49 60 (47) 79 16
-------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
income taxes
(benefit) .......... (89) -- 832 (72) (1,726) (1,171) 1,022 1,136
Income tax expense
(benefit) ............ (40) (266) 258 (22) (633) (609) 317 352
-------- -------- -------- -------- -------- -------- -------- --------
Net income (loss) ... (49) 266 574 (50) (1,093) (562) 705 784

Redeemable preferred
stock dividend and
accretion of beneficial
conversion feature .... -- -- -- -- -- (2,384) (323) (1,147)
-------- -------- -------- -------- -------- -------- -------- --------

Net income (loss)
available to common
stockholders .......... $ (49) $ 266 $ 574 $ (50) $ (1,093) $ (2,946) $ 383 $ (363)
======== ======== ======== ======== ======== ======== ======== ========

Net income (loss) per
basic share available
to common stockholders $ (0.00) $ 0.03 $ 0.06 $ (0.00) $ (0.11) $ (0.35) $ 0.05 $ (0.05)
======== ======== ======== ======== ======== ======== ======== ========

Shares used to compute
basic net income (loss)
per share available to
common stockholders ... 10,391 10,443 10,428 10,352 10,324 8,362 7,930 7,717
======== ======== ======== ======== ======== ======== ======== ========


LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents as of December 31, 2001 of $9,471,000 decreased by
$1,162,000, or 11%, from $10,633,000 at December 31, 2000. The decrease in cash
was due primarily to $2,065,000 provided by operating activities offset by
$2,559,000 and $360,000 used in investing and financing activities.


Net cash of $2,065,000 was provided by operating activities in 2001. Working
capital, which is the excess of current assets over current liabilities was
$19,000,000 at December 31, 2001 as compared to $20,102,000 at December 31, 2000
representing an decrease of $1,102,000 or 5%.

Net cash used in investing activities in 2001 was $2,559,000 which was primarily
for the purchase of laboratory and manufacturing equipment. The Company
anticipates capital spending in 2002 to be a least at levels incurred in 2001.


23





Net cash used in financing activities in 2001 was $360,000 of which $308,000 was
provided from the exercise of employee stock options and $668,000 was used in
the repurchase of the Company's common stock pursuant to a stock repurchase
program effective October 30, 2001. The repurchase program allows for spending
up to $5,000,000 on the repurchase of the Company's common stock. Through March
18, 2002, the Company had spent $2,900,000 and may continue to repurchase its
common stock until the $5,000,000 limit is used.

On February 15, 2000, the Company issued 371,300 shares of $0.001 par value
Series B Redeemable Preferred Stock and received net proceeds of $8,415,200.
These funds were used to reduce the Company's notes payable related to the
acquisitions of QCB and Biofluids in December 1998.

On September 18, 2000, two former executives of the Company invested a total of
$850,000 in the Company, acquiring 51,400 shares of common stock. Additionally,
on September 18, 2000, a major shareholder invested an additional $4,468,700,
net of expenses, into the Company acquiring 300,000 shares of common stock.

In the year ended December 31, 2001, the Company received $308,000 from the
issuance of common stock related to the exercise of stock options.

The Company has never paid dividends on common stock and has no plans to do so
in fiscal 2002. Our earnings will be retained for reinvestment in the business.

The Company has entered into various leases involving facility properties,
copiers and automobiles. Lease expense for 2002 will be approximately
$1,340,000.

At December 31, 2001, total future minimum payments under all of the Company's
leases are as follows (in thousands):

2002...................................$1,340
2003................................... 1,260
2004................................... 1,064
2005................................... 810
2006................................... 484
Thereafter............................. 36
------
$4,994
======

The Company expects to be able to meet its future cash and working capital
requirements for operations and capital additions through currently available
funds and cash generated from operations. As of March 21, 2002, the Company does
not have a line of credit. However, we may raise additional capital or secure
debt financing from time to time to take advantage of favorable conditions in
the market or in connection with our corporate development activities.

RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2001, the FASB issued SFAS No.141, "Accounting For Business
Combinations", and SFAS No. 142, "Accounting For Goodwill and Other Intangible
Assets". SFAS No. 141 requires that the purchase method of accounting be used
for all business combinations initiated after June 30, 2001. SFAS No. 142
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized to earnings, but instead be reviewed for impairment in
accordance with SFAS No. 142. The amortization of goodwill and intangible assets
with indefinite lives was approximately $1,098,000, $1,093,000, and $1,061,000
for fiscal years ended December 31, 2001, 2000, and 1999, respectively. The
Company is in the process of quantifying the anticipated financial statement
impact of adopting the provisions of SFAS No. 142, which is expected to be
material. The impairment charge for goodwill or intangible assets deemed to have
an indefinite useful life resulting from the adoption of SFAS 142 would be
non-operational in nature and reflected as a cumulative effect of an accounting
change net of the related tax impact. The Company will adopt of SFAS 142
effective January 1, 2002.


24





In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. While SFAS No.
144 supersedes SFAS No.121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," it retains many of the fundamental
provisions of that statement. The standard is effective for fiscal years
beginning after December 15, 2001. The Company expects that the adoption of SFAS
No. 144 will not have a material impact on the financial position or results
from operations.


RISK FACTORS

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

RISKS RELATED TO OUR BUSINESS

FAILURE TO MANAGE OUR GROWTH AND EXPANSION COULD IMPAIR OUR BUSINESS.

We historically have sought, and will continue to seek, to increase our sales
and profitability primarily through the acquisition or internal development of
new product lines, additional customers and new businesses. Our historical
revenue growth is primarily attributable to our acquisitions and new product
development and, to a lesser extent, to increased revenues from our existing
products. We expect that future acquisitions, if successfully consummated, will
create increased working capital requirements, which will likely precede by
several months any material contribution of an acquisition to our net income.
Our ability to achieve our expansion objectives and to manage our growth
effectively and profitably depends upon a variety of factors, including:

o our ability to internally develop new products;

o our ability to make profitable acquisitions;

o integration of new facilities into existing operations;

o hiring, training and retention of qualified personnel;

o establishment of new relationships or expansion of existing relationships
with customers and suppliers; and

o availability of capital.

In addition, the implementation of our growth strategy will place significant
strain on our administrative, operational and financial resources and increased
demands on our financial systems and controls. Our ability to manage our growth
successfully will require us to continue to improve and expand these resources,
systems and controls. If our management is unable to manage growth effectively,
our operating results could be adversely affected. Moreover, there can be no
assurance that our historic rate of growth will continue, that we will continue
to successfully expand or that growth or expansion will result in profitability.

WE CANNOT GUARANTEE THAT OUR FUTURE ACQUISITIONS WILL BE SUCCESSFUL.

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


25





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

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

A significant portion of our sales has been to researchers, universities,
government laboratories and private foundations whose funding is dependent upon
grants from government agencies such as the U.S. National Institutes of Health
and similar domestic and international agencies. Although the level of research
funding has increased during the past several years, we cannot assure that this
trend will continue. Government funding of research and development is subject
to the political process, which is inherently fluid and unpredictable. Our
revenues may be adversely affected if our customers delay purchases as a result
of uncertainties surrounding the approval of government budget proposals. Also,
government proposals to reduce or eliminate budgetary deficits have sometimes
included reduced allocations to the NIH and other government agencies that fund
research and development activities. A reduction in government funding for the
NIH or other government research agencies could seriously damage our business.

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

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

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

OUR ABILITY TO RAISE THE CAPITAL NECESSARY TO EXPAND OUR BUSINESS IS UNCERTAIN.

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

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

We incur significant research and development expenses to develop new products
and technologies. There can be no assurance that any of these products or
technologies will be successfully developed or that if developed, will be
commercially successful. In the event that we are unable to develop
commercialized products from our research and development efforts or we are
unable or unwilling to allocate amounts beyond our currently anticipated
research and development investment, we could lose our entire investment in
these new products and


26





technologies. Any failure to translate research and development expenditures
into successful new product introductions could have an adverse effect on our
business.

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

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

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

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

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

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

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

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

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

o availability, quality and price relative to competitive products;


27





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

o customers' opinion of the products utility;

o ease of use;

o consistency with prior practices;

o scientists' opinion of the product's usefulness;

o citation of the product in published research; and

o general trends in life sciences research.

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

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

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

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

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

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

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


28





Our business may be harmed as a result of these Web sites or other sales methods
which may be developed in the future.

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

International sales accounted for approximately 40% of our revenues in 2001,
42.0% of our revenues in 2000, and 47.0% of our revenues in 1999. International
sales can be subject to many inherent risks that are difficult or impossible for
us to predict or control, including:

o unexpected changes in regulatory requirements and tariffs;

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

o longer accounts receivable collection cycles in certain foreign countries;

o adverse economic or political changes;

o unexpected changes in regulatory requirements;

o more limited protection for intellectual property in some countries;

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

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

o problems in collecting accounts receivable; and

o potentially adverse tax consequences of overlapping tax structure.

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

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

In addition, approximately 18% of our sales are made in foreign currencies,
primarily Belgian francs, British pounds, and German marks. Although a
significant portion of the foreign currencies in which we conduct our business
is currently, or may in the future be, denominated in Euros as a result of the
European Monetary Union, we are not certain about the effect of the Euro on our
business, financial condition or results of operations. In the past, gains and
losses on the collection of our accounts receivable arising from international
operations have contributed to negative fluctuations in our results of
operations. In general, increases in the exchange rate of the United States
dollar to foreign currencies cause our products to become relatively more
expensive to customers in those countries, leading to a reduction in sales or
profitability in some cases. We historically have not, and currently are not,
using hedging transactions or other means to reduce our exposure to fluctuations
in the value of the United States dollar as compared to the foreign currencies
in which many of our sales are made.


29






OUR OPERATING RESULTS MAY FLUCTUATE.

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

o level of demand for our products;

o changes in our customer and product mix;

o timing of acquisitions and investments in infrastructure;

o competitive conditions;

o timing and extent of intellectual property litigation;

o exchange rate fluctuations; and

o general economic conditions.

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

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

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

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

INTELLECTUAL PROPERTY OR OTHER LITIGATION COULD HARM OUR BUSINESS.

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

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

If a third party claimed an intellectual property right to technology we use, we
might need to discontinue an important product or product line, alter our
products and processes, pay license fees or cease our affected


30





business activities. Although we might under these circumstances attempt to
obtain a license to this intellectual property, we may not be able to do so on
favorable terms, or at all.

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

ACCIDENTS RELATED TO HAZARDOUS MATERIALS COULD ADVERSELY AFFECT OUR BUSINESS.

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

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

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

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

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

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

As of March 21, 2002, 53 of our 257 employees worked for our BioSource Europe
subsidiary, which is located in Nivelles, Belgium. As a result of Belgian labor
laws, we are required to make specified severance payments in the event we
terminate a European employee. Accordingly, our management may be limited by the
application of the Belgian labor laws in the determination of staffing levels,
and may have less flexibility in making such determinations than our competitors
whose employees are not subject to similar labor laws.

RISKS ASSOCIATED WITH OUR INDUSTRY

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

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


31





o product performance, features and liability;

o price;

o timing of product introductions;

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

o sales and distribution capabilities;

o technical support and service;

o brand royalty;

o applications support; and

o breadth of product line.

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

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

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

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

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

WE ARE CURRENTLY SUBJECT TO GOVERNMENT REGULATION.

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


32





RISKS ASSOCIATED WITH OUR COMMON STOCK

OUR STOCK PRICE HAS BEEN VOLATILE.

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

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

o the gain or loss of significant contracts;

o loss of key personnel;

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

o delays in the development and introduction of new products;

o legislative or regulatory changes;

o general trends in the industry;

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

o biological or medical discoveries;

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

o public concern as to the safety of new technologies;

o sales of common stock of existing holders;

o securities class action or other litigation;

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

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

As a result of these factors, and potentially others, the sales price of our
common stock has ranged from $2.41 to $32.00 per share from January 1, 1998
through March 21, 2002 and from $5.19 to $8.20 per share from January 1, 2002
through March 20, 2002. For additional information regarding the price range of
our common stock, see "Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters."

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

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


33





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

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

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

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

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

Our principal stockholders and management own a significant percentage of our
capital stock and will be able to exercise significant influence over our
affairs. Our executive officers, directors and principal stockholders will
continue to beneficially own 32.3% of our outstanding common stock, based upon
the beneficial ownership of our common stock as of March 21, 2002. In addition,
these same persons also hold options to acquire additional shares of our common
stock, which may increase their percentage ownership of the common stock further
in the future. Accordingly, these stockholders:

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

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

o will continue to have significant influence over our business.

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

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

Our executive officers, directors and principal stockholders beneficially own
approximately 32.3% of our outstanding common stock, based upon the beneficial
ownership of our common stock as of March 21, 2002. As a result, these
stockholders, if they act together, could exert substantial influence over
matters requiring stockholder approval, including the election of directors and
approval of mergers and other significant corporate transactions. The voting
power of such persons may have the effect of delaying, preventing or deterring a
change in control, and could affect the market price of our common stock.

ABSENCE OF DIVIDENDS COULD REDUCE OUR ATTRACTIVENESS TO YOU.

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


34





ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
-----

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

Consolidated Balance Sheets at December 31,
2001 and December 31, 2000................................................ F-3

Consolidated Statements of Operations for
the years ended December 31, 2001, 2000
and 1999.................................................................. F-4

Consolidated Statements of Stockholders'
Equity and Comprehensive Income (Loss)
for the years ended December 31, 2001,
2000 and 1999............................................................. F-5

Consolidated Statements of Cash Flows for
the years ended December 31, 2001, 2000
and 1999.................................................................. F-6

Notes to Consolidated Financial Statements
as of December 31, 2001 and 2000 and for
the years ended December 31, 2001, 2000
and 1999 ................................................................. F-7

Financial Statement Schedule--Valuation and
Qualifying Account ...................................................... F-22

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

None


35





PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

INFORMATION WITH RESPECT TO DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information with respect to our directors,
executive officers and key employees as of March 21, 2002:

Name Age Position
----------------------------- ----- --------------------------------------
Leonard M. Hendrickson 54 President and Chief Executive Officer

Charles C. Best 42 Chief Financial Officer, Executive
Vice President, Finance

David S. Thrower 38 Vice President, Global Sales and
Marketing

Cirilo Cabradilla, Jr., Ph.D. 54 Vice President, Molecular Biology

Kevin J. Reagan, Ph.D 50 Vice President, Immunology

Jozef Vangenechten, Ph.D 47 General Manager, BioSource Europe, S.A

Jean-Pierre L. Conte* 38 Director

David J. Moffa, Ph.D.* 59 Director

John R. Overturf, Jr.** 41 Director

Robert D. Weist** 62 Director

Robert J. Weltman** 36 Director

- -----------
* Member of the Compensation Committee.

** Member of the Audit Committee.

Leonard M. Hendrickson became president and Chief Executive Officer on October
15, 2001. He has been a director of BioSource since October 1993. Prior to his
position with the Company, Mr. Hendrickson was President of Isotope Products
Laboratories from February 1992 to October 2001. From February 1990 to January
1992, Mr. Hendrickson served as the principal consultant for Microchemics, a
marketing and business development consulting firm that he founded. Mr.
Hendrickson holds a Bachelor of Science degree from the University of
Pennsylvania and a Masters in Business Administration from American University
in Washington, D.C.

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


36





David Thrower became Senior Vice President of Global Marketing in November 2000.
Mr. Thrower served as Senior Vice President of Global Marketing for GN Resound,
Inc. from 1998 to 1999. From 1993 to 1998 Mr. Thrower worked for Quattro
Consulting, Inc. and served as their Vice President from 1996 to 1998. Mr.
Thrower holds a Master degree in Business Administration from Harvard Graduate
School of Business Administration, and a Bachelor's degree in Mathematics and
Computational Sciences from Stanford University.

Cirilo D. Cabradilla, Jr., Ph.D. became Vice President of Molecular Biology and
President of our Keystone division in November 1995. From 1991 to 1995, Dr.
Cabradilla served as President of Keystone Laboratories, Inc. From 1988 to 1991,
Dr. Cabradilla was Vice President, Product Development, of Vascor, a
pharmaceutical company. Dr. Cabradilla was an Assistant Professor of Viral
Oncology from 1996-1997 at the University of Pennsylvania, School of Veterinary
Medicine. He did his postdoctoral training at the National Cancer Institute from
1974-1977. Dr. Cabradilla received a Bachelor of Science and a Ph.D. degree in
Biochemistry from the University of California at Davis.

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

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

Jean-Pierre L. Conte has served as a director of BioSource since February 2000.
Mr. Conte is a Managing Director of Genstar Capital LLC, which is the sole
general partner of Genstar Capital Partners II, L.P., a private equity limited
partnership and a Managing Director of Genstar Capital, L.P. which is the sole
general partner of Genstar Capital Partners III L.P. Prior to joining Genstar in
1995, he was a principal for six years at the NTC Group, Inc., a private equity
investment firm. He is a director of several private companies. Mr. Conte earned
a Masters of Business Administration from Harvard University Graduate School of
Business and a Bachelor of Arts from Colgate University. Mr. Conte has been
appointed to the Board of Directors pursuant to an investor rights agreement
among Genstar, Stargen and us, which is described under "Item 13. Certain
Relationships and Related Transactions."

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

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


37





Robert D. Weist has been a director of BioSource since April 1996. Mr. Weist has
been President of Weist Associates, a management consulting firm, since April
1992. From January 1986 through April 1992, Mr. Weist was a consultant to and
Senior Vice President, Administration, General Counsel and Secretary of Amgen,
Inc., having served as Vice President, General Counsel and Secretary from March
1982 through January 1986. Mr. Weist holds a Juris Doctor degree from New York
University and a Masters in Business Administration from the University of
Chicago.

Robert J. Weltman has served as a director of BioSource since February 2000. He
is currently a Principal of Genstar Capital LP, the sole general partner of
Genstar Capital Partners II, L.P., a private equity limited partnership. Mr.
Weltman joined Genstar in August 1995. Prior to joining Genstar, from July 1993
to July 1995, Mr. Weltman was an Associate with Robertson, Stephens & Company,
an investment banking firm. Mr. Weltman holds an AB degree in chemistry from
Princeton University. Mr. Weltman has been appointed to the Board of Directors
pursuant to an investor rights agreement among Genstar, Stargen and us, which is
described under "Item 13. Certain Relationships and Related Transactions."


SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, requires our executive
officers, directors, and persons who own more than ten percent of a registered
class of our equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC"). Executive
officers, directors and greater-than-ten percent stockholders are required by
SEC regulations to furnish us with all Section 16(a) forms they file. Based
solely on our review of the copies of the forms received by us and written
representations from certain reporting persons that they have complied with the
relevant filing requirements, we believe that, during the year ended December
31, 2000, all our executive officers, directors and greater-than-ten percent
stockholders complied with all Section 16(a) filing requirements, except for the
following; Jean-Pierre L. Conte and Robert J. Weltman each filed an Annual
Report of Beneficial Ownership on Form 5 for the calendar year ended December
31, 2001 which included a report relating to options that were granted during
the calendar year ended December 31, 2000, which transaction should have been
reported on an Annual Report of Bendficial Ownership on Form 5 for the calendar
year ended December 31, 2000.


38





ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

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


SUMMARY COMPENSATION TABLE

------------------------------------- -----------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------- -----------------------
OTHER NUMBER OF
YEAR ENDED ANNUAL SECURITIES ALL OTHER
NAME AND DECEMBER COMPEN- UNDERLYING COMPEN-
PRINCIPAL POSITION (1) 31, SALARY BONUS SATION OPTIONS SATION
- -------------------------------- ---- ---------- --------- -------- ------- ---------

Leonard M. Hendrickson.......... 2001 $ 49,000(2) $90,000(10) 173(3) 280,000
Chief Executive Officer and
President

David Thrower................... 2001 $200,000 $23,000 324(3) 110,000
Senior Vice President, 2000 28,750(7) 8,750 27(3) 235,000 $13,224(4)
Sales and Marketing

Charles C. Best................. 2001 $160,000 $23,500 325(3) 87,500
Chief Financial Officer 2000 142,200 22,500 489(3) 20,000
and Executive Vice President 1999 11,250(8) 0 30,000

Russell D. Hays................. 2001 $160,300(6) $ 0 21,173(5) 0 $90,460(4)
Chairman of the Board, 2000 107,000(9) 56,164 129(3) 395,000 57,428(4)
President and Chief
Executive Officer

Cy D. Cabradilla, Jr............ 2001 $140,000 $22,000 635(3) 52,500
Vice President, Molecular 2000 123,375 21,000 364(3) 12,000
Biology 1999 120,000 10,600 826(3) 5,000

- ----------

(1) For a description of employment agreements between certain executive
officers and the Company, see "Employment Agreements with Executive
Officers" below.
(2) Mr. Hendrickson joined the Company on October 15, 2001.
(3) Consists of group life insurance premiums paid by the Company.
(4) Relocation expenses.
(5) Consists of $20,527 for accrued vacation paid by the Company upon
termination and $645 for a group life insurance premium paid by the
Company.
(6) Mr. Hays joined the Company on September 18, 2000.
(7) Mr. Thrower joined the Company on November 1, 2000.
(8) Mr. Best joined the Company on December 1, 1999.
(9) Mr. Hays resigned as of May 18, 2001.
(10) Mr. Hendrickson received a signing bonus on October 15, 2001.




39





OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information regarding the grant of stock
options made during the fiscal year ended December 31, 2001 to the Named
Executive Officers.


OPTION GRANTS IN LAST FISCAL YEAR


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

Leonard M. Hendrickson.. 280,000 24% 5.19 10/15/11 $2,367,977 $5,113,080
David Thrower........... 110,000 9% 5.74 9/17/11 $ 396,895 $ 857,001
Charles C. Best......... 87,500 8% 8.78 12/19/11 $ 483,054 $1,043,040
Cy D. Cabradilla Jr..... 52,500 5% 8.17 12/19/11 $ 269,607 $ 582,152

- ----------

(1) Options granted in 2001 vest over various periods. The options were granted
for a term of 10 years.
(2) Options covering an aggregate of 1,165,750 shares were granted to employees
of the Company and its subsidiary during the year ended December 31, 2001.
(3) The exercise price and the tax withholding obligations related to exercise
may be paid by delivery of already owned shares held a minimum of six
months, subject to certain conditions.




OPTION EXERCISES AND STOCK OPTIONS HELD AT FISCAL YEAR END

The following table sets forth, for those Named Executive Officers who held
stock options at fiscal year end, certain information regarding options
exercised in fiscal year 2001, the number of shares of common stock underlying
stock options held and the value of options held at fiscal year end based upon
the last reported sales price of the common stock on the NASDAQ market on
December 31, 2001 ($8.30 per share).


AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES


SHARES NUMBER OF SECURITIES
ACQUIRED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ON VALUE OPTIONS AT IN-THE-MONEY OPTIONS AT
NAME EXERCISE REALIZED DECEMBER 31, 2001 DECEMBER 31, 2001
- ------------------------ -------- -------- ----------------- -----------------
(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--- --- ----------- ------------- ----------- -------------

Leonard M. Hendrickson.. -- -- 71,000 280,000 $310,900 $870,800
David Thrower........... -- -- 58,750 286,250 -- 293,000
Charles C. Best......... -- -- 16,500 117,500 55,890 97,650
Cy D. Cabradilla........ -- -- 31,228 62,772 133,002 36,250

- ----------

COMPENSATION OF DIRECTORS

Our non-employee corporate directors currently are paid $2,000 for each board
meeting attended, and $1,000 per year for service on a board committee. We also
pay out of pocket expenses incurred by our directors in connection with their
attendance. In addition, non-employee directors have received an annual grant of
4,000 non-statutory stock options, exercisable at the fair market value of our
common stock on the date of grant, and which fully vest on the date of grant.

EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS

We have entered into an employment agreement with Leonard M. Hendrickson to
serve as our President and Chief Executive Officer, effective as of October 15,
2001. Pursuant to this agreement Mr. Hendrickson receives an annual base salary
of $250,000, which we may increase, at the Board's sole discretion, at the end
of each year


40





of his employment. In addition to the base salary to be paid to Mr. Hendrickson,
the Company paid Mr. Hendrickson a one time signing bonus in the amount of
$90,000, upon commencement of his employment. In addition, Mr. Hendrickson is
eligible to receive an annual bonus under the Company's management incentive
plan. The agreement terminates on December 31, 2004. In the event that Mr.
Hendrickson's employment is terminated pursuant without cause or due to a
"change of control" during the term of the agreement, the Company is obligated
to continue to pay Mr. Hendrickson's then-current base salary for a period of 12
months following the effective date of such termination. Also, in certain
instances involving a "change of control," all stock options which have been
granted to Mr. Hendrickson that are unvested at the time of such change of
control become immediately vested and exercisable. According to our agreement
with Mr. Hendrickson, a "change of control" includes any event pursuant to which
(i) any person or entity (or group of related persons or entities acting in
concert) shall acquire shares of capital stock of the Company entitled to
exercise 35% or more of the total voting power represented by all shares of
capital stock of the Company then outstanding; or (ii) the Company sells or
otherwise transfers all or substantially all of its assets or merges,
consolidates or reorganizes with any other corporation or entity, resulting in
less than 75% of the total voting power represented by the capital stock or
other equity interests of the corporation or entity to which the Company's
assets are sold or transferred or surviving such merger, consolidation or
reorganization being held by the persons and entities who were holders of common
stock of the Company immediately prior to such event; or (iv) the Company
issues, otherwise than on a pro rata basis, additional shares of capital stock
representing (after giving effect to such issuance) more than 35% of the total
voting power of the Company; or (v) the persons who were the directors of the
Company as of October 15, 2001 cease to comprise a majority of the Board of
Directors of the Company.

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


Effective May 18, 2001, David Thrower, our Senior Vice President of Sales and
Marketing, entered into a separation agreement with us. In the event the Company
terminates Mr. Thrower's employment with the Company other than for cause at any
time (i) during the later of (A) 12 months from the date of his separation
agreement, and (B) Nine months from the appointment of a new Chief Executive
Officer by the Board, or (ii) within six months following a "change of control",
we are required to pay Mr. Thrower his then-current base salary for a period of
12 months following the effective date of such termination. In addition, if the
employment of Mr. Thrower is terminated within six months of a "change of
control" all stock options which have been granted to Mr. Thrower that are
unvested at the time of such change of control shall become immediately vested
and exercisable. According our agreement with Mr. Thrower, a "change of control"
is defined as the acquisition by any person or entity unaffiliated with Genstar
Capital LLC of capital stock representing at least 40% of the total fully
diluted shares of the Company.

STOCK OPTION PLANS

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


41





to certain adjustments to prevent dilution. Any shares of common stock subject
to an award, which for any reason expires or terminates unexercised are again
available for issuance under the 1993 Plan.

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

As of March 21, 2002, the Board had granted options under the 1993 Plan covering
an aggregate of 2,000,000 shares of common stock to certain of our directors,
officers and employees, of which options to purchase 767,238 shares were
outstanding.

In January 2000, our Board of Directors approved the 2000 BioSource
International, Inc. non-qualified stock option plan (the "2000 Plan"). Under the
2000 Plan, non-qualified stock options may be granted to full-time employees,
part-time employees, directors and consultants of the Company to purchase a
maximum of 2,000,000 shares of the company's common stock. Options granted under
the 2000 Plan are generally exercisable at the rate of 25% each year beginning
one year from the date of grant. The stock options generally expire ten years
from the date of grant. As of March 21, 2002, the Board had granted options
under the 2000 Plan covering an aggregate of 2,000,000 shares of common stock to
certain of our directors, officers and employees, of which, as of March 20,
2002, options to purchase 1,355,250 shares were outstanding.

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

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER TRADING PARTICIPATION

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

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL STOCKHOLDERS

The following table sets forth as of March 21, 2002 certain information relating
to the ownership of our common stock by (i) each person known by us to be the
beneficial owner of more than five percent of the outstanding shares of our
common stock, (ii) each of our directors, (iii) each of our executive officers,
and (iv) all of our executive officers and directors as a group. Except as may
be indicated in the footnotes to the table and subject to applicable community
property laws, each such person has the sole voting and investment power with
respect to the shares owned. Unless otherwise indicated, the address of each
person listed is in care of BioSource International, Inc., 542 Flynn Road,
Camarillo, California 93012, and the address of Messrs. Conte, Weltman and
Genstar Capital LLC is 555 California Street, Suite 4850, San Francisco,
California 94104.


42





Number of Shares
of Common Stock
Beneficially
Name and Address Owned (1) Percent (2)
---------------- ---------------- -----------

Genstar Capital LLC (3).................. 3,436,856 30.2%
Jean-Pierre L. Conte (3)................. 3,392,189 29.9%
Armetis Investment Management LLC(14).... 1,011,685 10.1%
Kennedy Capital Management, Inc(4)....... 868,625 8.6%
Dimensional Funds Advisors Inc. (5)...... 535,100 5.3%
Leonard M. Hendrickson (6)............... 109,400 1.1%
David J. Moffa, Ph.D. (7)................ 39,900 *
John R. Overturf, Jr. (8)................ 22,000 *
Robert D. Weist (9)...................... 65,000 *
Robert J. Weltman (10)................... 11,333 *
David Thrower (11)....................... 58,750 *
Charles C. Best (12)..................... 31,500 *
Cy D. Cabradilla (13).................... 31,228 *
All of the directors and executive
officers as a group (nine persons) (15) 3,765,722 32.3%
- ----------
* Less than one percent.

(1) Under Rule 13d-3, certain shares may be deemed to be beneficially owned by
more than one person (if, for example, persons share the power to vote or
the power to dispose of the shares). In addition, shares are deemed to be
beneficially owned by a person if the person has the right to acquire the
shares (for example, upon exercise of an option) within 60 days of the date
as of which the information is provided. In computing the percentage
ownership of any person, the amount of shares outstanding is deemed to
include the amount of shares beneficially owned by such person (and only
such person) by reason of these acquisition rights. As a result, the
percentage of outstanding shares of any person as shown in this table does
not necessarily reflect the person's actual ownership or voting power with
respect to the number of shares of common stock actually outstanding at
March 21, 2000.
(2) Percentage ownership is based on 10,065,731 shares of common stock
outstanding as of March 21, 2002.
(3) Genstar Capital Partners II, L.P. holds 2,008,025 shares of common stock
and 1,262,542 shares of common stock issuable upon exercise of warrants and
Stargen II LLC holds 34,380 shares of common stock and 24,458 shares of
common stock issuable upon exercise of warrants, all of which are currently
convertible or exercisable. Includes 8,000 stock options heldby Mr. Conte.
In addition, Mr. Conte holds 30,000 shares of common stock, Richard F.
Hoskins holds 16,667 shares of common stock and Richard D. Paterson holds
16,667 shares of common stock. Genstar Capital LLC is the general partner
of Genstar Capital Partners II, L.P. Mr. Conte, Mr. Hoskins and Mr.
Paterson are the managers and managing directors of Genstar Capital LLC and
are members of Stargen, and Mr. Paterson is the Administrative Member of
Stargen. In such capacities Messrs. Conte, Hoskins and Paterson may be
deemed to beneficially own shares of common stock beneficially held by
Genstar Capital Partners and Stargen, but disclaim such beneficial
ownership, except to the extent of their economic interest in these shares.
Messrs. Conte, Hoskins, Paterson, Genstar Capital LLC, Genstar Capital
Partners II, L.P. and Stargen II LLC may be deemed to be acting as a group
in relation to their respective holdings in BioSource but do not affirm the
existence of any such group.
(4) As disclosed in the Schedule 13G filed with the Securities and Exchange
Commission on February 15, 2002 by Kennedy Capital Management, Inc.
(5) As disclosed in the Schedule 13G filed with the Securities and Exchange
Commission on January 30, 2002 by Dimensional Fund Advisors, Inc.


43





(6) Includes (i) 71,000 shares of common stock reserved for issuance upon
exercise of stock options that are currently exercisable or are exercisable
within 60 days of March 21, 2002; (ii) 26,400 shares of common stock owned;
(iii) 4,000 shares of common stock held of record by two of Mr.
Hendrickson's minor children; and (iv) 8,000 shares of common stock held in
the Microchemics Simplified Employee Pension Plan.
(7) Includes (i) 32,500 shares of common stock reserved for issuance upon
exercise of stock options that are currently exercisable or are exercisable
within 60 days of March 21, 2002; (ii) 550 shares of common stock held
solely by Dr. Moffa's spouse; (iii) 4,000 shares of common stock held
jointly with Dr. Moffa's spouse; and (iv) 2,850 shares of common stock held
directly.
(8) Includes (i) 20,000 shares of common stock reserved for issuance upon
exercise of stock options that are currently exercisable or are exercisable
within 60 days of March 21, 2002; and (ii) 2,000 shares of common stock
owned.
(9) Includes 65,000 shares of common stock reserved for issuance upon exercise
of stock options that are currently exercisable or are exercisable within
60 days of March 21, 2002.
(10) Includes (i) 3,333 shares of common stock held directly; (ii) 8,000 shares
of common stock reserved for issuance upon exercise of stock options that
are currently exercisable or are exercisable within 60 days of March 21,
2002. Mr. Weltman is also a Principal of Genstar Capital LP and a member,
but not a managing member, of Stargen II LLC. Mr. Weltman does not have
power to vote or dispose of, or to direct the voting or disposition of, any
securities beneficially owned by Genstar Capital LLC or Stargen II LLC. Mr.
Weltman disclaims that he beneficially owns any shares of common stock
beneficially owned by Genstar Capital LLC or Stargen II LLC, except to the
extent of his economic interest in shares owned by Genstar Capital LLC or
Stargen II LLC.
(11) Includes 58,750 shares of common stock reserved for issuance upon exercise
of stock options that are currently exercisable or are exercisable within
60 days of March 21, 2002.
(12) Includes 16,500 shares of common stock reserved for issuance upon exercise
of stock options that are currently exercisable or are exercisable within
60 days of March 21, 2002.
(13) Includes 31,228 shares of common stock reserved for issuance upon exercise
of stock options that are currently exercisable or are exercisable within
60 days of March 21, 2002.
(14) As disclosed in the Schedule 13G filed with the Securities and Exchange
Commission on February 4, 2002 by Armetis Investment Management LLC.
(15) Includes (I) 292,000 shares of common stock reserved for issuance upon
exercise of stock options that are currently exercisable or are exercisable
within 60 days of March 21, 2002; (ii) 1,287,000 shares of common stock
reserved for issuance upon the exercise of warrants and (iii) includes
2,186,722 shares of common stock owned.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On January 10, 2000, we entered into a securities purchase agreement with
Genstar Capital Partners II, L.P. and Stargen II LLC. Pursuant to this
agreement, we sold Genstar and Stargen a total of 371,300 shares, including
364,244 to Genstar and 7,056 to Stargen, of our Series B Preferred Stock for
$9,000,312 in the aggregate. These shares were initially convertible into
1,485,200 shares, including 1,456,976 for Genstar and 28,224 for Stargen, of our
common stock. In addition, we issued to Genstar and Stargen warrants to purchase
a total of 1,287,000 shares of our common stock, including 1,262,542 to Genstar
and 24,458 to Stargen, exercisable at $7.77 per share. Under the investor rights
agreement among Genstar, Stargen and us, executed in connection with the
securities purchase agreement, Genstar and Stargen also have the right to
appoint two out of our seven directors to our Board of Directors as long as they
beneficially own, in the aggregate, at least 750,000 shares of common stock, or
one director if they beneficially own at least 495,000 shares. Pursuant to the
investor rights agreement, we appointed Jean-Pierre L. Conte, a Managing
Director of Genstar Capital LLC, and Robert J. Weltman, a Vice President of
Genstar Capital LLC, to our Board of Directors. Genstar and Stargen also have
the right of first refusal to purchase additional shares and the right to
require us to register their shares of our common stock underlying the preferred
stock and the warrants. The consummation of the securities purchase agreement,
including the issuance of the shares of Series B Preferred Stock and the
warrants, occurred on February 15, 2000. Pursuant to the securities purchase
agreement, we paid a $270,009 transaction fee to Genstar Capital LLC and
reimbursed all of the fees and expenses of approximately $195,426, incurred by
Genstar Capital Partners and its affiliates in connection with the securities
purchase agreement.


44





On September 20, 2000, pursuant to the terms of the Certificate of Designation
of Preferences, Rights and Limitations of our Series B Preferred, all issued and
outstanding shares of Series B Preferred Stock were automatically converted into
an aggregate of 1,556,574 shares of common stock, including 1,526,922 shares of
common stock issued to Genstar and 29,652 shares of common stock issued to
Stargen.

We entered into a Securities Purchase Agreement, effective as of August 9, 2000,
with Genstar Capital Partners II, L.P. Genstar agreed to purchase from us
300,000 shares of the our common stock at $15.00 per share. Genstar subsequently
assigned its right to purchase 30,000 of these shares to Jean-Pierre L. Conte
and 3,333 of the shares to Robert Weltman. Both Mr. Conte and Mr. Weltman
currently serve on our Board of Directors. Genstar assigned its right to
purchase an additional 33,334 of these shares to certain other individuals
affiliated with Genstar. We also entered into a Securities Purchase Agreement,
effective as of August 9, 2000, with Russell D. Hays, former President, and
Chief Executive Officer of the Company pursuant to which Mr. Hays agreed to
purchase 40,000 shares of the our common stock at $15.00 per share. We also
entered into a Securities Purchase Agreement, effective as of September 5, 2000,
with George Uveges, former Chief Operating Officer of the Company pursuant to
which Mr. Uveges agreed to purchase 11,428 shares of the our common stock at
$21.875 per share. The closing of each of these transactions occurred on
September 28, 2000.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

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

Independent Auditors' Report

Consolidated Balance Sheets at December 31, 2001 and 2000

Consolidated Statements of Operations for the Years ended December 31, 2001,
2000, and 1999

Consolidated Statements of Stockholders' Equity and Comprehensive Income
(Loss) for the Years ended December 31, 2001, 2000 and 1999

Consolidated Statements of Cash Flows for the Years ended December 31, 2001,
2000, and 1999

Notes to Consolidated Financial Statements

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

Financial Statement Schedule--Valuation and Qualifying Accounts

All other schedules are omitted because they are not applicable, not required
or because the required information is included in the consolidated financial
statements or notes thereto.

(a)(3) Exhibits

See Exhibit Index immediately following signature page.

(b) Reports on Form 8-K:

Current Report on Form 8-K dated September 26, 2001, reporting Item 5
and filed with the Securities and Exchange Commission on October 4,
2001.

Current Report on Form 8-K dated October 25, 2001, reporting Item 5 and
filed with the Securities and Exchange Commission on November 2, 2001.


45





SIGNATURES

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



Date: March 25, 2002 /s/ Charles C. Best
By: _________________________________
Charles C. Best
Chief Financial Officer




Date: March 25, 2002 /s/ Leonard M. Hendrickson
By: _________________________________
Leonard M. Hendrickson
President and Chief Executive Officer

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


Signature Title Date
- ------------------------------ -------------------------- --------------

/s/ Leonard M. Hendrickson President, Chief Executive March 25, 2002
Officer and Director
- ------------------------------
Leonard M. Hendrickson

/s/ David J. Moffa, Ph.D. Director March 25, 2002

- ------------------------------
David J. Moffa, Ph.D.

/s/ John R. Overturf, Jr. Director March 25, 2002

- ------------------------------
John R. Overturf, Jr.

/s/ Robert D. Weist Director March 25, 2002

- ------------------------------
Robert D. Weist

/s/ Jean-Pierre L. Conte Director March 25, 2002

- ------------------------------
Jean-Pierre L. Conte

/s/ Robert J. Weltman Director March 25, 2002

- ------------------------------
Robert J. Weltman


46





EXHIBIT INDEX
FOR FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001

Exhibit
Number Description
- ------- -----------------------------------------------------------------

3.1 Certificate of Incorporation of Registrant (1)

3.2 Bylaws of Registrant (1)

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

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

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

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

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

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

4.7 Form of Right Certificate (9)

4.8 Summary of Share Purchase Rights (9)

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

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

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

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

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

10.1 Registrant's 1993 Stock Incentive Plan (4)

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

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

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


47




EXHIBIT INDEX
FOR FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001, CONTINUED

Exhibit
Number Description
- ------- -----------------------------------------------------------------

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

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

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

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

10.9 Registrant's Employee Stock Purchase Plan (7)

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

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

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

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

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

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

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

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

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

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

10.20 Lease Agreement for 540 Flynn Road, dated March 7, 2000, between
Registrant and Lincoln Ventura Technology Center. (15)

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


48





EXHIBIT INDEX
FOR FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001, CONTINUED

Exhibit
Number Description
- ------- -----------------------------------------------------------------

21 Subsidiaries of the Company:
State/Country of
Name Incorporation
--------------------------------------------------------------------------
Keystone Laboratories, Inc.............................California
BioSource V.I. FSC., LTD...............................U.S. Virgin Islands
BioSource Europe S.A...................................Belgium
BioSource B.V..........................................Holland
BioSource GmbH.........................................Germany
BioSource U.K., Ltd....................................U.K.
Quality Controlled Biochemicals, Inc...................Massachusetts
Javelle, Inc...........................................Massachusetts

23.1 Consent of KPMG LLP, Independent Public Accountants
- ----------

(1) Incorporated by reference to the Company's Registration Statement on Form
S-4 as filed with the Securities and Exchange Commission on October 22,
1992, as amended.
(2) Incorporated by reference to the Company's Form 10KSB for the year ended
December 31, 1992.
(3) Incorporated by reference to the Company's Form 10KSB for the year ended
December 31, 1993.
(4) Incorporated by reference to the Company's Form 10KSB for the year ended
December 31, 1994.
(5) Incorporated by reference to the Company's Form 10KSB for the year ended
December 31, 1995.
(6) Incorporated by reference to the Company's Registration Statement on Form
SB-2 (SEC No. 333-3336) as filed with the Securities and Exchange
Commission on May 31, 1996, as amended.
(7) Incorporated by reference to the Company's Registration Statement on Form
S-8 (SEC No. 33-91838) as filed with the Securities and Exchange Commission
on May 4, 1995.
(8) Incorporated by reference to the Company's Current Report on Form 8-K/A
filed with the Securities and Exchange Commission on February 19, 1999.
(9) Incorporated by reference to the Company's Current Report on Form 8-A filed
with the Securities and Exchange Commission on March 1, 1999.
(10) Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 1998.
(11) Incorporated by reference to the Company's Registration Statement on Form
S-3 as filed with the Securities and Exchange Commission on March 16, 2000.
(12) Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-3 as filed with the Securities and Exchange Commission
on March 22, 2000.
(13) Incorporated by reference to the Company's Current Report on Form 8-K as
filed with the Securities and Exchange Commission on October 26, 2000, and
as amended on October 31, 2000.
(14) Incorporated by reference to the Company's definitive proxy statement as
filed with the Securities and Exchange Commission on May 16, 2000.
(15) Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 2000.


49





INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE



Page
----

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

Consolidated Balance Sheets at December 31,
2001 and December 31, 2000............................................... F-3

Consolidated Statements of Operations for
the years ended December 31, 2001, 2000
and 1999................................................................. F-4

Consolidated Statements of Stockholders'
Equity and Comprehensive Income (Loss)
for the years ended December 31, 2001,
2000 and 1999............................................................ F-5

Consolidated Statements of Cash Flows for
the years ended December 31, 2001, 2000 and 1999......................... F-6

Notes to Consolidated Financial Statements
as of December 31, 2001 and 2000 and for
the years ended December 31, 2001, 2000
and 1999 ................................................................ F-7

Financial Statement Schedule--Valuation and
Qualifying Accounts..................................................... F-22


F-1





INDEPENDENT AUDITORS' REPORT


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

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

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of BioSource
International, Inc. and subsidiaries as of December 31, 2001 and 2000 and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.

KPMG LLP

Los Angeles, California
February 18, 2002


F-2





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


DECEMBER 31,
2001 2000
-------- --------

ASSETS
Current assets:
Cash and cash equivalents ....................... $ 9,471 $ 10,633
Accounts receivable, less allowance for
doubtful accounts of $261 at December
31, 2001 and $143 at December 31, 2000 ........ 6,184 5,611
Inventories, net (note 3) ....................... 7,184 6,693
Prepaid expenses and other current assets ....... 540 1,261
Deferred income taxes (note 10) ................ 1,584 2,222
-------- --------
Total current assets ........................ 24,963 26,420


Property and equipment, net (note 4) ............... 5,408 4,353
Intangible assets net of accumulated
amortization of $3,377 at December 31,
2001 and $2,279 at December 31, 2000
(note 2) ........................................ 11,653 12,752
Other assets ....................................... 491 382
Deferred tax assets (note 10) ..................... 7,326 6,457
-------- --------
$ 49,841 $ 50,364
======== ========

LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable ................................ $ 2,416 $ 3,275
Accrued expenses ................................ 2,707 2,688
Deferred revenue ................................ 404 314
Income tax payable .............................. 436 41
-------- --------
Total current liabilities ................... 5,963 6,318
Commitments and contingencies (note 13)

Stockholders' equity:
Common stock, $.001 par value. Authorized
20,000,000 shares: issued 10,449,817
and outstanding 10,353,817 shares at
December 30, 2001; issued 10,616,889
shares and outstanding 10,326,458
shares at December 31, 2000 ..................... 10 10
Additional paid-in capital ......................... 48,761 49,304
Accumulated deficit ................................ (2,330) (3,071)
Accumulated other comprehensive loss ............... (2,563) (2,197)
-------- --------
Net stockholders' equity .................... 43,878 44,046
-------- --------
$ 49,841 $ 50,364
======== ========


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


F-3





BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(Amounts in thousands, except per share data)


2001 2000 1999
-------- -------- --------

Net sales ............................... $ 35,175 $ 32,210 $ 29,257
Cost of sales ........................... 15,540 13,600 11,071
-------- -------- --------
Gross profit ........................ 19,635 18,610 18,186

Operating expenses:
Research and development ............ 3,986 3,575 3,315
Sales and marketing ................. 7,395 5,682 4,737
General and administrative .......... 6,945 9,071 4,460
Amortization of intangibles ......... 1,098 1,093 1,061
-------- -------- --------
Total operating expenses ......... 19,424 19,421 13,573
-------- -------- --------
Operating income (loss) ................. 211 (811) 4,613

Interest income ......................... 376 266 397
Interest expense ........................ (2) (302) (1,367)
Other income (expense), net ............. 86 108 (46)
-------- -------- --------
Income (loss) before income tax
expense (benefit) ..................... 671 (739) 3,597
Income tax expense (benefit) ............ (70) (573) 20
-------- -------- --------
Net income (loss) ................ 741 (166) 3,577
Redeemable preferred stock
dividend and accretion of
beneficial conversion ................. -- (3,853) --
-------- -------- --------
Net income (loss) available to
common stockholders ................... $ 741 $ (4,019) $ 3,577
======== ======== ========

Net income (loss) per share
available to common stockholders
Basic ............................... $ 0.07 $ (0.47) $ 0.49
======== ======== ========
Diluted ............................. $ 0.07 $ (0.47) $ 0.46
======== ======== ========
Shares used to compute net income
(loss) available to common
stockholders
Basic ............................... 10,398 8,584 7,235
======== ======== ========
Diluted ............................. 10,965 8,584 7,833
======== ======== ========


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


F-4






BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME (LOSS)
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(Amounts in thousands)


Retained Compre-
Common stock Additional earnings Accumulated Net hensive
Number of paid-in (accumulated comprehen- stockholders' income
Shares Amount capital deficit) sive loss equity (loss)
--------------------------------------------------------------------------------------

Balance at December 31, 1998 7,179 7 21,187 (2,629) (869) 17,696
Issuance of stock options to non employees -- -- 14 -- -- 14
Exercise of stock options 247 0 608 -- 608
Income tax benefit from exercise of stock
options -- -- 217 -- -- 217
Net income -- -- -- 3,577 -- 3,577 $ 3,577
Foreign currency translation adjustments -- -- -- (690) (690) (690)
-------
Total comprehensive income $ 2,887
------------------------------------------------------------------------- =======
Balance at December 31, 1999 7,426 $ 7 $22,026 $ 948 $ (1,559) $ 21,422
-------------------------------------------------------------------------

Stock compensation 946 946
Issuance of common stock 351 -- 5,318 5,318
Exercise of stock options 827 1 2,952 -- 2,953
Exercise of Warrants 165 0 750 750
Sale of treasury stock 1 -- 8 8
Conversion of preferred stock 1,557 2 9,431 9,433
Issuance of warrants and beneficial
conversion feature of redeemable
preferred stock 2,836 2,836
Accretion of the redeemable preferred
stock to its redemption value (3,853) (3,853)
Income tax benefit from exercise of
stock options -- -- 5,037 -- -- 5,037
Net loss -- -- -- (166) (166) $ (166)
Foreign currency translation adjustments -- -- -- (638) (638) (638)
-------
Total comprehensive loss -- $ (804)
------------------------------------------------------------------------- =======
Balance at December 31, 2000 10,327 $ 10 $49,304 $(3,071) $ (2,197) $ 44,046
-------------------------------------------------------------------------

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


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


F-5





BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(Amounts in thousands)

2001 2000 1999
-------- -------- --------
Cash flows from operating activities:
Net income (loss) .................... $ 741 $ (166) $ 3,577
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and amortization ... 2,431 2,156 1,991
Loss on sale of property
and equipment ................. -- 99 --
Stock compensation .............. (388) 946 14
Write-down of inventory ......... -- 424 1,455
Changes in assets and liabilities
Accounts receivable ............. (753) (610) (1,175)
Inventories ..................... (654) (1,145) (2,812)
Prepaid expenses and other
current assets ................ 716 (684) (91)
Deferred income taxes ........... (31) (4,813) (904)
Other assets .................... 245 340 314
Accounts payable ................ (748) 1,229 328
Accrued expenses ................ 12 872 (2,255)
Deferred income ................. 90 (55) (257)
Income taxes payable ............ 404 4,830 216
-------- -------- --------
Net cash provided by operating
activities .................... 2,065 3,423 401
-------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment ... (2,559) (2,152) (1,077)
Proceeds from sales of property
and equipment ...................... -- 1,926 26
-------- -------- --------
Net cash used in investing
activities .................... (2,559) (226) (1,051)
-------- -------- --------
Cash flows from financing activities:
Proceeds from the exercise
of options ......................... 308 2,953 609
Proceeds from the exercise
of warrants ........................ -- 750 --
Proceeds from the exercise
of common stock .................... -- 5,319 --
Proceeds from the issuance
of redeemable preferred
stock and warrants ................. -- 8,415 --
Repayments to bank ................... -- (14,364) (2,476)
Payments to acquire treasury
stock .............................. (668) -- --
-------- -------- --------
Net cash provided from (used
in) financing activities ...... (360) 3,073 (1,867)
-------- -------- --------
Net increase (decrease) in
cash and cash equivalents ..... (854) 6,270 (2,517)

Effect of exchange rates on cash and
cash equivalents ......................... (308) (282) 85

Cash and cash equivalents at beginning
of year .................................. 10,633 4,645 7,077
-------- -------- --------

Cash and cash equivalents at end of year ... $ 9,471 $ 10,633 $ 4,645
======== ======== ========

Supplemental disclosure of cash flow
information: Cash paid during the year
for:
Interest ........................ $ 2 $ 345 $ 1,171
======== ======== ========
Income taxes .................... $ -- $ 439 $ 286
======== ======== ========

Supplemental disclosure of non-cash
information:
Preferred stock accretion ....... $ -- $ 3,853 $ --
======== ======== ========

Income tax benefit from
exercise of stock options ..... $ 205 $ 5,037 $ 217
======== ======== ========

In 2000, the conversion of redeemable preferred stock to common stock totaled
$9,433.

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


F-6





BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS
ENDED DECEMBER 31, 2001, 2000 AND 1999


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

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

Principles of Consolidation

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

Cash and cash equivalents

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

Financial Instruments

The carrying value of financial instruments such as cash and cash equivalents,
trade receivables, and payables approximates their fair value at December 31,
2001 and 2000 due to the short-term nature of these instruments.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market (net
realizable value) for raw materials and work in process and the average-cost
method for finished goods.

Depreciation and Amortization

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

Effective January 1, 2002, the Company will adopt Statement of Financial
Accounting Standards ("SFAS") No. 141, "Goodwill and Other Intangible Assets,"
which will result in no further amortization of goodwill. See Recently Issued
Accounting Standards.

Advertising, Marketing and Promotion Costs

Advertising, marketing and promotion costs are expensed as incurred. These costs
charged to operations for the years ended 2001, 2000 and 1999 were $2,489,000,
$2,261,000, and $1,718,000, respectively.


F-7





BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS
ENDED DECEMBER 31, 2001, 2000 AND 1999


License Agreements

License agreements primarily for the use of antibodies are recorded at cost and
are amortized using the straight-line method over the shorter of the estimated
useful lives of the license or the license term (generally five to ten years).
These costs are included with other assets in the accompanying consolidated
balance sheets. Accumulated amortization at December 31, 2001 and 2000 was
approximately $325,000 and $252,000, respectively.

Revenue Recognition

Sales and related cost of goods sold are recognized upon shipment of products.
Certain customers prepay for product and request shipment of the product at
future dates, primarily sera or media products. The Company records deferred
revenue until such time as a product is shipped to a customer.

Research and Development Costs

Research and development costs are charged to expense as incurred.

Income Taxes

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

Long-Lived Assets

It is our policy to account for long-lived assets, including intangibles, at
amortized cost. As part of an ongoing review of the valuation and amortization
of long-lived assets, management assesses the carrying value of such assets if
facts and circumstances suggest that they may be impaired. If this review
indicates that long-lived assets will not be recoverable, as determined by a
non-discounted cash flow analysis over the remaining amortization period, the
carrying value of the Company's long-lived assets would be reduced to its
estimated fair value based on discounted cash flows. As a result, we have
determined that our long-lived assets are not impaired as of December 31, 2001
and 2000. Effective January 1, 2002, goodwill and other intangible assets will
be accounted for under SFAS No. 141 "Business Combinations" and SFAS No. 142
"Goodwill and Other Intangible Assets." Other long-lived assets will be
accounted for under SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." See Recently Issued Accounting Standards.

Stock Compensation

We account for stock-based compensation under the provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). Under the provisions of SFAS No. 123, the Company has
elected to continue to measure compensation cost under Accounting Principles
Board Opinion No. 25 and comply with the pro forma disclosure requirements (see
note 8).


F-8





BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS
ENDED DECEMBER 31, 2001, 2000 AND 1999


Comprehensive Income (Loss)

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

Business Segment Reporting

Management of the Company has determined its reportable segments are strategic
business units that offer both sales to external customers from geographic
company facilities and sales to external customers in certain geographic
regions. Significant reportable business segments are the United States and
European facilities, and sales to external customers are summarized as those
located in the United States, Europe, Japan and other. Information related to
these segments is summarized in Note 12.

Recently Issued Accounting Standards

In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No.141, "Business Combinations", and SFAS No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 141 requires that the purchase method of accounting
be used for all business combinations initiated after June 30, 2001. SFAS No.
142 requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized to earnings, but instead be reviewed for impairment in
accordance with SFAS No. 142. The amortization of goodwill and intangible assets
with indefinite lives was approximately $1,098,000 $1,093,000 and $1,061,000 for
fiscal years ended December 31, 2001, 2000, and 1999, respectively. The Company
is in the process of qualifying the anticipated impact of adopting the
provisions of SFAS No. 142, which is expected to be significant. The impairment
charge for goodwill or intangible assets deemed to have an indefinite useful
life as of the adoption of SFAS No. 142 would be non-operational in nature and
reflected as a cumulative effect of an accounting change net of the related tax
impact. The Company will adopt SFAS No. 142 effective January 1, 2002.

In October, 2001 the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. While SFAS No.
144 supersedes SFAS No.121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," it retains many of the fundamental
provisions of that statement. The standard is effective for fiscal years
beginning after December 15, 2001. The Company expects that the adoption of SFAS
No. 144 will not have a material impact on the financial position or results
from operations.

Use of Estimates

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


F-9





BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS
ENDED DECEMBER 31, 2001, 2000 AND 1999


Concentrations of Credit Risk

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

Foreign Currency Translation

The assets and liabilities of the Company's foreign subsidiary, whose functional
currency is Belgian francs, are translated at the rate of exchange at the
balance sheet date, and related revenues and expenses are translated at the
average exchange rate in effect during the period. Resulting translation
adjustments are recorded as a component of stockholders' equity. Gains and
losses from foreign currency transactions are included in net income. Foreign
currency transaction gains and losses were insignificant to the operating
results for each of the years in the three-year period ended December 31, 2001.


2. Business Combinations

On December 10, 1998, BioSource acquired Quality Controlled Biochemicals, Inc.
("QCB"). QCB is a leading manufacturer of phosphopeptides, phosphorylation
state-specific antibodies, custom peptides and custom antibodies. The
transaction was accounted for as a purchase. The results of operations of QCB
are included in the accompanying consolidated financial statements from the date
of acquisition. The purchase price was $15,193,900, including related
acquisition costs. The purchase price exceeded the fair value of net assets
acquired by approximately $16,034,500 of which $4,222,000 was allocated to
in-process technology. The remaining $11,812,500, which is being amortized on a
straight-line basis, was allocated to identifiable intangible assets and
goodwill with useful lives ranging from 5 to 15 years.

On December 15, 1998, the Company purchased certain assets and liabilities of
Biofluids, Inc. (Biofluids) for $2,822,500 in cash, including related
acquisition costs. Biofluids is involved in the manufacture and sale of sera,
media and buffers utilized in biomedical research. The acquisition was accounted
for as a purchase. The results of Biofluids operations from the date of the
acquisition to December 31, 1998 were not significant. Intangible assets were
acquired in the amount of $2,348,700 and are being amortized over a 15-year
period and included in intangible assets in the consolidated balance sheet at
December 31, 2000 and 1999.

3. Inventories

Inventories at December 31, 2001 and 2000 are summarized as follows (000's):

2001 2000
-------- ---------

Raw materials.................................... $ 2,367 $ 1,922
Work in process.................................. 304 553
Finished goods................................... 4,513 4,218
-------- ---------
$ 7,184 $ 6,693
======== =========


F-10





BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS
ENDED DECEMBER 31, 2001, 2000 AND 1999


4. Property and Equipment

Property and equipment at December 31, 2001 and 2000 are summarized as
follows (000's):

2001 2000
-------- ---------
Machinery and equipment.......................... $ 6,919 $ 5,356
Office furniture and equipment................... 2,604 2,155
Leasehold improvements........................... 907 779
-------- ---------
10,430 8,290
Less accumulated depreciation and amortization... (5,022) (3,937)
-------- ---------
$ 5,408 $ 4,353
======== =========
5. Lines of Credit

In April 2000, the Company established a revolving line of credit that provides
for borrowings up to $3,400,000 and bore interest at a rate of 2% per annum in
excess of either the bank's adjusted treasury rate, for a variable term, or the
bank's LIBOR rate, also for a variable term. No borrowings were made under the
line of credit. The line of credit expired on February 26, 2001.

6. Redeemable preferred stock

On February 15, 2000, the Company issued 371,300 shares of $0.001 par value
Series B Redeemable Preferred Stock with an initial aggregate liquidation value
of $9,000,300. The Series B Redeemable Preferred Stock was initially convertible
into 1,485,200 shares of the Company's Common Stock at an effective price of
$6.06 per share of Common Stock. The Series B Redeemable Preferred Stock shares
were entitled to receive dividends at an annual rate of 8% of the original issue
price. Unless all dividends on the outstanding Series B Redeemable Preferred
Stock shares were paid, no dividends or other distributions were to be paid to
Common Stockholders. The Series B Redeemable Preferred Stockholders had
liquidation preference to the Common Stockholders. On September 20, 2000, the
Series B Redeemable Preferred Stock automatically converted to common stock as
the last reported sales price of the Company's common stock had been above $20
for 20 consecutive days. Upon conversion, all of the originally issued
redeemable preferred stock and $432,400 of redeemable preferred dividends were
converted into 1,556,574 common shares at $6.06 per common share or $9,432,700.
Total non-cash preferred stock dividends and effects of beneficial conversion
related to the preferred stock totaled $3,853,300.

In connection with the issuance of Series B Redeemable Preferred Stock the
holders received detachable stock purchase warrants. In addition, the holders
received a beneficial conversion of $995,100. The warrants are exchangeable for
1,287,000 shares of Common Stock at an exercise price of $7.77 per share. The
Company allocated the net proceeds of $8,415,200 based on the relative fair
value of the warrants ($1,840,700), the Series B Redeemable Preferred Stock
($5,579,400) and the beneficial conversion ($995,100). The book value of the
Series B Redeemable Preferred Stock of $5,579,400 accreted to its liquidation
value by $995,100 related to the beneficial conversion feature and $1,840,700
upon conversion.


F-11





BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS
ENDED DECEMBER 31, 2001, 2000 AND 1999


7. Common Stock and Treasury Stock

In 1998, the Board of Directors authorized the repurchase of up to 1,500,000
shares of the Company's then outstanding common stock. Through 1998, the Company
had repurchased 1,279,500 common shares for $8,054,000. In October 2000, the
Company's Board of Directors approved a resolution terminating its stock
repurchase program. As of December 31, 2000, the Company held 290,431 shares of
treasury stock at a cost of $1,576,000. The 290,431 shares of treasury stock
were retired in 2001.

In October 2001, the Board of Directors authorized a stock repurchase program
for spending up to $5 million for the repurchase the Company's outstanding
common stock. Through December 31, 2001, the Company had repurchased 96,000
common shares for $668,000. As of December 31, 2001 the Company held these
96,000 shares as treasury stock. The stock repurchase program expires on June
30, 2003.

On September 18, 2000, a total of 351,400 shares of common stock were issued,
for cash proceeds of $5,318,700. Two former executives of the Company invested a
total of $850,000 in the Company, representing 51,400 shares of common stock and
a major stockholder invested an additional $4,468,700, net of expenses, into the
Company for 300,000 shares of common stock. The Company recorded stock
compensation expense of $557,900 as the 51,400 shares of common stock were
issued for less than market value, which is included in general and
administrative expense on the accompanying statement of operations.

In 1999 the Company recognized a non-cash charge of $13,500 for the issuance of
stock options to non-employees.

8. Stock Options, Purchase Plans and Warrants

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

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

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


F-12






BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS
ENDED DECEMBER 31, 2001, 2000 AND 1999


The per share weighted average market value of stock options granted during
2001, 2000 and 1999 was $6.00, $20.51 and $3.64, respectively, on the date of
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions:

2001 2000 1999
------- ------- -------

Expected dividend yield........................... 0.00% 0.00% 0.00%
Risk-free interest rate........................... 4.50% 4.76% 6.40%
Expected volatility............................... 89.87% 100.00% 60.00%
Expected option life (years)...................... 4.81 8.10 7.10



The Company applies APB Opinion No. 25 in accounting for its stock option grants
to employees and directors, and accordingly, no compensation cost, except for
the expenses for two former officers of the Company (see detail below in this
note), has been recognized for its stock options in the consolidated financial
statements as the market value of the Company's common stock at the date of
grant was equal to its exercise price on such date. Had the Company determined
compensation cost based upon the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net income (loss) would have changed
to the pro forma amounts indicated below:

2001 2000 1999
-------- --------- --------
(in thousands,
except per share data)

Net income (loss) available to common
stockholders:
As reported............................. $ 741 $ (4,019) $ 3,577
Pro forma............................... $ (2,023) $ (7,453) $ 2,194
========= ========= ========

Net income (loss) per share available to
common stockholders:
As reported
Basic................................. $ 0.07 $ (0.47) $ 0.49
Diluted............................... $ 0.07 $ (0.47) $ 0.46
Pro forma
Basic................................. $ (0.19) $ (0.87) $ 0.30
Diluted............................... $ (0.18) $ (0.87) $ 0.28
========= ========= ========

Pro forma net income (loss) available to common stockholders reflects
compensation expense related to the vested portion of options granted during the
periods 1996 through 2001.

To the extent that BioSource derives a tax benefit from options exercised by
employees, such benefit is credited to additional paid-in capital. Tax benefits
recognized totaling $201,000, $5,037,000 and $217,000 were credited to
additional paid-in capital in fiscal 2001, 2000 and 1999, respectively.


F-13





BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS
ENDED DECEMBER 31, 2001, 2000 AND 1999


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

Weighted
average
exercise
Shares price
--------- -------

Options outstanding at December 31, 1998......... 1,717,146 $ 3.30
Options granted.................................. 191,000 4.56
Options exercised................................ (221,791) 2.58
Options canceled................................. (169,930) 4.69
--------- ------
Options outstanding at December 31, 1999......... 1,516,425 3.54
Options granted.................................. 1,338,198 16.19
Options exercised................................ (702,100) 3.55
Options canceled................................. (87,700) 5.89
--------- ------
Options outstanding at December 31, 2000......... 2,064,823 12.67

Options granted.................................. 904,647 7.84
Options exercised................................ (36,952) 2.50
Options canceled................................. (885,166) 17.55
--------- ------
Options outstanding at December 31, 2001......... 2,047,352 $ 8.74
========= ======


At December 31, 2001, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $1.37-$31.00 and 8.2
years, respectively.

At December 31, 2001, 2000 and 1999, the number of options exercisable was
777,836, 621,015 and 1,108,445, respectively, and the weighted average exercise
price of those options was $6.41, $4.06 and $3.50, respectively.

In 2000, under the 2000 Plan, two former officers of the Company received stock
options at an exercise price less than fair value. The Company incurred a total
stock compensation expense of $388,100 in 2000. Upon termination of the former
officers in May 2001, the Company recognized a related expense reduction of
$388,100 in the second quarter of 2001, as the former officers were terminated
prior to their stock options vesting.

The Company has several stock option agreements with certain officers that are
outside the 1993 and the 2000 Plan. The outstanding agreements expire from May
2003 through October 2011.


F-14





BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS
ENDED DECEMBER 31, 2001, 2000 AND 1999


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

Weighted
average
exercise
Shares price
------- -------

Options outstanding at December 31, 1998........... 527,500 $3.13
Options granted.................................... -- --
Options exercised.................................. (25,000) 1.50
Options canceled................................... -- --
------- -----
Options outstanding at December 31, 1999 502,500 3.13
Options granted.................................... -- --
Options exercised..................................(145,834) 3.91
Options canceled................................... (66,666) 2.81
------- -----
Options outstanding at December 31, 2000........... 290,000 2.89


Options granted.................................... 280,000 5.19
Options exercised.................................. (64,000) 2.61
Options canceled................................... -- --
------- -----
Options outstanding at December 31, 2001........... 506,000 $4.19
======= =====

At December 31, 2001, the range of exercise prices and weighted average
remaining contractual life of outstanding options under certain agreements was
$1.50-$6.44 and 6.6 years, respectively.

At December 31, 2001, 2000 and 1999, the number of exercisable options was
226,000, 290,000 and 420,467, respectively, and the weighted average exercise
price of those options was $2.97, $2.89 and $3.18, respectively.

During 2001, 2000 and 1999, 120,235, 828,651 and 246,791 stock options,
respectively were exercised for proceeds totaling $308,000, $2,953,000 and
$609,000 of cash received by the company.

During 2000, a total of 218,100 warrants were exercised for $750,000 and
converted into 165,400 common shares.

Effective April 7, 1995, the Company adopted an Employee Stock Purchase Plan to
provide substantially all full-time employees, excluding officers, an
opportunity to purchase shares of its common stock through payroll deductions.
In addition, the Company provides a matching contribution equal to 50% of the
participant's contribution. All contributions are invested in the Company's
common stock, which is purchased on the open market at prevailing market prices.
Participants have a fully vested interest in the shares purchased with payroll
deductions and become fully vested in the shares purchased with Company matching
contributions after two years. The Company's matching expense for the years
ended December 31, 2001, 2000 and 1999 was approximately $19,000, $20,000 and
$18,000 respectively.

In connection with the issuance of Series B Redeemable Preferred Stock (see Note
6), 1,287,000 detachable stock purchase warrants were granted. The warrants have
a term of up to five years from date of issuance and are exchangeable for
1,287,000 shares of Common Stock at an exercise price of $7.77 per share.


F-15





BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS
ENDED DECEMBER 31, 2001, 2000 AND 1999


9. Stockholder Rights Plan

On February 16, 1999, the Company adopted a stockholders' rights plan to protect
the Company and its stockholders from unsolicited attempts or inequitable offers
to acquire the Company's stock. The rights plan has no immediate dilutive effect
and does not diminish the Company's ability to accept an offer to purchase the
Company that is approved by the board of directors. The stockholder rights plan
was implemented through a dividend of one preferred share purchase right on each
outstanding share of the Company's common stock outstanding on March 2, 1999.
Each right will entitle stockholders to buy one one-thousandth of a share of
Series A preferred stock at an exercise price of $24.50. The rights will become
exercisable (with certain limited exceptions provided in the rights agreement)
following the 10th day after: (a) a person or group announces an acquisition of
15% or more of the Company's common stock, (b) a person or group announces the
commencement of a tender offer the consummation of which would result in
ownership by the person or group of 15% or more of the Company's common stock,
(c) the filing of a registration statement for any such exchange offer under the
Securities Act of 1933, or (d) the Company's board of directors determining that
a person is an "adverse person," as defined in the rights plan. The buyer or any
"adverse person" would not be entitled to exercise rights under the rights plan.
The effect of the rights plan is to discourage acquisitions of more than 15% of
the Company's common stock without negotiations with the Company's board of
directors. The Company can redeem the rights for $.001 per right at certain
times as provided in the rights agreement. The rights expire on January 31,
2009.

10. Income Taxes

Income (loss) before income taxes (benefit) for 2001, 2000 and 1999 were from
the following sources (000's):

2001 2000 1999
------------------------------------------

Domestic ............. $(1,203) $(1,994) $ 2,107
Foreign .............. 1,874 1,255 1,490
------- ------- -------
$ 671 $ (739) $ 3,597
======= ======= =======

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

2001 2000 1999
-------------------------------------------
Current:
Federal .............. $ 95 $ 3,524 $ 720
State and local ...... 42 780 203
Foreign .............. 71 55
------- ------- -------
$ 208 4,359 923
------- ------- -------
Deferred:
Federal .............. (70) (3,866) 76
State and local ...... (350) (1,114) (7)
Foreign .............. 142 48 (972)
------- ------- -------
(278) (4,932) (903)
------- ------- -------
$ (70) $ (573) $ 20
======= ======= =======


F-16





BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS
ENDED DECEMBER 31, 2001, 2000 AND 1999


The primary components of temporary differences which give rise to deferred
taxes at December 31, 2001 and 2000 are (000's):

2001 2000
------ ------
Deferred tax assets:
Reserves for inventory ............................. $1,208 $1,089
Purchased in-process technology/goodwill ........... 1,472 1,561
Net operating loss carryforwards ................... 4,746 4,664
Allowance for doubtful accounts .................... 68 18
Stock option compensation .......................... 0 154
Accrual for severance .............................. 99 255
R & D and AMT credit carryforwards ................. 1,188 1,050
Other .............................................. 211 93
------ ------
Total deferred tax assets ............................ 8,992 8,885
Deferred tax liability
Depreciation ....................................... 82 206
------ ------
Net deferred tax assets ........................ $8,910 $8,679
====== ======

Management has reviewed the recoverability of deferred income tax assets and has
determined that it is more likely than not that the deferred tax assets will be
fully realized through future taxable earnings.

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


2001 2000 1999
------- ------- -------

Computed "expected" tax expense
(benefit) ............................. $ 228 $ (251) $ 1,223
Nondeductible items ..................... -- -- 16
State taxes (net of Federal
benefit) .............................. 21 (34) 139
Reduction of valuation allowance ........ -- -- (1,160)
Tax credits ............................. (338) (437) (100)
Tax effect resulting from
foreign sales corporation
activities ............................ -- -- (76)
Effect of foreign operations ............ (18) 66 188
Other ................................... 37 83 (210)
------- ------- -------
Total ............................ $ (70) $ (573) $ 20
======= ======= =======


F-17





BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS
ENDED DECEMBER 31, 2001, 2000 AND 1999


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

As of December 31, 2001, the Company has a net operating loss (NOL) carryforward
of approximately $10,482,500 and $12,036,400 for Federal and State income tax
purposes, respectively. The federal NOL's are available to offset future taxable
income, if any, through 2020 to 2021. The state NOL's are available to offset
future taxable income, if any, through 2006 to 2021.

11. 401(k) Benefit Plan

The Company has a 401(k) profit sharing plan, which covers substantially all
domestic employees of the Company. Plan participants may make voluntary
contributions up to 20% of their earnings up to the statutory limitation. The
Company's contribution is $0.25 for each $1.00 contributed by employees up to
the first $2,000. Company contributions have no vesting period. The Company's
contributions were $57,000, $55,000 and $38,000 in 2001, 2000 and 1999,
respectively.

12. Business Segments

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

Our accounting policies for the segments below are the same as those described
in the summary of significant accounting policies, except that we are only able
to track net sales for the geographic "Sales-to" segments. We evaluate
performance for the "Sales-from" segments on net revenues and profit or loss
from operations. The Company's reportable segments are strategic business units
that offer geographic product availability. They are managed separately because
each business requires different marketing and distribution strategies. Business
segment information is summarized as follows (000's):

2001 2000 1999
------------------------------------
SALES - FROM SEGMENTS: Net sales
to external customers from:
United States:
Domestic ..................... $ 21,027 $ 18,843 $ 15,518
Export ....................... 4,623 4,303 4,678
-------- -------- --------
Total United States ........ 25,650 23,146 20,196
Europe ........................... 9,525 9,064 9,061
-------- -------- --------
Consolidated ............... $ 35,175 $ 32,210 $ 29,257
======== ======== ========

Operating income (loss):
United States .................... $ (1,970) $ (2,204) $ 2,711
Europe ........................... 2,181 1,393 1,902
-------- -------- --------
Consolidated ............... $ 211 $ (811) $ 4,613
======== ======== ========


F-18





BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS
ENDED DECEMBER 31, 2001, 2000 AND 1999


2001 2000 1999
------------------------------------
SALES - TO SEGMENTS:
Net sales to external customers in:
United States .................... $ 21,027 $ 18,843 $ 15,518
Europe ........................... 8,846 8,180 10,139
Japan ............................ 3,085 3,203 2,790
Other ............................ 2,217 1,984 810
-------- -------- --------
Consolidated ............... $ 35,175 $ 32,210 $ 29,257
======== ======== ========

IDENTIFIABLE ASSETS AT END OF YEAR:
United States .................... $ 42,420 $ 42,544
Europe ........................... 7,421 7,820
-------- --------
Consolidated ............... 49,841 $ 50,364
======== ========

NET INTEREST EXPENSE (INCOME):
United States .................... $ (363) $ 58 $ 816
Europe ........................... (11) (22) 154
-------- -------- --------
Consolidated ............... $ (374) $ 36 $ 970
======== ======== ========

DEPRECIATION AND AMORTIZATION:
United States .................... $ 2,145 $ 1,785 $ 1,560
Europe ........................... 286 371 431
-------- -------- --------
Consolidated ............... $ 2,431 $ 2,156 $ 1,991
======== ======== ========

CAPITAL EXPENDITURES:
United States .................... $ 2,106 $ 1,913 $ 899
Europe ........................... 453 239 178
-------- -------- --------
Consolidated ............... $ 2,559 $ 2,152 $ 1,077
======== ======== ========


13. Commitments and Contingencies

At December 31, 2001 the Company had leases for certain of its facilities and
equipment under various noncancelable operating leases expiring through March
2007. Total rental expense was approximately $977,000, $872,000 and $723,000 for
the years ended December 31, 2001, 2000 and 1999, respectively.

On March 8, 2000 the Company entered into a lease for a new facility in
Camarillo, California. The lease commenced on May 1, 2000 and expires on June
30, 2005, with the option to extend the lease for two additional five-year
terms. Annual lease payments in the initial five-year period ended December 31,
2005 range from $342,000 at inception to $411,000 at termination.

In February 2001 the Company amended its current lease in Hopkinton,
Massachusetts. The original lease expires on May 31, 2001. The amended lease
extends the term of the lease for five additional years and expires on May 31,
2006. Annual lease payments in the five-year period ended May 31, 2006 are
approximately $131,000.

In January 2002, the Company leased an additional facility in Hopkinton,
Massachusetts. The original lease expires on January 17, 2007. The term of the
lease is for 5 years. Annual lease payments in the five-year period ended
January 2007 are approximately $195,000.


F-19





BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS
ENDED DECEMBER 31, 2001, 2000 AND 1999


At December 31, 2001, future minimum payments under the Company's leases are as
follows (in thousands):

2002...........................................$ 1,340
2003........................................... 1,260
2004........................................... 1,064
2005........................................... 810
2006........................................... 484
Thereafter..................................... 36
-------
$ 4,994
=======

On June 14, 2000, one of our former employees, Jordan Fishman, Ph.D., filed a
legal action against us in the United States Central District Court of
California alleging breach of Dr. Fishman's Employment Agreement and a number of
other causes of action. BioSource filed a counter claim against Dr. Fishman, and
a number of pre-trial motions, the result of which was that only the breach of
contract claim and BioSource's counter claim remained for trial. On January 14,
2002, shortly before the scheduled trial date, plaintiff agreed to settle the
case and the DiSorbo Lawsuit discussed below for $275,000.

Dr. Fishman also sued Dennis DiSorbo, Ph.D., a Vice President of our QCB
division, in the Superior Court of Worcester, Massachusetts for wrongfully
interfering with his employment contract with BioSource (the "DiSorbo Lawsuit").
The DiSorbo Lawsuit was stayed pending the determination of the California
Lawsuit. The parties agreed to settle the DiSorbo Lawsuit as part of the
settlement of the California Lawsuit without additional consideration.

In June of 2000, the former shareholders of QCB commenced a AAA arbitration
proceeding against the Company seeking the recovery of escrowed funds from the
purchase of QCB that were being held by the Company to recover damages
management believes it has suffered in connection with inaccuracies in, and/or
breaches of the representations and warranties contained in the original Stock
Purchase Agreement for QCB executed on December 9, 1998. The Company has
counterclaimed against the former shareholders of the QCB, including Dr.
Fishman, in the arbitration to recover those damages. The Company seeks to
recover $1,347,000 of Escrowed Funds for this claim. In addition, the Company
alsobrought a fraud claim against Dr. Fishman for the intentional
misrepresentations and/or omissions he made in connection with the Stock
Purchase Agreement. In its fraud claim, the Company seeks to recover the amount
of its overpayment for the purchase of QCB, the amount of lost profits that
BioSource would reasonably have anticipated and earned had QCB possessed the
characteristics fraudulently attributed to it, punitive damages, and attorneys'
fees and costs. The parties have selected a panel of three arbitrators who will
hear the dispute. The parties are in the process of conducting discovery in
connection with the arbitration. The arbitration is scheduled to begin on May 1,
2002. The company has not recorded an accrual for any potential gain realized
upon a successful recovery of any or all of the escrowed funds or recoverable
damages. The Company is expensing all legal fees as they are incurred.

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

14. Earnings Per Share

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


F-20





BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 2001 AND 2000 AND FOR THE YEARS
ENDED DECEMBER 31, 2001, 2000 AND 1999


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

Year ended December 31,
-----------------------------
2001 2000 1999
------- ------- -------
Net income (loss) available to common
stockholders used for basic and diluted
income (loss) per share................. $ 741 $(4,019) $ 3,577
======= ======= =======
Weighted average shares used in basic
computation............................. 10,398 8,584 7,235
Dilutive stock options and warrants...... 567 -- 598
------- ------- -------
Weighted average shares used for diluted
computation............................. 10,965 8,584 7,833
======= ======= =======

Options to purchase 793,332, 90,003 and 404,849 shares of common stock at prices
ranging from $8.00 to $31.00, $17.13 to $27.38 and $4.13 to $8.94 were
outstanding during 2001, 2000 and 1999, respectively, but were not included in
the computation of diluted earnings (loss) per share because the options'
exercise price was greater than the average market price of the common shares.
Options to purchase 1,190,469 shares of common stock at prices ranging from of
$1.37 to $12.18 per share were outstanding during 2000 but were not included in
the computation of diluted loss per share because the options were antidilutive,
as the Company incurred a net loss for that year.

Warrants to purchase 118,100 shares at a weighted average exercise price of
$11.10 per share were outstanding as of December 31, 1999 but were not included
in the computation of diluted net income per share for the year ended December
31, 1999 because the effect would be anti-dilutive.

Warrants to purchase 1,287,000 shares at an exercise price of $7.77 per share
were outstanding as of December 31, 2000 but were not included in the
computation of diluted net income per share because their effect would be
anti-dilutive.


F-21






BIOSOURCE INTERNATIONAL, INC. AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNT
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999




Balance at Provision Deductions Balance at
Beginning Charged Accounts End of
of Year to Income Written Off Year
------- --------- ----------- ----
(000's)

1999-allowance for
doubtful accounts .... $301 86 59 328

2000-allowance for
doubtful accounts .... $328 139 324 143

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



See accompanying independent auditors' report.


F-22





EXHIBIT INDEX
FOR FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001

Exhibit
Number Description
- ------- -----------------------------------------------------------------

3.1 Certificate of Incorporation of Registrant (1)

3.2 Bylaws of Registrant (1)

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

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

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

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

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

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

4.7 Form of Right Certificate (9)

4.8 Summary of Share Purchase Rights (9)

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

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

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

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

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

10.1 Registrant's 1993 Stock Incentive Plan (4)

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

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

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





EXHIBIT INDEX
FOR FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001, CONTINUED

Exhibit
Number Description
- ------- -----------------------------------------------------------------

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

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

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

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

10.9 Registrant's Employee Stock Purchase Plan (7)

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

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

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

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

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

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

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

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

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

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

10.20 Lease Agreement for 540 Flynn Road, dated March 7, 2000, between
Registrant and Lincoln Ventura Technology Center. (15)

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





EXHIBIT INDEX
FOR FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001, CONTINUED

Exhibit
Number Description
- ------- -----------------------------------------------------------------

21 Subsidiaries of the Company:
State/Country of
Name Incorporation
--------------------------------------------------------------------------
Keystone Laboratories, Inc.............................California
BioSource V.I. FSC., LTD...............................U.S. Virgin Islands
BioSource Europe S.A...................................Belgium
BioSource B.V..........................................Holland
BioSource GmbH.........................................Germany
BioSource U.K., Ltd....................................U.K.
Quality Controlled Biochemicals, Inc...................Massachusetts
Javelle, Inc...........................................Massachusetts

23.1 Consent of KPMG LLP, Independent Public Accountants
- ----------

(1) Incorporated by reference to the Company's Registration Statement on Form
S-4 as filed with the Securities and Exchange Commission on October 22,
1992, as amended.
(2) Incorporated by reference to the Company's Form 10KSB for the year ended
December 31, 1992.
(3) Incorporated by reference to the Company's Form 10KSB for the year ended
December 31, 1993.
(4) Incorporated by reference to the Company's Form 10KSB for the year ended
December 31, 1994.
(5) Incorporated by reference to the Company's Form 10KSB for the year ended
December 31, 1995.
(6) Incorporated by reference to the Company's Registration Statement on Form
SB-2 (SEC No. 333-3336) as filed with the Securities and Exchange
Commission on May 31, 1996, as amended.
(7) Incorporated by reference to the Company's Registration Statement on Form
S-8 (SEC No. 33-91838) as filed with the Securities and Exchange Commission
on May 4, 1995.
(8) Incorporated by reference to the Company's Current Report on Form 8-K/A
filed with the Securities and Exchange Commission on February 19, 1999.
(9) Incorporated by reference to the Company's Current Report on Form 8-A filed
with the Securities and Exchange Commission on March 1, 1999.
(10) Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 1998.
(11) Incorporated by reference to the Company's Registration Statement on Form
S-3 as filed with the Securities and Exchange Commission on March 16, 2000.
(12) Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-3 as filed with the Securities and Exchange Commission
on March 22, 2000.
(13) Incorporated by reference to the Company's Current Report on Form 8-K as
filed with the Securities and Exchange Commission on October 26, 2000, and
as amended on October 31, 2000.
(14) Incorporated by reference to the Company's definitive proxy statement as
filed with the Securities and Exchange Commission on May 16, 2000.
(15) Incorporated by reference to the Company's Form 10-K for the year ended
December 31, 2000.