Three Months Ended December 31,
                                                        2008                2007
                                                         %                    %
  STATEMENT OF OPERATIONS DATA:
  Revenue                                                  100.0               100.0
  Cost of revenue                                           75.3                67.5

  Gross profit                                              24.7                32.5
  Research and development expense                           4.2                 2.9
  Selling, general and administrative expenses              38.8                29.5
  Impairment of assets                                     162.8                   -
  Reorganization items                                         -                 4.9

  Operating loss                                          (181.1 )              (4.8 )
  Interest expense                                          (1.1 )              (0.8 )
  Other income, net                                          0.1                 0.3

  Loss before income taxes                                (182.1 )              (5.3 )
  Income tax expense                                        (0.3 )                 -

  Net loss                                                (182.4 )              (5.3 )

Comparison of three months ended December 31, 2008 and December 31, 2007 Revenue
The following table sets forth segment revenue in millions of dollars for the three months ended December 31, 2008 and 2007, respectively:

                                           December 31,       December 31,      Percent
                                               2008               2007           change
 Diagnostic & Biopharmaceutical Products   $         6.8     $          9.1        (25.3 )%
 BioServices                                         2.5                3.5        (28.6 )%

 Total revenue                             $         9.3     $         12.6        (26.2 )%

Revenue for the three months ended December 31, 2008 decreased by 26.2%, or $3.3 million, to $9.3 million from $12.6 million in the three months ended December 31, 2007. Diagnostic & Biopharmaceutical Products revenue during the same period decreased by $2.3 million, a 25.3% decrease. Diagnostic & Biopharmaceutical Products revenue had nominal sales from therapeutic grade human serum albumin products during the three months ended December 31, 2008 as compared to $2.6 million in the three months ended December 31, 2007. As previously disclosed, this revenue has historically been variable and is not expected to be significant during the remainder of the year due to the validation requirements to switch suppliers of raw materials used in biopharmaceutical manufacturing. The Company switched suppliers in December 2007 as its previous supply agreement was not renewed. Excluding therapeutic grade human serum albumin products, our core manufactured products increased $0.2 million, or 3%, due to organic growth.
Revenue for our BioServices segment decreased by $1.0 million, a 28.6% decrease. During the three months ended December 31, 2007 we billed $0.5 million pursuant to a government contract which related to the settlement of indirect billing rates used in previous periods. We had no such billings during the three months ended December 31, 2008. The remaining decrease is due to reduced research spending resulting in fewer requests for services from our customers. Gross Profit
Gross profit margin decreased to 24.7% in the three months ended December 31, 2008 from 32.5% in the three months ended December 31, 2007. During the three months ended December 31, 2007, our margin rates received a benefit due to $0.5 million billed pursuant to a government contract which related to the settlement of indirect billing rates used in previous periods. In addition, our margins decreased due to our fixed costs which were spread over a lower revenue base.
Research and Development Expense
Research and development expense totaled $0.4 million, or 4.2% of revenue, in the three months ended December 31, 2008 and $0.4 million, or 2.9% of revenue, in the three months ended December 31, 2007. During the three months ended December 31, 2008, we have focused on cost control and spending has remained flat as compared to the three months ended December 31, 2007. Selling, General and Administrative Expenses Selling, general and administrative expenses decreased to $3.6 million, or 38.8% of revenue in the three months ended December 31, 2008, from $3.7 million, or 29.5% of revenue in the three months ended December 31, 2007. As part of our fiscal 2009 operating plan, we have implemented procedures to decrease discretionary spending from the prior year. Impairment of Assets
Due to the economic downturn, the turmoil in the financial markets and the associated decline in the Company's stock price and market capitalization, the Company tested goodwill for impairment as of December 31, 2008. The Company revised its future cash flows projections as sales during the three months ended December 31, 2008 were lower than expected due to the economic downturn. As a result, the Company recorded an impairment charge to goodwill in the amount of $15.1 million which related to its Diagnostic & Biopharmaceutical Products segment. This represents the entire balance of goodwill related to the Diagnostic & Biopharmaceutical Products segment. The Company determined the fair value of this segment under various methodologies including allocating the Company's market capitalization to each segment according to revenue as well as performing a discounted cash flow analysis. Using a discounted cash flow model requires a number of assumptions about future cash flows and related costs necessary to generate such estimated cash flows. Using what management believes are reasonable assumptions based on the best information available as of the date of the financial statements, the value of the BioServices segment was found to be in excess of its carrying value as of December 31, 2008, and therefore the related goodwill was not impaired. The remaining goodwill of $4.3 million on the December 31, 2008 balance sheet relates to the BioServices segment. There was no impairment charge associated with the BioServices segment as it is service driven and has fewer assigned assets which have a lower carrying amount as compared to the Diagnostic & Biopharmaceutical Products segment which requires more assets to manufacture and sell products. The Company will continue to test the remaining goodwill for impairment as part of its annual impairment testing or as events occur that would more likely than not reduce the fair value of the reporting unit below its carrying value. Reorganization Items
Reorganization items include legal, accounting and other professional fees related to the Company's bankruptcy proceedings, reorganization, litigation and efforts to become a current and timely filer with the Securities and Exchange Commission ("SEC"). These expenses totaled $0.6 million during the three months ended December 31, 2007. There were no reorganization items during the three months ended December 31, 2008.

Operating Loss
Operating loss resulted from the factors above and included an impairment charge and stock-based compensation expense. Operating loss was $16.8 million for the three months ended December 31, 2008, which included impairment of goodwill and stock-based compensation expense totaling $15.1 million and $0.3 million, respectively, as compared to operating loss of $0.6 million for the three months ended December 31, 2007, which included stock-based compensation expense and reorganization expense totaling $0.4 million and $0.6 million, respectively.
Interest Expense and Other Income
Interest expense totaled $0.1 million in each of the three month periods ended December 31, 2008 and 2007. Other income was nominal in each period. Net Loss and Net Loss Per Share
As a result of the above, net loss was $16.9 million in the three months ended December 31, 2008 compared to a net loss of $0.7 million in the three months ended December 31, 2007. Net loss per share on a basic and fully diluted basis was $0.91 in the three months ended December 31, 2008 compared to $0.04 in the three months ended December 31, 2007.

Liquidity and Capital Resources
Cash Flows
   The following table summarizes our sources and uses of cash over the three
month periods indicated (in millions):

                                                                   December 31,          December 31,
                                                                       2008                  2007
Net cash used in operating activities                             $         (1.7 )      $         (1.8 )
Net cash provided by (used in) investing activities                          0.1                  (1.3 )
Net cash provided by (used in) financing activities                          3.7                  (0.1 )

Net increase (decrease) in cash and cash equivalents              $          2.1        $         (3.2 )

As of December 31, 2008, our cash balance was $5.0 million, an increase of $2.1 million from our cash balance as of September 30, 2008. We had a current ratio of 2.3 to 1 as of December 31, 2008 compared to 2.7 to 1 as of September 30, 2008. Total liabilities as of December 31, 2008 were $12.1 million compared to $10.7 million as of September 30, 2008. The total debt to equity ratio as of December 31, 2008 was 0.5 compared to 0.3 as of September 30, 2008.
We believe our current cash on hand combined with future operating cash flows and our availability to draw funds under our Credit and Security Agreement with GE Capital will be sufficient to meet our future operating cash needs through September 30, 2009. As of December 31, 2008, the balance outstanding under the revolving credit facility was $3.8 million and we had $1.8 million available for additional borrowing. Our Credit and Security Agreement with GE Capital contains financial maintenance covenants. We are currently in compliance with these covenants. However, we cannot assure that these covenants will be met in the future as described in the risk factors in our annual report. Operating Cash Flows
Cash used in operating activities was $1.7 million for the three months ended December 31, 2008, an improvement of $0.1 million compared to cash used of $1.8 million for the three months ended December 31, 2007. During the three months ended December 31, 2008, we had a net loss of $16.9 million, which included non-cash charges of approximately $16.0 million, primarily related to goodwill impairment of $15.1 million, depreciation and amortization of $0.4 million, stock based compensation of $0.3 million and inventory write-downs of $0.2 million. Our accounts receivable decreased $1.4 million while our accounts payable and accrued expenses decreased $1.0 million and $1.4 million, respectively. The decrease in accounts receivable is due to both increased collection activity as well as lower revenue during the three months ended December 31, 2008. Accounts payable declined as we decreased spending during the three months ended December 31, 2008. Accrued expenses decreased due to the payment of bonuses as well as lower accrued compensation due to the timing of payroll.
Investing Cash Flows
Cash provided by investing activities was $0.1 million in the three months ended December 31, 2008, an improvement of $1.4 million compared to cash used of $1.3 million in the three months ended December 31, 2007. During the three months ended December 31, 2008, we received $0.4 million from our landlord for renovations at our Gaithersburg, Maryland facility. In addition, we spent $0.4 million for renovations at our Frederick, Maryland facility as well as for various equipment. Cash flows used in investing activities in the three months ended December 31, 2007 related primarily to capital expenditures for construction of our new corporate offices in Milford, Massachusetts, net of landlord reimbursements. This construction was completed during the year ended September 30, 2008.
Financing Cash Flows
Cash provided by financing activities was $3.7 million in the three months ended December 31, 2008 compared to cash used of $0.1 million in the three months ended December 31, 2007. The Company utilized the GE Capital revolving credit facility and received proceeds of $11.0 million throughout the three months ended December 31, 2008. The Company made payments of $7.3 million during the three months ended December 31, 2008 for the revolving credit facility, mortgage note and various capital leases.

Off-Balance Sheet Arrangements
During the three months ended December 31, 2008, we were not party to any off-balance sheet arrangements.
Assets Held For Sale
On October 1, 2007, the Company signed a lease agreement which enabled it to consolidate all of its Massachusetts operations into its Milford facility during fiscal 2008. As a result, the Company began marketing the West Bridgewater facility and land for sale. The net book value of these assets is $1.9 million as of December 31, 2008.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate and Market Risk. As of December 31, 2008, our only assets or liabilities subject to risks from interest rate changes are (i) debt under the revolving credit facility in the aggregate amount of $3.8 million, (ii) debt under the West Bridgewater mortgage note in the aggregate amount of $1.9 million and (iii) cash and cash equivalents of $5.0 million, substantially all of which are collateralized by short-term federal government securities. Our debt bears interest at a variable rate. If interest rates affecting the Company's floating rate debt were to change by one percentage point from levels at December 31, 2008, we estimate that our pre-tax income would change by approximately $57,000 over a twelve month period. In addition, the fair value of our investments will change by an immaterial amount, and therefore, our exposure to interest rate changes is immaterial.
Foreign Currency Exchange Risk. The Company does not believe that it currently has material exposure to foreign currency exchange risk because all international sales are designated in U.S. dollars.
We were not a party to any derivative financial instruments at December 31, 2008.