10-K

UNITED STATES

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 October 31, 2005

Commission file number 0-15266

BIO-REFERENCE LABORATORIES, INC.

481 Edward H. Ross Drive, Elmwood Park, New Jersey  07407

201-791-2600

New Jersey	22-2405059
(State of incorporation)	(I.R.S. Employer
	Identification No.)

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

Securities registered pursuant to Section 12(g) of the Act:   Common Stock, $.01 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  o   No  ý.

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or in any amendment to this Form 10-K.     o

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o   No  ý

As of the last day of the quarter ended April 30, 2005, the aggregate market value of the voting stock of Bio-Reference Laboratories, Inc. (consisting of Common Stock, $.01 par value) held by non-affiliates of the registrant was approximately $142,000,000 based upon the last sale price for the Common Stock on said date as reported on the NASDAQ National Market System. On January 9, 2006, there were 12,981,367 shares of Common Stock issued and outstanding

PART I

Item. 1. - Business

Overview

We believe that we are the largest independent regional clinical laboratory servicing the greater New York metropolitan area. We offer a comprehensive list of laboratory testing services utilized by healthcare providers in the detection, diagnosis, evaluation, monitoring and treatment of diseases.

We currently process nearly 2.9 million requisitions each year. A requisition form accompanies a patient specimen. It indicates the tests to be performed and the party to be invoiced for the tests. Our clients include doctors, employers, clinics and governmental units. We have a network of over 50 patient service centers for collection of patient specimens.

In addition to our clinical testing operations, we operate a clinical knowledge management service through our PSIMedica business unit.  This system uses customer data from laboratory results, pharmaceutical data, claims data and other data sources to provide administrative and clinical decision support systems which enable our customers to provide quality and efficient healthcare to their populations.

We also operate a web-based connectivity portal solution for laboratories and physicians through our CareEvolve subsidiary. We use this portal ourselves to provide laboratory ordering and results to our physician customers.  We are also marketing this connectivity solution to other laboratories throughout the country.

We are a New Jersey corporation. We may at times refer to ourselves and our subsidiary as the “Company”. We are the successor to Med-Mobile, Inc., a New Jersey corporation that was organized in 1981. Our executive offices are located at 481 Edward H. Ross Drive, Elmwood Park, NJ  07407, telephone number: 201-791-2600.

The Clinical Laboratory Testing Market in the United States

We believe that the U.S. market for clinical laboratory testing generates approximately $40 billion in annual revenue.  Nearly all laboratory tests are performed by one of three types of laboratories: hospital laboratories, physician office laboratories or independent clinical laboratories. We believe approximately 54% of the clinical laboratory tests done in the United States are currently performed in a hospital laboratory, approximately 32% performed by an independent clinical laboratory and the balance in a physician office or other laboratory.

During the last few years, the economic fundamentals of the industry have been improving. In the cost containment era of the 1990s, the industry was negatively impacted by the rapid growth of managed care, stringent government regulation and investigations into fraud and abuse. These factors led to revenue and profit declines and industry consolidations, especially among commercial clinical laboratories. As a result, fewer but larger clinical laboratories have emerged with greater economies of scale, more effective compliance with government billing regulation and other laws and a better approach to pricing their services. These changes resulted in improved profitability.  In addition, new and emerging technologies continue to provide greater testing opportunities for clinical laboratories.

We believe the industry will continue to experience growth in testing volume due to the following:

• Aging of the population of the United States;

• Awareness by patients of the value of laboratory tests;

• Decrease in the cost of tests;

• Decrease in the influence of managed care organizations on the ordering patterns of their physicians.

• Development of sophisticated and specialized tests for early detection of disease and disease management;

• Diagnosis and monitoring of infectious diseases such as AIDS and Hepatitis C;

• Early detection and prevention as a means of reducing healthcare costs;

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• Employer sponsored wellness programs;

• Research and development in genomics.

Business Strategy

We are a regional clinical laboratory with subspecialty testing capabilities. As a regional laboratory, we service the New York metropolitan area, and currently conduct business in most New York State counties, as well as in most of New Jersey and some parts of Pennsylvania and Connecticut. We primarily offer laboratory services to physician offices in these areas with an infrastructure that includes a comprehensive logistical department, extensive phlebotomy services and phlebotomy draw stations scattered around our geographic area. We have also developed expertise in certain testing areas with specific emphasis in cancer pathology and diagnostics as well as molecular diagnostics. These services are marketed as a business unit, called GenPath, which services customers outside of routine physician office testing. We have developed certain specialized markets, such as in the areas of correctional health, substance abuse testing, fertility testing and molecular diagnostics. Testing in these areas also may be supported outside of physician offices.

We have one of the largest regional marketing staffs of any laboratory in the country, some of whom are trained specifically in Oncology and call on Oncology practices and hospitals.

We believe that our large marketing staff and strong infrastructure within our designated area can be leveraged to bring new technologies to physicians and healthcare providers. Over the past year, our volume of testing in the area of molecular diagnostics has increased.  We believe that laboratory data has great value in managing the healthcare of a population, but can only be properly utilized when combined with medical claims and pharmacy data. Our medical information unit, PSIMedica, seeks to combine laboratory data with these other data elements in order to provide information analytics that will help to improve the quality and efficiency of healthcare. We seek to continue our strong growth not only through our marketing organization, new technologies and superior service, but by providing value added analytics in conjunction with laboratory results.

Our mission is to be recognized by our clients as the best provider of clinical laboratory testing, information and related services. The principal components of our strategy to achieve our mission are as follows:

• Capitalize on our position within the clinical market

• Lead in the providing of medical information

• Provide the highest quality service

• Pursue strategic growth opportunities

Services

The clinical laboratory testing business consists of routine testing and esoteric testing. Routine testing generates approximately 62% and esoteric testing generates approximately 38% of our net revenues. The net revenue generated by our PSIMedica business unit and our CareEvolve subsidiary has been minimal to date.

Routine Testing

Routine tests measure various health parameters such as the functions of the heart, kidney, liver, thyroid and other organs. Below is an abbreviated list of some commonly ordered tests:

• Blood Cell Counts

• Cholesterol levels

• HIV-related tests

• Pap Smears

• Pregnancy

• Substance Abuse

• Urinalysis

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We perform these tests at our two processing facilities (Elmwood Park, New Jersey and Valley Cottage, New York).

We operate 24 hours a day, 365 days a year. We perform and report most routine tests within 24 hours. Tests results are delivered via driver or electronically.

Esoteric Tests

We also perform esoteric tests that require sophisticated equipment and materials, highly skilled personnel, professional attention and are ordered less frequently than routine tests. These tests are generally priced higher than routine tests. Esoteric tests are usually in these medical fields:

• Endocrinology (the study of glands and their hormone secretions)

• Genetics (the study of chromosomes, genes and their protein products)

• Immunology (the study of the immune system)

• Microbiology (the study of microscopic forms of life)

• Oncology (the study of abnormal cell growth)

• Serology (the study of body fluids)

• Toxicology (the study of chemicals and drugs and their effects on the body)

We perform cancer cytogenetics testing at our leased facility in Milford, Massachusetts.

Medical Information

Our PSIMedica business unit is based on a Clinical Knowledge Management (“CKM”) System that uses data derived from various disparate sources to provide both administrative and clinical analysis of a population. The source data consists of enrollment (demographic) data, claims data, pharmacy data, laboratory results data, and any other data that may be available. The system uses sophisticated algorithms to cleanse and configure the data so that analysis can be comprehensive and meaningful. The data is maintained on multiple levels of analysis enabling review of data from the global level to the granular transactional detail.  The system includes a base set of queries that provide basic functionality and allows on-line real-time ad hoc query capability enabling the user to customize analysis to the best needs of the organization using the system. In addition to the basic queries provided by the system, PSIMedica Quality Indicators (“PQI”) provide comprehensive, disease state oriented queries that disclose the quality and efficiency of the care and service. These indicators have been designed to provide the customer with standards and outcome predictors based on a medical standards basis.  We are using PSIMedica to market value-added clinical laboratory services to bulk purchasers of clinical laboratory solutions, as well as marketing our PSIMedica programs to businesses such as Health Plans, Integrated Delivery Networks, Disease Management Companies, Insurers, Clinical Trial Companies and other healthcare providers that most benefit from the ability of the system to combine both clinical and administrative analysis.

Other Products

CareEvolve, our wholly owned subsidiary, is a physician-based connectivity portal.  This system provides a complex, sophisticated system for ordering laboratory services and delivering laboratory results.  The system is designed to be physician-centric and to provide a highly flexible, scalable, comprehensive desktop solution for physicians to manage their day-to-day practice and personal needs, as well as to handle their clinical laboratory ordering and reporting.  This product has been designed to work as a platform with plug and play capability that can easily be used by other laboratories that also need a web-based solution for their physician customers. We executed a Strategic Marketing Agreement (the “SMA”) in December 2001 with Roche Diagnostics (“Roche”) to operate a Joint Venture for the sale and distribution of the CareEvolve Services to laboratories throughout the country. In December 2004, we executed an Addendum to the SMA with Roche. Pursuant to the Addendum, Roche’s rights to share in CareEvolve’s net after tax income and to purchase up to a 50% equity interest in CareEvolve were canceled. Roche did retain a right of first refusal to purchase CareEvolve in the event we were willing to accept such a purchase offer from a third party. Although we retained the rights

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to market the CareEvolve Services in all markets including the laboratory market, Roche was the sole Diagnostic Company (manufacturer of diagnostic equipment and supplies) granted the right to market the CareEvolve Services to laboratories. As a result of the execution of the Addendum, we took a one-time charge to fiscal 2004 earnings of approximately $400,000 to reflect the revised change in terms of our relationship with Roche. The charge was associated with one-time technology development expenses which had been assessed to CareEvolve and are now our responsibility. The Joint Venture was terminated by mutual consent in the fourth quarter of fiscal 2005 and we are now marketing the CareEvolve services on our own. CareEvolve’s current monthly revenues, although not significant,  now exceed its current monthly expenses.

Payors and Clients

We provide laboratory services to a range of healthcare providers. A “payor” is the party who pays for the tests while the “client” is the party that refers the tests to us. We may consider an organization that has a contract with us, such as a clinic or governmental agency, both a payor and a client. Some states, such as New York and New Jersey, prohibit us from billing physician clients. During fiscal year 2005, no single client accounted for more than 10% of our net revenues.

The following table reflects the current estimates of the breakdown of net revenue by payor for the twelve months ended October 31, 2003, 2004, and 2005.

	Years Ended October 31,
	2003	2004	2005
Direct Patient Billing	7%	7%	6%
Commercial Insurance	43%	48%	46%
Professional Billing	20%	17%	18%
Medicare	27%	25%	26%
Medicaid	3%	3%	4%
	100%	100%	100%

Clients

Physicians who order clinical tests for their patients represent one of the primary sources of our testing volume. Fees invoiced to patients and third parties are based on our fee schedule, which may be subject to limitations on fees imposed by third-party payors. Medicare and Medicaid reimbursements are based on fee schedules set by governmental authorities.

Employers, Governmental Agencies

We provide laboratory services to governmental agencies and large employer groups. We believe we are the largest regional laboratory providing service to correctional facilities in the Northeastern United States. All of these clients are charged on a contractual basis.

Sales and Marketing

We employ full and part-time sales and marketing representatives. All of our sales and marketing personnel operate in a dual capacity, as both marketing and client support representatives. This ensures that all of our salespersons are intimately involved with the client. We believe that this is unique in the industry and is extremely helpful in client retention, since it provides a strong connection between the physician and our staff.

Client Service Coordinators

We utilize the services of full and part-time client service coordinators at our Elmwood Park facility, all of whom are trained in medical and laboratory terminology. This staff is used as an interface with physicians and nurses and augments the client support provided by our sales force.

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They also report highly abnormal and life threatening results to the ordering physician immediately via telephone in order to provide speedy medical resolution to any patient problem.

Logistical Support

We employ full and part-time couriers. They pick up patient specimens from and deliver printed reports to physician offices, nursing homes, clinics and correctional facilities.

Strategic Growth Opportunities

In addition to increasing our core business through internal growth and pursuing our strategy of seeking opportunities with bulk purchasers of laboratory services through our PSIMedica business unit, we intend to target growth opportunities both inside and outside of our core laboratory business.

• Selective Acquisitions: The clinical laboratory industry is still highly fragmented. Historically, acquisition has been one method that has fueled our growth. In October 2005, we acquired certain assets of a Poughkeepsie, New York pathology practice for $2,174,000 plus assumed liabilities not to exceed $160,000. We retained the staff of this practice and continue to operate at the same three hospital locations that the practice previously operated at in New York’s mid-Hudson region. We intend to continue to look for acquisitions that can be integrated into our existing processing facilities without maintaining duplicate facilities or which will provide us with entry into new product or geographic areas. This strategy, if successfully implemented, will enable us to reduce costs and gain economies of scale from the elimination of redundant facilities and equipment and the reduction of personnel.

• Specialty Testing: We also intend to continue to increase our penetration into the specialty testing market, especially genomics. The current annual value of gene-based testing in the United States is approximately one billion dollars. We believe that we have positioned ourselves to take advantage of this market.

• Medical Information: Our medical information unit, PSIMedica, seeks to combine laboratory data with these other data elements so as to improve the quality and efficiency of healthcare.

Billing

Billing for laboratory services is extremely complicated. We must bill various payors, such as patients, Medicare, Medicaid, insurance companies and employer groups, all of which have different billing requirements. Compliance with applicable laws and regulations as well as internal compliance procedures adds complexity to this process.

Our bad debt expense is the result of issues that are not credit-related as is the case in most industries. It is due in most part to missing or incorrect billing information on our requisitions; this occurs because we depend on the healthcare provider to supply us with the information. We perform the tests and report the test results as requested on the requisition regardless of whether the demographic information is correct or even missing altogether. We then attempt to obtain any missing information and correct the billing information received from the healthcare provider. This adds to the complexity, slows the invoicing process, and generally increases the aging of our accounts receivable. When all issues are not resolved in a timely manner, the item is written-off to bad debt expense. Other items such as pricing differences and payor disputes also complicate billing. Adjustments to receivables as a result of these types of matters are accounted for as revenue adjustments and are not written-off to Bad Debt Expense.

Competition

We compete with three types of providers in a highly fragmented and competitive industry: hospital laboratories, physician-office laboratories and other independent clinical laboratories. Our major competitors in the New York metropolitan area are Quest Diagnostics and Laboratory

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Corporation of America. Although we are much smaller than these national laboratories, we believe that we compete successfully with them in our region because of the following factors:

• Fewer layers of staff

• A more responsive business atmosphere

• Customized service

We believe our responses to medical consultation are faster and more personalized than those of the national laboratories. Our client service staff only deals with basic technical questions and those that have medical or scientific significance are referred directly to our senior scientists and medical staff.

Quality Assurance

Medical testing is essentially a process of communication and data transfer. In order to provide accurate and precise information to the physician, it is essential that we maintain a well structured and vigorous quality assurance program. Our goal is to continually improve this process. We hold the required Federal and State licenses necessary to permit our operation of a clinical laboratory at our facilities in New Jersey, New York and Massachusetts. We submit to vigorous proficiency tests (or surveys) in all tests that we perform. We are also subject to unannounced inspections from the various state licensing agencies.

Our laboratories are accredited by the College of American Pathologists (“CAP”). This accreditation includes on-site inspections and participation in the CAP proficiency testing program or an equivalent. CAP is an independent organization of board certified pathologists approved by the Center for Medicare and Medicaid Services (“CMS”) to inspect clinical laboratories in order to determine compliance with the standards required by the Clinical Laboratory Improvement Amendments of 1988 (“CLIA-88”).

Our Quality Assurance Committee, headed by a Quality Assurance Coordinator and composed of supervisors from all departments, meets daily to assess and evaluate the laboratory’s quality.  Based on the information received from the Committee, recommendations are made to correct conditions which have led to errors.  Management, department supervisors and members of the Committee continually monitor the laboratory’s quality.  Depending on the test, two or three levels of Quality Control materials are run in each analytical assay to assure precision and accuracy.  Patient population statistics are evaluated each day. Testing of highly abnormal samples is repeated to assure accuracy.

We believe that all of these procedures are necessary, not only in assuring a quality product, but also in maintaining Federal and state licensing.  These high standards of quality are an important factor in what we regard as our excellent rate of client retention.

Regulation of Clinical Laboratory Operations

The clinical laboratory industry is highly regulated and subjected to significant Federal and state regulation. This includes inspections and audits by governmental agencies. These agencies may impose fines, criminal penalties, or other enforcement actions to enforce laws and regulations. These penalties can include revocation of a clinical laboratory’s license. Changes in regulations may increase the cost of testing or processing claims.

Waste management is subject to Federal and state regulations governing the transportation and disposal of medical waste including bodily fluids.  Federal regulations require licensure of interstate transporters of medical waste. In New Jersey, we are subject to the Comprehensive Medical Waste Management Act, (“CMWMA”), which requires us to register as a generator of special medical waste. All of our medical waste is disposed of by a licensed interstate hauler.  The hauler provides a manifest of the disposition of the waste products as well as a certificate of incineration which is retained by us. These records are audited by the State of New Jersey on a yearly basis. We are also subject to Federal requirements. The Federal Hazardous materials

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transportation law, 49 U.S.C. 5101 et seq., and the Hazardous Materials Regulations (HMR), 49 CFR parts 171-180. The Federal government has classified hazardous medical waste as hazardous materials for the purpose of regulation. These regulations preempt State regulation which must be “substantively the same,” “the non-Federal requirement must conform “in every significant respect to the Federal requirement. Editorial and other similar de minimis changes are permitted” 49 CFR 107.202(d). The amendments to provisions in 49 U.S.C., 5125 reaffirmed the need to achieve greater uniformity and to promote the public health, welfare, and safety at all levels, Federal standards for regulating the transportation of hazardous materials in intrastate, interstate, and foreign commerce are necessary and desirable. We believe we are in compliance with all Federal and State medical waste regulations.

Regulation of Reimbursement for Laboratory Services

Containment of health-care costs, including reimbursement for clinical laboratory services, has been a focus of ongoing governmental activity.  Omnibus budget reconciliation legislation, designed to “reconcile” existing laws with reductions and reimbursements required by enactment of a Congressional budget can adversely affect clinical laboratories by reducing Medicare reimbursement for laboratory services. For most of the tests performed for Medicare beneficiaries or Medicaid recipients, laboratories are required to bill Medicare or Medicaid directly, and to accept Medicare or Medicaid reimbursement as payment in full.

The current administration, Congress and various Federal agencies have examined the rapid growth of Federal expenditures for clinical laboratory services, and the use by the major clinical laboratories of dual fee schedules (“client” fees charged to physicians, hospitals, institutions and companies with whom a laboratory deals on a bulk basis and which involve relatively low administrative costs, and “patient” fees charged to individual patients and third party payors, including Medicare, who generally require separate bills or claims for each patient encounter and which involve relatively high administrative costs).  The permitted Medicare reimbursement rate for clinical laboratory services has been reduced by the Federal government in a number of instances over the past several years to a present level equal to 74% of the national median of laboratory charges. Next year marks the third year of a five-year freeze (through 2008) on Laboratory fee updates, as required by the Medicare Modernization Act of 2003. A number of proposals for legislation or regulation are under discussion which could have the effect of substantially reducing Medicare reimbursements to clinical laboratories through reduction of the present allowable percentage or through other means.  In addition, the structure and nature of Medicare reimbursement for laboratory services is also under discussion and we are unable to predict the outcome of these discussions. Depending upon the nature of congressional and/or regulatory action, if any, which is taken and the content of legislation, if any, which is adopted, we could experience a significant decrease in revenues from Medicare and Medicaid, which could have a material adverse effect on us.

CLIA-88

CLIA-88 extended Federal licensing requirements to all clinical laboratories (regardless of the location, size or type of laboratory), including those operated by physicians in their offices, based on the complexity of the tests they perform.  The legislation also substantially increased regulation of cytology screening, most notably by requiring the Secretary of Health and Human Services, (“HHS,”) to implement regulations placing a limit on the number of slides that a cytotechnologist may review in a twenty-four hour period.  CLIA-88 also established a more stringent proficiency testing program for laboratories and increased the range and severity of sanctions for violating Federal licensing requirements.  A number of these provisions, including those that imposed stricter cytology standards and increased proficiency testing, have been implemented by regulations applicable only to laboratories subject to Medicare certification. On February 28, 1992, HHS published three sets of regulations implementing CLIA-88, including quality standard regulations establishing Federal quality standards for all clinical laboratories; application and user fee regulations applicable to most laboratories in the United States which became effective on March 30 1993; and enforcement procedure regulations applicable to laboratories that are found not to meet CLIA-88 requirements.  The quality standard regulations

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establish varying levels of regulatory scrutiny depending upon the complexity of testing performed.  Under these regulations, a laboratory that performs only one or more of seventy eight routine “waived” tests may apply for a waiver from most requirements of CLIA-88.  We believe that most tests performed by physician office laboratories will fall into either the “waived” or the “moderately complex” category.  The latter category applies to simple or automated tests and generally permits existing personnel in physicians’ offices to continue to perform testing under the implementation of systems that insure the integrity and accurate reporting of results, establishment of quality control systems, proficiency testing by approved agencies, and biannual inspection.  Our testing is often much more complex and as a result, we are subject to full compliance with CLIA-88. The quality standard and enforcement procedure regulations became effective on September 1, 1992, most personnel, quality control and proficiency testing requirements have been implemented; the remainder will be phased in over a number of years.  Our laboratory completed its first CLIA inspection under CLIA-88 guidelines and received its certificate of compliance effective February 7, 1996.

Compliance Program

The Office of Inspector General has published a Model Compliance Program for the clinical laboratory industry. This is a voluntary program for laboratories to demonstrate to the Federal government that they are responsible providers. We have implemented a voluntary compliance program adhering to the standards set forth in the Model Compliance Program.

Confidentiality of Health Information

Pursuant to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), on December 28, 2000, the Secretary of HHS issued final regulations that would establish comprehensive federal standards with respect to the use and disclosure of protected health information by a health plan, healthcare provider or healthcare data clearinghouse. The regulations establish a regulatory framework on various subject matter, including:

• The circumstances under which disclosures and uses of protected health information require the patient’s consent, authorization or no patient consent or authorization.

• The content of notices of privacy practices for protected health data.

• Patient’s rights to access, amend and receive an accounting of the disclosures and uses of protected health information.

• Administrative, technical and physical safeguards required for that use or for disclosure of protected health data.

These regulations establish a “minimum” and would default to more stringent state laws. Therefore, we are required to comply with both sets of standards. Laboratories were required to submit a compliance plan to HHS by October 16, 2003.  We filed our application for a one year extension for compliance with the Transaction Data Set Regulations and filed our compliance plan during the extension period in accordance with the model form provided by HHS. HIPAA provides for significant fines as well as substantial criminal penalties for violations of the Act.

Fraud and Abuse Regulations

Medicare and Medicaid anti-kickback laws prohibit clinical laboratories from making payments or furnishing other benefits to influence the referral of tests billed to federal programs. Federal enforcement agencies (including both the Federal Bureau of Investigation and the Office of the Inspector General) liberally interpret and aggressively enforce statutory fraud and abuse provisions of these anti-kickback statutes. According to public statements made by the Department of Justice, healthcare fraud has become one of its highest priorities. Many of the anti-fraud statutes are vague or indefinite and have not been interpreted in the courts.  We believe we operate lawfully within these statutes; however, we cannot predict if some of our practices may be interpreted as violating these statutes and regulations.

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Insurance

We maintain professional liability insurance of $1,000,000 per occurrence, $3,000,000 in the aggregate. In addition, we maintain excess commercial insurance of $5,000,000 per occurrence and $5,000,000 in the aggregate. We believe that our present insurance coverage is sufficient to cover currently estimated exposures, but we cannot assure that we will not incur liabilities in excess of the policy limits.  In addition, although we believe that we will be able to continue to obtain adequate insurance coverage, we cannot assure that we will be able to do so at acceptable costs.

Employees

At October 31, 2005, we had 936 full-time and 340 part-time employees serving in executive positions, as technicians and technologists (including physicians, pathologists and PhDs), in marketing and as drivers and in bookkeeping, clerical and administrative positions. None of our employees are represented by a labor union. We regard relations with our employees as satisfactory.

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this Report, including without limitation, statements regarding our financial position, business strategy, products, products under development, markets, budgets and plans and objectives of management for future operations, are forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from our expectations are disclosed in statements set forth under “Cautionary Statements” herein and elsewhere in this Report, including, without limitation, in conjunction with the forward-looking statements included in this Report. All subsequent written and oral forward-looking statements attributable to us, or persons on our behalf, are expressly qualified in their entirety by the Cautionary Statements and such other statements.

Cautionary Statements

In addition to the other information in this Annual Report on Form 10-K, the following factors should be considered carefully in evaluating us. See also “Special Note Regarding Forward-Looking Statements.”

Risks Associated with Growth:

Over the last several years, we have experienced substantial growth and have expanded our operational capabilities. In October 2005, we acquired certain assets of a Poughkeepsie, New York pathology practice for $2,174,000 plus assumed liabilities not to exceed $160,000. We retained the staff of this practice and continue to operate at the same three hospital locations that the practice previously operated at in New York’s mid-Hudson region. We intend to develop further and expand both our core laboratory business and other products. This growth and expansion has placed, and will continue to place, a significant strain on our resources. We cannot assure that we will be able to successfully manage a continuation of the rate of growth similar to that which we have experienced in the past, should it occur.

Fluctuations in Operating Results:

Our quarterly and annual operating results can be affected by a wide variety of factors, many of which are outside of our control and which have in the past and could in the future materially and adversely affect our operating results. These factors include the quantities and timing of specimens received, pricing pressures, reimbursement changes, availability and cost of diagnostic supplies, cost of logistic and delivery systems, changes in product mix, retention and expansion of our marketing staff, timing of payments from governmental agencies and third-party payors and the effect of adverse weather conditions. We rely principally upon our internal logistic group for pick-up and delivery of specimens. However, as we shift our product mix we have begun to rely on

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Federal Express, UPS and other such providers for this service. Any disruption in this service, as occurred on September 11, 2001 when the National Airspace System (“NAS”) was shut down for a week, could have a material adverse effect on our operating results. As a result of these factors, our operating results may continue to fluctuate in the future.

Uncertainties Related to Government Regulation and Enforcement

We are a provider of healthcare services. As such, we are subject to extensive and rapidly changing federal, state and local laws and regulations governing licensure, billing practices, financial relationships, referrals, conduct of operations, purchase of existing businesses and other aspects of our business. We cannot predict the timing or impact of any changes in these laws and regulations or their interpretations by regulatory bodies, and we cannot assure that these changes will not have a material adverse effect on us.

Current federal laws governing federal healthcare programs, as well as some state laws, regulate certain aspects of the relationship between healthcare providers, including us, and their referral sources. The Federal Anti-Kickback Law and the Stark Law generally prohibit providers and others from soliciting, offering, receiving or paying, directly or indirectly, any monies in return for either making a referral for a service or item or purchasing, ordering or leasing a service or item, and prohibits physicians from making such referrals to entities in which they have an investment interest or with which they have a compensation arrangement. Exceptions to these laws are limited. Violations are punishable by disallowance of claims, civil monetary or criminal penalties and or exclusion from Medicare. Government authorities (both federal and state) have become more aggressive in examining laboratory billing practices, and in seeking repayments and even penalties based on how the services were billed, regardless of whether the carriers had furnished clear guidance.

In addition, our laboratory operations are required to be licensed or certified under CLIA-88, CMS and various State and local laws. We are also subject to federal and state laws relating to the handling and disposal of medical waste and radioactive materials, as well as the safety and health of laboratory employees. Although we seek to structure our practices to comply with these laws and regulations, no assurances can be given regarding compliance in any given situation. The possible sanctions for failure to comply with these laws and regulations may include the denial to conduct business, significant fines and criminal penalties. Any significant fine or criminal penalty could have a material adverse effect on our financial condition. Any exclusion or suspension from participation in a CMS program, any loss of licensure or accreditation or the inability to obtain the required license would have a material adverse effect on our business.

Uncertainties Related to Third-Party Payors

We typically bill third party payors such as Medicare, Medicaid, Governmental programs and private insurers for our services. Such third party payors are constantly negotiating prices with the goal of lowering their costs, which may result in lower profit margins for us. Reimbursement rates have been established for most, but not every service. We cannot collect from third party payors for services that these payors have not approved for reimbursement. As is common with all laboratories, there is a certain amount of variability with respect to reimbursement among third party payors. Furthermore, third party payors have, on occasion ceased reimbursements when certain tests are ordered for patients with certain diagnoses while maintaining reimbursement when those tests are ordered for other diagnoses deemed appropriate by the carrier. In addition, Medicare or Medicaid may retroactively audit its payments to us and may determine that certain payments must be returned.

Potential Healthcare Reform Including Decreasing Reimbursement Rates

The public and the federal government continue to focus attention on reforming the healthcare system in the United States. At the beginning of calendar year 2005, CMS announced significant cuts to Medicare reimbursement rates for flow cytometry testing. We do not anticipate any restoration of the former reimbursement rates in fiscal 2006. Furthermore, several legislative

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proposals have been introduced in Congress and state legislatures in recent years that would effect major reforms of the healthcare systems. In addition, CMS has made a number of proposals regarding the payment and coverage of laboratory services including the development of national coverage policies. Because of the uncertainties in regard to the nature, timing and extent of any such reimbursement changes, audits and reform initiatives, we are unable to predict the effect of these changes on us.

Insurance

Although we believe that our present insurance coverage is sufficient to cover currently estimated exposures, we cannot assure that we will not incur liabilities in excess of the policy limits.  In addition, although we believe that we will be able to continue to obtain adequate insurance coverage, we cannot assure that we will be able to do so at acceptable cost.

Uncertainties Related to Accounts Receivable

All of our services are rendered on a list fee for services. We therefore assume the financial risk related to collection of these receivables such as:

• Delays attendant to reimbursement by third party payors

• Difficulties in gathering complete and accurate billing information

• Inability to collect accounts

• Long collection cycles

There have been times when our accounts receivable have increased at a greater rate than revenue growth and, therefore, has adversely affected our cash from operations. We have taken steps to implement systems and processing changes intended to improve billing procedures and related collection results. We believe that we have made progress by reorganizing our accounts receivable and billing functions and that our allowance for doubtful accounts is adequate. However, we cannot assure that our ongoing assessment of accounts receivable will not result in the need for additional provisions. Such additional provisions, if implemented, could have a material adverse effect on our operating results.

Competition

We operate in a business which is characterized by intense competition. Our major competitors in the New York metropolitan area, Quest Diagnostics and Laboratory Corporation of America, are large national laboratories which possess greater name recognition, larger customer bases and significantly greater financial resources and employ substantially more personnel than we do. Many of our competitors have long established relationships. We cannot give assurances that we will be able to compete successfully with such entities in the future. Our ability to attract and retain sales representatives and management may also affect our ability to compete in this marketplace.

Dependence on Bank Financing

In October 2004, we entered into an Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with PNC Bank, National Association (“PNC Bank”) as Lender. Pursuant to the Loan Agreement, our credit facility from PNC Bank was extended to October 31, 2007 and the maximum permitted amount of our credit line (not to exceed 50% of our “eligible receivables” as defined in the Loan Agreement) was increased from $25,000,000 to $30,000,000. The Loan Agreement also provides us with an “Acquisition Subline” under the maximum $30,000,000 credit facility of up to $10,000,000 which can be repaid in 36 equal monthly installments thereafter. Interest on advances under this credit facility are subject to PNC Bank’s prime rate or the Eurodollar rate of interest plus, in certain instances, an additional interest percentage.

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Dependence on our Chief Executive Officer

Our success is substantially dependent on the efforts and abilities of Marc D. Grodman, M.D., our founder, president and chief executive officer. The unavailability of Dr. Grodman, whether as a result of his death, disability or otherwise, could have a material adverse effect upon our business.

Possible Volatility of Stock Price

There is a history of volatility in the market price for shares of companies in the healthcare marketplace. Factors such as fluctuations in our quarterly revenues and operating results, announcements of new innovations or services by us or our competitors, changes in third party payment policies and government regulations may have an effect on the market price of our Common Stock. In addition, any announcement of a material pending legal action could have a negative impact on the market price of our Common Stock regardless of the outcome of any such matter.

Factors In Place To Discourage Takeover Attempts

The substantial percentage ownership of our outstanding Common Stock by our executive officers and directors; our charter provision providing for a staggered board of directors so that only one-third of the board is elected each year to serve a three year term; our Rights Plan which was adopted to discourage hostile acquisitions of control of the Company; and the requirement that the holders of not less than 80% of our outstanding Common Stock must approve any merger, consolidation, asset sale or acquisition of the Company not approved by the board may discourage attempts by third parties to tender for or otherwise obtain control of the Company, even if such an attempt might be deemed beneficial to the Company and its shareholders. See Item 11 – “Employment Agreements with Executive Officers” and “Severance Payments for Other Employees” as to employment agreements signed by the Company which provide for substantial Severance Payments upon termination of employment in the event of a Change in Control of the Company. These Severance Payment provisions may also discourage attempts by third parties to tender for or otherwise obtain control of the Company.

Item 2. - Properties

Our executive offices and New Jersey processing facility occupy approximately 122,500 square feet of leased space in two one-story brick buildings at 481-487 Edward H. Ross Drive, Elmwood Park, New Jersey.  We are currently paying approximately $74,000 in total in monthly rentals for these facilities.  The leases for the majority of these facilities expire in February 2009. Our New York processing facility occupies approximately 12,000 square feet of leased space in a two-story brick building at 140 Route 303, Valley Cottage, New York.  The lease for this facility, which expires in April 2008, provides for a monthly rental of approximately $12,300. Our cancer cytogenetics testing facility occupies approximately 6,900 square feet of leased space in a three story brick building at 25 Birch Street, Milford, Massachusetts. The lease for this facility, which expires in December 2007, provides for a monthly rental of approximately $8,000. Our testing equipment maintained at each of our processing and testing facilities is in good condition and in working order.  We believe that these facilities, as presently equipped, have the capacity to generate up to approximately $250,000,000 in net revenues based on the type of testing now being performed by us.  We maintain fire, theft and liability insurance coverage for our facilities in what we believe are adequate amounts.  We also lease additional relatively small draw stations throughout the New York metropolitan area to collect specimens from physician-referred patients for testing at our processing facilities.

Item 3. - Legal Proceedings

At October 31, 2005 and at the date of this Report, we were not involved in any material legal proceedings.

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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 fiscal 2005.

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PART II

Item 5. - Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Our Common Stock is listed for trading on The NASDAQ National Market System under the symbol “BRLI”. It traded on the NASDAQ Small Cap System from November 24, 1993 until March 26, 2002 when our application to list our Common Stock on the NASDAQ National Market System was approved.

The following table sets forth the range of high and low closing bid prices for our Common Stock for the periods indicated, as derived from reports furnished by Pink Sheets LLC. Such quotations represent prices between dealers, do not include mark-ups, mark-downs or commissions and may not necessarily represent actual transactions.

	Bid Prices
Fiscal Year	High		Low
2004
First Quarter	$	21.88	$	12.62
Second Quarter	21.45		13.09
Third Quarter	15.46		10.76
Fourth Quarter	14.87		11.23
2005
First Quarter	$	17.48	$	13.25
Second Quarter	15.30		12.93
Third Quarter	15.04		13.55
Fourth Quarter	18.91		14.32

On January 9, 2006 the last sale price for the Common Stock on NASDAQ was $17.10 per share.

At October 31, 2005, the number of record owners of the Common Stock was 370. Such number of record owners was determined from our shareholder records and does not include beneficial owners whose shares are held in nominee accounts with brokers, dealers, banks and clearing agencies.

Dividends

We have not paid any dividends on our Common Stock since our inception and, do not contemplate or anticipate paying any dividends in the foreseeable future. Furthermore, our loan agreement with PNC Bank prohibits us from paying any cash dividends or making any cash distributions with respect to shares of our Common Stock.

Recent Sales of Unregistered Securities

On April 14, 2005 we issued 13,334 shares of our common stock to an executive officer, Howard Dubinett, upon his exercise of incentive stock options issued in 1997. He paid the full exercise price of $.71875 per share at the time of exercise.

On July 19, 2005, we issued 200,000 shares of our common stock to a consulting firm upon its exercise of warrants issued in fiscal 2001 for software services. The full exercise price of $2.00 per share was paid at the time of exercise.

A restrictive legend was placed on the certificates for the 13,334 shares and the 200,000 shares and stop transfer instructions were issued against the shares. The shares were issued in reliance upon the exemption from the registration requirements of the Securities Act of 1933 in

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accordance with Section 4(2) of the Act on the basis that neither transaction involved a public offering.

Equity Compensation Plan Information

The information required under this item is disclosed in item 12 of this Annual Report on Form 10-K and is incorporated herein by reference.

Issuer Purchases of Equity Securities

On June 1, 2005, the Board of Directors authorized the repurchase of up to 500,000 shares of our common stock from time to time at prevailing market prices in the over-the-counter market over the period ending October 31, 2007. As of October 31, 2005, no shares had been repurchased under this plan.

Item 6. -  Selected Financial Data

	[In thousands, except per share data]
	Years ended
	October 31,
	2005		2004		2003		2002		2001
Operating Data:
Net Revenues	$	163,896	$	136,184	$	109,034	$	96,631	$	80,622
Cost of Services	$	83,352	$	68,201	$	56,216	$	51,706	$	44,265
Gross Profit	$	80,544	$	67,983	$	52,818	$	44,925	$	36,357
General and Administrative Expenses	$	67,937	$	55,163	$	43,533	$	38,853	$	32,750
Income from Operations	$	12,607	$	12,820	$	9,285	$	6,072	$	3,607
Other Expenses - Net	$	1,118	$	634	$	681	$	849	$	1,660
Provision for Income Tax Expense [Benefit]	$	3,868	$	3,670	$	2,064	$	301	$	(414	)
Net Income	$	7,621	$	8,516	$	6,540	$	4,922	$	2,361
Net Income Per Common Share	$	.60	$	.71	$	.57	$	.43	$	.24
Net Income Per Share - Diluted	$	58	$	.67	$	.51	$	.39	$	.21
Cash Dividends Per Common Share	$	—	$	—	$	—	$	—	$	—
Balance Sheet Data:
Total Assets	$	88,373	$	72,151	$	53,219	$	47,442	$	44,006
Total Long-Term Liabilities	$	4,934	$	4,520	$	2,833	$	1,519	$	1,158
Total Liabilities	$	37,658	$	31,478	$	23,261	$	23,235	$	25,532
Working Capital	$	30,515	$	23,815	$	18,302	$	12,651	$	7,257
Shareholders’ Equity	$	50,715	$	40,673	$	29,958	$	24,207	$	18,474

Item 7. -  Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

We are a clinical laboratory located in northeastern New Jersey. Our regional footprint lies within the New York City metropolitan area and the surrounding areas of New Jersey and southern New York State as well eastern Pennsylvania and some areas of western Connecticut; under certain circumstances, we provide services further into New York State, Pennsylvania, Delaware and Maryland. As a regional provider, we are a full-service laboratory that primarily services physician office practices; our drivers pick up samples and deliver reports and supplies, we provide sophisticated technical support, phlebotomy services or patient service centers where appropriate, and electronic communication services in many cases. We have also developed a national reputation for our expertise in certain focused areas of clinical testing. GenPath, our cancer and oncology laboratory, is one of the premier hematopathology laboratories in the country. Physicians outside of our regional footprint send samples to our laboratory in order to take advantage of the expertise that we are able to provide in blood-based cancer pathology and associated diagnostics. Our correctional healthcare services are used throughout the country at prisons and jails. The focused markets we

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serve on a national basis outside of our regional footprint do not require many of the logistical and other ancillary support services required within the region. Even within our regional footprint, we provide the same services that we provide on a national basis as well as some regional focused diagnostic services, such as histology and pathology support services, substance abuse testing, fertility testing, hemostasis testing, women’s health testing, and molecular diagnostics that are unavailable from many of the smaller regional competitors; testing for some of these areas may be provided outside of physician offices.

Over the last few years, there have been fundamental changes in the laboratory services industry. In the 1990s, the industry was negatively impacted by the growth of managed care, increased government regulation, and investigations into fraud and abuse. These factors led to revenue and profit declines and industry consolidations, especially among commercial laboratories. There are currently only four publicly-traded laboratories, and one of those is being acquired by a private corporation and will be leaving the public markets in the near future. While that will leave the two national mega-laboratories and BioReference Laboratories as the only remaining publicly traded commercial laboratories, there are numerous hospital outreach programs and smaller reference laboratories that compete for the commercial clinical laboratory business scattered throughout the country. Clinical laboratories have had to improve efficiency, leverage economies of scale, comply with government regulations and other laws and develop more profitable approaches to pricing. Moreover, there has been a proliferation of technology advancements in clinical diagnostics over the last decade that has created significant opportunities for new testing and growth.

As a full service clinical laboratory, we are constantly looking for new technologies and new methodologies that will help us to grow. Since the turn of the century, our size alone has made us attractive to companies that are driving the advances in technology. We represent a significant opportunity for these companies to market their products in one of the major population centers of the world—the New York Metropolitan area. We have had several successful strategic relationships with such technology opportunities. In addition to new technology opportunities, we have an extremely seasoned and talented management staff that has been able to identify emerging laboratory markets that are under-served or under-utilized. We are currently developing programs for histology and women’s health to go along with our existing hemostasis, hematopathology and correctional healthcare initiatives which have already been established and in which we have been increasing our market share for the past several years. We will continue to vigilantly seek focused diagnostic marketing opportunities where we can provide information, technology, service or support that expand and grow our clinical laboratory.

While we recognize that we are a clinical laboratory that processes samples, we also understand that we are an information company that needs to effectively communicate the results of our efforts back to healthcare providers. Laboratory results play a major role in the implementation of physician healthcare. Laboratory results are used to diagnose, monitor and classify health concerns. In many cases, laboratory results represent the confirming data in diagnosing complicated health issues. Since laboratory results play such an important role in routine physician care, we have developed informatics solutions that leverage our role in healthcare. We needed to build a web-based solution to quickly, accurately, conveniently and competitively collect ordering information and deliver results, so we built an internal solution that we call CareEvolve. That solution has been so essential to our own operations that we license the technology to other laboratories throughout the country so they may more effectively compete against the national laboratories. These other laboratories licensing our technology are not out competitors since they are outside our regional footprint. In 2001, we entered into a strategic marketing agreement with Roche Diagnostics to co-market CareEvolve to laboratories throughout the country. Thanks to the relationship with Roche, CareEvolve received funding during its early years and built a solid infrastructure for growth and marketing. However, over the subsequent years, it became apparent that the relationship had served its purpose and it was terminated by mutual consent. We own all right, title and interest to CareEvolve and the informatics solution that has been built. We use it for our own customers and to help other smaller labs effectively compete against our common competition.

We have also created our PSIMedica business unit which has developed a Clinical Knowledge Management (CKM) System that takes data from enrollment, claims, pharmacy, laboratory results

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and any other available electronic source to provide both administrative and clinical analysis of a population. The system uses proprietary algorithms to cleanse and configure the data and transfer the resulting information into a healthcare data repository. Using advanced cube technology methodologies, the data can be analyzed from a myriad of views and from highly granular transactional detail to global trended overview. Events such as the Katrina disaster in Louisiana this past summer and general pressures from the government have made development of an electronic medical record system and Pay-for Performance reimbursement priority goals in the healthcare industry. A large portion of an individual’s medical record consists of laboratory data and a key performance indicator in any Pay-for-Performance initiative is laboratory result data. Our CKM system is a mature, full functioning solution that will allow us to play a role in these important national initiatives.

To date, neither our PSIMedica business unit nor CareEvolve has produced significant revenues.

Results of Operations (In thousands, except per patient data)

Fiscal Year 2005 Compared to 2004

NET REVENUES:

Net Revenues for the year ended October 31, 2005 were $163,896 as compared to $136,184 for the year ended October 31, 2004; this represents a 20% increase in net revenues. This increase is due to a 15% increase in patients serviced and a 5% increase in net revenue per patient. Our laboratory operations had net revenues of $161,856 in fiscal 2005.

The number of patients serviced during the year ended October 31, 2005 was 2,865 which was 14% greater when compared to the prior fiscal year.  Net revenue per patient for the year ended October 31, 2005 was $56.48 compared to net revenue per patient for the year ended October 31, 2004 of $53.71, an increase of $2.77 or 5% as a result of increases in esoteric testing.

COST OF SERVICES:

Cost of Services for the year ended October 31, 2005 was $83,352 as compared to $68,201 for the year ended October 31, 2004, an increase of 22%. Employee related expenses increased by $7,031 (23%) and is attributable to the hiring of additional technical and professional personnel dedicated to the expansion of the Company’s cancer and esoteric testing business. Depreciation increased from $1,764 for the period ended October 31, 2004 to $2,946 for the period ended October 31, 2005, an increase of $1,182 or 67% and is consistent with our investment in infrastructure and capacity. Total depreciation and amortization increased from $2,602 for the period ended October 31, 2004 to $4,206 for the period ended October 31, 2005 an increase of $1,604 or 62%.

GROSS PROFIT:

Gross profit on net revenues increased to $80,544 for the year ended October 31, 2005 from $67,983 for the year ended October 31, 2004; an increase of $12,561 (18%), primarily attributable to the increase in net revenues. Gross profit margins decreased to 49% from 50%, primarily due to the increase in direct operating expenses.

GENERAL AND ADMINISTRATIVE EXPENSES:

General and administrative expenses for the year ended October 31, 2005 were $67,937 as compared to $55,163 for the year ended October 31, 2004, an increase of $12,774 or 23%. This is 3% greater than the increase in net revenues and is attributable to an increase in bad debt expense to just over 13% of net revenues as compared to just under 13% for the twelve month period ended October 31, 2004. Management believes that this expense category may remain at this level in the immediate future. Marketing expenses as a percent of net revenues remained relatively constant over the two year period at 10% and management believes that it may remain at this level in the future.

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INTEREST EXPENSE:

Interest expense increased from $667 during the year ended October 31, 2004 to $1,226 during the year ended October 31, 2005; an increase of $559. This increase is due to an increase in the variable interest rates associated with and the increased utilization of our line of credit. Management believes that this trend may continue in the future due to the continued use of our revolving line of credit to fund our growth and the increase in interest rates that may continue to occur during fiscal year 2006.

NET INCOME:

We realized net income of $7,621 for the twelve month period ended October 31, 2005 as compared to $8,516 for the twelve month period ended October 31, 2004, a decrease of 11%. At the beginning of calendar year 2005, CMS announced significant cuts to Medicare reimbursement rates for flow cytometry testing. These cuts adversely affected both our net revenues and operating income in fiscal 2005. We do not anticipate any restoration of the former reimbursement rates in fiscal 2006.

Pre-tax income for the period ended October 31, 2005 was $11,489, as compared to $12,186 for the period ended October 31, 2004, a decrease of $697 (6%) and was caused primarily by an increase in expenses in relation to an increase in net revenues.  The provision for income taxes increased from $3,670 for the period ended October 31, 2004, to $3,868 for the current twelve month period.

Fiscal Year 2004 Compared to 2003

NET REVENUES:

Net Revenues for the year ended October 31, 2004 were $136,184 as compared to $109,034 for the year ended October 31, 2003; this represents a 25% increase in net revenues. This increase is due to a 19% increase in patients serviced and a 5% increase in net revenue per patient. Our laboratory operations had net revenues of $135,435 in fiscal 2004.

The number of patients serviced during the year ended October 31, 2004 was 2,522 which was 19% greater when compared to the prior fiscal year.  Net revenue per patient for the year ended October 31, 2004 was $53.71 compared to net revenue per patient for the year ended October 31, 2003 of $51.41, an increase of $2.30 or 4% as a result of increases in esoteric testing.

COST OF SERVICES:

Cost of Services for the year ended October 31, 2004 was $68,201 as compared to $56,216 for the year ended October 31, 2003, an increase of 21%.  This increase is related to the increase in net revenues of 25%.

GROSS PROFIT:

Gross profit on net revenues increased to $67,983 for the year ended October 31, 2004 from $52,818 for the year ended October 31, 2003; an increase of $15,165 (29%), primarily attributable to the increase in net revenues and the decrease in direct costs relative to the increase in net revenues. Gross profit margins in the laboratory increased to 50% from 48%, primarily due to the increase in net revenues and efficiencies in direct operating expenses.

GENERAL AND ADMINISTRATIVE EXPENSES:

General and administrative expenses for the year ended October 31, 2004 were $55,163 as compared to $43,533 for the year ended October 31, 2003, an increase of $11,630 or 27%. This is 2% greater than the increase in net revenues and is attributable to several factors. Bad debt expense increased to 13% of net revenues as compared to 12% for the twelve month period ended October 31, 2003. This increase in bad debt is partly attributable to an increase in our third party billing and our acquisition of new payors in new geographical regions resulting from the expansion of our

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Oncology and esoteric testing services. Marketing expenses as a percent of net revenues increased from 9% in fiscal year 2003 to 10% in fiscal year 2004, a result of our continued emphasis on sales and marketing in the area of Oncology and esoteric testing. In addition, we took a one time charge against earnings of approximately $400,000 that came about because of changes in an Addendum we executed to our Strategic Marketing Alliance with Roche Diagnostic Corporation.

INTEREST EXPENSE:

Interest expense decreased from $704 during the year ended October 31, 2003 to $667 during the year ended October 31, 2004; a decrease of $37. This decrease is due to a decline in the variable interest rates associated with our line of credit. Management believes that this trend may not continue in the future due to the continued use of our revolving line of credit to fund our expansion and growth and the increase in interest rates that may continue to occur during fiscal year 2005.

NET INCOME:

We realized net income of $8,516 for the twelve month period ended October 31, 2004 as compared to $6,540 for the twelve month period ended October 31, 2003, an increase of 30%.

Pre-tax income for the period ended October 31, 2004 was $12,186, as compared to $8,604 for the period ended October 31, 2003, an increase of $3,582 (42%) and was caused primarily by a decrease in expenses in relation to an increase in net revenues.  The provision for income taxes increased from $2,064 for the period ended October 31, 2003, to $3,670 for the current twelve month period. This increase was anticipated due to the full utilization of Federal and State net operating loss carry-forwards during the third quarter of fiscal 2003. However, it was mitigated by other tax considerations.

Liquidity and Capital Resources (In thousands)

For the Fiscal Year Ended October 31, 2005

Our working capital at October 31, 2005 was approximately $30,515 as compared to approximately $23,815 at October 31, 2004, an increase of $6,700. Our cash position decreased by approximately $2,378 during the current period. We increased our short term borrowing by approximately $555 and repaid approximately $3,094 in existing debt. We had current liabilities of approximately $32,724 at October 31, 2005. We generated approximately $2,899 in cash from operations, a decrease of approximately $2,127 as compared to the year ended October 31, 2004.

At the end of the third quarter of the current fiscal year, our short term debt was approximately $17,007. We utilized approximately $2,568 in cash and allowed our accounts payable to increase approximately $1,007 during the fourth quarter to decrease our short term debt to $10,888 at October 31, 2005. In addition, we utilized approximately $2,174 of cash for the PATHCO acquisition.

Accounts receivable, net of allowance for doubtful accounts, totaled approximately $53,113 at October 31, 2005, an increase of approximately $12,161 from October 31, 2004, or 30%. This increase was primarily attributable to increased revenue.  Cash collected over the twelve month period ended October 31, 2005 increased 17% over the prior twelve month period.

Net service revenues on the statements of operations are as follows:

	Years Ended October 31
	2005		2004		2003
Gross Revenues	430,162		341,180		269,676
Contr. Adjustments and Discounts	266,266		204,996		160,642
Net Revenues	163,896		136,184		109,034
Percent of Contractual Adjustments and Discounts To Gross Revenues	61.9	%	60.0	%	59.6	%

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The table above illustrates the relationship between contractual adjustments and gross revenues for the years 2003, 2004 and 2005. From 2003 to 2004, contractual allowances as a percentage of gross revenues increased approximately 40 basis points, consistent with a relatively stable reimbursement environment. Between 2004 and 2005, contractual allowances increased approximately 190 basis points. The most significant factor in this increase was the decrease in reimbursement rates for flow cytometry. This decrease was fully discussed upon release of our fiscal 2004 results. The Company’s growth in flow cytometry testing volume contributed significantly to the increase in contractual allowances for fiscal year 2005.

Credit risk with respect to accounts receivable is generally diversified due to the large number of patients comprising our client base.  We have significant receivable balances with government payors and various insurance carriers.  Generally, we do not require collateral or other security to support customer receivables. However, we continually monitor and evaluate our client acceptance and collection procedures to minimize potential credit risks associated with our accounts receivable and establish an allowance for uncollectible accounts. As a consequence, we believe that our accounts receivable credit risk exposure beyond such allowance is not material to the financial statements.

A number of proposals for legislation continue to be under discussion which could substantially reduce Medicare and Medicaid reimbursements to clinical laboratories.  Depending upon the nature of regulatory action, and the content of legislation, we could experience a significant decrease in revenues from Medicare and Medicaid, which could have a material adverse effect on us. We are unable to predict, however, the extent to which such actions will be taken.

GROSS RECEIVABLES BY PAYOR GROUP

FY 2005

	30 Days	%	60 Days	%	90 Days	%	>90 Days	%	Total	%
Self Pay	2,473	17	1,448	10	1,364	9	9,629	65	14,914	15
Medicare	9,090	38	4,039	17	1,721	7	9,251	38	24,101	24
Medicaid	1,680	20	1,650	19	1,445	17	3,697	44	8,472	8
Prof. Billing	4,043	42	2,244	23	946	10	2,466	25	9,699	10
Comm. Ins	16,037	37	9,209	21	4,784	11	13,152	30	43,182	43
Total	33,323	33	18,590	19	10,260	10	38,195	38	100,368	100

FY 2004

	30 Days	%	60 Days	%	90 Days	%	>90 Days	%	Total	%
Self Pay	2,003	17	1,334	11	1,131	10	7,410	62	11,878	15
Medicare	7,910	38	2,316	11	994	5	9,646	46	20,866	27
Medicaid	1,255	38	721	22	511	16	782	24	3,269	4
Prof. Billing	4,054	53	804	11	883	12	1,874	25	7,615	10
Comm. Ins	12,753	37	6,521	19	3,274	9	11,932	35	34,480	44
Total	27,975	36	11,696	15	6,793	9	31,644	41	78,108	100

Billing for laboratory services is complicated and we must bill various payors, such as the individual, the insurance company, the government (federal or state), the private company or the health clinic. Other factors that may complicate billing include:

• Differences between fee schedules and reimbursement rates.

• Incomplete or inaccurate billing information as provided by the doctor.

• Disparity in coverage and information requirements.

• Disputes with payors.

• Internal and external compliance policies and procedures.

Significant costs are incurred as a result of our participation in government programs since billing and reimbursement for laboratory tests are subject to complex regulations. We perform the requested tests and report the results whether the information is correct or not or even missing. This adds to the complexity and slows the collection process and increases the aging of our accounts receivable (“A/R”). When patient invoices are not collected in a timely manner the item is written off to the allowance.

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Days Sales Outstanding (“DSO”) for fiscal years 2004 and 2005 were 101 and 111, respectively, an increase of approximately 10%. During April of 2005, CMS along with other commercial insurers implemented certain changes as required by HIPAA that caused this increase in our DSO’s. These changes are exaggerated by our primary marketplace, the physician office marketplace. This event caused a 3% reduction in cash collected, as compared to the prior fiscal year. However, when you compare our DSO lag to our collectable net revenues as reported on our financial statements for the periods in question, it varies between 98% to 102%, depending on the period.

Overall, the components of A/R as shown above for the two years under review have not varied much year over year. The percent of A/R over 90 days has decreased from 41% as of October 31, 2004 to 38% as of October 31, 2005. We have maintained a 48% reserve in both fiscal years.

In October 2004, the Company entered into an amended revolving note payable loan agreement with a bank.  The maximum amount of the credit line available to the Company is the lesser of (i) $30,000 or (ii) 50% of the Company’s qualified accounts receivable [as defined in the agreement]. The amended loan agreement provides for an “acquisition subline” of up to $10,000 which can be repaid in 36 equal monthly installments. The amendment to the Loan and Security Agreement provides for interest on advances to be subject to the bank’s prime rate or Eurodollar rate of interest plus, in certain instances, an additional interest percentage.  The additional interest percentage charges on Eurodollar borrowings range from 1% to 4% and are determined based upon certain financial ratios achieved by the Company.  At October 31, 2005, the Company had elected to have $10,000 of the total advances outstanding converted into a Eurodollar rate loan with a variable interest rate of 5.02% at October 31, 2005.  The remaining outstanding advances during that period were subject to the bank’s prime rate of interest.  At October 31, 2005, advances of $888 were subject to interest at the prime rate.  As of October 31, 2005 and 2004, the bank’s prime rate of interest was 6.75% and 4.75%, respectively.  The credit line is collateralized by substantially all of the Company’s assets. The line of credit is available through October 2007 and may be extended for annual periods by mutual consent, thereafter.  The terms of this agreement contain, among other provisions, requirements for maintaining defined levels of capital expenditures, fixed charge coverage, insurance coverage and the prohibition of the payment by the Company of cash dividends. As of October 31, 2005, the Company utilized $13,434 (including $2,546 utilized under the “acquisition subline”) and had $19,931 of available unused credit under this revolving note payable loan agreement.

The weighted average interest rate on short-term borrowings outstanding as of October 31, 2005 and 2004 was approximately 5.84% and 3.92%, respectively.

We intend to expand our laboratory operations through aggressive marketing while also attempting to diversify into related medical fields through acquisitions.  These acquisitions may involve cash, notes, Common Stock, and/or combinations thereof.

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Tabular Disclosure of Contractual Obligations

Payments Due By Period

(Dollars in thousands)

	Total	FY 2006	FY 2007	FY 2008	FY 2009	FY 2010 and thereafter
Long-Term Debt	$ 1,061	$ 1,061	$ -0-	$ -0-	$ -0-	$ -0-
Capital Leases	$ 6,823	$ 2,504	$ 2,092	$ 1,302	$ 676	$ 249
Operating Leases	$ 4,441	$ 1,323	$ 1,122	$ 948	$ 899	$ 149
Purchase Obligations	$ 18,211	$ 7,594	$ 4,837	$ 2,631	$ 2,203	$ 946
Long-Term Liabilities under Employment and Consultant Contracts	$ 8,016	$ 2,411	$ 1,905	$ 1,100	$ 1,100	$ 1,500
Total	$ 38,552	$ 14,893	$ 9,956	$ 5,981	$ 4,878	$ 2,844

Our cash balances at October 31, 2005 totaled approximately $4,303 as compared to approximately $6,681 at October 31, 2004.  We believe that our cash position, the anticipated cash generated from future operations, and the availability of our credit line with PNC Bank, will meet our anticipated cash needs in fiscal 2006.

We do not have any off-balance sheet items.

Impact of Inflation

To date, inflation has not had a material effect on our operations.

New Authoritative Pronouncements

In November 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 151, “Inventory Costs – an amendment to ARB No. 43.” This statement provides guidance to clarify the accounting for abnormal amounts of idle facility expense, freight handling costs, and wasted material (spoilage), among other production costs. Provisions of ARB No. 43 stated that under some circumstances, items such as idle facility expense, excessive spoilage and other costs “may” be so abnormal as to require treatment as current period charges. This statement requires that those items be recognized as current period charges regardless of whether they meet the criterion of so abnormal. In addition, SFAS 151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production overheads to the costs of conversion be based on the normal capacity of the production facilities. Adoption of the Statement is not expected to have a material impact on the financial statements of the Company.

In November 2004, the FASB issued SFAS No. 152 “Accounting for Real Estate time-Sharing Transactions” – An amendment of SFAS No. 66 and 67. This Statement amends SFAS No. 66. “Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing Transactions. This Statement also amends SFAS No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects,” to state the guidance for (a) incidental costs and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to guidance in SOP 04-2. Effective for financial statements with fiscal years beginning after June 15, 2005. Adoption of this Statement is not expected to have a material impact on the financial statements of the Company.

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In November 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets – an amendment to APB No. 29.” This Statement amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity expected to change significantly as a result of the exchange. Adoption of this statement is not expected to have a material impact on the financial statements of the Company.

In December 2004, the FASB issued SFAS No. 123 (Revised 2004). “Share-Based Payment.” The statement requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instrument issued. The statement covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. The company will be required to adopt SFAS 123 (R) as of August 1, 2005. The adoption may have a material impact on the consolidated financial statements of the Company.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3.” This Statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement, in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed. The company will be required to adopt SFAS No. 154 as of November 1, 2006. The adoption of this standard may have a material impact on the Company’s consolidated financial statements.

In June 2005, the EITF reached consensus on Issue No. 05-6, Determining the Amortization Period for Leasehold Improvements (“EITF 05-6”). EITF 05-6 provides guidance on determining the amortization period for leasehold improvements acquired in a business combination or acquired subsequent to lease inception. The guidance in EITF 05-6 will be applied prospectively and is effective for periods beginning after June 29, 2005. EITF 05-6 is not expected to have a material impact on the Company’s unaudited interim consolidated financial statements.

With the exception of the adoption of SFAS 123 (R) and SFAS 154, the Company expects that the adoption of the new statements will not have a significant impact on its consolidated financial statements.

Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported periods.

Accounting for Goodwill

We evaluate the recoverability and measure the possible impairment of its goodwill under SFAS 142, The impairment test is a two-step process that begins with the estimation of the fair value of the reporting unit. The first step screens for potential impairment and the second step measures the amount of the impairment, if any.  Management’s estimate of fair value considers publicly available information regarding our market capitalization as well as (i) publicly available information regarding comparable publicly-traded companies in the clinical laboratory testing industry, (ii) the financial projections and future prospects of our business, including its growth opportunities and likely operational improvements, and (iii) comparable sales prices, if available. As part of the first step to assess potential impairment, management compares the estimate of its fair value to its book value on a consolidated net assets.  If the book value of the consolidated net assets is greater than the estimate of fair value, we then proceed to the second step to measure the impairment, if any.  The second step compares the implied fair value of goodwill with its carrying value

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The implied fair value is determined by allocating the fair value of the reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit.  The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill.  If the carrying amount of the goodwill is greater than its implied fair value, an impairment loss will be recognized in that period.

Accounting for Intangible and Other Long-Lived Assets

Weevaluate the possible impairment of our long-lived assets, including intangible assets. We review the recoverability of our long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable.  Evaluation of possible impairment is based on our ability to recover the asset from the expected future pretax cash flows (undiscounted and without interest charges) of the related operations. If the expected undiscounted pretax cash flows are less than the carrying amount of such asset, an impairment loss is recognized for the difference between the estimated fair value and carrying amount of the asset.

Accounting for Revenue

Service revenues are principally generated from clinical laboratory testing services such as routine and esoteric testing (See pages 3 and 4).  Net service revenues are recognized at the time the testing services are performed and are reported at the estimated net realizable amounts from patients, third-party payors and others for services rendered including prospectively determined adjustments under reimbursement agreements with third-party payors.  These adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined.  The Company has a subsidiary that provides non-clinical laboratory services.  Revenues generated from these services are not material for each of the years presented.

Accounting for Contractual Credits and Doubtful Accounts

An allowance for contractual credits is determined based upon a review of the reimbursement policies and subsequent collections for the different types of payors (such as the decrease in flow cytometry reimbursement rates from CMS starting January 1, 2005). Agings of accounts receivable are monitored by billing personnel and follow-up activities are conducted as necessary. Bad debt expense is recorded within selling, general and administrative expenses as a percentage of sales considered necessary to maintain the allowance for doubtful accounts at an appropriate level, based on our experience with our accounts receivable. We write off accounts against the allowance for doubtful accounts when they are deemed to be uncollectible. For client billing, accounts are written off when all reasonable collection efforts prove to be unsuccessful. Patient accounts are written off after the normal dunning cycle has occurred and the account has been transferred to a third party collection agency. Third party accounts are written off when they exceed the payer’s timely filing limits.

Accounting for Employment Benefit Plan

We sponsor the Bio-Reference Laboratories, Inc. 401(k) Profit-Sharing Plan [the “Plan”].  Our employees become eligible for participation after attaining the age of eighteen and completing one year of service.  Participants may elect to contribute up to ten percent of their compensation, as defined in the Plan Adoption Agreement, to a maximum allowed by the Internal Revenue Service.  We may choose to make a matching contribution to the plan for each participant who has elected to make tax-deferred contributions for the plan year, at a percentage determined each year by the Company.  For the plan years beginning January 1, 2005 we elected to make a matching contribution of 3% of salary not to exceed $500 which amounted to $182,739.  For the plan years beginning January 1, 2004 and 2003, we elected to make a matching contribution of 3% of salary not to exceed $250 per participant which amounted to $78,000 and $71,000 respectively which were charged to operations.  Our contribution will be fully vested after the third year of service.

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Accounting for Income Taxes

We account for income taxes utilizing the asset and liability method. Under this 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 for tax loss 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. Future tax benefits, such as net operating loss carryforwards, are recognized to the extent that realization of such benefits is more likely than not.

Forward Looking Statements

This Annual Report on Form 10-K contains historical information as well as forward-looking statements. Statements looking forward in time are included in this Annual Report pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to be materially different from any future performance suggested herein.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. While many aspects of our business are subject to complex federal, state and local regulations, the accounting for our business is generally straightforward.  Our revenues are primarily comprised of a high volume of relatively low dollar transactions, and about 42% of all our costs consist of employee compensation and benefits.  Revenues are recognized at the time the services are performed and are reported at the estimated net realizable amounts from patients, third-party payors and others for services rendered including prospectively determined adjustments under reimbursement agreements with third-party payors.  These adjustments are accrued on an estimated basis in the period the services are rendered and adjusted in future periods as final settlements are determined.  These estimates are reviewed and adjusted, if warranted, by senior management on a monthly basis.  We believe that our estimates and assumptions are correct; however, several factors could cause actual results to differ materially from those currently anticipated due to a number of factors in addition to those discussed under “Cautionary Statements” as well as elsewhere herein including:

•our failure to integrate newly acquired businesses (if any) and the cost related to such integration.

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

•adverse results from investigations of clinical laboratories by the government, which may include significant monetary damages and/or exclusion from the Medicare and Medicaid programs.

•loss or suspension of a license or imposition of a fine or penalties under, or future changes in, the law or regulations of CLIA-88, or those of Medicare, Medicaid or other federal, state or local agencies.

•changes in federal, state, local and third party payor regulations or policies (or in the interpretation of current regulations) affecting governmental and third-party reimbursement for clinical laboratory testing (such as the decrease in Medicare reimbursement for Flow Cytometry testing described above under Cautionary Statements).

•failure to comply with the Federal Occupational Safety and Health Administration requirements and the recently passed Needlestick Safety and Prevention Act.

•failure to comply with HIPAA, which could result in significant fines as well as substantial criminal penalties.

•changes in payor mix.

•failure to maintain our days sales outstanding levels.

•increased competition, including price competition.

•our ability to attract and retain experienced and qualified personnel.

•adverse litigation results.

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•              liabilities that result from our inability to comply with new corporate governance requirements.

•              failure to comply with the Sarbanes-Oxley Act of 2002.

Item 7A. -  Quantitative and Qualitative Disclosures about Market Risk

We do not invest in or trade market risk sensitive instruments. We also do not have any foreign operations or foreign sales so that our exposure to foreign currency exchange rate risk is non-existent.

We do have exposure to both rising and falling interest rates. At October 31, 2005, advances of approximately $888 under our Loan Agreement with PNC Bank were subject to interest charges at the Bank’s then prime rate of 6.75 %. In addition, we elected to have the remaining $10,000 of advances outstanding at said date converted into a Eurodollar rate loan with a variable interest rate of 5.02%.

We estimate that our monthly cash interest expense at October 31, 2005 was approximately $102 thousand and that a one percentage point increase or decrease in short-term rates would increase or decrease our monthly interest expense by approximately $14 thousand.

See Note 5  to the Consolidated Financial Statements contained herein.

Item 8. -  Financial Statements and Supplementary Data

Financial Statements are annexed hereto

Item 9. -  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A. -  Controls and Procedures

An evaluation was carried out under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Based upon that evaluation, our principal executive officer and principal financial officer concluded that those disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company’s internal control over financial reporting includes those policies and procedures that i) pertain to the maintenance of records that in reasonable detail accurately reflect the transactions and dispositions of the assets of the Company; ii) provide reasonable assurance that transactions are recorded as necessary to permit preparations of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s financial statements.

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Internal control over financial reporting cannot provide absolute assurance regarding the prevention or detection of misstatements because of inherent limitations. These inherent limitations are known by management and considered in the design of the Company’s internal control over financial reporting which reduce, though not eliminate this risk.

Management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of October 31, 2005. Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of October 31, 2005, has been audited by Moore Stephens, P.C., an independent registered public accounting firm, as stated in their report, which is included in part II, Item 8 of this Form 10-K.

Item 9B. -  Other Information

None.

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PART III

Item 10.- Directors and Executive Officers of the Registrant

The following table sets forth certain information with respect to each of the directors and executive officers of the Company.

Name	Age	Position
Marc D. Grodman, M.D.	54	Chairman of the Board, President, Chief Executive Officer and Director
Howard Dubinett	54	Executive Vice President, Chief Operating Officer and Director
Sam Singer	62	Vice President, Chief Financial Officer, Chief Accounting Officer and Director
Joseph Benincasa(a)(c)(e)	56	Director
Harry Elias(a)(c)(e)	75	Director
Gary Lederman, Esq. (b)(c)(e)	71	Director
John Roglieri, M.D. (a)(d)(e)	66	Director

(a)Member of the Audit Committee

(b)Chairman of the Audit Committee

(c)Member of the Compensation Committee

(d)Chairman of the Compensation Committee

(e)Member of Nominating Committee

The Audit Committee is comprised of the four non-employee members of the Board of Directors, Gary Lederman (Chairman), Joseph Benincasa, John Roglieri and Harry Elias. The Board of Directors deems each such individual as “independent” as defined by the rules of the National Association of Securities Dealers. The Audit Committee met four times during fiscal year 2005. The Audit Committee confers with the Company’s auditors and reviews, evaluates and advises the Board of Directors concerning the adequacy of the Company’s accounting systems, its financial reporting practices, the maintenance of its books and records and its internal controls. In addition, the Audit Committee reviews the scope of the audit of the Company’s financial statements and the results thereof. The Board of Directors has determined that Gary Lederman is qualified to serve as the Company’s “audit committee financial expert” as defined in Item 401 (h) of Regulation S-K promulgated by the SEC.

The Compensation Committee is comprised of four non-employee members of the Board of Directors, John Roglieri (Chairman), Joseph Benincasa, Harry Elias and Gary Lederman. The Compensation Committee met four times during fiscal year 2005. The Compensation Committee reviews salaries, cash bonuses and compensation plans for the Company’s executive officers and eligible employees and makes recommendations concerning same to the Board of Directors.

The Company does not have an Executive Committee. Officers are elected by and hold office at the discretion of the Board of Directors.

The Nominating Committee is comprised of the four non-employee members of the Board of Directors, Harry Elias, Joseph Benincasa, Gary Lederman and John Roglieri. Pursuant to its charter, the Nominating Committee’s role is to establish criteria for the selection of directors; to identify individuals qualified to be directors; to evaluate director candidates proposed by stockholders; to recommend individuals to fill vacancies on the Board and to recommend nominees for director at each annual stockholder meeting.

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Code of Ethics

The Company has adopted a Code of Ethics that applies to its executive officers and to key financial and accounting personnel. The Company will, upon a stockholder’s written request to Investor Relations, c/o the Company, furnish a paper copy of the Code of Ethics.

The following is a brief account of the business experience of each director and executive officer of the Company.

Marc D. Grodman, M.D. founded the Company in December 1981 and has been its Chairman of the Board, President, Chief Executive Officer and a Director since its formation. Dr. Grodman is an Assistant Professor of Clinical Medicine at Columbia University’s College of Physicians and Surgeons and Assistant Attending Physician at Presbyterian Hospital, New York City. From 1980 to 1983, Dr. Grodman attended the Kennedy School of Government at Harvard University and was a Primary Care Clinical Fellow at Massachusetts General Hospital. From 1982 to 1984, he was a medical consultant to the Metal Trades Department of the AFL-CIO. Dr. Grodman received a B.A. degree from the University of Pennsylvania in 1973 and an M.D. degree from Columbia University College of Physicians and Surgeons in 1977.  Except for his part time duties as Assistant Professor of Clinical Medicine and Assistant Attending Physician at Columbia University and Presbyterian Hospital, Dr. Grodman devotes all of his working time to the business of the Company.

Since January 2005, Dr. Grodman has been a member of the Board of Directors of the American Clinical Laboratory Association, an industry organization comprised of the largest and most significant commercial clinical laboratories in the United States. Other Board members include the chief executive officers of Quest Diagnostics and Laboratory Corporation of America.

Howard Dubinett has been the Executive Vice-President and Chief Operating Officer of the Company since its formation in 1981. He became a Director of the Company in April 1986. Mr. Dubinett attended Rutgers University. Mr. Dubinett devotes all of his working time to the business of the Company.

Sam Singer has been the Company’s Vice President and Chief Financial Officer since October 1987 and a Director since November 1989.  He is responsible for all of the Company’s financial activities. Mr. Singer was the Controller for Sycomm Systems Corporation, a data processing and management consulting company, from 1981 to 1987, prior to joining the Company.  He received a B.A. degree from Strayer University and an M.B.A. from Rutgers University.  Mr. Singer devotes all of his working time to the business of the Company.

Joseph Benincasa became a Director of the Company in June 2005. Mr. Benincasa currently serves as the Executive Director of The Actors’ Fund of America, a position he has held since 1989. The Actors’ Fund is the leading national, non-profit human services organization providing comprehensive social and health care services, employment, training and housing support to the entertainment profession. It is headquartered in New York City with regional offices in Chicago and Los Angeles. Mr. Benincasa also sits on the Board of Directors of The Greater New York Blood Program where he previously served as Director of Public Education and Public Relations. He is a director of St. Peter’s University Medical Center and also sits on the board of directors of Broadway Cares/Equity Fights AIDS; the National Theatre Workshop of the Handicapped; Career Transition for Dancers; the Times Square Alliance; the New York Society of Association Executives and the Somerset Patriots, a minor league baseball team. Mr. Benincasa holds a B.A. degree from St. Joseph’s University and an M. Ed. Degree from Rutgers University. He also attended Fordham University Graduate School of Business.

Harry Elias became a Director of the Company in March 2004. Mr. Elias commenced his employment in sales and marketing with JVC Company of America (“JVC”) in 1967, subsequently being appointed as JVC’s Senior Vice President of Sales and Marketing in 1983 and as Executive Vice President of Sales and Marketing in 1990. In 1995, Mr. Elias was named as JVC’s Chief Operating Officer, a position he occupied until April 2003 when he resigned his positions upon his

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appointment as JVC’s “Honorable Chairman.” JVC, a distributor of audio and video products headquartered in Wayne, New Jersey is the wholly owned United States subsidiary of Victor Company of Japan, a manufacturer of audio and video products headquartered in Japan. In January 2005, after retiring from JVC, Mr. Elias was appointed Chairman of the Board of and commenced to serve as a consultant to AKAI USA, the sole distributor in the United States of electronic products produced by AKAI, a Chinese manufacturer.

Gary Lederman, Esq. became a Director of the Company in May 1997. He received his B.A. degree from Brooklyn College in 1954 and his J.D. degree from NYU Law School in 1957.  He was manager of Locals 370, 491 and 662 of the U.F.C.W. International Union from 1961 to 1985. He is retired from the unions and has been a lecturer at Queensboro Community College in the field of insurance. He currently serves on an institutional review board for RTL, a pharmaceutical drug testing laboratory.

John Roglieri, M.D. became a Director of the Company in September 1995.  He is an Assistant Professor of Clinical Medicine at Columbia University’s College of Physicians and Surgeons and an Assistant Attending Physician at Presbyterian Hospital, New York City.  Dr. Roglieri received a B.S. degree in Chemical Engineering and a B.A. degree in Applied Sciences from Lehigh University in 1960, an M.D. degree from Harvard Medical School in 1966, and a Master’s degree from Columbia University School of Business in 1978.  From 1969 until 1971, he was a Senior Assistant Surgeon in the U.S. Public Health Service in Washington.  From 1971 until 1973 he was a Clinical and Research Fellow at Massachusetts General Hospital.  From 1973 until 1975, he was Director of the Robert Wood Johnson Clinical Scholars program at Columbia University.  In 1975 he was appointed Vice-President, Ambulatory Services at Presbyterian Hospital, a position which he held until 1980.  Since 1980, he has maintained a private practice of internal medicine at Columbia-Presbyterian Medical Center.  From 1988 until 1992, he was also Director of the Employee Health Service at Presbyterian Hospital. From 1992 through 1999, Dr. Roglieri was the Corporate Medical Director of NYLCare, a managed care subsidiary of New York Life. Dr. Roglieri was chief medical officer of Physician WebLink, a national physician practice management company, from 1999 to 2000. Since 2001, he has been Medical Director for New York Life Insurance Company in Manhattan. He is a member of advisory boards to several pharmaceutical companies, a member of the Editorial Advisory Board of the journals Managed Care and Seminars in Medical Practice, and is a subject of biographical record in Who’s Who in America.

There are no family relationships between or among any directors or executive officers of Bio-Reference Laboratories. The Company’s Certificate of Incorporation provides for a staggered Board of Directors pursuant to which the Board is divided into three classes of directors and the members of only one class are elected each year to serve a three-year term. Dr. Grodman and Mr. Dubinett are the Class I directors whose term expires in fiscal 2007. Mr. Singer and Mr. Elias are the Class II directors whose term expires in fiscal 2008. Mr. Benincasa, Mr. Lederman and Dr. Roglieri are the Class III directors whose term expires in fiscal 2006.

Key Personnel and Consultants

The following key personnel and consultants make significant contributions to the Company’s operations.

James Weisberger, M.D. (Age 50) joined the Company in September 2003 as Vice President, Assistant Chief Medical Officer and Director of Hematopathology. He is currently employed as the Company’s Chief Medical Officer. Prior to joining the Company, he was Director of Hematopathology at IMPATH, Inc.  (1999-2003). He is board certified in internal medicine, anatomic and clinical pathology, and hematopathology. He has a New York State Department of Health Certificate of Qualification as a Laboratory Director. He is a Clinical Assistant Professor of Pathology at New York Medical College, Valhalla, New York.  Prior to joining IMPATH,  he was an Assistant Professor of Medicine and Pathology at New York Medical College (1995-1999).  He has a B.S. degree from Stanford University (1977); an M.S. degree from Stanford University (1978); and an M.D. degree from the University of Pennsylvania (1983).

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Charles T. Todd, Jr.  (Age 54) is a Senior Vice President engaged in Sales. Mr. Todd was the founder and CEO of GenCare Biomedical Research Corporation, a specialty oncology laboratory that was purchased by the Company in 1995.  He attended Seton Hall University from where he received a B.S. degree in Finance in 1974.

John W. Littleton (Age 44) joined the Company in September 2002 as a Vice President engaged in Sales.  Prior to joining the Company, Mr.  Littleton was Vice President of Sales for Specialty Laboratories and the Northeast Regional Vice President of Sales for Quest Diagnostics.  He received a B.A.. degree from Seton Hall University in 1983.

John Bennett, M.D., (Age 72) Scientific Advisory Board Chairman, Professor Emeritus, University of Rochester Medical Center, Rochester, New York.  Dr. Bennett has long been recognized as an intellectual force in the treatment and understanding of leukemias, lymphomas and other cancer-related diseases.  He established the French-American-British (FAB) Leukemia working Group and is one of the world’s leading authorities on Myelodysplasia.  He is founder and Chairman of the MDS Foundation, as well as Editor of the Journal of Leukemia Research. Dr.  Bennett is currently Professor Emeritus and former Head of the Medical Oncology Unit at the University of Rochester Medical Center and formerly was a Professor of Oncology in Medicine, Pathology and Laboratory Medicine at the University of Rochester Medical School.  For nearly four decades, Dr.  Bennett has been honored by the medical community as an expert in the field of oncology as evidenced by the numerous chairs he has held in prestigious societies and committees and over 400 publications in peer review journals, the majority of which are in the area of hematologic malignancies.  Dr. Bennett earned his B.A. from Harvard University and his M.D. from Boston University. He served his residency in medicine at Beth-Israel Hospital, Boston, Massachusetts and completed a fellowship in hematology at Boston City Hospital. He headed the Morphology and Cytochemistry Section of the Clinical Center at NIH before joining the faculty at the University of Rochester. Dr. Bennett serves the Company in an advisory capacity as chairman of our Scientific Advisory Board.

Compliance with Section 16(a) of the Exchange Act

Based solely on a review of Forms 3 and 4 and any amendments thereto furnished to the Company pursuant to Rule 16a-3(e) under the Securities Exchange Act of 1934, or representations that no Forms 5 were required, we believe that with respect to fiscal 2005, our officers, directors and beneficial owners of more than 10% of our equity timely complied with all applicable Section 16(a) filing requirements. However, Harry Elias filed a Form 4 on June 14, 2005 reporting his open market purchase on July 13, 2004 of 1,000 shares of our common stock.

Item 11. - Executive Compensation

The following table sets forth information concerning the compensation paid or accrued by us during the year ended October 31, 2005 to our Chief Executive Officer and our other executive officers who were serving as our executive officers at October 31, 2005. All of our group life, health, hospitalization or medical reimbursement plans, if any, do not discriminate in scope, terms or operation, in favor of the executive officers or directors and are generally available to all salaried employees.

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SUMMARY COMPENSATION TABLE

	Annual Compensation				Long-Term Compensation
	Year			Other	Restricted			All
Name and Principal Position	Ended October 31,	Salary	Bonus(a)	Annual Compensation(b)	Stock Awards	Options (SARs)	LTIP Payouts	Other Compensation
Marc D. Grodman M.D.	2005	$ 750,000	$ —	$ -0-	-0-	-0-	$ -0-	$ -0-
President and Chief	2004	$ 554,625	$ 125,000	$ -0-	-0-	-0-	$ -0-	$ -0-
Executive Officer	2003	$ 499,750	$ 154,750	$ -0-	-0-	-0-	$ -0-	$ -0-
Howard Dubinett	2005	$ 285,000	$ 14,600	$ -0-	-0-	-0-	$ -0-	$ -0-
Executive Vice	2004	$ 272,200	$ 60,000	$ -0-	-0-	-0-	$ -0-	$ -0-
President and Chief	2003	$ 240,000	$ 21,800	$ -0-	-0-	-0-	$ -0-	$ -0-
Operating Officer
Sam Singer
Vice President and	2005	$ 285,000	$ 14,600	$ -0-	-0-	-0-	$ -0-	$ -0-
Chief Financial and	2004	$ 259,004	$ 60,000	$ -0-	-0-	-0-	$ -0-	$ -0-
Accounting Officer	2003	$ 240,000	$ 9,600	$ -0-	-0-	-0-	$ -0-	$ -0-

(a) The Compensation Committee adopted an Incentive Bonus Plan for Senior Management with respect to fiscal 2005. The Plan established two classes of employee participants. Dr. Grodman and two other management employees comprised the Class I participants. Mr. Dubinett, Mr. Singer and six other management employees comprised the Class II participants. The Plan entitled each participant to earn a bonus equal to a percentage of his or her annual gross wages to the extent that the Company’s operating income in fiscal 2005 was equal to or greater than certain percentages of its Net Revenues in the case of Class I participants, or in the case of Class II participants, to the extent that the Company’s adjusted operating income in fiscal 2005 was equal to or greater than certain percentages of its adjusted Net Revenues as defined by the Plan. No bonuses were earned for fiscal 2005 pursuant to the Plan by the Class I participants. An aggregate $94,400 in bonuses were earned for fiscal 2005 pursuant to the Plan by the eight Class II participants including the bonus amounts reflected in the above table for Messrs. Dubinett and Singer.

(b) See “Split-Dollar Life Insurance” herein concerning our payment of life insurance premiums pursuant to “split-dollar” life insurance programs for our three executive officers.

Employment Agreements with Executive Officers

Dr. Grodman serves as our President and Chief Executive Officer pursuant to a seven-year employment agreement which expires on October 31, 2011. Dr. Grodman has the right to elect to cancel the employment agreement effective at the end of any calendar month commencing October 31, 2008 on not less than 90 days prior written notice, subject to a six month non-competition restriction. The employment agreement is automatically renewable for additional two year periods subject to the right of either party to elect not to renew at least six months prior thereto. The employment agreement provides Dr. Grodman with minimum annual base compensation of $750,000 subject to annual percentage increases to the extent of annual percentage increases in the Consumer Price Index. The Compensation Committee can but is not required to increase Dr. Grodman’s compensation at the end of any fiscal year based upon his and the Company’s performance. The employment agreement also provides Dr. Grodman with business use of an automobile leased by the Company and participation in any fringe benefit and bonus plans available to the Company’s employees to the extent determined by the Compensation Committee. The employment agreement contains provisions governing in the event of Dr. Grodman’s partial or total disability and provides for termination for cause or in the event of Dr. Grodman’s death. Dr. Grodman has the right to terminate the employment agreement in the event of a material change in his duties and responsibilities, the relocation of the Company’s principal executive offices from Elmwood Park, New Jersey to a location more than fifty miles distant or a material breach of the employment agreement by the Company (including a reduction in Dr. Grodman’s benefits under the agreement). In the event of a Change in Control of the Company, Dr. Grodman can elect to terminate the agreement. In that event, he will be entitled to be paid a lump sum Severance Payment equal to 2.99 times the average of his annual compensation paid by the Company for the five calendar years preceding the earlier of the calendar year in which the Change of Control occurred or

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the calendar year of the Date of Termination. See “Split-Dollar Life Insurance” herein as to the Endorsement Split-Dollar Life Insurance Agreement between the Company and Dr. Grodman.

Mr. Dubinett serves as Executive Vice President and Chief Operating Officer pursuant to an employment agreement which was extended in fiscal 2004 for two additional years beyond its October 31, 2004 termination date.  Mr. Dubinett’s minimum annual compensation under the extended agreement is equal to his annual compensation in fiscal 2002 and is subject to increases based on increases in the Consumer Price Index as well as to increases (including bonuses) at the discretion of the Compensation Committee.  The agreement provides (i) typical health insurance coverage; (ii) the leasing of an automobile for his use; (iii) participation in fringe benefit, bonus, pension, profit sharing, and similar plans maintained for the Company’s employees; (iv) disability benefits; (v) certain termination benefits; and (vi) in the event of termination due to a Change in Control of the Company, a Severance Payment equal to 2.99 times Mr. Dubinett’s average annual compensation during the preceding five years.  The Company has the option to extend the extension period of the employment agreement on the same terms and conditions through October 31, 2007.  See “Split Dollar Life Insurance” herein as to the Endorsement Split Dollar Life Insurance Agreement between the Company and Mr. Dubinett.

Mr. Singer serves as Vice President and Chief Financial Officer pursuant to an employment agreement which was extended in fiscal 2004 for two additional years beyond its October 31, 2004 termination date. Mr. Singer’s minimum annual compensation under the extended agreement is equal to his annual compensation in fiscal 2002 and is subject to increases based on increases in the Consumer Price Index as well as to increases (including bonuses) at the discretion of the Compensation Committee. The agreement provides (i) typical health insurance coverage; (ii) the leasing of an automobile for his use; (iii) participation in fringe benefit, bonus, pension, profit sharing, and similar plans maintained for the Company’s employees; (iv) disability benefits; (v) certain termination benefits; and (vi) in the event of termination due to a Change in Control of the Company, a Severance Payment equal to 2.99 times Mr. Singer’s average annual compensation during the preceding five years. The Company has the option to extend the employment agreement on the same terms and conditions through October 31, 2007. See “Split-Dollar Life Insurance” herein as to the Endorsement Split-Dollar Life Insurance Agreement between the Company and Mr. Singer.

The Compensation Committee increased Dr. Grodman’s, Mr. Dubinett’s and Mr. Singer’s minimum annual base compensation with respect to fiscal 2006 by 5% in each case over his fiscal 2005 annual base salary.

Severance Payments for Other Employees

The Company signed employment agreements with three other employees effective November 1, 2005 providing in each case for a Severance Payment equal to 2.99 times the employee’s average annual compensation during the preceding five years in the event of termination of the employee’s employment upon a Change in Control of the Company. The Severance Payment provisions for these three employees were approved by the Compensation Committee. Two of the employees including Charles T. Todd, Jr. are engaged in Sales and the third employee is the Company’s Director of Information Services.

Split-Dollar Life Insurance

Pursuant to the terms of their 1997 employment agreements, the Company had establishedsplit-dollar life insurance programs for each of its three Executive Officers. As a result of the passage of the Sarbanes Oxley Act of 2002 (signed into law on July 30, 2002), these three programs were modified. Pursuant to the modification, each of the three Executive Officers assigned ownership of his policies to the Company and new policies were issued to replace the prior policies with annual premiums under the new policies ($70,000 under Dr. Grodman’s policy and $25,000 each under Messrs. Dubinett’s and Singer’s policies) being equal to the premiums paid under the replaced policies. The Company has now executed new “Endorsement Split-Dollar Life Insurance Agreements” with each of its three Executive Officers. Pursuant to the new agreements, the

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Company has agreed to continue to pay the annual premium on the policy on each officer’s life during the period of his full-time employment by the Company. The Company is the sole owner of the policy and of its net cash surrender value, and in the event of the officer’s death while serving as a full-time employee of the Company, the Company will be entitled to receive that amount of the death proceeds equal to its interest in the policy (the aggregate amount of premiums paid by the Company with respect to the policy less the amount of any loans, if any, from the Insurer to the Company against the cash value or policy proceeds, and less the aggregate amount of any premiums paid by the officer to the Company in reimbursement of premiums paid by the Company) and the balance of the death proceeds will be paid to the officer’s designated beneficiaries. The premiums paid by the Company on the current policies and the prior policies aggregated approximately $1,114 at October 31, 2005. At that date, the net cash surrender value of the three current policies aggregated approximately $690 and is recorded on the books of the Company at that value.

Stock Options

Employee Stock Option Plans

The 1989 Plan

In July 1989, the Company’s Board of Directors adopted the 1989 Employees Stock Option Plan (the “1989 Plan”) which was approved by shareholders in November 1989.  The 1989 Plan provided for the grant of options to purchase up to 666,667 shares of Common Stock.  Under the terms of the 1989 Plan, options granted thereunder could be designated as options which qualify for incentive stock option treatment (“ISOs”) under Section 422 of the Internal Revenue Code of 1986 (“the Code”), or options which do not so qualify (“NQOs”).

Under the 1989 Plan, the exercise price of an option designated as an ISO could not be less than the fair market value of the Common Stock on the date the option was granted.  However, in the event an option designated as an ISO was granted to a 10% shareholder (as defined in the 1989 Plan) such exercise price was required to be at least 110% of such fair market value.  Exercise prices of NQOs could be less than such fair market value.  The aggregate fair market value of shares subject to options granted to a participant which are designated as ISOs which first become exercisable in any calendar year could not exceed $100,000. All options under the 1989 Plan were required to be granted before the Plan’s July 1999 Termination Date so that no further options can be granted under the 1989 Plan.

During fiscal 2005, Howard Dubinett, an executive officer, exercised ISOs under the 1989 plan and purchased an aggregate 13,334 shares at an exercise price of $.71875 per share and one employee terminated his employment with the Company and an aggregate 33,334 shares were canceled. As a result, at October 31, 2005, there were outstanding ISOs under the 1989 Plan exercisable to purchase an aggregate 6,000 shares at an exercise price of $.71875 per share.

The 2000 Plan

On August 25, 2000, the Board of Directors adopted the 2000 Employee Incentive Stock Option Plan (the “2000 Plan”) reserving an aggregate 800,000 shares of Bio-Reference Common Stock for issuance upon exercise of ISOs which may be granted under the 2000 Plan.  Stockholders ratified the adoption of the 2000 Plan at our December 14, 2000 Annual Meeting of Stockholders. During fiscal 2005, twelve employees exercised ISOs issued under the 2000 Plan and purchased an aggregate 54,094 shares at exercise prices ranging from $4.21 to $9.66 per share and one employee terminated her employment with the Company and options to purchase an aggregate 12,218 shares were canceled. As a result, at October 31, 2005, there were outstanding ISOs under the 2000 Plan exercisable to purchase an aggregate 475,600 shares at exercise prices ranging from $1.688 to $15.34 per share.

The 2000 Plan authorizes the grant of options which qualify for ISO treatment under Section 422 of the Code, to purchase up to a maximum aggregate 800,000 shares of the Company’s

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Common Stock. Options may only be granted under the 2000 Plan to employees of the Company and its subsidiaries (including officers and directors who are also employees).

The 2000 Plan will be administered by the Board of Directors or by a Stock Option Committee designated by the Board of Directors. The Board or the Stock Option Committee, as the case may be, has the discretion to determine the eligible employees to whom, and the price (not less than the fair market value on the date of grant) at which options will be granted; the periods during which each option is exercisable; and the number of shares subject to each option. The Board or the Stock Option Committee has the authority to interpret the 2000 Plan and to establish and amend rules and regulations relating thereto.

The 2000 Plan provides that the exercise price of an option granted thereunder shall not be less than the fair market value of the Common Stock on the date the option is granted. However, in the event an option is granted under the 2000 Plan to a holder of 10% or more of the Company’s outstanding Common Stock, the exercise price must be at least 110% of such fair market value. Under the 2000 Plan, options must be granted before the August 24, 2010 Termination Date. No option may have a term longer than ten years (limited to five years in the case of an option granted to a 10% or greater stockholder of the Company). The aggregate fair market value of the Company’s Common Stock with respect to which options are exercisable for the first time by a grantee under the 2000 Plan during any calendar year cannot exceed $100,000. Options granted under the 2000 Plan are non-transferable and must be exercised by an optionee, if at all, while employed by the Company or a subsidiary or within three months after termination of such optionee’s employment due to retirement, or within one year of such termination if due to disability or death. The Board or the Stock Option Committee, as the case may be, may, in its sole discretion, cause the Company to lend money to or guaranty any obligation of an employee for the purpose of enabling such employee to exercise an option granted under the 2000 Plan provided that such loan or obligation cannot exceed fifty percent (50%) of the exercise price of such option.

The 2003 Plan

On June 3, 2003, the Board of Directors adopted the 2003 Employee Incentive Stock Option Plan (the “2003 Plan”) reserving an aggregate 800,000 shares of Bio-Reference Common Stock for issuance upon exercise of ISOs which may be granted under the 2003 Plan. Stockholders ratified the adoption of the 2003 Plan at our July 31, 2003 Annual Meeting of Stockholders. During fiscal 2005, ISOs were granted under the plan to 108 employees exercisable to purchase an aggregate 375,458 shares at exercise prices ranging from $12.48 to $18.25 per share, eight employees exercised their ISOs and purchased an aggregate 23,500 shares at exercise prices ranging from $12.22 to $14.82 per share and seven employees terminated their employment with the Company as a result of which, options to purchase an aggregate 39,500 shares were canceled. As a result, at October 31, 2005, there were outstanding ISOs under the 2003 Plan exercisable to purchase an aggregate 414,458 shares at exercise prices ranging from $12.22 to $21.46 per share.

The 2003 Plan authorizes the grant of options which qualify for ISO treatment under Section 422 of the Code to purchase up to a minimum aggregate 800,000 shares of the Company’s Common Stock.  Options may only be granted under the 2003 Plan to employees of the Company and its subsidiaries (including those officers and directors who are also employees).

The 2003 Plan will be administered by the Board of Directors or by a Stock Option Committee designated by the Board of Directors.  The Board or the Stock Option Committee, as the case may be, has the discretion to determine the eligible employees to whom, and the prices (not less than the fair market value on the date of grant) at which options will be granted; the periods during which each option is exercisable; and the number of shares subject to each option.  The Board or the Stock Option Committee has the authority to interpret the 2003 Plan and to establish and amend rules and regulations relating thereto.

The 2003 Plan provides that the exercise price of an option granted thereunder shall not be less than the fair market value of the Common Stock on the date the option is granted.  However, in

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the event an option is granted under the 2003 Plan to a holder of 10% or more of the Company’s outstanding Common Stock, the exercise price must be at least 110% of such fair market value.

Under the 2003 Plan, options must be granted before the June 2, 2013 Termination Date.  No option may have a term longer than ten years (limited to five years in the case of an option granted to a 10% or greater stockholder of the Company).  The aggregate fair market value of the Company’s Common Stock with respect to which options are exercisable for the first time by a grantee under all of the Company’s Stock Option Plans during any calendar year cannot exceed $100,000.  Options granted under the 2003 Plan are non-transferable and must be exercised by an optionee, if at all, while employed by the Company or a subsidiary or within three months after termination of such optionee’s employment due to retirement, or within one year of such termination if due to disability or death.  The Board or the Stock Option Committee, as the case may be, may, in its sole discretion, cause the Company to lend money to or guaranty any obligation of an employee for the purpose of enabling such employee to exercise an option granted under the 2003 Plan provided that such loan or obligation cannot exceed fifty percent (50%) of the exercise price of such option.

Non-Qualified Options (NQOs) and Warrants

At October 31, 2004, there were outstanding NQOs and Warrants owned by directors, consultants including members of the Scientific Advisory Board and a software provider exercisable to purchase an aggregate 326,000 shares at exercise prices ranging from $1.19 to $13.70 per share. During fiscal 2005, NQOs exercisable to purchase 232,500 shares were exercised by three individuals and a software provider. As a result, at October 31, 2005, there were outstanding NQOs and Warrants owned by directors, and members of the Scientific Advisory Board exercisable to purchase an aggregate 93,500 shares at exercise prices ranging from $3.14 to $13.70 per share.

See Note 11 of Notes to the Consolidated Financial Statements.

Option Grants to Our Three Named Executive Officers in Last Fiscal Year

No options to purchase shares of our Common Stock were granted to any of our three Named Executive Officers in fiscal 2005.

Aggregated Option Exercises by Our Three Named Executive Officers in Last Fiscal Year And Fiscal Year-End Option Values

Name	Shares of Common Stock Acquired Upon Option Exercise in Fiscal 2005	Value Realized	Shares of Common Stock Underlying Unexercised Options at 2005 Fiscal Year End (b)	Value of Unexercised In-The-Money Options at 2005 Fiscal Year-End (c)
Marc D. Grodman	—	—	4,000	$ 75,568
Howard Dubinett	13,334	$ 178,517(a)	4,000	75,568
Sam Singer	—	—	4,000	75,568

(a) Based upon the difference between the last sale price for the Common Stock on NASDAQ on April 14, 2005 (the date of exercise) and the exercise price.

(b) All of these options are currently exercisable.

(c) Based upon the difference between the last sales price for the Common Stock on NASDAQ on Monday, October 31, 2005 and the exercise price.

Directors’ Compensation

Directors who are not our employees were each paid a $12,500 per quarter director’s fee during of fiscal year 2005. Directors who chair a committee received an additional $2,500 per quarter during fiscal year 2005.

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Item 12. - Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters

The following table sets forth information as of January 6, 2006 with respect to the ownership of Common Stock by (i) each person known to us to be the beneficial owner of more than 5% of our outstanding Common Stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) all directors and executive officers as a group.  The percentages have been calculated on the basis of treating as outstanding for a particular holder, all shares of Common Stock outstanding on said date owned by such holder and all shares of Common Stock issuable to such holder in the event of exercise or conversion of outstanding options, owned by such holder at said date which are exercisable within 60 days of such date.

Name and Address of Beneficial Owner Directors and Executive Officers*	Shares of Common Stock Beneficially Owned(1)	Percentage Ownership
Marc D. Grodman(2)	1,657,846	12.8%
Howard Dubinett(3)	481,001	3.7%
Sam Singer(4)	277,467	2.1%
Joseph Benincasa	-0-	0%
Harry Elias	1,000	**
Gary Lederman(5)	27,200	**
John Roglieri(6)	52,000	**
Executive Officers and Directors as a group (seven persons)(2)(3)(4)(5)(6)	2,496,514	19.1%
Other Greater than 5%
Beneficial Owner
Babson Capital Management LLC(7)
One Memorial Drive
Cambridge, MA 02142-1300	1,513,894	11.6%

*The address of all of the Company’s directors and executive officers is c/o the Company, 481 Edward H. Ross Drive, Elmwood Park, New Jersey 07407.

**Less than one (1%) percent.

(1)Except as otherwise noted, each holder named in the table has sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned.

(2)Includes 1,429,779 shares owned directly and 4,000 shares issuable upon exercise of options.  Also includes 176,067 shares owned directly by Dr. Grodman’s wife, Pam Grodman, and 48,000 shares owned by their minor children. Dr. Grodman disclaims beneficial ownership of these 224,067 shares.

(3)Includes 477,001 shares owned directly and 4,000 shares issuable upon exercise of options. In lieu of an outright sale, on March 30, 2004, Mr. Dubinett entered into a pre-paid variable forward sales contract (“Forward Contract”) with Bear Stearns Bank plc (“Bear Stearns”). Pursuant to the Forward Contract, Mr. Dubinett pledged 100,000 shares of his BRLI Common Stock to secure his obligation to deliver a maximum 100,000 shares of BRLI Common Stock to Bear Stearns on March 30, 2006 (the “Settlement Date”). As prepayment

38

for the pledge of these shares, Bear Stearns paid Mr. Dubinett $1,297,680 or approximately $12.98 per share representing 80.75% of the proceeds from the sale of 100,000 shares on March 30, 31 and April 1, 2004. The number of shares that Mr. Dubinett will be obligated to deliver on the Settlement Date varies based on the price of the Common Stock on the Settlement Date. Mr. Dubinett will benefit from any excess in the price of the Common Stock on the Settlement Date between $16.07 per share up to a maximum $21.69 per share by being able to deliver fewer shares.

In addition, in lieu of an outright sale, on September 28, 2005, Howard Dubinett entered into a second pre-paid variable forward sales contract (“Forward Contract”) with Bear Stearns Bank plc (“Bear Stearns”). Pursuant to the Forward Contract, Mr. Dubinett pledged 100,000 shares of his BRLI Common Stock to secure his obligation to deliver a maximum 100,000 shares of BRLI Common Stock to Bear Stearns on September 28, 2007 (the “Settlement Date”). As prepaymentfor the pledge of these shares, Bear Stearns paid Mr. Dubinett $1, 374,400 or approximately $13.74 per share representing 80% of the proceeds from the sale of 100,000 shares on September 28, 2005. The number of shares that Mr. Dubinett will be obligated to deliver on the Settlement Date varies based on the price of the Common Stock on the Settlement Date. Mr. Dubinett will benefit from any excess in the price of the Common Stock on the Settlement Date between $17.18 per share up to a maximum $24.052 per share by being able to deliver fewer shares.

(4)Includes 268,567 shares owned directly, 4,000 shares issuable upon exercise of options and 4,900 shares owned by children who share Mr. Singer’s household. Mr. Singer disclaims beneficial ownership of these 4,900 shares.

(5)Includes 15,200 shares owned directly and 12,000 shares issuable upon exercise of options.

(6)Includes 40,000 shares owned directly and 12,000 shares issuable upon exercise of options.

(7)Babson Capital LLC (“Babson”) in its capacity as an investment advisor may be deemed the beneficial owner of these 1,513,894 shares which are owned by investment advisory clients. In its Schedule 13G Amendment No. 1 dated May 10, 2005 filed with the Securities and Exchange Commission, Babson stated that to the best of its knowledge, these 1,513,894 shares were acquired in the ordinary course of business; were not acquired for the purpose of and do not have the effect of changing or influencing the control of the Company; and were not acquired in connection with or as a participant in any transaction having such purpose or effect.

Equity Compensation Plan Information

The following table provides information as of October 31, 2005 regarding shares of Common Stock that may be issued pursuant to the Company’s equity compensation plans:

	(a) Number of Shares Issuable upon Exercise of Outstanding Options and Warrants		(b) Weighted-Average Exercise Price per Share of Outstanding Options and Warrants		(c) Number of Shares Remaining Available for Future Issuances Under Equity Compensation Plans (Excluding Shares Reflected in Column (a))
Equity Compensation Plans Approved by Stockholders	896,058	(1)	$	8.67	372,260	(2)
Equity Compensation Plans Not Approved by Stockholders	93,500	(3)	$	7.72	-0	-
Totals	989,558		$	8.58	372,260

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(1) Reflects shares issuable upon exercise of outstanding ISOs granted pursuant to the Company’s 1989, 2000 and 2003 Employee Stock Option Plans.

(2) Reflects shares reserved for issuance upon the grant of ISOs which may be granted pursuant to the Company’s 2000 and 2003 Employee Incentive Stock Option Plans.

(3) Includes 57,500shares issuable upon exercise of NQOs held by members of the Company’s Scientific Advisory Board; and 36,000 shares issuable upon exercise of NQOs held by five directors.

Item 13. – Certain Relationships and Related Transactions

No material transactions occurred between the Company and related parties other than reported elsewhere herein during fiscal 2005.

Item 14. -  Principal Accountant Fees and Services

The firm of Moore Stephens, P.C. (“Moore Stephens”) certified public accountants, audited our accounts and the accounts of our subsidiaries for the fiscal years ended October 31, 2005 and 2004. Moore Stephens and its predecessor firm have been our auditors since 1988.

(1)Audit Fees

Moore Stephens billed us $187,600 for professional services rendered in connection with the audit of our annual financial statements for the fiscal year ended October 31, 2005 and the review of the financial statements included in our quarterly reports on Form 10-Q for such fiscal year compared to $125,600 in billings for such services for the fiscal year ended October 31, 2004. In addition, Moore Stephens billed us $9,400 in fiscal 2005 for its audit of our 401(k) Plan for calendar year 2004 as compared to $7,600 of such fees in fiscal 2004 with respect to calendar year 2003.

(2)   Audit-Related Fees

Moore Stephens billed us $7,000 for due diligence fees incurred in relation to an acquisition during fiscal 2005 and $80,000 for Sarbanes-Oxley (“SOX”) related audit fees.

(3)   Tax Fees

Moore Stephens billed us approximately $68,500 for tax services for fiscal 2005 and approximately $39,000 for tax services for fiscal 2004. The fees were billed for tax return preparation.

(4)   All Other Fees

No fees were billed to us by Moore Stephens with respect to fiscal 2005 or fiscal 2004 other than for services described in Item 14 (1) and (3) herein.

(5)Pre-Approval Policies and Procedures

The engagement of Moore Stephens to render the above audit and tax serviceswas approved by our audit committee prior to the engagement.

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PART IV

Item 15. – Exhibits and Financial Statement Schedules
(a)1.	Financial Statements
	The following financial statements of the Company are included in Part II, Item 8
		Page To Page
	Report of Independent Registered Public Accounting Firm	46
	Consolidated Balance Sheets - October 31, 2005 and 2004	47 - 48
	Consolidated Statements of Operations-
	Years ended October 31, 2005, 2004 and 2003	49
	Consolidated Statements of Shareholders’ Equity
	Years ended October 31, 2005, 2004, and 2003	50
	Consolidated Statements of Cash Flows -
	Years ended October 31, 2005, 2004 and 2003	51 - 52
	Notes to Consolidated Financial Statements-	53 - 73
2.	Financial Statements Schedule	74
	Schedule II -	75
	Years ended October 31, 2005, 2004 and 2003
3.	Exhibits	After 75

		Incorporated by
Exhibit No.	Item	Reference to
3.1*	Amended and Restated Certificate of Incorporation dated November 15, 1989	(A)
3.1.1*	Amendment to Certificate of Incorporation dated October 4, 1991 (authorizing one-for-10 reverse stock split)	(B)
3.1.2*	Amendment to Certificate of Incorporation dated August 23, 1993 (authorizing one-for-three reverse stock split)	(C)
3.1.3*	Amendment to Certificate of Incorporation dated March 23, 1998 (creating Series A Senior Preferred Stock)	(F)
3.1.4*	Amendment to Certificate of Incorporation dated March 31, 1998 (creating Series A Junior Participating Preferred Stock)	(F)
3.1.5*	Amendment to Certificate of Incorporation dated September 22, 2003 (increasing authorized shares of Common Stock to 35,000,000 shares)	(J)
3.2*	By-laws	(D)
3.2.1*	Amendments to Article III, Sections 2 and 4 of the By-laws adopted June 1, 2005	(L)
4.1*	Form of Common Stock Certificate, $.01 par value	(M)

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10.1*	Lease Agreement for Elmwood Park, New Jersey Premises, expiring in February, 2004	(F)
10.1.1*	Fifth Amendment dated as of July 16, 2004 to Lease for Elmwood Park, New Jersey Premises	(M)
10.1.2*	Sixth Amendment dated as of October 27, 2004 to Lease for Elmwood Park, New Jersey Premises	(M)
10.2*	Employment Agreement between the Company and Marc Grodman expiring in October 2011	(K)
10.3*	Employment Agreement between the Company and Howard Dubinett as in effect at October 31, 2001	(F)
10.3.1*	Extension to Employment Agreement between the Company and Howard Dubinett effective November 1, 2002	(I)
10.3.2*	Extension to Employment Agreement between the Company and Howard Dubinett effective November 1, 2004.	(M)
10.4*	Employment Agreement between the Company and Sam Singer as in effect at October 31, 2001	(F)
10.4.1*	Extension to Employment Agreement between the Company and Sam Singer effective November 1, 2002	(I)
10.4.2*	Extension to Employment Agreement between the Company and Sam Singer effective November 1, 2004	(M)
10.4.3	Employment Agreement between the Company and Charles T. Todd, Jr. effective November 1, 2005
10.4.4	Employment Agreement between the Company and Scott Fein effective October 31, 2005
10.4.5	Employment Agreement between the Company and Richard L. Faherty effective November 1, 2005.
10.5*	The Company’s 1989 Stock Option Plan	(B)
10.5.1*	The Company’s 2000 Employee Incentive Stock Option Plan.	(G)
10.5.2*	The Company’s 2003 Employee Incentive Stock Option Plan.	(J)
10.5.2	Terms of the Company’s 2005 Senior Management Incentive Bonus Plan. Marc D. Grodman was one of the three Class I participants, Howard Dubinett and Sam Singer were two of the eight Class II Participants.
10.7*	Rights Agreement dated as of March 31, 1998 including Exhibits thereto between the Company and American Stock Transfer & Trust Company as Rights Agent	(E)
10.12*	Strategic Marketing Alliance Agreement dated as of December 31, 2001 between the Company and CareEvolve.com, Inc. on the one hand and Roche Diagnostics Corporation on the other. (terminated in the fourth quarter of fiscal 2005).	(H)

42

10.12.1*	Addendum dated as of December 27, 2004 between the Company and CareEvolve.com, Inc. on the one hand and Roche Diagnostics Corporation on the other. (terminated in the fourth quarter of fiscal 2005).	(M)
10.13*	Amended and Restated Loan and Security Agreement as of September 30, 2004 between the Company and PNC Bank, National Association.	(M)
21	Subsidiaries of the Company

The following are the Company’s two wholly-owned subsidiaries:

			Name under which it Conducts or
		State of Incorporation	Conducted Business
Medilabs, Inc.	New York		Medilabs
CareEvolve.com, Inc.	New Jersey		CareEvolve
23.1	Consent of Independent Registered Public Accounting Firm
31.1	Certification of Chief Executive Officer
31.2	Certification of Chief Financial Officer
32.1	Certification pursuant to 18 U.S.C. Section 1350 of Chief Executive Officer
32.2	Certification pursuant to 18 U.S.C. section 1350 of Chief Financial Officer

The exhibits designated above with an asterisk (*) have previously been filed with the Commission and, pursuant to 17 C.F.R. Secs. 201.24 and 240.12b-32, are incorporated by reference to the documents as indicated below.

(A)Incorporated by reference to exhibit filed with the Company’s Registration Statement on Form S-1 (File No. 33-31360).

(B)Incorporated by reference to exhibit filed with the Company’s annual report on Form 10KSB for the year ended October 31, 1992.

(C)Incorporated by reference to exhibit filed with the Company’s Registration Statement on Form SB-2 (File No. 33-68678).

(D)Incorporated by reference to exhibit filed with the Company’s Registration Statement on Form S-18 (File No. 33-5048-NY).

(E)Incorporated by reference to exhibit filed with the Company’s report on Form 8-A dated March 31, 1998.

(F)Incorporated by reference to exhibit filed with the Company’s annual report on Form 10-K for the year ended October 31, 1999.

(G)Incorporated by reference to exhibit filed with the Company’s annual report on Form 10-K for the year ended October 31, 2000.

(H)Incorporated by reference to exhibit filed with the Company’s annual report on Form 10-K for the year ended October 31, 2001.

(I)Incorporated by reference to exhibit filed with the Company’s annual report on Form 10-K for the year ended October 31, 2002

(J)Incorporated by reference to exhibit filed with the Company’s Registration Statement on Form S-8 (File No.  333-111578).

43

(K)Incorporated by reference to exhibit filed with the Company’s current report on Form 8-K (for December 6, 2004).

(L)Incorporated by reference to exhibit filed with the Company’s quarterly report on Form 10-Q for the quarter ended April 30, 2005

(M)Incorporated by reference to exhibit filed with the Company’s annual report on Form 10-K for the year ended October 31, 2004.

44

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BIO-REFERENCE LABORATORIES, INC.

By	/S/ Marc D. Grodman
Marc D. Grodman
Chairman of the Board, President,
Chief Executive Officer and Director
Dated: January12, 2006

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/S/ Marc D. Grodman

Marc D. Grodman

Chairman of the Board, President,

Chief Executive Officer and Director

January 12, 2006

/S/ Howard Dubinett

Howard Dubinett

Executive Vice President,

Chief Operating Officer and Director

January 12, 2006

/S/ Sam Singer

Sam Singer

Vice President, Chief Financial Officer,

Chief Accounting Officer and Director

January 12, 2006

/S/ Joseph Benincasa

Joseph Benincasa

Director

January 12, 2006

/S/ Harry Elias

Harry Elias

Director

January 12, 2006

/S/ Gary Lederman

Gary Lederman

Director

January 12, 2006

/S/ John Roglieri

John Roglieri

Director

January 12, 2006

45

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Bio-Reference Laboratories, Inc.

Elmwood Park, New Jersey

We have audited the accompanying consolidated balance sheets of Bio-Reference Laboratories, Inc. and its subsidiary as of October 31, 2005 and 2004, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three fiscal years in the period ended October 31, 2005. We also have audited management’s assessment, included in the accompanying Report of Management on Internal Control over Financial Reporting, that Bio-Reference Laboratories, Inc. maintained effective internal control over financial reporting as of October 31, 2005 based on criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Bio-Reference Laboratories, Inc.’s management is responsible for these consolidated financial statements for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on these consolidated financial statements, an opinion on management’s assessment, and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that control may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Bio-Reference Laboratories, Inc. and its subsidiaries as of October 31, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended October 31, 2005, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, management’s assessment that Bio-Reference Laboratories, Inc. maintained effective internal control over financial reporting as of October 31, 2005, is fairly stated, in all material respects, based on criteria established in “Internal Control—Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Furthermore, in our opinion, Bio-Reference Laboratories Inc. maintained, in all material respects, effective internal control over financial reporting as of October 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).”

MOORE STEPHENS, P. C.

Certified Public Accountants.

Cranford, New Jersey

December 17, 2005

46

BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

[Dollars In Thousands, Except Per Share Data]

	October 31,
	2005		2004
Assets:
Current Assets:
Cash and Cash Equivalents	$	4,303	$	6,681
Accounts Receivable - Net	53,113		40,952
Inventory	1,339		1,277
Other Current Assets	878		834
Deferred Tax Asset	3,606		1,029
Total Current Assets	63,239		50,773
Property and Equipment - At Cost	18,703		13,501
Less:Accumulated Depreciation	6,776		4,225
Property and Equipment - Net	11,927		9,276
Other Assets:
Deposits	450		426
Goodwill - Net	8,919		8,190
Intangible Assets - Net	3,079		2,438
Other Assets	759		1,048
Total Other Assets	13,207		12,102
Total Assets	$	88,373	$	72,151

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

47

	October 31,
	2005			2004
Liabilities and Shareholders’ Equity:
Current Liabilities:
Accounts Payable	$	14,346		$	10,801
Accrued Salaries and Commissions	3,352			2,139
Accrued Taxes and Expenses	1,028			1,081
Revolving Note Payable - Bank	10,888			10,333
Current Maturities of Long-Term Debt	1,061			1,273
Capitalized Lease Obligation - Short-Term Portion	2,049			1,331
Total Current Liabilities	32,724			26,958
Long-Term Liabilities:
Capitalized Lease Obligations - Long-Term Portion	3,956			3,092
Long-Term Debt—Net of Current Portion	—			1,061
Other Long-Term Liabilities	—			25
Deferred Tax Liabilities	978			342
Total Long-Term Liabilities	4,934			4,520
Commitments and Contingencies	—			—
Shareholders’ Equity:
Preferred Stock, Par Value $.10 Per Share, Authorized 1,059,589 Shares; None Issued	—			—
Series A - Senior Preferred Stock, Par Value $.10 Per Share, Authorized, Issued and Outstanding; -0- and 604,078 Shares at October 31, 2005 and 2004, respectively	—			—
Series A - Junior Participating Preferred Stock, Par Value $.10 Per Share, Authorized 3,000 Shares; None Issued	—			—
Common Stock, Par Value $.01 Per Share, Authorized 35,000,000 Shares; Issued and Outstanding 12,981,367 and 12,657,939 Shares at October 31, 2005 and 2004, Respectively	130			127
Additional Paid-in Capital	32,348			30,099
Retained Earnings	18,452			10,831
Totals	50,930			41,057
Deferred Compensation	(215		)	(384		)
Total Shareholders’ Equity	50,715			40,673
Total Liabilities and Shareholders’ Equity	$	88,373		$	72,151

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

48

BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

[Dollars In Thousands, Except Per Share Data]

	Years ended
	October 31,
	2005			2004			2003
Net Revenues	$	163,896		$	136,184		$	109,034
Cost of Services:
Depreciation and Amortization	2,946			1,764			1,032
Employee Related Expenses	37,849			30,818			26,562
Reagents and Laboratory Supplies	24,716			20,523			16,843
Other Cost of Services	17,841			15,096			11,779
Total Cost of Services	83,352			68,201			56,216
Gross Profit	80,544			67,983			52,818
General and Administrative Expenses:
Depreciation and Amortization	1,260			838			689
General and Administrative Expenses	44,817			36,819			30,038
Provision for Doubtful Accounts	21,860			17,506			12,806
Total General and Administrative Expenses	67,937			55,163			43,533
Income from Operations	12,607			12,820			9,285
Other [Income] Expense:
Interest Expense	1,226			667			704
Interest Income	(108		)	(33		)	(23		)
Total Other Expense - Net	1,118			634			681
Income Before Income Taxes	11,489			12,186			8,604
Provision for Income Tax Expense	3,868			3,670			2,064
Net Income	$	7,621		$	8,516		$	6,540
Net Income Per Common Share - Basic	$	.60		$	.71		$	.57
Net Income Per Common Share - Diluted	$	.58		$	.67		$	.51

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

49

BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

[Dollars In Thousands]

	Series A										Additional									Total
	Senior Preferred Stock					Common Stock					Paid-in			Accumulated			Deferred			Shareholders’
	Shares		Amount			Shares		Amount			Capital			[Deficit]			Compensation			Equity
Balance - October 31, 2002	604,078		$	60		11,588,583		$	116		$	28,544		$	(4,225	)	$	(288	)	$	24,207
Amortization of Deferred Compensation	—		—			—		—			—			—			140			140
Shares Issued for Compensation	—		—			10,000		—			15			—			—			15
Exercise of Options - Employees	—		—			82,140		1			125			—			—			126
Warrants Issued to Advisory Board	—		—			—		—			291			—			(291		)	—
Common Stock Repurchased and Retired	—		—			(229,700	)	(2		)	(1,068		)	—			—			(1,070		)
Net Income	—		—			—		—			—			6,540			—			6,540
Balance - October 31, 2003	604,078		$	60		11,451,023		$	115		$	27,907		$	2,315		$	(439	)	$	29,958
Warrants Issued to Advisory Board	—		—			—		—			137			—			(137		)	—
Amortization of Deferred Compensation	—		—			—		—			—			—			192			192
Common Stock Repurchased and Retired	—		—			(30,000	)	—			(350		)	—			—			(350		)
Exercise of Stock Options	—		—			632,838		6			1,898			—			—			1,904
Conversion of Preferred Stock to Common Stock	(604,078	)	(60		)	604,078		6			507			—			—			453
Net Income	—		—			—		—			—			8,516			—			8,516
Balance – October 31, 2004	—		$	—		12,657,939		$	127		$	30,099		$	10,831		$	(384	)	$	40,673
Amortization of Deferred Compensation	—		—			—		—			—			—			169			169
Exercise of Stock Options-Employees	—		—			323,428		3			1,146			—			—			1,149
Options Issued to Consultant	—		—			—		—			1,103			—			—			1,103
Net Income	—		—			—		—			—			7,621			—			7,621
Balance – October 31, 2005	—		$	—		12,981,367		$	130		$	32,348		$	18,452		$	(215	)	$	50,715

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

50

BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

[Dollars In Thousands]

	Years ended
	October 31,
	2005			2004			2003
Operating Activities:
Net Income	$	7,621		$	8,516		$	6,540
Adjustments to Reconcile Net Income to Net Cash Provided by [Used for] Operating Activities:
Depreciation and Amortization	4,206			2,602			1,722
Amortization of Deferred Compensation	169			192			140
Provision for Doubtful Accounts	21,860			17,506			12,806
Deferred Income Tax (Benefit)/Expense	(1,942		)	(1,318		)	939
Stock Issued for Compensation	—			—			15
Loss on Disposal of Property, and Equipment	9			—			—
Changes in Assets and Liabilities
[Net of Effects from Acquisitions]:
[Increase] Decrease in:
Accounts Receivable	(33,726		)	(25,330		)	(17,020		)
Inventory	(63		)	(189		)	(7		)
Other Current Assets	(44		)	(71		)	113
Other Assets	289			222			(203		)
Deposits	(25		)	(112		)	(21		)
Increase [Decrease] in:
Accounts Payable, Accrued Taxes and Expenses	4,545			3,008			569
Total Adjustments	(4,722		)	(3,490		)	(947		)
Net Cash - Operating Activities - Forward	2,899			5,026			5,593
Investing Activities:
Business Acquisitions	(2,174		)	(3,146		)	—
Acquisition of Property and Equipment	(2,860		)	(3,541		)	(1,105		)
Proceeds from Sale of Equipment	65			—			—
Capitalized Loan Fees	(21		)	(75		)	—
Net Cash - Investing Activities - Forward	(4,990		)	(6,762		)	(1,105		)
Financing Activities:
Proceeds from Long-Term Debt	—			2,546			—
Payments of Long-Term Debt	(1,298		)	(212		)	(400		)
Payments of Capital Lease Obligations	(1,796		)	(1,505		)	(753		)
Increase [Decrease] in Revolving Line of Credit	555			1,615			(1,828		)
Proceeds from the Exercise of Stock Options	2,252			1,904			126
Conversion of Preferred Stock	—			453			—
Common Stock Repurchased	—			(350		)	(1,070		)
Net Cash - Financing Activities - Forward	$	(287	)	$	4,451		$	(3,925	)

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

51

BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

[Dollars In Thousands]

	Years ended
	October 31,
	2005			2004			2003
Net Cash - Operating Activities - Forwarded	$	2,899		$	5,026		$	5,593
Net Cash - Investing Activities - Forwarded	(4,990		)	(6,762		)	(1,105		)
Net Cash - Financing Activities - Forwarded	(287		)	4,451			(3,925		)
Net Increase in Cash and Cash Equivalents	(2,378		)	2,715			563
Cash and Cash Equivalents - Beginning of Years	6,681			3,966			3,403
Cash and Cash Equivalents - End of Years	$	4,303		$	6,681		$	3,966
Supplemental Disclosures of Cash Flow Information:
Cash paid during the years for:
Interest	$	1,160		$	646		$	723
Income Taxes	$	5,413		$	4,590		$	326

Supplemental Schedule of Non-Cash Investing and Financing Activities:

In October 2005, the Company assumed $160 of liabilities in connection with the acquisition of PATHCO

In fiscal 2004, the Company issued 15,000 common stock options valued at $137 to a member of its Scientific Advisory Board as deferred compensation.

During fiscal 2005 and 2004, the Company wrote-off approximately $806 and $617 of furniture and equipment which were fully depreciated.

Approximately $428 of capitalized costs related to covenants not-to-compete and employment agreements, which were fully amortized and written off in fiscal 2004.

During fiscal 2005, 2004 and 2003, the Company incurred capital lease obligations totaling approximately $3,185, $2,869 and $1,807 in connection with the acquisition of property and equipment.

[See Notes 9, 11 and 18 for additional non-cash transactions]

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

52

BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

[Dollars In Thousands Except Per Share Data or Unless Otherwise Indicated]

[1] Organization and Business

Bio-Reference Laboratories, Inc. [“Bio-Reference” or the “Company”] was incorporated on December 24, 1981.  Bio-Reference is principally engaged in providing clinical laboratory testing services, primarily to customers in the greater New York metropolitan area as well as to customers in a number of other states.  Bio-Reference offers a comprehensive list of chemical diagnostic tests including blood and urine analysis, blood chemistry, hematology services, serology, radioimmuno analysis, toxicology (including drug screening), pap smears, tissue pathology (biopsies) and other tissue analysis.  It operates two clinical laboratories, one in Elmwood Park, New Jersey and one in Valley Cottage, New York, and an andrology laboratory in New York City and a cytogenetics testing laboratory located in Milford, MA..  Bio-Reference markets its clinical laboratory testing services directly to physicians, hospitals, clinics, correctional and other health facilities.

In October 2005, the Company  acquired certain assets of a Poughkeepsie, New York pathology practice for $2,174 plus accounts payable of $160. We retained the staff of this practice and continue to operate at its premises in Poughkeepsie, New York.

[2] Summary of Significant Accounting Policies

Principles of Consolidation - - The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary.  All significant intercompany accounts and transactions have been eliminated.

Cash and Cash Equivalents - Cash equivalents are comprised of certain highly liquid investments with a maturity of three months or less when purchased.  The Company had $2,790 and $4,282 in cash equivalents at October 31, 2005 and 2004, respectively.

Inventory - Inventory is stated at the lower of cost [on a first-in, first-out basis] or market.  Inventory consists primarily of purchased laboratory supplies, which is used in our various testing laboratories.

Property and Equipment - Property and equipment are carried at cost.  Depreciation is computed by the straight-line method over the estimated useful lives of the respective assets which range from 2 to 15 years.  Leasehold improvements are amortized over the life of the lease, which is approximately five years.

The statements of operations reflect depreciation expense related to property and equipment of $3,592, $2,034 and $1,153 for the years ended October 31, 2005, 2004 and 2003, respectively.

On sale or retirement, the asset cost and related accumulated depreciation or amortization are removed from the accounts, and any related gain or loss is reflected in general and administrative expenses.  Repairs and maintenance are charged to expense when incurred.

Goodwill - Effective November 1, 2001, the Company evaluates the recoverability and measures the possible impairment of its goodwill under SFAS 142, “Goodwill and Other Intangible Assets.”  The impairment test is a two-step process that begins with the estimation of the fair value of the reporting unit. The first step screens for potential impairment and the second step measures the amount of the impairment, if any.  Management’s estimate of fair value considers publicly available information regarding the market capitalization of the Company as well as (i) publicly available information regarding comparable publicly-traded companies in the clinical laboratory testing industry, (ii) the financial projections and future prospects of the Company’s business, including its growth opportunities and likely operational improvements, and (iii) comparable sales prices, if available. As part of the first step to assess potential impairment, management compares the estimate of fair value for the Company to

53

the book value of the Company’s consolidated net assets.  If the book value of the consolidated net assets is greater than the estimate of fair value, the Company would then proceed to the second step to measure the impairment, if any.  The second step compares the implied fair value of goodwill with its carrying value

The implied fair value is determined by allocating the fair value of the reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit.  The excess of the fair value of the reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill.  If the carrying amount of the goodwill is greater than its implied fair value, an impairment loss will be recognized in that period.  No impairment loss was recognized in the years ended October 31, 2005, 2004 and 2003.

The balance sheet reflects accumulated amortization of $2,401 as of October 31, 2005 and 2004, respectively.

Other Intangible Assets - Intangible assets are amortized using the straight-line method.  The estimated useful life of costs capitalized is evaluated for each specific project when completed, at which time such costs begin to be amortized. The statements of operations reflect amortization expense related to intangible assets of $614, $568, and $569 for the years ended October 31, 2005, 2004 and 2003, respectively.  The balance sheet reflects accumulated amortization of $3,409, and $2,795 as of October 31, 2005, and 2004, respectively.

Net Service Revenue - Service revenues are principally generated from clinical laboratory testing services including chemical diagnostic tests such as blood and urine analysis, among others.  Net service revenues are recognized at the time the testing services are performed and are reported at the estimated net realizable amounts from patients, third-party payors and others for services rendered including prospectively determined adjustments under reimbursement agreements with third-party payors.  These adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined.  The Company has a subsidiary that provides non-clinical laboratory services.  Revenues generated from these services are not material for each of the years presented.  The Company has historically not provided any significant amount of charity care.Net service revenues on the statements of operations are as follows:

	Years ended
	October 31,
	2005		2004		2003
Gross Revenues	$	430,162	$	341,180	$	269,676
Contractual Adjustments and Discounts:
Medicare/Medicaid Portion	113,650		92,753		78,148
Other	152,616		112,243		82,494
Total Contractual Adjustments and Discounts	266,266		204,996		160,642
Net Revenues	$	163,896	$	136,184	$	109,034

54

Contractual Credits and Provision for Doubtful Accounts - An allowance for contractual credits is determined based upon a review of the reimbursement policies and subsequent collections for the different types of payors.  An allowance for doubtful accounts is determined based upon a percentage of total receivables.  The aggregate allowance, which is shown net against accounts receivable, was $48,920 and $38,102 as of October 31, 2005 and 2004, respectively.

As of October 31, 2005 and 2004, accounts receivable is reported net of an allowance for doubtful accounts which is comprised of the following items:

	October 31,
	2005		2004
Contractual Credits/Discounts	$	40,945	$	31,067
Doubtful Accounts	7,975		7,035
Total Allowance	$	48,920	$	38,102

Deferred Income Taxes - Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Earnings Per Share - Basic earnings per share [“EPS”] reflects the amount of income [loss] attributable to each share of common stock based on average common shares outstanding during the period.  Diluted EPS reflects Basic EPS while giving effect to all potential dilutive common shares that were outstanding during the period, such as common shares that could result from the exercise or conversion of securities into common stock.  The computation of Diluted EPS is calculated by using the treasury stock method, which assumes that any proceeds obtained from the exercise of such dilutive securities would be used to purchase common stock at the average market price of the common stock during the period.  This reduces the gross number of dilutive shares by the number of shares purchasable from the proceeds of the securities assumed to be exercised.  Securities whose conversion would have an anti-dilutive effect on EPS are not assumed converted.  Securities that could potentially dilute earnings in the future are disclosed in Note 10.

Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Recoverability and Impairment of Intangible Assets and Other Long-Lived Assets - Effective November 1, 2002, the Company evaluates the possible impairment of its long-lived assets, including intangible assets (which are amortized pursuant to the provisions of SFAS 142), under SFAS No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable.  Evaluation of possible impairment is based on the Company’s ability to recover the asset from the expected future pretax cash flows (undiscounted and without interest charges) of the related operations. If the expected undiscounted pretax cash flows are less than the carrying amount of such asset, an impairment loss is recognized for the difference between the estimated fair value and carrying amount of the asset. The Company’s adoption of SFAS 144 did not result in any impairment loss being recorded.  No impairment loss was recognized in the fiscal years ended October 31, 2005, 2004 and 2003.

55

Stock Options Issued to Employees - The Company adopted Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” for financial note disclosure purposes and continues to apply the intrinsic value method of Accounting Principles Board [“APB”] Opinion No. 25, “Accounting for Stock Issued to Employees,” for financial reporting purposes.

Advertising Costs - Advertising costs are expensed when incurred.  Advertising costs amounted to approximately $213, $272 and $188 for the years ended October 31, 2005, 2004 and 2003, respectively.

Reclassification - Certain prior year amounts have been reclassified to conform with the current year presentation.

[3] Property and Equipment - Property and equipment - at cost is summarized as follows:

	October 31,
	2005		2004
Medical Equipment	$	7,467	$	5,980
Leasehold Improvements	3,728		3,313
Furniture, Fixtures and Office Equipment	3,815		1,873
Automobiles	3,693		2,335
Totals	18,703		13,501
Less: Accumulated Depreciation	6,776		4,225
Totals - Net of Accumulated Depreciation	$	11,927	$	9,276

[4] Intangible Assets

Intangible assets are summarized as follows:

October 31, 2005:

	Weighted-Average			Accumulated		Net of Accumulated
Intangible Asset	Amortization Period	Cost		Amortization		Amortization
Software Costs	5	$	1,535	$	1,249	$	286
Customer Lists	20	2,456		946		1,510
Covenants Not-to-Compete	5	405		3		402
Employment Agreement	7	825		780		45
Costs Related to Acquisitions	19	1,111		348		763
Patent	17	156		83		73
Totals	11	$	6,488	$	3,409	$	3,079

October 31, 2004:

	Weighted-Average			Accumulated		Net of Accumulated
Intangible Asset	Amortization Period	Cost		Amortization		Amortization
Software Costs	5	$	1,535	$	943	$	592
Customer Lists	20	1,697		860		837
Covenants Not-to-Compete	5	5		1		4
Employment Agreement	7	825		661		164
Costs Related to Acquisitions	19	1,015		260		755
Patent	17	156		70		86
Totals	11	$	5,233	$	2,795	$	2,438

56

The estimated amortization expense related to intangible assets for each of the five succeeding fiscal years and thereafter as of October 31, 2005 is as follows:

Year Ended
October 31,
2006	$	344
2007	300
2008	291
2009	271
2010	250
Thereafter	1,623
Total	$	3,079

[5] Revolving Note Payable - Bank

In October 2004, the Company entered into an amended revolving note payable loan agreement with a bank.  The maximum amount of the credit line available to the Company is the lesser of (i) $30,000 or (ii) 50% of the Company’s qualified accounts receivable [as defined in the agreement]. The amended loan agreement provides for an “acquisition subline” of up to $10,000 which can be repaid in 36 equal monthly installments. The amendment to the Loan and Security Agreement provides for interest on advances to be subject to the bank’s prime rate or Eurodollar rate of interest plus, in certain instances, an additional interest percentage.  The additional interest percentage charges on Eurodollar borrowings range from 1% to 4% and are determined based upon certain financial ratios achieved by the Company.  At October 31, 2005, the Company had elected to have $10,000 of the total advances outstanding converted into a Eurodollar rate loan with a variable interest rate of 5.02% at October 31, 2005.  The remaining outstanding advances during that period were subject to the bank’s prime rate of interest.  At October 31, 2005, advances of $888 were subject to interest at the prime rate.  As of October 31, 2005 and 2004, the bank’s prime rate of interest was 6.75% and 4.75%, respectively.  The credit line is collateralized by substantially all of the Company’s assets. The line of credit is available through October 2007 and may be extended for annual periods by mutual consent, thereafter.  The terms of this agreement contain, among other provisions, requirements for maintaining defined levels of capital expenditures, fixed charge coverage, insurance coverage and the prohibition of the payment by the Company of cash dividends. As of October 31, 2005, the Company utilized $13,434 (including $2,546 utilized under the “acquisition subline”) and had $17,385 of available unused credit under this revolving note payable loan agreement.

The weighted average interest rate on short-term borrowings outstanding as of October 31, 2005 and 2004 was approximately 5.84% and 3.92%, respectively.

[6] Long-Term Debt - Bank

In connection with the CGI acquisition, the Company borrowed $2,546 under the “acquisition subline” available under the revolving note payable agreement (See notes 5 and 18). Principal and interest are due in 26 equal installments of $113 through August 2006. At October 31, 2005 the Company had a principal balance of $1,061 outstanding. Interest is charged at the bank’s prime rate % per annum. At October 31, 2005 the principal balance outstanding under the borrowing was subject to interest at 6.75% per annum.

57

Principal repayment for each of the five succeeding fiscal years and thereafter as of October 31, 2005 is as follows:

Year Ended
October 31,
2006	$	1,061

[7] Related Party Transactions

In March 2001, the Company entered into a joint marketing agreement [the “agreement”] with General Prescription Programs, Inc. [“GPP”].  Provisions of the agreement provide that GPP will assist the Company in marketing its PSIMedica programs to various customers.  In addition, GPP will provide ongoing data and data support to the PSIMedica program development.  The term of the agreement is for a five year period commencing on October 2001.  In exchange for obtaining GPP marketing and technical services, the Company issued GPP 220,000 shares of its common stock with a fair value of approximately $248 which is being amortized over the five year term of the agreement. For the years ended October 31, 2005, 2004 and 2003, the Company recorded an expense of $50, $50 and $50, respectively.  The Chairman of the Board of GPP is the brother of the Company’s Chief Executive Officer.

See Note 9A as to the conversion by the Company’s Chief Executive Officer and his wife of shares of Series A Senior preferred Stock during fiscal 2004.

[8] Income Taxes

The reconciliation of income tax from continuing operations computed at the U.S. federal statutory tax rate to the Company’s effective income tax rate is as follows:

	October 31,
	2005		2004		2003
U.S. Federal Statutory Rate	34	%	34.0	%	34.0	%
State and Local Income Taxes, Net of U.S. Federal Income Tax Benefit	7.0	%	6.0	%	6.0	%
Permanent Differences and Other	(7.0	)%	(10.0	)%	13	%
Utilization of Net Operating Loss Carryforwards	—	%	—	%	(18.0	)%
Change in Valuation Allowance	—	%	—	%	(11.0	)%
Actual Rate	34	%	30.0	%	24.0	%

The provision [benefit] for income taxes shown in the consolidated statements of operations consist of the following:

	October 31,
	2005			2004			2003
Current:
Federal	$	4,577		$	3,562		$	543
State and Local	1,233			1,426			582
Deferred:
Federal	(1,530		)	(1,120		)	798
State and Local	(412		)	(198		)	141
Total Provision for Income Taxes	$	3,868		$	3,670		$	2,064

58

At October 31, 2005 and 2004, the Company had a net deferred tax asset [liability] of approximately $2,628 and $687, respectively.  The deferred taxes primarily relate to timing differences associated with the deductibility of depreciation, bad debts and certain accrued expenses and deferred costs. For fiscal year ended in 2005 and in 2004, the Company had no net operating loss carryforwards available to reduce current year taxable income. For fiscal 2003, the Company utilized approximately $4,378 (federal) and $2,682 (state) of net operating loss carryforwards to reduce current year taxable income.

	October 31,
	2005			2004
Deferred Tax Asset:
Bad Debt Allowance	$	3,190		$	2,814
Accrued Expenses	502			329
	3,692			3,143
Deferred Tax Liability:
Deferred Costs	(1,050		)	(2,114		)
Property and Equipment	(14		)	(342		)
	(1,064		)	(2,456		)
Deferred Tax Asset [Liability] – Net	$	2,628		$	687
As Follows:
Net Current Deferred Tax Asset	$	3,606		$	1,029
Net Long-Term Deferred Tax Liability	(978		)	(342		)
Deferred Tax Asset [Liability] - Net	$	2,628		$	687

The company has recorded a deferred tax asset of $3,606 reflecting the benefit of approximately $8,000 in allowance for bad debts and $1,200 in certain accrued expenses in future periods as well as generating sufficient taxable income in order to utilize these deferred assets. Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset will be realized. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income or changes in the accrued expenses during the future periods are reduced.

[9] Capital Transactions

[A] Preferred Stock and Common Stock - The Company is authorized to issue an aggregate of 1,666,667 shares of preferred stock, $.10 par value.  At October 31, 2003, there were 604,078 shares of Series A Senior preferred stock issued and outstanding.  The Series A Senior preferred stock is convertible into an aggregate 604,078 shares of common stock on or before May 1, 2007 at a conversion price of $.75 per share and has the same voting rights [one vote per share], dividend rights and liquidation rights as each share of common stock. In July 2004, the Series A Senior preferred stock shareholders (the Company’s Chief Executive Officer and his wife) converted 604,078 shares of preferred stock into an equal number of common shares of the Company. The Company received approximately $453 in proceeds upon conversion.

In July 2003, the stockholders approved an increase in the number of authorized shares of common stock from 18,333,333 shares to 35,000,000 shares.

Holders of the Company’s Common Stock are entitled to one vote per share on matters submitted for shareholder vote.  Holders are also entitled to receive dividends ratably, if declared.  In the event of dissolution or liquidation, holders are entitled to share ratably in all assets remaining after payment of liabilities.

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On March 31, 1998, the Company’s Board of Directors adopted a Shareholder Rights Plan and declared a dividend distribution of one Right for each outstanding share of Common Stock and each outstanding share of Series A Senior Preferred Stock.  Each Right entitles the registered holder to purchase one one-ten-thousandth of a share of Series A Junior Participating Preferred Stock [the “Junior Preferred Stock”] from the Company at a price of $4.00.  Because of the nature of the dividend, liquidation and voting rights of the Junior Preferred Stock, the value of each one-ten-thousandth of a share of Junior Preferred Stock is intended to approximate the value of one share of Common Stock.  Junior Preferred Stock purchasable upon exercise of the Rights will not be redeemable.  Each outstanding share of Junior Preferred Stock will be entitled to a minimum preferential quarterly dividend of $.05 per share and will be entitled to an aggregate dividend of 10,000 times the dividend declared per share of Common Stock.  In the event of liquidation, the holders of the Junior Preferred Stock will be entitled to a minimum preferential liquidation payment of $10 per share and will be entitled to an aggregate payment of 10,000 times the payment made per share of Common Stock.  Each share of Junior Preferred Stock will have 10,000 votes, voting together with the Common Stock.

In the event of any merger, consolidation or other transaction in which the Common Stock is exchanged, each share of Junior Preferred Stock will be entitled to receive 10,000 times the amount received per share of Common Stock.  The Rights are protected by customary anti-dilution provisions.  The Rights are not exercisable unless any one of certain triggering events occur including the acquisition by an individual or entity and their associates of 25% or more of the outstanding shares of Common Stock.  The Shareholder Rights Plan is designed to protect the Company and its shareholders from coercive, unfair and inadequate takeover bids and practices.  The Plan is designed to strengthen the Board of Directors’ ability to deter a person or group from attempting to gain control of the Company without offering a fair price and equal treatment to all shareholders.

The Company implemented a stock repurchase program to repurchase up to 500,000 shares of its common stock in the over-the-counter market on or before October 31, 2004 provided (1) all such repurchases and bids to repurchase effective on any given day shall be made only through a single broker or dealer on that day (2) any such repurchases on a given day shall not be the opening transaction recorded to the consolidated transaction reporting system and no repurchases shall be made during the last half hour before the scheduled close of trading (3) the highest price paid to repurchase any shares shall not exceed the higher of the highest independent bid or the last independent reported sale price and (4) the maximum number of shares that can be repurchased on a given day (excluding block repurchases) shall not exceed 25% of the average daily trading volume reported for the four calendar weeks preceding the week in which the repurchase is made. Common Stock acquired by the Company under the repurchase program are to be retired and canceled. In fiscal 2004 and 2003, the Company repurchased 30,000 and 229,300 shares of the Company’s common stock at a cost of $350 and $1,070, respectively.

On June 1, 2005, the Board of Directors authorized the repurchase of up to 500,000 shares of the Company’s common stock over the period of ending October 31, 2007.  As of October 31, 2005, no shares were repurchased under this plan.

[B] Equity Transactions for Services - For the year ended October 31, 2003, the Company issued 10,000 shares of common stock for employment services having a value of $15.  In fiscal year ended in 2005 and 2004, no shares of the Company’s common stock were issued for employment or consulting services [See Note 11 for common stock options issued for employee and consulting services].

[10] Income Per Share

The computation of basic and diluted net income per common share was as follows [in thousands, except per share data]:

60

	For the years ended October 31,
	2005		2004		2003
Income Available to Common Stockholders	$	7,621	$	8,516	$	6,540
Weighted Average Common Shares Outstanding	12,775		12,078		11,489
Effect of Dilutive Securities:
Convertible Preferred Stock	—		—		542
Warrants/Options	374		637		767
Weighted Average Diluted Common Shares Outstanding	13,149		12,715		12,798
Net Income Per Share - Basic	$	.60	$	.71	$	.57
Net Income Per Share - Diluted	$	.58	$	.67	$	.51

For the year ended October 31, 2005, outstanding options to purchase 233,458 shares of company common stock at exercise prices ranging from $15.61 to $18.25 were not included in the computation of diluted EPS.  For the year ended October 31, 2004, outstanding options to purchase 77,000 shares of company common stock at exercise price of $14.96 were not included in the computation of diluted EPS. For the year ended October 31, 2003, outstanding options to purchase 177,000 shares of Company common stock at exercise prices ranging from $7.79 to $11.67 per share were not included in the computation of diluted EPS.  For the year ended.  The exercise price of these options and warrants was greater than the average market price of the common shares and they are considered anti-dilutive.  These securities could potentially dilute EPS in the future.

[11] Stock Options and Warrants

[A] Employee Incentive Stock Options - In June 2003, the Board of Directors adopted, and in July 2003, the stockholders approved, the 2003 Employee Incentive Stock Option Plan [the “2003 Plan”].  The 2003 Plan authorizes the grant of incentive stock options to purchase up to a maximum aggregate 800,000 shares of Company common stock. The 2003 Plan provides that the exercise price of an option granted there under shall not be less than the fair market value of the Common Stock on the date the option is granted.  However, in the event an option is granted under the 2003 Plan to a holder of 10% or more of the Company’s outstanding Common Stock, the exercise price must be at least 110% of such fair market value.  Under the 2003 Plan, options must be granted before the June 2, 2013 Termination Date.  No option may have a term longer than ten years (limited to five years in the case of an option granted to a 10% or greater stockholder of the Company).  The aggregate fair market value of the Company’s Common Stock with respect to which options are exercisable for the first time by a grantee under all of the Company’s Stock Option Plans during any calendar year cannot exceed $100.  Options granted under the 2003 Plan are non-transferable and must be exercised by an optionee, if at all, while employed by the Company or a subsidiary or within three months after termination of such optionee’s employment due to retirement, or within one year of such termination if due to disability or death.  The Board (or a Stock Option Committee, if designated), may, in its sole discretion, cause the Company to lend money to or guaranty any obligation of an employee for the purpose of enabling such employee to exercise an option granted under the 2003 Plan provided that such loan or obligation cannot exceed fifty percent (50%) of the exercise price of such option. In fiscal year ended October 31, 2005, 2004 and 2003, 375,458, 104,000 and -0- options were granted under the Plan, respectively. A total of 23,500, 2,000 and -0- incentive stock options issued under the 2003 Plan were exercised in fiscal year ended in October 31, 2005, 2004 and 2003, respectively. A total of 39,500 options were cancelled in fiscal year ended October 31, 2005.

61

In August 2000, the Company adopted, and on December 15, 2000, the stockholders approved, the 2000 Employee Incentive Stock Option Plan [“2000 Plan”].  The 2000 Plan provides for the granting of incentive stock options to purchase an aggregate of 800,000 shares of the Company’s common stock at a price not less than 100% of the fair market value per share of the common stock at the date of grant.  However, in the event an option is granted under the 2000 Plan to a holder of 10% or more of the Company’s outstanding common stock, the exercise price must be at least 110% of fair market value at the date of grant.  Employees of the Company or its subsidiary, as determined, are eligible for the 2000 Plan.  The term of the options shall not exceed ten years from the date of grant.  In fiscal 2000, 200,000 options were granted under the 2000 Plan which vests in four equal annual installments commencing January 31, 2002 contingent on the Company realizing targeted net revenue levels.  In fiscal year ended October 31, 2005, 2004 and 2003 - 2,000, 50,000 and 281,000 options were granted under the Plan, respectively. A total of 54,094, 215,088 and 15,000 incentive stock options issued under the 2000 Plan were exercised in fiscal year ended in October 31, 2005, 2004 and 2003, respectively. A total of 12,218, -0-, 57,000 options were cancelled in fiscal year ended October 31, 2005, 2004 and 2003, respectively.  Options issued under the 2000 Plan must be granted before the August 2010 termination date.

In November 1989, the shareholders approved and the Company adopted the 1989 Employee Stock Option Plan [“1989 Plan”] which provides for the granting of options to acquire 666,667 shares of common stock.  Under the terms of this stock option plan, incentive stock options to purchase shares of the Company’s common stock are granted at a price not less than the fair market value of the common stock at the date of grant.  A total of 13,334, 205,000 and 5,000 incentive stock options issued under the 1989 Plan were exercised in fiscal year ended October 31, 2005, 2004 and 2003 respectively.  Additionally, 33,334, -0-, 11,667 options were canceled in fiscal year ended in October 2005, 2004 and 2003 respectively.  All options under the 1989 Plan were required to be granted before the Plan’s July 1999’s termination date so that no further options can be granted under the 1989 Plan.

These stock options are exercisable up to ten years from the date of grant.  The following is a summary of Employee Incentive Stock Option Plan transactions:

	2003 Plan
	Shares Under Options		Weighted Average Exercise Price Per Share
	[In Thousands]
Outstanding and Eligible for Exercise at October 31, 2003	—		$	—
Granted	104		14.24
Expired	—		—
Exercised	(2	)	12.09
Outstanding and Eligible for Exercise at October 31, 2004	102		$	14.29
Granted	376		16.50
Expired	(40	)	13.24
Exercised	(24	)	12.83
Outstanding at October 31, 2005	414		$	16.47
Eligible for Exercise at at October 31, 2005	398		$	16.64

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	2000 Plan				1989 Plan
			Weighted Average				Weighted Average
	Shares Under		Exercise Price		Shares Under		Exercise Price
	Options		Per Share		Options		Per Share
	[In Thousands]				[In Thousands]
Outstanding at October 31, 2002	496		$	4.27	274		$	.72
Granted	281		6.34		—		—
Cancelled/Expired	(57	)	7.16		(11	)	.72
Exercised	(15	)	1.13		(5	)	.72
Outstanding at October 31, 2003	705		$	4.93	258		$	.72
Granted	50		14.68		—		—
Expired	—		—		—		—
Exercised	(215	)	6.20		(205	)	.72
Outstanding at October 31, 2004	540		$	5.51	53		$	.72
Granted	2		5.72		—		—
Expired	(12	)	7.79		(34	)	.72
Exercised	(54	)	5.95		(13	)	.72
Outstanding and Eligible for Exercise at October 31, 2005	476		$	5.40	6		$	.72

	Options Outstanding				Options Exercisable
	Weighted Average					Weighted
	Number of	Remaining				Average
	Shares Under	Contractual	Exercise Price		Number of	Exercise
Exercise Price Range	Option	Life	Per Share		Options	Price
	[In Thousands]	[In Years]			[In Thousands]
$.71875 Per Share	6	1.58	$	.72	6	$	.72
$1.688 Per Share	215	4.83	$	1.69	215	$	1.69
$4.21 to $5.70 Per Share	31	7.58	$	5.53	31	$	5.53
$5.94 to $6.82 Per Share	99	6.52	$	6.79	99	$	6.79
$7.19 to $8.40 Per Share	81	7.50	$	7.79	81	$	7.79
$12.09 to $14.50 per share	98	8.74	$	13.39	82	$	13.39
$14.51 to $15.61 per share	140	8.85	$	15.09	140	$	15.09
$17.75 to $21.46 per share	226	9.92	$	18.34	226	$	18.34
	896				880

63

The weighted average grant date fair value of incentive stock options under the 2003 plan granted during the year ended October 31, 2005, 2004 and 2003 was $16.50, $14.24, and $-0- per share, respectively.  These options have weighted average remaining contractual lives of approximately 9 years.

The weighted average grant date fair value of incentive stock options under the 2000 plan granted during the year ended October 31, 2005, 2004 and 2003 was $5.72, $14.68, and $6.34 per share, respectively.  These options have weighted average remaining contractual lives of approximately 5years.

The Company accounts for these stock-based compensation awards to employees under the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees.”  No compensation cost was recognized for stock-based employee compensation awards for the years ended October 31, 2005, 2004 and 2003.

[B] Non-Incentive Stock Options and Warrants - Non-incentive stock options and warrants may be granted to employees or non-employees at fair market value or at a price less than fair market value of the common stock at the date of grant.  The following is a summary of transactions:

			Weighted
	Shares Under		Average
	Options		Exercise Price
	and Warrants		Per Share
	[In Thousands]
Outstanding and Eligible for Exercise at October 31, 2002	558		$	2.21
Granted	70		7.60
Cancelled/Expired	(32	)	1.77
Exercised	(62	)	1.69
Outstanding at October 31, 2003	534		$	2.98
Granted	15		13.10
Cancelled/Expired	(12	)	4.36
Exercised	(211	)	3.10
Outstanding at October 31, 2004	326		$	3.80
Granted	—		—
Cancelled/Expired	—		—
Exercised	(232	)	$	2.22
Outstanding at October 31, 2005	94		$	7.72
Eligible for Exercise at October 31, 2005	89		$	7.38

In fiscal 2004, the Company granted 15,000 options to purchase common stock to an advisory board member with an exercise price of $13.70. A total of 5,000 options vested immediately with the remaining 10,000 to vest over a two year period. The fair value of $134 has been recorded as deferred compensation and is being expensed over the term of the related service agreement. During fiscal 2003, the Company granted 70,000 options to purchase common stock to members of a newly formed scientific advisory board.  The exercise prices of these options ranged from $6.98 to $7.94 per share. The fair value of each option granted was estimated on the date of grant using the Black-Scholes option pricing model.  The fair value of those options granted in fiscal 2003 was approximately $291 and has been accounted for as deferred compensation to be expensed over the terms of the agreements.

64

The Company accounts for these options under the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees.” No compensation cost was recognized against income for employee non-incentive stock options and warrants for the years ended October 31, 2005, 2004 and 2003.

	Options and Warrants Outstanding		Options and Warrants Exercisable
	Weighted
	Number of	Average			Number of	Weighted
	Shares Under	Remaining	Weighted Average		Shares Under	Average
	Options and	Contractual	Exercise Price		Options and	Exercise Price
Exercise Price Range	Warrants	Life	Per Share		Warrants	Per Share
	[In Thousands]	[In Years]			[In Thousands]
$3.14 Per Share	16	0.67	$	3.14	16	$	3.14
$6.80 Per Share	20	1.25	$	6.80	20	$	6.80
$6.98 to $7.94 Per Share	43	1.18	$	7.77	43	$	7.77
$13.70 Per Share	15	2.17	$	13.70	10	$	13.70
	94				89

These options have weighted average remaining contractual lives of approximately 1 year.  The weighted average grant date fair value of non-incentive stock options granted during the years ended October 31, 2005, 2004 and 2003 were $-0-, $8.94, and $4.16 per share, respectively.

[A] and [B] Pro Forma - The Company issued employee stock options through stock-based employee compensation plans and also issued employee non-incentive stock options.  The Company accounts for these options under the measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations.  No stock-based employee compensation cost is reflected in net income, as all options granted under these plans as well as employee non-incentive stock options have an exercise price equal to the fair market value of the underlying common stock on the date of grant.  The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123 to stock-based employee compensation.

	Year ended October 31,
	2005			2004			2003
Net Income [Loss]:
As Reported	$	7,621		$	8,516		$	6,540
Deduct: Stock Based Employee Compensation Expense Determined Under the Fair Value Based Method - Net of Tax	(1,684		)	(1,310		)	(1,453		)

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Pro Forma - Net Income	$		5,937	$	7,206	$	5,087
Basic Earnings Per Share:
As Reported	$	.60		$	.71	$	.57
Pro Forma	$	.46		$	.60	$	.44
Diluted Earnings Per Share:
As Reported	$	.58		$	.67	$	.51
Pro Forma	$	.45		$	.57	$	.40

The fair value used in the pro forma data was estimated by using the Black-Scholes option-pricing model which took into account as of the grant date, the exercise price and the expected life of the option, the current price of the underlying stock and its expected volatility, expected dividends on the stock and the risk-free interest rate for the expected term of the option.  The following is the average of the data used for the following items.

	Risk-Free			Expected		Expected
Year Ended	Interest Rate		Expected Life	Volatility		Dividends
October 31, 2005	4.0	%	10 Years	51.65	%	None
October 31, 2004	4.0	%	4 Years	115.21	%	None
October 31, 2003	5.0	%	7 Years	87.91	%	None

[12] Employment Contracts and Consulting Agreements

During fiscal 2003, the Company established a Scientific Advisory Board [the “Board”] and entered into consulting agreements with members of the Board.  The terms of the agreements range from three years and two months to four years and three months.

The Company has also entered into various employment contracts and consulting agreements for periods ranging from one to seven years. In January 2004, the Employment Agreement of the Chief Financial Officer/Vice President and Chief Operating Officer/Executive Vice President were extended for two additional years beyond their October 31, 2004 termination date. Minimum annual compensation under these extended agreements is equal to Fiscal 2002 Annual Compensation, subject to increases in the Consumer Price Index as well as to stage increases as defined in the Agreement. Subsequent to October 31, 2004, the Company entered into a new Employment Agreement with its Chief Executive Officer, President which expires on October 31, 2007. At October 31, 2005, the approximate aggregate minimum commitment under these employment contracts and agreements, excluding commissions or consumer price index increases, is as follows:

October 31,	Employees and Consultants		Advisory Board
2006	$	2,316	$	70
2007	1,880		25
2008	1,100		—
2009	1,100		—
2010	750		—
Thereafter	750		—
Total	$	7,896	$	95

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The Company entered into an employment agreement which included a provision for a $250 bonus to be paid over a seven-year period.  At October 31, 2004, the Company had a long-term liability of $25 and $50 current liability related to the remaining bonus amount due the employee.  The balance due at October 31, 2005 will be paid as follows:

2006 $ 25

Some of these agreements provide bonuses and commissions based on a percentage of collected revenues ranging from 1% to 10% on accounts referred by or serviced by the employee or consultant.

In addition to the above, the Company has entered into sixteen at – will employment and consulting agreements which together with prior at – will agreements provide for annual aggregate minimum commitments of approximately $9,415 which have no termination dates.

In accordance with Section 402 of the Sarbanes-Oxley Act of 2002 [the “Act”], companies are prohibited from making future loans to officers and directors and also prohibited are any extension of credit after the date of the acts enactment. While the Company had entered into and funded “split-dollar” life insurance agreements of several officer/directors of the Company before passage of the Act, future premiums could be deemed an extension of credit.  Until further clarification of the issue, the Company suspended paying any additional future premiums. In January 2004, the Company adopted a new “split-dollar” life insurance program under which the Company will be the sole owner of the policies (including the cash values of the policies) and will pay the premiums on the policies. Prior to termination of his employment, the executive will have the right to name the beneficiary of the death benefit but will have no access to any policy cash value. The new “split-dollar” insurance program was adopted in consideration of the executives transferring back the ownership of the insurance policies under the original “split-dollar” program of the Company and their reimbursement to the Company of those amounts, if any, by which the premiums paid, exceed the net cash surrender values of the policies.

[13] Capitalized Lease Obligations

The Company leases various assets under capital leases expiring in fiscal 2010 as follows:

	October 31,
	2005		2004
Medical Equipment	$	4,061	$	3,786
Furniture, Fixtures and Office Equipment	1,425		1,315
Automobiles	2,316		2,292
Totals	7,802		7,393
Less: Accumulated Depreciation	2,420		1,998
Net	$	5,382	$	5,395

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Depreciation expense on assets under capital leases was approximately $422, $364, and $325 for the years ended October 31, 2005, 2004 and 2003, respectively.

Aggregate future minimum rentals under capital leases are:

Years ended
October 31,
2006	2,504
2007	2,092
2008	1,302
2009	676
2010	249
Thereafter	—
Total	6,823
Less: Interest	818
Present Value of Minimum Lease Payments	$	6,005

[14] Commitments and Contingencies

The Company leases various office and laboratory facilities and equipment under operating leases expiring from 2005 to 2010.  Several of these leases contain renewal options for one to five year periods.

Total expense for property and equipment rental for the years ended October 31, 2005, 2004 and 2003 was $3,871 $3,709 and $3,180, respectively.  There were no contingent rental amounts due through October 31, 2005.

Aggregate future minimum rental payments on noncancelable operating leases [exclusive of several month to month leases] are as follows:

October 31,	Property		Equipment
2006	$	1,131	$	192
2007	981		141
2008	902		46
2009	886		13
2010	148		1
Thereafter	—		—
Totals	$	4,048	$	393

The Company has entered into several purchase agreements for reagent supplies through March 2010.

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Minimum purchase commitments as of October 31, 2005 are as follows:

2006	7,594
2007	4,837
2008	2,631
2009	2,203
2010	946
Thereafter	—
	$	18,211

Reagent supplies expense under purchase agreements amount to $3,369, $1,777 and $673 for the years ended October 31, 2005, 2004 and 2003, respectively.

In December 2001, one of the Company’s wholly owned subsidiaries [CareEvolve] entered into a five year strategic marketing alliance agreement to operate a joint venture with Roche Diagnostic Corporation [“RDC”].  RDC is engaged in the business of manufacturing, marketing and selling medical diagnostic equipment and medical supplies to various hospitals and health care providers.  The terms of the agreement provided that RDC would provide managerial and sales support to CareEvolve in an effort to further expand the sale of CareEvolve services.  The Company, including CareEvolve, hired marketing and management personnel to provide increased selling and marketing efforts.  RDC initially funded CareEvolve the sum of $1,000 to be used to fund operations and expenses of CareEvolve.  Only those expenses approved by a Steering Committee would be authorized to be paid with the proceeds of the $1,000.  During the term of the agreement, CareEvolve agreed to pay to each of RDC and Bio-Reference, 50% of the net after-tax income generated each quarter.  In addition, the agreement granted RDC an option to purchase an equity interest in CareEvolve from the Company equal to 50% of the ownership in CareEvolve. During fiscal 2004, the Company and RDC were involved in negotiations to amend the agreement and in December 2004 such amendment was completed. The Company took a one-time charge of approximately $400 against fiscal 2004 earnings associated with additional expenses incurred as a result of the amendment. The joint venture was terminated by mutual consent in the fourth quarter of fiscal 2005.

[15] Litigation

In the normal course of business, the Company is exposed to a number of asserted and unasserted potential claims.  In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company’s financial position or results of operations.

[16] Insurance

The Company maintains professional liability insurance of $3,000 in the aggregate, with a per occurrence limit of $1,000 .  In addition, the Company maintains excess commercial insurance of $5,000 per occurrence and $5,000 in aggregate.  The Company believes, but cannot assure, that its insurance coverage is adequate for its current business needs.  A determination of Company liability for uninsured or underinsured acts or omissions could have a material adverse affect on the Company’s operations.

[17] Significant Risks and Uncertainties

[A] Concentrations of Credit Risk - Cash - At October 31, 2005 and 2004, the Company had approximately $2,048 and $1,885 , respectively, in cash and certificate of deposit balances at financial institutions which were in excess of the federally insured limits.

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[B] Concentration of Credit Risk - Accounts Receivable - Credit risk with respect to accounts receivable is generally diversified due to the large number of patients comprising the client base.  The Company does have significant receivable balances with government payors and various insurance carriers.  Generally, the Company does not require collateral or other security to support customer receivables, however, the Company continually monitors and evaluates its client acceptance and collection procedures to minimize potential credit risks associated with its accounts receivable and establishes an allowance for uncollectible accounts and as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is not material to the financial statements.

A number of proposals for legislation continue to be under discussion which could substantially reduce Medicare and Medicaid reimbursements to clinical laboratories.  Depending upon the nature of regulatory action, and the content of legislation, the Company could experience a significant decrease in revenues from Medicare and Medicaid, which could have a material adverse effect on the Company.  The Company is unable to predict, however, the extent to which such actions will be taken.

[18] Acquisitions

In October 2005, the Company acquired certain assets of Pathco Medical, P.C. a New York State professional corporation. (“PATHCO”) for $2,174 including assumed liabilities not to exceed $160.  The Company retained the staff of this practice and continue to operate at its premises in Poughkeepsie, New York.  In connection with the acquisition, the Company received a five year non-compete agreements with the former owner of PATHCO and Pathco Medical, P.C.  In addition the Company entered into an employment agreement with key management personnel of PATHCO.  The acquisition resulted in goodwill of $729 being recorded.

In February 2004, the Company acquired certain assets and liabilities of Metropolitan Diagnostic, Inc. (“MDI”) for $500. In connection with the acquisition, the Company received a three year non-compete agreement with the former owners of MDI. The purchase price was principally allocated to a customer list.

In July 2004, the Company entered into an agreement to purchase certain operating assets of CGI for the sum of $2,485. The operations of CGI are included in the Company results of operations commencing August 1, 2004. In connection with the acquisition, the Company entered into employment agreements with key management personnel. In addition, the Company obtained a three year “non-competition/non-solicitation agreement” with the former owners of CGI. The acquisition resulted in goodwill of $2,347 being recorded.

These acquisitions were not material to the financial position or operations of the Company.

[19] Fair Value of Financial Instruments

For certain financial instruments, including cash and cash equivalents, trade receivables, trade payables, and short-term debt, it was estimated that the carrying amount approximated fair value for the majority of these items because of their short maturities.  The fair value of the Company’s long-term debt is estimated based on the quoted market prices for similar issues or by discounting expected cash flows at the rates currently offered to the Company for debt of the same remaining maturities.

Due to the non-interest bearing nature and unspecified payment terms, it was not practicable to estimate the fair value of amounts due from related parties [See also Note 7].

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[20] Health Insurance Plan

The Company has a limited self-funded health insurance plan for its employees under which the Company pays the initial $150 of covered medical expenses per person each year.  The Company has a contract with an insurance carrier for any excess up to a maximum of $2,000 per person and $3,844 in the aggregate.  Health insurance premium expense for the years ended October 31, 2005, 2004 and 2003 amounted to approximately $887, $622 and $385, respectively.  Uninsured employee medical expenses incurred by the Company amounted to approximately $4,084, $3,283 and $2,515 for the years ended October 31, 2005, 2004 and 2003, respectively.  During fiscal years ended October 31, 2005, 2004 and 2003, employee contributions of $929, $821 and $603 offset, the above health plan costs.

[21] Employee Benefit Plan (Dollars Not In Thousands)

The Company sponsors the Bio-Reference Laboratories, Inc. 401(k) Profit-Sharing Plan [the “Plan”].  Employees become eligible for participation after attaining the age of eighteen and completing one year of service.  Participants may elect to contribute up to ten percent of their compensation, as defined in the Plan Adoption Agreement, to a maximum allowed by the Internal Revenue Service.  The Company may choose to make a matching contribution to the plan for each participant who has elected to make tax-deferred contributions for the plan year, at a percentage determined each year by the Company.  For the plan years beginning January 1, 2005 the Company elected to make a matching contribution of 3% of salary not to exceed $500 which amounted to $182,739.  For the plan years beginning January 1, 2004 and 2003, the Company elected to make a matching contribution of 3% of salary not to exceed $250 per participant which amounted to $78,000 and $71,000 respectively which were charged to operations.  The Employer contribution will be fully vested after the third year of service.

[22] New Authoritative Accounting Pronouncements

In November 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 151, “Inventory Costs – an amendment to ARB No. 43.” This statement provides guidance to clarify the accounting for abnormal amounts of idle facility expense, freight handling costs, and wasted material (spoilage), among other production costs. Provisions of ARB No. 43 stated that under some circumstances, items such as idle facility expense, excessive spoilage and other costs “may” be so abnormal as to require treatment as current period charges. This statement requires that those items be recognized as current period charges regardless of whether they meet the criterion of “so abnormal”. In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities.  Adoption of the Statement is not expected to have a material impact on the financial statements of the Company.

In November 2004, the FASB issued SFAS No. 152 “Accounting for Real Estate Time-Sharing Transactions” – An amendment of SFAS No. 66 and 67. This Statement amends SFAS No. 66. “Accounting for Sales of Real Estate, to reference the financial accounting and reporting guidance for real estate time-sharing transactions that is provided in AICPA Statement of Position (SOP)
04-2, Accounting for Real Estate Time-Sharing Transactions. This Statement also amends SFAS No. 67, “Accounting for Costs and Initial Rental Operations of Real Estate Projects,” to state the guidance for (a) incidental costs and (b) costs incurred to sell real estate projects does not apply to real estate time-sharing transactions. The accounting for those operations and costs is subject to guidance in SOP 04-2. Effective for financial statements with fiscal years beginning after June 15, 2005.  Adoption of this Statement is not expected to have a material impact on the financial statements of the Company.

In November 2004, the FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets – an amendment to APB No. 29.” This Statement amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity expected to change significantly as a result of the exchange. Adoption of this statement is not expected to have a material impact on the financial statements of the Company.

71

In December 2004, the FASB issued SFAS No. 123 (Revised 2004). “Share-Based Payment.” The statement requires that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instrument issued. The statement covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. The company will be required to adopt SFAS 123 ( R ) as of November 1, 2005. The adoption may have a material impact on the consolidated financial statements of the Company.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3.”  This Statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement, in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed.  The company will be required to adopt SFAS No. 154 as of as of November 1, 2006.  The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.

In June 2005, the EITF reached consensus on Issue No. 05-6, Determining the Amortization Period for Leasehold Improvements (“EITF 05-6”). EITF 05-6 provides guidance on determining the amortization period for leasehold improvements acquired in a business combination or acquired subsequent to lease inception. The guidance in EITF 05-6 will be applied prospectively and is effective for periods beginning after June 29, 2005. EITF 05-6 is not expected to have a material impact on the Company’s consolidated financial statements.

[23] Selected Quarterly Financial Data [Unaudited]

	Three months ended								Fiscal
	1/31/05		4/30/05		7/31/05		10/31/05		Year 2005
Net Revenues	$	36,835	$	40,049	$	42,723	$	44,289	$	163,896
Gross Profit	$	17,444	$	19,688	$	21,170	$	22,242	$	80,544
Net Income	$	925	$	1,427	$	2,493	$	2,776	$	7,621
Net Income Per Common Share:
Basic	$	.07	$	.11	$	.19	$	.21	$	.60
Diluted	$	.07	$	.11	$	.19	$	.21	$	.58
Weighted Average Common Shares Outstanding - Basic [in thousands]	12,667		12,682		12,787		12,965		12,775
Weighted Average Common Shares Outstanding - Diluted [in thousands]	13,345		13,251		13,162		13,382		13,149

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	Three months ended								Fiscal
	1/31/04		4/30/04		7/31/04		10/31/04		Year 2004
Net Revenues	$	28,950	$	33,647	$	35,843	$	37,744	$	136,184
Gross Profit	13,905		16,549		18,272		19,257		67,983
Net Income	919		1,959		2,325		3,313		8,516
Net Income Per Common Share:
Basic	.08		. 16		.19		.26		.71
Diluted	.07		.15		.18		.25		.67
Weighted Average Common Shares Outstanding - Basic [in thousands]	11,523		11,920		12,227		12,640		12,078
Weighted Average Common Shares Outstanding - Diluted [in thousands]	13,124		13,188		12,863		13,252		12,715

	Three months ended								Fiscal
	1/31/03		4/30/03		7/31/03		10/31/03		Year 2003
Net Revenues	$	23,759	$	25,951	$	28,920	$	30,404	$	109,034
Gross Profit	$	10,572	$	12,241	$	14,578	$	15,427	$	52,818
Net Income	$	470	$	1,523	$	2,301	$	2,246	$	6,540
Net Income Per Common Share:
Basic	$	.04	$	.13	$	.20	$	.20	$	.57
Diluted	$	.04	$	.12	$	.18	$	.17	$	.51
Weighted Average Common Shares Outstanding - Basic [in thousands]	11,595		11,487		11,423		11,451		11,489
Weighted Average Common Shares Outstanding - Diluted [in thousands]	12,899		12,665		12,709		13,044		12,798

.   ..   .   .   ..   .   .   ..   .   .

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Bio-Reference Laboratories, Inc.

Elmwood Park, New Jersey

Our report on our audit of the basic financial statements of Bio-Reference Laboratories, Inc. and its subsidiary appears on page 46.  That audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole.  The supplemental schedule II is presented for purposes of complying with the Securities and Exchange Commissions Rules and Regulations under the Securities Exchange Act of 1934 and is not otherwise a required part of the basic financial statements.  Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

	MOORE STEPHENS, P. C.
	Certified Public Accountants.
Cranford, New Jersey
December 17, 2005

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BIO-REFERENCE LABORATORIES, INC. AND SUBSIDIARY

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED OCTOBER 31, 2005, 2004 AND 2003.

[In Thousands]

(a)	(b)		(c)		(d)			(e)
	Balance at		Charged to		Deductions			Balance
	Beginning		Cost and		To Valuation			at End
Description	of Period		Expenses		Accounts			of Period
Year Ended October 31, 2005
Allowance for Doubtful Accounts	$	7,035	$	21,860	$	(20,920	)	$	7,975
Contractual Credits/Discounts	31,067		266,266		(256,388		)	40,945
Total Allowance	$	38,102	$	288,126	$	(277,308	)	$	48,920
Year Ended October 31, 2004
Allowance for Doubtful Accounts	$	5,159	$	17,506	$	(15,630	)	$	7,035
Contractual Credits/Discounts	24,026		204,996		(197,955		)	31,067
Total Allowance	$	29,185	$	222,502	$	(213,585	)	$	38,102
Year Ended October 31, 2003
Allowance for Doubtful Accounts	$	7,035	$	12,806	$	(14,682	)	$	5,159
Contractual Credits/Discounts	23,010		160,642		(159,626		)	24,026
Total Allowance	$	30,045	$	173,448	$	(174,308	)	$	29,185

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EX-10.4.3

Exhibit 10.4.3

EMPLOYMENT AGREEMENT

This Employment Agreement dated as of the 1st day of November, 2005, between Bio-Reference Laboratories, Inc, a New Jersey corporation with its principal place of business at 481 Edward H. Ross Drive, Elmwood Park, New Jersey 07407 (the “Company”) and Charles T. Todd, Jr., residing at 1 Whitenack Road, Califon, New Jersey 07830 (the “Employee”).

W I T N E S S E T H :

WHEREAS, the Company is primarily engaged in the operation of a clinical laboratory in northern New Jersey, and

WHEREAS, the Company desires to avail itself of the Employee’s knowledge and experience and to employ the Employee as a Senior Vice President on the terms and conditions hereinafter set forth, and

WHEREAS, the Employee desires to be so employed by the Company on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows:

1.Term of Employment.  The Company agrees to employ the Employee as a Senior Vice President, or in such other position of comparable status and responsibility as the Company may from time to time direct and/or desire, and the Employee agrees to accept such employment with the Company, for a term commencing as of the date of full execution of this Agreement (the “Commencement Date”) and continuing until October 31, 2009 or such later date to which the Agreement is extended pursuant to Section 2 hereof (the “Expiration Date”), unless sooner terminated as provided in this Agreement (the “Employment Period”).  As used in this Agreement, the term “Employment Period” shall also include any periods for which this Agreement is extended pursuant to Section 2 hereof.

2.Extension. This Agreement may be extended beyond the Initial Expiration Date for additional one year periods at the Company’s option. This Agreement shall be automatically extended at the end of each Company fiscal year for an additional one year term beyond its then Expiration Date unless the Company gives written notice to the Employee not less than ten (10) days prior to the end of such fiscal year that it elects not to extend the Agreement. (the “Non-Extension Notice”). By way of example:

If the
Company Fails to
Give Non-Extension	Agreement Expiration Date
Notice Prior to	Automatically Extended to
October 21	October 31
2006	2010
2007	2011
2008	2012

Once the Company gives a Non-Extension Notice, this Agreement shall terminate at the close of business on October 31 of the Company’s third fiscal year succeeding the fiscal year in which the Non-Extension Notice was given. By way of example, if the Non-Extension Notice is given in fiscal 2007 prior to October 21 of such year, the Agreement shall terminate October 31, 2010.

3.Duties. 

a.During the Employment Period, the Employee shall perform such duties and exercise such powers relating to the Company as are commensurate with the office of a Senior Vice President and shall have such other duties and powers as the Board of Directors or Management shall from time to time assign to him, including by way of example, but not limitation, duties with respect to any of the Company’s associated companies.  As used in this Agreement, the term “Associated Companies” shall mean any company (i) of which not less than fifty (50%) percent of the equity is beneficially owned by the Company or (ii) any subsidiary of such company, if any.

b.During the Employment Period, the Employee shall devote all of his working time during normal business hours and his best efforts and ability to the business of the Company, shall faithfully and diligently perform the duties of his employment with the Company and shall do all reasonably in his power to promote, develop and extend the business of the Company.

c.During the Employment Period, the Employee shall not, except as a representative of the Company or with the written consent of the Company, be directly or indirectly engaged, concerned or interested in the conduct of any other business competing or likely to compete with the Company; provided, that notwithstanding anything contained in this Agreement to the contrary, the Employee shall not be precluded from devoting a reasonable amount of his time to:

i.Serving with the prior written approval of the Company as a director or member of a committee of any organization involving no conflict of interest with the business of the Company; and

ii.Managing his personal investments; provided, that such activities shall not materially interfere with the Employee’s performance of his duties hereunder;

1

d.The Employee shall be employed at the offices of the Company located in Elmwood Park, New Jersey; provided that the Employee acknowledges and agrees that the proper performance of these duties may make it necessary to spend reasonable periods of time in other parts of the country.

4.Compensation.

a.During the Employment Period, the Company shall pay the Employee as compensation for his services under this Agreement, a minimum Base compensation at an annual rate of Three Hundred Fifty Thousand ($350,000) Dollars (the “Base Compensation”).  The Base Compensation shall be payable in equal installments in accordance with regular payroll procedures established by the Company.  At the appropriate time thereafter at least once during each fiscal year, the Company will consider increasing the Employee’s compensation under this Agreement, based upon the performance of the Company and of the Employee during the fiscal year with such increase, if granted, taking effect as of the date determined by the Company.

b.The Company shall lease and insure, either under the Company’s policy or by reimbursement to the Employee, an automobile for the benefit of the Employee.  The Company shall be responsible for maintenance, gasoline, repair and all other such costs but only to the extent such expenses relate to business use of the automobile.  At the end of the lease term, or in the event of the termination of this Agreement for any reason, including non-renewal, the Employee shall have the following options:

i.Surrender the automobile to the Company;

ii.Assume the Company’s lease payment obligation; or

iii.Exercise the purchase option of the lease, if any.

c.The Company shall promptly pay or reimburse the Employee for all expenses incurred by the Employee in the performance of his duties under this Agreement.  Such expenses shall be limited to reasonable out-of-pocket expenses necessarily and actually incurred by the Employee in the performance of his duties; provided that (i) the expenses have been detailed on a form acceptable to the Company and submitted to the Company for review and approval and (ii) appropriate supporting documentation is submitted together with the approved expense form.

d.The Employee shall be entitled to participate in any fringe benefit and bonus plans available to the Company’s employees as in effect from time to time, to the extent the Employee may be eligible to do so under the applicable provisions of the plans including but not limited to pension, profit sharing, stock option and similar plans and life and medical insurance plans or coverage maintained by the Company for senior personnel and/or all personnel.

e.The Employee shall be entitled to such vacation, personal time and holidays as he is eligible for under the Company’s Employment and Personnel Policy as the same presently exists or may hereafter be amended.

f.Notwithstanding the provisions of subparagraph (a) of this section 4, the Employee shall also be entitled to a percentage increase in his Base Compensation as in effect on June 30 of each year that this Agreement is in effect, equal to the percentage increase in the Consumer Price Index – All Items for the New York metropolitan area (or any successor index) for such month of June as compared to such Consumer Price Index for the month of June in the immediately preceding year.  Any such increase shall be effective on the next following February 1.  No adjustments shall be made for a decrease in such Index.

5.Disability.  If during the Employment Period, the Employee shall incur a Total Disability then, subject to the earlier termination of this Agreement or the earlier termination of the disability, the Company shall compensate the Employee as provided in subparagraphs (a), (b), (c) and (d) of this Section 5.

a.For the month in which the Employee incurs the total disability, and for the following twelve (12) months of the disability, the Company shall compensate the Employee at a rate equal to his then current Base Compensation.

b.For a period of three (3) months commencing upon the termination of the period described in subparagraph (a), the Company shall not pay Employee any portion of his Base Compensation and Employee shall be on an unpaid leave of absence.

c.If the Employee’s disability shall terminate at any time prior to the expiration of the period described in subparagraph (b) of this Section 5, then the Employee shall return to full and active employment with the Company under the terms of this Agreement; provided that if he shall again become disabled within a period of three (3) months after such return, and such disability is related to his original disability, then the Employee shall be deemed to have been continuously disabled from the date he incurred the original disability.

d.Upon expiration of the three (3) month period described in subparagraph (b) of this Section 5, the employment of Employee shall terminate, unless an additional leave of absence is granted by the Company, in which event the employment of the Employee shall terminate upon the expiration of the additional leave of absence.

e.In the event the Employee shall incur a Partial Disability then during the period of the Partial Disability, the Employee’s Base Compensation shall be equitably adjusted according to the time that he is able to devote to the affairs of the Company.

f.In addition to the foregoing, the Employee shall be entitled to receive the amounts, if any, as may be payable to him by reason of his disability under policies of insurance maintained by the Company.

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g.As used in this Agreement, the term “Total Disability” shall mean disability such that, for physical or mental reasons, the Employee is unable to perform any of his usual duties to the Company on a full-time basis.  As used in this Agreement, the term “Partial Disability” shall mean a disability, such that for physical or mental reasons, the Employee is unable to perform all of his usual duties to the Company on a full-time basis.

6.Termination.

a.Termination by Death.  If the Employee dies during the Employment Period, the Company’s obligations under this Agreement shall terminate six (6) months after the date of death and the Employee’s estate shall be entitled to all arrearages of Base Compensation and expenses.  In addition, the Employee’s estate (or such other named beneficiary) shall be entitled to the amounts, if any, as may be payable to his estate or beneficiaries under policies of insurance maintained by the Company.

b.Termination for Cause.  This Agreement and the Employee’s employment with the Company may be terminated for Cause at any time in accordance with subparagraph (d) of this Section 6.  In the event this Agreement is terminated for Cause, the Employee shall be entitled to all arrearages of Base Compensation and expenses through the Date of Termination but shall not be entitled to further compensation.  As used in this Agreement, and without limitation, the term “Cause” shall mean:

i.An act or acts of dishonesty constituting criminal acts by the Employee resulting or intending to result directly or indirectly in gain to or personal enrichment of the Employee at the Company’s expense;

ii.The commission of any crime involving fraud, embezzlement or theft by the Employee;

iii.The Employee’s material breach of this Employment Agreement.

c.Termination at the Option of the Employee.  This Agreement and the Employee’s employment with the Company may be terminated at any time, at the election of the Employee, for Good Reason in accordance with subparagraph (d) of this Section 6.  In the event this Agreement is terminated for Good Reason, the Employee shall be paid during the remainder of the Employment Period (computed without giving effect to the earlier termination hereunder), his Base Compensation (other than due to Partial Disability) at the rate in effect as of the Date of Termination, and shall continue to be entitled to employee benefits as if he were still employed by the Company, until completion of such Employment Period (computed without giving effect to the earlier termination hereunder).  As used in the Agreement, and without limitation, the term “Good Reason” shall mean:

i.The assignment to the Employee of duties inconsistent with the office of a senior executive of the Company or his then current office, removal of the Employee from such office or substantial reduction in the nature or status of the Employee’s then current responsibilities;

ii.The reduction of the Employee’s then current Base Compensation (other than due to Partial Disability);

iii.The relocation of the Company’s principal executive offices to a location more than fifty (50) miles from the Company’s current principal executive offices or the transfer of the Employee to a place other than the Company’s principal executive offices (excepting required travel on the Company’s business in a manner substantially similar to the Employee’s then current travel obligations); and

iv.The failure by the Company to provide the Employee with the benefits at least as favorable as those in which the Employee was then participating.

d.Notice of Termination.  Any purported termination of the Employee’s employment shall be communicated by a written notice of termination to the other party hereto and shall specify the Date of Termination (the “Notice of Termination”).  Such notice shall indicate a specified termination provision in this Agreement which is relied upon, recite the facts and circumstances claimed to provide the basis for such termination and specify the Date of Termination.  As used in this Agreement, the term “Date of Termination” shall mean the date specified in the Notice of Termination, which date shall not be less than thirty (30) days nor more than sixty (60) days from the date the Notice of Termination is given.  If within thirty (30) days from the date the Notice of Termination is given, the party receiving such notice notifies the other party that a dispute exists concerning such termination, the Date of Termination shall be the date on which the dispute is finally resolved.  The Date of Termination shall be extended by notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence.  Notwithstanding the pendency of any such dispute, the Company will continue to pay the Employee his full Base Compensation in effect as of the date of the Notice of Termination and continue the Employee as a participant in all compensation, benefit and insurance plans in which he was participating at such date, until the dispute is finally resolved.  Amounts paid under this subparagraph (d) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement.

7.Change in Control.  In the event of a Change in Control and, as a result of such Change in Control, the Employee is terminated without Cause or the Employee elects within a reasonable time thereafter to terminate his employment as a result of such Change in Control, then the Employee shall receive the following benefits:

a.The Company shall pay to the Employee his full Base Compensation at the rate in effect at the time of the Notice of Termination through the Date of Termination.

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b.In lieu of any further Base Compensation payments for periods subsequent to the Date of Termination, the Company shall pay to the Employee as severance pay not later than the tenth business day following the Date of Termination, a lump sum payment (the “Severance Payment”) equal to 2.99 times the average of the annual Compensation which was payable by the Company and includible in the Employee’s gross income for federal income tax purposes for the five (5) calendar years, or for the portion of such period during which the Employee was actually employed by the Company if the Employee has been employed by the Company for less than five (5) calendar years, preceding the earlier of the calendar year in which a Change in Control occurred or the calendar year of the Date of Termination (the “Base Period”).  Such average shall be determined in accordance with the provisions of Section 280G(d) of the Internal Revenue Code of 1986 as amended (the “Code”).  As used in this Agreement, the term “Compensation” shall mean and include every type and form of compensation includible in the Employee’s gross income in respect of his employment by the Company including compensation income recognized as a result of the exercise of stock options or sale of the stock so acquired, except to the extent otherwise provided in Congressional or Joint Committee Reports or temporary or final regulations interpreting Section 280G(d) of the Code.

c.The Severance Payment shall be reduced by the amount of any other payment or the value of any benefit received or to be received by the Employee in connection with the termination of his employment or contingent upon a Change in Control (whether payable pursuant to the terms of this Agreement, any other plan, agreement or arrangement with the Company) unless (i) the Employee shall have effectively waived his receipt or enjoyment of such payment or benefit prior to the date of payment of the Severance Payment, (ii) in the opinion of tax counsel selected by the Company such other payment or benefit does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code, or (iii) in the opinion of such tax counsel, the Severance Payment (in its full amount or as partially reduced, as the case may be) plus all other payments or benefits which constitute “parachute payments” within the meaning of Section 280G(b)(2) of the Code are reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4) of the Code, and such payments are deductible by the Company.  The value of any non-cash benefit or any deferred cash payment shall be determined by the Company in accordance with the principles of Section 280G(d)(3) and (4) of the Code.

d.Except to the extent that Congressional or Joint Committee Reports or temporary or final regulations interpreting Section 280G of the Code specify that such payments would result, under subsection (c) above, in a reduction in the Severance Payment:

i.The Company shall pay to the Employee, not later than the tenth business day following the Date of Termination, a lump sum amount equal to the sum of (x) any bonus compensation which has been allocated or awarded for a fiscal year preceding the Date of Termination but has not yet been paid, and (y) a pro rata portion of any bonus compensation which the Employee has earned for the fiscal year in which the Date of Termination occurs determined by multiplying the Employee’s prior years’ bonus compensation by a fraction equal to the number of full calendar months in the fiscal year prior to the Date of Termination over twelve.

ii.     The Company shall also pay all legal fees and expenses incurred by the Employee as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).

e.If it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that, notwithstanding the good faith of the Employee and the Company in applying the terms of this Section 7, the aggregate “parachute payments” paid are in an amount that would result in any portion of such “parachute payments” not being deductible by the Company by reason of Section 280G of the Code, then the Employee shall have an obligation to pay the Company upon demand an amount equal to the sum of (i) the portion of the aggregate “parachute payments” paid that would not be deductible by reason of Section 280G of the Code and (ii) interest on the amount set forth in clause (i) of this sentence at the applicable Federal rate (as defined in Section 1274(d) of the Code) from the date of receipt of such excess until the date of such payment.

f.As used in the Agreement, the term “Change in Control” shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A issued under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as in effect as of the date hereof (regardless of whether or not a Proxy Statement is being filed pursuant to such Regulation at such time), or if Item 6(e) is no longer in effect, any subsequent regulation issued under the Exchange Act for a similar purpose, whether or not the Company is subject to such reporting requirements; provided, that without limitation, such a change in control shall be deemed to have occurred if:

i.      any “Person” other than the Employee is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing

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25% or more of the combined voting power of the Company’s then outstanding securities;

ii.     during any period of two consecutive fiscal years (not including any period prior to the date of the Agreement), individuals who at the beginning of such period constitute the Board of Directors, and any new director, whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for elections was previously approved, cease for any reason to constitute a majority of the Board; or

iii.    the business of the Company is disposed of by the Company pursuant to a liquidation, sale of assets of the Company, or otherwise.

8.Confidential Information.  The Employee acknowledges an obligation of confidentiality to the Company and shall not divulge, disclose or communicate any trade secret, private or confidential information or other proprietary knowledge of the Company or its associated companies obtained or acquired by him while so employed.  This restriction shall apply after the termination of Employee’s employment without limit in point of time but shall cease to apply to information or knowledge which may come into the public domain or whose disclosure may be required by law or court order or pursuant to the written consent of the Company.

9.Return of Information.  Upon termination of employment, the Employee agrees to not take with him and to deliver to the Company all records, notes, data, memoranda, models, equipment, blueprints, drawings, manuals, letters, reports and all other materials of a secret or confidential nature relating to the business of the Company which are in possession or control of the Employee.

10.General Provisions.

a.This Agreement contains the entire transaction between the parties, and there are no other representations, warranties, conditions or agreements relating to the subject matter of this Agreement.

b.The waiver by any party of any breach or default of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

c.This Agreement may not be changed orally but only by an Agreement in writing duly executed on behalf of the party against which enforcement of any waiver, change, modification, consent or discharge is sought.

d.This Agreement shall be binding upon and be enforceable against the Company and its successors and assigns.  Insofar as the Employee is concerned, this Agreement is personal and cannot be assigned.

e.This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

f.This Agreement shall be construed pursuant to and in accordance with the laws of the State of New Jersey.

g.If any term or provision of this Agreement is held or deemed to be invalid or unenforceable, in whole or in part, by a court of competent jurisdiction, this Agreement shall be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and  provisions of this Agreement.

h.Any dispute, grievance or controversy arising under or in conjunction with this Agreement shall be referred to the Board of Directors of the Company and shall be dealt with by personal discussion, and if not satisfactorily resolved, shall be submitted under the Rules of the American Arbitration Association of New York City.

i.Any consent of the Company required under this Agreement shall not be unreasonably withheld or delayed.

IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written.

COMPANY:

Bio-Reference Laboratories, Inc.

S/ Marc D. Grodman

By: Marc D. Grodman, President

Duly Authorized

EMPLOYEE:

S/ Charles T. Todd, Jr.

Charles T. Todd, Jr.

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EX-10.4.4

Exhibit 10.4.4

EMPLOYMENT AGREEMENT

AGREEMENT made as of October 28, 2005 and effective as of October 31, 2005 (the “Effective Date”), by and between Scott Fein, having an address at 191 Bristol Drive, Woodbury, New York, 11797 (hereinafter referred to as “Employee”) and Bio-Reference Laboratories, Inc., a New Jersey corporation with principal offices located at 481 Edward H. Ross Drive, Elmwood Park, New Jersey 07407, and its successors and assigns (hereinafter referred to as the “Company” or “Employer”).

WITNESSETH

WHEREAS, the Company is a New Jersey Corporation and is engaged in the clinical laboratory business, including, among other things, the ownership, operation and marketing of licensed clinical laboratories; and

WHEREAS, Employee has background and experience in the marketing of clinical laboratory services and the servicing of customers of clinical laboratories and has been employed by the Company since March 1994; and

WHEREAS, Employee and the Company are parties to an employment agreement effective May 1, 1999 (the “1999 Agreement”); and

WHEREAS, the Company desires to continue the employment of Employee as a marketing representative; and

WHEREAS, the Employee desires to continue employment with the Company, pursuant to the terms and conditions herein set forth, superseding all prior agreements, including but not limited to the 1999 Agreement, between the Company, its subsidiaries, and/or predecessors and Employee;

NOW, THEREFORE, it is mutually agreed by and between the parties hereto as follows:

ARTICLE I

EMPLOYMENT

Subject to and upon the terms and conditions of this Agreement, the Company hereby agrees to continue the employment of the Employee, and the Employee hereby accepts such continued employment in his capacity as Senior Vice President and Sales Representative of the Company.

Employee represents and warrants that there is no restriction or impediment, contractual or otherwise, to his accepting such employment as provided for herein, and that he is not in breach or violation of any covenant or agreement with any party relation to his employment. Employee represents and warrants, and covenants and agrees that in continuing his employment with the Company and in the performance of his duties that he is not utilizing any secret or confidential information of any other person. The Employee also represents and warrants that he has consulted with an attorney prior to executing this Employment Agreement.

Employer represents and warrants that the products and services to be marketed and sold by the Employee will in no way contravene any contract, nor will the anticipated services of the Employee be in contravention of any state, Federal or local statute or court ruling.

ARTICLE II

DUTIES/OBLIGATIONS

(A)          In exchange for payment of the consideration set forth in this Agreement, the Employee shall, during his continued employment with the Company, and subject to the direction and control of the Company’s executive officers, perform such reasonable services, duties and functions of a Senior Vice President and Sales Representative as he may be called upon by such executive officers during the term of this Agreement. The Employee shall report directly to the Senior Management of the Company.

(B)           During the continuation of his employment, the Employee will work for the Company on a full-time basis and agrees to devote his best efforts to the performance of his duties for the Company. The Employee has informed the Company that from time to time he may be requested to act as a consultant

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(“Consulting Work”) for a bio-technical like company not in the clinical laboratory testing business and not in competition with the Company (“Non-Clinical Laboratory Companies”). The Consulting Work for Non-Clinical Laboratory Companies primarily involves introducing these companies and their products to the doctors that the Employee solicits or is otherwise involved with on behalf of the Company. The Employee has also informed the Company that the Consulting Work will not interfere with his work for the Company. The Employee agrees to notify the Company of his acceptance of Consulting Work and the nature of the business of the Company for which he will be consulting.

(C)           The services, duties and functions referred to in subsection (A) above that the Employee may be called upon to perform include, but are not limited to the following:

(i)            Those duties attendant to the position with the Company in which he is employed, including the marketing and sale of the various health and clinical laboratory services;

(ii)           Assist the Company in the planning and implementation of all sales promotion, advertising, public relations, personnel and product development programs;

(iii)          Promotion of the relationships of the Company and its subsidiary and affiliate corporations with their respective employees, customers, suppliers, and others in the business community;

(iv)          Work with the Company’s professional staff toward the development of special programs to offer laboratory services to different groups of physicians and specialists;

(v)           Assisting other sales personnel in marketing and servicing their accounts;

(vi)          Assisting the Company in training and managing other sales and service personnel;

(D)          Work Product.      Employee grants to the Company, and the Company accepts, Employee’s entire right, title and interest in and to the Work Product (as defined below) and in and to all patents, copyrights, trade secrets and other proprietary rights in or based on the Work Product. Employee grants to the Company, and the Company accepts, an unlimited, unrestricted, royalty-free, fully paid-up, worldwide and exclusive right and license, with the right to grant licenses and sublicenses to others without accounting to Employee, under the Background Rights (as defined below) and all proprietary rights therein or based thereon. Employee agrees that if the Work Product or any portion thereof is copyrightable, it shall be deemed to be a “work made for hire,” as such term is defined in the Copyright Laws of the United States. Employee shall cooperate with the Company or its designees and execute documents of assignment, oaths, declaration and other documents, prepared by the Company, to effect the foregoing or to perfect or enforce any proprietary rights resulting from or related to this Agreement. Such cooperation and execution shall be at no additional compensation to Employee; provided, however, the Company shall reimburse Employee for reasonable out-of-pocket expenses incurred at the specific request of the Company. For purposes of this provision, the following definitions shall apply: (a) “Work Product” shall mean all data, documentation, software and information, in whatever form, first produced or created by Employee or for Employee as a result of or related to the performance of work or the rendition of services under this Agreement or under any prior agreement with the Company including, but not limited to, work or services performed by Employee as an independent contractor for the Company; and (b) “Background Rights” shall mean all data, documentation, software and information, in whatever form, not first produced or created by Employee or for Employee as a result of or related to the performance of work or the rendition of services under this Agreement or under any prior Agreement with the Company, but included in, necessary, useful or utilizable in or with the Work Product or any portion thereof.

ARTICLE III

TERM AND COMPENSATION

(A)          The initial term of this Agreement shall be for a period of four (4) years commencing on November 1, 2005 and ending on October 31, 2009. Each year of the Agreement (November 1 – October 31) is referred to as a “Contract Year.” The period of November 1, 2005 through October 31, 2009, plus any extension years as provided in Article XIII, is referred to as the “Employment Term.”

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(B)           For the Contract Year commencing November 1, 2005, the Company shall pay to Employee a salary (the “Base Salary”) of $150,000. For the Contract Years beginning on November 1, 2006, November 1, 2007, and November 1, 2008, the Company shall pay to Employee a Base Salary of $350,000. The Base Salary is payable in bi-weekly installments or otherwise pursuant to the Company’s then-current payroll practices.

(C)           In addition to the Base Salary provided for in this Article III (B) above, the Employee shall receive sales commissions from the Employer based upon the net cash revenues actually received by the Company from the Employee’s accounts less refunds (“Net Cash Revenues”) at the same rates, terms and conditions as established between the Employee and the Company prior to the Effective Date of this Agreement, which are set forth below. (Net Cash Revenues are defined here and throughout this Agreement as those revenues actually received by the Company less refunds).

(i)            For new accounts obtained solely by the Employee’s efforts (including new accounts obtained prior to the Effective Date), a sales commission of 9% of the Net Cash Revenues actually received by the Company from such accounts, which rate of commission shall continue so long as the Company keeps such account and so long as the Employee services the account. For the purpose of this provision, a new account shall mean: (x) an account not previously serviced by the Company and introduced to the Company by the Employee, or (y) an account previously serviced by the Company which has not ordered for a period of 180 days and which has become an active account as a result of the Employee’s efforts. An account having been serviced within 180 days by the Company, from which an order has been received within 180 days and/or referred to the Employee by the Company shall be denominated a house account. The foregoing commission rate of 9% shall not apply to accounts serviced by the Employee prior to the Effective Date where the Employee and the Company have agreed to a lower rate. For those accounts, the lower rate shall continue to apply during the term of this Agreement. Additionally, the 9% commission on new accounts shall not apply to any new accounts where: (x) 50% or more of the patient mix is Medicaid and or Medicaid/HMO, or; (y) the professional billing rate is set at the Medicaid rate or below. For such accounts, the commission rate shall be 4.5%.

(ii)           For all those accounts brought to the Company by the Employee in conjunction with another marketing representative, the Employee will receive sales commission as determined by mutual agreement of the Company and the Employee, based upon the Net Cash Revenues. Those accounts considered to have been in conjunction with another marketing representative include those accounts not serviced by the Company within the previous 180 days, and/or those accounts not referred by the Company. Such commission shall continue unabated so long as the Company keeps such account and so long as the Employee and/or other marketing representative services such account.

(iii)          On sales made by the Employee to the Company’s house accounts or to accounts developed as a result of Company referrals or leads, the Employee shall receive a sales commission of 4.5% of the Net Cash Revenues. Such commission shall continue unabated so long as the Employee services said account. Accounts considered by the Company to be house accounts for the purposes of (C)(ii) above shall be those accounts submitted to the Employee by the Company and agreed upon by the Company representative and the Employee.

(iv)          The Employee will receive commissions on the business generated from drawing stations he assisted in establishing in accordance with sections (C)(i) and (C)(ii) above. The commission will be mutually agreed upon by the Company and the Employee upon establishment of each new drawing station.

(v)           The standard deduction applicable to all commissions arising from reference work that was in effect as of the Effective Date will remain in effect for the Employment Term.

(vi)          The sales commission provided for herein shall be paid pursuant to the terms of the Company’s then-current policy on the payment of commissions. The Company shall, if required, deduct and withhold all applicable federal, state, and local employee taxes from such payment.

(vii)         The Company shall provide Employee with a report so that the Employee may determine

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his commission on a monthly basis.

(vii)         The Company reserves the right to reasonably reject any new account sold by the Employee, solely or jointly, that is deemed insufficiently profitable by the Company.

(viii)        The Employee reserves the right to refuse to service any account, house or otherwise, which (1) will not generate more than $500 per month in commission; (2) or the servicing of which would substantially impair the Employee’s ability to service other accounts necessary for him to maximize his profits under the Contract.

(D)          If (i) the Employee is absent from work for more than 130 business days in any twelve-month period by reason of illness or incapacity (whether physical or otherwise) or (ii) the Company reasonably determines that the Employee is unable to perform his duties, services and responsibilities hereunder by reason of illness or incapacity (whether physical or otherwise) for more than 130 business days in any twelve-month period during the Employment Term (“Disability” or “Disabled”), the Company shall not be obligated to pay the Employee any compensation (Salary, bonus or commissions) for any period in excess of such 130 business; furthermore, any such payments during such 130 business day period shall be reduced by any amount the Employee is entitled to receive as a result of such disability under any plan provided through the Company or under state or federal law. See, however, Article X hereof pursuant to which Employee’s spouse, Debbie Fein, may assume Employee’s obligations under this Agreement.

(E)           Any and all taxable income relating to the compensation and benefits to be received by Employee hereunder shall be reported pursuant to applicable federal, state and local tax laws, and Employee shall bear the financial responsibility for all such tax obligations applicable to him (as distinct from those tax obligations that are the Employer’s responsibility).

ARTICLE IV

SIGNING BONUS

The Employee will receive a signing bonus payment as follows:

(A)          After the Effective Date but no later than December 31, 2005, the Employee will receive a signing bonus of $200,000, less all required deductions and withholdings.

ARTICLE V

STOCK OPTIONS

The Board of Directors has authorized the Company to grant Employee non-transferable incentive stock options (the “Options”) exercisable to purchase shares of Bio-Reference Common Stock (the “Stock”) as set forth below. The number of Options to be issued to Employee shall be determined by dividing $100,000 by the closing stock price on the Date of Grant, as defined below (for example if the closing Stock price on the Date of Grant is equal to $20, employee will be issued 5,000 Options). The Date of Grant of the Options (“Date of Grant”) shall be the date determined by the Board of Directors to be the Date of Grant, but in no event shall the Date of Grant occur later than October 31, 2005. It is the intent of the parties that the Date of Grant will occur on or prior to the Effective Date. The Option exercise price per share shall be equal to the last sale price on the NASDAQ Stock Market for the Stock on the Date of Grant. In the event of and upon grant, the Company and Employee shall execute and deliver to each other, an Incentive Stock Option Agreement (the “Stock Option Agreement”) containing such terms and vesting provisions as shall be determined by the Board of Directors consistent with the provisions of the Company’s Employee Incentive Stock Option Plan (the “Plan”) pursuant to which the Options are granted. The Stock Option Agreement will set forth, among other items, the term of the Option, provisions as to termination in the event of cessation of employment, death or permanent disability, method of exercise and restrictions affecting transfer or sale of the underlying Common Stock. Consistent with the provisions of the Plan, the aggregate fair market value of Bio-Reference Common Stock with respect to which Options are exercisable by Employee for the first time during any calendar year shall not exceed $100,000. Subject to the limitations of the preceding sentence, the Options shall vest immediately upon the Date of Grant.

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ARTICLE VI

BENEFITS

(A)          During the Employment Term, (i) the Company shall make available to the Employee, his wife and their dependent children eligible for coverage, the same hospital and major medical insurance benefits coverage provided by the Company to its Senior Management; (ii) Employee shall be reimbursed by the Company upon presentation of appropriate vouchers for all reasonable business and entertainment expenses incurred by the Employee on behalf of the Company; and (iii) Employee shall receive a car allowance of $1,600 per month. In addition, the Company will pay for gasoline, maintenance, excess annual mileage over 15,000 miles per year, and the amount of insurance coverage necessary to maintain compliance with the leasing company. If the Employee desires insurance coverage above the coverage provided by the Company, the Employee may obtain coverage at his own cost.

(B)           In the event the Company wishes to obtain and/or maintain Key Man Life Insurance on the life of the Employee, the Employee agrees to cooperate with the Company in completing any applications necessary to obtain such insurance and promptly submit to such physical examinations and furnish such information as any proposed insurance carrier may request, providing Employee is insurable.

(C)           The Company shall provide Employee, so long as Employee continues to be employed by the Company, a term life insurance policy in an amount equal to the lesser of one and one-half (1½) times Employee’s salary or $50,000.

(D)          The Company shall indemnify and hold harmless the Employee against all claims, liability, losses, damages and expenses, including reasonable legal fees (“Claims”) arising directly or indirectly from acts of the Company and/or its employees, including but not limited to all tests and other laboratory services. The indemnity contained in the paragraph does not apply to Claims arising from the acts or omissions of Employee or his spouse, where such acts or omissions are or were: (i) outside the scope of their employment; (ii) the result of gross negligence, or; (iii) the result of intentional wrongdoing.

ARTICLE VII

CLIENT ENTERTAINMENT

The Company will provide Employee access to a country club of his choosing for the purpose of entertaining clients. Employee will be one of the named country club members and yearly membership fees paid by the Company will not exceed $30,000.

ARTICLE VIII

TERMINATION

(A)      Except as otherwise provided in this Agreement, the employment of Employee hereunder and the Employment Term shall terminate (“Date of Termination”) upon the earliest to occur of the dates specified below:

(i)            the close of business on the date of expiration of the Employment Term;

(ii)           the close of business on the date of the Employee’s death, unless, following the delivery of notice from the Company, the obligations of this Agreement are assumed by Debbie Fein as provided in Article X, in which case the Employment Term shall continue for Debbie Fein;

(iii)          the close of business on an early termination date mutually agreed to in writing by the Company and the Employee;

(iv)          the close of business on the day on which the Company shall have delivered to the Employee a written notice of the Company’s election to terminate his employment for “Cause” (as defined in Article VIII(C) hereof);

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(v)           the close of business on the day on which the Company shall have delivered to the Employee a written notice of the Company’s election to terminate his employment because of Disability, unless, following the delivery of such notice, the obligations of this Agreement are assumed by Debbie Fein (either permanently or temporarily) as provided in Article X, in which case the Employment Term shall continue for Debbie Fein and may be later assumed by Scott Fein at the conclusion of his Disability;

(vi)          the close of business on the day on which the Company shall have terminated the employment of the Employee hereunder and such termination is not for death, Cause or Disability; or

(vii)         the close of business on the date which is five business days after the date on which the Employee delivers to the Company a written notice of the Employee’s election to terminate his employment hereunder (x) for “Good Reason” (as defined in Article VIII(D) hereof) or (y) for any other reason.

(B)           Any purported termination by the Company or by the Employee pursuant to Article VIII(A) (iv) (vii) hereof shall be communicated by written “Notice of Termination” to the other party. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which indicates the specific termination provision in this Agreement relied upon and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee’s employment under the provision so indicated. For purposes of this Agreement, no such purported termination shall be effective without delivery of such Notice of Termination.

(C)           For purposes of this Agreement, termination of Employee for “Cause” shall mean termination based on (i) the Employee’s material breach of this Agreement; (ii) willful misconduct or gross negligence by Employee with regard to the Company or its business, assets or employees; (iii) the refusal of Employee to follow the proper and reasonable direction of the Chief Executive Officer or his designee relating to the normal, customary and reasonably related duties and responsibilities of Employee as set forth in Article II(C) and provided that Employee is warned in writing at least three (3) days prior to the Company terminating his employment for Cause as defined under this paragraph (C)(iii); (iv) substantial and continuing refusal by the Employee to attempt to perform the normal, customary, and reasonably related duties and responsibilities of Employee as set forth in Article II(C) (other than any such failure resulting from incapacity due to physical or mental illness) and provided that Employee’s breach of this paragraph (C)(iv) is not cured by Employee within 15 days following written notice from the Company; (v) the Employee being convicted of a felony or pleading nolo contendere to a felony (other than a felony involving a motor vehicle); (vi) the breach by Employee of any fiduciary duty owed by Employee to the Company; or (vii) Employee’s misappropriation or fraud with regard to the Company (other than good faith expense account disputes).

(D)          For purposes of this Agreement, the term “Good Reason” shall mean (i) in the event of a Change in Control (as defined below), or (ii) any material breach by the Company of this Agreement, provided, however, that Employee first delivers written notice thereof to the Chief Executive Officer of the Company and the Company shall have failed to cure such breach within thirty (30) days after receipt of such written notice.

(E)           In the event of termination of this Agreement, for whatever reason, the Employee agrees to cooperate with the Company and to be reasonably available to the Company with respect to continuing and/or future matters arising out of the Employee’s employment or any other relationship with the Company, whether such matters are business related, legal or otherwise. The Company agrees to reimburse the Employee for the Employee’s reasonable expenses incurred in complying with the terms of this paragraph upon delivery by the Employee to the Company of valid receipts for such expenses. The provisions of this paragraph shall survive termination of this Agreement.

ARTICLE IX

TERMINATION PAYMENTS

(A)          In the event that Employee’s employment is terminated for any reason whatsoever, Employee shall receive his earned but unpaid wages and commission earned through the date of Employee’s termination and shall be notified of his rights, if any, to continued benefits coverage under any of the

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Company’s benefit plans.

(B)           Termination Payments in the Event of Termination By the Company Without Cause or By Employee With Good Reason.

(i) If the Employee’s employment with the Company terminates pursuant to Article VIII (A)(vi) or Article VIII (A)(vii)(x) hereof, but not within twelve months following a Change in Control, the Company will pay to Employee the following:

salary, bonus, commissions, and other benefits provided for herein for the remainder of the Employment Term. Salary and Bonus will be paid out pursuant to the terms of this Agreement and over the Employment Term at the same rate and amount as Employee would have received had Employee remained employed for the duration of the Employment Term. Commissions will be calculated by taking the average of the commissions earned during the last six months of Employee’s employment (“Average Commissions”). Employee will receive the Average Commissions on a monthly basis for the remainder of the Employment Term. To continue receiving the compensation set for in this Article IX(B)(i), the Employee must engage in mitigation of damages by actively seeking new employment with similar duties and obligations as set forth in Article II(C) herein. Good faith mitigation of damages requires the Employee to accept substantially similar employment, if offered, regularly contact prospective new employers, investigate new markets, utilize the services of employment search firms, and employ other avenues which will assist him in finding suitable employment. Employee will not be obligated to accept employment as being “substantially similar employment” unless such employment opportunity provides him with the reasonable opportunity to earn a total financial package of at least $1,200,000 per year. Upon accepting substantially similar employment, payments under this provision will cease.

(ii)           If the Employee’s employment with the Company terminates pursuant to Article VIII (A)(vi) or Article VIII (A)(vii)(x) hereof within twelve months following a Change in Control, the Company will pay to Employee the following:

a.In lieu of any further compensation payments for periods subsequent to the Date of Termination, the Company shall pay to the Employee as severance pay not later than the tenth business day following the Date of Termination, a lump sum payment (the “Severance Payment) equal to 2.99 times the average of the annual Compensation which was payable by the Company and includible in the Employee’s gross income for federal income tax purposes for the five (5) calendar years, preceding the earlier of (x) the calendar year in which a Change in Control occurred or (y) the calendar year of the Date of Termination (the “Base Period”). Such average shall be determined in accordance with the provisions of Section 280G(d) of the Internal Revenue Code of 1986 as amended (the “Code”). As used in this Agreement, the term “Compensation” shall mean and include every type and form of compensation includible in the Employee’s gross income in respect of his employment by the Company (but, excluding compensation or income recognized as a result of the exercise of stock options or sale of Bio-Reference stock), except to the extent otherwise provided in Congressional or Joint Committee Reports or temporary or final regulations interpreting Section 280G(d) of the Code.

b.The Severance Payment shall be reduced by the amount of any other payment or the value of any benefit received or to be received by the Employee in connection with the termination of his employment or contingent upon a Change in Control (whether payable pursuant to the terms of this Agreement, any other plan, agreement or arrangement with the Company) unless (i) the Employee shall have effectively waived his receipt or enjoyment of such payment or benefit prior to the date of payment of the Severance Payment, (ii) in the opinion of tax counsel selected by the Company such other payment or benefit does not constitute a “parachute payment” within the meaning of Section 280(G)(b)(2) of the Code, or (iii) in the opinion of such tax counsel, the Severance Payment (in its full amount or as partially reduced, as the case may be) plus all other payments or benefits which constitute “parachute payments” within the meaning of

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Section 280(G)(b)(2) of the Code are reasonable compensation for services actually rendered, within the meaning of Section 280(G)(b)(4) of the Code, and such payments are deductible by the Company. The value of any non-cash benefit or any deferred cash payment shall be determined by the Company in accordance with the principles of Section 280(G)(d)(3) and (4) of the Code.

c.Except to the extent that Congressional or Joint Committee Reports or temporary or final regulations interpreting Section 280G of the Code specify that such payments would result, under subsection (b) above, in a reduction in the Severance Payment:

1.The Company shall pay to the Employee, no later than the tenth business day following the Date of Termination, a lump sum amount equal to the sum of (x) any bonus compensation which has been allocated or awarded for a fiscal year preceding the Date of Termination but has not yet been paid, and (y) a pro rata portion of any bonus compensation which the Employee has earned for the fiscal year in which the Date of Termination occurs determined by multiplying the Employee’s prior years’ bonus compensation by a fraction equal to the number of full calendar months in the fiscal year prior to the Date of Termination over twelve.

2.The Company shall also pay all legal fees and expenses incurred by the Employee as a result of such termination (including all such fees and expenses, if any, in contesting or disputing any such termination or seeking to obtain or enforce any right or benefit provided by this Agreement).

d.If it is established pursuant to a final determination of a court or an Internal Revenue proceeding that, notwithstanding the good faith of the Employee and the Company in applying the terms of this Section 8, the aggregate “parachute payments” paid are in an amount that would result in any portion of such “parachute payments” not being deductible by the Company by reason of Section 280G of the Code, then the Employee shall have an obligation to pay the Company upon demand an amount equal to the sum of (i) the portion of the aggregate “parachute payments” paid that would not be deductible by reason of Section 280G of the Code and (ii) interest on the amount set forth in clause (i) of this sentence at the applicable Federal rate (as defined in Section 1274(d) of the Code) from the date of receipt of such excess until date of such payment.

e.As used in the Agreement, the term “Change in Control” shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A issued under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as in effect as of the date hereof (regardless of whether or not a Proxy Statement is being filed pursuant to such Regulation at such time), or if Item 6(e) is no longer in effect, any subsequent regulation issued under the Exchange Act for a similar purpose, whether or not the Company is subject to such reporting requirements; provided, that without limitation, such a change in control shall be deemed to have occurred if:

1.any “Person” other than the Employee is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding securities;

2.during any period of two consecutive fiscal years (not including any period prior to the date of the Agreement), individuals who at the beginning of such period constitute the Board of Directors, and any new director, whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in their office who either were directors at the

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beginning of the period or whose election or nomination for elections was previously approved, cease for any reason to constitute a majority of the Board; or

3.the business of the Company is disposed of by the Company pursuant to a liquidation, sale of assets of the Company, or otherwise.

f.The parties reserve the right to mutually amend the provisions of Article IX(B)(ii) to provide the most favorable tax treatment to Employee and the company.

(C)           Termination Payments in the Event of Termination For all Reasons Other than Those Covered by Article IX (B). In the event Employee’s employment with the Company is terminated pursuant to Article VIII (i), (ii), (iii), (iv), (v), or (vii)(y) , the Company shall have no further obligations than those that are set forth in Article IX(A)

(D)          Employee shall only be eligible to receive the payments set forth in Article IX (B) on the condition that he executes a separation agreement and release in a form reasonably acceptable to the Company. Moreover, the payments set forth in Article IX (B) upon termination shall constitute the exclusive payments due the Employee upon termination under this Agreement, but shall have no effect on any benefits which may be due the Employee under any plan of the Company which provides benefits after termination of employment, except that the Employee shall not be eligible for benefits under any Company severance plan. Nothing herein shall affect any of the post-Employment restrictions contained in the Key Employee Agreement attached as Exhibit A and Employee’s violation of any provisions of such Key Employee Agreement shall result in the immediate and permanent cessation of any and all post-employment payments under this Article IX.

ARTICLE X

SURVIVAL BENEFITS

This Agreement may not be assigned to any successors and assigns of the Employee. The restriction shall not apply to any monetary benefit which the Employee may be entitled to, which shall in that event inure to the benefit of the Employee’s heirs, personal representatives, successors and assigns.

However, in the event the Employee dies during the term of this Agreement or shall become Disabled, the Employee, upon prior written instructions or upon becoming Disabled, may temporarily or permanently assign this Agreement, and all obligations, compensation and benefits hereunder to his wife, Debbie Fein, so long as the Employee’s responsibilities are performed and his accounts are maintained (except those lost to legitimate and normal industry account turnover) during the term of this Agreement by his wife, Debbie Fein, and further provided that Debbie Fein, within thirty (30) days following the event leading to the triggering of this paragraph, agrees in writing to be bound in the same manner as Employee pursuant to all of the provision of this Agreement. Unless Employee is incapacitated or deceased, such an assignment must be made in writing by the Employee. No other assignment of this Agreement may be made nor can the Employee’s duties be fulfilled by any one other than Scott Fein or his wife, Debbie Fein, in order for such the benefits of this Agreement to accrue. Simultaneously herewith, Debbie Fein shall enter into the Agreement attached hereto as Exhibit B (“DF Agreement”).

ARTICLE XI

POST –EMPLOYMENT RESTRICTIONS

As an inducement for the Company to enter into this Agreement, Employee agrees to execute and adhere to the obligations set forth in the Key Employee Agreement attached hereto as Exhibit A.

ARTICLE XII

THE COMPANY’S REPRESENTATIONS

The Company warrants and represents the following:

(i)            It is presently licensed to perform clinical laboratory services and tests in New York, New Jersey, and Connecticut and will maintain said licenses throughout the term of this Agreement; and

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(ii)           It has the ability and capacity to service the Employee’s accounts in a timely and professional manner in accordance with all applicable governmental regulations and that during the term of this Agreement shall maintain said ability and capacity and will service the Employee’s accounts in a timely and professional manner in accordance with all applicable governmental regulations.

(iii)          The execution and delivery of this Agreement and the consummation of the transaction herein contemplated and the performance, observation and fulfillment by the Company of all the terms and conditions hereof on its part to be performed, observed and fulfilled have been approved by resolution of the Board of Directors of the Company.

(iv)          The Company has sufficient shares to issue pursuant to Article V.

ARTICLE XIII

CONTRACTUAL RENEWAL

Notwithstanding anything to the contrary, this Agreement shall automatically renew for an additional Contract Year (an “Additional Contract Year”), unless either party shall notify the other party during the month of August in any Contract Year of the Employment Term. Thus, for example, unless either party notifies the other between August 1, 2006 and August 31, 2006, that it desires not to renew the Agreement, the Employment Term shall then be extended automatically to conclude on October 31, 2010. The same cancellation option exists every year. If cancelled, the Agreement will continue only until the end of the Contract Years remaining in the Employment Term, unless earlier terminated by the parties pursuant to the Agreement.   Thus, for example, if either party notifies the other between August 1, 2006 and August 31, 2006, that it desires not to renew the Agreement, the Employment Term would terminate as of October 31, 2009. Any Additional Contract Years added to this Agreement as a result of the operation of this Article XIII shall be under the same terms and conditions as are applicable to the Contract Year preceding such Additional Contract Year. Thus, if the Agreement is automatically extended to conclude on October 31, 2010, the terms and conditions applicable to the Additional Contract Year commencing November 1, 2009 and concluding October 31, 2010 shall be the same as those for the Contract Year commencing November 1, 2008 and ending October 31, 2009.

ARTICLE XIV

SEVERABILITY

If any provision of the Agreement shall be held invalid and unenforceable, the remainder of this Agreement shall remain in full force and effect. If any provision is held invalid or unenforceable with respect to particular circumstances, it shall remain in full force and effect in all other circumstances.

ARTICLE XV

NOTICES

All notices required to be given under the terms of this Agreement shall be in writing and shall be deemed to have been duly given only if delivered to the addressee in person or mailed by certified mail, return receipt requested, as follows:

IF TO COMPANY:	Marc Grodman, M.D.
	Bio-Reference Laboratories, Inc.
	481 Edward H. Ross Drive
	Elmwood Park, New Jersey 07407
WITH COPY TO:	Glenn J. Smith, Esq.
	Grotta Glassman & Hoffman
	75 Livingston Avenue
	Roseland, NJ 07068
IF TO EMPLOYEE:	Scott Fein
	191 Bristol Drive
	Woodbury, New York 11797

or such other additional address as the party to receive the notice shall advise by due notice in accordance with this paragraph.

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ARTICLE XVI

BENEFIT

This Agreement shall inure to and be binding upon the parties hereto, the successors and assigns of the Company and the estate, heirs and successors of the Employee.

ARTICLE XVII

WAIVER

The waiver by either party of any breach or violation of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach or construction and validity.

ARTICLE XVIII

GOVERNING LAW & ARBITRATION

The parties hereto agree that it is their intention and covenant that this Agreement and performance hereunder and all suits and special proceedings hereunder be construed in accordance with and pursuant to the laws of the State of New Jersey.

Any dispute, claim or controversy (whether statutory, contractual, or arising under common law) that relates to this Agreement, Employee’s employment with the Company, or the termination of Employee’s employment from the Company (but not relating to the Key Employee Agreement attached hereto as Exhibit A), shall be submitted to JAMS/Endispute (“JAMS”) for binding arbitration by the complaining party providing written notice to JAMS and the other party. The arbitration shall take place in a location mutually agreed upon by Employee and the Company or, if the parties cannot agree upon a location, in a location in Bergen or Union County, New Jersey selected by the arbitrator. The parties will try to agree on a retired judge from the JAMS panel for the binding arbitration. If the parties are unable to agree, JAMS will provide a list of three available judges and the Company and the Employee can each strike one. The remaining judge will serve as the arbitrator. Judgment on the decision of the arbitrator may be entered in the highest court of any forum, federal or state, having jurisdiction. The arbitrator shall set the guidelines for discovery. Nothing contained herein shall prevent either Employee or the Company from applying to a court having jurisdiction for emergent equitable relief. The cost for JAMS shall initially be shared equally between Employee and the Company, with the prevailing party being entitled to recover its share of said cost and reasonable attorneys’ fees and expenses from the other party. BY EXECUTING THIS EMPLOYMENT AGREEMENT, EMPLOYEE AGREES TO WAIVE HIS RIGHT TO A JURY TRIAL IN ANY ACTION OR PROCEEDING. EMPLOYEE UNDERSTANDS THAT HE IS WAIVING HIS RIGHT TO A JURY TRIAL VOLUNTARILY AND KNOWINGLY AND FREE FROM DURESS OR COERCION. EMPLOYEE UNDERSTANDS THAT HE HAS A RIGHT TO CONSULT WITH A PERSON OF HIS CHOOSING, INCLUDING AN ATTORNEY, BEFORE SIGNING THIS EMPLOYMENT AGREEMENT.

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IN WITNESS WHEREOF, the parties have hereto set their hands and seals the day and year written below their names.

Signed, sealed and delivered in the presence of:

WITNESS	BIO-REFERENCE LABORATORIES, INC.
/S/ Sam Singer	By:	/S/ Charles T. Todd. Jr.
Sam Singer	Charles T. Todd, Jr. as approved by the Board of Directors
WITNESS:
/S/ Linda Niedweske	By:	/S/ Scott Fein
Linda Niedweske	Scott Fein
STATE OF NEW JERSEY	:
	: ss.
COUNTY OF	:

On the 28^th day of October, 2005, before me personally came Scott Fein known to me to be the individual described herein and who executed the foregoing instrument and acknowledged that he executed same.

Notary Public.

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EXHIBIT A

KEY EMPLOYEE AGREEMENT

This Key Employee Agreement is entered into between BioReference Laboratories, Inc. (“Company”), a New Jersey Corporation having its principal place of business in the State of New Jersey with testing facilities in other states, and Scott Fein (“Employee”), an individual residing at 191 Bristol Drive, Woodbury, NY 11797 on this 28th day of October, 2005.

1.     Employee agrees to the terms and conditions set forth below in exchange for: (1) Employee’s employment with Company as set forth in the Employment Agreement (“Employment Agreement”) to which this is attached, and; (2) Employee’s participation in Company’s employee benefits or other programs pursuant to the terms thereof.

2.     Company agrees to employ Employee and Employee agrees to work for the Company in the capacity of Senior Vice President and Sales Representative.  Employee shall, as an employee of the Company, devote full time best efforts and attention to the performance of Employee’s duties, except as delineated in Article II(B) of the Employment Agreement.. Should Employee’s position and/or compensation change, the parties agree that this Key Employee Agreement will nevertheless remain in effect.

3.     This Key Employee Agreement supplements the Employment Agreement.

4.     As used in this Key Employee Agreement, “Confidential Information” is defined as information not generally or publicly known or readily available to the public, and proprietary to the Company, including, without limitation, information relating to past, present or prospective customers, vendors, suppliers and distributors; marketing, merchandising or servicing techniques, methodologies and procedures; manuals; Agreements; reports; notes; price schedules; memoranda and correspondence; product lists; financial records; computer programs, systems or modes; contracts and the content of negotiations culminating in such contracts, including any records thereof.  This paragraph shall not apply to any Confidential Information that is or becomes generally available to the public for reasons other than as a result of disclosure which is prohibited under this Key Employee Agreement or any agreement.

5.     As used in this Key Employee Agreement, the term “Customer” shall include any entity to whom the Company has sold, provided or been obligated to provide, any service or product or who has otherwise received any benefit from the Company within the 180-day period preceding the date of Employee’s termination of employment.

6.     Employee recognizes and acknowledges that Confidential Information, and relationships with Employee’s actual customers and prospective customers, which Employee will become knowledgeable of as an employee of Company are valuable, special, and unique aspects of Company’s business, which have been created and developed at great time, effort and expense to the Company. Employee acknowledges that this “Confidential Information”, and these existing and prospective customer relationships are not transitory and will not soon be obsolete.

A. Accordingly, during Employee’s employment and for a period of one (1) year following the termination of Employee’s employment with the Company (such one year period referred to as the “Restricted Period”) for any reason set forth in Article VIII(A) of the Employment Agreement (except as modified by Section 6(B)(1) and 6(B)(2) of this Key Employee Agreement, and regardless of the reason therefore, Employee shall not, without the express written consent of Company, directly or indirectly, by Employee or through any other person, firm, partnership, corporation, entity or enterprise:

(1)           directly or indirectly solicit any sales (or make or derive any sales from such

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direct or indirect solicitation) from any customer or prospective customer of the Company that Employee (or such other employees of the Company that directly report to Employee) solicited, serviced, was responsible for or interacted with (in the performance of Employee’s duties for the Company) while employed by the Company; or

(2)           induce, approach or attempt to induce any employee of the Company to leave the Company and become professionally affiliated with and/or work for or with Employee or at Employee’s new employer.

B. The Restricted Period may be modified as follows:

(1) In the event Employee receives the severance payments set forth in Article IX(B)(ii) of the Employment Agreement which are triggered in the event of certain terminations following a Change in Control (as such term is defined in the Scott Fein Employment Agreement), the Restricted Period shall be for the period of Employee’s employment with the Company and for a period of three (3) years following the termination of Employee’s employment with the Company.

(2) In the event Employee’s employment with the Company terminates pursuant to Article VIII (A)(iv) or Article VIII (A)(vi)of the Employment Agreement, but not within twelve months following a Change in Control, the Restricted Period shall be for the period of Employee’s employment with the Company and for a period of six (6) months following the termination of Employee’s employment with the Company.

C. Further, during Employee’s employment and for an unlimited period following the termination of Employee’s employment with the Company, whether termination is voluntary or involuntary, and regardless of the reason therefore, Employee shall not, without the express written consent of Company, directly or indirectly, by Employee or through any other person, firm, partnership, corporation, entity or enterprise:

(1)           disclose or use, in any manner, or allow to be disclosed or used in any manner, “Confidential Information”.

D. The time restrictions set forth herein shall run from the date of Employee’s termination of employment for any reason, except that if Employee violates this Key Employee Agreement, such time restrictions shall commence on the date of compliance with the restrictions contained herein, whether such compliance is voluntary or compelled.

7.             Employee acknowledges that: (1) compliance with the restrictive covenants contained in Section 5 of this Key Employee Agreement is necessary to protect the business and goodwill of Company; and (2) a breach of Section 5 will result in irreparable and continuing damage to Company for which money damages may not provide adequate relief. Consequently, Employee agrees that, in the event Employee breaches or threatens or attempts to breach the restrictive covenants contained in Section 5, Company shall be entitled to both: (1) a temporary restraining order, preliminary injunction and permanent injunction in order to prevent such harm; and (2) money damages as may be determined. Nothing in this Key Employee Agreement shall be construed to prohibit Company from also pursuing any other remedy, the parties agreeing that all remedies are cumulative.

8.             All originals and photocopies or any other form of reports, memoranda, manuals, Agreements, books, computer records and printouts, customer lists, sales records, and any other material and/or equipment furnished to and/or maintained by Employee in connection with Employee’s employment by Company shall remain the property of the Company and shall be returned to the Company: (1) upon demand; or (2) immediately upon termination of employment.

9.             If any clause or provision herein shall be adjudged invalid or unenforceable by a court of competent jurisdiction or by operation of any applicable law, it shall not affect the validity of any other clause or provision, which shall remain in full force and effect. This Key Employee Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to its conflict of law principles. The courts of the State of New Jersey shall have jurisdiction over any disputes arising under this Key Employee Agreement, and each of the parties hereby consents to such exercise of jurisdiction. If either party to this Key Employee Agreement breaches any of the terms of this Key Employee Agreement, that party shall pay to the non-defaulting party all of the non-defaulting party’s costs and expenses incurred in enforcing the terms of this Key Employee Agreement, including its attorneys’ fees.

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10.           The parties have attempted to limit Employee’s activities only to the extent necessary to protect the Company from unfair competition. The parties recognize, however, that reasonable people may differ in making such a determination. Consequently, the parties hereby agree that, if the scope and/or enforceability of the restrictive covenants contained herein are in any way disputed at any time, a court or other trier of fact may modify and enforce such covenants to the extent that it believes to be reasonable under the circumstances existing at that time.

11.           The waiver by the Company of a breach of any of the provisions of this Key Employee Agreement by Employee shall not operate or be construed as a waiver of any subsequent breach by Employee.

12.           The Company shall have the right to assign any rights or obligations under this Key Employee Agreement without the prior written approval of Employee. The Employee shall not have the right to assign rights or obligations under this Key Employee Agreement.

13.           This Key Employee Agreement contains the entire agreement of the parties as to the subject matter hereof and supersedes all prior written and oral agreements and understandings between the parties as to such subject matter. This Key Employee Agreement may not be modified, changed or altered by any oral promise or statement by whoever made, nor shall any written modifications of this Key Employee Agreement be binding on the Company unless such modification shall have been approved in writing by an officer of the Company.

EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE HAS READ THIS KEY EMPLOYEE AGREEMENT, UNDERSTANDS IT AND IS BOUND BY ITS TERMS AND CONDITIONS AND THAT EMPLOYEE HAS VOLUNTARILY EXECUTED THIS KEY EMPLOYEE AGREEMENT IN ORDER TO BECOME EMPLOYED IN ACCORDANCE WITH THE TERMS AND CONDITIONS SET FORTH HEREIN.

/S/ Linda Niedweske			By:	Scott Fein
Witness	Date 10/28/05		(Employee)		Date 10/28/05
/S/ Sam Singer			By:	Charles T. Todd, Jr.
Witness		Date 10/28/05	(Company)		Date 10/28/05

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EXHIBIT B

AGREEMENT BETWEEN DEBBIE FEIN AND BIO-REFERENCE

This agreement (“DF Agreement”) is entered into between BioReference Laboratories, Inc. (“Company”), a New Jersey Corporation having its principal place of business in the State of New Jersey with testing facilities in other states, and Debbie Fein (“Debbie Fein”), an individual residing at 191 Bristol Drive, Woodbury, NY 11797 on this 28^th day of October, 2005.

1.             Debbie Fein agrees to the terms and conditions set forth below in exchange for: (1) Scott Fein’s employment with the Company as set forth in the Employment Agreement (“Scott Fein Employment Agreement” ) of Scott Fein to which this is attached; (2) Debbie Fein’s employment with the Company as set forth herein; and (3) Debbie Fein’s participation in Company’s employee benefits or other programs pursuant to the terms hereof.

2.             Company agrees to employ Debbie Fein and Debbie Fein agrees to work for the Company in the capacity of Sales Representative. Debbie Fein shall be paid an annual salary of $35,000, pursuant to the regular payroll practices of the Company for the performance of her duties.  The Board of Directors has authorized the Company to grant Debbie Fein non-transferable incentive stock options (the “Options”) exercisable to purchase shares of Bio-Reference Common Stock (the “Stock”) as set forth below. The number of Options to be issued to Debbie Fein shall be determined by dividing $100,000 by the closing stock price on the Date of Grant, as defined below (for example if the closing Stock price on the Date of Grant is equal to $20, Debbie Fein will be issued 5,000 Options). The Date of Grant of the Options (“Date of Grant”) shall be the date determined by the Board of Directors to be the Date of Grant, but in no event shall the Date of Grant occur later than October 31, 2005. It is the intent of the parties that the Date of Grant will occur on or prior to the Effective Date. The Option exercise price per share shall be equal to the last sale price on the NASDAQ Stock Market for the Stock on the Date of Grant. In the event of and upon grant, the Company and Debbie Fein shall execute and deliver to each other, an Incentive Stock Option Agreement (the “Stock Option Agreement”) containing such terms and vesting provisions as shall be determined by the Board of Directors consistent with the provisions of the Company’s Employee Incentive Stock Option Plan (the “Plan”) pursuant to which the Options are granted. The Stock Option Agreement will set forth, among other items, the term of the Option, provisions as to termination in the event of cessation of employment, death or permanent disability, method of exercise and restrictions affecting transfer or sale of the underlying Common Stock. Consistent with the provisions of the Plan, the aggregate fair market value of Bio-Reference Common Stock with respect to which Options are exercisable by Debbie Fein for the first time during any calendar year shall not exceed $100,000. Subject to the limitations of the preceding sentence, the Options shall vest immediately upon the Date of Grant. Debbie Fein shall, as an employee of the Company, devote reasonable effort and attention to the performance of her duties. Should Debbie Fein’s position and/or compensation change, the parties agree that this Agreement will nevertheless remain in effect.

3.             This Agreement between Debbie Fein and the Company shall remain in effect for the duration of the term of the Agreement between the Company and Scott Fein, which includes any assumption by Debbie Fein of Scott Fein’s responsibilities pursuant to Article X of the Agreement between the Company and Scott Fein.

4.             As used in this DF Agreement, “Confidential Information” is defined as information not generally or publicly known or readily available to the public, and proprietary to the Company, including, without limitation, information relating to past, present or prospective customers, vendors, suppliers and distributors; marketing, merchandising or servicing techniques, methodologies and procedures; manuals; Agreements; reports; notes; price schedules; memoranda and correspondence; product lists; financial records; computer programs, systems or modes; contracts and the content of negotiations culminating in such contracts, including any records thereof.  This paragraph shall not apply to any Confidential Information that is or becomes generally available to the public for reasons other than as a result of disclosure which is prohibited under this DF Agreement or any agreement.

5.             As used in this DF Agreement, the term “Customer” shall include any entity to whom the Company has sold, provided or been obligated to provide, any service or product or who has otherwise received any benefit from the Company within the 180-day period preceding the date of Debbie Fein’s termination of employment.

6.             Debbie Fein recognizes and acknowledges that Confidential Information, and relationships with

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her or Scott Fein’s actual customers and prospective customers, which she will become knowledgeable of as an employee of Company are valuable, special, and unique aspects of Company’s business, which have been created and developed at great time, effort and expense to the Company. Debbie Fein acknowledges that this “Confidential Information”, and these existing and prospective customer relationships are not transitory and will not soon be obsolete.

A. Accordingly, during Debbie Fein’s employment and for a period of one (1) year following the termination of Debbie Fein’s employment with the Company (such one year period referred to as the “Restricted Period”) for any reason set forth in Article VIII(A) of the Employment Agreement (except as modified by Section 6(B)(1) and 6(B)(2) of this Key Employee Agreement and regardless of the reason therefore, Debbie Fein shall not, without the express written consent of Company, directly or indirectly, by Debbie Fein or through any other person, firm, partnership, corporation, entity or enterprise:

(1) directly or indirectly solicit any sales (or make or derive any sales from such direct or indirect solicitation) from any customer or prospective customer of the Company that Debbie Fein or Scott Fein solicited, serviced, was responsible for or interacted with while employed by the Company; or

(2) induce, approach or attempt to induce any employee of the Company to leave the Company and become professionally affiliated with and/or work for or with Debbie Fein or Scott Fein or at Debbie Fein’s or Scott Fein’s new employer.

B.The Restricted Period may be modified as follows:

(1) In the event either Scot Fein or Debbie Fein receives the severance payments set forth in Article IX(B)(ii) of the Scott Fein Employment Agreement which are triggered in the event of certain terminations following a Change in Control (as such term is defined in the Employment Agreement), the Restricted Period shall be for the period of Debbie Fein’s employment with the Company and for a period of three (3) years following the termination of Debbie Fein’s or Scott Fein’s employment with the Company.

(2) In the event the employment of either Scott Fein or Debbie Fein with the Company terminates pursuant to Article VIII (A)(iv) or Article VIII (A)(vi) of the Employment Agreement, but not within twelve months following a Change in Control, the Restricted Period shall be for the period of Employee’s employment with the Company and for a period of six (6) months following the termination of Employee’s employment with the Company.

C. Further, during Debbie Fein’s employment and for an unlimited period following the termination of Debbie Fein’s employment with the Company, whether termination is voluntary or involuntary, and regardless of the reason therefore, Debbie Fein shall not, without the express written consent of Company, directly or indirectly, by Debbie Fein or through any other person, firm, partnership, corporation, entity or enterprise:

(1) disclose or use, in any manner, or allow to be disclosed or used in any manner, “Confidential Information”.

D. The time restrictions set forth herein shall run from the later of the date of Debbie Fein’s termination of employment for any reason or Scott Fein’s termination of employment for any reason, except that if Debbie Fein violates this DF Agreement, such time restrictions shall commence on the date of compliance with the restrictions contained herein, whether such compliance is voluntary or compelled.

7.             Debbie Fein acknowledges that: (1) compliance with the restrictive covenants contained in Section 5 of this DF Agreement is necessary to protect the business and goodwill of Company; and (2) a breach of Section 5 will result in irreparable and continuing damage to Company for which money damages may not provide adequate relief. Consequently, Debbie Fein agrees that, in the event Debbie Fein breaches or threatens or attempts to breach the restrictive covenants contained in Section 5, Company shall be entitled to both: (1) a temporary restraining order, preliminary injunction and permanent injunction in order to prevent such harm; and (2) money damages as may be determined. Nothing in this DF Agreement shall be construed to prohibit Company from also pursuing any other remedy, the parties agreeing that all remedies are cumulative.

8.             All originals and photocopies or any other form of reports, memoranda, manuals, Agreements, books, computer records and printouts, customer lists, sales records, and any other material and/or equipment furnished to and/or maintained by Debbie Fein in connection with Debbie Fein’s employment by Company shall

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remain the property of the Company and shall be returned to the Company: (1) upon demand; or (2) immediately upon termination of employment.

9.             If any clause or provision herein shall be adjudged invalid or unenforceable by a court of competent jurisdiction or by operation of any applicable law, it shall not affect the validity of any other clause or provision, which shall remain in full force and effect. This DF Agreement shall be governed by the internal laws of the State of New Jersey, without giving effect to its conflict of law principles. The courts of the State of New Jersey shall have jurisdiction over any disputes arising under this DF Agreement, and each of the parties hereby consents to such exercise of jurisdiction. If either party to this DF Agreement breaches any of the terms of this DF Agreement, that party shall pay to the non-defaulting party all of the non-defaulting party’s costs and expenses incurred in enforcing the terms of this DF Agreement, including its attorneys’ fees.

10.           The parties have attempted to limit Debbie Fein’s activities only to the extent necessary to protect the Company from unfair competition. The parties recognize, however, that reasonable people may differ in making such a determination. Consequently, the parties hereby agree that, if the scope and/or enforceability of the restrictive covenants contained herein are in any way disputed at any time, a court or other trier of fact may modify and enforce such covenants to the extent that it believes to be reasonable under the circumstances existing at that time.

11.           The waiver by the Company of a breach of any of the provisions of this DF Agreement by Debbie Fein shall not operate or be construed as a waiver of any subsequent breach by Debbie Fein.

12.           The Company shall have the right to assign any rights or obligations under this DF Agreement without the prior written approval of Debbie Fein. Debbie Fein shall not have the right to assign rights or obligations under this DF Agreement.

13.           This DF Agreement contains the entire agreement of the parties as to the subject matter hereof and supersedes all prior written and oral agreements and understandings between the parties as to such subject matter. This DF Agreement may not be modified, changed or altered by any oral promise or statement by whoever made, nor shall any written modifications of this DF Agreement be binding on the Company unless such modification shall have been approved in writing by an officer of the Company.

DEBBIE FEIN ACKNOWLEDGES THAT SHE HAS READ THIS DF AGREEMENT, UNDERSTANDS IT AND IS BOUND BY ITS TERMS AND CONDITIONS AND THAT SHE HAS VOLUNTARILY EXECUTED THIS DF AGREEMENT IN ORDER TO BECOME EMPLOYED IN ACCORDANCE WITH THE TERMS AND CONDITIONS SET FORTH HEREIN.

/S/ Linda Niedweske			By:	/S/ Scott Fein
Witness	Date        10/28/05		(Employee)		Date 10/28/05
/S/ Sam Singer			By:	/S/ Charles T. Todd, Jr.
Witness		Date        10/28/05	(Company)		Date 10/28/05

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EX-10.4.5

Exhibit 10.4.5

EMPLOYMENT AGREEMENT

This Employment Agreement dated as of the 1st day of November, 2005, between Bio-Reference Laboratories, Inc, a New Jersey corporation with its principal place of business at 481 Edward H. Ross Drive, Elmwood Park, New Jersey 07407 (the “Company”) and Richard L. Faherty, residing at 36 Clark Road, Port Jervis, NY 12771 (the “Employee”).

W I T N E S S E T H :

WHEREAS, the Company is primarily engaged in the operation of a clinical laboratory in northern New Jersey, and

WHEREAS, the Company desires to avail itself of the Employee’s knowledge and experience and to employ the Employee as Director of Information Services on the terms and conditions hereinafter set forth, and

WHEREAS, the Employee desires to be so employed by the Company on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties agree as follows:

2.Term of Employment.  The Company agrees to employ the Employee as Director of Information Services, or in such other position of comparable status and responsibility as the Company may from time to time direct and/or desire, and the Employee agrees to accept such employment with the Company, for a term commencing as of the date of full execution of this Agreement (the “Commencement Date”) and continuing until October 31, 2009 or such later date to which the Agreement is extended pursuant to Section 2 hereof (the “Expiration Date”), or unless sooner terminated as provided in this Agreement (the “Employment Period”).  As used in this Agreement, the term “Employment Period” shall also include any periods for which this Agreement is extended pursuant to Section 2 hereof.

2. Extension. This Agreement may be extended beyond the Initial Expiration Date for additional one year periods at the Company’s option. This Agreement shall be automatically extended at the end of each Company fiscal year for an additional one year term beyond its then Expiration Date unless the Company gives written notice to the Employee not less than ten (10) days prior to the end of such fiscal year that it elects not to extend the Agreement. (the “Non-Extension Notice”). By way of example:

If the
Company Fails to
Give Non-Extension	Agreement Expiration Date
Notice Prior to	Automatically Extended to
October 21	October 31
2006	2010
2007	2011
2008	2012

Once the Company gives a Non-Extension Notice, this Agreement shall terminate at the close of business on October 31 of the Company’s third fiscal year succeeding the fiscal year in which the Non-Extension Notice was given. By way of example, if the Non-Extension Notice is given in fiscal 2007 prior to October 21 of such year, the Agreement shall terminate October 31, 2010.

3.   Duties.

a.During the Employment Period, the Employee shall perform such duties and exercise such powers relating to the Company as are commensurate with those of a Director of Information Services and shall have such other duties and powers as the Board of Directors or Management shall from time to time assign to him, including by way of example, but not limitation, duties with respect to any of the Company’s associated companies.  As used in this Agreement, the term “Associated Companies” shall mean any company (i) of which not less than fifty (50%) percent of the equity is beneficially owned by the Company or (ii) any subsidiary of such company, if any.

b.During the Employment Period, the Employee shall devote at least 90% of his working time during normal business hours and his best efforts and ability to the business of the Company, shall faithfully and diligently perform the duties of his employment with the Company and shall do all reasonably in his power to promote, develop and extend the business of the Company.

c.During the Employment Period, the Employee shall not, except as a representative of the Company or with the written consent of the Company, be directly or indirectly engaged, concerned or interested in the conduct of any other business competing or likely to compete with the Company; provided, that notwithstanding anything contained in this Agreement to the contrary, the Employee shall not be precluded from devoting a reasonable amount of his time to:

i.	Serving with the prior written approval of the Company as a director or member of a committee of any organization involving no conflict of interest with the business of the Company;
ii.	Managing his personal investments; provided, that such activities shall not materially interfere with the Employee’s performance of his duties hereunder; and

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iii. Participating in the management and maintenance of his privately held consulting service corporations (CH Consulting Services and MD Management & Support Services, Inc.), providing that such management and maintenance services do not interfere with the further terms and conditions of this Agreement.

d.The Employee shall be employed at the offices of the Company located in Elmwood Park, New Jersey; provided that the Employee acknowledges and agrees that the proper performance of these duties may make it necessary to spend reasonable periods of time in other parts of the country.

4.   Compensation.

a.During the Employment Period, the Company shall pay the Employee as compensation for his services under this Agreement, a minimum Base compensation at an annual rate of Four Hundred Thousand ($400,000) Dollars (the “Base Compensation”).  The Base Compensation shall be payable in equal installments in accordance with regular payroll procedures established by the Company.  At the appropriate time thereafter at least once during each fiscal year, the Company will consider increasing the Employee’s compensation under this Agreement, based upon the performance of the Company and of the Employee during the fiscal year with such increase, if granted, taking effect as of the date determined by the Company.

b.The Company shall lease and insure, either under the Company’s policy or by reimbursement to the Employee, an automobile for the benefit of the Employee.  The Company shall be responsible for maintenance, gasoline, repair and all other such costs but only to the extent such expenses relate to business use of the automobile.  At the end of the lease term, or in the event of the termination of this Agreement for any reason, including non-renewal, the Employee shall have the following options:

i.	Surrender the automobile to the Company;
ii.	Assume the Company’s lease payment obligation; or
iii.	Exercise the purchase option of the lease, if any.

c.The Company shall promptly pay or reimburse the Employee for all expenses incurred by the Employee in the performance of his duties under this Agreement.  Such expenses shall be limited to reasonable out-of-pocket expenses necessarily and actually incurred by the Employee in the performance of his duties; provided that (i) the expenses have been detailed on a form acceptable to the Company and submitted to the Company for review and approval and (ii) appropriate supporting documentation is submitted together with the approved expense form.

d.The Employee shall be entitled to participate in any fringe benefit and bonus plans available to the Company’s employees as in effect from time to time, to the extent the Employee may be eligible to do so under the applicable provisions of the plans including but not limited to pension, profit sharing, stock option and similar plans and life and medical insurance plans or coverage maintained by the Company for senior personnel and/or all personnel.

e.The Employee shall be entitled to such vacation, personal time and holidays as he is eligible for under the Company’s Employment and Personnel Policy as the same presently exists or may hereafter be amended.

f.Notwithstanding the provisions of subparagraph (a) of this section 4, the Employee shall also be entitled to a percentage increase in his Base Compensation as in effect on June 30 of each year that this Agreement is in effect, equal to the percentage increase in the Consumer Price Index – All Items for the New York metropolitan area (or any successor index) for such month of June as compared to such Consumer Price Index for the month of June in the immediately preceding year.  Any such increase shall be effective on the next following February 1.  No adjustments shall be made for a decrease in such Index.

5.   Disability.  If during the Employment Period, the Employee shall incur a Total Disability then, subject to the earlier termination of this Agreement or the earlier termination of the disability, the Company shall compensate the Employee as provided in subparagraphs (a), (b), (c) and (d) of this Section 5.

a.For the month in which the Employee incurs the total disability, and for the following twelve (12) months of the disability, the Company shall compensate the Employee at a rate equal to his then current Base Compensation.

b.For a period of three (3) months commencing upon the termination of the period described in subparagraph (a), the Company shall not pay Employee any portion of his Base Compensation and Employee shall be on an unpaid leave of absence.

c.If the Employee’s disability shall terminate at any time prior to the expiration of the period described in subparagraph (b) of this Section 5, then the Employee shall return to full and active employment with the Company under the terms of this Agreement; provided that if he shall again become disabled within a period of three (3) months after such return, and such disability is related to his original disability, then the Employee shall be deemed to have been continuously disabled from the date he incurred the original disability.

d.Upon expiration of the three (3) month period described in subparagraph (b) of this Section 5, the employment of Employee shall terminate, unless an additional leave of absence is granted by the Company, in which event the employment of the Employee shall terminate upon the expiration of the additional leave of absence.

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e.In the event the Employee shall incur a Partial Disability then during the period of the Partial Disability, the Employee’s Base Compensation shall be equitably adjusted according to the time that he is able to devote to the affairs of the Company.

f.In addition to the foregoing, the Employee shall be entitled to receive the amounts, if any, as may be payable to him by reason of his disability under policies of insurance maintained by the Company.

g.As used in this Agreement, the term “Total Disability” shall mean disability such that, for physical or mental reasons, the employee is unable to perform any of his usual duties to the Company on a full-time basis.  As used in this Agreement, the term “Partial Disability” shall mean a disability, such that for physical or mental reasons, the Employee is unable to perform all of his usual duties to the Company on a full-time basis.

6.   Termination.

a.Termination by Death.  If the Employee dies during the Employment Period, the Company’s obligations under this Agreement shall terminate six (6) months after the date of death and the Employee’s estate shall be entitled to all arrearages of Base Compensation and expenses.  In addition, the Employee’s estate (or such other named beneficiary) shall be entitled to the amounts, if any, as may be payable to his estate or beneficiaries under policies of insurance maintained by the Company.

b.Termination for Cause.  This Agreement and the Employee’s employment with the Company may be terminated for Cause at any time in accordance with subparagraph (d) of this Section 6.  In the event this Agreement is terminated for Cause, the Employee shall be entitled to all arrearages of Base Compensation and expenses through the Date of Termination but shall not be entitled to further compensation.  As used in this Agreement, and without limitation, the term “Cause” shall mean:

i.	An act or acts of dishonesty constituting criminal acts by the Employee resulting or intending to result directly or indirectly in gain to or personal enrichment of the Employee at the Company’s expense;
ii.	The commission of any crime involving fraud, embezzlement or theft by the Employee;
iii.	The Employee’s material breach of this Employment Agreement.

c.Termination at the Option of the Employee.  This Agreement and the Employee’s employment with the Company may be terminated at any time, at the election of the Employee, for Good Reason in accordance with subparagraph (d) of this Section 6.  In the event this Agreement is terminated for Good Reason, the Employee shall be paid during the remainder of the Employment Period (computed without giving effect to the earlier termination hereunder), his Base Compensation (other than due to Partial Disability) at the rate in effect as of the Date of Termination, and shall continue to be entitled to employee benefits as if he were still employed by the Company, until completion of such Employment Period (computed without giving effect to the earlier termination hereunder).  As used in the Agreement, and without limitation, the term “Good Reason” shall mean:

i.	The assignment to the Employee of duties inconsistent with the office of Director of Information Services of the Company or his then current office, removal of the Employee from such office or substantial reduction in the nature or status of the Employee’s then current responsibilities;
ii.	The reduction of the Employee’s then current Base Compensation (other than due to Partial Disability);
iii.	The relocation of the Company’s principal executive offices to a location more than fifty (50) miles from the Company’s current principal executive offices or the transfer of the Employee to a place other than the Company’s principal executive offices (excepting required travel on the Company’s business in a manner substantially similar to the Employee’s then current travel obligations); and
iv.	The failure by the Company to provide the Employee with the benefits at least as favorable as those in which the Employee was then participating.

d.Notice of Termination.  Any purported termination of the Employee’s employment shall be communicated by a written notice of termination to the other party hereto and shall specify the Date of Termination (the “Notice of Termination”).  Such notice shall indicate a specified termination provision in this Agreement which is relied upon, recite the facts and circumstances claimed to provide the basis for such termination and specify the Date of Termination.  As used in this Agreement, the term “Date of Termination” shall mean the date specified in the Notice of Termination, which date shall not be less than thirty (30) days nor more than sixty (60) days from the date the Notice of Termination is given.  If within thirty (30) days from the date the Notice of Termination is given, the party receiving such notice notifies the other party that a dispute exists concerning such termination, the Date of Termination shall be the date on which the dispute is finally resolved.  The Date of Termination shall be extended by notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence.  Notwithstanding the pendency of any such dispute, the Company will continue to pay the Employee his full Base Compensation in effect as of the date of the Notice of Termination and continue the Employee as a participant in all compensation, benefit and insurance plans in which he was participating at such date, until the dispute is finally resolved.  Amounts paid under this subparagraph (d) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement.

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7.   Change in Control.  In the event of a Change in Control and, as a result of such Change in Control, the Employee is terminated without Cause or the Employee elects within a reasonable time thereafter to terminate his employment as a result of such Change in Control, then the Employee shall receive the following benefits:

a.The Company shall pay to the Employee his full Base Compensation at the rate in effect at the time of the Notice of Termination through the Date of Termination.

b.In lieu of any further Base Compensation payments for periods subsequent to the Date of Termination, the Company shall pay to the Employee as severance pay not later than the tenth business day following the Date of Termination, a lump sum payment (the “Severance Payment”) equal to 2.99 times the average of the annual Compensation which was payable by the Company and includible in the Employee’s gross income for federal income tax purposes for the five (5) calendar years, or for the portion of such period during which the Employee was actually employed by the Company if the Employee has been employed by the Company for less than five (5) calendar years, preceding the earlier of the calendar year in which a Change in Control occurred or the calendar year of the Date of Termination (the “Base Period”).  Such average shall be determined in accordance with the provisions of Section 280G(d) of the Internal Revenue Code of 1986 as amended (the “Code”). In no event shall such “average” exceed the annual Compensation payable by the Company and includible in the Employee’s gross income for federal income tax purposes for the calendar year preceding the earlier of the calendar year in which a Change of Control occurred or the calendar year of the Date of Termination. As used in this Agreement, the term “Compensation” shall mean and include every type and form of compensation includible in the Employee’s gross income in respect of his employment by the Company including compensation income recognized as a result of the exercise of stock options or sale of the stock so acquired, except to the extent otherwise provided in Congressional or Joint Committee Reports or temporary or final regulations interpreting Section 280G(d) of the Code.

c.The Severance Payment shall be reduced by the amount of any other payment or the value of any benefit received or to be received by the Employee in connection with the termination of his employment or contingent upon a Change in Control (whether payable pursuant to the terms of this Agreement, any other plan, agreement or arrangement with the Company) unless (i) the Employee shall have effectively waived his receipt or enjoyment of such payment or benefit prior to the date of payment of the Severance Payment, (ii) in the opinion of tax counsel selected by the Company such other payment or benefit does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code, or (iii) in the opinion of such tax counsel, the Severance Payment (in its full amount or as partially reduced, as the case may be) plus all other payments or benefits which constitute “parachute payments” within the meaning of Section 280G(b)(2) of the Code are reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4) of the Code, and such payments are deductible by the Company.  The value of any non-cash benefit or any deferred cash payment shall be determined by the Company in accordance with the principles of Section 280G(d)(3) and (4) of the Code.

d.Except to the extent that Congressional or Joint Committee Reports or temporary or final regulations interpreting Section 280G of the Code specify that such payments would result, under subsection (c) above, in a reduction in the Severance Payment:

i.

The Company shall pay to the Employee, not later than the tenth business day following the Date of Termination, a lump sum amount equal to the sum of (x) any bonus compensation which has been allocated or awarded for a fiscal year preceding the Date of Termination but has not yet been paid, and (y) a pro rata portion of any bonus compensation which the Employee has earned for the fiscal year in which the Date of Termination occurs determined by multiplying the Employee’s prior years’ bonus compensation by a fraction equal to the number of full calendar months in the fiscal year prior to the Date of Termination over twelve.

ii.

The Company shall also pay all legal fees and expenses incurred by the Employee as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement).

e.If it is established pursuant to a final determination of a court or an Internal Revenue Service proceeding that, notwithstanding the good faith of the Employee and the Company in applying the terms of this Section 8, the aggregate “parachute payments” paid are in an amount that would result in any portion of such “parachute payments” not being deductible by the Company by reason of Section 280G of the Code, then the Employee shall have an obligation to pay the Company upon demand an amount equal to the sum of (i) the portion of the aggregate “parachute payments” paid that would not be deductible by reason of Section 280G of the Code and (ii) interest on the amount set forth in clause (i) of this sentence at the applicable Federal rate (as defined in Section 1274(d) of the Code) from the date of receipt of such excess until the date of such payment.

f.As used in the Agreement, the term “Change in Control” shall mean a change in control of a nature

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that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A issued under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as in effect as of the date hereof (regardless of whether or not a Proxy Statement is being filed pursuant to such Regulation at such time), or if Item 6(e) is no longer in effect, any subsequent regulation issued under the Exchange Act for a similar purpose, whether or not the Company is subject to such reporting requirements; provided, that without limitation, such a change in control shall be deemed to have occurred if:

i.	any “Person” other than the Employee is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding securities;
ii.	during any period of two consecutive fiscal years (not including any period prior to the date of the Agreement), individuals who at the beginning of such period constitute the Board of Directors, and any new director, whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for elections was previously approved, cease for any reason to constitute a majority of the Board; or
iii.	the business of the Company is disposed of by the Company pursuant to a liquidation, sale of assets of the Company, or otherwise.

8.   Confidential Information.  The Employee acknowledges an obligation of confidentiality to the Company and shall not divulge, disclose or communicate any trade secret, private or confidential information or other proprietary knowledge of the Company or its associated companies obtained or acquired by him while so employed.  This restriction shall apply after the termination of Employee’s employment without limit in point of time but shall cease to apply to information or knowledge which may come into the public domain or whose disclosure may be required by law or court order or pursuant to the written consent of the Company.

9.   Return of Information.  Upon termination of employment, the Employee agrees to not take with him and to deliver to the Company all records, notes, data, memoranda, models, equipment, blueprints, drawings, manuals, letters, reports and all other materials of a secret or confidential nature relating to the business of the Company which are in possession or control of the Employee.

10. General Provisions.

a.This Agreement contains the entire transaction between the parties, and there are no other representations, warranties, conditions or agreements relating to the subject matter of this Agreement.

b.The waiver by any party of any breach or default of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

c.This Agreement may not be changed orally but only by an Agreement in writing duly executed on behalf of the party against which enforcement of any waiver, change, modification, consent or discharge is sought.

d.This Agreement shall be binding upon and be enforceable against the Company and its successors and assigns.  Insofar as the Employee is concerned, this Agreement is personal and cannot be assigned.

e.This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

f.This Agreement shall be construed pursuant to and in accordance with the laws of the State of New Jersey.

g.If any term or provision of this Agreement is held or deemed to be invalid or unenforceable, in whole or in part, by a court of competent jurisdiction, this Agreement shall be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement.

h.Any dispute, grievance or controversy arising under or in conjunction with this Agreement shall be referred to the Board of Directors of the Company and shall be dealt with by personal discussion, and if not satisfactorily resolved, shall be submitted under the Rules of the American Arbitration Association of New York City.

i.Any consent of the Company required under this Agreement shall not be unreasonably withheld or delayed.

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IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written.

COMPANY:

Bio-Reference Laboratories, Inc.

S/ Marc D. Grodman

By: Marc D. Grodman, President

Duly Authorized

EMPLOYEE:

S/ Richard L. Faherty

Richard L. Faherty

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EX-10.5.2

Exhibit 10.5.2

BIO-REFERENCE LABORATORIES, INC.

2005 SENIOR MANAGEMENT INCENTIVE BONUS PLAN

TERMS OF THE PLAN

Terms

A.The 2005 Senior Management Incentive Bonus Plan will provide bonuses to the employee participants based on Operating Income as a percentage of Net Revenues as reported on the Corporation’s audited consolidated financial statements for fiscal 2005, subject, however, to the exception defined in B herein for Class II employee participants.

B.For Class II employee participants, bonuses under the Plan will be based on Adjusted Operating Income for fiscal 2005 as a percentage of Adjusted Net Revenues for such fiscal year. Adjusted Net Revenues and Adjusted Operating Income will be determined by the Corporation’s CEO and CFO acting jointly, by deducting the total net revenues and the total cost of services and/or general and administrative expenses attributable to the Corporation’s PSIMedica business unit in fiscal 2005 from the Corporation’s Net Revenues and cost of services and/or general and administrative expenses as reported on the Corporation’s audited consolidated financial statements for such fiscal year.

C.Bonus for Class I employee participants

In the event that Operating Income as a percentage of Net Revenues for fiscal 2005 equals or exceeds 9%, each Class I employee participant will be entitled to be paid a bonus equal to the following percentage of his annual gross wages for calendar 2005 (excluding commissions, bonuses,option exercise income, auto expense charge-backs and any unearned income).

If the Operating Income
Percentage of Net Revenues
Is Equal to or		And		Bonus as a Percentage
Greater Than		Less Than		of Annual Gross Wages
9.00	%	9.25	%	5	%
9.25	%	9.50	%	10	%
9.50	%	10.00	%	15	%
10.00	%	10.50	%	20	%
10.50	%	11.00	%	25	%
11.00	%	11.50	%	30	%
10.50	%	12.00	%	35	%
12.00	%	12.50	%	40	%
12.50	%	13.00	%	45	%
13.00	%	—		50	%

D.            Bonus for Class II employee participants

In the event that Adjusted Operating Income as a percentage of Adjusted Net Revenues for fiscal 2005 equals or exceeds 9%, each Class II employee participant will be entitled to be paid a bonus equal to the following percentage of his or her annual gross wages for calendar 2005 (excluding commissions, bonuses, option exercise income, auto expense charge-backs and any unearned income.)

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If the Adjusted Operating Income
Percentage of Adjusted Net Revenues
Is Equal to or		And		Bonus as a Percentage
Greater Than		Less Than		of Annual Gross Wages
9.00	%	9.25	%	5	%
9.25	%	9.50	%	10	%
9.50	%	10.00	%	15	%
10.00	%	10.50	%	20	%
10.50	%	11.00	%	25	%
11.00	%	11.50	%	30	%
10.50	%	12.00	%	35	%
12.00	%	12.50	%	40	%
12.50	%	13.00	%	45	%
13.00	%	—		50	%

E.The maximum bonus to be paid pursuant to the Plan to any Class I or Class II employee participant will not exceed 50% of his or her annual gross wages for calendar 2005 (excluding commissions, bonuses, option exercise income, auto expense charge-backs or any unearned income),regardless of the amount of Operating Income or Adjusted Operating Income. Furthermore, to qualify for a bonus under the Plan, the employee participant must be a full-time employee of the Corporation on the last day of fiscal 2005.

2

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We hereby consent to the incorporation by reference in the registration statement of Bio-Reference Laboratories, Inc. on Form S-8 (File No. 333-111578) or our report dated December 17, 2005 on our audit of the consolidated financial statements of Bio-Reference Laboratories, Inc. and its subsidiaries as of October 31, 2005 and 2004 and for the three fiscal years then ended, which report is included in Bio-Reference Laboratories, Inc.’s Annual Report on Form 10-K for the year ended October 31, 2005.

MOORE STEPHENS, P.C.

Certified Public Accountants

Cranford, New Jersey

January 11, 2006

1

EX-31

Exhibit 31

REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Bio-Reference Laboratories, Inc. (the “Company”), including its Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes policies and procedures that:

•pertain to the maintenance of records that, in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of American, and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and

•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the consolidated financial statements.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of October 31, 2005. Management based this assessment on criteria for effective internal control over financial reporting described in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operating effectiveness of its internal control over financial reporting.

Based on this assessment, management has determined that the Company’s internal control over financial reporting as of October 31, 2005 is effective. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of October 31, 2005 has been audited by Moore Stephens, P.C., an independent registered public accounting firm, as stated in their report attached to this filing, which expresses unqualified opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting as of October 31, 2005.

1

EX-31.1

Exhibit 31.1

CHIEF EXECUTIVE OFFICER CERTIFICATION

I, Marc D. Grodman, Chief Executive Officer of Bio-Reference Laboratories, Inc. (the “Company”) do hereby certify that:

I have reviewed this annual report on Form 10-K of the Company for the fiscal year ended October 31, 2005

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report;

The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report was being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purpose in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this annual report on Form 10-K for the fiscal year ended October 31, 2005, our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

(d)disclosed in this annual report on Form 10-K, any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (namely the fourth quarter of fiscal 2005) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors:

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Dated:   January 12, 2006

/S/ Marc D. Grodman

Marc D. Grodman

Chief Executive Officer

Bio-Reference Laboratories, Inc

1

EX-31.2

Exhibit 31.2

CHIEF EXECUTIVE OFFICER CERTIFICATION

I, Sam Singer, Chief Financial Officer of Bio-Reference Laboratories, Inc. (the “Company”) do hereby certify that:

I have reviewed this annual report on Form 10-K of the Company for the fiscal year ended October 31, 2005

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report;

The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report was being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purpose in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this annual report on Form 10-K for the fiscal year ended October 31, 2005, our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

(d)disclosed in this annual report on Form 10-K, any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (namely the fourth quarter of fiscal 2005) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors:

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Dated:   January 12, 2006

/S/ Sam Singer

Sam Singer

Chief Financial Officer

Bio-Reference Laboratories, Inc.

1

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Marc D. Grodman, Chief Executive Officer of Bio-Reference Laboratories, Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(a)the Annual Report on Form 10-K of the Company for the fiscal year ended October, 31 2005, which this certification accompanies (the “Periodic Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(b)based on my knowledge, the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: January 12, 2006
	/S/ Marc D. Grodman
	Marc D. Grodman
	Chief Executive Officer
	Bio-Reference Laboratories, Inc.

1

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION

OF THE SARBANES-OXLEY ACT OF 2002

I, Sam Singer, Chief Financial Officer of Bio-Reference Laboratories, Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(a)the Annual Report on Form 10-K of the Company for the fiscal year ended October 31 2005, which this certification accompanies (the “Periodic Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(b)based on my knowledge, the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: January 12, 2006
	/S/ Sam Singer
	Sam Singer
	Chief Financial Officer
	Bio-Reference Laboratories, Inc.

1