================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)

[X]       Annual  Report  Pursuant  to  Section  13 or 15(d)  of the  Securities
          Exchange Act of 1934
For the fiscal year ended December 31, 1996
[ ]       Transition  Report  Pursuant to Section 13 or 15(d) of the  Securities
          Exchange Act of 1934

For the transition period from ___________________ to _______________________
Commission file number 000-21615 .





                             BOSTON BIOMEDICA, INC.
                             ----------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)





              MASSACHUSETTS                                  04-2652826
              -------------                                  ----------
     (State or other Jurisdiction of                      (I.R.S. Employer
        Incorporation or Organization)                   Identification No.)

            375 WEST STREET,
     WEST BRIDGEWATER, MASSACHUSETTS                            02379
     -------------------------------                            -----
(Address of Principal Executive Offices)                      (zip code)


Registrant's telephone number, including area code    (508) 580-1900
                                                      --------------

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OFTHE ACT:
                                      None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                     Common Stock, par value $.01 per share

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

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

         The aggregate  market value of the voting stock held by  non-affiliates
of the  Registrant at February 28, 1997 was  $30,074,188.  The aggregate  market
value was  computed  by  reference  to the closing  price as of that date.  (For
purposes of calculating this amount only, all directors,  executive officers and
greater than 10% shareholders of the Registrant are treated as affiliates.)

         The  number of shares  outstanding  of the  Registrant's  only class of
common stock as of February 28, 1997 was 4,378,157.

                       DOCUMENTS INCORPORATED BY REFERENCE
                       -----------------------------------

         Portions of the  Registrant's  definitive  Proxy Statement for its 1997
annual meeting,  are incorporated by reference into Part III of this Report, and
portions of the Registrants Registration Statement on Form S-1 (Registration No.
333-10759) are incorporated by reference into Part IV of this Report.


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                                     PART I


ITEM 1. BUSINESS


         The Company is a  worldwide  provider of  proprietary  quality  control
products  for use with in vitro  diagnostic  test  kits  ("test  kits")  for the
detection,  analysis and  monitoring of  infectious  diseases,  including  AIDS,
Hepatitis  and Lyme  Disease.  These  products are used to develop test kits, to
permit the monitoring of laboratory equipment and personnel,  and to help ensure
the  accuracy of test  results.  The  Company's  products are derived from human
plasma and serum using proprietary manufacturing processes. The Company believes
its Quality Control Panel products are viewed as the current  industry  standard
for the  independent  assessment of the  performance  of HIV and Hepatitis  test
kits. The Company also manufactures  diagnostic test kit components and provides
specialty  laboratory   services,   including  clinical  trials.  The  Company's
customers include test kit manufacturers,  regulatory  agencies and end-users of
test kits such as blood banks,  hospital  laboratories  and  clinical  reference
laboratories.  Currently the Company's  products are used in connection with the
detection of more than 15  infectious  diseases,  and its  specialty  laboratory
services are used in connection with the detection of over 100 such diseases.


         The Company's  strategy is to leverage its scientific  capabilities  in
microbiology,  immunology,  virology, and molecular biology to (i) capitalize on
the emerging  end-user  market,  (ii) develop new products and  services,  (iii)
enhance  technical  leadership,   (iv)  capitalize  on  complementary   business
operations, and (v) pursue strategic acquisitions and alliances.


INDUSTRY OVERVIEW


         Infectious Disease Test Kits and Testing Methods.  Test kits contain in
one  compact  package  all  of the  materials  necessary  to  run a test  for an
infectious  disease.   These  include  the  disposable  diagnostic   components,
instructions,  and reaction  mixing  vessels  (generally  96-well plates or test
tubes)  which  are  coated  with  the  relevant   infectious  disease  antigens,
antibodies  or other  materials.  To perform the test,  either a technician or a
specially  designed  instrument  typically mixes the solutions from the test kit
with human blood  specimens  in a specific  sequence  according  to the test kit
instructions.  The mixture must then "incubate" for up to 18 hours, during which
time a series of biochemical  reactions trigger signals  (including color, light
and  radioactive  count)  which  indicate  the presence or absence and amount of
specific markers of the particular disease in the specimen.


         Test kits generally employ one of three methods for infectious  disease
testing: microbiology, immunology or molecular biology. Traditional microbiology
tests use a growth medium that enables an organism, if present, to replicate and
be detected visually.  Immunology tests detect the antigen or antibody, which is
an  indicator  (marker)  of the  pathogen  (e.g.,  virus,  bacterium,  fungus or
parasite).  Molecular diagnostic methods,  such as the polymerase chain reaction
("PCR"),  test for the presence of nucleic acids (DNA or RNA) which are specific
to a particular pathogen.


         Most  infectious   disease  tests  currently  use   microbiological  or
immunological  methods.  However,  molecular diagnostic methods are increasingly
being used in research laboratories worldwide and the Company believes that soon
they will be accepted for routine use in the clinical  laboratory  setting.  The
Company believes that the advent of molecular diagnostic methods will complement
rather  than  diminish  the need to test by  microbiological  and  immunological
procedures,  because different test methods reveal different information about a
disease  state.  The Company  anticipates  that as new test methods  become more
widespread, they will account for a larger portion of the Company's business.


         Quality  Control for In Vitro  Diagnostic Test Kits.  Customers  employ
quality control  products in order to develop and use test kits (both infectious
and non-infectious).  Quality control products help ensure that test kits detect
the  correct  analyte   (specificity),   detect  it  the  same  way  every  time


                                      -2-







(reproducibility  or  precision),  and  detect  it  at  the  appropriate  levels
(sensitivity).  The  major  element  of  this  quality  control  process  is the
continuous  evaluation  of test kits by the testing of  carefully  characterized
samples that resemble the donor or patient samples routinely used with the test.
Quality  control  is used in both  the  infectious  and  non-infectious  disease
markets, although currently it is not as prevalent among end-users of infectious
disease test kits.


         The market for quality control products consists of three main customer
segments:  (i) manufacturers of test kits, (ii) regulatory agencies that oversee
the  manufacture  and use of test kits and (iii) end-users of test kits, such as
hospitals, clinical reference laboratories and blood banks.


COMPANY PRODUCTS AND SERVICES


OVERVIEW


         The  Company  offers  three  product   groups  in  infectious   disease
diagnostics:  Quality  Control  Panels,  Accurun(TM) Run Controls and Diagnostic
Components.  These products are used  throughout the entire test kit life cycle,
from initial research and development,  through the regulatory  approval process
and test  kit  production,  to  training,  troubleshooting  and  routine  use by
end-users.  The  Company's  Quality  Control  Panels,  which combine human blood
specimens with comprehensive  quantitative data useful for comparative analysis,
help ensure that test kits detect the correct analyte  (specificity),  detect it
the same way every  time  (reproducibility),  and  detect it at the  appropriate
levels (sensitivity). The Company's Accurun(TM) Run Controls enable end-users of
test kits to confirm the  validity of results by  monitoring  test  performance,
thereby minimizing false negative test results and improving error detection. In
addition, the Company provides Diagnostic Components, which are custom processed
human plasma and serum products, to test kit manufacturers.


         The  Company's  specialty  clinical  laboratory  services  include both
routine and sophisticated infectious disease testing in microbiology, immunology
and  molecular  biology.  The Company  seeks to focus its  specialty  laboratory
services in advanced areas of infectious disease testing,  and provides contract
research and clinical trials for domestic and foreign test kit manufacturers.


PRODUCTS


         The Company manufactures its products from human plasma and serum which
are obtained  from  nonprofit and  commercial  blood  centers,  primarily in the
United  States.   The  Company  has  acquired  and  developed  an  inventory  of
approximately  50,000 individual blood units and specimens (with volumes ranging
from 1 ml to 800 ml) which provides most of the raw material for its products.


         QUALITY CONTROL PANELS


         Quality Control Panels consist of blood products  characterized  by the
presence or absence of  specific  disease  markers  and a Data Sheet  containing
comprehensive  quantitative data useful for comparative analysis.  These Quality
Control  Products are designed for measuring  overall test kit  performance  and
laboratory proficiency,  as well as for training laboratory  professionals.  The
Company's Data Sheets,  containing  comprehensive  quantitative  data useful for
comparative  analysis,  are an integral  part of its Quality  Control  Products.
These Data  Sheets are  created as the result of  extensive  testing of proposed
panel  components  in both  the  Company's  laboratories  and at  major  testing
laboratories on behalf of the Company in the United States and Europe, including
national  public health  laboratories,  research and clinical  laboratories  and
regulatory agencies. These laboratories are selected based on their expertise in
performing the appropriate tests on a large scale in an actual clinical setting;
this testing process provides the Company's  customers with the benefit that the
Quality  Control Panels they purchase from the Company have  undergone  rigorous
testing  in  actual  clinical  settings.  In  addition,   the  Company  provides
information on its Data Sheets on the reactivity of panel  components in all FDA
licensed test

                                      -3-





kits and all leading European test kits for the target pathogen,  as well as for
all other appropriate markers of this pathogen.  For example,  the Company's HIV
panel Data Sheets  include  anti-HIV by IFA, ELISA and western blot; HIV antigen
by ELISA; and HIV RNA by several molecular diagnostic procedures.  The Company's
Data Sheets require  significant time and scientific  expertise to prepare.  The
following table describes the types of Quality Control Panel products  currently
offered by the Company.

<TABLE>
<CAPTION>

                                          QUALITY CONTROL PANEL PRODUCTS

-------------------------------- ----------------------------------- --------------------------------- ---------------------

PRODUCT LINE                     DESCRIPTION                         USE                               CUSTOMERS
-------------------------------- ----------------------------------- --------------------------------- ---------------------

<S>                             <C>                                  <C>                               <C>
Seroconversion Panels            Plasma samples collected from a     Compare the clinical              Test kit
                                 single individual overra specific   sensitivity of competing          manufacturers and
                                 time period showing conversion      manufacturers' test kits,         regulators.
                                 from negative to positive for       enabling the user to assess the
                                 markers of an infectious            sensitivity of a test in
                                 disease.-                           detecting a developing
                                                                     antigen/antibody.
-------------------------------- ----------------------------------- --------------------------------- ---------------------

Performance Panels               A set of 10 to 50 serum and         Determine test kit performance    Test kit
                                 plasma samples collected from       against all expected levels of    manufacturers and
                                 many different individuals and      reactivities in the evaluation    regulators.
                                 characterized for the presence or   of new, modified and improved
                                 absence of a particular disease     test methods.
                                 marker.
-------------------------------- ----------------------------------- --------------------------------- ---------------------

Sensitivity Panels               Precise dilutions of human plasma   Evaluate the low-end analytical   Test kit
                                 or serum human plasma or serum      sensitivity of a test kit.        manufacturers
                                 containing a known amount of an
                                 infectious disease marker as
                                 calibrated against international
                                 standards.
-------------------------------- ----------------------------------- --------------------------------- ---------------------

Qualification Panels             Dilutions of human plasma or        Demonstrate the consistent        Clinical reference
                                 serum manifesting a full range of   lot-to-lot performance of test    laboratories, blood
                                 reactivities in test kits for a     kits, troubleshoot problems,      banks, and hospital
                                 specific marker.                    evaluate proficiency, and train   laboratories
                                                                     laboratory technicians.
-------------------------------- ----------------------------------- --------------------------------- ---------------------

OEM Panels                       Custom-designed Qualification       Train laboratory personnel on     Custom designed
                                 Panels for regulators and test      new test kits or equipment.       with test kit
                                 kit manufacturers for                                                 manufacturers and
                                 distribution to customers or for                                      regulators as an
                                 internal use.                                                         end-user product or
                                                                                                       for internal use.
-------------------------------- ----------------------------------- --------------------------------- ---------------------
</TABLE>

         The  Company  first  introduced  Quality  Control  Panels in 1987.  The
Company  currently offers a broad range of Quality Control Panels that address a
variety of needs of  manufacturers  and regulators of test kits as well as blood
banks,  hospitals,  clinical  laboratories and other  end-users.  Prices for the
Company's  quality control  seroconversion,  performance and sensitivity  panels
range from $450 to $2,000 each, and its  qualification and OEM panels range from
$100 to $200 per panel.


                                      -4-




                  Seroconversion  and Performance Panels are comprised of unique
and rare plasma specimens  obtained from individuals  during the short period of
time when the markers for a particular  disease are converting  from negative to
positive.  As a result,  the quantity of any such panel is limited,  so that the
Company must replace these panels as they sell out with another panel  comprised
of different  specimens  equally unique and rare. The Company  believes that its
inventory  and  relationships  with  blood  centers  affords  it  a  competitive
advantage in acquiring  such plasma for  replacement  panels and  developing new
products to meet market demand.  There can be no assurance that the Company will
be able to continue to obtain such specimens.


         Quality Control Panels currently span the immunologic  markers for AIDS
(i.e.,  HIV),  Hepatitis B and C, Lyme Disease and ToRCH  (Toxoplasma,  rubella,
cytomegalovirus  and herpes simplex virus).  New introductions this year include
molecular Performance Panels for HBV and HCV,  qualification panels for HIV, HBV
and HCV, and additional Seroconversion Panels for HIV, HBV, and HCV.


         ACCURUN(TM) RUN CONTROLS


         End-users  of test kits utilize Run Controls to confirm the validity of
results by monitoring test performance,  thereby  minimizing false negative test
results and  improving  error  detection.  Run  controls  consist of one or more
specimens of known  reactivity  that are tested  together  with donor or patient
samples in an assay to  determine  whether  the assay is  performing  within the
manufacturer's  specifications.  Clinical  laboratories  generally process their
patient  specimens in a batch processing  mode, and typically  include 25 to 100
specimens to be tested in each batch (a "run").  Large  laboratories may perform
several runs per day, while smaller  laboratories  may perform only a single run
each day, or sometimes only several runs per week. A clinical laboratory using a
Run Control will place the Run Control  product in a testing well or  test-tube,
normally used for a specimen,  and will test it in the same manner that it tests
the donor or patient specimens. It will then compare the results generated to an
acceptable range, determined by the user, to measure whether the other specimens
are  being  accurately  tested.  The  Run  Control  result  must be  within  the
acceptable range to be considered  valid. This is often tracked visually using a
Levey-Jennings chart.  Depending upon a particular  laboratory's quality control
practices,  it may use several  Run  Controls on each run or it may simply use a
Run Control in a single run at the beginning and end of the day.


         The  Company's  Accurun(TM)  family  of  products  is  targeted  at the
emerging  market of  end-users  of  infectious  disease  test kits.  The Company
believes  that it offers  the most  comprehensive  line of Run  Controls  in the
industry,  and that its Accurun(TM)  products,  in combination  with its Quality
Control  Panel  products,  provide an  extensive  line of  products  for quality
assurance in  infectious  disease  testing.  The Company  intends to continue to
expand its line of Accurun(TM)  products,  thereby  providing its customers with
the convenience and cost  effectiveness of a single supplier for independent run
controls.


         The Company  introduced its first four Accurun(TM) Run Control products
in the fourth  quarter of 1993 and has since  developed and released for sale an
additional  25  Accurun(TM)  products.  A limited  number of these  products are
available for diagnostic purposes;  the others currently are limited to research
use. Current Accurun(TM) Run Control products range in price from $15 to $45 per
milliliter and are described in the following table.



                                      -5-

<TABLE>
<CAPTION>


                                               ACCURUN(TM) RUN CONTROLS

------------------------------- -------------------------------- ---------------------- ------------------------------


         PRODUCT LINE                     DESCRIPTION              CURRENT NUMBER OF          PRIMARY CUSTOMERS
                                                                       PRODUCTS
------------------------------- -------------------------------- ---------------------- ------------------------------
<S>                              <C>                               <C>                  <C>

   Accurun(TM)1-99              Multi-marker Run Control                 4              Blood Banks
                                for immunological tests
------------------------------- -------------------------------- ---------------------- ------------------------------

   Accurun(TM)100-199           Single-marker Run Control                18             Hospitals and clinical
                                for immunological tests                                 reference laboratories
------------------------------- -------------------------------- ---------------------- ------------------------------

   Accurun(TM)200-299           Multi-marker Run Control                 1              Research and specialty
                                for molecular tests                                     laboratories
------------------------------- -------------------------------- ---------------------- ------------------------------

   Accurun(TM)300-399           Single-marker Run Control                3              Research and specialty
                                for immunological tests                                 laboratories
------------------------------- -------------------------------- ---------------------- ------------------------------

   Accurun(TM)800-899           Negative Run Control for                 3              All laboratories
                                immunological and molecular
                                tests
------------------------------- -------------------------------- ---------------------- ------------------------------
</TABLE>




         The Company has received  510(k)  clearance  from the FDA to market its
Accurun  1(R)  line,  for  diagnostic  purposes,  and  intends to apply for such
clearance for the remainder of its  Accurun(TM)  products.  All of the Company's
Accurun Run Controls will require FDA premarket  clearance or approval  prior to
being marketed for diagnostic  use. An application  for clearance for diagnostic
use for one additional  Accurun(TM) product has been submitted by the Company to
the FDA, and the Company  anticipates  that  applications  for  approximately 16
additional Accurun(TM) products will be prepared and submitted to the FDA by the
end of 1997.  Failure to  obtain,  or delays in  obtaining,  such  clearance  or
approval would  adversely  affect the Company's  strategy of capitalizing on the
end-user market.


         DIAGNOSTIC COMPONENTS


         Diagnostic   Components  are  the  individual   materials  supplied  to
infectious  disease test kit  manufacturers  and combined  (often after  further
processing by the manufacturer) with other materials to become the various fluid
components  of the  manufacturer's  test kit.  The Company  supplies  Diagnostic
Components  in four  product  lines:  Normal Human  Plasma,  Normal Human Serum,
Basematrix,  and  Characterized  Disease  State Serum and Plasma.  Normal  Human
Plasma  and Serum are both the clear  liquid  portion  of blood  which  contains
proteins,  antibodies,  hormones  and other  substances,  except  that the Serum
product  has  had  the  clotting  factors  removed.  Basematrix,  the  Company's
proprietary  processed  serum product that has been  chemically  converted  from
plasma, is designed to be a highly-stable, lower cost substitute for most Normal
Human  Serum and Plasma  applications.  Characterized  Disease  State  Serum and
Plasma are collected  from  specific  blood donors  pre-selected  because of the
presence or absence of a particular disease marker. The Company often customizes
its  Diagnostic  Components by further  processing  the raw material to meet the
specifications of the test kit manufacturer. The Company's Diagnostic Components
range in price  from  $0.25 to $60 per  milliliter,  with the  majority  selling
between $0.50 and $5 per milliliter.



                                      -6-



SERVICES


         The Company  seeks to focus its specialty  laboratory  services in both
the clinical  reference  laboratory  testing and advanced  research  areas.  The
Company  concentrates its services in those areas of infectious  disease testing
which  are  complementary  to  its  quality  control  and  diagnostic   products
businesses.


         Specialty  Clinical  Laboratory   Testing.   The  Company  operates  an
independent  specialty  clinical  laboratory  which  performs  both  routine and
sophisticated  infectious  disease  testing  in  microbiology,   immunology  and
molecular  biology,  with special  emphasis in AIDS,  Viral  Hepatitis  and Lyme
Disease.  The  Company's  specialty  clinical  laboratory  combines  traditional
microbiology,  advanced immunology, and current molecular diagnostic techniques,
such as PCR, to detect and identify  microorganisms,  their antigens and related
antibodies,  and their  nucleic  acids (i.e.,  DNA and RNA).  Customers  include
physicians, clinics, hospitals and other clinical/research laboratories.


         Contract  Research.  The Company offers a variety of contract  research
services in molecular  biology,  cell  biology and  immunology  to  governmental
agencies,   diagnostic  test  kit  manufacturers  and  biomedical   researchers.
Molecular  biology  services  include DNA  sequencing,  recombinant DNA support,
probe  labeling  and custom PCR assays.  Cell  biology and  immunology  services
include sterility testing,  virus infectivity  assays,  cultivations of virus or
bacteria from clinical specimens,  preparation of viral or bacterial antigens or
nucleic acids, and production of antibodies.  The Company is currently providing
research  services for assessment of the efficiency of candidate HIV vaccines in
a monkey model system under two separate  contracts with the National  Institute
for Allergy and Infectious Disease ("NIAID"),  a part of the National Institutes
of Health ("NIH").  Each of these contracts has a two year term which expires in
September  1997.  In  addition,  since  1983,  the  Company,  through  its  BTRL
subsidiary,  has  provided  blood  processing  and  repository  services for the
National Cancer Institute ("NCI"), also a part of the NIH. The repository stores
over 2,000,000 specimens and processes or ships up to several thousand specimens
per week in support of various NIH cancer and virus research programs. A new one
year NCI repository contract was signed in February 1997 which includes four one
year renewal options  exercisable by NCI. The total value of the contract in the
first year is $916,000, and including all options, is $4.8 million. There can be
no assurance that any of these options will be exercised.


         Clinical Trials.  The Company conducts clinical trials for domestic and
foreign test kit manufacturers.  Test kit manufacturers must conduct such trials
to collect data for  submission  to the United  States FDA and other  regulatory
agencies.  By  providing  this  service,  the Company is able to maintain  close
contact with test kit manufacturers and regulators,  and is able to evaluate new
technologies  in various stages of  development.  The Company  believes that the
reputation of its laboratory and scientific  staff,  its large number of Quality
Control Panels,  and its inventory of  characterized  serum and plasma specimens
assist the Company in marketing its clinical  trial  services to its  customers.
The  Company has  performed  clinical  trials for a number of United  States and
foreign  test kit  manufacturers  seeking  to  obtain  FDA  approval  for  their
infectious disease test kits.


         Drug Screening  Program.  As a subcontractor for an NIH AIDS grant held
by the University of North Carolina at Chapel Hill, the Company has  established
an anti-HIV drug  screening  program to test a large number of natural  products
(largely plant derivatives) to determine whether they inhibit HIV replication in
an in vitro assay system. These in vitro assays are also offered as a service to
researchers  and  pharmaceutical  companies  who wish to test various  candidate
anti-viral agents for anti-HIV activity.



                                      -7-



RESEARCH AND DEVELOPMENT


         The  Company's  research  and  development  effort  is  focused  on the
development of (i) new and improved  Quality  Control  Products for the emerging
end-user  market,  (ii) new products for existing  customers,  (iii)  Diagnostic
Components  for use with  test  kits for  both  new test  methodologies  and new
diseases,  and (iv)  infectious  disease  testing  services  using PCR and other
amplification  assays for AIDS,  Viral  Hepatitis,  Lyme Disease and  Chlamydia,
among  others.  The Company has  approximately  20 full or  part-time  employees
dedicated to its research and development effort. For 1996 the Company increased
spending on research and  development  as a percentage  of revenues  compared to
1995 and expects to continue to increase  such  expenditures  as a percentage of
revenues for the next several years. See  "Management's  Discussion and Analysis
of Financial  Condition and Results of Operations -- Results of Operations." The
Company's   research   scientists   work  closely  with  sales,   marketing  and
manufacturing  personnel  to identify  and  prioritize  the  development  of new
products and services.


         The   Company's   product   development   activities   center   on  the
identification  and  characterization  of materials for the  manufacture  of new
Quality Control Products and the replacement of sold-out products.  During 1996,
the Company introduced 30 new Seroconversion,  Performance and Sensitivity Panel
products as well as 25 new Accurun(TM) Run Controls;  in addition,  during 1996,
the Company released six Qualification Panel products. The Company is developing
new Quality Control  Products for use with molecular  diagnostic  tests for HIV,
HCV and HBV.  Recently  the Company  expanded its Quality  Control  Product line
beyond the retrovirus and Viral Hepatitis  diagnostics  area to include sexually
transmitted diseases (e.g., Syphilis), tick-borne diseases (e.g., Lyme Disease),
and respiratory and other infections  (e.g.,  Tuberculosis) and is continuing to
develop new Quality Control  Products for these and other diseases.  The Company
has   increased  the  number  of  Quality   Control   Products  it  offers  from
approximately 20 in 1990 to approximately 191 products in 1996.


         The Company is also  developing  new and  improved  infectious  disease
specialty  tests for Lyme Disease and other  tick-borne  diseases for use in its
specialty laboratory business.  The Company is also pursuing new applications of
PCR technology to infectious disease  diagnostics,  such as amplification assays
for the pathogens of AIDS, Viral Hepatitis,  Lyme Disease and Chlamydia, and for
the direct detection of other infectious agents in blood, tissues and other body
fluids.


         From time to time in the past,  the Company has funded a portion of its
research and development activities from grants provided by various agencies and
departments of the U.S. government. See "-- Services."


STRATEGIC ALLIANCES

         University  of North  Carolina at Chapel Hill.  The Company is directly
supporting  a drug  discovery  program  at UNC,  in which a  full-time  research
scientist is working to develop synthetic derivatives of anti-HIV compounds that
have been  discovered  pursuant to the Company's joint  collaboration  with UNC.
This  research  scientist is also working to  introduce  modifications  to these
derivatives that would make them more soluble,  less toxic, or otherwise enhance
their anti-viral properties. UNC has licensed to the Company exclusive worldwide
rights to three series of patent  applications filed by the Company and UNC with
respect  to  three  classes  of  anti-HIV  compounds.  Two such  compounds  have
exhibited  therapeutic indices in in vitro test model systems in excess of those
recorded  for AZT under  comparable  test  conditions.  The Company is expending
approximately  $100,000 per year for research and development  relating to these
compounds.  In  addition,  under this  license,  the Company  will also have the
rights to any new anti-HIV  compounds or derivatives  developed in the course of
this  sponsored  research,  provided  the  Company  obtains  certain  regulatory
approvals from the FDA. See "-- Services."


                                      -8-





         Ajinomoto  Co.,  Inc.  The  Company  entered  into  an  agreement  with
Ajinomoto  Co., Inc. in October 1995 pursuant to which the Company is performing
research regarding among other things,  whether tests for certain amino acids in
plasma  can be used to  determine  a person's  immune  status,  particularly  in
chronic  fatigue  syndrome.  This project is funded by Ajinomoto and has a three
year budget of approximately $1,000,000. Discoveries and inventions arising from
the research will be owned by Ajinomoto,  but the Company has the right of first
refusal to obtain  certain  exclusive  licenses  from  Ajinomoto of any patented
technology  arising  from the  research.  The  Company  is  entitled  to certain
royalties  based  upon a  percentage  of sales of  products  arising  out of the
research. This agreement expires in September 1998.


         BioSeq,  Inc. In October  1996,  the Company  entered  into a strategic
alliance  with  BioSeq,  Inc.  an  early  stage  biotechnology  company  that is
developing a technology that may,  through the use of pressure,  be able to more
precisely control chemical reactions.  The Company believes that this technology
may be useful for sequencing,  synthesizing and characterizing nucleic acids and
proteins, which may then allow for the more precise identification of infectious
disease agents. See also Note 4 to the Company's Notes to Consolidated Financial
Statements in Item 8 hereunder  regarding  the  Company's  investment in BioSeq,
Inc.


SALES AND MARKETING


         The Company's sales and marketing efforts are directed by a Senior Vice
President of Sales and Marketing  who  supervises 18 sales people and four other
full-time sales and marketing employees.


         The Company's  marketing  strategy is focused upon addressing the needs
of its customers in the infectious  disease testing market throughout the entire
test  kit  life-cycle,  from  initial  research  and  development,  through  the
regulatory   approval   process   and  test   kit   production,   to   training,
troubleshooting  and routine  use by  end-users  such as clinical  laboratories,
hospitals and blood banks.


         The Company recently has begun to focus its sales and marketing efforts
on the emerging  end-user  market for quality  control  products for  infectious
disease test kits.  To promote this  objective,  the Company has  implemented  a
major  marketing  platform,  known as "Total Quality System"  ("TQS").  TQS is a
package of Quality  Control  Products,  including the Company's  Accurun(TM) Run
Controls,  which is designed to provide  test kit  end-users  with the  products
needed  in  an  overall  quality  assurance   program.   These  products  enable
laboratories  to  evaluate  each of the key  elements  involved  in the  testing
process:  the test kit,  laboratory  equipment  and  laboratory  personnel.  The
Company believes that TQS effectively addresses the need for end-users to ensure
the accuracy of their test  results.  The Company  intends to continue to expand
its sales and marketing  activities with respect to its Accurun(TM)  line of Run
Control products.


         The  Company's  products are currently  sold through a  combination  of
telephone,  mail,  third party  distributors  and limited  direct sales efforts.
Domestically,  products are sold through an in-house tele-sales group consisting
of seven sales  representatives,  two sales  managers and one  customer  service
representative.  Internationally,  the Company  distributes  its  products  both
directly and through 18 independent  distributors  located in Japan,  Australia,
South America,  Southeast Asia, Israel and Europe.  The Company's  international
sales  manager  oversees  the  Company's  foreign  distributors.  Export  sales,
including sales to  distributors,  for the years ended December 31, 1994,  1995,
and 1996 were $2.3 million, $3.1 million, and $3.9 million, respectively.


         The  Company's  Specialty  Clinical  Laboratory  Testing  services  are
marketed  primarily  through a direct  domestic sales force  consisting of seven
sales representatives managed by a sales director. The sales representatives are
located throughout the eastern and mid-western United States. They are supported
internally by a client services representative.


                                      -9-





         The Company  emphasizes high quality  products and services,  technical
knowledge,  and responsiveness to customer needs in its marketing activities for
both products and services. The Company educates its distributors, customers and
prospective  customers about its products through a series of detailed marketing
brochures,  technical  bulletins and  pamphlets,  press releases and direct mail
pieces.  These  materials are  supplemented  by  advertising  campaigns in major
industry  publications,  technical  presentations,  and  exhibitions  at  local,
national and international trade shows and expositions.


CUSTOMERS


         The Company's  customers for Quality  Control  Products and  Diagnostic
Components  comprise  three major  groups:  (i)  international  diagnostics  and
pharmaceutical  manufacturing  companies,  such as Abbott Diagnostics,  Behring,
Boehringer  Mannheim,  Chiron,  Fujirebio,  Hoffman LaRoche,  Ortho  Diagnostics
(Johnson and Johnson),  Sanofi Diagnostics and Sorin Biomedica;  (ii) regulatory
agencies  such as the United States FDA, the British  Public  Health  Laboratory
Service, the French Institut National de la Transfusion Sanguine, and the German
Paul Ehrlich  Institute;  and (iii)  end-users of diagnostic  test kits, such as
hospital  clinical  laboratories,  public health  laboratories  and blood banks,
including the Swiss Red Cross, United Blood Services and Kaiser Permanente.  The
Company's  Specialty  Clinical  Laboratory Testing services are sold to hospital
and  clinical  laboratories,  blood  banks,  researchers  and other  health care
providers.  The Company's Contract Research services are typically offered under
contracts  to  governmental  agencies,  diagnostic  test kit  manufacturers  and
biomedical researchers.


         The Company does not have  long-term  contracts  with its customers for
Quality Control Products and Diagnostic  Components.  The Company's products are
sold to its  customers  pursuant  to  purchase  orders for  discrete  purchases.
Although the Company  believes that its  relationships  with these customers are
satisfactory,  termination  of the Company's  relationship  with any one of such
customers could have a material adverse effect on the Company.


         During the fiscal  years 1994,  1995 and 1996,  sales to the  Company's
three largest  customers  accounted for an aggregate of approximately 20% of the
Company's net sales,  although the  customers  were not identical in each period
and no one customer accounted for more than 10% of net sales.


MANUFACTURING AND OPERATIONS


         The  Company  manufactures  and  assembles  substantially  all  of  its
products at its facility in West Bridgewater,  Massachusetts.  Raw materials are
acquired  from a variety of vendors and through a program of donor  recruitment,
donor  screening,   product  collection,   product  characterization  and  donor
management. All important materials have multiple sources of supply.


         The  Company  also  operates a  specialty  clinical  laboratory  in New
Britain,  Connecticut  and a research and  development  laboratory in Rockville,
Maryland. See "Item 2 -- PROPERTIES."


COMPETITION


         The  market  for  the   Company's   products  and  services  is  highly
competitive.  Many of the Company's  competitors are larger than the Company and
have  greater  financial,  research,  manufacturing,  and  marketing  resources.
Important  competitive  factors  for  the  Company's  products  include  product
quality,  price,  ease of use,  customer  service and  reputation.  In a broader
sense,  industry competition is based upon scientific and technical  capability,
proprietary  know-how,  access to adequate  capital,  the ability to develop and
market  products  and  processes,  the ability to attract  and retain  qualified
personnel,  and the  availability of patent  protection.  To the extent that the
Company's  products  and  services do not reflect  technological  advances,  the
Company's  ability to compete in those  products and services could be adversely
affected.


                                      -10-






         In the area of Quality Control  Products,  the Company  competes in the
United States primarily with NABI (formerly North American Biologicals, Inc.) in
Run Controls and Quality  Control Panel  products,  and Dade  International  and
Blackhawk Biosystems Inc. in Run Controls.  In Europe, the Netherlands Red Cross
has recently begun offering several Run Control and panel products.  The Company
believes that all three of these competitors currently offer a more limited line
of products than the Company, although there can be no assurance these companies
will not expand their product lines.


         In  the  Diagnostic  Components  area,  the  Company  competes  against
integrated plasma collection and processing companies such as Serologicals, Inc.
and NABI, as well as smaller,  independent plasma collection centers and brokers
of plasma products.  In the Diagnostic  Components area, the Company competes on
the  basis  of  quality,  breadth  of  product  line,  technical  expertise  and
reputation.


         In the Specialty  Clinical  Laboratory  Testing services portion of the
Company's business, it competes with large national reference laboratories, such
as LabCorp of America,  Corning  Clinical  Laboratories  and SmithKline  Beecham
Clinical  Laboratories,  as well as several independent  regional  laboratories,
hospital  laboratories,  government  contract  laboratories  and large  research
institutions.  The Company  believes that by focusing on the specialty  clinical
laboratory  market,  it is able to offer  its  customers  a  higher  value-added
service on the more complex  diagnostic tests than the larger national reference
laboratories.

INTELLECTUAL PROPERTY

         None of the Company's Quality Control Products or Diagnostic Components
have been  patented.  The Company has decided to hold as trade  secrets  current
technology  used to  prepare  Basematrix  and other  blood-based  products.  The
Company relies  primarily on a combination  of trade secrets and  non-disclosure
and confidentiality  agreements, and in certain limited circumstances,  patents,
to establish and protect its proprietary  rights in its technology and products.
There  can be no  assurance  that  others  will  not  independently  develop  or
otherwise acquire the same, similar or more advanced trade secrets and know-how.

         The Company has two United  States  patents and,  jointly with UNC, has
filed three series of United States and foreign patent applications  relating to
compounds,  pharmaceutical  compositions  and therapeutic  methods in connection
with the Company's drug discovery program at UNC.

         The Company has no reason to believe that its products and  proprietary
methods  infringe the  proprietary  rights of any other  party.  There can be no
assurance,  however,  that other parties will not assert  infringement claims in
the future.


GOVERNMENT REGULATION


         The manufacture and distribution of medical devices, including products
manufactured  by the Company that are intended for in vitro  diagnostic use, are
subject to extensive  government  regulation  in the United  States and in other
countries.


         In the  United  States,  the Food,  Drug,  and  Cosmetic  Act  ("FDCA")
prohibits the  marketing of in vitro  diagnostic  products  until they have been
cleared or approved by the FDA, a process that is time-consuming, expensive, and
uncertain.  In  vitro  diagnostic  products  must be the  subject  of  either  a
premarket  notification clearance (a "510(k)") or an approved premarket approval
application  ("PMA").  With  respect  to  devices  reviewed  through  the 510(k)
process,  a Company may not market a device for diagnostic use until an order is
issued by FDA finding the product to be  substantially  equivalent  to a legally
marketed  device.  A  510(k)  submission  may  involve  the  presentation  of  a
substantial  volume  of  data,  including  clinical  data,  and  may  require  a
substantial  period of review.  With respect to devices reviewed through the PMA
process,  a  Company  may not  market  a device  until  FDA has  approved  a PMA
application,  which must be supported by extensive data,  including  preclinical
and clinical trial data, literature,  and manufacturing information to prove the
safety and effectiveness of the device.


                                      -11-




         The Company's  Accurun Run Controls,  when marketed for diagnostic use,
have  been  classified  by  the  FDA  as  medical  devices.   The  Accurun  1(R)
Multi-Marker Run Control, which include eight analytes, has been cleared through
the 510(k)  process.  The  Company  expects  that,  in the  future,  most of its
products that need FDA premarket review also will be reviewed through the 510(k)
process. The FDA could, however,  require that some products be reviewed through
the PMA  process,  which  generally  involves  a longer  review  period  and the
submission  of more  information  to FDA.  There  can be no  assurance  that the
Company will obtain  regulatory  approvals on a timely basis, if at all. Failure
to obtain  regulatory  approvals  in a timely  fashion  or at all  could  have a
material adverse effect on the Company.


         All of the Company's  Quality Control  Products,  with the exception of
Accurun  1(R),  are marketed  "for  research use only," which do not require FDA
premarket  clearance or approval,  and not for diagnostic uses, which do require
FDA premarket clearance or approval. The labeling of these products limits their
use to research. It is possible, however, that some purchasers of these products
may use them for  diagnostic  purposes  despite the  Company's  intended use. In
these  circumstances,  the FDA could allege that these products should have been
cleared or  approved by the FDA prior to  marketing,  and  initiate  enforcement
action  against the Company,  which could have a material  adverse effect on the
Company.


         Once cleared or approved,  medical devices are subject to pervasive and
continuing  regulation  by  the  FDA,  including,   but  not  limited  to,  good
manufacturing  practices ("GMP")  regulations  governing testing,  control,  and
documentation;  and reporting of adverse experiences with the use of the device.
Ongoing  compliance  with GMP and other  applicable  regulatory  requirements is
monitored through periodic inspections. FDA regulations require agency clearance
or  approval  for  certain  changes  if they do or could  affect  the safety and
effectiveness of the device,  including,  for example,  new indications for use,
labeling  changes or changes in design or  manufacturing  methods.  In addition,
both before and after  clearance  or  approval,  medical  devices are subject to
certain  export and import  requirements  under the FDCA.  Product  labeling and
promotional  activities  are  subject  to  scrutiny  by the FDA and,  in certain
instances,  by the Federal  Trade  Commission.  Products  may be promoted by the
Company  only for their  approved  use.  Failure to comply  with these and other
regulatory  requirements  can result,  among other  consequences,  in failure to
obtain premarket approvals, withdrawal of approvals, total or partial suspension
of product  distribution,  injunctions,  civil penalties,  recall or seizures of
products and criminal prosecution.


         The Company  believes that its Quality Control Panels are not regulated
by the FDA because they are not intended for  diagnostic  purposes.  The Company
believes  that its  Diagnostic  Components,  which  are  components  of in vitro
diagnostic products, may be subject to certain regulatory requirements under the
FDCA and other laws administered by the FDA, but do not require that the Company
obtain a premarket  approval or clearance.  There can be no assurance,  however,
that  the  FDA  would  agree  or  that  the  FDA  will  not  adopt  a  different
interpretation  of the FDCA or other  laws it  administers,  which  could have a
material adverse effect on the Company.


         Laws and  regulations  affecting some of the Company's  products are in
effect in many of the  countries  in which the  Company  markets  or  intends to
market its products.  These  requirements  vary from country to country.  Member
states of the European  Economic  Area (which is composed of the European  Union
members and the European Free Trade  Association  members) are in the process of
adopting various product and services  "Directives" to address essential health,
safety, and environmental  requirements associated with the subject products and
services.  The "Directives"  cover both quality system  requirements (ISO Series
9000  Standards) and product and marketing  related  requirements.  In addition,
some  jurisdictions  have  requirements  related to marketing  of the  Company's
products.  There can be no assurance that the Company will be able to obtain any
regulatory  approvals  required to market its products on a timely basis,  or at
all. Delays in receipt of, or failure to receive such approvals,  or the failure
to comply with  regulatory  requirements in these countries or states could lead
to  compliance

                                      -12-






action,  which could have a material  adverse effect on the Company's  business,
financial condition, or results of operations.


         The Company's  service-related  business  (clinical trials,  infectious
disease testing,  and contract  research) is subject to other national and local
requirements.  The  Company's  facilities  are  subject to  review,  inspection,
licensure or accreditation by some states,  national professional  organizations
(College of  American  Pathologists),  and other  national  regulatory  agencies
(Health  Care  Financing  Administration).  Studies  to  evaluate  the safety or
effectiveness  of FDA regulated  products  (primarily  human and animal drugs or
biologics) must also be conducted in conformance with relevant FDA requirements,
including Good Laboratory Practice ("GLP") regulations, investigational new drug
or device  regulations,  Institutional  Review  Board  ("IRB")  regulations  and
informed consent regulations.


         The  Clinical  Laboratory   Improvement  Amendments  of  1988  ("CLIA")
prohibits  laboratories  from  performing  in vitro  tests  for the  purpose  of
providing information for the diagnosis,  prevention or treatment of any disease
or impairment  of, or the assessment of, the health of human beings unless there
is in effect for such laboratories a certificate  issued by the U.S.  Department
of Health and Human Services  ("HHS")  applicable to the category of examination
or procedure performed.


         The  Company  currently  holds  permits  issued by HHS (CLIA  license),
Centers for Disease Control and Prevention (Importation of Etiological Agents or
Vectors of Human Diseases),  the U.S. Department of Agriculture (Importation and
Transportation  of Controlled  Materials and Organisms and Vectors) and the U.S.
Nuclear  Regulatory  Commission (in vitro testing with byproduct  material under
general license, covering the use of certain radioimmunoassay test methods).


         The Company is also subject to  government  regulation  under the Clean
Water Act, the Toxic  Substances  Control Act,  the  Resource  Conservation  and
Recovery  Act,  the  Atomic  Energy  Act,  and other  national,  state and local
restrictions  relating to the use and disposal of biohazardous,  radioactive and
other hazardous  substances and wastes.  The Company is an exempt small quantity
generator  of hazardous  waste and has a U.S.  Environmental  Protection  Agency
identification  number.  The Company is also  registered  with the U.S.  Nuclear
Regulatory Commission for use of certain radioactive  materials.  The Company is
also subject to various state regulatory  requirements governing the handling of
and disposal of biohazardous,  radioactive and hazardous wastes. The Company has
never been a party to any environmental proceeding.


         Internationally,   some  of  the  Company's  products  are  subject  to
additional  regulatory  requirements,  which vary  significantly from country to
country.  Each country in which the Company's  products and services are offered
must  be  evaluated   independently   to  determine  the  country's   particular
requirements.  In foreign  countries,  the Company's  distributors are generally
responsible for obtaining any required government consents.


EMPLOYEES


         As of December 31, 1996 the Company  employed 191 persons,  all of whom
were located in the United States. Eighty of these persons were employed in West
Bridgewater,  Massachusetts,  62 in  New  Britain,  Connecticut,  and  49 at the
Rockville,  Maryland  site.  None of the  Company's  employees  is  covered by a
collective bargaining agreement. The Company believes that it has a satisfactory
relationship with its employees.



                                      -13-






EXECUTIVE OFFICERS OF THE REGISTRANT


         The  following  table sets forth the names,  ages and  positions of the
    current executive officers of the Registrant as of December 31, 1996:

<TABLE>
<CAPTION>

      NAME                                     AGE                   POSITION
      ----                                     ---                   --------
<S>                                            <C>                   <C>
    Richard T. Schumacher                      46                    President; Chief Executive Officer and
                                                                     Chairman of the Board

    Kevin W. Quinlan                           46                    Senior Vice President, Finance; Chief
                                                                     Financial Officer; Treasurer and Director

    Patricia E. Garrett, Ph.D.                 53                    Senior Vice President, Regulatory Affairs
                                                                     & Strategic Programs

    Mark M. Manak, Ph.D.                       45                    Senior Vice President, Research and
                                                                     Development

    Richard C. Tilton, Ph.D.                   60                    Senior Vice President, Specialty
                                                                     Laboratory Services

    Barry M. Warren                            49                    Senior Vice President, Sales & Marketing

    Ronald V. DiPaolo, Ph.D.                   52                    Vice President of Operations

</TABLE>




         Mr.  Schumacher,  the founder of the  Company,  has been the  President
since 1986, and Chief Executive  Officer and Chairman since 1992. Mr. Schumacher
served as the Director of  Infectious  Disease  Services  for  Clinical  Science
Laboratory, a New England-based medical reference laboratory, from 1986 to 1988.
From 1972 to 1985, Mr. Schumacher was employed by the Center for Blood Research,
a nonprofit medical research  institute  associated with Harvard Medical School.
Mr. Schumacher received a B.S. in zoology from the University of New Hampshire.


         Mr. Quinlan, a Director of the Company since 1986, has been Senior Vice
President,  Finance,  Treasurer, and Chief Financial Officer since January 1993.
From 1990 to December 1992, he was the Chief Financial Officer of ParcTec,  Inc.
a New  York-based  leasing  company.  Mr.  Quinlan  served as Vice President and
Assistant  Treasurer of American  Finance Group,  Inc. from 1981 to 1989 and was
employed  by Coopers & Lybrand  from 1975 to 1980.  Mr.  Quinlan is a  certified
public accountant and received a M.S. in accounting from Northeastern University
and a B.S. in economics from the University of New Hampshire.


         Dr.  Garrett  has been  Senior  Vice  President,  Regulatory  Affairs &
Strategic  Programs  since 1988.  From 1980 to 1987,  Dr.  Garrett served as the
Technical  Director  of  the  Chemistry  Laboratory,  Department  of  Laboratory
Medicine at the Lahey Clinic Medical  Center.  Dr. Garrett earned her Ph.D. from
the University of Colorado and was a postdoctoral  research associate at Harvard
University,  Oregon State University,  Massachusetts Institute of Technology and
the University of British Columbia.


         Dr. Manak has served as Senior Vice President, Research and Development
since 1992. From 1980 to 1992, he served as Senior Research Scientist, Molecular
Biology,  of Biotech  Research  Laboratories.  Dr. Manak  received his Ph.D.  in
biochemistry  from the  University of  Connecticut  and  completed  postdoctoral
research work in biochemistry/virology at Johns Hopkins University.


         Dr. Tilton has served as Senior Vice  President,  Specialty  Laboratory
Services  since the Company's  acquisition  of BBI Clinical  Laboratories,  Inc.
("BBICL")  in 1993 and was one of the  founders  of  BBICL,  where he  served as
President from 1989 to 1993. Dr. Tilton has 25 years of experience in university
hospital  clinical  microbiology  laboratories and is board certified in medical
and public health  microbiology.  Dr. Tilton  received his Ph.D. in microbiology
from the University of Massachusetts.


         Mr. Warren has served as Senior Vice President, Sales & Marketing since
1993.  From 1985 to 1993,  Mr. Warren  served as Group  Director of Marketing of
Organon  Teknika,  a manufacturer  of

                                      -14-






infectious  disease  reagents.  Mr. Warren received an M.A. in political science
from Loyola University of Chicago and a B.A. from Loyola University.


         Dr. DiPaolo has been Vice President of Operations  since 1993. Prior to
joining the Company, Dr. DiPaolo served as Vice President and General Manager of
the Biomedical Products Division of Collaborative  Research,  a medical research
products  company from 1986 to 1989. From 1975 to 1986 he was employed by DuPont
New England Nuclear, an in vitro test kit manufacturer. Dr. DiPaolo received his
Ph.D. in  biochemistry  from  Massachusetts  Institute of  Technology  and later
completed  postdoctoral  research  at the  Eunice  Shriver  Center  in  Waltham,
Massachusetts.


         Officers  are  elected by, and serve at the  pleasure  of, the Board of
Directors.


ITEM 2.  PROPERTIES.


         The  Company's  corporate  offices  and  manufacturing  facilities  are
located  in a two  story,  22,500  square  foot  building  in West  Bridgewater,
Massachusetts.  The Company  owns and  operates  this  building.  The Company is
currently  expanding the  manufacturing  capacity by approximately  7,500 square
feet,  and  believes  that  following  these  renovations,  its facility in West
Bridgewater will be sufficient to meet its foreseeable needs.


         The Company leases its laboratory facilities in Rockville, Maryland and
New Britain, Connecticut. The Rockville facility contains 21,000 square feet and
is occupied under a five-year  lease that is due to expire on June 30, 1997. The
Company is currently  considering  extending the lease for an additional period,
as well as relocating its laboratory. The New Britain facility has 15,000 square
feet,  most of which is dedicated  to  laboratory  space.  The lease is for five
years and is due to expire on July 30, 2000;  the Company has an option to renew
for an additional five years.


ITEM 3.  LEGAL PROCEEDINGS.


         There are no material legal proceedings  pending against the Company or
its subsidiaries.


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


         No matter was submitted  during the fourth  quarter of fiscal 1996 to a
vote of security holders of the Company.


                                     PART II


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


         The Company  completed an initial public  offering of its Common Stock,
$.01 par value,  (the "Common  Stock") on October 31, 1996.  The Common Stock is
listed on the NASDAQ  National  Market under the symbol  "BBII".  For the period
from October 31, 1996 through December 31, 1996, the high and low closing prices
of the Company's Common Stock on NASDAQ were 8 1/2 and 6 3/4, respectively.


         As of December 31, 1996,  there were 20,000,000  shares of Common Stock
authorized of which 4,378,157 shares of Common Stock were  outstanding,  held of
record by approximately 166 stockholders.


         The Company has not declared or paid any dividends on its Common Stock.
Payment of dividends  on Common Stock is  restricted  under the  Company's  loan
agreement with its bank.



                                      -15-






ITEM 6.  SELECTED FINANCIAL DATA

         The  statement  of income data for each of the fiscal years in the four
year period ended  December 31, 1996,  and the balance sheet data as of December
31, 1993, 1994, 1995 and 1996, have been derived from the consolidated financial
statements of the Company  which have been audited by Coopers & Lybrand  L.L.P.,
independent  accountants.  The  statement  of income data of the Company for the
fiscal year ended  December  31, 1992 and the balance  sheet data as of December
31, 1992 have been derived from consolidated financial statements of the Company
which  have been  audited by other  independent  public  accountants.  This data
should be read in conjunction with "Item 8"--"Consolidated  Financial Statements
and Supplementary Data", and "Item 7"--"Management's  Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere herein.


<TABLE>
<CAPTION>



                                                                YEAR ENDED DECEMBER 31,
                                                   --------------------------------------------------
                                                    1996       1995      1994       1993      1992
                                                                                   (2)(3)      (1)
                                                   --------   --------  --------   --------  --------
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED STATEMENT OF INCOME DATA:
<S>                                                <C>         <C>       <C>        <C>       <C>

REVENUE:
    Product sales                                  $ 8,470     $6,622    $5,982     $3,942    $2,955
    Services
                                                     7,039      5,649     4,741      5,215     1,680
                                                   --------   --------  --------   --------  --------
         Total revenue                              15,509     12,271    10,723      9,157     4,635
                                                   --------   --------  --------   --------  --------

COSTS AND EXPENSES:
    Cost of product sales                            4,252      3,564     3,194      2,088     1,638
    Cost of services                                 4,856      4,168     3,416      3,965     1,443
    Research and development                           797        375       469        279       222
    Selling and marketing                            2,188      1,340     1,192        894       353
    General and administrative                       2,401      2,316     2,047      1,619       745
                                                   --------   --------  --------   --------  -------
         Total operating costs and expenses         14,494     11,763    10,318      8,845     4,401
                                                   --------   --------  --------   --------  --------
         Income from operations                      1,015        508       405        312       234
Interest expense, net                                  213        336       244        179       113
                                                   --------   --------  --------   --------  --------
    Income before income taxes and                     802        172       161        133       121
      extraordinary item
Provision for income taxes                            (321)       (69)      (64)       (41)      (45)
                                                   --------   --------  --------   --------  --------
    Income before extraordinary item                   481        103        97         92        76
Extraordinary item-gain on elimination of debt,
net of income taxes                                     --         --        --         50        --
                                                   --------   --------  --------   --------  --------
    Net income                                     $   481     $  103   $           $  142   $    76
                                                                             97
                                                   --------   --------  --------   --------  --------
Net income per share(4)                            $  0.14     $ 0.04   $  0.04     $ 0.06    $ 0.04
Weighted average common and common equivalent
     shares outstanding(4)                           3,340      3,151     2,587      2,438     2,160

</TABLE>


<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                --------------------------------------------------
                                                 1996       1995      1994       1993      1992
                                                --------   --------  --------   --------  --------
                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED BALANCE SHEET DATA:

<S>                                           <C>         <C>       <C>       <C>        <C>
Working capital(5)                              $12,836     $4,829    $4,686    $ 3,612    $2,457
Total assets                                     19,798      9,928     8,076      6,870     4,828
Long term debt, less current                         41      4,216     3,180      2,381     1,760
maturities(5)
Total stockholders' equity                       16,290      3,187     3,041      2,762     1,837
Dividends                                            --         --        --         --        --
</TABLE>



------------------

(1) Effective July 1, 1992, the Company acquired through its BTRL subsidiary the
    net assets of a division of Cambridge Biotech Corporation for $762,000 which
    increased 1992 revenues by $1,450,000.
(2) On  June  30,  1993,  the  Company  exercised  its  option  to  pre-pay  the
    acquisition  note  in  connection  with  the  1992  purchase  of  BTRL  at a
    substantial  discount  from the balance due,  resulting in an  extraordinary
    gain of $50,000 net taxes of $33,000.  The 1993 net income per share  before
    such extraordinary gain was $0.04.
(3) Effective  January 1, 1993,  the  Company  acquired  the net assets of North
    American  Laboratory  Group Ltd.,  Inc. for $425,000,  which  increased 1993
    revenues by $2,019,000.
(4) The effect of the common stock  equivalents on net income per share has been
    excluded from the calculation for years ended December 31, 1992 through 1994
    as its inclusion was antidilutive.
(5) The Company's demand line of credit with  outstanding  amounts of $1,091,000
    and  $1,895,000  as of December  31, 1992 and 1993,  respectively,  has been
    presented as part of long-term  debt (and excluded from current  liabilities
    in calculating  working capital) for 1992 and 1993 to be consistent with its
    reclassification  to  long-term  debt  in  1994,  1995  and  1996  due  to a
    modification of its maturity date.


                                      -16-


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

OVERVIEW

         The Company  generates  revenue from products and services  provided to
the in vitro diagnostic  infectious disease industry.  Products consist of three
groups:  Quality  Control  Panels,   Accurun(TM)  Run  Controls  and  Diagnostic
Components.  Services consist of Specialty Clinical Laboratory Testing, Contract
Research,  Clinical Trials and Drug Screening. In the three full years since the
Company's acquisition of Biotech Research Laboratories ("BTRL") and BBI Clinical
Laboratories, Inc. ("BBICL"), the Company has experienced a shift in revenue mix
towards  increased  product sales,  as product  revenue as a percentage of total
revenue  increased  from  43.1% in 1993 to 54.6% in 1996,  with a  corresponding
decrease in the percentage of total revenue provided by services.

         The Company's gross profit margin increased from 33.9% in 1993 to 41.3%
in 1996  principally  as a result of the  increased  percentage of higher margin
product  revenues.  Within  products,  the Company's  Quality  Control  Products
(Accurun(TM)  Run Controls and Quality  Control Panels) have higher margins than
the Company's Diagnostic  Components.  Within services,  Contract Research gross
margins  are lower than  other  services.  However,  such  contracts  enable the
Company  to  maintain  certain  scientific  staff and  capability  that it might
otherwise not be able to afford.  The Company intends to continue to concentrate
on the growth in sales of its Quality Control Products.

         Historically,  the Company's results of operations have been subject to
quarterly  fluctuations  due  to  a  variety  of  factors,   including  customer
purchasing patterns, primarily driven by end-of-year expenditures,  and seasonal
demand  during the summer months for certain  laboratory  testing  services.  In
particular,  the Company's sales of its Quality Control  Products and Diagnostic
Components  typically  have been highest in the fourth quarter and lowest in the
first quarter of each fiscal year, whereas Specialty Clinical Laboratory Testing
has generally reached a seasonal peak during the third quarter,  coinciding with
the peak incidence of Lyme Disease.  Research  Contracts are generally for large
dollar  amounts  spread  over a one or two year  period,  and  upon  completion,
frequently  do not have  renewal  phases.  As a  result  they  can  cause  large
fluctuations  in revenue and net  income.  In  addition  to staff  dedicated  to
internal research and development, certain of the Company's technical staff work
on both  Contract  Research for  customers  and Company  sponsored  research and
development.  The allocation of certain technical staff to such projects depends
on the  volume of  Contract  Research.  As a result,  research  and  development
expenditures fluctuate due to increases or decreases in Contract Research.

         To develop new Quality Control  Products and support  increased  sales,
the Company hired additional  research and development  staff in the second half
of 1995 and sales and marketing  staff in 1996. The Company  intends to continue
to add  staff  to  these  departments.  This  should  cause  both  research  and
development  and selling and  marketing  expenses to increase as a percentage of
revenue in 1997,  compared to 1996. General and administrative  expenses are not
expected  to increase  at the same rate,  as the  Company  has already  incurred
significant infrastructure expenses.

         The Company does not have any foreign operations.  However, the Company
does have significant export sales to agents under distribution  agreements,  as
well as directly to test kit  manufacturers.  All sales are  denominated in U.S.
dollars. Export sales for the years ended December 31, 1994, 1995, and 1996 were
$2.3 million, $3.1 million, and $3.9 million,  respectively. The Company expects
that  export  sales will  continue  to be a  significant  source of revenue  and
operating income.



                                      -17-


RESULTS OF OPERATIONS

         The following table sets forth for the periods indicated the percentage
of total  revenue  represented  by  certain  items  reflected  in the  Company's
consolidated statements of operations:

                                                YEAR ENDED DECEMBER 31
                                           1996          1995         1994
                                           ----          ----         ----
Revenue:
    Products                               54.6%         54.0%        55.8%
    Services                               45.4          46.0         44.2
                                           ----          ----         ----
           Total revenue                  100.0         100.0        100.0
Gross profit                               41.3          37.0         38.4
Operating expenses:
    Research and development                5.1           3.1          4.4
    Selling and marketing                  14.1          10.9         11.1
    General and administrative             15.5          18.9         19.1
                                           ----          ----         ----
           Total operating expenses        34.7          32.9         34.6
                                           ----          ----         ----
    Income from operations                  6.5           4.1          3.8
Interest expense                            1.4           2.7          2.3
                                            ---           ---          ---
    Income before income taxes              5.1           1.4          1.5
    Net income                              3.1           0.8          0.9
                                            ===           ===          ===
Product gross profit                       49.8%         46.2%        46.6%
Services gross profit                      31.0%         26.2%        28.0%





YEARS ENDED DECEMBER 31, 1996 AND 1995

         Total revenue  increased  26.4%, or $3,239,000,  to $15,509,000 in 1996
from  $12,271,000  in 1995.  The  increase in revenues was the result of a 27.9%
increase in product revenues of $1,848,000 to $8,470,000 from $6,622,000,  and a
24.6% increase in service  revenues of $1,390,000 to $7,039,000  from $5,649,000
in 1995. The increase in product revenue was  attributable to an increase in the
volume of sales of Quality Control Products,  particularly Accurun. The increase
in service  revenue was  primarily  the result of increased  volume of specialty
clinical  laboratory  testing and a favorable  mix shift  towards  higher priced
molecular  testing,  and the  impact  of two new  research  contracts.  This was
partially offset by lower volume of clinical trial services.

         Gross profit  increased  41.0%,  or $1,862,000,  to $6,400,599 for 1996
from $4,539,000 in 1995.  Products gross profit  increased 38.0%, or $1,160,000,
to $4,217,000 in 1996 from $3,057,000 in 1995 as the products sales increase was
positively  impacted by an increase in products gross profit margin (to 49.8% in
1996 from 46.2%). The products gross margin increase was a result of a favorable
mix shift towards  Accurun sales.  Services  gross profit  increased  47.3%,  or
$701,000,  to $2,183,000 in 1996 from  $1,481,000 in 1995 as the testing  volume
increased  at a faster rate than  laboratory  headcount  increased,  and thereby
caused the services  gross profit margin to increase to 31.0% in 1996 from 26.2%
in 1995.

         Research and development expenditures increased 112.1%, or $421,000, to
$797,000 in 1996 from $376,000 in 1995.  The increase  resulted  from  increased
costs of  personnel  hired in the second half of 1995 to step-up the rate of new
product introductions, and increased research project expenditures.  Development
projects  included  Accurun(TM),   molecular  and  immunological  Run  Controls,
specialized  molecular  assays,  and expenditures  related to the Company's drug
discovery program.

         Selling  and  marketing  expenses  increased  63.3%,  or  $848,000,  to
$2,188,000  in 1996 from  $1,340,000  in 1995.  The  increase  was  attributable
primarily  to  additional  sales and  marketing  staff and  overhead;  increased
advertising,  promotion,  trade show and travel expenses due to the commencement
of the Company's  "Total Quality  System" (TQS)  marketing  campaign;  and costs
associated with participation by the Company's  Specialty Clinical Laboratory in
the Roche  Diagnostics'  Amplicor(  Access  program in  connection  with Roche's
launch  of  their  new FDA  approved  HIV PCR test  kit.  The


                                      -18-





Amplicor(  kit is  primarily  used to  monitor  the HIV viral  load  (level)  in
patients prior to and during drug therapy.

         General  and  administrative  costs  increased  3.7%,  or  $85,000,  to
$2,401,000  in 1996 from  $2,316,000  in 1995.  This  increase was  attributable
primarily to additional staffing in support of revenue growth and higher reserve
provisions for doubtful accounts associated with the increased volume of revenue
related to testing in  situations  in which  payment to the  Company  depends on
collecting from the patient rather than a healthcare institution.

         Net interest expense decreased 36.6%, or $123,000,  to $213,000 in 1996
from  $336,000  in 1995,  as the  proceeds  from the  Company's  initial  public
offering  were  used to pay down  almost  all debt in  early  November,  and the
remaining amount invested in short term, investment grade securities.

YEARS ENDED DECEMBER 31, 1995 AND 1994

         Total revenue  increased  14.4%, or $1,548,000,  to $12,271,000 in 1995
from  $10,723,000  in 1994.  The  increase in revenues was the result of a 10.7%
increase in product  revenues of $640,000 to $6,622,000 from  $5,981,000,  and a
19.1% increase in service  revenues of $908,000 to $5,649,000 from $4,741,000 in
1995 compared to 1994. The increase in product  revenue was  attributable  to an
increase  in prices at the  beginning  of 1995 and an  increase in the volume of
sales of  Quality  Control  Products  and  Basematrix  (part  of the  Diagnostic
Components  group),  which  increase  was  partially  offset by the  absence  of
revenues  in 1995  from two OEM  Quality  Control  Panel  contracts  which  were
completed in 1994.  The Company also  reduced  emphasis on certain  lower margin
Diagnostic  Components  as it focused  more  effort on sales of its  proprietary
Basematrix  product,  which carries a higher  margin.  During 1995,  the Company
reorganized  its sales and  marketing  department  and believes that this had an
adverse effect on sales growth for the period.  The increase in service  revenue
was primarily the result of increased specialty clinical laboratory testing, two
new research  contracts and increased  clinical trial services,  particularly in
the area of HIV.

         Gross profit increased 10.4%, or $426,000,  to $4,539,000 for 1995 from
$4,113,000  in 1994.  Products  gross profit  increased  9.7%,  or $270,000,  to
$3,057,000 in 1995 from  $2,787,000 in 1994 as the products  sales  increase was
offset by a small  decrease in products  gross  profit  margin (to 46.2% in 1995
from 46.6%). The products gross margin decrease was a result of a small increase
in material handling personnel costs.  Services gross profit increased 11.8%, or
$156,000,  to $1,481,000 in 1995 from  $1,326,000 in 1994 as the sales  increase
was offset by a decrease in services  gross profit  margin to 26.2% in 1995 from
28.0% in 1994. Services gross margin declined primarily as a result of increased
personnel costs in the specialty clinical laboratory and an increase in contract
research activities, which carry a lower margin.

         Research and development  expenditures  decreased 20.0%, or $94,000, to
$376,000 in 1995 from  $469,000 in 1994.  The  decrease  resulted  from  certain
technical staff being utilized for Company sponsored research and development in
1994 and Contract Research in 1995.  Development projects included  Accurun(TM),
molecular and immunological Run Controls,  specialized molecular assays, and the
development  of a second  generation  Lyme  Disease  western  blot  test kit for
internal use by the Company's specialty testing laboratory.

         Selling  and  marketing  expenses  increased  12.4%,  or  $148,000,  to
$1,340,000  in  1995  from  $1,192,000  in  1994.  The  increase  was  primarily
attributable  to additional  sales and marketing  staff and overhead,  partially
offset by lower trade show and travel expenses as the Company  realized  greater
benefits from its distributor network.

         General and  administrative  costs  increased  13.1%,  or $269,000,  to
$2,316,000  in 1995  from  $2,047,000  in  1994.  This  increase  was  primarily
attributable  to  additional  staffing  in support of revenue  growth and higher
reserve provisions for doubtful accounts associated with the increased volume of
revenue related to testing in situations where payment to the Company depends on
collecting  from  the  patient  rather  than  a  healthcare  institution.  These
increases were partially  offset by lower  professional


                                      -19-





fees.  Also  included in general and  administrative  expense was  approximately
$60,000 of nonrecurring  costs associated with the move of the specialty testing
laboratory into a larger, custom-designed facility.

         Interest expense increased 37.8%, or $92,000,  to $336,000 in 1995 from
$244,000 in 1994,  as the Company  funded its working  capital  needs  primarily
through increased borrowings.

LIQUIDITY AND CAPITAL RESOURCES

         On October 31, 1996 the Company's Common Stock commenced trading on the
NASDAQ as a result of its initial  public  offering of its common stock ("IPO"),
selling  1,600,000  shares at $8.50  per  share.  Net  proceeds  received  after
underwriting  discounts,   commissions  and  offering  costs  was  approximately
$11,633,000.  On November 5, 1996, the Company repaid  substantially  all of its
outstanding bank debt which totaled approximately $3.9 million.

         The Company has financed its  operations to date through cash flow from
operations,  borrowings  from banks and sales of equity.  With the  repayment of
debt from the IPO proceeds,  the Company expects its cash flow and cash position
to meet existing  operational  needs,  although  amounts repaid on its Revolving
Line of Credit  Agreement (the  "Revolver") will be available for reborrowing as
needed.

         Net cash provided by operations  for 1996 was $1,460,000 as compared to
cash used in  operations  of $29,000  in 1995.  This  increase  in cash flow was
primarily  attributable to an increase in net income,  improved  working capital
position, and an increase in deferred revenue from a payment of $306,000 under a
research  contract  for  future  clinical  trial  services.  Cash  flow  used in
operations  in 1994 was  $554,000 as working  capital  needs due to sales growth
exceeded cash generated from net income adjusted by non cash expenses.

         Cash used in investing  activities for 1996,  1995 and 1994 amounted to
$1,412,000,  $1,320,000,  and $405,000,  respectively.  In addition to equipment
purchases  in 1996,  the Company  purchased  common  stock in BioSeq,  Inc.  for
$732,500 which represents an ownership  position of approximately 14% in BioSeq,
Inc. The  increased  use of cash in 1995  compared to 1994 was the result of the
purchase of the Company's West Bridgewater facility.

         During 1996, net cash generated from common stock issued, including the
IPO, approximated $12,600,000. This was used to pay down net debt of $4,577,000.
Net cash  provided by borrowings  for 1995 and 1994  amounted to $1,240,000  and
$846,000,  and net  proceeds  from the sale of Common Stock for the same periods
amounted to $176,000 and $170,000,  respectively. The proceeds of such debt were
used for  working  capital,  to acquire  the West  Bridgewater  property  and to
purchase capital equipment.

         In 1996,  1995 and 1994  capital  expenditures  amounted  to  $669,000,
$1,316,000,  and  $405,000,  respectively.  In 1995,  $806,000 of the  Company's
capital expenditures related to the purchase of the West Bridgewater facility.

         On April 26, 1996 the Company entered into a new five year distribution
agreement with Kyowa Medex,  Co., Ltd., a foreign  distributor,  extending a six
year old relationship.  Simultaneously, Kyowa Medex, Co., Ltd. purchased 117,647
shares of the Company's Common Stock at a price of $8.50 per share.

         The Company anticipates capital  expenditures to increase over the near
term as it expects to use  approximately  $1.0  million from the IPO proceeds to
expand its  manufacturing  capacity in West  Bridgewater  during 1997,  of which
approximately  $500,000 will be spent on building  expansion  and  approximately
$500,000  will be  spent  on  equipment.  The  Company  expects  to make a final
investment  in BioSeq in 1997 of  $750,000  which will  increase  its  ownership
position to 19.9%.  This final  payment is mandated  if BioSeq  attains  certain
technical  milestones by July 31, 1997, and at the Company's  option by December
31, 1997 if such milestones are not achieved. The Company believes that existing
cash balances,  the borrowing  capacity  available under the Revolver,  and cash
generated  from  operations are  sufficient to fund  operations and  anticipated
capital  expenditures for the foreseeable future.  Except for purchase orders in
connection with the manufacturing expansion, and the BioSeq investment described
above, there were no material financial  commitments for capital expenditures as
of December 31, 1996.



                                      -20-




         In March 1997,  the Company  entered into an Asset  Purchase  Agreement
with Source Scientific,  Inc. to acquire substantially all of their assets. Also
in March,  the Company entered into a new line of credit agreement with its bank
replacing  the  Revolver.  See Note 12 to the  Company's  Notes to  Consolidated
Financial Statements in Item 8 hereunder.

RECENT ACCOUNTING PRONOUNCEMENTS

         The  Financial  Accounting  Standards  Board issued  Statement  No. 128
("SFAS 128"), "Earnings per Share", which requires the presentation of basic and
diluted earning per share (EPS).  Basic EPS excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average  number
of common shares outstanding for the period.  Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were  exercised  or  converted  into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity.  Basic EPS replaces
primary EPS.  Diluted EPS is computed  similarly to fully  diluted EPS under the
existing rules. The Company will adopt SFAS 128 as of December 15, 1997 and upon
adoption, will restate all prior period EPS data presented.  The Company has not
yet quantified what the impact of SFAS 128 will be on EPS.


FORWARD - LOOKING INFORMATION


         The  Annual  Report on Form 10-K  contains  forward-looking  statements
concerning the Company's  financial  performance  and business  operations.  The
Company wishes to caution readers of this Annual Report on Form 10-K that actual
results  might differ  materially  from those  projected in the  forward-looking
statements contained herein.


         Factors  which might cause  actual  results to differ  materially  from
those projected in the forward-looking  statements  contained herein include the
following:  inability  of the Company to develop the end user market for quality
control  products;  inability of the Company to integrate the business of Source
Scientific,  Inc. into the Company's business;  inability of the Company to grow
the sales of Source  Scientific,  Inc. to the extent  anticipated;  inability of
Source  Scientific,  Inc.  to repay the  $650,000  loan made by the  Company;  a
material  adverse  change in the business,  financial  condition or prospects of
BioSeq, Inc., an early stage biotechnology company in which the Company has made
a significant investment;  inability of the Company to obtain an adequate supply
of the unique and rare  specimens of plasma and serum  necessary  for certain of
its products;  significant reductions in purchases by any of the Company's major
customers; and the potential insufficiency of Company resources, including human
resources, plant and equipment and management systems, to accommodate any future
growth.  Certain of these and other factors which might cause actual  results to
differ  materially  from  those  projected  are more  fully set forth  under the
caption "Risk Factors" in the Company's  Registration Statement on Form S-1 (SEC
File No. 333-10759).




                                      -21-







ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                           -------------------------------
                                                                               1996             1995
                                                                           --------------   --------------

                               ASSETS
<S>                                                                         <C>              <C>
CURRENT ASSETS:
    Cash and cash equivalents                                               $   8,082,642    $      11,463
    Accounts receivable, less allowances of $352,058 in 1996 and
       $142,372 in 1995                                                         3,415,994        3,075,870
    Inventories (Note 2)                                                        4,180,334        3,676,851
    Prepaid expense and other                                                     239,950          254,199
    Deferred income taxes (Note 7)                                                283,200          110,766
                                                                           --------------   --------------
                Total current assets                                           16,202,120        7,129,149
                                                                           --------------   --------------

Property and equipment, net (Note 3)                                            2,699,158        2,614,982

OTHER ASSETS:
    Long term investment (Note 4)                                                 732,500              -
    Goodwill and other intangibles, net (Note 1)                                   95,302          100,820
    Notes receivable and other                                                     69,234           83,422
                                                                           --------------   --------------
                                                                                  897,036          184,242
                                                                           --------------   --------------
              TOTAL ASSETS                                                  $  19,798,314    $   9,928,373
                                                                           ==============   ==============


                LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Current maturities of long term debt (Note 6)                           $      12,820    $     436,509
    Accounts payable                                                              991,839          745,216
    Accrued compensation                                                          840,666          395,755
    Accrued income taxes                                                          427,140           36,582
    Other accrued expenses                                                        264,262          303,820
    Deferred revenue                                                              829,477          523,401
                                                                           --------------   --------------
                Total current liabilities                                       3,366,204        2,441,283
                                                                           --------------   --------------

LONG-TERM LIABILITIES:
    Long-term debt, less current maturities (Note 6)                               40,948        4,215,501
    Deferred income taxes (Note 7)                                                101,580           84,641

COMMITMENTS AND CONTINGENCIES (Note 8)

STOCKHOLDERS' EQUITY (Note 10):
    Common stock, $.01 par value; authorized 20,000,000 shares in
       1996 and 1995; issued and outstanding 4,378,157 in 1996 and issued
       2,640,417 in 1995                                                           43,782           26,404
    Additional paid-in capital                                                 15,258,656        2,798,620
    Retained earnings                                                             987,144          505,924
                                                                           --------------   --------------
                                                                               16,289,582        3,330,948
    Less treasury stock, at cost-80,000 shares in 1995 and none in 1996                -          (144,000)

                                                                           --------------   --------------
                Total stockholders' equity                                     16,289,582        3,186,948
                                                                           --------------   --------------
             TOTAL LIABILITIES & STOCKHOLDERS' EQUITY                       $  19,798,314    $   9,928,373
                                                                           ==============   ==============

The accompanying notes are an integral part of these consolidated financial statements
</TABLE>



                                      -22-





                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME



<TABLE>
<CAPTION>
                                                            Years Ended December 31,
                                                  --------------------------------------------
                                                      1996            1995           1994
                                                  --------------  -------------  -------------
<S>                                                 <C>            <C>            <C>
REVENUE:
     Product sales                                  $ 8,469,890    $ 6,621,631    $ 5,981,378
     Services                                         7,039,406      5,649,099      4,741,376
                                                  --------------  -------------  -------------
            Total revenue                            15,509,296     12,270,730     10,722,754

COSTS AND EXPENSES:
     Cost of product sales                            4,252,068      3,564,241      3,194,217
     Cost of services                                 4,856,630      4,167,625      3,415,777
     Research and development                           796,805        375,712        469,358
     Selling and marketing                            2,188,152      1,339,792      1,191,573
     General and administrative                       2,400,681      2,315,814      2,047,256
                                                  --------------  -------------  -------------
            Total operating costs and expenses       14,494,336     11,763,184     10,318,181

            Income from operations                    1,014,960        507,546        404,573

Interest expense, net                                   212,969        335,899        243,694
                                                  --------------  -------------  -------------

            Income before income taxes                  801,991        171,647        160,879

Provision for income taxes (Note 7)                    (320,771)       (68,657)       (64,351)
                                                  --------------  -------------  -------------

            Net income                             $    481,220    $   102,990    $    96,528
                                                  ==============  =============  =============

            Net income per share                   $       0.14    $      0.04    $      0.04
                                                  ==============  =============  =============

Weighted average common and common
   equivalent shares outstanding                        3,340,236       3,151,477      2,587,137


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

</TABLE>






                                      -23-





                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY




<TABLE>
<CAPTION>

                                                  Common Stock
                                             ------------------------
                                                                        Additional                                   Total
                                                           $.01 Par       Paid-In       Retained      Treasury   Stockholders'
                                               Shares        Value        Capital       Earnings       Stock         Equity
                                             ------------  ----------  --------------  ------------  ----------- ---------------
<S>                                            <C>          <C>         <C>             <C>           <C>         <C>
BALANCE, December 31, 1993                     2,525,028    $ 25,250    $  2,430,100    $  306,406         -      $   2,761,756
    Issuance of common stock                      29,862         299         139,403                                    139,702
    Stock options and warrants exercised          23,975         240          30,197                                     30,437
    Tax benefit of stock options exercised                                    12,800                                     12,800
    Net income                                                                              96,528                       96,528
                                             ------------  ----------  --------------  ------------  ----------- ---------------
BALANCE, December 31, 1994                     2,578,865      25,789       2,612,500       402,934         -          3,041,223
    Issuance of common stock                       8,535          85          58,160                                     58,245
    Stock options and warrants exercised          47,200         472         117,068                                    117,540
    Conversion of note payable                     5,817          58           9,542                                      9,600
    Treasury stock purchased - 80,000 shares                                                           (144,000)       (144,000)
    Tax benefit of stock options exercised                                     1,350                                      1,350
    Net income                                                                             102,990                      102,990
                                             ------------  ----------  --------------  ------------  ----------- ---------------
BALANCE, December 31, 1995                     2,640,417      26,404       2,798,620       505,924     (144,000)      3,186,948
    Issuance of common stock, net of
      issuance costs                           1,637,647      16,377      12,371,469                    144,000      12,531,846
    Stock options and warrants exercised          85,760         858          67,210                                     68,068
    Conversion of note payable                    14,333         143          21,357                                     21,500
    Net income                                                                             481,220                      481,220
                                             ------------  ----------  --------------  ------------  ----------- ---------------
BALANCE, December 31, 1996                     4,378,157    $ 43,782    $ 15,258,656     $ 987,144         -       $ 16,289,582
                                             ============  ==========  ==============  ============  =========== ===============



The accompanying notes are an integral part of these consolidated financial statements
</TABLE>


                                      -24-





                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS




<TABLE>
<CAPTION>
                                                                         Years Ended December 31,
                                                                 ------------------------------------------
                                                                     1996          1995           1994
                                                                 -------------  ------------  -------------
<S>                                                                    <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income                                                    $   481,220    $  102,990    $    96,528
    Adjustments to reconcile net income to net
       cash provided by (used in) operating activities:
    Depreciation and amortization                                     600,495       441,356        360,512
    Provision for doubtful accounts                                   247,080       181,084        102,099
    Deferred rent                                                     (87,152)      (45,792)         5,908
    Deferred income taxes                                            (155,495)      (61,765)       (42,798)
    Tax benefit of stock options exercised                                  -         1,350         12,800
Changes in operating assets and liabilities:
    Accounts receivable                                              (587,204)     (997,112)      (529,157)
    Note receivable and other assets                                   14,188       (61,343)        (3,720)
    Inventories                                                      (503,483)      (67,335)      (567,420)
    Prepaid expenses                                                   14,249       (98,082)        (3,500)
    Accounts payable                                                  246,623       (42,190)       (86,130)
    Accrued compensation and other expenses                           883,063        94,126        100,767
    Deferred revenue                                                  306,076       523,401              -
                                                                 -------------  ------------  -------------
        Net cash provided by (used in) operating activities         1,459,660       (29,312)      (554,111)
                                                                 -------------  ------------  -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Payments for additions to property and equipment                 (669,154)   (1,316,217)      (404,639)
    Purchase of intangible assets                                      (9,999)       (4,000)             -
    Purchase of long term investment                                 (732,500)            -              -
                                                                 -------------  ------------  -------------
        Net cash used in investing activities                      (1,411,653)   (1,320,217)      (404,639)
                                                                 -------------  ------------  -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from long term debt                                      226,300     1,517,867      1,734,425
    Repayments of long-term debt                                   (4,803,042)     (277,789)      (887,989)
    Proceeds of common stock issued                                13,581,315       175,785        170,139
    Offering costs associated with common stock issued               (981,401)            -              -
    Purchase of treasury stock                                              -      (144,000)             -
                                                                 -------------  ------------  -------------
        Net cash provided by financing activities                   8,023,172     1,271,863      1,016,575
                                                                 -------------  ------------  -------------

INCREASE (DECREASE) IN CASH:                                        8,071,179       (77,666)        57,825
    Cash, beginning of year                                            11,463        89,129         31,304
                                                                 -------------  ------------  -------------
    Cash, end of year                                             $ 8,082,642   $    11,463   $     89,129
                                                                 =============  ============  =============

SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
    Conversion of note payable to common stock                    $    21,500   $     9,600              -
    Noncash exercise of warrants to stockholder                   $   180,650             -              -

SUPPLEMENTAL INFORMATION:
    Income taxes paid                                             $    85,460   $   168,994   $     33,718
    Interest paid                                                 $   300,587   $   331,495   $    254,133




The accompanying notes are an integral part of these consolidated financial statements
</TABLE>


                                      -25-




                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(1) BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

         Boston  Biomedica,   Inc.  ("BBI")  and  Subsidiaries  (together,   the
"Company") provide infectious disease diagnostic products, contract research and
specialty  infectious  disease  testing  services  to  the  in-vitro  diagnostic
industry,  government  agencies,  blood banks,  hospitals  and other health care
providers worldwide.  The Company is subject to risks common to companies in the
Biotechnology industry, including but not limited to, development by the Company
or  its  competitors  of  new  technological  innovations,   dependence  on  key
personnel,  protection  of  proprietary  technology,  and  compliance  with  FDA
government regulations.

         Significant  accounting  policies  followed in the preparation of these
consolidated financial statements are as follows:

  (I) PRINCIPLES OF CONSOLIDATION

         The consolidated  financial  statements include the accounts of BBI and
its wholly-owned subsidiaries,  Biotech Research Laboratories, Inc. ("BTRL") and
BBI Clinical Laboratories, Inc. ("BBICL"). All significant intercompany accounts
and  transactions  have been  eliminated in the  consolidation.  Certain amounts
included in the prior year's financial  statements may have been reclassified to
conform to the current presentation.

  (II) USE OF ESTIMATES

         To prepare  the  financial  statements  in  conformity  with  generally
accepted  accounting  principles,  management is required 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.  In particular,  the Company  records  reserves for estimates
regarding  the  collectability  of  accounts  receivable  as  well  as  the  net
realizable  value  of its  inventory.  Actual  results  could  differ  from  the
estimates and assumptions used by management.

  (III) REVENUE RECOGNITION

         Product  revenues are recognized as sales upon shipment of the products
or, for specific orders at the request of the customer, on a bill and hold basis
after completion of manufacture.  All bill and hold  transactions meet specified
revenue  recognition  criteria which include normal billing,  credit and payment
terms,  and  transfer to the  customers  of all risks and rewards of  ownership.
Accounts  receivable  as of  December  31, 1996 and 1995  include  bill and hold
receivables of $23,000 and $179,000, respectively.

         The Company  periodically enters into barter  transactions  whereby the
Company exchanges inventory for testing services.  Revenue on these transactions
are recognized when both the products have been shipped and the testing services
have been  completed and are recorded at the estimated  fair market value of the
inventory based upon standard  Company prices.  The revenue  recognized on these
transactions  for the years ended December 31, 1996, 1995 and 1994 was $244,000,
$213,000, and $192,000, respectively.

         Services  are  recognized  as  revenue  upon  completion  of tests  for
specialty laboratory services.

         Revenue  under  long-term  contracts,  including  funded  research  and
development  contracts,  is recorded under the percentage of completion  method,
wherein costs plus profit is recorded as service  revenue and billed  monthly as
the work is performed. Certain customers make advance payments that are deferred
until revenue recognition is appropriate. Unbilled amounts for fee retainage are
included  in  accounts  receivable  at  December  31,  1996  and  1995,  and are
immaterial.  When the current contract estimates  indicate a loss,  provision is
made for the total  anticipated loss. The Company does not believe there are any
material collectability issues associated with these receivables.

         Total revenue related to funded research and development  contracts was
approximately  $1,126,000,  $728,000,  and $660,000 for the years ended December
31, 1996,  1995 and 1994,  respectively.  Total contract costs  associated  with
these  agreements  were  approximately  $975,000,  $575,000 and $511,000 for the
years ended December 1996, 1995 and 1994, respectively.



                                      -26-


                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

  (IV) CASH AND CASH EQUIVALENTS

         The  Company's  policy  is to  invest  available  cash  in  short-term,
investment grade,  interest bearing  obligations,  including money market funds,
municipal notes, and bank and corporate debt instruments.  Securities  purchased
with initial maturities of three months or less, are valued at cost plus accrued
interest,  which  approximates  market,  and classified as cash equivalents.  At
December  31,  1996 the  Company's  cash  equivalents  consisted  of  $6,091,120
invested in a money market fund and a banker's acceptance of $1,991,522.

  (V) RESEARCH AND DEVELOPMENT COSTS

         Research and development costs are expensed as incurred.

  (VI) INVENTORIES

         Inventories  are stated at the lower of average cost or net  realizable
value and include material, labor and manufacturing overhead.

  (VII) PROPERTY AND EQUIPMENT

         Property and  equipment  are stated at cost.  For  financial  reporting
purposes,   depreciation  is  recognized  using  accelerated  and  straight-line
methods,  allocating  the cost of the assets over their  estimated  useful lives
ranging from five years to ten years for certain  manufacturing  and  laboratory
equipment,  five years for office equipment and management  information systems,
three years for automobiles and fifteen years for the building.  Upon retirement
or sale, the cost and related accumulated  depreciation of the asset are removed
from the books. Any resulting gain or loss is credited or charged to income.

  (VIII) GOODWILL AND INTANGIBLES

         Goodwill  results from excess of the purchase  prices over the acquired
net assets of BTRL and BBICL and is amortized on a straight  line basis over ten
years.   Other  intangibles   primarily  consist  of  patents,   licenses,   and
intellectual property rights and are amortized over four to ten years.

         In  March  1995,  the  Financial   Accounting  Standards  Board  issued
Statement  of  Financial  Accounting  Standards  No.  121,  "Accounting  for the
Impairment of  Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of"
("SFAS  121").  SFAS 121 requires  that an  impairment  loss be  recognized  for
long-lived assets and certain identified intangibles when the carrying amount of
these assets may not be recoverable.  The Company has adopted SFAS 121 effective
in 1996  and the  adoption  did not  have a  material  impact  on the  financial
statements.

  (IX) INCOME TAXES

         The Company  utilizes the  liability  method of  accounting  for income
taxes.  Under  the  liability  method,   deferred  taxes  arise  from  temporary
differences  between  the  financial  statement  and tax  bases  of  assets  and
liabilities  using  enacted  tax  rates in  effect  in the  years  in which  the
differences are expected to reverse.  A valuation  allowance is provided for net
deferred  tax assets if, based on the weighted  available  evidence,  it is more
likely  than  not  that  some or all of the  deferred  tax  assets  will  not be
realized. Tax credits are recognized when realized using the flow through method
of accounting.

  (X) CONCENTRATION OF CREDIT RISK

         Financial   instruments  which  potentially   subject  the  Company  to
concentrations  of credit risk are principally  cash and cash  equivalents,  and
accounts  receivable.  The Company places its cash in federally chartered banks,
each of which  is  insured  up to  $100,000  by the  Federal  Deposit  Insurance
Corporation.  The Company  limits credit risk in cash  equivalents  by investing
only in short term,  investment  grade  securities  including money market funds
restricted  to such  securities.  Concentration  of credit risk with  respect to
accounts  receivable  is limited to certain  customers to whom the Company makes
substantial  sales (see also Note 5). The Company  does not  require  collateral
from its customers. To reduce risk, the Company routinely assesses the financial
strength  of its  customers  and,  as a  consequence,  believes  that its  trade
accounts receivable credit risk exposure is limited.



                                      -27-



                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

  (XI) DEFERRED REVENUE

           Deferred  revenue  consists of payments  received  from  customers in
advance of services performed.

  (XII) COMPUTATION OF NET INCOME PER SHARE

         Net income per common share is computed based upon the weighted average
number of common shares and common  equivalent  shares (using the treasury stock
method) outstanding after certain adjustments described below. Common equivalent
shares consist of common stock options and warrants  outstanding.  In accordance
with Securities and Exchange  Commission Staff  Accounting  Bulletin No. 83, all
common and common  equivalent shares issued during the twelve month period prior
to the initial filing of the Company's S-1  Registration  Statement  (August 23,
1996) have been included in the calculation as if they were  outstanding for all
periods using the treasury stock method and an initial public  offering price of
$8.50 per share.  Fully  diluted net income per common share is not presented as
it does not differ from primary earnings per share.

  RECENT ACCOUNTING STANDARDS

         The  Financial  Accounting  Standards  Board issued  Statement  No. 128
("SFAS 128"), "Earnings per Share", which requires the presentation of basic and
diluted earning per share (EPS).  Basic EPS excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average  number
of common shares outstanding for the period.  Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were  exercised  or  converted  into common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity.  Basic EPS replaces
primary EPS.  Diluted EPS is computed  similarly to fully  diluted EPS under the
existing rules. The Company will adopt SFAS 128 as of December 15, 1997 and upon
adoption, will restate all prior period EPS data presented.  The Company has not
yet quantified what the impact of SFAS 128 will be on EPS.

(2) INVENTORIES

         The Company  purchases  human plasma and serum from various private and
commercial  blood  banks.  Upon  receipt,   such  purchases   generally  undergo
comprehensive  testing,  and  associated  costs are included in the value of raw
materials.  Most plasma is  manufactured  into  Basematrix and other  diagnostic
components  to  customer  specifications.  Plasma  and  serum  with the  desired
antibodies or antigens are sold or  manufactured  into Quality  Control  Panels,
Accurun(TM) run controls,  and reagents ("Finished Goods").  Panels and reagents
are unique to specific donors and/or collection periods, and require substantial
time to characterize and manufacture due to stringent technical  specifications.
Panels play an important role in diagnostic test kit development,  licensure and
quality  control.  Panels are  manufactured  in  quantities  sufficient  to meet
expected user demand which may exceed one year.  Inventory  balances at December
31, 1996 and 1995 consist of the following:


                                             1996              1995
                                         --------------    --------------

Raw materials                             $  1,359,569      $  1,298,131
Work-in-process                                697,749           565,667
Finished goods                               2,123,016         1,813,053
                                         --------------    --------------
                                          $  4,180,334     $   3,676,851
                                         ==============    ==============




                                      -28-





                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(3) PROPERTY AND EQUIPMENT

         Property  and  equipment  at December  31, 1996 and 1995 consist of the
following:



                                                1996              1995
                                            --------------    --------------
Laboratory equipment                         $  1,751,737      $  1,630,872
Management information systems                  1,247,190           834,768
Office equipment                                  394,957           332,496
Automobiles                                       196,663           178,465
Leasehold improvements                            122,419           108,892
Land, building and improvements                   956,386           941,175
                                            --------------    --------------
                                                4,669,352         4,026,668
Less accumulated depreciation                   1,970,194         1,411,686
                                            --------------    --------------

Net book value                               $  2,699,158      $  2,614,982
                                            ==============    ==============







         Depreciation expense for the years ended December 31, 1996 and 1995 was
approximately $585,500, and $425,700, respectively.

(4) LONG TERM INVESTMENT

         In October 1996, the Company entered into a License Agreement, Purchase
Agreement,  Stockholders'  Agreement  and Warrant  Agreement  with BioSeq,  Inc.
("BioSeq") a privately held, technology based development stage company.

         The  Company  has  agreed  to  purchase  convertible   preferred  stock
equivalent to approximately  19% of the capital stock of BioSeq for an aggregate
of $1,482,500 in three installments. Of the $1,482,500, $210,000 was invested at
the date of the  agreements  and  $522,500 was  invested in November  1996.  The
Company must make the remaining  $750,000  installment if BioSeq attains certain
technical  milestones by July 31, 1997. If such  milestones  are not attained by
BioSeq by July 31,  1997,  the  Company  will  still have the option to make the
remaining  $750,000  investment  until  December 31, 1997.  Under the  operative
documents,  the Company has price anti-dilution  protection,  pre-emptive rights
and the right to board  representation.  In  addition,  the  Company was granted
warrants to acquire  additional  shares of common stock of BioSeq for additional
consideration  under  certain  conditions,  provided  that  this  right  is  not
exercisable  to the extent it would cause the  Company's  ownership  to equal or
exceed 20%. The Company is accounting  for its  investment in BioSeq on the cost
basis  in  accordance  with  the  provisions  of APB  18  since  its  cumulative
investment  is and must  remain  less that 20% of the  equity of BioSeq  and the
Company does not exert significant  influence or control. Due to the uncertainty
of technology  based  development  stage  enterprises and in accordance with the
provisions  of SFAS 121,  the Company  will  perform a periodic  analysis of the
investment to determine  whether the carrying  value of its investment in BioSeq
has been impaired. If so determined, the Company would adjust the carrying value
of its investment by taking a charge to earnings.

         Upon the earlier of payment of the final  installment  of the Company's
aggregate  $1,482,500  investment  and December  31,  1997,  the Company will be
granted a worldwide  right to use the BioSeq  technology  relating to sequencing
and analysis  services.  The License will be  exclusive  until BioSeq  commences
selling on a  commercial  basis the  equipment  used in the DNA  sequencing  and
analysis  process,  at which time the  License  will become  non-exclusive.  The
License  provides that the Company will pay BioSeq  royalties  ranging from five
percent to ten percent of net revenues arising out of the services  performed by
the Company  with the  licensed  technology.  The Company  will  account for the
royalty as a cost of revenue as the revenues are earned.


                                      -29-





                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(5) REVENUE FROM SIGNIFICANT CUSTOMERS AND EXPORT SALES

         The Company performs contract research and certain other services under
contracts,  subcontracts  and grants from  United  States  Government  Agencies,
primarily  the  National  Institutes  of  Health  ("NIH").   Revenue  from  such
contracts,  subcontracts  and  grants  was  approximately  $1,920,000  in  1996,
$1,628,000 in 1995 and $1,677,000 in 1994.

         Export  sales  accounted  for  approximately   $3,914,000,  or  25%  of
consolidated revenue in 1996; $3,104,000, or 25% in 1995; and $2,279,000, or 21%
in 1994.

(6) LONG TERM DEBT

         The Company's  revolving line of credit  ("Revolver") has a due date of
June 30,  1998 and bears  interest  at prime  plus  1/2%.  Borrowings  under the
Revolver are limited to 80% of eligible  accounts  receivable plus the lesser of
40% of inventory or $1,500,000.  The Company had $3,500,000 available under it's
Revolver as of December 31, 1996.  Amounts  outstanding  under the Revolver,  if
any, are  collateralized  by all of the  Company's  assets and a $2 million life
insurance  policy of an  officer/stockholder.  The Revolver  contains  covenants
regarding the Company's  debt-to-equity  ratio and certain  minimum debt service
coverage  ratios.  The Revolver further provides for restrictions on the payment
of  dividends,  limitations  on  the  acquisition  of  property  and  equipment,
limitations on additional borrowings, and certain minimum stock ownership levels
by the officer/stockholder referred to above.

         In December 1995, the Company purchased its corporate  headquarters and
manufacturing  facility in West  Bridgewater,  MA from its former  landlord at a
price of $806,800  including  closing costs, and borrowed $750,000 from its bank
to finance the  purchase.  This mortgage on this property was repaid in December
1996 from proceeds of the Company's initial public offering of common stock. See
also Note 3.

         During 1996,  convertible  debt in the amount of $21,500 was  converted
into 14,333  shares of common stock at a price of $1.50 per share.  During 1995,
convertible  debt in the amount of $9,600  was  converted  into 5,817  shares of
common stock at a price of $1.65 per share.

         The Company prepaid  substantially  all debt out of the proceeds of its
initial  public  offering.  At December  31, 1996 and 1995,  the Company had the
following debt outstanding:



<TABLE>
<CAPTION>

                                                                                             1996           1995
                                                                                          ------------  -------------


<S>                                                                                        <C>           <C>
Revolving line of credit agreement due June 30, 1998.                                      $        -    $ 2,784,307

Four notes payable to one bank which had interest rates from 8.22% to 9.25%, and
   due dates from October 1998 through December 2000. Collateralized by all the
   assets of the Company.                                                                           -        995,445

Note payable to a bank, due in 84 fixed payments of principal and interest of
   $11,729, bearing interest fixed at 8.30% for the first five years, and floating at
   prime plus 1.0% for the remaining term. Collateralized by a mortgage and all
   of the assets of the Company.                                                                    -        750,000

Subordinated convertible note payable, which was converted by the holder into
   common stock at $1.50 per share.                                                                 -         21,500

Other installment note payable with an interest rate of 9.75% and due August 2001.
   Collateralized by office and laboratory equipment and furniture.                            53,768        100,758
                                                                                          ------------  -------------
    Total long term debt                                                                       53,768      4,652,010
    Less: current maturities                                                                  (12,820)      (436,509)
                                                                                          ------------  -------------
                                                                                           $   40,948    $ 4,215,501
                                                                                          ============  =============
</TABLE>


Debt maturities beyond current are $14,128 in 1998, $15,569 in 1999, and $11,251
in 2000.

                                      -30-






                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(7) INCOME TAXES


         The Company's effective tax rate does not significantly differ from the
federal and state income tax statutory  rates.  The  components of the provision
for income taxes are as follows:




<TABLE>
<CAPTION>
                                                      1996            1995            1994
                                                   ------------    ------------    -----------
<S>                                                 <C>             <C>             <C>
Current expense: federal and state                  $  476,206      $  130,422      $  91,242
Deferred (benefit) expense: federal and state         (155,495)        (61,765)       (26,891)
                                                   ------------    ------------    -----------
        Total                                       $  320,711      $   68,657      $  64,351
                                                   ============    ============    ===========

</TABLE>


         Significant  items making up deferred tax  liabilities and deferred tax
assets are as follows:



<TABLE>
<CAPTION>

                                                                      1996            1995
                                                                  -------------   -------------
        <S>                                                        <C>             <C>
        Current deferred taxes:
            Inventory                                              $    87,158               -
            Accounts receivable allowance                              115,548     $    56,863
            Other accruals                                              80,494          53,903
                                                                  -------------   -------------
                 Total deferred tax assets                             283,200         110,766
        Long term deferred taxes:
            Accelerated tax depreciation                              (176,015)       (207,361)
            Goodwill                                                    13,551         (22,795)
            Tax credits                                                      -         106,710
            State net operating loss carryforwards                      60,884          38,805
                                                                  -------------   -------------
                 Total deferred tax liabilities                       (101,580)        (84,641)
                                                                  -------------   -------------
                 Total net deferred tax (liabilities) assets       $   181,620     $    26,125
                                                                  =============   =============

</TABLE>

         As of December 31, 1996,  the state net  operating  loss  carryforwards
expire at various dates beginning in 1999 through 2007.

(8) COMMITMENTS AND CONTINGENCIES

         The Company  leases  certain  office  space,  laboratory,  and research
facilities  under operating leases with various terms through July 2000. All the
real estate leases include renewal options at increasing levels of rent.

         One of the facility leases includes  scheduled base rent increases over
the term of the lease.  The  amount of base rent  payments  is being  charged to
expense on the  straight-line  method over the term of the lease. As of December
31, 1996 and 1995, the Company has recorded a liability of $53,900 and $141,100,
respectively, included in accrued expenses to reflect the excess of rent expense
over cash payments since  inception of the lease.  In addition to base rent, the
Company  pays a monthly  allocation  of the  operating  expenses and real estate
taxes for the above facilities.

         Rent expense for the years ended  December 31, 1996,  1995 and 1994 was
$365,700,  $477,600,  and  $549,700,  respectively.  At December 31,  1996,  the
remaining fixed lease commitment was as follows:

           Year Ended                                     Amount
         --------------                                ----------
              1997                                       254,600

              1998                                       117,300

              1999                                       124,800

              2000                                        79,700
                                                        --------
                                                        $576,400
                                                        --------



         Commencing in February  1995, the Company  committed  under a sponsored
research  agreement with a university to fund a research  scientist at a cost of
$13,125 per  quarter  for three  years  which costs are charged to research  and
development expense. In return, the Company has exclusive rights to any anti-HIV
compounds or derivatives developed in the course of this research,  provided the
Company obtains certain regulatory approvals from the FDA.

                                      -31-







                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) RETIREMENT PLAN

         In January 1993, the Company adopted a retirement  savings plan for its
employees,  which has been qualified under Section 401(k) of the Code.  Eligible
employees are permitted to  contribute  to the plan through  payroll  deductions
within  statutory  limitations  and subject to any  limitations  included in the
plan. To date, the Company has made no contributions to the plan.

(10) STOCKHOLDERS' EQUITY

     COMMON STOCK

           On October  31,  1996,  the Company  commenced  trading on the Nasdaq
 National  Market as a result of the initial public offering of its common stock
 ("IPO"),  raising net proceeds of $11,633,000 from the sale of 1,600,000 shares
 at $8.50 per share.

         On April 26, 1996, the Company entered into a Stock Purchase  Agreement
and Exclusive  Distributor  Agreement for five years with a foreign distributor.
Pursuant to the Stock Purchase  Agreement,  the Company issued 117,647 shares of
redeemable common stock at a price per share of $8.50, for which it received net
proceeds  of  $898,503.  Issuance  costs were  $101,497.  Completion  of the IPO
terminated the redemption  feature.  The  distributor is restricted from selling
these  securities for a one-year period after completion of the IPO. The Company
issued the 80,000 shares of Treasury Stock in connection with this transaction.

         On August 8, 1996 the Board of  Directors  approved  a 1-for-2  reverse
stock split and an increase  in  authorized  common  shares to  20,000,000,  and
authorized  1,000,000  shares of preferred  stock (par value  $.01),  which were
approved by the  stockholders  on September  10, 1996.  The stock split has been
retroactively  reflected in the accompanying  financial statements and notes for
all periods presented.

     OPTIONS AND WARRANTS

         The Company has two stock  option  plans  which are  administered  by a
committee of the Board of Directors who  determines the employees and affiliated
persons to receive  options and the number and option price of shares covered by
each such option. Options granted under both plans may be either incentive stock
options or non-qualified stock options. In general, for incentive stock options,
the option  price shall not be less than the fair  market  value at the time the
option is granted.  Generally,  options become exercisable at the rate of 25% at
the end of each of the  four  years  following  the  anniversary  of the  grant.
Options issued expire ten years from the date of grant, or 30 days from the date
of termination or affiliation.

         At  December  31,  1996,   897,600   shares  have  been   reserved  for
non-qualified stock options, of which 98,875 are available for future grants. At
December  31,  1996,  750,000  shares have been  reserved  for  incentive  stock
options, of which 574,462 are available for future grants.

         The  Company  applies  Accounting  Principles  Board  Opinion  No.  25,
"Accounting  for Stock  Issued to  Employees"  and  related  Interpretations  in
accounting for the plans. Accordingly,  no compensation cost has been recognized
for the plans. Had  compensation  cost for the plans been determined on the fair
value at the grant  dates for awards  under the plans in 1996 and 1995 using the
minimum value method  consistent  with SFAS No. 123 for grants prior to the IPO,
the  Company's  net income would have been reduced by $77,500 or $0.02 per share
in 1996, and by $23,300 or $0.01 per share in 1995. In computing these pro forma
amounts the Company has assumed a risk-free interest rate equal to approximately
6.18%,  no dividends,  and expected  average option life of  approximately  five
years.  There were no options  granted  subsequent to the IPO. SFAS 123 does not
apply to  awards  prior to 1995,  and  additional  awards  in  future  years are
anticipated.  The average fair value of options  granted during 1996 and 1995 is
estimated as $1.93 and $1.59, respectively, on the date of the grant.

         The  Company  has issued  warrants  in  connection  with  certain  debt
financings.  As of December 31, 1996,  120,000  shares of Common Stock have been
reserved  for issuance  pursuant to the exercise of such  warrants at a weighted
average exercise price of $2.50 per share.


                                      -32-


                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


 (10) STOCKHOLDERS' EQUITY - (CONTINUED)
         The Company has reserved  shares of its authorized but unissued  common
stock for the following:

<TABLE>
<CAPTION>
                                               Stock Options                        Warrants
                                    --------------------------------------------------------------------
                                                        Weighted                          Weighted                  Total
                                                      Average price                     Average price   ----------------------------
                                         Shares         per share         Shares          per share         Shares       Exercisable
                                    ----------------  ---------------  --------------  ---------------  ---------------  -----------
<S>                                         <C>            <C>               <C>            <C>              <C>            <C>
Balance outstanding, December 31, 1993      881,850        2.14              306,138        2.66             1,187,988      712,163
      Granted                                     -           -                    -           -                     -
      Exercised                             (19,375)       0.68               (4,600)       3.75               (23,975)
      Expired                               (81,525)       2.69                    -           -               (81,525)
                                    ----------------                   --------------                   ---------------
Balance outstanding, December 31, 1994      780,950        2.12              301,538        2.73             1,082,488      827,576
      Granted                                73,187        6.00                    -           -                73,187
      Exercised                              (6,000)       1.88              (41,200)       2.58               (47,200)
      Expired                               (47,850)       2.64                    -           -               (47,850)
                                    ----------------                   --------------                   ---------------
Balance outstanding, December 31, 1995      800,287        2.45              260,338        2.85             1,060,625      879,038
      Granted                               140,600        7.27                    -           -               140,600
      Exercised                              (1,500)       4.50              (84,260)       2.88               (85,760)
      Expired                               (21,500)       6.05              (56,078)       3.54               (77,578)
                                    ================                   ==============                   ===============
Balance outstanding, December 31, 1996       917,887       3.10              120,000        2.50             1,037,887      839,272
                                    ================                   ==============                   ===============

The following table summarizes information concerning options outstanding and exercisable as of December 31, 1996:
</TABLE>

<TABLE>
<CAPTION>
                                                            Options Outstanding               Options Exercisable
                                                      --------------------------------  ---------------------------------
     Range of Exercise Prices       Weighted                               Weighted                           Weighted
                                     Average              Number of        Average         Number of           Average
                                 Remaining Life            Options      Exercise Price       Options       Exercise Price
                                 -----------------------------------------------------------------------------------------
           <S>                        <C>                  <C>               <C>            <C>                  <C>
           $0.25 - $1.65              3.49                 359,500           1.21           359,500              1.21
           $2.50 - $4.50              5.59                 359,600           2.98           328,538              2.89
           $6.00 - $8.50              9.40                 198,787           6.86            31,234              6.00
                                                      ===============                   ================
                                                           917,887                           719,272
                                                      ===============                   ================
</TABLE>

(11) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

         Unaudited (Amounts in thousands, except for per share data)

<TABLE>
<CAPTION>
<S>                                    <C>          <C>          <C>          <C>
1996                                  1st Qtr      2nd Qtr      3rd Qtr      4th Qtr
                                     ----------   ----------   ----------   ----------
        Total revenue                  $ 3,084      $ 3,844      $ 4,015      $ 4,566
        Gross profit                     1,051        1,621        1,752        1,976
        Net income (loss)                  (97)         179          163          236
        Income (loss) per share          (0.04)        0.06         0.05         0.06


1995                                  1st Qtr      2nd Qtr      3rd Qtr      4th Qtr
                                     ----------   ----------   ----------   ----------
        Total revenue                  $ 2,728      $ 2,837      $ 2,896      $ 3,810
        Gross profit                       853        1,105        1,107        1,474
        Net income (loss)                  (39)           3          (19)         159
        Income (loss) per share          (0.01)        0.00        (0.01)        0.05
</TABLE>




                                      -33-




                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(12) SUBSEQUENT EVENTS

     SOURCE SCIENTIFIC ACQUISITION

         On March 26, 1997 the Company entered into an Asset Purchase  Agreement
to acquire  substantially  all of the assets and  business  and assume  selected
liabilities of Source  Scientific,  Inc.  ("Source") for $2.1 million in cash. A
substantial  majority of this  purchase  price will be allocated to goodwill and
other intangibles  Goodwill is expected to be amortized over 10 years. Source is
a developer and  manufacturer  of a broad line of clinical  instrumentation  and
biomedical devices for the worldwide in vitro diagnostic  industry.  The Company
has advanced  Source $650,000 in the form of senior secured demand notes to fund
working capital, product development and other operational needs. The notes bear
interest  of 15%.  The  Company  expects to make  additional  advances  prior to
closing. The proposed  acquisition is subject to standard conditions,  including
Source  shareholder  approval and will be recorded in  accordance  with purchase
accounting.

     NEW LOAN AGREEMENT

         Effective  March 28,  1997,  the Company  terminated  its  Revolver and
entered  into a $7.5  million  uncollateralized  revolving  line of credit ("New
Line") with its bank.  The New Line matures on June 30, 1999;  bears interest at
the Company's  option based on either base rate,  LIBOR plus 1.75%, or overnight
money  market  rate plus 1.75%;  and  carries a facility  fee of .25% per annum,
payable quarterly. The New Line contains covenants regarding the Company's ratio
of total  liabilities-to-equity,  minimum  tangible net worth,  and minimum debt
service  coverage ratio.  The New Line further  provides for restrictions on the
payment of dividends, and limitations on additional borrowings.

(13) SUPPLEMENTARY PRO FORMA EARNINGS PER SHARE - (UNAUDITED)

         If the Offering had been completed on January 1, 1995, a portion of the
proceeds  would have been used to retire all debt  outstanding at that time, and
all debt  incurred  in 1995 and 1996  would not have been  needed.  Based on the
foregoing,  supplemental  pro forma net earnings per share of common stock would
have  been  $.19  and $.09 for the  years  ended  December  31,  1996 and  1995,
respectively. Such net earnings per share of common stock are based on 3,544,183
and 3,626,391 shares of common stock  respectively,  consisting of 3,069,269 and
3,151,477  shares of common  stock and common  stock  equivalents  plus  474,914
shares  assumed to be issued at $8.50 per share as if the  Offering had occurred
on January 1, 1995 to retire indebtedness outstanding during 1995.



                                      -34-




                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
BOSTON BIOMEDICA, INC.:

         We have audited the accompanying  consolidated balance sheets of Boston
Biomedica,  Inc.  and  Subsidiaries  as of  December  31,  1996 and 1995 and the
related consolidated  statements of income,  stockholders' equity and cash flows
for each of the  three  years in the  period  ended  December  31,  1996.  These
consolidated  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

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

         In our opinion, the consolidated financial statements referred to above
present  fairly,  in all material  respects,  the  financial  position of Boston
Biomedica,  Inc.  and  Subsidiaries  as of  December  31,  1996 and 1995 and the
results of their  operations and their cash flows for each of the three years in
the period  ended  December  31,  1996 in  conformity  with  generally  accepted
accounting principles.



COOPERS & LYBRAND L.L.P.

Boston, Massachusetts
March 4, 1997, except as to
Note 12, for which the date is
March 28, 1997



                                      -35-




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


         None.


                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


         The  information  called for by Item 10 is incorporated by reference to
the  information  under Part I, Item 1 - Business  under the caption  "Executive
Officers of the Registrant" at page 14 of this Report, and to the information in
the Registrant's definitive Proxy Statement which is expected to be filed by the
Registrant within 120 days after the close of its fiscal year.


ITEM 11. EXECUTIVE COMPENSATION


         The  information  called for by Item 11 is incorporated by reference to
the information in the Registrant's definitive Proxy Statement which is expected
to be filed by the  Registrant  within  120 days  after the close of its  fiscal
year.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


         The  information  called for by Item 12 is incorporated by reference to
the information in the Registrant's definitive Proxy Statement which is expected
to be filed by the  Registrant  within  120 days  after the close of its  fiscal
year.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.


         The  information  called for by Item 13 is incorporated by reference to
the information in the Registrant's definitive Proxy Statement which is expected
to be filed by the  Registrant  within  120 days  after the close of its  fiscal
year.



                                      -36-





                                     PART IV


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

<TABLE>
<CAPTION>

 (A) 1. INDEX TO FINANCIAL STATEMENTS:
<S>                                                                                                     <C>
       Consolidated Balance Sheets as of December 31, 1996 and 1995.......................................22
       Consolidated Statements of Income for the three years ended December 31, 1996......................23
       Consolidated Statements of Changes in Stockholders' Equity for the three years ended
                        December 31, 1996.................................................................24
       Consolidated Statements of Cash Flows for the three years ended December 31, 1996..................25
       Notes to Consolidated Financial Statements.........................................................26
       Report of Independent Accountants..................................................................35

(A) 2. FINANCIAL STATEMENT SCHEDULES:
       Schedule II-Valuation and Qualifying Accounts......................................................42
       Report of Independent Accountants..................................................................43
</TABLE>

       All  supplemental  schedules other than as set forth above are omitted as
inapplicable or because the required information is included in the Consolidated
Financial Statements or the Notes to Consolidated Financial Statements.

(A) 3. EXHIBITS:

<TABLE>
<CAPTION>

       Exhibit No.
<S>              <C>
       3.1        Amended and Restated Articles of Organization of the Company**

       3.2        Amended and Restated Bylaws of the Company**

       4.1        Specimen Certificate for Shares of the Company's Common Stock**

       4.2        Description of Capital Stock (contained in the Restated Articles of Organization of the Company
                  filed as Exhibit 3.1) **

       10.1       Agreement, dated January 17, 1994, between Roche Molecular Systems, Inc. and the Company**

       10.2       Exclusive License Agreement, dated December 6, 1994, between the University of North Carolina at
                  Chapel Hill and the Company**

       10.3       Contract, dated September 30, 1995, between the National Institutes of Health and the Company (No.
                  1-AI55273) **

       10.4       Contract, dated September 30, 1995, between the National Institutes of Health and the Company (No.
                  1-AI-55277) **

       10.5       Contract, dated March 1, 1993, between National Cancer Institute and the Company **

       10.6       Agreement, dated October 1, 1995, between Ajinomoto Co., Inc. and the Company**

       10.7       Lease Agreement, dated June 30, 1992, for Rockville, Maryland Facility between Cambridge Biotech
                  Corporation and the Company**

       10.8       Lease Agreement, dated July 28, 1995, for New Britain, Connecticut Facility between MB Associates
                  and the Company**

       10.9       Worcester County Institution for Savings Warrant dated December 1, 1995 (No. 1) **

       10.10      Worcester County Institution for Savings Warrant dated July 26, 1993 (No. 2) **

       10.11      Stock Purchase Agreement, dated June 5, 1990, between G&G Diagnostics Limited Partnership I and
                  the Company, as amended**


                                      -37-




       10.12      Purchase and Sale Agreement, dated December 11, 1995, for 375 West Street Property between James
                  Leonard, Trustee, C.W.B. Trust and the Company**

       10.13      Purchase and Sale Agreement, dated December 20, 1995, for 80 Manley Street Property between the
                  Company and Donald M. Leonard, Trustee, Live Oak Realty Trust**

       10.14      Stock Purchase Agreement, dated April 26, 1996, between Kyowa Medex Co., Ltd. and the Company**

       10.15      1987 Non-Qualified Stock Option Plan**++

       10.16      Employee Stock Option Plan**++

       10.17      Underwriters Warrants, each dated November 4, 1996, between the Company and each of Oscar Grus &
                  Son Incorporated and Kaufman Bros., L.P. **

       10.20      Purchase Agreement, dated October 7, 1996, between BioSeq, Inc. and the Company**

       10.21      Warrant Agreement, dated October 7, 1996, between BioSeq, Inc. and the Company**

       10.22      Stockholders' Agreement, dated October 7, 1996, between BioSeq, Inc. and the Company**

       10.23      License Agreement, dated October 7, 1996, between BioSeq, Inc. and the Company**

       10.24.1    Commercial Loan Agreement, dated as of March 28, 1997, between
                  The First National Bank of Boston and the Company

       10.25      Asset Purchase Agreement, dated March 26, 1997 between Source Scientific, Inc. and the Company

       11.1       Statement re: Computation of Per Share Earnings

       21.1       Subsidiaries of the Company

       27         Financial Data Schedule

</TABLE>






------------------------

++     Management contract or compensatory plan or arrangement.

**     In accordance with Rule 12b-32 under the Securities Exchange Act of 1934,
       as amended,  reference is made to the documents previously filed with the
       Securities   and  Exchange   Commission,   which   documents  are  hereby
       incorporated by reference.

(B) REPORTS ON FORM 8-K.

                  The  Registrant  did not file any Current  Reports on Form 8-K
during the quarter ended December 31, 1996.



                                      -38-






                                   SIGNATURES

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

Date: March 28, 1997                 Boston Biomedica, Inc.

                                     By:   /s/ Richard T. Schumacher
                                           -------------------------
                                           Richard T. Schumacher
                                           President and Chief Executive Officer

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



<TABLE>
<CAPTION>

         SIGNATURES                                  TITLES                                         DATE
         ----------                                  ------                                          ----

       <S>                                          <C>                                       <C>

           /s/ Richard T. Schumacher                 President, Chief Executive Officer,      March 28, 1997
          ----------------------------------         and Chairman of the Board
        Richard T. Schumacher                         (Principal Executive Officer)


           /s/  Kevin W. Quinlan                     Senior Vice President, Finance;          March 28, 1997
         -----------------------------------         Chief Financial Officer; Treasurer
         Kevin W. Quinlan                            and Director
                                                     (Principal Accounting Officer)


           /s/  Calvin A. Saravis                    Director                                 March 28, 1997
         -----------------------------------
         Calvin A. Saravis

           /s/  Henry A. Malkasian Sr.               Director                                 March 28, 1997
         -----------------------------------
         Henry A. Malkasian Sr.

           /s/  Francis E. Capitanio                 Director                                 March 28, 1997
         -----------------------------------
         Francis E. Capitanio


</TABLE>


                                      -39-




EXHIBIT INDEX

<TABLE>
<CAPTION>

       Exhibit No.                                                                                      Reference

      <S>        <C>                                                                                    <C>
       3.1        Amended and Restated Articles of Organization of the Company                             A**

       3.2        Amended and Restated Bylaws of the Company                                               A**

       4.1        Specimen Certificate for Shares of the Company's Common Stock                            A**

       4.2        Description of Capital Stock (contained in the Restated Articles of                      A**
                  Organization of the Company filed as Exhibit 3.1)

       10.1       Agreement, dated January 17, 1994, between Roche Molecular Systems, Inc. and             A**
                  the Company

       10.2       Exclusive License Agreement, dated December 6, 1994, between the University of           A**
                  North Carolina at Chapel Hill and the Company

       10.3       Contract, dated September 30, 1995, between the National Institutes of Health            A**
                  and the Company (No. 1-AI55273)

       10.4       Contract, dated September 30, 1995, between the National Institutes of Health            A**
                  and the Company (No. 1-AI-55277)

       10.5       Contract, dated March 1, 1993, between National Cancer Institute and the Company         A**

       10.6       Agreement, dated October 1, 1995, between Ajinomoto Co., Inc. and the Company            A**

       10.7       Lease Agreement, dated June 30, 1992, for Rockville, Maryland Facility between           A**
                  Cambridge Biotech Corporation and the Company

       10.8       Lease Agreement, dated July 28, 1995, for New Britain, Connecticut Facility              A**
                  between MB Associates and the Company

       10.9       Worcester County Institution for Savings Warrant dated December 1, 1995 (No. 1)          A**

       10.10      Worcester County Institution for Savings Warrant dated July 26, 1993 (No. 2)             A**

       10.11      Stock Purchase Agreement, dated June 5, 1990, between G&G Diagnostics Limited            A**
                  Partnership I and the Company, as amended

       10.12      Purchase and Sale Agreement, dated December 11, 1995, for 375 West Street                A**
                  Property between James Leonard, Trustee, C.W.B. Trust and the Company

       10.13      Purchase and Sale Agreement, dated December 20, 1995, for 80 Manley Street               A**
                  Property between the Company and Donald M. Leonard, Trustee, Live Oak Realty
                  Trust

       10.14      Stock Purchase Agreement, dated April 26, 1996, between Kyowa Medex Co., Ltd.            A**
                  and the Company

       10.15      1987 Non-Qualified Stock Option Plan*                                                    A**

       10.16      Employee Stock Option Plan*                                                              A**

       10.17      Underwriters  Warrants,  each dated November 4, 1996,  between
                  the Company and B** each of Oscar Grus & Son  Incorporated and
                  Kaufman Bros., L.P.

                                      -40-


       10.20      Purchase Agreement, dated October 7, 1996, between BioSeq, Inc. and the Company          A**

       10.21      Warrant Agreement, dated October 7, 1996, between BioSeq, Inc. and the Company           A**

       10.22      Stockholders' Agreement, dated October 7, 1996, between BioSeq, Inc. and the             A**
                  Company

       10.23      License Agreement, dated October 7, 1996, between BioSeq, Inc. and the Company           A**

       10.24.1    Commercial Loan Agreement, as of dated March 28, 1997, between
                  The First  Filed  herewith  National  Bank of  Boston  and the
                  Company

       10.25      Asset Purchase Agreement, dated March 26, 1997 between Source Scientific, Inc.     Filed herewith
                  and the Company

       11.1       Statement re: Computation of Per Share Earnings                                    Filed herewith

       21.1       Subsidiaries of the Company                                                        Filed herewith


       27         Financial Data Schedule                                                            Filed herewith

</TABLE>







------------------------
A      Incorporated by reference to the Company's Registration Statement on Form
       S-1  (Registration  No.  333-10759)(the  "Registration  Statement").  The
       number set forth herein is the number of the Exhibit in said registration
       statement.

B      Incorporated  by  reference  to the  Registration  Statement,  where  the
       Exhibit was filed as Exhibit No. 10.17 and contained in Exhibit 1.1.

*      Management contract or compensatory plan or arrangement.

**     In accordance with Rule 12b-32 under the Securities Exchange Act of 1934,
       as amended,  reference is made to the documents previously filed with the
       Securities   and  Exchange   Commission,   which   documents  are  hereby
       incorporated by reference.



                                      -41-




                                                                    SCHEDULE II

                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                                        Recoveries
                                      Balance at                       for Accounts       Uncollectible       Balace at
                                      Beginning       Additions to      Previously           Accounts           End of
Allowance for Doubtful Accounts       of Period        Allowance        Written Off        Written Off         PPeriod
                                      ------------------------------------------------------------------------------------
<C>                                   <C>              <C>              <C>                <C>              <C>
1996                                  $ 142,372        $ 429,677        $   62,753         $(282,744)       $ 352,058
1995                                     94,723          181,084                 -          (133,435)         142,372
1994                                     43,956          102,099                 -           (51,332)          94,723

</TABLE>



                                      -42-








                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
BOSTON BIOMEDICA, INC.:

         In connection with our audits of the consolidated  financial statements
of Boston Biomedica,  Inc. and  Subsidiaries,  as of December 31, 1995 and 1996,
and for each of the three years in the period ended  December  31,  1996,  which
financial  statements  are included in this Annual  Report on Form 10-K, we have
also audited the  consolidated  financial  statement  schedule listed in Item 14
herein.

         In our opinion,  this consolidated  financial statement schedule,  when
considered  in  relation  to the basic  financial  statements  taken as a whole,
presents  fairly,  in all  material  respects,  the  information  required to be
included therein.



COOPERS & LYBRAND L.L.P.

Boston, Massachusetts
March 4, 1997



                                      -43-