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


                                Form 10-K/A No. 1


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(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, 2000, or
         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 .

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                             BOSTON BIOMEDICA, INC.
             (Exact Name of Registrant as Specified in its Charter)

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                                  Massachusetts
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         (State or other Jurisdiction of Incorporation or Organization)

                                375 West Street,
                         West Bridgewater, Massachusetts
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                    (Address of Principal Executive Offices)

                                   02379-1040
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                                   (zip code)

                                   04-2652826
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                      (I.R.S. Employer Identification No.)


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

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

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

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

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

     The   aggregate   market   value  of  the  voting   common  stock  held  by
non-affiliates  of the registrant at February 28, 2001 was $6,799,889,  based on
the closing price of the common stock as quoted on the Nasdaq National Market on
that date.

     As of March 12, 2001 there were 6,454,841 shares of the registrant's common
stock outstanding.




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<PAGE>

PART I

ITEM     1.       BUSINESS

     Boston Biomedica,  Inc. and its wholly-owned  subsidiaries (together,  "the
Company"),  provide  products and services for the  detection  and  treatment of
infectious  diseases such as AIDS and Viral Hepatitis.  As of March 1, 2001, the
Company had three business  units,  which are  comparable to operating  segments
(the  terms   "business   units"  and  "operating   segments"  are  used  herein
interchangeably):

(1)       BBI Diagnostics, an ISO 9001 certified manufacturer of quality control
          and other diagnostic products used to increase the accuracy of in
          vitro diagnostic tests;

(2)       BBI Biotech Research Laboratories, the research and development arm
          of the Company which supplements its support for the other BBI
          business units with research contracts and repository services
          primarily for agencies of the United States government; and

(3)       BBI Source Scientific, an ISO 9001 and EN 46001 certified
          manufacturer of laboratory and medical instruments.

     In addition, the Company is conducting research and development in the area
of  Pressure  Cycling  Technology  ("PCT")  with the  goals of  introducing  new
solutions  for  a  number  of  healthcare  issues,  including:  inactivation  of
pathogens  in human  plasma,  extraction  of nucleic  acids,  food  safety,  and
genomics.

     In late 2000, the Company elected to exit the clinical  laboratory  segment
of the  business and  accordingly,  in February  2001,  the Company sold certain
assets of BBI  Clinical  Laboratories,  a  wholly-owned  subsidiary,  to a third
party.  The  Company  intends  to  complete  its' exit from this  segment of the
business by the end of 2001.

     The  Company  was  organized  in   Massachusetts  in  1978,  and  commenced
significant operations in 1986.

     In  July  1999,  the  Company  announced  a  major  reorganization  and the
formation of a corporate function. Pursuant to this reorganization a Senior Vice
President and General Manager was appointed for each business unit, reporting to
the  President & Chief  Operating  Officer.  The  responsibility  of the General
Manager is to achieve the agreed upon goals and plan of the business  unit.  The
primary  focus of  corporate  is to oversee  the  business  units and guide them
according to the strategic direction of the Company.

     In  September   1999,  the  Company  moved  its  research  and  development
activities in PCT from leased  laboratory space in Woburn,  Massachusetts to its
BBI  Biotech  facility  in  Gaithersburg,  Maryland.  This was done to allow the
scientific team working on PCT to have easy and open access to the molecular and
cellular  biology  capabilities at BBI Biotech,  as well as to reduce  operating
costs and promote efficiencies.

     In October 1999, the Company formed a new, wholly-owned subsidiary, Panacos
Pharmaceuticals, Inc., ("Panacos"), a Delaware corporation. All of the Company's
technology  related  to its drug  discovery  and  vaccine  programs,  consisting
primarily of patents and related sponsored research agreements, were transferred
to Panacos  effective  January  2000. In  accordance  with its strategic  plans,
Panacos  obtained  additional  equity  financing  from third party  investors in
November 2000 in order to obtain the substantial  amount of capital  required to
progress to more advanced  stages of drug  development  including human clinical
trials.  As of December 31, 2000,  the Company owns  approximately  30.5% of the
equity of Panacos via nonvoting shares.

     The  Company's  strategy  is to leverage  its  scientific  capabilities  in
microbiology,  immunology,  virology, and molecular biology to (1) capitalize on
both the  emerging  end-user  market for  quality  control  products,  molecular
testing  market,  (2) develop new products and services,  (3) enhance  technical
leadership,  (4) capitalize on complementary business operations, and (5) pursue
strategic acquisitions and alliances.




                                       2
<PAGE>

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 materials include disposable diagnostic components, instructions,
and reaction  mixing vessels  (generally  96-well plates or test tubes) that are
coated  with the  relevant  infectious  disease  antigens,  antibodies  or other
materials.  To perform the test,  typically  either a technician  or a specially
designed  instrument  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 or radioactive
count),  that 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) that 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 and clinical laboratories worldwide. 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
("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
groups:  (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

     Through its business unit BBI Diagnostics, the Company offers a broad array
of "Diagnostic  Products," for in vitro  diagnostic  use,  consisting of Quality
Control Panels,  Accurun(R) Run Controls and Diagnostic Components,  all used in
connection  with  infectious  disease  testing.  Diagnostic  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
are  as  specific,  reproducible,  and  sensitive  as  possible.  The  Company's
Accurun(R) 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.


                                       3
<PAGE>

     Through its wholly-owned  subsidiary,  BBI Source  Scientific,  Inc., ("BBI
Source"),   the  Company   designs,   manufactures   and   markets   "Laboratory
Instruments", consisting of readers and washers and other small medical devices.
These  instruments  are  used  in  hospitals  and  clinics,   and  in  research,
environmental  and  food  testing  laboratories.  Utilizing  a  common  hardware
technology  platform,   these  instruments  are  used  in  connection  with  the
performance of an in-vitro diagnostics test, including reading the test result.

     BBI  Biotech  Research   Laboratories,   Inc.,  ("BBI  Biotech"),   another
wholly-owned subsidiary, is the R&D "arm" of the Company, helping to develop new
products and services for the other business units.  BBI Biotech seeks to obtain
government  grants and other research support wherever possible to help fund the
cost of this R&D. In addition,  BBI Biotech provides repository services for the
United States  government,  and other  commercial  services for laboratories and
test kit manufacturers.

     During each of the last three fiscal years, each of the Company's operating
segments contributed at least 15% of the Company's  consolidated  revenue,  with
the  exception of BBI Source in fiscal 2000 and 1999 and the "Other"  segment in
fiscal 2000, 1999 and 1998. The Company's  Consolidated Financial Statements set
forth in Item 8 of this report provide financial information relating to each of
the Company's operating segments.


Diagnostic Products

     The Company  manufactures  its  Diagnostic  Products  from human plasma and
serum that are obtained from nonprofit and commercial  blood centers,  primarily
in the United  States.  The Company has acquired  and  developed an inventory of
approximately  20,000 individual blood units and specimens (with volumes ranging
from 1 ml to 800 ml) which  provides  most of the raw material for its products.
Within the Diagnostic  Products class are two groups:  Quality Control Products,
consisting of Quality Control Panels and Accurun(R) Run Controls, and Diagnostic
Components.


     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  Panels are designed for  measuring  overall  test kit  performance  and
laboratory proficiency,  as well as for training laboratory  professionals.  The
Company's data sheets, which contain comprehensive  quantitative data useful for
comparative analysis,  are an integral part of its Quality Control Panels. 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 laboratory 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  laboratory  settings.  In  addition,  the  Company
provides information on its data sheets on the reactivity of panel components in
all FDA  licensed  test 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:


                                       4
<PAGE>
<TABLE>

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

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

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

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

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

Verification Panels       Verification Panels contain naturally   Verify accuracy and ensure       Clinical reference
                          occurring undiluted samples at          that reagents perform to         laboratories, blood banks,
                          varying titers.                         expectation:  also used to       hospital laboratories.
                                                                  troubleshoot system problems
                                                                  and to document problem
                                                                  resolution.
------------------------- --------------------------------------- -------------------------------- -------------------------------
</TABLE>

                                       5
<PAGE>
     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,  OEM,  and  verification  panels
generally range from $100 to $200 per panel.

     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  from a different  individual,  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.  However,  the Company cannot be
certain that it will be able to continue to obtain such specimens.

     Quality  Control  Panels  currently span the  immunologic  markers for AIDS
(i.e.,  HIV),  Hepatitis  (A, B and C),  Lyme  Disease  and  ToRCH  (Toxoplasma,
rubella, cytomegalovirus and herpes simplex virus).


     Accurun(R) Run Controls

     End-users of test kits use run controls to monitor  test  performance,  and
minimizing  false  negative  test results and  improving  error  detection.  Run
controls  consist of one or more specimens of known  reactivity  that are tested
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 for the run  control,
determined  by the user,  to measure  whether the other,  unknown  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 what is known
as 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 AccuChart(TM) tracking and charting software, used as part of
a laboratory's  quality  assurance  program,  runs on a personal computer and is
designed to provide the data tracking  capability needed to document  laboratory
performance.

     The  Company's  Accurun(R)  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(R) 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(R)  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(R) Run Control  products in
the fourth  quarter of 1993 and has since  developed  and  released  for sale an
additional 50 Accurun(R) products.  Five products have been discontinued,  for a
total of 49 Run Controls  available  as of December  31,  2000.  The majority of
these products are available for diagnostic  purposes;  the others currently are
limited to research use. Current Accurun(R) Run Control products generally range
in price from $5 to $60 per  milliliter.  All of the  Company's  Accurun(R)  Run
Controls for diagnostic use require either FDA premarket clearance (a 510(k)) or
validation studies (if the products are exempt from FDA submission  requirements
under the FDA Modernization Act of 1997), prior to being marketed for diagnostic
use. As of March 1, 2001, a total of 14 products in the Accurun 1(R) line and 27
single analyte Accurun(R) controls have either received 510(k) clearance or have
been validated.



                                       6
<PAGE>

     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 and 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.


Laboratory Instruments

     BBI Source,  the Laboratory  Instrumentation  operating  segment,  designs,
manufactures and markets laboratory  instruments and other small medical devices
used in hospitals  and clinics and in research,  environmental  and food testing
laboratories.  These  instruments are generally sold on a  private-label  or OEM
basis for other companies utilizing a common hardware technology  platform.  The
instruments  manufactured by the Company use advanced optical  detection methods
(luminescence,  fluorescence,  reflectance, photometry), robotics, fluidics, and
unique  software,  all of which are desired by customers  reselling or supplying
state-of-the-art  instrumentation  systems to laboratories  worldwide in various
applications.


     Most of the Laboratory  Instrumentation  products  currently  being offered
have been commercialized  since 1985 and were primarily developed in conjunction
with in vitro  diagnostics test kit  manufacturers.  BBI Source hopes to attract
development partners for new prototype products.  Management believes that these
products address important market segments in biomedical and clinical diagnostic
testing and in  environmental  monitoring  and food  testing  research.  The BBI
Source product line currently includes the following:

     MicroChem(R)  and   MicroChemII(R)   Photometers.   A  compact,   low-cost,
photometer designed for immunoassay and general chemistry applications.

     ChemStat(R) Automated Photometer. A high-speed, automated photometer with a
sample  capacity  of 95 tubes and a read rate of one  sample  per  second.  This
product is suited for high-volume processing.

     EXECWASH(R)  Washing System. An automated  immunoassay  washing system that
can be  quickly  configured  by the  user to wash  different  solid-phase  assay
formats by a proprietary manifold design. The EXEC-WASH is fully compatible with
a variety of other  Company  products,  such as the ChemStat and the E/LUMINA II
Luminescence Analyzer.

     Protocol Design  Software  System.  A development  tool for researchers and
assay manufacturers,  the program operates under Microsoft(R) Windows and serves
as the master  programming center for EXEC-WASH systems to create fluid handling
protocols.

     Verif-EYE(R) A reflectance  reader for rapid,  reliable  results for use in
research and development or process inspection and verification.


Services

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




                                       7
<PAGE>
     Contract Research and Services

     The BBI Biotech  operating segment offers a variety of research services in
molecular  biology,  cell  biology  and  immunology  to  governmental  agencies,
diagnostic test kit manufacturers and biomedical researchers.  Molecular biology
services include DNA extractions and sequencing,  recombinant DNA support, probe
labeling,  performing tests for  researchers,  and development of custom nucleic
acid  amplification   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 and custom
western blot assays.

     The Company  currently  provides  contract  research services under several
contracts and grants. These services are primarily related to infectious disease
diagnostics,  in support of the products and services that the Company wishes to
develop.  Current contracts  include the following:  clinical trials support for
candidate  HIV  vaccines,  identification  and DNA  sequencing  of  human  genes
involved  in  neurological  disorders,  development  of  PCR  based  assays  for
Babesiosis and Transfusion  Transmitted  Virus,  and microtiter plate assays for
HIV-1 genotyping.  Additional assays under development  include PCR based assays
for Parvovirus B19, Hepatitis B virus and Erhichiosis.


     Blood Processing and Repository Services

     Since 1983,  BBI Biotech  has  provided  blood  processing  and  repository
services for the National Cancer Institute ("NCI"),  also a part of the National
Institutes of Health ("NIH"). The repository stores over 8,000,000 specimens and
processes  or ships up to  several  thousand  specimens  per week in  support of
various NIH cancer and virus research programs. In 1997, BBI Biotech was awarded
a five-year  (including renewal options) NCI repository  contract with aggregate
payments of up to $5.2 million.  In 1998,  BBI Biotech  received a six-year $4.7
million repository contract (including five one-year extension options) with the
National  Heart,  Lung and Blood  Institute  of the NIH. In 1999,  it received a
seven-year,  $9.6 million  repository  contract  with the National  Institute of
Allergy  and  Infectious  Disease.  In 2000,  BBI Biotech was awarded a one-year
$854,000  subcontract  by New  England  Research  Institutes,  Inc.  to  provide
repository  and  related  specimen  processing  and  testing  services  for  the
Hepatitis C Antiviral  Long-term  Treatment against Cirrhosis  (HALT-C) Trial, a
clinical  trial funded by the National  Institutes of Diabetes and Digestive and
Kidney  Diseases  (NIDDK),  an  institute  of the NIH.  BBI Biotech is currently
focusing on developing a research and development program to extend the life and
maintain the quality of specimens that are stored at ultra-low  temperatures  as
well as  expanding  the  Company's  repository  customer  base to  include  more
industry  clients.  To date all renewal  options under these contracts have been
approved,  although the Company  cannot be certain that any  subsequent  options
will be exercised.


     Other Services

     Clinical Trials. The Company from time to time conducts clinical trials for
domestic  and  foreign  test kit and device  manufacturers.  Manufacturers  must
collect  data for  submission  to the  United  States  FDA and other  countries'
regulatory agencies, and these manufacturers contract with organizations such as
the Company to perform this work. By providing this service, the Company is able
to maintain close contact with test kit and device 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 and device  manufacturers  seeking to obtain
FDA approval for their infectious disease test kits and medical devices.

     Laboratory  Instrumentation Services. BBI Source offers services to design,
develop,  manufacture and distribute laboratory instruments to companies seeking
to   market   biomedical   products   manufactured   under   government-approved
manufacturing  practices.  These services range in complexity from consulting to
full system development and distribution.


                                      8
<PAGE>
     After-sales   Service.   BBI  Source  also  provides  after-sales  service.
Management  believes that after-sales  service is a major marketing advantage in
many of the  Company's  markets,  since many of the  Company's  customers do not
maintain  their  own full  service  departments.  Servi-Trak(R),  a  proprietary
software program,  is a key element of this after-sales  service.  The Company's
service  department  is  located  at BBI  Source's  facility  in  Garden  Grove,
California.  The Company utilizes an independent third party contractor  located
in Giessen,  Germany, to provide a fully functional European service and support
center.


Research and Development

     The Company's  research and development  effort  subsequent to December 31,
2000 is focused  on (i) the  development  of new and  improved  Quality  Control
Products  (Panels and  Accurun(R))  for the emerging  end-user market and the in
vitro  diagnostics  market,  (ii) the design and  development  of new laboratory
instruments  and mechanical and optical  detection  techniques,  emphasizing its
Verif-EYE  reflectance  reader,  and (iii) the  development of pressure  cycling
technology ("PCT") for nucleic acid purification and pathogen inactivation.  The
Company  has  approximately  20  full or  part-time  employees  involved  in its
research and development  effort  associated  with  continuing  operations as of
December 31,  2000.  As announced  in 1998,  at the time of its  acquisition  of
BioSeq,  Inc.,  the Company  continues to invest  significantly  in research and
development  both in whole dollars and as a percentage of revenue in 2000,  1999
and 1998. 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,  manufacturing,  regulatory and
finance personnel to identify and prioritize the development of new products and
services.  Whenever  it  can,  the  Company  seeks  to  fund  its  research  and
development  activities from grants provided by various agencies and departments
of the United States government. See also "Contract Research and Services."


     Quality Control Products

     In the area of Quality Control Products,  the Company's product development
activities center on the  identification and  characterization  of materials for
the manufacture of new products and the replacement of sold-out products. During
2000, the Company introduced 11 new Seroconversion, Performance, and Sensitivity
Panel products, and 4 new Accurun(R) Run Controls. The Company is developing new
Quality  Control  Products  for  use  with  both   immunological  and  molecular
diagnostic tests for subtypes and variants of HIV, HCV and HBV, and a variety of
controls targeted for leading  instrument  platforms.  The Company has increased
the number of Quality Control Products it offers from  approximately 20 products
in 1990 to more than 200 in 2000.


     Laboratory Instruments

     The  Company's  product   development   activities  related  to  laboratory
instruments are centered on additional  configurations of a "reflectance" reader
to produce  objective results from rapid in vitro diagnostic tests as well as an
updated version of the MicroPhotometer  (MicroChemII).  In addition, the Company
continues  to work on  applications  for  existing  products  to  broaden  their
utilization.


     Pressure Cycling Technology

     BBI BioSeq, a wholly-owned  subsidiary of the Company,  owns patent pending
technology  based on PCT. PCT research is  primarily  focused in two areas:  (1)
nucleic acid  extraction and  purification  from target  pathogens in connection
with sample  preparation  for PCR or other molecular  testing;  and (2) pathogen
inactivation   of  blood  plasma   intended  for   transfusion  or  for  further
fractionation  into transfusion  products.  See Note 2 to the Company's Notes to
Consolidated  Financial  Statements  in Item 8  hereunder  for  further  details
related to the 1998 acquisition of BioSeq, Inc.


                                      9
<PAGE>

Sales and Marketing

     The Company's  sales and  marketing  efforts are organized by business unit
consistent  with the unit's  business  objectives,  and coordinated via frequent
planning with senior management.  Overall, the Company employs  approximately 24
people in sales,  marketing,  and customer  service  functions  associated  with
continuing  operations as of December 31, 2000. The Company's  overall marketing
strategy is to focus on the needs of its  customers in two broad areas:  (i) the
quality and accuracy of test results in the in vitro  diagnostic  industry,  and
(ii) products and services in support of infectious disease researchers.

     The strategy for  Diagnostic  Products is to focus on customer needs 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 end-user
portion of this market is promoted under the marketing platform, known as "Total
Quality System" ("TQS"). TQS is a package of Quality Control Products, including
the Company's  Accurun(R) Run Controls and AccuChart  Quality Control  Software,
that 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(R)  line of run control  products.  In
addition, the Company continues to expand the Accurun(R) product line to support
the high growth nucleic acid testing market,  and to capitalize on the worldwide
implementation of new technology to improve the safety of blood products.

     The Company's  Diagnostic Products are currently sold through a combination
of  telephone,   mail,  third  party  distributors  and  direct  sales  efforts.
Domestically, Diagnostic Products are sold through a direct sales force led by a
Director of Sales and  Marketing.  The sales  force  consists of two sales group
managers and 12 sales representatives.  Internationally, the Company distributes
its Diagnostic  Products both directly and through 22  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.  The Company's  Laboratory  Instruments  are sold through a direct
domestic and international  sales force consisting of one director and one sales
representative.

     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 occasional  advertising in industry
publications,  technical  presentations,  and exhibitions at local, national and
international trade shows and expositions.  In 1999 the Company introduced a new
product information  library on its web site (www.bbii.com)  allowing customers,
field  sales  personnel  and  international  distributors  immediate  access  to
detailed product information and marketing literature.


Seasonality

     Historically,  the  Company's  results of  operations  have been subject to
quarterly  fluctuations  due  to  a  variety  of  factors,   primarily  customer
purchasing patterns, driven by end-of-year expenditures, and seasonal demand. In
particular,  the  Company's  sales  of  its  off-the-shelf  Diagnostic  Products
typically  have been  highest  in the  fourth  quarter  and  lowest in the first
quarter of each fiscal year,  whereas OEM product  sales may peak in any quarter
of the year, depending on the customer's  underlying  production cycle for their
product.  Research  Contracts are generally for large dollar amounts spread over
one to five-year  periods,  and upon completion,  frequently do not have renewal
phases. As a result, these contracts 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 performed.


                                       10
<PAGE>
Customers

     The  Company's  customers  for  Diagnostic  Products  consist of four major
groups:   (1)  international   diagnostics  and   pharmaceutical   manufacturing
companies,  such as  Abbott  Diagnostics,  Bayer,  bioMerieux,  Biorad,  Chiron,
Dade-Behring, DiaSorin, Fujirebio, Hoffman LaRoche, Ortho Diagnostics (Johnson &
Johnson),  and Sanofi  Diagnostics;  (2) 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,  (3)
national and international proficiency providers such as the College of American
Pathologists and the European Union Concerted Action for Quality Control and (4)
end-users of diagnostic  test kits,  such as hospital and  independent  clinical
laboratories, including Quest Diagnostics, Specialty Laboratories, public health
laboratories and blood banks, including the American Red Cross, Swiss Red Cross,
and United Blood Services.

     The Company's customers for Laboratory Instruments consist of international
diagnostic and pharmaceutical  manufacturing companies and are generally sold on
an OEM basis, for use by hospitals,  and clinical and research laboratories.  In
addition,  Laboratory  Instruments are sold directly to  environmental  and food
testing   laboratories,   and  wineries.   Customers  include  Hitachi  Chemical
Diagnostics,  Beckman/Hybritech  Inc.,  Vicam,  and Toray Fuji  Bionics Inc. The
Company's  customers  for  contract  research  include  various  agencies of the
National  Institutes of Health (NIH) such as the National Institute of Allergies
and Infectious Disease  ("NIAIDS"),  the National Cancer Institute ("NCI"),  and
the National Heart Lung and Blood Institute ("NHLBI").

     The  Company  does not have  long-term  contracts  with its  customers  for
Diagnostic  Products,  which are generally sold pursuant to purchase  orders for
discrete  purchases.  Laboratory  Instruments are generally sold on an OEM basis
under  short-term  contracts with monthly  delivery dates.  The Company believes
that its relationships with customers are satisfactory.

     The  Company's  Consolidated  Financial  Statements,  including  the  Notes
thereto,  set forth in Item 8 of this report provide information relating to the
Company's foreign and domestic sales.

     During the fiscal  years  2000,  1999,  and 1998,  sales  (from  continuing
operations) to the Company's three largest customers  accounted for an aggregate
of  approximately  20%, 24% and 24%,  respectively,  of the Company's net sales,
although the  customers  were not  identical  in each period.  During the fiscal
years 2000,  1999,  and 1998,  the  combined  revenues  from all branches of the
National Institutes of Health, a United States Government agency,  accounted for
approximately 30%, 23% and 18%,  respectively,  of total  consolidated  revenues
from continuing  operations of the Company.  While the Company believes that the
loss of any one of these customers would have an adverse effect on the Company's
results,  this risk is partially mitigated by the diversity of its customer base
within  the in  vitro  diagnostics  industry  and  the  different  diseases  and
instrument platforms on which they focus.


Manufacturing and Operations

     The Company  manufactures and assembles Diagnostic Products at its facility
in West Bridgewater,  Massachusetts.  Raw materials (primarily plasma and serum)
are  acquired  from a  variety  of  vendors  and  through  a  program  of  donor
recruitment,    screening,   management,   and   plasma/serum   collection   and
characterization.  Laboratory  instruments are manufactured and assembled at the
Company's facility in Garden Grove, California.  All important raw materials and
sub-assemblies  are acquired from a variety of vendors with multiple  sources of
supply.

     The Company  operates its research and  development  laboratory  (including
PCT) in Gaithersburg, Maryland and a repository facility in Frederick, Maryland.
See "Item 2 -- PROPERTIES."



                                       11
<PAGE>
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 its current and future markets could be adversely affected.

     In the area of Quality Control Products, the Company competes in the United
States with NABI (formerly North American Biologicals, Inc.) in run controls and
quality control panel products,  with Acrometrix,  Dade  International,  Bio-Rad
Laboratories,  Inc., and Blackhawk  Biosystems Inc. in run controls,  and with a
number of  smaller,  privately-held  companies  in quality  control  panels.  In
Europe, in addition to the above, the Dutch Red Cross offers several run control
and panel products. The Company believes that all of these competitors currently
offer a less  diverse line of panel and run control  products  than the Company,
although  the Company  cannot be certain  that these  companies  will not expand
their product lines.

     In the Diagnostic  Components  area, the Company  competes with  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.

     The  laboratory  instrument  manufacturing  industry  is diverse and highly
competitive.   The  Company  believes  its  technology   base,   reputation  for
reliability,  systems  integration  and service  capabilities  provide it with a
competitive  advantage  over  its  competitors  which  include:  Dynatech  Corp,
Kollsman  Manufacturing Company, Inc., Bio-Tek Instruments Inc., Rela Inc. (part
of Colorado Medtech,  Inc.) and SeaMed, as well as numerous,  smaller companies,
such as Awareness Technology Inc.

     BBI Biotech  competes  primarily with  BioReliance  Corporation and several
universities   for  research  and   development   contracts  and  with  McKesson
Bioservices, Inc., for repository services.


Intellectual Property

     The  Company  holds as trade  secrets  current  technology  used to prepare
Basematrix  and other  blood-based  products.  None of the Company's  Diagnostic
Components has been patented.  The Company relies  primarily on a combination of
trade secrets and non-disclosure and confidentiality agreements to establish and
protect its  proprietary  rights in these products and related  technology.  The
Company  cannot  be  certain  that  others  will not  independently  develop  or
otherwise acquire the same, similar or more advanced trade secrets and know-how.

     BBI Source has also relied on trade  secrets and  proprietary  know-how for
its  Laboratory   Instruments  which  it  protects  in  part  by  entering  into
confidentiality  agreements  with  persons  or  parties  deemed  appropriate  by
management.  In addition,  the Company  currently  has six issued  United States
patents,   covering   significant  aspects  of  the  Company's  core  instrument
technology and techniques,  as well as several electronic and mechanical designs
employed in the Company's products. These patents expire between 2006 and 2013.

     The Company has four patents issued and several pending patent applications
for its Pressure Cycling Technology. Several of these have been followed up with
foreign  applications,  and  the  Company  expects  to file  additional  foreign
applications  in 2000  relating to Pressure  Cycling  Technology.  These patents
expire between 2015 and 2018.

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

                                       12
<PAGE>

     BBI(R), Accurun(R), MicroChem(R), MicroChemII(R),  Chemstat(R), EXECWASH(R)
and  Verif-EYE(R)  are  registered  trademarks  of the  Company.  The  Company's
registered  trademarks currently have expiration dates ranging from 2004 to 2008
and the Company may renew such registrations prior to expiration.


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 most 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 the FDA  finding  the  product to be  substantially  equivalent  to an
existing FDA cleared,  and 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 the 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.

     The  Company's  Accurun(R)  Run  Controls,  when  marketed  for blood donor
screening or diagnostic  use, have been classified by the FDA as medical devices
that until 1998 required clearance under the 510(k) process.  In 1998, new rules
took effect that  exempted  unassayed  controls  intended for use in  diagnostic
testing from the  requirement for a 510(k)  submission.  BBI may now label these
products "For In Vitro  Diagnostic  Use" if they are validated  according to the
Company's   protocols   and   manufactured   according  to  cGMP  (current  Good
Manufacturing  Practices,  which is FDA guidance for manufacturing processes for
medical devices).  The FDA still requires 510(k) clearance for assayed controls,
and controls  intended for use in blood  screening.  The FDA could, in addition,
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.
The Company  cannot be certain  that it 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.

     As of March 1, 2001, a total of 14 products in the Accurun 1(R) line and 27
single analyte  Accurun(R) Run controls have either received 510(k) clearance or
have been validated  according to the Company's  protocols and are  manufactured
according  to  cGMP.  Certain  of the  Company's  Accurun(R)  Run  Controls  are
currently  marketed  "for  research  use only." 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,  or  validated  prior to
marketing, and initiate enforcement action against the Company, which could have
a material  adverse  effect on the  Company.  The FDA has issued a Draft  Policy
Compliance  Guideline,  which,  if it takes  effect as  currently  issued,  will
strictly limit the sale of products labeled "for research use only." The Company
is monitoring this situation, and will adapt its policies as required.

     BBI Source  generally  obtains  510(k) and CE approval  for all  laboratory
instrumentation designed and manufactured in its Garden Grove facility.

     The Company is registered as a medical device manufacturer with the FDA for
its Diagnostic Products and Laboratory Instruments and files changes/listings of
its  products  semi-annually.  The  Company's  facilities  in West  Bridgewater,
Massachusetts  for  Diagnostic   Products  and  Garden  Grove,   California  for
Laboratory   Instruments  are  FDA  Good   Manufacturing   Practices   (FDA/GMP)
facilities.   The  Company   must   maintain   high   standards  of  quality  in
manufacturing,  testing and  documentation,  and implement  strict  cGMP/quality
system requirement guidelines governing reagent and instrument manufacturing.



                                       13
<PAGE>

     Once cleared or  approved,  medical  devices are subject to  pervasive  and
continuing  regulation by the FDA,  including,  but not limited to  cGMP/quality
system requirements,  regulations governing testing,  control, and documentation
and  reporting  of  adverse  experiences  with  the use of the  device.  The FDA
monitors  ongoing  compliance with  cGMP/quality  system  requirements and other
applicable  regulatory  requirements  by conducting  periodic  inspections.  FDA
regulations  require FDA 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.  The  Company  cannot be  certain,
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.

     The Company's Diagnostic Products and Laboratory Instruments business units
are  both  ISO9001  certified,  with  registration  by  TUV  Rheinland  for  the
Diagnostic  Products  unit and British  Standard  Institute  for the  Laboratory
Instruments unit. The Laboratory  Instrument group is also certified to EN46001,
a set of supplementary requirements applicable to their products.

     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 members of the European  Union and
the  European  Free Trade  Association)  are in the process of adopting  various
product  and service  "Directives"  to address  essential  health,  safety,  and
environmental  requirements  associated  with the products and  services.  These
"Directives"  cover both quality system  requirements (ISO Series 9000 Standards
and the EN46001 Requirements) and product and marketing related requirements. In
addition,  some  jurisdictions  have  requirements  related to  marketing of the
Company's products. The Company cannot be certain that it 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  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
(such as the College of American  Pathologists),  and other national  regulatory
agencies (such as the 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")  and  Good
Manufacturing  Practice ("GMP") regulations,  investigational new drug or device
regulations, Institutional Review Board ("IRB") regulations and informed consent
regulations.

     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  US  Department  of  Agriculture   (Importation  and
Transportation  of  Controlled  Materials  and  Organisms  and  Vectors) and the
Maryland  State and US Nuclear  Regulatory  Commission  (in vitro  testing  with
by-product  material  under  general  license,   covering  the  use  of  certain
radioimmunoassay test methods and Radioactive Materials).


                                       14
<PAGE>

     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 US  Environmental  Protection  Agency
identification  number.  The  Company  is also  registered  with the US  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, 2000 the Company employed 259 persons,  all of whom were
located in the United  States.  Of these,  100 persons were employed by the West
Bridgewater,  Massachusetts company, 68 by the New Britain,  Connecticut company
(a  discontinued  operation  as of December  31,  2000),  69 at its two Maryland
facilities,  and  22 by  the  Garden  Grove,  California  company.  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.

Executive Officers of the Registrant

     The  following  table  sets  forth the  names,  ages and  positions  of the
executive officers of the Company as of December 31, 2000:
<TABLE>

Name                             Age  Position
<S>                              <C>  <C>
Richard T. Schumacher            50   Chief Executive Officer and Chairman of the Board
Kevin W. Quinlan                 50   President and Chief Operating Officer; and Director
William R. Prather, R.Ph, M.D    53   Senior Vice President, Finance and Business Development,
                                      Treasurer and Director
Patricia E. Garrett, Ph.D        57   Senior Vice President - Strategic Programs
Mark M. Manak, Ph.D              49   Senior Vice President and General Manager of BBI Biotech
David F. Petersen                54   Senior Vice President and General Manager of BBI Source
Richard C. Tilton, Ph. D         64   Senior Vice President, Science and Technology
Kathleen W. Benjamin             44   Vice President, Human Resources
Richard D'Allessandro            54   Vice President, Information Technology

</TABLE>
     Mr.  Schumacher,  the Founder of the Company,  has been the Chief Executive
Officer  and  Chairman  since 1992 and served as  President  from 1986 to August
1999. 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 served as President
and Chief Operating Officer since August 1999. From January 1993 to August 1999,
he served  as Senior  Vice  President,  Finance,  Chief  Financial  Officer  and
Treasurer.  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.

                                       15
<PAGE>

     Dr.  Prather,  a Director of the Company  since 1999,  has been Senior Vice
President,  Finance and Business  Development since July 1999. From January 1999
to  August  1999,  Dr.  Prather  served  as  Senior  Vice  President,   Business
Development.  Prior to joining the Company,  Dr.  Prather was the Senior  Health
Care Analyst for the investment  banking firm,  Cruttenden Roth, Inc., from 1995
to 1998.  From 1992 to 1995 he was the Senior Analyst in Health Care for Manning
and Napier  Advisors.  Dr.  Prather  earned a B.S. in Pharmacy  and an MD at the
University of Missouri - Kansas City and completed a Clinical Research Geriatric
Fellowship  at Harvard  Medical  School.  Dr.  Prather  is a Director  of Primed
International,  a medical  device  company and a member of the Advisory Board of
the Canadian Medical Discovery Fund, Inc., a fund of MDS Capital Corp.

     Dr. Garrett is presently  Senior Vice President - Strategic  Programs,  and
has  served as  Senior  Vice  President  and  General  Manager  of BBI  Clinical
Laboratories  since August 1999.  From 1988 to August 1999, she served as Senior
Vice President,  Regulatory Affairs & Strategic Programs. 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  and General  Manager of BBI
Biotech since August 1999. From 1992 to 1999 he served as Senior Vice President,
Research and Development.  From 1980 to 1992, he served as Director of Molecular
Biology and Director of Contracts and Services 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.

     Mr. Petersen has served as Senior Vice President and General Manager of BBI
Source since August 1999.  From May 1998 to August 1999, he was Vice  President,
BBI Source  Scientific.  Mr.  Petersen has 25 years of  experience in operations
management  and  materials  planning  including  10 years as Senior  Director of
Operations for Source  Scientific.  Before joining Source Scientific in 1988, he
was the Manager of  Manufacturing  for Matrix  Instruments from 1985 to 1988 and
previously  was Manager of Production  and  Inventory  Control for Farr Company,
Inc. from 1977 to 1985. He is certified in production  and inventory  management
(CPIM) by the American  Production and Inventory Control Society (APICS).  He is
also an Assistant  Professor at California  State  University  Dominguez  Hills,
where he  instructs  upper  division  courses in  manufacturing  techniques  and
material  resource  planning.  He holds a B.S. in business  management  from the
University of LaVerne in LaVerne, California.

     Dr.  Tilton has served as Senior Vice  President,  Science  and  Technology
since  August  1999.  Prior to this time he 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,
serving as its President from 1989 to 1993.  Dr. Tilton has 25 years  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.

     Ms.  Benjamin has served as Vice  President,  Human Resources since January
1999. Prior to her promotion to Vice President,  Ms. Benjamin served as Director
of Human  Resources and Investor  Relations from 1997 to 1999.  Prior to joining
the Company in 1997 she was employed by Shields Health Care Group, a provider of
Magnetic Resonance Imaging and radiation oncology,  serving as their Director of
Operations  from  1992 to 1997.  Prior to this  time  she was an  educator.  Ms.
Benjamin received her B.S., from the College of Life Sciences and Agriculture at
the University of New Hampshire.

     Mr.  D'Allessandro  has served as Vice  President,  Information  Technology
since January 1999.  Mr.  D'Allessandro  joined the Company in 1993 as Director,
Management  Information  Systems and served in that capacity until his promotion
to  Vice  President.  Mr.  D'Allessandro  has 30  years  of  experience  in data
processing/information  systems  technology,  with a focus on manufacturing  and
biotechnology  organizations.  Mr. D'Allessandro is APICS certified and received
his B.S. in Management Information Systems from Northeastern University.

     Officers are  nominated by the Chief  Executive  Officer and elected by the
Board of Directors.


                                       16
<PAGE>

ITEM 2.  PROPERTIES.

     The  Company   owns  its   corporate   offices  and   diagnostic   products
manufacturing  facility  for its BBI  Diagnostics  operating  segment,  which is
located  in a  two-story,  32,000  square  foot  building  in West  Bridgewater,
Massachusetts.  The Company has been  renovating  and  expanding  this  facility
during recent  years,  and believes that upon  completion  of  renovations,  its
facility in West Bridgewater MA will be sufficient to meet its needs for several
years. This building is subject to a 10 year mortgage.  Monthly payments on this
mortgage  is based on a 20 year  amortization  schedule  with a balloon  payment
representing  the remaining  balance due in full on March 10, 2010.  The Company
leases  41,000 square feet of space in Garden  Grove,  California  where its BBI
Source business unit manufactures  laboratory  instruments.  The lease continues
until  February 1, 2002 and the Company has an option to renew at market  rates.
Commencing  in October 2000,  approximately  17,000 square feet of this facility
were  subleased to a third party through the end of the lease term.  The Company
leases laboratory  facilities in Gaithersburg and Frederick,  Maryland.  The BBI
Biotech  segment's  Gaithersburg  facility contains 36,500 square feet of custom
built  laboratory and office space,  and is occupied under a ten-year lease that
is due to expire on October 31, 2007.  The Frederick  facility  contains  36,000
square  feet of  primarily  repository  space  and is also  occupied  by the BBI
Biotech segment,  under a seven-year lease that is due to expire on November 30,
2006.

     BBI Clinical  Laboratories,  a discontinued  operation as of December 2000,
occupies a 15,000 square foot facility in New Britain CT facility  pursuant to a
lease which expires in July 2004. In February  2001, the buyer of certain assets
and  liabilities  of BBICL agreed to reimburse the Company for  essentially  all
rental-related costs of this facility through December 31, 2001.


ITEM 3.  LEGAL PROCEEDINGS.

     On August 18,  2000,  the  Company  received a summons and  complaint  from
Paradigm Group, LLC naming the Company as a defendant.  Paradigm Group, LLC is a
selling  shareholder in the Company's  registration  statement on Form S-3 which
has been  declared  effective  by the  Securities  and  Exchange  Commission  on
December 8, 2000. The suit, filed in the Circuit Court of Cook County, Illinois,
alleged  breach of contract  claims and fraud  against the Company in connection
with the sale by the Company to the Paradigm Group,  LLC of warrants to purchase
up to 500,000  shares of the  Company's  common  stock,  the  exercise  of those
warrants by Paradigm Group,  LLC and a delay in the registration of those shares
with the Securities and Exchange  Commission.  Paradigm Group LLC sought several
remedies,  including  $3,000,000  in damages or  unspecified  monetary  damages,
return of the $42,500  purchase  price for the  warrants and  rescission  of its
exercise of the warrants,  and unspecified  punitive damages.  In December 2000,
Paradigm Group, LLC withdrew this lawsuit.


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

     No matter was submitted  during the fourth quarter of fiscal 2000 to a vote
of security holders of the Company.


                                       17
<PAGE>

                                     PART II


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


     The Company's 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".


     The following table sets forth the high and low price,  by quarter,  during
the two most recent fiscal years:
<TABLE>

                                            Common Stock Price

Fiscal Year Ended December 31, 2000         High            Low

<S>                                   <C>             <C>
First Quarter .....................   $    16.968     $    2.250
Second Quarter ....................   $     7.500     $    3.375
Third Quarter .....................   $     7.125     $    2.625
Fourth Quarter ....................   $     4.625     $    1.500

Fiscal Year Ended December 31, 1999         High            Low

First Quarter .....................   $     4.000     $    2.625
Second Quarter ....................   $     5.375     $    2.625
Third Quarter .....................   $     4.625     $    3.250
Fourth Quarter ....................   $     4.625     $    2.375

</TABLE>

     As of March  12,  2001,  there  were  20,000,000  shares  of  Common  Stock
authorized of which 6,454,841 shares were issued and outstanding, held of record
by approximately 3,992  stockholders.  See also Note 12 of Notes to Consolidated
Financial Statements included in Part 2, Item 8 hereunder.

     The Company has not declared or paid any dividends on its Common Stock.  In
accordance  with the terms of the  Company's  mortgage  with a bank,  payment of
dividends on Common Stock is not permitted. The Company plans to reinvest future
profits to expand its business.


                                       18
<PAGE>
ITEM 6.  SELECTED FINANCIAL DATA (In thousands, except per share data)

     The  statement of income data for each of the fiscal years in the five-year
period ended  December 31, 2000,  and the balance  sheet data as of December 31,
2000,  1999,  1998,  1997,  and 1996,  have been derived  from the  consolidated
financial  statements  of the Company.  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>
                                                                                   Year Ended December 31,
                                                                  --------------------------------------------------------
                                                                    2000        1999       1998 (1)    1997 (2)      1996
Consolidated Statement of Income Data:                            --------    --------    --------    --------    --------

REVENUE:
<S>                                                               <C>         <C>         <C>         <C>         <C>
Products ......................................................   $ 12,387    $ 14,057    $ 13,075    $ 11,711    $  8,470
Services ......................................................      7,083       5,741       6,190       4,844       2,562
                                                                  --------    --------    --------    --------    --------
Total revenue .................................................     19,470      19,798      19,265      16,555      11,032
                                                                  --------    --------    --------    --------    --------

COSTS AND EXPENSES:
Cost of products ..............................................      7,270       7,267       7,180       5,774       4,252
Cost of services ..............................................      5,581       4,568       4,289       3,624       2,019
Research and development ......................................      2,444       3,132       2,297       1,311         797
Acquired research and development (3) .........................       --          --         4,231        --          --
Selling and marketing .........................................      2,660       2,831       2,883       2,306       1,416
General and administrative ....................................      4,919       3,451       3,334       2,447       1,556
Impairment of intangible asset (4) ............................      1,464        --          --          --          --
                                                                  --------    --------    --------    --------    --------
Total operating costs and expenses ............................     24,338      21,249      24,214      15,462      10,040
                                                                  --------    --------    --------    --------    --------
(Loss) income from continuing operations ......................     (4,868)     (1,451)     (4,949)      1,093         992
Interest (expense) income, net (5) ............................     (1,594)       (413)        (48)        287        (205)
                                                                  --------    --------    --------    --------    --------
(Loss) income from continuing operations before income taxes ..     (6,462)     (1,864)     (4,997)      1,380         787
(Provision for) benefit from income taxes (6) .................     (1,152)        744         614        (510)       (302)
                                                                  --------    --------    --------    --------    --------
Loss from continuing operations before cumulative effect
of change in accounting principle .............................     (7,614)     (1,120)     (4,383)        870         485
Cumulative effect of change in accounting principle (5) .......       (190)       --          --          --          --
                                                                  --------    --------    --------    --------    --------
(Loss) income from continuing operations ......................     (7,804)     (1,120)     (4,383)        870         485
(Loss) income from discontinued operations ....................       (197)        306          (6)        135          (4)
                                                                  --------    --------    --------    --------    --------
Net (loss) income .............................................   $ (8,001)   $   (814)   $ (4,389)   $  1,005    $    481
                                                                  ========    ========    ========    ========    ========

(Loss) income per share from continuing operations, basic .....   $  (1.43)   $  (0.24)   $  (0.94)   $   0.20    $   0.17
(Loss) income per share from continuing operations, diluted ...      (1.43)      (0.24)      (0.94)       0.18        0.15
Net (loss) income per share, basic ............................      (1.46)      (0.17)      (0.94)       0.23        0.17
Net (loss) income per share, diluted ..........................   $  (1.46)   $  (0.17)   $  (0.94)   $   0.21    $   0.14

Number of shares used to calculate net (loss) income per share
    Basic .....................................................      5,465       4,670       4,655       4,438       2,916
    Diluted ...................................................      5,465       4,670       4,655       4,780       3,340

                                                                                           December 31,
                                                                    --------------------------------------------------------
                                                                      2000        1999        1998        1997        1996
                                                                    --------    --------    --------    --------    --------
Consolidated Balance Sheet Data:

Working capital ...............................................   $  3,596    $  8,615    $  8,231    $  8,935    $ 11,561
Net assets from discontinued operations........................      1,238       1,978       1,346       1,180       1,721
Total assets ..................................................     22,549      24,934      23,038      22,882      19,523
Long term debt, less current maturities .......................      5,287       7,146       3,977        --          --
Total stockholders' equity ....................................      7,750      13,646      14,069      18,067      16,290
Dividends .....................................................       --          --          --          --          --
</TABLE>

(1)  Effective  September 30, 1998, the Company acquired all classes of stock of
     BioSeq, Inc., a development stage company with no revenue, for a total
     purchase price of $4,226.
(2)  Effective July 1, 1997, the Company acquired the business and net assets of
     Source Scientific, Inc. for $1,994 which increased 1997 revenue by $2,608.
(3)  Consists of $3,381 of in-process research and development related to the
     BioSeq acquisition, and a charge of $850 related to the purchase of
     licensed technology in the first quarter of 1998.
(4)  Includes a $1,464 write-down of goodwill associated with the acquisition of
     BBI Source Scientific.
(5)  Includes $840 of interest expense associated with the beneficial conversion
     feature of the Company's 3% Senior Subordinated Convertible Debentures.
     $190 of this amount is recorded as a cumulative effect of change in
     accounting principle.
(6)  Includes $1,135 for establishment of a full valuation allowance on the
     Company's deferred tax assets.

                                       19
<PAGE>
ITEM 7.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS.

Overview

     The Company generates revenue from products and services provided primarily
to the in vitro diagnostic  infectious disease industry.  As discussed in Note 6
to the  Consolidated  Financial  Statements,  the  Company  has  four  operating
segments:  "Diagnostics,"  "Biotech," "Laboratory  Instrumentation" and "Other."
Two  of  these,   "Diagnostics"  and  "Laboratory   Instrumentation"   primarily
manufacture products. Within Diagnostics there are three groups: Quality Control
Panels,  Accurun(R) Run Controls, and Diagnostic  Components.  The remaining two
segments generate  primarily  service revenue and consist of "BBI Biotech",  and
"Other"  (development stage research and development).  Within BBI Biotech there
are three groups:  Contract Research,  Blood Processing and Repository Services,
and Research  Services.  Revenue in the "Other" segment consists of both private
and NIH funded support for the research activities  associated with our pressure
cycling  technology  and  drug  discovery  operations.  See  Note 6 of  Notes to
Financial  statements  for a  further  discussion  of the  activities  of  these
segments and Note 13 of Notes to Financial  Statements relative to the Company's
discontinued clinical laboratory operations.

     Effective January 2000, all of the Company's technology related to its drug
discovery  and vaccine  programs,  consisting  primarily  of patents and related
sponsored  research  agreements,  were  transferred to Panacos  Pharmaceuticals,
Inc., a  wholly-owned  subsidiary  that the Company  formed in October  1999. In
November 2000,  Panacos sold a majority of its equity to third party  investors,
reducing the Company's ownership to 30.5% which is held in non-voting  preferred
securities.  As a result,  the  Company no longer  consolidates  the  results of
Panacos.  As of November 14, 2000 the  Company's  investment in Panacos was zero
and the Company is no longer required to fund Panacos's operations. Therefore no
further losses of Panacos will be recorded by the Company.  The Company believes
that this will  position  Panacos to  progress to more  advanced  stages of drug
development   including  clinical  trials,  while  at  the  same  time  allowing
management to focus more time on the Company's core business.

     In December  2000,  the  Company  decided to exit the  clinical  laboratory
segment of the business and  accordingly,  in February  2001, the Company sold a
majority of the assets and the accounts payable of BBI Clinical Laboratories,  a
wholly-owned  subsidiary,  to a third party.  In connection  with the sale,  BBI
Clinical  Laboratories  will  continue to provide  clinical  laboratory  testing
services for at least 180 days from the closing date of the transaction,  but in
no event later than December 31, 2001. Results of operations for this segment of
the  business are  discussed  hereunder  in the caption  entitled  "Discontinued
Operations."  Prior period data has been  reclassified to conform to the current
format of presentation relative to continuing operations.


PRODUCTS

     The economics and cost structures of the segments have certain differences.
The Diagnostics  segment has  historically  been the largest and most profitable
segment, both in absolute dollars and in operating profit margin, as it operates
primarily in a commercial  environment  with fewer  competitors  and  relatively
short product  development  cycles. The Laboratory  Instrumentation  segment had
been in decline for  several  years prior to its  acquisition  in mid 1997,  and
management is working to turn around this business. It also operates in a highly
competitive,  low margin  business:  contract  manufacturing  of instruments and
medical  devices.  At the  current  low annual  revenue  level of less than $2.5
million, it operates significantly under capacity with high overhead, and should
significantly benefit from relatively small revenue increases.


                                       20
<PAGE>
SERVICES

     BBI Biotech has been project oriented with a high proportion of its revenue
generated from government  contracts (for both research and service  activities)
and assisting the other  segments in their new product and service  development.
It has the highest level of  inter-segment  activity,  and is structured  around
project  tracking of direct costs plus  overhead and a low  percentage  fee. Its
financial goal has been to breakeven  while  contributing  to the development of
future  products  and  services  for the  Company.  The  "Other"  segment's  R&D
operation  does not  currently  have any  product  or  service  revenue,  and no
significant  revenues are expected in the near future.  Revenue to date consists
of both  private  and public  (NIH)  funding of  segment  research.  Most of the
expenditures  by this  segment  are for R&D  expenses,  and  general  management
expenses including patent costs. The Company continues to seek funding from both
private and public sources to minimize the impact of their  development costs on
the Company's overall operating results. In this regard, Panacos Pharmaceuticals
obtained  independent  third  party  equity  financing  in November  2000,  thus
terminating the Company's  responsibility  going forward to fund future research
and development  activities of Panacos.  The Company retains a 30.5% interest in
non-voting preferred shares of Panacos.


QUARTERLY FLUCTUATIONS

     Historically,  the  Company's  results of  operations  have been subject to
quarterly  fluctuations  due  to  a  variety  of  factors,   primarily  customer
purchasing patterns, driven by end-of-year  expenditures.  In particular, in the
Diagnostics  segment,  the Company's sales of its off-the-shelf  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 OEM product
sales may peak in any quarter of the year,  depending on the production cycle of
a given project.  In the Company's BBI Biotech segment,  research  contracts are
generally for large dollar  amounts  spread over one to five year  periods,  and
upon  completion,  frequently  do not have  renewal  phases.  As a result  these
contracts 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 performed. Neither the Laboratory Instrumentation segment nor the Other
segment are subject to material seasonal variations.


RESEARCH AND DEVELOPMENT

     With the acquisition of BioSeq,  Inc and its pressure cycling technology in
September  1998 as well as the hiring of a Vice President for the Drug Discovery
and  Development  program (which evolved into Panacos  Pharmaceuticals,  Inc. in
2000) the Company has  expended  significant  amounts for ongoing  research  and
development spending on new technologies in the Other operating segment.


EXPORT SALES

     The Company does not have any foreign operations. However, the Company does
have significant export sales in Europe, the Pacific Rim countries and Canada to
agents  under  distribution  agreements,   as  well  as  directly  to  test  kit
manufacturers.  All sales are  denominated  in US dollars.  Export sales for the
years ended December 31, 2000,  1999, and 1998 were $4.2 million,  $4.0 million,
and $4.1  million,  respectively.  The Company  expects  that export  sales will
continue to be a significant source of revenue and gross profit.


                                       21
<PAGE>


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:

<TABLE>
                                                               Year Ended December 31,
                                                            2000        1999        1998
                                                          -------     -------     -------
Revenue:
<S>                                                         <C>         <C>         <C>
    Products ......................................         63.6 %      71.0 %      67.9 %
    Services ......................................         36.4        29.0        32.1
                                                          -------     -------     -------
           Total revenue ..........................        100.0       100.0       100.0

Gross profit ......................................         34.0        40.2        40.5
Operating expenses:
    Research and development ......................         12.6        15.8        11.9
    Acquired research and development .............          --          --         22.0
    Selling and marketing .........................         13.7        14.3        15.0
    General and administrative ....................         25.3        17.4        17.3
    Impairment of intangible asset ................          7.5         --          --
                                                          -------     -------     -------
           Total operating expenses ...............         59.1        47.5        66.2
                                                          -------     -------     -------
Operating loss from continuing operations .........        (25.0)       (7.3)      (25.7)
Interest expense, net .............................         (8.2)       (2.1)       (0.3)
                                                          -------     -------     -------
Loss before income taxes and cumulative
  effect of change in accounting principle ........        (33.2)       (9.4)      (26.0)
Provision for (benefit from) income taxes .........         (5.9)        3.8         3.2
Cumulative effect of change in accouting principle.         (1.0)        --          --
(Loss) income from discontinued operations ........         (1.0)        1.5         --
                                                          -------     -------     -------
    Net loss ......................................        (41.1)       (4.1)      (22.8)
                                                          =======     =======     =======
Product gross profit ..............................         41.3 %      48.3 %      45.1 %
Services gross profit .............................         21.2 %      20.4 %      30.7 %

</TABLE>

Years Ended December 31, 2000 and 1999

Revenue

     Total revenue from continuing  operations  decreased 1.7%, or $328,000,  to
$19,470,000  in 2000 from  $19,798,000  in 1999. The decrease in revenue was the
result of a decrease in product revenue of 11.9% or $1,670,000 to $12,387,000 in
2000 from  $14,057,000  in 1999,  partially  offset by an  increase  in  service
revenue of 23.4% or $1,341,000 to $7,083,000 in 2000 from $5,742,000 in 1999.

     Product Revenue

     The product  revenue  decrease was primarily  attributable  to a $1,078,000
decrease in the  Diagnostics  segment and a $625,000  decrease in the Laboratory
Instrumentation  segment.  The Diagnostics  decrease was the result of a reduced
level of sales  of its OEM and  Seroconversion  panels,  and  Basematrix  as the
consolidation  within the in vitro diagnostic  industry has negatively  affected
demand for these products.  These decreases were partially offset by an increase
in  Accurun(R)  and  Characterized   Disease  State  blood  product  sales.  The
Laboratory  Instrumentation  segment  revenue  decreased due to a lower level of
contract  manufacturing  due to the timing of an order from a large customer and
another customer  experiencing  financial difficulty causing them to place their
order  on  hold.  The  Company   believes  the  negative   effects  of  industry
consolidation  are  mostly  befind it and that  there are  growth  oppertunities
within both its existing  business as well as providing  products for rapid test
and chip based technologies.

                                       22
<PAGE>

     Service Revenue

     The increase in service revenue was primarily  attributable to increases of
$104,000 from the  Diagnostics  segment,  $850,000 from the Biotech  segment and
$198,000  in the  Other  segment.  The  growth in  Diagnostics  was  related  to
increased service work for in vitro  Diagnostic  manufacturers  including plasma
inactivations.  The Biotech segment's growth was due to new government contracts
for both its repository and research services.  The Other segment's growth was a
result of  funding  received  from both the NIH and the  Consortium  for  Plasma
Science,  which  partially  defrayed  the cost of  pressure  cycling  technology
development and certain other drug discovery activities  associated with Panacos
Pharmaceuticals ("Panacos").

Gross Profit

     Overall gross profit decreased  16.9%, or $1,344,000,  to $6,619,000 in the
year ended  December 31, 2000 from  $7,963,000  for 1999.  Product  gross profit
decreased  24.6%, or $1,671,000,  to $5,118,000 in 2000 from $6,789,000 for 1999
and  product  gross  margin  decreased  to 41.3% in  2000,  from  48.3% in 1999.
Services gross profit  increased  $327,000 to $1,501,000 in 2000 from $1,174,000
for 1999 and service  gross  margin  increased  to 21.2% in 2000,  from 20.4% in
1999.

     Product Gross Margin

     The  decrease  in product  gross  margin was due  substantially  to a 12.3%
decrease  in the  gross  margin  of  the  Laboratory  Instrumentation  operating
segment. This decrease was due to a lower level of sales activity,  resulting in
underutilized  capacity and excess  overhead  costs.  In  addition,  the Company
increased  the  inventory  reserves  for both this  segment  and the  Diagnostic
segment in year 2000.

     Service Gross Margin

     The increase in service  gross  margins was due to small  increases in both
the  Diagnostics  and Other  segments,  which were  partially  offset by a lower
service  gross margin from the Biotech  segment due to an increase in low margin
government contracts.

Research and Development

     Research and development  expenditures  decreased  22.0%,  or $688,000,  to
$2,444,000 in 2000 as compared to $3,132,000 in 1999.  The Company  continued to
emphasize development efforts within the "Other" business segment which includes
BBI BioSeq  ("BioSeq") and Panacos,  the latter being included during the period
January 1, 2000 to  November  14, 2000 as  discussed  further  hereunder.  Other
segment research and development  expenditures were approximately  flat. However
there was a decrease in spending at the  Laboratory  Instrumentation  segment as
the PlateMate program was discontinued in September 1999. In addition, there was
a decrease in spending at Biotech in order to meet contract schedules.

Selling and Marketing

     Selling  and  marketing  expenses  decreased  by  6.0%,  or  $171,000,   to
$2,660,000  in 2000 from  $2,831,000  in 1999.  This  decrease was a result of a
slight  reduction in promotion  and travel  costs,  and vacancies in several key
positions at the Diagnostics and Laboratory  Instrumentation  segments.  Some of
these positions were filled early in the third quarter of 2000.

General and Administrative

     General  and  administrative  costs  increased  42.6%,  or  $1,468,000,  to
$4,919,000  for 2000 from  $3,451,000  in 1999.  This increase was primarily the
result of an increase in professional  consulting  services  associated with the
Company's  exploration  of various  financing  and  strategic  transactions  and
options in 2000. Additionally,  $448,000 of general and administrative personnel
related  expenses  incurred in 1999 were  capitalized  as part of the ERP system
implementation in accordance with applicable accounting  standards.  The Company
completed the project in November  1999;  therefore,  no  additional  costs were
capitalized in 2000.

                                       23
<PAGE>
Impairment of Intangible Asset

     As part of an ongoing  strategic  review  process,  the Company's  Board of
Directors  met in  September  2000 to  review  the  progress  of its  Laboratory
Instrumentation  segment,  and  that  segment's  prospects  for  the  future  to
determine if any  impairment  of the segment's  goodwill had occurred.  Based on
information  presented at that meeting and  subsequent  analyses  showing  lower
revenue  expectations,  management  approved a cost  reduction  plan including a
headcount reduction,  salary freeze, and sublease of excess manufacturing space.
Using the lower revenue  projections  associated  with this plan, the Laboratory
Instrumentation  segment's  undiscounted  future cash flows were projected to be
less than the carrying value of that segment's goodwill.  In accordance with the
provisions  of both  "Accounting  Principles  Board  Opinion No. 17 - Intangible
Assets" and  "Statement of Financial  Accounting  Standards No. 121 - Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," this segment's goodwill was written down by approximately $1,464,000 in the
third quarter of fiscal year 2000.

Operating Loss

     Consolidated  loss from  continuing  operations  increased to $4,868,000 in
2000 versus a  $1,451,000  loss in 1999.  The  Diagnostics  segment's  operating
income  decreased to $1,015,000  in 2000 from  $2,436,000 in 1999 as a result of
decreased  revenue  and the  beneficial  effect  on 1999's  operating  income of
capitalizing   certain  employee   salaries   associated  with  the  ERP  System
implementation.  The Biotech  segment's  operating loss decreased to $398,000 in
2000 from $482,000 in 1999, due to increased revenue from government  contracts.
The Laboratory  Instrumentation  segment had an operating loss of $2,819,000 for
2000  versus a loss for  1999 of  $1,163,000.  The year  2000  loss  includes  a
write-down of  approximately  80% of their  goodwill as of the previous  balance
sheet  date.  Excluding  this,  the  Laboratory  Instrumentation  segment had an
operating  loss of  $1,355,000  for 2000 as a result of continued  low levels of
revenue.  At the end of the third  quarter of 2000,  management  approved a cost
reduction plan in the Laboratory  Instrumentation  segment including a headcount
reduction,  salary  freeze,  and  sublease of excess  manufacturing  space.  The
operating  loss of the  Other  segment  increased  to  $2,325,000  in 2000  from
$2,006,000 in 1999 due to planned  research and  development  and patent related
costs. The Company  continued to invest heavily in the areas of pressure cycling
technology and the drug discovery program, through its subsidiary BBI BioSeq and
its investment in Panacos Pharmaceuticals.

     The  Company's  ownership  of  Panacos  was  reduced to 30.5% in the fourth
quarter of 2000 as a result of Panacos  obtaining  additional  equity  financing
from new investors. Accordingly, the Company terminated consolidation accounting
subsequent to November 14, 2000.  The Company had recorded  Panacos's  operating
losses for the  period  January 1, 2000 to  November  14,  2000 in the amount of
approximately $790,000.

Interest Expense/Cumulative change in accounting principle

     Interest  expense  increased  from  $420,000 in 1999 to $1,617,000 in 2000.
Throughout the year 2000, the Company  carried a higher average debt balance and
interest rate on its line of credit than in 1999.  Additional  interest  expense
was  incurred in 2000  associated  with the Company  obtaining a new  $2,447,000
mortgage on its West Bridgewater MA facility, effective April 2000. In addition,
the Company incurred a charge of $898,000 (including $190,223 for the cumulative
effect of change in accounting  principle) due to amortization of the beneficial
conversion  feature,  warrant costs and original  issue  discount/debt  issuance
costs associated with the Company's August 2000 issuance of $3,250,000 3% Senior
Subordinated Convertible Debentures.

Income Taxes

     In 2000 the Company established a full valuation allowance for its deferred
tax assets in accordance  with Statement of Financial  Accounting  Standards No.
109 and in  consideration  of three  consecutive  years of  losses.  In 1999 the
Company recorded an income tax benefit at a combined rate of 38%.


                                       24
<PAGE>
Loss from Continuing Operations

     Loss from continuing  operations increased to $7,614,000 for the year ended
December 31, 2000 from  $1,120,000  for the year ended  December 31, 1999,  as a
result of the items discussed above.

Discontinued Operations

     The Clinical Laboratory Services segment, a discontinued operation,  had an
operating  loss of $197,000 in 2000  versus  income of $306,000  for 1999 due to
both a lower volume of molecular  testing as several  customers began performing
these tests  in-house in 2000,  and  competitive  pricing  pressure in molecular
testing, resulting in lower gross margin.

Summary

     The Company had a net loss of  $8,001,000 in 2000 as compared to a net loss
of  $814,000  in  1999 as a  result  of the  operating  loss,  interest  expense
associated  with the August  2000  issuance of  $3,250,000  of  debentures,  the
impairment of an intangible asset at the laboratory  instrument segment, and the
establishment of a full valuation allowance for deferred tax assets as described
above.


Years Ended December 31, 1999 and 1998

Revenue

     Total revenue from continuing  operations  increased 2.8%, or $533,000,  to
$19,798,000  in 1999 from  $19,265,000  in 1998. The increase in revenue was the
result of an increase in product revenue of 7.5% or $981,000 to $14,057,000 from
$13,075,000,  partially  offset  by a  decline  in  service  revenue  of 7.2% or
$448,000 to $5,742,000 from $6,190,000 in 1998.

     Product Revenue

     The product  revenue  increase  was  primarily  attributable  to a $700,000
increase by the  Diagnostics  segment and a $287,000  increase by the Laboratory
Instrumentation  segment.  The  Diagnostics  increase  was a  result  of a 15.0%
increase in Accurun(R) sales as the Company continued to successfully  penetrate
the emerging  end-user  market,  and a 57.8% increase in Basematrix sales due to
increased  outsourcing  occurring in the in vitro  diagnostics  industry.  These
increases were  partially  offset by a 22.7%  decrease in  Seroconversion  Panel
sales,  as  the  consolidation  within  the in  vitro  diagnostic  industry  has
negatively  affected demand for these products.  The Laboratory  Instrumentation
segment  achieved  a  $287,000  or  12.6%  increase  in  instrument  sales as it
refocused its efforts in OEM contract  manufacturing.  Management feels that the
end-user  market will  continue to be an area of growth for its Quality  Control
Products  while the  outsourcing  within the IN VITRO  diagnostics  market  will
continue   to   benefit   sales  of   Diagnostic   Components   and   Laboratory
Instrumentation.

     Service Revenue

     The decrease in service revenue was primarily  attributable to a $1,293,000
decrease in  Laboratory  Instrumentation  services as the Company  completed its
work on the ABX, Inc.  contract in the first  quarter of 1999.This  decrease was
partially offset by a $942,000 increase in BBI Biotech,  and a $434,000 increase
in the  Other  segment  revenue.  BBI  Biotech's  growth  was  driven by a 43.9%
increase  in  repository  services  and the start of new  contracts  in the AIDS
Vaccine  Support  arena.  The Other  segment's  growth  was a result of  funding
received  from  both  the NIH and  the  Consortium  for  Plasma  Science,  which
partially  defrayed the cost of pressure  cycling  technology  development.  The
Company  anticipates  that  new  contracts  at  the  BBI  Biotech  segment  will
contribute to revenue growth.



                                       25
<PAGE>
Gross Profit

     Overall gross profit  increased  2.1%,  or $167,000,  to $7,963,000 in 1999
from $7,796,000 in 1998.  Product gross profit increased 15.2%, or $894,000,  to
$6,789,000 in 1999 from $5,895,000 in 1998 and product gross margin increased to
48.3% in 1999, from 45.1% in 1998.  Services gross profit decreased  $727,000 to
$1,174,000 in 1999 from  $1,901,000 in 1998 and service gross margin declined to
20.4% in 1999 from 30.7% in 1998.

     Product Gross Margin

     The increase in product  gross margin was due entirely to the gross margins
realized in the Laboratory  Instrumentation  operating segment,  which increased
from 17.8% in 1998 to 28.1% in 1999 as the  business  unit  operated at a higher
volume,  thus realizing better economies of scale compared with 1998 as overhead
costs were spread over a greater  number of units.  Product gross margins at the
Diagnostics  segment remained  relatively  steady.  Management  anticipates that
further utilization  increases for the Laboratory  Instrumentation  segment will
continue to benefit gross margins.

     Service Gross Margin

     The  decrease  in service  gross  margins  was  realized  at all  operating
segments. The BBI Biotech segment's service gross margin decreased from 26.8% to
19.8%.  BBI Biotech margins were adversely  affected by startup costs associated
with new repository  contracts in 1999,  primarily the  acquisition of freezers,
which under the terms of the contract  become  government  property and thus are
charged  directly to cost of  services.  Finally,  in early 1999 the  Laboratory
Instruments  segment  realized a decrease in service gross margins from 52.7% to
46.3%,  as it completed the  high-margin  ABX, Inc.  contract in early 1999. The
other remaining  Company  segments do not generate  service  revenues that would
significantly impact segment results.

Research and Development

     Research and development costs,  exclusive of acquired  in-process research
and  development,  increased  36.4%  or  $835,000  to  $3,132,000  in 1999  from
$2,297,000 in 1998. A significant portion of the increase is attributable to the
operating segment referred to as "Other", which consists of the pressure cycling
technology ("PCT") and Drug Discovery activities.  The Company increased its PCT
expenditures by approximately $893,000 as it completed the design,  development,
and  manufacture  of 8 prototype PCT  instruments  known as  "barocyclers".  The
Company  also made  significant  progress  during  1999 with its  patents in the
nucleic acid extraction and pathogen inactivation areas. The Company's increased
expenditures in Drug Discovery by  approximately  $361,000  resulted in expanded
rights under its  agreement  with the  University of North  Carolina,  at Chapel
Hill, and significant  progress in the prosecution of patents for the compounds.
In  addition,  the BBI Biotech  segment  increased  its spending to continue its
support of the Diagnostics and Clinical Laboratory Services segments.

     There were two  accounting  charges in 1998,  which were  classified on the
income statement as acquired in-process  research and development.  In the first
quarter there was an accounting charge of $850,000 related to the acquisition of
the worldwide exclusive rights to BioSeq, Inc.'s  immunodiagnostic  research and
development  technology.  In the third quarter, the Company recorded a charge of
$3,381,000  related  to  in-process  technology  as a  result  of the  Company's
acquisition of BioSeq,  Inc. This  allocation of the purchase price was based on
an independent  valuation and was expensed, as no alternative future uses exist.
There were no such charges during 1999.

Selling and Marketing

     Selling and marketing  expenditures remained relatively flat during 1999 as
compared to 1998, across all operating segments.  Costs declined 1.8% or $52,000
to $2,831,000 in 1999 from $2,883,000 in 1998 as the Company effectively managed
costs in this area.



                                       26
<PAGE>
General and Administrative

     General and  administrative  costs increased 3.5% or $117,000 to $3,451,000
in 1999 from  $3,334,000 in 1998. This increase is attributable to the corporate
reorganization  that was announced in July of 1999. The  reorganization  created
operating  segments,  which are directed by a senior vice  president and general
manager. The reorganization  resulted in the classification of the salaries, and
other related costs, of two executives in the general and administrative line of
the income  statement  from other income  statement  lines,  to more  accurately
reflect  their  new  responsibilities.  General  and  administrative  costs  are
expected to increase in 2000, as the reorganization  impact will be felt for the
entire  fiscal year 2000.  In addition,  1999  benefited as certain  general and
administrative  personnel  costs  amounting  to  $448,000  were  capitalized  as
property and  equipment in  connection  with the  implementation  of  enterprise
resource  planning  systems  at  the  Diagnostics  and  Laboratory   Instruments
segments. General and administrative costs at the other segments were flat.

Operating Loss

     As a result of all of the above, the Company  experienced an operating loss
from  continuing  operations of  $1,451,000  in 1999 versus  $4,949,000 in 1998.
Excluding the $4,231,000 of acquired in-process research and development charges
realized in 1998, the Company's  operating loss increased $732,000 to $1,451,000
in 1999 from $719,000 in 1998. The  Diagnostics  operating  segment  realized an
increase in  operating  income  (excluding  $850,000 of  acquired  research  and
development costs in 1998) of approximately  $346,000 or 61.8%, as a result of a
6.4% increase in product sales  coupled with a relatively  steady  product gross
margin. The Laboratory Instrumentation segment only realized a slight reduction,
8.1%, in its operating  loss as the improved  product gross margin was more than
offset by lower service  profitability  due to the  completion of the previously
discussed ABX contract.  These operational improvements were more than offset by
the planned increases in research and development  expenditures,  which resulted
in significant  operating losses in the "Other" operating segment.  In addition,
increased  research  and  development  expenses at the BBI Biotech  segment were
primarily  responsible  for the  increased  operating  loss of  $661,000 in 1999
versus a loss of $61,000 in 1998. Management anticipates continued strength from
its Diagnostics  segment.  Although the Laboratory  Instrumentation  segment has
realized  operating  losses  since it was  acquired  in July 1997,  the  Company
believes  that the  goodwill  created  in  connection  with the  acquisition  is
realizable  as  management  believes  that the  segment  will begin to  generate
operating  income by the end of 2001.  The Company will continue to increase its
spending in the Other  segment,  however,  it expects  that the impact from this
increased spending on the Company's bottom line will be mitigated by the planned
sale of the common  stock of Panacos and the  continued  funding  support in the
area of PCT.

Interest Expense

     The Company  had  interest  expense of  $420,000 in 1999 versus  $75,000 in
1998. The Company had used its proceeds from its initial public offering and, at
the end of the second quarter of 1998,  began to borrow funds from its revolving
line of credit to continue  its  infrastructure  and  research  and  development
investments.  In addition to a higher  average  borrowing  balance in 1999,  the
Company realized the effects of rising interest rates.

Income Taxes

     The  Company  recorded  tax  benefits  at its  combined  federal  and state
statutory  rate of 38% for 1999.  Although  the  Company  realized  consolidated
operating  losses  for 1999 and 1998,  management  believed  that its  valuation
allowance  was  adequate as the  Company had planned to return to  profitability
within six to twelve  months,  at which point it would have begun to realize the
benefit from its federal and state tax assets.  The tax benefit rate  recognized
in 1998 was  adversely  affected  by the  in-process  research  and  development
charges discussed above. The March 1998 technology license transaction  resulted
in a  temporary  difference  as the  technology  license is  deductible  for tax
purposes  over  a  15-year  period,   while  the  September  1998  common  stock
acquisition  resulted in a permanent  difference that is never  deductible.  See
Note 9 to  Consolidated  Financial  Statements  in Item 8 hereunder  for further
detail.



                                       27
<PAGE>
Loss from Continuing Operations

     Loss from continuing  operations decreased to $1,120,000 for the year ended
December 31, 1999 from  $4,382,000  for the year ended  December 31, 1998,  as a
result of the items discussed above.

Discontinued Operations

     The Clinical  Laboratories Services segment of the business, a discontinued
operation,  recorded  income of $306,000 in 1999 as compared to a loss of $6,000
in 1998. This segment's growth was led by a 55.1% increase in molecular  testing
as part of a 37% increase in segment  revenues,  which more than offset a slight
decline in that  segment's  service  gross margin to 30.3% in 1999 from 32.4% in
1998.

Summary

     The Company had a net loss of $814,000 in 1999 versus $4,389,000 in 1998 as
a result of the operating loss (which includes acquired research and development
costs expensed in 1998 in the amount of $4,231,000),  interest expense,  and the
tax benefit described above.


LIQUIDITY AND FINANCIAL CONDITION

     In  December  2000,  the  Company  made a  decision  to exit  the  clinical
laboratory   testing  services  segment  and  in  February  2001,  BBI  Clinical
Laboratories,  Inc. ("BBICL"),  a wholly-owned  subsidiary of the Company,  sold
certain assets and liabilities to a third party for an aggregate  purchase price
of  $9,500,000,  subject to certain  post closing  adjustments.  The Company has
retained certain other assets and liabilities of BBICL subsequent to the closing
date,  which the Company  intends to liquidate  throughout the remainder of year
2001 as part of its decision to exit this segment of the  business.  The Company
expects to record an after-tax gain in the first quarter of 2001.  Closing costs
include an estimate of costs  associated with disposing of all remaining  assets
and retiring all existing  liabilities  including a facility lease.  The Company
expects  to  utilize  in year 2001  certain  prior  period  net  operating  loss
carryforwards,  previously  reserved for by the Company in year 2000,  to offset
the tax effect of this future gain.  In  accordance  with a transition  services
agreement,  the Company is required to operate the business in a normal  fashion
for a minimum of six months  subsequent  to the sale but in no event longer than
one year  from  the  date of  sale;  substantially  all  costs  associated  with
operation  of the business  subsequent  to the closing date will be borne by the
purchaser.  A portion  of the  proceeds  from this sale were used to redeem  all
outstanding  3% Senior  Subordinated  Convertible  Debentures  and to retire the
Company's line of credit, as discussed further hereunder.

     In August 2000,  the Company  issued  $3,250,000 of 3% Senior  Subordinated
Convertible Debentures due August 25, 2003. Net proceeds to the Company amounted
to  approximately  $2,871,000  after  deduction  of original  issue  discount of
$162,500 and associated closing costs of $216,500.  For accounting  purposes,  a
portion of the cash proceeds,  amounting to $327,000,  has been allocated to the
relative fair value of warrants issued in conjunction with these debentures.  In
the first  quarter of 2001,  certain  holders of the  Company's  outstanding  3%
Senior  Convertible  Debentures  (the  "Debentures")  exercised  their rights to
convert $1,210,000 of such Debentures into shares of the Company's common stock,
in accordance with the conversion formula.  The conversion of a portion of these
outstanding  Debentures and/or the exercise of outstanding  warrants to purchase
the Company's common stock will have a dilutive impact on our security  holders.
The  conversion  price of the  Debentures was the lower of: (i) $3.36 a share or
(ii) 90% of the average of the five (5) lowest  volume  weighted  average  sales
prices of common  stock as reported by  Bloomberg,  L.P.  during the 25 business
days  immediately  preceding the date on which any Debenture holder notified the
Company that it will convert all or a part of their Debenture into common stock.
The terms of the Debenture entitled the Company to redeem any of the outstanding
Debenture(s) at a redemption price equal to the number of shares of common stock
into which the Debenture(s)  was then convertible  times the average closing bid
price as reported by Bloomberg  L.P.  for the five (5) trading days  immediately
prior to the date that the  Debenture(s) is called for redemption,  plus accrued
and unpaid  interest.  These  conversions  resulted  in the  issuance of 801,325


                                       28
<PAGE>

additional  shares of common stock subsequent to December 31, 2000. In addition,
in the first quarter of 2001, the Company  redeemed the remaining  $2,040,000 of
Debentures  at  face  value  plus  a  $190,000  premium  and  accrued  interest.
Unamortized  debt  discount,  debt  issuance  costs  and  warrant-related  costs
associated  with  the  converted  Debentures,  approximating  $40,000,  will  be
reclassified  as an offset to  additional  paid-in  capital,  with the remaining
$377,000 of such costs associated with the redeemed Debentures being included in
the loss on  extinguishment  of the  Debentures.  The Company  will also reverse
approximately $528,000 of expenses, previously recorded in 2000, associated with
the Debentures  beneficial  conversion  feature. As a result of the above items,
the Company expect to record a net loss of  approximately  $39,000,  relative to
this early  extinguishment of debt, in the first quarter of 2001. As a result of
both the  conversions  and  redemptions,  which occurred in the first quarter of
2001,  none  of  the  3%,  Senior  Subordinated  Convertible  Debentures  remain
outstanding subsequent to February 27, 2001.

     The  Company's  working  capital  position  as of  December  31,  2000  was
adversely  affected  by  the  classification  of its  $5,763,000  line-of-credit
balance as short-term  debt. The Company  reclassified the debt because in 2000,
it violated a financial covenant limiting the amount of allowable losses. In the
first  quarter  of 2001,  utilizing  proceeds  generated  by the sale of certain
assets of BBICL as discussed  above, the Company paid off in full the $5,763,000
outstanding  balance (plus accrued interest),  thereby  terminating this line of
credit. There were no payment defaults at any time on this line of credit.

     In October 1999, the Company formed a new, wholly-owned subsidiary, Panacos
Pharmaceuticals,  Inc. ("Panacos"), a Delaware corporation. All of the Company's
technology  related  to its drug  discovery  and  vaccine  programs,  consisting
primarily of patents and related sponsored research agreements, were transferred
to Panacos  effective  January  2000. In  accordance  with its strategic  plans,
Panacos  obtained  additional  equity  financing  from third party  investors in
November  2000 as the first step in raising  the  substantial  amount of capital
required to progress to more advanced stages of drug development including human
clinical trials. As a result of the new equity financing, the Company retained a
30.5%  interest  in  non-voting   preferred  shares  of  Panacos.   Accordingly,
subsequent  to November 14, 2000,  the Company no longer  consolidates  Panacos'
results of operations,  nor is the Company required to fund any further research
and development  activities of Panacos.

     In April 2000,  the Company  borrowed  $2,447,000  (net of issuance  costs)
under a mortgage  agreement on its West  Bridgewater,  MA facility.  The Company
used these funds to reduce the outstanding  balance on its  line-of-credit.  The
mortgage is due on March 31, 2010.  During the first five years the note carries
an  interest  rate of 9.75%;  after  five years the rate  charged  will be 0.75%
greater than the bank base rate then in effect.  Under this  mortgage  agreement
the Company is subject to certain financial  covenants by which a default in its
line-of-credit  covenants  will cause a default on this note.  The  Company  has
received  a  waiver  from  this  lending  institution   regarding  the  covenant
violation.  Payments due on this  mortgage  are based on a 20 year  amortization
schedule with a balloon payment  representing the remaining  balance due in full
on March 10, 2010.

     In February  2000, the Company  received  notice that Paradigm  Group,  LLC
exercised  all of its  warrants to purchase the  Company's  common  stock.  This
exercise  was  expected to result in  proceeds  to the Company of  approximately
$2,100,000.  The holders of the warrants were required to pay the exercise price
when the  registration  of the underlying  shares became  effective which was in
December 2000. In August 2000, the Company received a summons and complaint from
Paradigm Group,  LLC naming the Company as a defendant.  The suit,  filed in the
Circuit Court of Cook County,  Illinois,  alleged breach of contract  claims and
fraud  against  the  Company in  connection  with the sale by the Company to the
Paradigm  Group,  LLC of the above  warrants,  the exercise of those warrants by
Paradigm  Group,  LLC and a delay in the  registration  of those shares with the
U.S. Securities and Exchange  Commission.  In December 2000, Paradigm Group, LLC
withdrew this lawsuit. The Company believes it is entitled to the funds due from
the  exercise  of the  above  warrants,  however,  it  has  fully  reserved  the
receivable as of December 31, 2000 pending receipt of payment.  Additionally, in


                                       29
<PAGE>

the  fourth  quarter,  the  Company  expensed  approximately  $265,000  of costs
incurred  related  to these  warrants  and the  registration  of the  underlying
shares.  The shares related the exercise of these warrants are outstanding  from
the date the warrants were  exercised  through the end of the year and have been
included in the calculation of weighted average shares  outstanding and earnings
per share.

     The Company has outstanding warrants, with various strike prices, which are
exercisable  for a total of  457,730  shares of common  stock.  This  represents
approximately 8.1% of the Company's issued and outstanding common stock based on
the number of shares issued and outstanding as of December 31, 2000.

     Net cash used in continuing operations for the year ended December 31, 2000
was $2,796,000 as compared to cash use of $601,000 for year 1999.  This increase
in operational use of cash was primarily the result of higher operating losses.

     Cash used in investing  activities  was $1,025,000 for the year 2000 versus
$2,457,000  for the year 1999.  During 2000,  the Company's BBI Biotech  segment
invested  $580,000  to  build-out  its new  repository  facility  in  Frederick,
Maryland,  and approximately  $800,000  relative to the Company's  investment in
Panacos  Pharmaceuticals  as discussed  further above. In addition,  significant
investments were made for laboratory and manufacturing  equipment.  Expenditures
in 1999 included approximately  $1,138,000 of computer hardware and software, of
which $807,000 was invested in new enterprise  resource planning systems for the
Diagnostics and Laboratory Instrumentation segments of the business; this latter
amount  includes  approximately  $448,000  of general and  administrative  costs
capitalized by the Company relative to the  implementation  of its ERP system in
1999.

     Cash  provided  by  financing  activities  was  $4,783,000  in 2000  versus
$3,560,000 in 1999.  During 2000, the net cash provided by debt consisted of the
mortgage of approximately  $2,447,000 and the Debentures and related warrants of
approximately  $2,531,000 and $328,000,  respectively,  as discussed above, less
net  repayments  on the  line-of-credit  of  $1,383,000.  In  addition,  cash of
approximately  $936,000  was  received  in year 2000 from the  exercise of stock
options and  warrants,  exclusive of the 500,000  warrants  associated  with the
Paradigm Group LLC as discussed herein.

     As of March 1, 2001,  the Company had existing cash balances  approximating
$2,100,000 (excluding $900,000 of restricted cash relating to final post closing
adjustments  associated  with the sale of  certain  BBICL  assets  as  discussed
herein) and believes this amount  coupled with  internally  generated cash flows
will be sufficient to fund operations and anticipated  capital  expenditures for
the next year. The Company  continually  evaluates financing options, as well as
other strategic alternatives, in order to maximize shareholder value.

Recent Accounting Pronouncements

     Statement  of  Financial  Accounting  Standards  No. 133,  "Accounting  for
Derivative  Instruments  and  Hedging  Activities"  (SFAS 133),  as amended,  is
effective for quarters of fiscal years  beginning  after June 15, 2000.  The new
standard requires companies to record derivatives on the balance sheet as assets
or liabilities,  measured at fair value.  Gains or losses resulting from changes
in the values of those  derivatives  would be accounted for depending on the use
of the  derivatives  and  whether  they  qualify for hedge  accounting.  The key
criterion for hedge accounting is that the hedging  relationship  must be highly
effective  in  achieving  offsetting  changes in fair value or cash  flows.  The
Company does not currently  engage in derivative  trading or hedging activity so
it does not believe that adoption of SFAS 133 will have a material effect on its
financial statements.



                                       30
<PAGE>

     In late 2000 the and early 2001, the Financial  Accounting  Standards Board
Emerging Issues Task Force ("EITF")  reached  consensus on a number of revisions
to EITF Issue No. 98-5  "Accounting for  Convertible  Securities with Beneficial
Conversions  Features  or  Contingently   Adjustable   Conversion  Ratios."  The
Securities and Exchange  Commission's ("SEC") Observer to the EITF indicated the
SEC's  preference that the revision  relative to the computation of a beneficial
conversion  features  associated with  convertible  securities be applied to all
securities  issued after May 20, 1999.  The Company has  therefore  applied this
adjusted  calculation to the beneficial  conversion  feature associated with its
August  2000  issuance  of  $3,250,000  of 3%  Senior  Subordinated  Convertible
Debentures  and  accordingly,  the  Company  has  included  the  effects  of the
revisions, as indicated by the SEC staff member.  Approximately $190,000 of this
revised  computation  is  reflected  as the  cumulative  effect  of a change  in
accounting principle in the accompanying financial statements.

     In September  2000, the FASB issued SFAS No. 140  "Accounting for Transfers
and  Servicing  of  Financial  Assets  and   Extinguishments  of  Liabilities--a
replacement of FASB  Statement No. 125".  SFAS No. 140 revises the standards for
accounting  for  securitizations  and other  transfers of  financial  assets and
collateral and requires  certain  disclosures,  but it carries over most of SFAS
No. 125's provisions  without  reconsideration.  This Statement is effective for
transfers and servicing of financial assets and  extinguishments  of liabilities
occurring  after March 31, 2001. This Statement is effective for recognition and
reclassification  of collateral and for disclosures  relating to  securitization
transactions and collateral for fiscal years ending after December 15, 2000. The
Company does not expect the  adoption of SFAS No. 140 to have a material  effect
on its financial statements.

     In March 2000, the FASB issued FASB  Interpretation No. 44, "Accounting for
Certain  Transactions  Involving  Stock  Compensation,"  (an  Interpretation  of
Accounting  Principles  Bulletin  Opinion No. 25 ("APB 25")) ("FIN 44").  FIN 44
provides  guidance on the  application of APB 25,  particularly as it relates to
options.  The  effective  date of FIN 44 was July 1, 2000,  and the  Company has
adopted FIN 44 as of that date. The application of FIN 44 has not had a material
effect on the Company's financial statements.

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 by the September
2000 downsizing of this segment of the business; the renewal and full funding of
contracts with National  Institutes of Health (NIH),  National  Heart,  Lung and
Blood  Institute  (NHLBI) and other  government  agencies;  the inability of the
Company to develop the  technology  acquired as part of its  purchase of BioSeq,
Inc. to the level of  commercial  utilization;  the  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  most
recent  Registration  Statements  on Form  S-3 (SEC  File  No.'s  333-94379  and
333-46426).





                                       31
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  Company  is  subject  to  interest  rate risk in  connection  with its
long-term  debt.  The  aggregate  hypothetical  loss in earnings for one year of
those  financial  instruments  held by the Company at December 31, 2000 that are
subject to interest rate risk resulting from a hypothetical increase in interest
rates of 10 percent is less than $100,000,  after-tax. The hypothetical loss was
determined by calculating the aggregate  impact of a 10 percent  increase in the
interest rate of each variable rate financial  instrument held by the Company at
December 31, 2000,  that is subject to interest rate risk.  Fixed rate financial
instruments were not evaluated, as the Company believes the risk exposure is not
material.

     The  Company is exposed to  concentrations  of credit risk in cash and cash
equivalents  and trade  receivables.  Cash and cash  equivalents are placed with
major financial institutions with high quality credit ratings. Trade receivables
credit risk exposure is significant as the Company derives a significant portion
of its revenues from a small number of customers  however this risk is mitigated
by the  dispersion  across  different  industries  and  geographies in which the
customers operate;  in addition to this,  approximately 30% of 2000 consolidated
revenue  was from all  branches of the  National  Institutes  of Health,  a U.S.
Government  agency.  The Company is exposed to  credit-related  risks associated
with its trade accounts  receivable  denominated in U.S.  Dollars but receivable
from foreign customers.


                                       32
<PAGE>
ITEM 8.            FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
                                                                                 December 31,
                                                                         ----------------------------
                                                                             2000            1999
                                                                         ------------    ------------
                               ASSETS
CURRENT ASSETS:
<S>                                                                      <C>             <C>
    Cash and cash equivalents ........................................   $  1,782,100    $    276,168
    Accounts receivable, less allowances of $88,981 in 2000 and
       $86,796 in 1999 ...............................................      3,881,943       4,353,950
    Inventories ......................................................      6,465,548       6,461,693
    Prepaid expenses and other current assets ........................        236,731         285,047
    Income taxes receivable (2000) and deferred (1999) ...............        212,762         934,790
                                                                         ------------    ------------
                Total current assets .................................     12,579,084      12,311,648
                                                                         ------------    ------------

Property and equipment, net ..........................................      7,459,283       7,752,719

OTHER ASSETS:
    Goodwill and other intangibles, net ..............................        933,793       2,571,404
    Deferred income taxes ............................................           --           220,535
    Debt issuance costs ..............................................        203,523            --
    Other long-term assets ...........................................        135,578          99,171
    Net assets from discontinued operations (Note 15) ................      1,237,535       1,978,245
                                                                         ------------    ------------
                                                                            2,510,429       4,869,355
                                                                         ------------    ------------
              TOTAL ASSETS ...........................................   $ 22,548,796    $ 24,933,722
                                                                         ============    ============


                LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable .................................................   $  1,232,697    $  1,787,577
    Accrued employee compensation ....................................        836,804         833,233
    Other accrued expenses ...........................................        974,606       1,076,014
    Current maturities of long term debt .............................      5,840,172            --
    Deferred revenue and other current liabilities ...................         99,074            --
                                                                         ------------    ------------
                Total current liabilities ............................      8,983,353       3,696,824
                                                                         ------------    ------------

LONG-TERM LIABILITIES:
    Long term debt, less current maturities ..........................      2,420,449       7,145,651
    3% Senior Subordinated Convertible Debentures ....................      2,818,375            --
    Other liabilities ................................................        577,044         445,124

COMMITMENTS AND CONTINGENCIES (Note 11)

STOCKHOLDERS' EQUITY:
    Common stock, $.01 par value; 20,000,000 shares authorized,
      5,652,516 and 4,773,365 issued and outstanding at
      December 31, 2000 and 1999, respectively .......................         56,525          47,734
    Additional paid-in capital .......................................     18,904,862      16,809,242
    Accumulated deficit ..............................................    (11,211,812)     (3,210,853)
                                                                         ------------    ------------
                Total stockholders' equity ...........................      7,749,575      13,646,123
                                                                         ------------    ------------
             TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ................   $ 22,548,796    $ 24,933,722
                                                                         ============    ============

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


                                       33
<PAGE>
                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
                                                                               Years Ended December 31,
                                                                    --------------------------------------------
                                                                        2000            1999            1998
                                                                    ------------    ------------    ------------
REVENUE:
<S>                                                                 <C>             <C>             <C>
     Products ...................................................   $ 12,387,416    $ 14,056,657    $ 13,075,085
     Services ...................................................      7,082,538       5,741,690       6,189,674
                                                                    ------------    ------------    ------------
Total revenue ...................................................     19,469,954      19,798,347      19,264,759

COSTS AND EXPENSES:
  Cost of products ..............................................      7,269,817       7,267,273       7,179,920
  Cost of services ..............................................      5,581,636       4,567,863       4,288,968
  Research and development ......................................      2,443,779       3,131,590       2,296,717
  Acquired research and development .............................           --         4,230,812
  Selling and marketing .........................................      2,659,935       2,831,293       2,883,368
  General and administrative ....................................      4,918,899       3,450,879       3,334,293
  Impairment of intangible asset ................................      1,464,220            --              --
                                                                    ------------    ------------    ------------
Total operating costs and expenses ..............................     24,338,286      21,248,898      24,214,078

Operating loss from continuing operations .......................     (4,868,332)     (1,450,551)     (4,949,319)

Interest income .................................................         23,598           6,146          27,901
Interest expense, including beneficial conversion feature (Note 7)    (1,617,311)       (419,980)        (75,250)
                                                                    ------------    ------------    ------------
Loss from continuing operations before income taxes
  and cumulative effect of change in accounting principle .......     (6,462,045)     (1,864,385)     (4,996,668)

(Provision for) benefit from income taxes .......................     (1,151,940)        744,093         613,905
                                                                    ------------    ------------    ------------
Loss from continuing operations before cumulative
  effect of change in accounting principle ......................     (7,613,985)     (1,120,292)     (4,382,763)

Cumulative effect of change in accounting principle (Note 7) ....       (190,223)           --              --
                                                                    ------------    ------------    ------------
Loss from continuing operations .................................   $ (7,804,208)   $ (1,120,292)   $ (4,382,763)

Discontinued operations (Note 15)
  (Loss) income from discontinued operations of Clinical
     Laboratory segment (less income taxes of $0, $245,121
     and $49,506 in 2000, 1999 and 1998, respectively ...........       (196,751)        306,180          (5,956)
                                                                    ------------    ------------    ------------
Net loss ........................................................   $ (8,000,959)   $   (814,112)   $ (4,388,719)
                                                                    ============    ============    ============

Loss from continuing operations per share,
  basic & diluted ...............................................   $      (1.43)   $      (0.24)   $      (0.94)
(Loss) income per share from discontinued
  operations, basic & diluted ...................................   $      (0.03)   $       0.07    $      (0.00)
Net loss per share, basic & diluted .............................   $      (1.46)   $      (0.17)   $      (0.94)

Number of shares used to calculate net (loss)
  income per share basic & diluted ..............................      5,465,358       4,669,717       4,654,609

</TABLE>

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

                                       34
<PAGE>
                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

<TABLE>

                                                      Common Stock
                                                -------------------------    Additional    Receivable      Retained        Total
                                                               $.01 Par        Paid-In   for Exercised     Earnings    Stockholders'
                                                  Shares         Value         Capital      Warrants       (Deficit)      Equity
                                                -----------   -----------   ------------   -----------   ------------  ------------
<S>                                              <C>         <C>           <C>             <C>             <C>          <C>
BALANCE, DECEMBER 31, 1997 ...................    4,622,566   $    46,226   $ 16,029,049                  $ 1,991,978  $ 18,067,253
  Stock options and warrants issued with
    acquisition ..............................                                   236,327                                    236,327
  Stock options exercised ....................       45,250           453         88,696                                     89,149
  Tax benefit of stock options exercised .....                                    64,644                                     64,644
  Net loss ...................................                                                             (4,388,719)   (4,388,719)
                                                -----------   -----------   ------------   -----------   ------------  ------------
BALANCE, DECEMBER 31, 1998 ...................    4,667,816        46,679     16,418,716                   (2,396,741)   14,068,654
  Common stock issued ........................       53,300           533        147,905                                    148,438
  Stock warrants issued, net of
    issuance costs ...........................                                   206,011                                    206,011
  Stock options and warrants exercised .......       52,249           522         36,610                                     37,132
  Net loss ...................................                                                               (814,112)     (814,112)
                                                -----------   -----------   ------------   -----------   ------------  ------------
BALANCE, DECEMBER 31, 1999 ...................    4,773,365        47,734     16,809,242                   (3,210,853)   13,646,123
  Common stock issued in connection with
  Employee Stock Purchase Plan ...............        8,458            84         26,264                                     26,348
  Stock warrants issued ......................                                     1,000                                      1,000
  Stock options and other warrants exercised .      370,693         3,707        906,304                                    910,011
  Exercise of Paradigm warrants ..............      500,000         5,000      1,954,979   $(2,225,000)                    (265,021)
  Reserve for exercise of Paradigm warrants ..                                (1,959,979)    2,225,000                      265,021
  Stock warrants issued and beneficial conversion
    feature in connection with 3% Senior
    Subordinated Convertible Debentures ......                                 1,167,052                                  1,167,052
  Net loss ...................................                                                             (8,000,959)   (8,000,959)
                                                -----------   -----------   ------------   -----------   ------------  ------------
BALANCE, DECEMBER 31, 2000 ...................    5,652,516   $    56,525   $ 18,904,862   $      --     $(11,211,812)  $ 7,749,575
                                                ===========   ===========   ============   ===========   ============  ============


</TABLE>

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

                                       35
<PAGE>
                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
                                                                              Years Ended December 31,
                                                                    -----------------------------------------
                                                                        2000           1999           1998
                                                                    -----------    -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                 <C>            <C>            <C>
Net loss ........................................................   $(8,000,959)   $  (814,112)   $(4,388,719)
Income (loss) from discontinued operations ......................      (196,751)       306,180         (5,956)
                                                                    -----------    -----------    -----------
Loss from continuing operations .................................    (7,804,208)    (1,120,292)    (4,382,763)

Adjustments to reconcile net (loss) income to net cash (used in)
  provided by operating activities:
Depreciation and amortization ...................................     1,609,454      1,338,789      1,062,615
Non-cash interest expense on convertible debentures .............       707,704           --             --
Cumulative effect of change in accounting principle .............       190,223
Impairment of intangible assets .................................     1,464,220           --             --
Provision for doubtful accounts .................................         2,064           --           87,229
Other liabilities ...............................................       190,078       (320,243)       117,911
Deferred income tax valuation allowance .........................     1,155,325       (447,420)      (528,676)
Tax benefit of stock options exercised ..........................          --             --           64,644
Acquired research and development ...............................          --             --        4,230,812
Loss on disposal of property and equipment ......................         4,721         35,672         74,506

Changes in operating assets and liabilities:
  Accounts receivable ...........................................       469,943        237,548       (332,695)
  Inventories ...................................................        (3,855)       (73,672)      (657,863)
  Prepaid expenses and other current assets .....................        48,316        141,608       (117,415)
  Receivable for income taxes ...................................      (212,762)
  Other long-term assets ........................................        11,910         (2,224)        26,971
  Accounts payable ..............................................      (554,880)        29,150        (82,958)
  Accrued compensation ..........................................         3,571       (124,042)       127,766
  Other accrued expenses ........................................      (101,408)       395,260       (289,096)
  Deferred revenue ..............................................        23,897       (690,760)      (558,264)
                                                                    -----------    -----------    -----------
        Net cash used in operating activities ...................    (2,795,687)      (600,626)    (1,157,276)
                                                                    -----------    -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
    Acquired research and development ...........................          --             --         (850,000)
    Payments for additions to property and equipment ............    (1,025,460)    (2,456,521)    (2,802,061)
    Purchase of intangible assets ...............................          --             --           (3,470)
    Acquisitions, net of cash aquired ...........................          --             --       (1,706,540)
                                                                    -----------    -----------    -----------
        Net cash used in investing activities ...................    (1,025,460)    (2,456,521)    (5,362,071)
                                                                    -----------    -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from mortgage, net .....................................     2,446,573           --             --
Proceeds from issuance of convertible debentures, net ...........     2,531,023           --             --
Proceeds from issuance of warrants ..............................       327,643        206,011           --
Proceeds from issuance of common stock ..........................       936,359        185,570         89,149
(Repayments) Borrowings on line of credit .......................    (1,383,016)     3,168,300      3,977,351
Repayments of long-term debt ....................................       (75,462)          --             --
                                                                    -----------    -----------    -----------
        Net cash provided by financing activities ...............     4,783,120      3,559,881      4,066,500
                                                                    -----------    -----------    -----------

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS: ...............       961,973        502,734     (2,452,847)
Change in cash and cash equivilants provided by
  discontinued operations .......................................       543,959       (326,480)      (171,571)
Cash and cash equivalents, beginning of year ....................       276,168         99,914      2,724,332
                                                                    -----------    -----------    -----------
Cash and cash equivalents, end of year ..........................   $ 1,782,100    $   276,168    $    99,914
                                                                    ===========    ===========    ===========

SUPPLEMENTAL INFORMATION:
  Income taxes paid .............................................   $    85,119    $    33,391    $   113,287
  Interest paid .................................................       416,557        414,297         72,755
  Long-term investment included in acquisition ..................          --             --        1,482,500
NON-CASH ACTIVITIES:
  Capital lease obligations incurred ............................   $    95,577    $      --      $      --

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


                                       36
<PAGE>

                     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,  laboratory  instrumentation,
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 as of December 31, 2000. The Company also
invests in new  technologies  related to  infectious  diseases.  The  Company is
subject to risks common to companies in the  biotechnology,  medical  device and
diagnostic industries,  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
governmental 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,  BBI  Biotech  Research  Laboratories,   Inc.  ("BBI
Biotech"),  BBI Source  Scientific,  Inc. ("BBI Source"),  and BBI BioSeq,  Inc.
("BBI BioSeq").  BBI consists  primarily of the Diagnostic  Products  segment as
well  as  the  executive   corporate   office.  In  January  2000,  the  Company
incorporated Panacos  Pharmaceuticals,  Inc., ("Panacos").  All of the Company's
technology  related to its drug  discovery and vaccine  programs,  consisting of
primarily patents and related sponsored agreements,  were transferred to Panacos
effective January 2000.  Panacos was accounted for as a consolidated  subsidiary
of the  Company  during  the  period  January  1,  2000 to  November  14,  2000,
subsequent to which  Panacos  obtained  independent  third party funding and the
Company  ceased  consolidation  of Panacos as a wholly-owned  subsidiary.  As of
November 14, 2000 the  Company's  investment in Panacos was zero and the Company
is no longer required to fund Panacos's operations.  Therefore no further losses
of Panacos will be recorded by the Company. The Company retains a 30.5% interest
in non-voting preferred shares of Panacos. All significant intercompany accounts
and transactions have been eliminated in the consolidation.

     Subsequent  to December  31, 2000,  the Company sold certain  assets of BBI
Clinical  Laboratories,  Inc. ("BBICL") to a third party in conjunction with its
decision to exit the clinical  laboratory  business  segment.  Accordingly,  the
accompanying  financial statements have been reclassified to present BBICL's net
assets and results of operations as discontinued operations.

     (ii) Use of Estimates

     To prepare the financial  statements in conformity with generally  accepted
accounting principles,  management is required to make significant 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, the value and realizability
of intangible  assets,  deferred tax assets, as well as the net realizable value
of its inventory.

     The valuation  methodology  applied to the acquisition of BioSeq, Inc. (see
Note 2) was based on estimated  discounted future cash flows. The purchase price
accounting is based on this valuation. Significant assumptions include gross and
operating profit margins, and future tax, discount, and royalty rates.

     Actual  results  could differ from the estimates  and  assumptions  used by
management.



                                       37
<PAGE>
(1)      Business and Significant Accounting Policies (Continued)

     (iii) Revenue Recognition

     Product  revenue  is  recognized  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,
firm  commitment  and  transfer  to the  customers  of all risks and  rewards of
ownership. Total revenue related to bill and hold transactions was approximately
$562,000,  $1,998,000,  and  $1,388,000  for the years ended  December 31, 2000,
1999, and 1998, respectively.

     Services are recognized as revenue upon  completion of tests for laboratory
services.  Revenue from service contracts and research and development contracts
for the  Company's  laboratory  instrumentation  business is  recognized  as the
service and research and development activities are performed under the terms of
the contracts.

     Revenue  under  long-term  contracts,  generally  lasting  from one to five
years,  including  funded research and development  contracts,  is recorded when
costs to perform such research and development activities are incurred. Billings
under  long-term  contracts are generally at cost plus a  predetermined  profit.
Billings  occur as  costs  associated  with  time and  materials  are  incurred.
Customers are obligated to pay for such services,  when billed, and payments are
non-refundable.  On occasion  certain  customers make advance  payments that are
deferred until revenue recognition is appropriate.  The Company does not believe
there are any material collectability issues associated with these receivables.

     Total revenue related to long-term contracts was approximately  $5,082,000,
$4,457,000, and $4,175,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.  Total  contract  costs  associated  with  these  agreements  were
approximately  $5,540,000,  $4,323,000,  and  $3,950,000  for  the  years  ended
December 2000, 1999 and 1998,  respectively.  Included in the revenue recognized
under  long-term  contracts  are  certain  unbilled   receivables   representing
additional  indirect costs,  which are allowed under the terms of the respective
contracts. Unbilled receivables were less than $40,000 for all years presented.

     In December  1999,  the Staff of the  Securities  and  Exchange  Commission
issued Staff  Accounting  Bulletin No. 101,  "Revenue  Recognition  in Financial
Statements"  ("SAB 101").  This SAB  summarizes  certain of the Staff's views in
applying  generally  accepted  accounting  principles,  in the United States, to
revenue  recognition  in  financial  statements.  SAB 101 is  effective  for the
Company's  fiscal year ended December 31, 2000. The adoption of this standard by
the  Company  did not  have a  material  impact  on the  accompanying  financial
statements.

     (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  fair  market  value,  and  classified  as  cash
equivalents.

     (v) Research and Development Costs

     Research and development costs are expensed as incurred.

     (vi) Inventories

     Inventories  are stated at the lower of cost  (first-in,  first-out) or net
realizable value and include material, labor and manufacturing overhead.



                                       38
<PAGE>
(1)      Business and Significant Accounting Policies (Continued)

     (vii) Property and Equipment

     Property  and  equipment  are  stated  at  cost.  For  financial  reporting
purposes,  depreciation is recognized using the straight-line method, allocating
the cost of the assets over their  estimated  useful lives  ranging from five to
ten years for certain manufacturing and laboratory equipment, from three to five
years for management  information systems and office equipment,  three years for
automobiles  and  thirty  years for the  building.  Leasehold  improvements  are
amortized over the shorter of the life of the  improvement or the remaining life
of the leases,  which range from four to ten years. Upon retirement or sale, the
cost and related  accumulated  depreciation  of the asset are  removed  from the
accounting records. Any resulting gain or loss is credited or charged to income.

     In March of 1998, the American  Institute of Certified  Public  Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software  Developed or Obtained for Internal  Use".  SOP 98-1 requires  computer
software costs associated with internal use software to be charged to operations
as incurred  until  certain  capitalization  criteria  are met.  SOP 98-1 became
effective beginning January 1, 1999. The Company adopted this policy during 1999
as it implemented  enterprise resource planning systems at two of its locations.
See Footnote 4 for further information.

     (viii) Goodwill and Intangibles

     The Company has classified as goodwill, the cost in excess of fair value of
the  assets  of the  businesses  acquired.  Goodwill  is  being  amortized  on a
straight-line  basis  over ten to fifteen  years.  Other  intangibles  primarily
consist of patents, licenses, and intellectual property rights and are amortized
over periods ranging from four to sixteen years.

     (ix) Impairment of Long-Lived Assets

     The Company  evaluates the potential  impairment of its  long-lived  assets
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.  At the occurrence of a certain event or change
in  circumstances,  the Company  evaluates the potential  impairment of an asset
based on  estimated  future  undiscounted  cash flows.  In the event  impairment
exists,  the Company  will  measure the amount of such  impairment  based on the
present value of estimated future cash flows using a discount rate  commensurate
with the risks involved. Upon the occurrence of a material circumstance, such as
the  failure of  certain  technology  to  demonstrate  promise  that it may gain
commercial  acceptance or the failure of a business  segment to achieve  certain
performance objectives, management reassesses the value of associated assets and
if appropriate at that time, will recognize an impairment charge. (See Note 5.)

     (x) Income Taxes

     The Company  utilizes the liability  method of accounting for income taxes.
Under this 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. In the year ended December
31, 2000,  the Company'  established a full  valuation  allowance for all of its
deferred  tax  assets  based  on   applicable   accounting   standards   and  in
consideration of incurring three consecutive years of losses (see Note 10).

     (xi) 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 and cash equivalents with high
credit quality  financial  institutions.  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 Note 6). 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.



                                       39
<PAGE>
(1)      Business and Significant Accounting Policies (Continued)

     (xii) Deferred Revenue

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

     (xiii) Computation of Earnings (Loss) per Share

     Basic  earnings  (loss) per share is  computed by  dividing  income  (loss)
available to common shareholders by the weighted average number of common shares
outstanding.  Diluted  earnings  (loss) per share is computed by dividing income
(loss)  available to common  shareholders by the weighted  average common shares
outstanding  plus additional  common shares that would have been  outstanding if
dilutive  potential  common  shares  had  been  issued.  For  purposes  of  this
calculation, stock options are considered common stock equivalents in periods in
which they have a dilutive  effect.  Options and warrants that are  antidilutive
are excluded from the calculation.

     Potentially  dilutive  securities having a net effect of 2,500,  68,023 and
192,826  common shares were not included in the  computation of diluted loss per
share because to do so would have been antidilutive for the years ended December
31, 2000, 1999 and 1998, respectively.

     (xiv) Segment Reporting

     SFAS No. 131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information," establishes standards for the way that public business enterprises
report information about operating  segments in annual financial  statements and
requires  selected  information  about operating  segments in interim  financial
reports.  It also establishes  standards for related  disclosures about products
and services, geographic areas and major customers. Disclosures required by this
new standard are included in the notes to the consolidated  financial statements
under the caption "Segment Reporting and Related Information."

     (xv) Recent Accounting Standards

     Statement  of  Financial  Accounting  Standards  No. 133,  "Accounting  for
Derivative  Instruments  and  Hedging  Activities"  (SFAS 133),  as amended,  is
effective for quarters of fiscal years  beginning  after June 15, 2000.  The new
standard requires companies to record derivatives on the balance sheet as assets
or liabilities,  measured at fair value.  Gains or losses resulting from changes
in the values of those  derivatives  would be accounted for depending on the use
of the  derivatives  and  whether  they  qualify for hedge  accounting.  The key
criterion for hedge accounting is that the hedging  relationship  must be highly
effective  in  achieving  offsetting  changes in fair value or cash  flows.  The
Company does not currently  engage in derivative  trading or hedging activity so
it does not believe that adoption of SFAS 133 will have a material effect on its
financial statements.

     In September  2000, the FASB issued SFAS No. 140  "Accounting for Transfers
and  Servicing  of  Financial  Assets  and   Extinguishments  of  Liabilities--a
replacement of FASB  Statement No. 125".  SFAS No. 140 revises the standards for
accounting  for  securitizations  and other  transfers of  financial  assets and
collateral and requires  certain  disclosures,  but it carries over most of SFAS
No. 125's provisions  without  reconsideration.  This Statement is effective for
transfers and servicing of financial assets and  extinguishments  of liabilities
occurring  after March 31, 2001. This Statement is effective for recognition and
reclassification  of collateral and for disclosures  relating to  securitization
transactions and collateral for fiscal years ending after December 15, 2000. The
Company does not expect the  adoption of SFAS No. 140 to have a material  effect
on its financial statements.

     In March 2000, the FASB issued FASB  Interpretation No. 44, "Accounting for
Certain  Transactions  Involving  Stock  Compensation,"  (an  Interpretation  of
Accounting  Principles  Bulletin  Opinion No. 25 ("APB 25")) ("FIN 44").  FIN 44
provides  guidance on the  application of APB 25,  particularly as it relates to
options.  The  effective  date of FIN 44 was July 1, 2000,  and the  Company has
adopted FIN 44 as of that date. The application of FIN 44 has not had a material
effect on the Company's financial statements.

     (xvi) Reclassifications

     Certain amounts included in the prior year's financial statements have been
reclassified to conform to the current years presentation.

                                       40
<PAGE>
(2)      Acquisition of BioSeq, Inc.

     On  September  30, 1998 the Company  acquired  the  remaining  common stock
outstanding  of BioSeq  (approximately  81%) for  $879,000  in cash (net of cash
acquired of  $121,000),  warrants to purchase  100,000  shares of the  Company's
stock at an  exercise  price of  $2.50  per  share,  minimum  long-term  royalty
payments of $424,000,  debt and accrued  interest  owed by BioSeq at the time of
acquisition of approximately  $736,000, and other acquisition costs. The Company
also exchanged  BioSeq's stock options for 46,623 of the Company's stock options
with an average exercise price of $2.74.  Accordingly,  the Company's  aggregate
cost of acquiring all of BioSeq's equity,  including the original 19% investment
under  the 1996  Purchase  Agreement  of  $1,482,000  (classified  as  long-term
investment at December 31, 1997 was approximately  $4,226,000.  The cash portion
of the  acquisition  was  financed  from a  combination  of debt and  cash.  The
acquisition has been recorded using purchase  accounting,  and BioSeq's  results
are included in the consolidated  results of the Company  commencing  October 1,
1998.

     BBI BioSeq is a development  stage company with patent  pending  technology
based on pressure cycling technology.  The assets were capitalized by allocating
the aggregate  cost of $4,226,000  ratably to the  individual  components of the
$11,124,000  total  estimated  fair  value of the  assets  acquired,  based upon
independent  valuation of the assets acquired as performed by the  Michel/Shaked
Group,  a division of Back Bay  Management  Company.  Management  believes  that
because of the Company's initial investment in BioSeq, and intimate knowledge of
its technology and business, its understanding of the industry to which pressure
cycling  technology  would be  applied,  and as a result of lengthy  and intense
negotiations,  the Company was  successful  in reaching an  extremely  favorable
purchase price for BioSeq compared to the fair value of the assets acquired.

The assets acquired and their allocation are as follows:
<TABLE>
                                       Estimated                          Allocated
            Item                      Useful Life      Fair Value      Purchase Price
-----------------------------------  -------------   ---------------   ---------------
<S>                                  <C>             <C>               <C>
Acquired in-process research
and development ...................        --        $     8,764,000   $     3,381,000
Patents ...........................     16 years           2,017,000           778,000
Other assets ......................   3 - 10 years           343,000            67,000
                                                     ---------------   ---------------
Totals ............................                  $    11,124,000   $     4,226,000
                                                     ===============   ===============
</TABLE>
     Allocated  in-process  research and  development  consists of two projects,
that were on-going at the time of the  acquisition:  nucleic acid extraction and
purification and pathogen  inactivation.  BioSeq had expended approximately $1.6
million prior to September 30, 1998 on these  projects.  Both of these  projects
have  encouraging  preliminary data  demonstrating  potential  feasibility,  but
significant  scientific,  mechanical  and  design  issues  remain.  The  Company
estimates  that it may spend up to $3.0  million in years 2001  through  2003 to
complete  the  development  into  commercially  viable  products  and  to  begin
generating  revenue.  Remaining  development  efforts are focused on feasibility
studies to establish the key performance parameters and biological activities to
be retained; designing and building a prototype instrument;  further development
of the prototype for the applications;  scale-up of design;  data generation and
clinical trials;  applying and obtaining Food and Drug Administration  approval,
where applicable, final design modifications;  and transfer to manufacturing. In
addition  to the risk of the  technology  ultimately  not  working,  failure  to
complete on a timely basis could allow new or existing competing technologies to
be developed and commercially  accepted.  The valuation methodology was based on
estimated  discounted future cash flows.  Significant  assumptions include gross
and operating profit margins, and future tax, discount, and royalty rates.

     The following  unaudited pro forma  information  combines the  consolidated
results  of  operations  of the  Company  and BioSeq as if the  acquisition  had
occurred at the beginning of 1998,  after giving effect to certain  adjustments,
including  amortization of the intangible assets,  increased interest expense on
the  acquisition  debt, and related income tax effects.  The unaudited pro forma
information is shown for comparative  purposes only and is based on management's
estimates of research and development expenditures.



                                       41
<PAGE>

(2)      Acquisition of BioSeq, Inc. (continued)
<TABLE>
                               Year Ended
                           December 31, 1998
                               Pro Forma
                               ----------
<S>                          <C>
Revenues ..................  $ 26,081,077
Operating income (loss) ...    (1,474,694)
Net income (loss) .........      (989,327)
EPS .......................  $      (0.21)

</TABLE>

     The pro forma  information  excludes  acquired  research and development of
$4,231,000


(3)      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 QC Panels,  Accurun(R) 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 also includes component parts used
in the manufacture of laboratory instrumentation. Inventory balances at December
31, 2000 and 1999 consisted of the following:
<TABLE>

                               2000         1999
                            ----------   ----------
<S>                         <C>          <C>
Raw materials ...........   $3,029,962   $2,219,512
Work-in-process .........    1,753,867    1,845,778
Finished goods ..........    1,681,719    2,396,403
                            ----------   ----------
                            $6,465,548   $6,461,693
                            ==========   ==========
</TABLE>

(4)      Property and Equipment

     Property  and  equipment  at December  31, 2000 and 1999  consisted  of the
following:
<TABLE>
                                                  2000          1999
                                              -----------   -----------
<S>                                           <C>           <C>
Laboratory and manufacturing equipment ....   $ 3,228,054   $ 3,006,313
Management information systems ............     3,315,397     3,119,064
Office equipment ..........................       882,584       838,950
Automobiles ...............................       135,485       135,485
Leasehold improvements ....................     2,696,561     2,114,261
Land, building and improvements ...........     2,672,240     2,611,733
                                              -----------   -----------
                                               12,930,321    11,825,806
Less accumulated depreciation .............     5,471,038     4,073,087
                                              -----------   -----------

Net book value ............................   $ 7,459,283   $ 7,752,719
                                              ===========   ===========

</TABLE>

     Depreciation  expense for the years ended December 31, 2000,  1999 and 1998
was approximately $1,410,000, $1,126,000, and $886,000 respectively. Included in
2000,  1999 and 1998  land,  building  and  improvements  is  approximately  $0,
$203,000 and $1,345,000, respectively, of construction in progress.


                                       42
<PAGE>

(4)      Property and Equipment (continued)

     In accordance with SOP 98-1, the Company capitalized approximately $448,000
of internal labor and related costs,  in 1999, in connection with its ERP System
Implementation.  These costs are included in the Management  Information Systems
line item and are being  depreciated  over the same life as the system, 5 years.
Depreciation  expense,  related  to these  capitalized  costs was  approximately
$90,000 and $7,000 for the years ended December 31, 2000 and 1999, respectively.


(5)      Intangible Assets

     Intangible assets at December 31, 2000 and 1999 consisted of the following:
<TABLE>

                                         2000          1999
                                      ----------   ----------
<S>                                   <C>          <C>
Goodwill ..........................   $  820,248   $2,284,468
Patents ...........................      795,880      795,880
Licenses ..........................        6,359        6,359
                                      ----------   ----------
                                       1,622,487    3,086,707
Less accumulated amortization .....      688,694      515,303
                                      ----------   ----------

Net book value ....................   $  933,793   $2,571,404
                                      ==========   ==========

</TABLE>

     Amortization  expense for the years ended December 31, 2000,  1999 and 1998
was approximately $173,000, $213,000, and $177,000 respectively.

     As part of an ongoing  strategic  review  process,  the Company's  Board of
Directors met in late  September  2000 to review the progress of its  Laboratory
Instrumentation  segment,  and that segment's prospects for the future. Based on
new  updated  information  presented  at this  meeting and  subsequent  analyses
showing lower revenue expectations, management approved implementation of a cost
reduction plan including a headcount  reduction,  salary freeze, and sublease of
excess manufacturing  space. Using the assumptions  associated with this revised
business plan, the Company  estimated future net  undiscounted  cash inflows and
cash outflows over the remaining original  amortization period of that segment's
goodwill, and concluded an impairment had occurred. These annual net future cash
inflows  and  outflows  were then  discounted  at a rate  commensurate  with the
business   risks   inherent  with  the  future   operations  of  the  Laboratory
Instrumentation  segment,  and thus, in accordance  with the  provisions of both
"Accounting  Principles Board Opinion No. 17 - Intangible Assets" and "Statement
of Financial  Accounting  Standards No. 121 - Accounting  for the  Impairment of
Long-Lived  Assets and for Long-Lived  Assets to Be Disposed Of," this segment's
goodwill  was  written  down  by  approximately  $1,464,000  in year  2000.  The
remaining  net balance of goodwill  associated  with the  Laboratory  Instrument
segment is approximately $249,000 as of December 31, 2000.

(6)      Segment Reporting and Related Information
         (all dollar amounts in thousands)

     Operating  segments are  components  of an  enterprise  for which  separate
financial  information  is  available  that is  evaluated  regularly  by  senior
management  in  deciding  how  to  allocate   resources  and  in  assessing  the
performance of each segment.  The Company is organized  along legal entity lines
and senior  management  regularly  reviews  financial  results for all entities,
focusing primarily on revenue and operating income.

     The Company had four  operating  segments as of  December  31,  2000,  as a
result of its decision in late 2000 to exit the clinical  laboratory  segment of
the business.  The Diagnostics segment serves the worldwide in vitro diagnostics
industry,  including  users and  regulators  of their  test kits,  with  quality
control  products,  and test kit  components.  The Biotech segment pursues third
party  contracts to help fund the  development  of products and services for the
other  segments,  primarily with agencies of the United States  Government.  The
Laboratory Instrumentation segment sells diagnostic instruments primarily to the


                                       43
<PAGE>
(6)      Segment Reporting and Related Information
         (continued - all dollar amounts in thousands)

worldwide  in vitro  diagnostic  industry  on an OEM  basis,  and also  performs
in-house  instrument  servicing.  "Other"  consists of research and  development
primarily in pressure cycling technology ("PCT").  The Company performs research
in the  development of PCT, with  particular  focus in the areas of nucleic acid
purification  and pathogen  inactivation.  The "Other"  segment's R&D operations
does not  currently  have any  significant  product or service  revenue,  and no
significant  revenue  is  expected  in the near  future.  This  revenue  to date
consists of both private and public (NIH) funding of segment  research.  Most of
the  expenditures by this segment are for R&D expenses,  and general  management
expenses including patent costs.

     The  Company's  underlying  accounting  records are  maintained  on a legal
entity basis for government and public  reporting  requirements,  as well as for
segment performance and internal management  reporting.  Inter-segment sales are
recorded on a "third  party best price" basis and are  significant  in measuring
segment operating results. Throughout 1999, the cost of most corporate functions
are included in the Diagnostic  Products segment as the senior  management group
has dual responsibility to this segment as well as the Company.  Pursuant to the
August  1999  reorganization,  many  of  the  senior  managers  and a few  other
employees  were  segregated  from the  Diagnostics  segment to form a  Corporate
operating unit,  effective January 2000. The following  segment  information has
been  prepared  in  accordance  with the  internal  accounting  policies  of the
Company, as described above. Prior year data has been restated,  where feasible,
to conform to the current year presentation format.

     Operating  segment  revenue for the years ended December 31, 2000, 1999 and
1998 were as follows:
<TABLE>

                                        2000        1999        1998
                                      --------    --------    --------
<S>                                   <C>         <C>         <C>
Diagnostics .......................   $ 10,863    $ 11,837    $ 11,277
Biotech ...........................      7,428       6,297       5,355
Laboratory Instrumentation ........      2,309       2,923       3,929
Other .............................        532         434        --
Eliminations ......................     (1,662)     (1,693)     (1,296)
                                      --------    --------    --------
   Total revenue ..................   $ 19,470    $ 19,798    $ 19,265
                                      ========    ========    ========

</TABLE>

     Operating segment (loss) income for the years ended December 31, 2000, 1999
and 1998 were as follows:
<TABLE>

                                        2000        1999        1998
                                      --------    --------    --------
<S>                                   <C>         <C>         <C>
Diagnostics .......................   $  1,015    $  2,436    $  1,962
Biotech ...........................       (398)       (482)       (214)
Laboratory Instrumentation ........     (2,819)     (1,163)     (1,187)
Other .............................     (2,325)     (2,006)     (1,085)
Eliminations ......................       (341)       (236)       (194)
Acquired research & development ...       --          --        (4,231)
                                      --------    --------    --------
   Total loss from operations .....   $ (4,868)   $ (1,451)   $ (4,949)
                                      ========    ========    ========
</TABLE>



                                       44
<PAGE>
(6)      Segment Reporting and Related Information
         (continued - all dollar amounts in thousands)

     Operating segment depreciation and amortization expense for the years ended
December 31, 2000, 1999 and 1998 were as follows:
<TABLE>
                                        2000        1999        1998
                                      --------    --------    --------
<S>                                   <C>         <C>         <C>
Diagnostics .......................   $    665    $    537    $    408
Biotech ...........................        582         419         346
Laboratory Instrumentation (1) ....      1,717         299         292
Other .............................         83          84          17
                                      --------    --------    --------
   Total depreciation and
     amortization.....................$  3,047    $  1,339    $  1,063
                                      ========    ========    ========
</TABLE>

     (1) Included in the Laboratory  Instrumentation segments loss for 2000 is a
$1,464  write  down of a portion  of the  Laboratory  Instrumentation  segment's
goodwill. (See also Note 5)

     Identifiable operating segment assets are all located in the United States,
and as of December 31, 2000 and 1999 were as follows:
<TABLE>

                                        2000       1999
                                      --------   --------
<S>                                   <C>        <C>
Diagnostics .......................   $ 11,183   $ 13,375
Biotech ...........................      4,693      4,643
Laboratory Instrumentation ........      2,141      3,789
Other .............................      3,294      1,148
                                      --------   --------
   Total assets ...................   $ 21,311   $ 22,955
                                      ========   ========

</TABLE>

     Operating  segment  capital  expenditures  for the years ended December 31,
2000, 1999 and 1998 were as follows:
<TABLE>
                                        2000       1999       1998
                                      --------   --------   --------
<S>                                   <C>        <C>        <C>
Diagnostics .......................   $    283   $  1,315   $  1,472
Biotech ...........................        818        944      1,234
Laboratory Instrumentation ........         19        164         96
Other .............................          1         34       --
                                      --------   --------   --------
   Total capital expenditures .....   $  1,121   $  2,457   $  2,802
                                      ========   ========   ========

</TABLE>

     Revenue by geographic  area for the years ended December 31, 2000, 1999 and
1998 are as follows:
<TABLE>

                                        2000       1999       1998
                                      --------   --------   --------
<S>                                   <C>        <C>        <C>
United States .....................   $ 15,295   $ 15,758   $ 15,162
Europe ............................      2,594      2,509      2,453
Pacific Rim .......................        841        818      1,063
Total all others ..................        740        713        587
                                      --------   --------   --------
     Total ........................   $ 19,470   $ 19,798   $ 19,265
                                      ========   ========   ========

</TABLE>

                                       45
<PAGE>
(6)      Segment Reporting and Related Information
         (continued - all dollar amounts in thousands)

     Revenue of Product  and  Service  classes in excess of 10% of  consolidated
revenue from continuing operations (excludes  inter-segment sales) for the years
ended December 31, 2000, 1999 and 1998 were as follows:
<TABLE>

                                        2000       1999       1998
                                      --------   --------   --------
<S>                                   <C>        <C>        <C>
Quality Control Products ..........   $  8,210   $  9,445   $  9,369
Government Contracts ..............      5,929      4,530      3,535
Laboratory Instrument Products ....      1,953      2,578      2,291

</TABLE>

     The  government   contract  revenues  are  from  United  States  government
agencies,  primarily various branches of the National Institutes of Health (NIH)
and represent  the only  customer with revenue in excess of 10% of  consolidated
revenue in each of the years ended December 31, 2000, 1999 and 1998.


(7)      Debt

     Effective June 30, 1999, the Company entered into an amended revolving line
of credit agreement (the "Amended Line") with its bank,  increasing the facility
to $10  million  from $7.5  million.  The  Amended  Line bears  interest  at the
Company's  option  based on either the base rate plus 1/4% or LIBOR plus  2.75%;
carries  a  facility  fee  of  1/4%  per  annum,   payable  quarterly;   and  is
collateralized by substantially all of the assets of the Company, excluding real
property. Borrowings under the Amended Line are limited to commercially standard
percentages of accounts  receivable,  inventory and equipment.  The Amended Line
contains  covenants  regarding the Company's  total  liabilities to tangible net
worth ratio,  minimum debt service  coverage  ratio,  and maximum net loss.  The
Amended Line  further  provides for  restrictions  on the payment of  dividends,
incurring additional debt, and the amount of capital expenditures.

     The December  31, 2000 balance  sheet  reflects the  classification  of the
Company's $5,762,635 outstanding  line-of-credit balance as short-term debt. The
Company  has  reclassified  this debt to  short-term  because  in March 2000 and
through the  remainder of the year,  the Company was in violation of a financial
covenant  limiting the amount of allowable losses. In December 2000, the line of
credit was limited to a maximum  borrowing  level of $5,762,635 and the interest
rate was raised four  percentage  points above the normal rate  associated  with
this line of credit.  In February  2001,  the Company  utilized a portion of the
proceeds  from the sale of  BBICL  to pay off in full  the  outstanding  balance
(together with accrued  interest) on this line of credit, at which time the bank
released all liens  associated  with this line of credit and terminated the line
of credit.  There were no payment defaults at any time associated with this line
of credit.

     On August 25, 2000, the Company entered into Securities Purchase Agreements
providing  for the issuance of  $3,250,000  (face value) 3% Senior  Subordinated
Convertible Debentures due August 25, 2003, (the "Debentures").  Proceeds to the
Company,  net of a 5% original issue discount and debt issuance costs,  amounted
to  $2,858,000,  of which $327,000 has been allocated to the relative fair value
of the associated common stock purchase warrants. The fair value of the warrants
was determined  using the Black Scholes  option-pricing  model and the following
assumptions:  a risk free interest rate of 6.02%, a volatility factor of 91.17%,
a contractual  life of 5 years and no expected  dividend yield. The Company then
allocated the proceeds of the  Debentures,  net of the original  issue  discount
($3,087,500),  on a  pro-rata  basis  using  the  calculated  fair  value of the
warrants  ($318,000)  and the fair value of the  Debentures  ($2,685,000).  This
resulted in proceeds of approximately $327,000 and $2,761,000 being allocated to
the relative fair value of the warrants and the  Debentures,  respectively.  The
Debentures are convertible into the Company's  common stock commencing  November
24, 2000,  at a  conversion  price equal to the lesser of (i) $3.36 per share or
(ii) 90% of the average of the five lowest volume weighted  average sales prices
of Common Stock as reported by Bloomberg L.P.  during the  twenty-five  business
days  immediately  preceding the date on which the Debenture  holders notify the
Company of their  intention to convert all or part of the Debenture  into Common
Stock.  In connection  with this  transaction,  the Company  issued  warrants to


                                       46
<PAGE>
(7)      Debt (continued)

purchase up to 135,556 shares of the Company's common stock at an exercise price
of $3.60 per share.  Interest on the Debentures is payable  quarterly in arrears
commencing  September  30, 2000.  The  Debentures  are  subordinate  to both the
Company's line of credit (which was terminated in February 2001) and mortgage on
its West Bridgewater,  MA facility.  The Company may elect at any time to redeem
all or any portion of the remaining  unpaid  principal  amount of the Debentures
for cash. In addition,  upon receipt of a notice of conversion  from a holder of
the Debentures, the Company may elect to redeem that portion being converted for
cash in lieu of common stock of the Company. In both cases, the redemption price
equals the  number of shares of common  stock  into  which the  Debenture  being
redeemed is  convertible,  times the average  closing bid price of the Company's
common stock for the five preceding trading days.

     The  Securities  Purchase  Agreements and related  documents  place certain
restrictions on the Company's ability to incur additional indebtedness,  to make
certain  payments,  investments,  loans,  guarantees  and/or  transactions  with
affiliates,  to sell or otherwise  dispose of a  substantial  portion of assets,
and/or to merge or consolidate with an unaffiliated entity.

     Original issue discount and associated  debt issuance costs of $162,500 and
$230,000,  respectively, are being amortized ratably over the three-year life of
the underlying  debt as additional  interest  expense.  Also, in accordance with
Emerging Issues Task Force Issues 98-5 and 00-27, proceeds of $840,000 have been
allocated to the beneficial  conversion  feature of the Debentures by decreasing
the  value of the debt  and  increasing  additional  paid in  capital.  Of this,
$351,000 was originally calculated in the third quarter when the Debentures were
issued.  The additional  amount of $489,000 was calculated in the fourth quarter
using the  accounting  conversion  method  preferred by the SEC pursuant to EITF
00-27  which  clarified  the method of  calculating  the  beneficial  conversion
feature.  The amount allocated to the beneficial  conversion  feature was valued
using conversion  method (ii) from above as of the date of the transaction as it
was determined to be the most beneficial to the holders of the Debentures.  This
amount  was  expensed  over  the  initial  90-day  non-convertible  period.  The
remaining  difference  between the relative fair value of the Debentures and the
face value of the Debentures (as a result of the $327,000 of proceeds  allocated
to the warrants) will be expensed as interest  expense over the three-year  term
of the Debentures.  For the year ended December 31, 2000, the Company recorded a
charge of $898,000  (including $190,223 for the cumulative effect of a change in
accounting  principle  noted  above)  due  to  amortization  of  the  beneficial
conversion  feature,  warrant costs and original  issue  discount/debt  issuance
costs associated with the Company's August 2000 issuance of $3,250,000 3% Senior
Subordinated Convertible Debentures.  Under the Debenture agreements the Company
is  subject  to certain  financial  covenants  by which a default in its line of
credit financial  covenants will cause a default on the Debentures.  The Company
has received a waiver from the holders of the debentures  regarding the covenant
vioaltion.

     In the first quarter of 2001, certain holders of the Company's  outstanding
3% Senior Convertible  Debentures (the  "Debentures")  exercised their rights to
convert $1,210,000 of such Debentures into shares of the Company's common stock,
in accordance with the conversion  formula.  These  conversions  resulted in the
issuance of 801,325 additional shares of common stock subsequent to December 31,
2000. In addition,  the Company redeemed the remaining  $2,040,000 of Debentures
at face plus a $190,000 premium and accrued interest. Unamortized debt discount,
debt issuance  costs and  warrant-related  costs  associated  with the converted
Debentures,  approximating  $231,000 will debited to additional paid-in capital,
with  the  remaining  $377,000  of  such  costs  associated  with  the  redeemed
Debentures being included in the loss on  extinguishment  of the Debentures.  In
addition,  the Company will reverse approximately $528,000 of expense previously
recorded in 2000 associated with the Debentures beneficial conversion feature.

     Accordingly,  the Company will record a net loss of  approximately  $39,000
relative to this early extinguishment of debt in the first quarter of 2001. As a
result of both the  conversions  and  redemptions,  which  occurred in the first
quarter of 2001,  none of the 3%,  Senior  Subordinated  Convertible  Debentures
remain outstanding subsequent to February 27, 2001.



                                       47
<PAGE>
(7)      Debt (continued)

     On April 5, 2000, the Company  borrowed  $2,447,000,  net of related costs,
under a  mortgage  agreement  on its West  Bridgewater,  MA  facility,  of which
approximately  $2,466,000  remains  outstanding  as of December  31,  2000.  The
Company used the funds to reduce the outstanding balance of its existing line of
credit.  The principal amount of the note issued in connection with the mortgage
is due on March 31,  2010.  During  the first  five  years the note  carries  an
interest  rate of 9.75%;  after five years the rate charged will be .75% greater
than the Corporate Base Rate then in effect.  The mortgage precludes the payment
of  dividends  on  the  Company's   common  stock  and  contains  certain  other
restrictive  covenants.  Under this mortgage agreement the Company is subject to
certain  financial  covenants by which a default in its line of credit financial
covenants  will cause a default on this note.  The Company has received a waiver
from this lending institution regarding the covenant violation. Monthly payments
on this  mortgage are based on a 20 year  amortization  schedule  with a balloon
payment  representing  the remaining  balance due in full on March 10, 2010. The
mortgage is  collateralized  by the  Company's  West  Bridgewater,  MA facility.
Principal  payments due on the Company's  mortgage  agreement are  approximately
$49,000,  $54,000,  $60,000,  $66,000  and  $72,000  for each of the years ended
December 31, 2001, 2002, 2003, 2004 and 2005, respectively.


(8)      Other Liabilities

     Included in  long-term  liabilities  at December  31, 2000 and 1999 are the
present value of future minimum royalty  payments of  approximately  $55,000 and
$139,000 payable to the former owners of BioSeq, Inc. (see Note 2).


(9)      Income Taxes

     The components of the (benefit) provision for income taxes are as follows:
<TABLE>
                                                        2000         1999          1998
                                                     ----------   ----------    ----------
<S>                                                  <C>          <C>           <C>
Current (benefit) provision: federal .............   $     --     $ (226,368)   $  (63,868)
Current provision: state .........................         --          2,168         2,168
                                                     ----------   ----------    ----------
    Total current (benefit) provision ............         --       (224,200)      (61,700)

Deferred (benefit) provision: federal ............      879,557     (373,497)     (437,315)
Deferred (benefit) provision: state ..............      272,383     (146,396)     (114,890)
                                                     ----------   ----------    ----------
    Total deferred (benefit) provision ...........    1,151,940     (519,893)     (552,205)
                                                     ----------   ----------    ----------
    Total (benefit) provision for income taxes ...   $1,151,940   $ (744,093)   $ (613,905)
                                                     ==========   ==========    ==========
</TABLE>
     Significant  items  making up deferred  tax  liabilities  and  deferred tax
assets were as follows:
<TABLE>
                                                         2000           1999
                                                     -----------    -----------
        Current deferred taxes:
<S>                                                  <C>            <C>
            Inventory ............................   $   562,134    $   174,338
            Accounts receivable allowance ........       355,611        298,271
            Technology licensed ..................       277,250        299,883
            Other accruals .......................       173,504        162,298
            Less: valuation allowance ............    (1,368,499)          --
                                                     -----------    -----------
        Total current deferred tax assets ........          --          934,790

        Long term deferred taxes:
            Accelerated tax depreciation .........      (232,282)      (335,880)
            Goodwill and intangibles .............       594,657         19,961
            Tax credits ..........................       252,589        252,589
            Operating loss carryforwards .........     3,094,247      1,082,665
            Less: valuation allowance ............    (3,709,211)      (798,800)
                                                     -----------    -----------
         Total long term deferred tax
           assets (liabilities), net..............          --          220,535
                                                     -----------    -----------
         Total net deferred tax assets ...........   $      --      $ 1,155,325
                                                     ===========    ===========
</TABLE>

                                       48
<PAGE>
(9)      Income Taxes (continued)

     A valuation allowance is established if it is more likely than not that all
or a portion of the  deferred  tax asset will not be  realized.  Accordingly,  a
valuation allowance has been established for the full amount of the deferred tax
asset due to the uncertainty of realization.

     The Company had net operating  loss  carryforwards  for federal  income tax
purposes of  approximately  $7,550,000  and  $2,300,000 at December 31, 2000 and
1999,  respectively.  These net operating loss  carryforwards  expire at various
dates from 2011 through 2020.  Included in this number are loss carryforwards of
approximately  $2,000,000 that were obtained  through the acquisition of BioSeq,
Inc.  These  carryforwards  expire  from 2011  through  2018.  The  Company  has
established  a valuation  allowance  of $798,800 to reserve for this entire loss
since the acquisition of BioSeq, Inc.

     The Company  had net  operating  loss  carryforwards  for state  income tax
purposes of  approximately  $9,200,000  and  $5,000,000 at December  31,2000 and
1999,  respectively.  These net operating loss  carryforwards  expire at various
dates from 2001 through 2020.  Included in this number are loss carryforwards of
approximately  $2,000,000 that were obtained  through the acquisition of BioSeq,
Inc. These carryforwards  expire from 2001 through 2003. As discussed above, the
Company has  established  a valuation  allowance to reserve for this entire loss
since the acquisition of BioSeq, Inc.

     Included  in the net  operating  loss  carryforwards  discussed  above is a
deferred  tax  asset of  approximately  $1,200,000  reflecting  the  benefit  of
deductions  from the exercise of stock  options.  The benefit from this deferred
tax asset  will be  recorded  as a credit  to  additional  paid-in-capital  when
realized.

     As  of  December  31,  2000,  the  Company  had  approximately  $47,000  of
alternative  minimum tax credits,  which do not expire,  and $205,000 of federal
research credits, which expire from 2011 to 2018.

     The Company's  effective income tax rate differs from the statutory federal
income tax rate as follows:
<TABLE>
                                                                    2000      1999      1998
                                                                   -----     -----     -----
<S>                                                                 <C>       <C>       <C>
Federal tax (benefit) provision rate ..........................     (34%)     (34%)     (34%)
State tax (benefit) provision, net of federal benefit .........      (6%)      (6%)      (1%)
Nondeductable writeoff of acquired research and development ...                          23%
Non-cash deductions and other permanent items .................       4%
Effect of subsidiary leaving the group ........................      (6%)
Valuation allowance ...........................................      59%        2%        1%

                                                                   -----     -----     -----
Effective income tax (benefit) provision rate .................      17%      (38%)     (11%)
                                                                   =====     =====     =====
</TABLE>

     The Company's  federal  income tax return for fiscal year 1997 is currently
under examination by the Internal Revenue Service.  The Company's  Massachusetts
state income tax returns for the years  1996-1998  have been reviewed and closed
pursuant to a recently  completed  examination.  Any  assessments  or  potential
assessments  are  not  expected  to  have  a  material  adverse  effect  on  the
accompanying financial statements.


(10)      Commitments and Contingencies

     The  Company  leases  certain  office  space,   repository,   research  and
manufacturing  facilities  under  operating  leases with various  terms  through
October 2007.  All of the real estate leases include  renewal  options at either
market or increasing levels of rent.

     In May 2000,  the  Company  acquired  laboratory  equipment  pursuant  to a
three-year  capital  lease at 12%  financing,  resulting  in total  payments  of
approximately $115,000 over the life of the lease agreement.

                                       49
<PAGE>
(10)      Commitments and Contingencies (continued)

     At December 31, 2000,  future minimum lease  payments under  non-cancelable
leases, excluding discontinued operations, is as follows:
<TABLE>

Year Ended                                              Operating Leases  Capital Leases
--------------                                           ---------------  ---------------
<S>                                                       <C>                   <C>
2001 .............................................        $ 1,128,000           $ 38,000
2002 .............................................            858,000             38,000
2003 .............................................            870,000             16,000
2004 .............................................            889,000                  -
2005 .............................................            915,000                  -
2006 and thereafter ..............................          1,186,000                  -
                                                         -------------      -------------
Total mimimum lease payments .....................        $ 5,846,000             92,000
                                                         =============
Less amount representing interest .........................................      (15,000)
                                                                            -------------
Present value of minimum lease payments ...................................     $ 77,000
                                                                            =============
</TABLE>

     The Company has entered into a  non-cancelable  sublease  agreement  with a
third party that will offset the future minimum lease payments by $184,000. Rent
expense, net of sublease income consisted of the following:
<TABLE>
                                          2000           1999          1998
                                      -----------    -----------   -----------
<S>                                   <C>            <C>           <C>
Basic expense .....................   $ 1,109,000    $ 1,094,000   $   797,000
Sublease income ...................       (42,000)          --            --
                                      -----------    -----------   -----------
Rent expense, net .................   $ 1,067,000    $ 1,094,000   $   797,000
                                      ===========    ===========   ===========
</TABLE>

     In addition,  as  discussed  further in Note 13  hereunder,  the Company is
subject to future  minimum lease  payments in connection  with the  discontinued
operations of its Clinical Laboratory segment of $161,000,  $161,000,  $161,000,
$161,000,  and $67,000 in 2001,  2002,  2003, 2004 and 2005,  respectively.  The
Company has entered  into a Transition  Services  agreement  with the  purchaser
whereby the purchaser has  subleased  these  premises for the remainder of 2001.
The Company has accrued a portion of the remaining  lease  commitment in 2001 as
part of the  calculation  of the gain on the  sale of  certain  assets  from the
Clinical Laboratory segment.

     The Company's  California and Maryland  facility's leases include scheduled
base rent increases over the term of the lease. The amount of base rent payments
is charged to expense using the straight-line method over the term of the lease.
As of December 31, 2000 and 1999, the Company has recorded a long-term liability
of $262,000 and  $306,000,  respectively  ($337,000  and $341,000  including the
current  portion) 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  California
and Maryland facilities.

     In April 1999, the Company  increased it's commitment to directly support a
drug  discovery  program at UNC,  in which a  full-time  post-doctoral  research
scientist and two doctoral students are working to develop synthetic derivatives
of anti-HIV compounds that have been discovered  pursuant to the Company's joint
collaboration  with UNC. The Company was committed to pay approximately  $44,000
per quarter for three years.  These costs,  charged to research and  development
expense,  provide for the rights to any new anti-HIV  compounds and  derivatives
developed in the course of this sponsored research,  provided certain regulatory
approvals are obtained from the FDA. Effective November 2000, all rights,  costs
and   obligations   under   this   agreement   were   transferred   to   Panacos
Pharmaceuticals,  Inc., of which the Company has a 30.5% ownership of non-voting
securities as of December 31, 2000.

                                       50
<PAGE>
(11)      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 Internal Revenue
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. Company contributions are made at the discretion of management.  To
date,  no such  contributions  have been made.  During  2000,  1999 and 1998 the
Company recognized administrative expense of approximately $30,000, $30,000, and
$32,000, respectively in connection with the plan.


(12)      Stockholders' Equity

     Common Stock

     In July 1999, the Company's  Board of Directors  approved the 1999 Employee
Stock  Purchase  Plan.  The Company  adopted this plan,  which  allows  eligible
employees to purchase  shares of the  Company's  stock at 85% of market value as
determined  at the  beginning  and the end of the  offering  period.  A total of
250,000 shares have been reserved for this plan. As of December 31, 2000,  8,458
shares had been issued under this plan.

     Options and Warrants

     The Company has a  nonqualified  stock option plan and an  incentive  stock
option plan (1996 Employee Stock Option Plan) both of which are  administered by
a  committee  of the Board of  Directors.  In July 1999 the  Company's  Board of
Directors  approved the designation of an additional  1,250,000 shares to become
available for distribution  under the 1996 Employee Stock Option Plan. The Board
of Directors  also  approved  the 1999 Non-  Qualified  Stock  Option Plan,  and
designated  500,000 shares for distribution  under this plan. The exercise price
of an option  generally equals the fair market value of the stock at grant date.
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 expire ten years
from the date of grant, or 30 days from the date the grantee's  affiliation with
the Company terminates.

     At December 31, 2000,  1,999,500  shares were reserved for incentive  stock
options,  of which  1,031,185 are available for future  grants.  At December 31,
2000, 1,098,680 shares were reserved under the nonqualified stock option plan of
which 251,270 were available for future grants.

     In August 1999, the Company sold 500,000 warrants to purchase the Company's
stock to Paradigm Group, a private  investment  company.  The private  placement
consisted of 400,000  common stock  purchase  warrants with a exercise  price of
$4.25 and 100,000  common  stock  purchase  warrants  with an exercise  price of
$5.25.  Paradigm Group paid the Company  $50,000 for the warrants.  In addition,
National  Securities  received  40,000  common stock  purchase  warrants with an
exercise price of $4.25,  10,000 common stock purchase warrants with an exercise
price of $5.25, and 25,000 common stock purchase warrants with an exercise price
of $8.00, as transaction fee.

     In February  2000, the Company  received  notice that Paradigm  Group,  LLC
exercised  all of their  warrants to purchase the Company's  common  stock.  The
holders  of the  warrants  were  required  to pay the  exercise  price  when the
registration  of the underlying  shares became  effective  which was in December
2000. In August 2000, the Company received a summons and complaint from Paradigm
Group,  LLC naming the Company as a  defendant.  The suit,  filed in the Circuit
Court of Cook  County,  Illinois,  alleged  breach of contract  claims and fraud
against the Company in  connection  with the sale by the Company to the Paradigm
Group,  LLC of the above  warrants,  the exercise of those  warrants by Paradigm
Group,  LLC and a delay  in the  registration  of  those  shares  with the U. S.
Securities  and Exchange  Commission.  In December  2000,  Paradigm  Group,  LLC
withdrew  this  lawsuit.  While the Company  believes that it is entitled to the
funds due from the  exercise of the above  warrants,  it has fully  reserved the
receivable due to concerns over its collectability.  Additionally, in the fourth
quarter, the Company has expensed  approximately $265,000 of expenses related to
these warrants and the registration of the underlying shares. The 500,000 shares
associated  with the exercise of these warrants are included in the total shares
outstanding as well as in the  calculation of earnings (loss) per share from the
date the warrants were exercised through the end of the year.

                                       51
<PAGE>
(12)      Stockholders' Equity (continued)

     In November  1999,  the Company sold 29,153 equity units to MDBio,  Inc., a
Maryland not-for-profit  corporation.  Each equity unit consists of one share of
common stock and one common  stock  purchase  warrant with an exercise  price of
$10.00.  MDBio paid the  Company  $175,000  for the  equity  units and has until
September 2003 to exercise the warrants.

     On December 11, 1998,  the  Company's  Board of  Directors  authorized  the
Company to offer a reduction  of the stock  option  exercise  price to $3.25 per
share,  which  represented a premium over the market price of $2.56 on that day.
Any option holder with  outstanding  stock options with an exercise price higher
than $3.25 was  eligible to  participate  in the  repricing.  A total of 411,417
options were repriced,  which represents substantially all eligible options. The
original  vesting  schedule,  generally four years from date of grant,  remained
unchanged.  However,  all  optionees  accepting the offer agreed not to exercise
vested,  repriced  options for a period of one year from the date of  amendment.
The previous weighted average exercise price of the options repriced was $6.72.

     The Company has elected to follow  Accounting  Principles Board Opinion No.
25,   "Accounting   for  Stock  Issued  to  Employees"   (APB  25)  and  related
interpretations  in accounting  for its employee  stock  options.  Under APB 25,
because the exercise  price of employee stock options equals the market price of
the underlying stock on the date of grant, no compensation  expense is recorded.
The Company has adopted the disclosure-only provisions of Statement of Financial
Accounting  Standards No. 123,  "Accounting for Stock-Based  Compensation" (SFAS
123).  Pro forma  information  regarding  net income and  earnings  per share is
required by SFAS 123 and has been determined as if the Company had accounted for
its employee  stock options under the fair value method of that  statement.  The
fair  value  of  these  options  was  estimated  at the  date of  grant  using a
Black-Scholes   option  pricing  model  with  the  following   weighted  average
assumptions for 2000, 1999, and 1998.
<TABLE>
                                        2000        1999        1998
                                      --------    --------    --------
<S>                                       <C>         <C>         <C>
Risk-free interest rate ...........       5.77%       5.26%       4.69%
Volatility factor .................      98.54%      76.68%      75.57%
Weighted average expected life ....   5.1 years   5.1 years   5.0 years
Expected dividend yield ...........       --          --          --

</TABLE>
     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
estimating the fair value of traded options,  which have no vesting restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input of highly  subjective  assumptions  including  the  expected  stock  price
volatility.  Because the Company's  employee stock options have  characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially  affect the fair value estimate,  in
management's  opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

     For  purposes of pro forma  disclosures,  the  estimated  fair value of the
options is amortized to expense over the options' vesting period.  The Company's
pro forma net income and pro forma net loss per share is as follows:
<TABLE>

                                                           2000             1999            1998
                                                      -------------    -------------    -----------
<S>                                                   <C>              <C>              <C>
Net loss - as reported ............................   $  (8,000,959)   $    (814,112)   $(4,388,719)
Net loss - pro forma ..............................   $  (9,161,689)   $  (1,394,564)   $(4,776,812)

Net loss per share - as reported, basic$a             $       (1.46)   $       (0.17)   $     (0.94)
Net loss per share - pro forma, basic a               $       (1.68)   $       (0.30)   $     (1.03)


</TABLE>

     The average fair value of options  granted  during  2000,  1999 and 1998 is
estimated as $2.67, $2.63 and $1.77, respectively.



                                       52
<PAGE>
(12)      Stockholders' Equity (continued)

     The Company has reserved shares of its authorized but unissued common stock
for the following:
<TABLE>

                                                      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, 1997           1,026,093       4.28        160,000        11.48       1,186,093       832,231
      Granted ...............................      358,836       3.80 *      100,000         2.50         458,836
      Exercised .............................      (45,250)      1.97           --            --          (45,250)
      Cancelled .............................     (165,013)      6.05           --            --         (165,013)
                                                ----------                 ----------                  ----------
Balance outstanding, December 31, 1998           1,174,666       2.75 **     260,000         8.34       1,434,666       829,434
      Granted ...............................      260,500       3.91        579,153         4.73         839,653
      Exercised .............................      (47,249)      0.52         (5,000)        2.50         (52,249)
      Cancelled .............................     (107,688)      3.56           --            --         (107,688)
                                                ----------                 ----------                  ----------
Balance outstanding, December 31, 1999           1,280,229       3.00        834,153         5.80       2,114,382     1,591,795
      Granted ...............................      489,600       3.05        145,556         3.64         635,156
      Exercised .............................     (353,254)      2.51       (521,979) ***    4.38        (875,233)
      Cancelled .............................     (171,397)      3.51           --            --         (171,397)
                                                ----------                 ----------                  ----------
Balance outstanding, December 31, 2000           1,245,178       3.06        457,730         6.81       1,702,908     1,061,316
                                                ==========                 ==========                  ==========

</TABLE>

*   Includes 46,623 shares at $2.74 granted in connection with the BioSeq, Inc.
    acquisition.
**  Includes the effect of 411,417 options repriced in December 1998 from a
    weighted average price of $6.72 to $3.25 per share.
*** Included a net exercise of 11,397 warrants for which 7,232 shares of the
    Company's common stock were issued.


     The following table summarizes  information  concerning options outstanding
and exercisable as of December 31, 2000:
<TABLE>
                                                     Options Outstanding                     Options Exercisable
                                             -------------------------------------   -----------------------------------
  Range of Exercise     Weighted Average        Number of        Weighted Average       Number of       Weighted Average
        Price            Remaining Life          Options          Exercise Price         Options         Exercise Price
---------------------- ------------------    ---------------    ------------------   --------------    -----------------
<S>            <C>            <C>                  <C>                 <C>                <C>                  <C>
  0.00    -    1.50           0.3                  42,000              1.50               42,000               1.50
  1.51    -    2.00           0.8                  27,000              1.65               27,000               1.65
  2.01    -    2.50           7.0                 469,100              2.50              153,100               2.50
  2.51    -    3.00           1.5                  42,986              2.83               33,505               2.86
  3.01    -    3.50           6.2                 445,942              3.26              300,669               3.26
  3.51    -    4.00           8.8                  60,150              4.00                3,000               4.00
  4.01    -    4.50           8.7                 130,500              4.32               29,312               4.27
  4.51    -    5.00           8.6                  25,000              4.68               12,500               4.68
  5.51    -    7.00           5.2                   2,500              7.00                2,500               7.00
                                              --------------                          -------------
  0.00    -    7.00           6.5               1,245,178              3.06              603,586               2.97
                                              ==============                          =============

</TABLE>
     Preferred Stock

     In 1996,  the  Company  authorized  the  issuance  of  1,000,000  shares of
preferred  stock  having a par value of $0.01.  None of these  shares  have been
issued to date.

                                       53
<PAGE>
(13)      Subsequent Events

     In  December  2000,  the  Company  made a  decision  to exit  the  clinical
laboratory   testing  services  segment  and  in  February  2001,  BBI  Clinical
Laboratories,  Inc., a  wholly-owned  subsidiary  of the  Company,  sold certain
assets and liabilities of its clinical  laboratory business to a third party for
an aggregate  purchase price of  $9,500,000,  of which $900,000 is being held in
escrow  subject to certain  post closing  adjustments.  The Company has retained
certain other assets and  liabilities  of BBICL,  primarily  property  plant and
equipment  together with a facility lease  subsequent to the closing date, which
the Company  intends to liquidate  throughout the remainder of year 2001 as part
of its  decision to exit this  segment of the  business.  In  accordance  with a
transition services  agreement,  the Company is required to operate the business
in a normal fashion for a minimum of six months subsequent to the sale but in no
event  longer  than one year  from the  date of sale;  substantially  all  costs
associated  with  operating the business  subsequent to the closing date will be
borne by the purchaser.

     The Company  expects to record an  after-tax  gain in the first  quarter of
2001,  subject to post closing  adjustments.  Closing costs include  estimate to
dispose of all remaining  assets and retire all existing  liabilities  including
the facility  lease.  The Company  expects to utilize in year 2001 certain prior
period net operating loss carryforwards,  previously reserved for by the Company
in year 2000, to offset the tax effect of this future gain.  All financial  data
presented in the  accompanying  financial  statements has been  reclassified  to
reflect discontinued  operations of this segment of the business for all periods
presented.   Revenues  from   discontinued   operations   net  of   intercompany
eliminations of $197,287, $368,979 and $367,617 were $8,366,995,  $9,472,741 and
$6,816,317 in 2000, 1999 and 1998 respectively.


(14)      Selected Quarterly Financial Data
          (Unaudited - Amounts in thousands, except for per share data)
<TABLE>

2000                                                  1st Qtr    2nd Qtr    3rd Qtr    4th Qtr
                                                      -------    -------    -------    -------
<S>                                                   <C>        <C>        <C>        <C>
Total revenue .....................................   $ 4,539    $ 5,535    $ 4,534    $ 4,862
Gross profit ......................................     1,631      2,160      1,537      1,291
Net loss from continuing operations before
cumulative effect of change in accounting principle      (608)      (276)    (4,695)    (2,035)
Loss from continuing operations ...................      (608)      (276)    (4,695)    (2,225)
Loss from discontinued operations .................       (63)       (16)       (71)       (47)
                                                      -------    -------    -------    -------
Net (loss) ........................................   $  (671)   $  (292)   $(4,766)   $(2,272)
                                                      =======    =======    =======    =======
(Loss) per share from continuing operations
   before cumulative effect of change in accounting
   principle, basic & diluted .....................   $  --      $  --      $  --      $ (0.36)
(Loss) per share from continuing operations,
   basic & diluted ................................     (0.12)     (0.05)     (0.84)     (0.39)
(Loss) per share from discontinued operations,
   basic & diluted ................................     (0.01)      --        (0.01)     (0.01)
                                                      -------    -------    -------    -------
Net (loss) per share, basic & diluted .............   $ (0.13)   $ (0.05)   $ (0.85)   $ (0.40)
                                                      =======    =======    =======    =======

1999                                                  1st Qtr    2nd Qtr    3rd Qtr    4th Qtr
                                                      -------    -------    -------    -------
Total revenue .....................................   $ 4,725    $ 4,783    $ 4,925    $ 5,365
Gross profit ......................................     1,921      2,001      2,036      2,005
Loss from continuing operations ...................      (309)      (281)      (337)      (193)
Loss from discontinued operations .................        72         56         80         98
                                                      -------    -------    -------    -------
Net (loss) ........................................   $  (237)   $  (225)   $  (257)   $   (95)
                                                      =======    =======    =======    =======
(Loss) per share from continuing operations,
   basic & diluted ................................   $ (0.07)   $ (0.06)   $ (0.07)   $ (0.04)
(Loss) per share from discontinued operations,
   basic & diluted ................................      0.02       0.01       0.02       0.02
                                                      -------    -------    -------    -------
Net (loss) per share, basic & diluted .............   $ (0.05)   $ (0.05)   $ (0.05)   $ (0.02)
                                                      =======    =======    =======    =======
</TABLE>

                                       54
<PAGE>



                       Report of Independent Accountants

To the Board of Directors and Stockholders
of Boston Biomedica, Inc.:

     In  our  opinion,  the  consolidated  financial  statements  listed  in the
accompanying index in item 14 of this Form 10-K, present fairly, in all material
respects, the financial position of Boston Biomedica,  Inc. and its subsidiaries
at December  31, 2000 and 1999,  and the results of their  operations  and their
cash flows for each of the three years in the period ended  December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedule listed in
the  accompanying  index  presents  fairly,  in  all  material   respects,   the
information  set  forth  therein  when  read in  conjunction  with  the  related
consolidated  financial  statements.  These  financial  statements and financial
statement  schedule are the  responsibility  of the  Company's  management;  our
responsibility  is to  express  an opinion  on these  financial  statements  and
financial  statement  schedule  based on our audits.  We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United  States of America,  which  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,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.



/s/ PricewaterhouseCoopers LLP



Boston, Massachusetts
February 27, 2001









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


         None.



                                       55
<PAGE>

                                    PART III



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


     Certain  information  called  for by  Item  10 is  hereby  incorporated  by
reference to the  information  under Part I, Item 1 - Business under the heading
"Executive Officers of the Registrant" at page 16 of this report.

     The  following  table sets forth  certain  information  with respect to the
Directors of the Company.
<TABLE>
                                                                                     Director      Year Term Expires,
Name                                    Age    Position                               Since             and Class
----                                    ---    --------                              --------      ---------------------
<S>                                     <C>    <C>                                   <C>           <C>
Francis E. Capitanio (1)                 57    Director                              1986          2003
                                                                                                   Class I

Calvin A. Saravis (1)(2)                 71    Director                              1978          2003
                                                                                                   Class I

William R. Prather                       54    Senior Vice President, Finance and    1999          2001
                                               Business Development, Treasurer and                 Class II
                                               Director

Kevin W. Quinlan  (1)                    51    President and Chief Operating         1978          2002
                                               Officer, and Director                               Class III

Richard T. Schumacher (2)                50    Chief Executive Officer and           1978          2002
                                               Chairman of the Board                               Class III

</TABLE>
(1) Member of the Company's Audit Committee
(2) Member of the Company's Compensation Committee

     Mr.  Capitanio  has served as a Director of the Company since January 1986.
Since 1997, Mr. Capitanio has served as President of Kalisto  Biologicals,  Inc.
From  1996 to 1997,  he  served  as an  independent  consultant  in the  medical
diagnostics industry.  From 1980 to 1996, he served as President,  Treasurer and
Director of Diatech Diagnostics Inc. (formerly  Immunotech  Corporation),  an in
vitro   diagnostics   company  and  a  wholly  owned  subsidiary  of  Healthcare
Technologies  Ltd.  Mr.  Capitanio  received an M.B.A.  from the Sloan School of
Management,  Massachusetts Institute of Technology and a B.S. in metallurgy from
Massachusetts Institute of Technology.

     Dr. Saravis has served as a Director of the Company since 1978. Since 1984,
he has been an Associate Professor of Surgery  (Biochemistry) at Harvard Medical
School and an Associate  Research  Professor  of Pathology at Boston  University
School  of  Medicine.  From  1971 to 1997,  Dr.  Saravis  was a Senior  Research
Associate at the Mallory  Institute of Pathology and from 1979 to 1997, he was a
Senior  Research  Associate  at  the  Cancer  Research   Institute--New  England
Deaconess  Hospital.  Dr. Saravis  received his Ph.D. in immunology and serology
from Rutgers University.

     Dr.  Prather,  a Director of the Company  since 1999,  has been Senior Vice
President, Finance and Business Development since August 1999. From January 1999
to  August  1999,  Dr.  Prather  served  as  Senior  Vice  President,   Business
Development.  Prior to joining the Company,  Dr.  Prather was the Senior  Health
Care Analyst for Cruttenden  Roth,  Inc. from 1995 to 1998. From 1992 to 1995 he
was the Senior  Analyst in Health  Care for  Manning  and Napier  Advisors.  Dr.
Prather  earned a B.S. in pharmacy  and his MD at the  University  of Missouri -
Kansas City, and completed a Clinical Research  Geriatric  Fellowship at Harvard
Medical  School.  Dr. Prather is a Director of Primed  International,  a medical
device  company  and a member  of the  Advisory  Board of the  Canadian  Medical
Discovery Fund, Inc., a fund of MDS Capital Corp.

     Mr. Quinlan,  a Director of the Company since 1978, has served as President
and Chief Operating Officer since August 1999. From January 1993 to August 1999,
he served as Senior Vice  President,  Finance,  Treasurer,  and Chief  Financial
Officer.  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 (now  PricewaterhouseCoopers  L.L.P.)
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.

     Mr.  Schumacher,  the Founder of the Company,  has been the Chief Executive
Officer and Chairman of the Board since 1992 and served as  President  from 1986
to August 1999.  Mr.  Schumacher  served as the Director of  Infectious  Disease
Services for Clinical Sciences 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.

Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------

     Section 16(a) of the Securities Exchange Act of 1934, as amended,  requires
the Company's  Executive  Officers and Directors,  and persons who own more than
10% of the Company's  Common Stock,  to file reports of ownership and changes in
ownership on Forms 3, 4 and 5 with the  Securities  and Exchange  Commission and
the Nasdaq. Executive Officers,  Directors and greater than 10% stockholders are
required to furnish the Company with copies of all Forms 3, 4 and 5 they file.

     Based solely on the  Company's  review of the copies of such Form(s) it has
received and written representations from certain reporting persons, the Company
believes  that all of its  Executive  Officers,  Directors  and greater than 10%
stockholders  complied with all Section 16(a) filing requirements  applicable to
them during the Company's fiscal year ended December 31, 2000.


ITEM 11. EXECUTIVE COMPENSATION

     The following  Summary  Compensation  Table sets forth the  compensation of
each of the Chief Executive  Officer and the four other most highly  compensated
executive  officers of the Company who were serving as Executive Officers at the
end of fiscal 2000 and whose total  annual  salary and bonus,  if any,  exceeded
$100,000 for services in all  capacities  to the Company  during the fiscal year
ended December 31, 2000 (the "Named Executive Officers").

<TABLE>

                                                Summary Compensation Table
                                                --------------------------
                                                   Annual Compensation                       Long Term
                                                   -------------------                      Compensation
                                                                         Other Annual       Securities           All Other
          Name and            Fiscal Year     Salary         Bonus       Compensation        Underlying         Compensation
     Principal Position          Ended          ($)           ($)             ($)          Stock Options (#)        ($)
     ------------------       -----------     ------         -----       ------------      ----------------     ------------
<S>                            <C>           <C>             <C>           <C>                 <C>               <C>
Richard T. Schumacher          12/31/00      $229,279          --          $1,550(1)             --              $5,579(2)(4)
 Chief Executive Officer       12/31/99       229,010          --           1,520(1)           25,000             4,450(2)(4)
 and Chairman of the Board     12/31/98       200,002        $5,000           370(1)           15,000               420(2)

Kevin W. Quinlan               12/31/00      $178,596          --          $3,575(1)             --                $850(4)
 President and Chief           12/31/99       168,075          --             --               17,500                --
 Operating Officer, and        12/31/98       143,347        $4,000           --               10,000                --
 Director

Richard C. Tilton              12/31/00      $131,095          --          $6,000(3)           12,000            $2,391(2)(4)
 Senior Vice President,        12/31/99       135,203          --           6,000(3)             --                  --
 Science and Technology        12/31/98       127,019        $3,000         6,000(3)            6,000                --


Mark M. Manak,                 12/31/00      $137,846          --             --                5,000              $624(4)
 Senior Vice President         12/31/99       129,894          --             --                 --                  --
 and General Manager           12/31/98       118,510        $3,000           --                6,000                --


Patricia E. Garrett            12/31/00      $126,465          --             --               12,000            $1,047(2)(4)
 Senior Vice President         12/31/99       124,873          --             --               10,000               --
 and General Manager           12/31/98       112,402          --             --               17,000               --

</TABLE>
(1)      Consists of personal usage of Company vehicle
(2)      Includes the value of premiums paid for a term life insurance policy
(3)      Consists of automobile allowance
(4)      Includes the value of imputed income from group life insurance


     The  following  tables set forth  certain  information  with respect to the
stock options  granted to and exercised by the Named  Executive  Officers during
fiscal 2000 and the  aggregate  number of and value of options  exercisable  and
un-exercisable held by the Named Executive Officers during fiscal 2000.


<TABLE>

                                                  Options Granted in Fiscal Year 2000
                                                  -----------------------------------

                                                    Individual Grants                            Potential Realizable Value at
                               ------------------------------------------------------------      Assumed Annual Rates of Stock
                                 Number of           Total                                            Price Appreciation
                                Securities          Options       Exercise                      for Option Term at Year End (1)
                                Underlying        Granted to      ----------    -----------     --------------------------------
                                  Options          Employees        Price       Expiration
            Name                Granted (#)         in 2000        ($/Sh.)         Date            5% ($)          10% ($)
------------------------       --------------     ------------    ----------    -----------      ---------       -----------
<S>                               <C>                <C>            <C>          <C>              <C>              <C>
Richard T. Schumacher               --                --             --             --               --              --
Kevin W. Quinlan                    --                --             --             --               --              --
Richard C. Tilton, Ph.D.          12,000             2.45%          2.50         12/01/10         $11,537          $36,140
Mark M. Manak, Ph.D.               5,000             1.02%          4.00         02/03/10         $28,613          $57,408
Patricia E. Garrett               12,000             2.45%          2.50         12/01/10         $11,537          $36,140

</TABLE>

     (1)  The  5% and  10%  assumed  rates  of  annual  compounded  stock  price
appreciation are mandated by the rules of the Securities and Exchange Commission
and do not represent the Company's estimate or projection of future Common Stock
prices.

<TABLE>

                                                  Aggregated Option Exercises in Last
                                             Fiscal Year and Fiscal Year End Option Values
                                             ---------------------------------------------

                                                                     Number of Securities             Value of Unexercised
                                 Shares                             Underlying Unexercised            In-the-Money Options
                                Acquired           Value         Options at Year End (#) (2)          at Year End ($) (3)
                                   on            Realized        -----------------------------    -----------------------------
            Name                Exercise (#)      ($) (1)        Exercisable  Un-exercisable      Exercisable   Un-exercisable
------------------------       ------------    --------------    ------------ ----------------    ------------ ----------------
<S>                              <C>              <C>                 <C>              <C>          <C>            <C>
Richard T. Schumacher            90,000           288,500             26,785           20,595         --             --
Kevin W. Quinlan,                  --               --                69,375           18,125       1,250            --
Richard C. Tilton, Ph.D.         35,000           274,050             20,500             --           --             --
Mark M. Manak, Ph.D.               --               --                40,500            8,000         --             --
Patricia E. Garrett              10,000            67,500             20,500           22,500         --             --

</TABLE>

(1)  The "value  realized"  represents  the excess of the fair market value over
     the purchase  price at the time of purchase based upon the closing price
     of the Common Stock on the Nasdaq National Market on the date of exercise,
     minus the respective option exercise price.
(2)  Includes the number of shares underlying both "exercisable" (i.e. vested)
     and "un-exercisable" (i.e. unvested) stock options as of December 31, 2000.
(3)  The values of "in-the-money" options reflect the positive spread between
     the exercise price of any such existing stock options and the closing
     year-end per share price of the Common Stock of $1.625.

Compensation of Directors
-------------------------

     Non-employee  Directors of the Company received cash compensation of $6,000
for their services in year 2000. Commencing in year 2001, non-employee Directors
will receive a quarterly  stipend of $1,500,  for a yearly total of $6,000 each.
In addition,  in year 2001,  each  non-employee  director who is a member of the
Audit  Committee will receive an additional  $500 per quarter for a yearly total
of $2,000 each.  Each Director is eligible to receive options to purchase Common
Stock under the Company's 1999 Non-Qualified Stock Option Plan.

Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------

     The Board of Directors makes  decisions  regarding  executive  compensation
based on the  recommendations  of the Compensation  Committee.  The Compensation
Committee of the Board of Directors  is comprised of Richard T.  Schumacher  and
Calvin A. Saravis,  each of whom has received  options to purchase Common Stock.
Mr.  Schumacher  serves as the Chief Executive Officer and Chairman of the Board
of the Company. Dr. Saravis is neither a former nor current officer nor employee
of the Company.

Compensation Committee Report
-----------------------------

     The  Compensation  Committee  of the Board of Directors is comprised of Mr.
Schumacher and one  non-employee  Director,  Dr.  Saravis.  The functions of the
Compensation  Committee include making  recommendations and presentations to the
Board of Directors on compensation levels, including salaries,  incentive plans,
benefits and overall  compensation  for officers and  Directors  and issuance of
stock  options  to  officers,   Directors  and  employees.   Subsequent  to  the
recommendation of the Compensation Committee,  the Board of Directors then votes
on these proposals.

     The objectives of the  Compensation  Committee in determining  the type and
amount  of  Executive  Officer  compensation  are to  provide  a  level  of base
compensation which allows the Company to attract and retain superior talent. The
Compensation Committee endeavors to align the Executive Officer's interests with
the success of the Company through participation in the Company's Employee Stock
Option Plan, which provides the Executive  Officer with the opportunity to build
a substantial ownership interest in the Company.

     The  compensation of Executive  Officers  includes cash  compensation,  the
grant of stock options,  and participation in benefit plans generally  available
to employees.  In determining base salary, the Compensation  Committee considers
executive  compensation for comparably sized companies as well as the individual
experience and performance of each Executive Officer. The Compensation Committee
then  recommends  to the Board of  Directors  base  salaries  at a level that it
believes  is   comparable  to  cash   compensation   of  officers  with  similar
responsibilities  in  similarly  situated  corporations.  The Board  makes final
determination of recommendations.

     Each of the Executive Officers, including Mr. Schumacher, and all full-time
employees are eligible to receive grants of options under the Company's employee
stock  option  plans.  The  employee  stock  option  plans  are used to  provide
incentives to officers and employees and to associate more closely the interests
of such persons with  stockholders'  interests and the long-term  success of the
Company.  In  determining  the number of options to be granted to each Executive
Officer or employee, the Compensation Committee makes a subjective determination
based on factors such as the individual's level of responsibility,  performance,
and  number  of  options  held.   The  Board  of  Directors  then  acts  on  the
recommendation  of the  Compensation  Committee.  During fiscal 2000, a total of
29,000  options were granted to the Named  Executive  Officers noted above under
the employee stock option plans.

     During the  fiscal  year ended  December  31,  2000,  Mr.  Schumacher,  the
Company's  Chief  Executive  Officer,  received a base salary of  $229,279.  The
Compensation  Committee,  and  the  Board  of  Directors,   believes  that  this
compensation is comparable to the cash compensation of Chief Executive  Officers
of comparable companies.  Mr. Schumacher was not granted any options to purchase
shares of Common Stock in 2000.

                                    Compensation Committee

                                    Richard T. Schumacher
                                    Calvin A. Saravis

Performance Graph
-----------------

     The following graph compares the change in the Company's  cumulative  total
stockholder return from October 31, 1996, when the Company's Common Stock became
publicly traded,  to March 31, 2001 including  December 31, 2000, which includes
the last trading day of fiscal  2000,  with the  cumulative  total return on the
Nasdaq Stock Market Index (Composite) and the Nasdaq  Biotechnology Stocks Index
(SIC 2830-2839 U.S. and Foreign) for that period.

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
    LEGEND

Index Description         10/31/96   12/31/96   12/31/97   12/31/98  12/31/99   12/31/00   3/31/01
<S>                          <C>         <C>       <C>       <C>        <C>       <C>        <C>
Boston Biomedica, Inc.       100.0       87.1      70.97     38.31      37.10     20.97      21.78
Nasdaq Stock Market          100.0     102.11     102.04    147.23     296.87    365.12     258.08
(Biotechnology)
Nasdaq Stock Market          100.0     105.69     128.56    179.51     333.14    202.25     150.65
(Composite)
</TABLE>

     Assumes $100  invested on October 31, 1996 in the  Company's  Common Stock,
the Nasdaq Stock Market Index  (Biotechnology) and the Nasdaq Stock Market Index
(Composite), and the reinvestment of any and all dividends.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table sets forth certain  information  as of March 31, 2001
concerning  beneficial ownership of Common Stock by each Director,  each nominee
for Director,  each named Executive  Officer in the Summary  Compensation  Table
under "Executive  Compensation" below, all Executive Officers and Directors as a
group,  and each person known by the Company to be the beneficial owner of 5% or
more of the Company's  Common Stock.  This information is based upon information
received from or on behalf of the named individuals.

<TABLE>
                                                         Number of Shares of
                                                      Common Stock Beneficially
                 Name *                                        Owned              Percent of Class
------------------------------------------------      -------------------------   ----------------

<S>                                                             <C>                    <C>
Richard T. Schumacher (1)(2)*                                   866,657                13.35%
   c/o Boston Biomedica, Inc.
   375 West Street
   West Bridgewater, MA  02379
Kevin W. Quinlan (1)                                             97,475                 1.49%
William R. Prather (1)(4)                                        82,018                 1.26%
Mark M. Manak (1)(3)                                             69,311                 1.07%
Patricia E. Garrett                                              50,000                  **
Richard C. Tilton (1)                                            38,000                  **
Calvin A. Saravis (1)                                            13,456                  **
Francis E. Capitanio (1)                                          2,500                  **
All Executive Officers and Directors as a group
    (11 Persons)(1)(2)(3)(4)                                  1,251,495                19.26%

Paradigm Group, L.L.C. *                                        425,000***              6.58%
    3000 Dundee Road, Suite 105
    Northbrook, IL 60062

Richard P. Kiphart (5) *                                        879,685                13.61%
    c/o William Blair & Company, L.L.C.
    222 West Adams Street
    Chicago, IL  60606
</TABLE>

*      Address provided for beneficial owners of more than 5% of the Common
       Stock.
**     Less than 1% of the outstanding Common Stock.
***    These shares are not entitled to vote until they are fully paid for.
(1)    Includes the following shares subject to options exercisable within 60
       days after March 31, 2001: Mr.Schumacher - 31,130; Mr. Quinlan - 71,875;
       Dr. Prather - 52,918, Dr. Tilton - 20,500; Dr. Manak - 43,250;
       Dr. Garrett - 25,000; Dr. Saravis - 2,500; and Mr. Capitanio - 2,500
(2)    Includes 30,500 shares held of record by Mr. Schumacher's spouse.
       Excludes certain additional shares held by other relatives of
       Mr. Schumacher as to which Mr. Schumacher disclaims beneficial ownership.
(3)    Includes 4,000 shares held of record by Mr. Manak's daughter and 20,466
       in Mr. Manak's name.
(4)    Includes 28,300 shares held by Avon Medical Profit Sharing Plan and
       Trust. Dr. Prather and his spouse are the sole trustees and beneficiaries
       of the trust.
(5)    Includes 357,791 shares held of record by Shoreline Micro-Cap Fund I LP
       of which Mr. Kiphart has reported to the Securities and Exchange
       Commission on February 26, 2001 as having sole voting power.



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     In August 1999, the Company sold 500,000 warrants to purchase the Company's
stock to  Paradigm  Group  L.L.C.,  a private  investment  company.  The private
placement  consisted of 400,000 common stock purchase  warrants with an exercise
price of $4.25 and 100,000 common stock purchase warrants with an exercise price
of $5.25. Paradigm Group paid the Company $50,000 for the warrants. In addition,
National  Securities  received  40,000  common stock  purchase  warrants with an
exercise price of $4.25,  10,000 common stock purchase warrants with an exercise
price of $5.25, and 25,000 common stock purchase warrants with an exercise price
of $8.00, as transaction fee. In February 2000, the Company received notice that
Paradigm Group, L.L.C. exercised all of their warrants to purchase the Company's
common  stock.  The holders of the  warrants  were  required to pay the exercise
price when the registration of the underlying  shares became effective which was
in December 2000. See also Part I Item 3 "Legal Proceedings" herein.

     In August 2000,  the Company  issued  $3,250,000 of 3% Senior  Subordinated
Convertible  Debentures  to  investors,  of which  $780,000  were  issued to Mr.
Richard P. Kiphart and $220,000 were issued to Shoreline  Micro-Cap  Fund I L.P.
In January 2001, Mr. Kiphart and Shoreline Micro-Cap Fund I L.P. exercised their
conversion rights associated with these debentures. Mr. Kiphart has subsequently
indicated in a Schedule 13D filing with the Securities  and Exchange  Commission
that he has sole voting power of 897,685  shares of common stock of the Company,
which  includes  357,791  shares held in the name of Shoreline  Micro-Cap Fund I
L.P. as of February 6, 2001.  See also Part II Item 7  "Management's  Discussion
and Analysis of Financial  Condition  and Results of  Operations - Liquidity and
Financial Condition" herein.





                                       56
<PAGE>

                                     PART IV


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

 (a) 1. Index to Financial Statements:
<S>                                                                                           <C>
       Consolidated Balance Sheets as of December 31, 2000 and 1999 .......................   33
       Consolidated Statements of Income for the three years ended December 31, 2000 ......   34
       Consolidated Statements of Changes in Stockholders' Equity for the three years
          ended December 31, 2000 .........................................................   35
       Consolidated Statements of Cash Flows for the three years ended December 31, 2000 ..   36
       Notes to Consolidated Financial Statements .........................................   37
       Report of Independent Accountants ..................................................   55

(a) 2. Financial Statement Schedule:
       Schedule II-Valuation and Qualifying Accounts ......................................   61
</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.

                                       57
<PAGE>
(a) 3. Exhibits:
<TABLE>

       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)

       4.3        Form of warrants issued in connection with Paradigm Group                                H**

       4.4        3% Senior Subordinated Convertible Debenture issued to GCA Strategic Investment          K**
                  Fund Limited

       4.5        Warrant issued to GCA Strategic Investment Fund Limited                                  K**

       4.6        Warrant issued to Wharton Capital Partners, Ltd.                                         K**

       4.7        Warrant issued to DP Securities, Inc.                                                    K**

       4.8        Registration Rights Agreement, dated as of August 25, 2000, by and among Boston          K**
                  Biomedica, Inc., Wharton Capital Partners, Ltd., DP Securities, Inc. and GCA
                  Strategic Investment Fund Limited

       4.9        3% Senior Subordinated Convertible Debenture issued to Richard P. Kiphart                K**

       4.10       3% Senior Subordinated Convertible Debenture issued to Shoreline Micro-Cap               K**
                  Fund, L.P.

       4.11       Warrant issued to Richard P. Kiphart                                                     K**

       4.12       Warrant issued to Shoreline Micro-Cap Fund, L.P.                                         K**

       4.13       Registration Rights Agreement dated as of August 25, 2000, by and among Boston           K**
                  Biomedica, Inc., Richard P. Kiphart and Shoreline Micro-Cap Fund, L.P.

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

       10.2       Exclusive License Agreement, dated April 28, 1999, between the University of             A**
                  North Carolina at Chapel Hill and the Company

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

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

       10.5       1987 Non-Qualified Stock Option Plan*                                                    A**

       10.6       Employee Stock Option Plan*                                                              A**

       10.7       1999 Non-Qualified Stock Option Plan*                                                    I**

       10.8       1999 Employee Stock Purchase Plan*                                                       I**

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

       10.11      Contract, dated March 1, 1997, between National Cancer Institute and the Company         D**

       10.12      Lease Agreement, dated May 16, 1997, for Gaithersburg, Maryland facility                 E**
                  between B.F. Saul Real Estate Investment Trust and the Company

       10.13      Lease Agreement dated January 30, 1995 for Garden Grove, California facility             F**
                  between TR Brell, Cal Corp. and Source Scientific, Inc., and Assignment of
                  Lease, dated July 2, 1997, for Garden Grove, California facility between Source
                  Scientific, Inc. and BBI Source Scientific

       10.14      Contract, dated July 1, 1998, between the National Institutes of Health and the          G**
                  Company (NO1-A1-85341)


                                       58
<PAGE>
       10.15      Contract, dated July 1, 1998, between the National Heart Lung and Blood                  G**
                  Institute and the Company (NO1-HB-87144)

       10.16      Line of Credit Agreement with BankBoston dated June 30, 1999                             H**

       10.17      Agreement with Paradigm Group for the purchase of warrants dated August 18, 1999         H**

       10.18      Agreement with MDBio for the purchase of common stock and common stock                   J**
                  warrants, dated September 30, 1999

       10.19      Lease Agreement dated September 30, 1999, for Frederick, Maryland facility,              J**
                  between MIE Properties, Inc., and the Company.

       10.20      Sponsored Research Agreement with the University of North Carolina, Chapel Hill          J**
                  and the Company, dated, April 28, 1999 and the Company.

       10.21      Repository Contract with National Institute of Allergy and Infectious Disease,           J**
                  Division of AIDS (NO1-A1-95381), dated August 16, 1999.

       10.22      Securities Purchase Agreement dated as of August 25, 2000, by and among Boston           K**
                  Biomedica, Inc., and GCA Strategic Investment Fund Limited

       10.23      Securities Purchase Agreement dated as of August 25, 2000, by and among Boston           K**
                  Biomedica, Inc., Richard P. Kiphart and Shoreline Micro-Cap Fund, L.P.

       10.24      Mortgage and Security Agreement dated March 31, 2000                                     L**

       10.25      Asset Purchase Agreement dated February 20, 2001, by and between BBI Clinical            M**
                  Laboratories, Inc., Boston Biomedica, Inc. and Specialty Laboratories, Inc.


       21.1       Subsidiaries of the registrant                                                           N**

       23         Consent of PricewaterhouseCoopers LLP                                                    N**


       99         Audited Financial Statements of BioSeq, Inc., for the years ended December 31,
                  1997, 1996 and for the period October 17, 1994 (Date of Inception) to
                  December 31, 1997.                                                                       J**


</TABLE>

A      Incorporated by reference to the registrant'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 Exhibit No. 10.17 of the Registration
       Statement.
C      Incorporated by reference to the registrant's Annual Report on Form 10-K
       for the fiscal year ended December 31, 1996.
D      Incorporated by reference to the registrant's Quarterly Report on
       Form 10-Q for the fiscal quarter ended March 31, 1997.
E      Incorporated by reference to the registrant's Quarterly Report on
       Form 10-Q for the fiscal quarter ended June 30, 1997.
F      Incorporated by reference to the registrant's Annual Report on Form 10-K
       for the fiscal year ended December 31, 1997.
G      Incorporated by reference to the registrant's Quarterly Report on
       Form 10-Q for the fiscal quarter ended June 30, 1998.
H      Incorporated by reference to the registrant's Quarterly Report on
       Form 10-Q for the fiscal quarter ended September 30, 1999.
I      Incorporated by reference to the registrant's proxy statement, filed with
       the Securities and Exchange Commission on June 14, 1999.
J      Incorporated by reference to the registrant's Annual Report on
       Form 10-K/A for the fiscal year ended December 31, 1999.
K      Incorporated by reference to the registrant's Report on Form 8-K filed
       September 8, 2000.
L      Incorporated by reference to the registrant's Quarterly Report on
       Form 10-Q for the fiscal quarter ended September 30, 1999.
M      Incorporated by reference to the registrant's Report on Form 8-K filed
       March 8, 2001.

N      Incorporated by reference to the registrant's Annual Report on Form 10-K
       for the fiscal year ended December 31, 2000.


*      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.


                                       59
<PAGE>


(b) REPORTS ON FORM 8-K.

     The  Registrant  did not file any  Current  Reports  on Form 8-K during the
quarter ended December 31, 2000.



                                   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:  May 2, 2001                                Boston Biomedica, Inc.


                                              By:/s/ Richard T. Schumacher
                                                 --------------------------
                                                     Richard T. Schumacher
                                                     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.


         SIGNATURES                                 TITLES

         /S/ Richard T. Schumacher
         ----------------------------          Director and Principal
         Richard T. Schumacher                 Executive Officer

         /s/ Kevin W. Quinlan
         ----------------------------          Director and Principal
         Kevin W. Quinlan                      Accounting and Financial Officer


         ----------------------------          Director
         Francis E. Capitanio


         ----------------------------          Director and Treasurer
         William R. Prather, R.Ph. MD.

         /s/ Calvin A. Saravis, Ph.D.
         ----------------------------          Director
         Calvin A. Saravis, Ph.D.



                                       60
<PAGE>


SCHEDULE II
<TABLE>
                     BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS

                               Balance at
       Allowance for          Begining of                                                              Balance at
     Doubtful Accounts          Period          Additions        Recoveries         Deductions        end of Period
                           ---------------   ---------------   ---------------    ---------------    ---------------
<S>                        <C>               <C>               <C>                <C>                <C>
2000 ....................  $        86,796   $         2,064   $         2,185    $        (2,064)   $        88,981
1999 ....................          151,564             1,751              --              (66,519)            86,796
1998 ....................          103,008            87,229              --              (38,673)           151,564

      Inventory Reserve
2000 ....................  $       601,167   $       176,397   $          --      $       (11,864)   $       765,700
1999 ....................          533,252           145,497              --              (77,582)           601,167
1998 ....................          631,565            16,932              --             (115,245)           533,252


</TABLE>

                                       61