<PAGE>

                                                                    Exhibit 99.1

                                  BioSeq, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                              FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
                    AND FOR THE PERIOD FROM OCTOBER 17, 1994
                    (DATE OF INCEPTION) TO DECEMBER 31, 1997


<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Stockholders of BioSeq, Inc.:

In our opinion, the accompanying balance sheets and the related statements of
operations, changes in stockholders' equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of BioSeq, Inc. (a
development stage enterprise) at December 31, 1997 and 1996 and the results of
its operations and its cash flows for each of the two years in the period ended
December 31, 1997 and for the period from October 17, 1994 (date of inception)
to December 31, 1997, in conformity with accounting principles generally
accepted in the United States. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States 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 the opinion expressed above.


Boston, Massachusetts
July 10, 1998, except as to certain
information in the second paragraph of Note I,
for which the date is September 30, 1998.
<PAGE>



                                  BioSeq, Inc.
                        (A Development Stage Enterprise)

                                 BALANCE SHEETS

                        as of December 31, 1997 and 1996


<TABLE>
<CAPTION>
                                 ASSETS                                 1997              1996
                                                                        ----              ----
<S>                                                                 <C>               <C>
Current assets:
  Cash and cash equivalents                                         $   336,598       $   452,704
  Contract receivable                                                    11,000                --

        Total current assets                                            347,598           452,704
Property and equipment, net (Note C)                                    219,611            75,395
                                                                    -----------       -----------
        Total assets                                                $   567,209       $   528,099
                                                                    ===========       ===========

               LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Liabilities:
  Accounts payable                                                       40,125             7,895
  Accrued expenses                                                      150,911            35,500
  Due to related party (Note G)                                         110,100           148,436
                                                                    -----------       -----------
        Total current liabilities                                       301,136           191,831

Convertible notes payable (Note D)                                      625,000                --

Commitments and contingencies (Note G)

Stockholders' equity (deficit) (Note F):
  Preferred stock, $.01 par value; 1,150 shares authorized:
    Series A Convertible Preferred Stock, $.01 par value; 300
      shares designated, issued and outstanding
      (liquidation preference $700 per share)                                 3                 3
    Series B Convertible Preferred Stock, $.01 par value; 550
      shares designated, issued and outstanding
      (liquidation preference $950 per share)                                 6                 6
    Series C Convertible Preferred Stock, $.01 par value;
      300 shares designated, 300 and zero shares issued and
      outstanding at December 31, 1997 and 1996, respectively
      (liquidation preference $2,500 per share)                               3                --
  Additional paid-in capital - Preferred stock                        1,341,751           680,491
  Common stock, no par value; 15,000 shares authorized,
    4,762 shares issued and outstanding                                 352,143           352,143
  Deficit accumulated during development stage                       (2,052,833)         (696,375)
                                                                    -----------       -----------
        Total stockholders' equity (deficit)                           (358,927)          336,268
                                                                    -----------       -----------
          Total liabilities and stockholders' equity (deficit)      $   567,209       $   528,099
                                                                    ===========       ===========
</TABLE>

    The accompanying notes are an integral part of the financial statements


                                        2
<PAGE>

                                  BioSeq, Inc.
                        (A Development Stage Enterprise)

                            STATEMENTS OF OPERATIONS

     for the years ended December 31, 1997 and 1996 and for the period from
           October 17, 1994 (date of inception) to December 31, 1997


<TABLE>
<CAPTION>
                                                                             For the period from
                                                                              October 17, 1994
                                                                             (Date of Inception)
                                                                               to December 31,
                                                   1997            1996              1997
                                                   ----            ----      -------------------
<S>                                            <C>               <C>             <C>
Contract research and development revenue      $    19,000                       $    19,000

Operating expenses:
  Research and development                       1,068,153       $ 390,974         1,702,755
  General and administrative                       294,127          45,300           357,657
                                               -----------       ---------       -----------

                                                 1,362,280         436,274         2,060,412
                                               -----------       ---------       -----------

    Operating loss                              (1,343,280)       (436,274)       (2,041,412)

Interest income                                     26,100           1,757            27,857
Interest expense                                   (39,278)             --           (39,278)
                                               -----------       ---------       -----------

    Net loss                                   $(1,356,458)      $(434,517)      $(2,052,833)
                                               ===========       =========       ===========
</TABLE>

    The accompanying notes are an integral part of the financial statements


                                        3
<PAGE>

                                  BioSeq, Inc.
                        (A Development Stage Enterprise)

             STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

 for the period from October 17, 1994 (date of inception) to December 31, 1997




<TABLE>
<CAPTION>

                                                                                Preferred Stock
                                                     -----------------------------------------------------------------------------
                                                     Series A Convertible   Series B Convertible  Series C Convertible  Additional
                                                     ------------------     ----------------      ----------------      Paid-in
                                                     Shares      Amount     Shares    Amount      Shares    Amount      Capital
                                                     ------      ------     ------    ------      ------    ------      -------
<S>                                                  <C>         <C>        <C>       <C>         <C>       <C>         <C>
Issuance of common stock to founders in
  December 1, 1994

Net loss

Balance at December 31, 1994

Issuance of common stock to founders in
  July 1, 1995

Net loss

Balance at December 31, 1995

Issuance of common stock to founders,
  various dates April to August 1996

Issuance of common stock to related party for
  repayment of note to related party March 1996

Issuance of common stock to related party in
  exchange for services in April and July 1996

Issuance of common stock in August 1996

Issuance of common stock in exchange for
  services in December 1996

Issuance of Series A convertible preferred stock
  in October 1996                                      300       $   3                                                $   209,997

Issuance of Series B convertible preferred stock
  in November 1996                                                            550      6                                  522,494

Issuance costs related to stock                                                                                           (52,000)

Net loss
                                                       ---       -----        ---    ---                              ------------
Balance at December 31, 1996                           300       $   3        550      6                                  680,491

Issuance of Series C preferred
  in April 1, 1997                                                                                 $ 300        3         749,997

Issuance costs related to stock                                                                                           (88,737)

Net loss
                                                       ---       -----        ---    ---           -----       ---    ------------

Balance at December 31, 1997                           300       $   3        550      6             300        3     $ 1,341,751
                                                       ===       =====        ===    ===           =====       ===    ------------
</TABLE>



<TABLE>
<CAPTION>
                                                      Common Stock            Deficit                 Total
                                                      ----------------       Accumulated          Stockholders'
                                                      Shares    Amount      Since Inception      Equity (Deficit)
                                                      ------    ------      ---------------      ---------------
<S>                                                   <C>      <C>              <C>                <C>
Issuance of common stock to founders in
  December 1, 1994                                      650    $ 65,000                            $   65,000

Net loss                                                                        $    (63,397)

Balance at December 31, 1994                            650    $ 65,000              (63,397)           1,603
                                                      -----    --------         ------------       ----------
Issuance of common stock to founders in
  July 1, 1995                                          936         436                                   436

Net loss                                                                            (198,461)
                                                      -----    --------         ------------       ----------

Balance at December 31, 1995                          1,586      65,436             (261,858)        (196,422)

Issuance of common stock to founders,
  various dates April to August 1996                  1,330       1,514                                 1,514

Issuance of common stock to related party for
  repayment of note to related party March 1996         500      75,000                                75,000

Issuance of common stock to related party in
  exchange for services in April and July 1996        1,196     135,193                               135,193

Issuance of common stock in August 1996                 100      50,000                                50,000

Issuance of common stock in exchange for
  services in December 1996                              50      25,000                                25,000

Issuance of Series A convertible preferred stock
  in October 1996                                                                                     210,000

Issuance of Series B convertible preferred stock
  in November 1996                                                                                    522,500

Issuance costs related to stock                                                                       (52,000)

Net loss                                                                            (434,517)        (434,517)
                                                      ----     --------         ------------       ----------
Balance at December 31, 1996                         4,762      352,143             (696,375)         336,268

Issuance of Series C preferred
  in April 1, 1997                                                                                    750,000

Issuance costs related to stock                                                                       (88,737)

Net loss                                                                          (1,356,458)      (1,356,458)
                                                      ----     --------         ------------       ----------

Balance at December 31, 1997                         4,762     $352,143         $ (2,052,833)     $  (358,927)
                                                     =====     ========         ============      -=========
</TABLE>




     The accompanying notes are an integral part of the financial statements

                                        4

<PAGE>



                                  BioSeq, Inc.
                        (A Development Stage Enterprise)

                            STATEMENTS OF CASH FLOWS

               For the years ended December 31, 1997 and 1996 and
 for the period from October 17, 1994 (date of inception) to December 31, 1997


<TABLE>
<CAPTION>
                                                                                          For the Period From
                                                                                            October 17, 1994
                                                                                          (Date of Inception)
                                                                                             to December 31,
                                                             1997              1996               1997
                                                             ----              ----       -------------------
<S>                                                       <C>               <C>               <C>
Cash flows for operating activities:
Net loss                                                  $(1,356,458)      $  (434,517)      $(2,052,833)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation                                                   35,678             3,652            39,330
Stock issued for services                                          --           135,193           135,193
Changes in assets and liabilities:
Accounts receivable                                           (11,000)               --           (11,000)
Accounts payable and accrued expenses                         159,305            21,669           268,636
                                                          -----------       -----------       -----------

Net cash used in operating activities                      (1,172,475)         (274,003)       (1,620,674)
                                                          -----------       -----------       -----------

Cash flows for investing activities:
Purchases of property and equipment                          (179,894)          (79,047)         (258,941)
                                                          -----------       -----------       -----------

Net cash used in investing activities                        (179,894)          (79,047)         (258,941)
                                                          -----------       -----------       -----------

Cash flows from financing activities:
Proceeds from issuance of common stock                             --            51,514           116,950
Proceeds from issuance of preferred stock                     750,000           732,500         1,482,500
Issuance costs related to preferred stock                     (88,737)          (27,000)         (115,737)
Proceeds from related party loans                                  --            67,500           195,000
Principal payments of related party loans                     (50,000)          (37,500)          (87,500)
Proceeds from notes payable                                   625,000                --           625,000
                                                          -----------       -----------       -----------

Net cash provided by financing activities                   1,236,263           787,014         2,216,213
                                                          -----------       -----------       -----------

Net (decrease) increase in cash and cash equivalents         (116,106)          433,964           336,598

Cash and cash equivalents, beginning of period                452,704            18,740                --
                                                          -----------       -----------       -----------

Cash and cash equivalents, end of period                  $   336,598       $   452,704       $   336,598
                                                          ===========       ===========       ===========

Supplemental disclosures of noncash transactions:
Related party loans converted into common stock                    --       $    75,000       $    75,000
Interest paid                                                      --                --                --
</TABLE>

     The accompanying notes are an integral part of the financial statements


                                        5
<PAGE>

                                  BioSeq, Inc.
                        (A Development Stage Enterprise)

                          NOTES TO FINANCIAL STATEMENTS


A.     Nature of Business:

       BioSeq, Inc. (the "Company"), which began operations on October 17, 1994
       and was incorporated on December 12, 1994, is a development stage
       enterprise engaged in developing a platform technology for precise
       bimolecular interaction control which enables faster, simpler, and
       inherently lower cost products and services as compared to conventional
       technologies. The Company's proprietary technology employs a unique
       approach and has broad application in a number of emerging and
       established industries. The Company plans to continue to develop its
       broad-based enabling technology platform in order to establish an array
       of patents covering numerous potential commercial applications. Since its
       inception, the Company has devoted substantially all of its efforts to
       establishing a new business and to carrying on research and development
       activities. See Note I. Subsequent Events which describes that BioSeq,
       Inc., was acquired by Boston Biomedica, Inc. in 1998.

       The Company is subject to a number of risks similar to other companies
       in the industry, including rapid technological change, uncertainty of
       market acceptance of products, uncertainty of regulatory approval,
       competition from substitute products and larger companies, customers'
       reliance on third-party reimbursement, the need to obtain additional
       financing, compliance with government regulations, protection of
       proprietary technology, dependence on third-parties, product liability,
       and dependence on key individuals.


B.     Summary of Significant Accounting Policies:

       Cash and Cash Equivalents

       The Company considers all highly liquid investments with remaining
       maturities of three months or less at the time of acquisition to be cash
       equivalents. Cash equivalents, which are primarily money market accounts,
       are stated at cost, which approximates market value.

       Concentration of Credit Risk

       Cash and cash equivalents are financial instruments, which potentially
       subject the Company to concentrations of credit risk. At December 31,
       1997 and 1996, substantially all of the Company's cash was invested in a
       money market account at one financial institution.

       Property and Equipment

       Property and equipment are stated at cost. Depreciation is computed using
       the straight-line method over the estimated useful lives of the assets,
       generally three to five years. The cost of maintenance and repairs is
       charged to expense as incurred.

       Research and Development Expense

       Research and development costs are expensed as incurred.


                                   Continued

                                       6
<PAGE>

                                  BioSeq, Inc.
                        (A Development Stage Enterprise)

                    NOTES TO FINANCIAL STATEMENTS, CONTINUED


       Income Taxes

       The Company uses the liability method of accounting for income taxes.
       Under the liability method, deferred tax assets and liabilities reflect
       the impact of temporary timing differences between amounts of assets and
       liabilities for financial reporting purposes and such amounts as measured
       by tax laws. A valuation allowance is required to offset any net deferred
       tax assets if, based upon the available evidence, it is more likely than
       not that some or all of the deferred tax assets will not be realized.

       Use of Estimates

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

       Stock-Based Compensation

       Statement of Financial Accounting Standards No. 123, "Accounting for
       Stock-Based Compensation," ("SFAS 123") encourages, but does not require
       companies to record compensation cost for stock-based employee
       compensation plans at fair value. The Company has chosen to account for
       stock-based compensation using the intrinsic value method prescribed in
       Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
       to Employees," and related interpretations. Accordingly, compensation
       cost for stock options is measured as the excess, if any, of the fair
       value of the Company's stock at the date of the grant over the amount an
       employee must pay to acquire the stock. Had compensation cost for the
       Company's stock-based compensation been determined based on the fair
       value at the date of grant consistent with the method of SFAS 123, the
       Company's net loss would not have been materially impacted.

       Reclassifications

       Certain reclassifications have been made in the prior year's financial
       statements to conform with the 1997 presentation.


                                   Continued

                                       7
<PAGE>

                                  BioSeq, Inc.
                        (A Development Stage Enterprise)

                    NOTES TO FINANCIAL STATEMENTS, CONTINUED


C.     Property and Equipment:

       Property and equipment at December 31, 1997 and 1996 consists of:

<TABLE>
<CAPTION>
                                       1997            1996
                                    ---------       ---------
<S>                                 <C>             <C>
Lab equipment                       $ 234,733       $  79,047
Office equipment                       24,208              --
                                    ---------       ---------

Property and equipment, gross         258,941          79,047

Less: accumulated depreciation        (39,330)         (3,652)
                                    ---------       ---------

Property and equipment, net         $ 219,611       $  75,395
                                    =========       =========
</TABLE>

D.     Notes Payable:

       On April 11, 1997, the Company issued $625,000 of convertible notes ( the
       " Notes"). The notes bear interest at 8.25% per annum and both principal
       and interest are due in April 1999. The outstanding principal and accrued
       interest on this Note will be automatically converted without action of
       the holder, upon the closing of an equity financing or series of related
       equity financings for the same security of at least $2,000,000 in the
       aggregate, into the security issued in that financing (the "Underlying
       Security"), at a price equal to 80% of the average gross issue price
       thereof (the "Conversion Price"). The holder of this Note, upon such
       conversion, will receive such number of fully paid and nonassessable
       shares of Underlying Securities as the outstanding principal and accrued
       but unpaid interest on this Note to which such conversion relates as of
       the Conversion date could purchase at the Conversion Price then in
       effect.


E.     Stockholders' Equity:

       Capital Stock

       The authorized capital stock of the Company consists of (i) 15,000 shares
       of voting common stock authorized for issuance with no par value, 4,762
       shares of which are issued and outstanding at December 31, 1997 and 1996,
       (ii) 1,150 shares of preferred stock, with a par value of $.01, 300
       shares of which are designated, issued and outstanding as Series A
       Convertible Preferred Stock ("Series A Stock") at December 31, 1997 and
       1996; 550 shares of which are designated, issued and outstanding as
       Series B Convertible Preferred Stock ("Series B Stock") at December 31,
       1997 and 1996; and 300 and zero shares of which are designated, issued
       and outstanding as Series C Convertible Preferred Stock ("Series C
       Stock") at December 31, 1997 and 1996, respectively. The holders of all
       series of Preferred Stock are entitled to one vote for each share of
       Common Stock, into which the Preferred Stock is then convertible. No
       dividends may be paid on the Common


                                    Continued

                                       8
<PAGE>

                                  BioSeq, Inc.
                        (A Development Stage Enterprise)

                    NOTES TO FINANCIAL STATEMENTS, CONTINUED


       Stock until all dividends, including accrued but unpaid dividends have
       been paid to the holders of all series of preferred stock. The Company
       has reserved 1,150 shares of common stock for the conversion of preferred
       stock.

       Under the terms of a preferred stock purchase agreement the holder of the
       Series A and B stock had the right to purchase the designated shares of
       Series C Stock for a per share price of $2,500 until December 31, 1997.
       On April 10, 1997, the holder of the Series A and B stock exercised its
       right under the stock purchase agreement to purchase 300 shares of Series
       C Stock for $2,500 per share. Additionally, the preferred stock purchase
       agreement requires 33% of the proceeds from the Series A Stock and 66% of
       the proceeds from Series B and C Stock to be used to fund research and
       development activities. The holder of the Series A, B and C Stock is an
       unaffiliated corporation that, based upon the agreement, cannot purchase
       in excess of 20% of the aggregate preferred and common stock of the
       Company and is entitled to elect one director of the Company. The
       agreement also required the Company to pay to the unaffiliated
       corporation a minimum of $100,000 for research services by September 30,
       1997. Upon the closing of the Series C Stock the minimum requirement
       increases to $150,000 by December 31, 1998.

       Liquidation Preference

       In the event of any liquidation, dissolution or winding up of the
       corporation, either voluntary or involuntary, the holders of the Series A
       Stock, Series B Stock and Series C Stock shall be entitled to receive,
       prior and in preference to any distribution of any of the assets or
       surplus funds of the corporation to the holders of the Common stock by
       reason of their ownership thereof, an amount equal to the original issue
       prices of $700 per share of the Series A Stock, $950 per share of Series
       B Stock and $2,500 per share Series C Stock, respectively.

       Conversion Rights

       The holder of the Series A Stock, Series B Stock and Series C Stock shall
       have the following rights with respect to the conversion of the Preferred
       Stock into shares of Common Stock:

         a)    Optional Conversion. Any shares of Preferred Stock may, at the
               option of the holder, be converted at any time into shares of
               Common Stock. Initially, the holder will be entitled upon
               conversion to receive one share of common stock for each share of
               Series A, B, or C stock. If prior to conversion, the Company
               sells or issues any shares of common stock or securities
               convertible into common stock, subject to certain conditions, for
               consideration less than the respective issuance prices of the
               Series A, B, or C stock, the conversion ratio will be reduced on
               a weighted average basis.

         b)    Automatic Conversion. Each share of Preferred Stock shall
               automatically be converted into shares of Common Stock, based on
               each then-effective conversion ratio immediately upon the closing
               of a firmly underwritten public offering pursuant to an effective
               registration statement under the Securities Act of 1933, as
               amended, covering the offer and sale of Common Stock for the
               account of the Company in which (i) the share price is at least
               $1,300, and (ii) and the gross cash proceeds to the Company are
               at least $10,000,000.


                                    Continued

                                       9
<PAGE>

                                  BioSeq, Inc.
                        (A Development Stage Enterprise)

                    NOTES TO FINANCIAL STATEMENTS, CONTINUED


       Warrants

       In October 1996, the Company issued a stock purchase warrant to the
       purchaser of Series A and B Stock, granting the warrant holder the right
       to purchase, 300 shares at a per share price of $770, 550 shares at a per
       share price of $1,045 and 300 shares at a per share price of $2,570,
       shares of the Company's common stock for a period of five years. The
       warrants are not exercisable if it would cause the holder's percentage
       interest in the equity of the Company to exceed 20%. In the event the
       Company sells any shares of common stock, warrants options or convertible
       securities for consideration less than the warrant purchase price, the
       warrant purchase price will be reduced. At date of issuance, the value of
       these warrants was not material to the results of operations of the
       financial statements.

       Stock Options

       In September and October of 1995, the Company issued options to purchase
       27.5 shares of common stock with an exercise price of $1,000 per share to
       advisors of the Company. The options vest over the following schedule:
       25% after 6 months, 50% after 12 months, 75% after 24 months and 100%
       after 36 months. There were 27.5 of these options outstanding at December
       31, 1997 and 1996; 20 and 13 of these options were vested and exercisable
       at December 31, 1997 and 1996, respectively.

       1996 Stock Option Plan

       In December 1996, the Company adopted the 1996 Stock Option Plan (the
       "Option Plan"). The Option Plan is administered by a Committee of the
       Company's Board of Directors (the "Committee"), and allows for the
       granting of awards in the form of incentive stock options, nonstatutory
       stock options, stock appreciation rights, and stock grants which may
       include restricted stock for up to 1,086 shares of common stock to
       eligible employees nonemployed directors, advisors and consultants to the
       Company. Awards granted under the plan are subject to terms and
       conditions as determined by the Committee, except that no incentive stock
       options may be issued at less than the fair market value of the common
       stock on the date of grant or have a term in excess of ten years. In
       addition, no individual will be granted options in any calendar year for
       the purchase of more than 200 shares. Stock option awards normally vest
       over 48 months as follows: 12.5% after 6 months from the date of grant,
       an additional 12.5% after 12 months from the date of grant, an additional
       25% after 24 months from the date of grant, an additional 25% after 36
       months from the date of grant and the remaining 25% after 48 months from
       the date of grant. At December 31, 1997 and 1996, 1,086 shares were
       available for the granting of awards. There were 781 and zero options
       outstanding under the Option Plan at December 31, 1997 and 1996,
       respectively. The options granted during the year ended December 31, 1997
       have an exercise price ranging from $500 to $550 per share. The
       weighted-average remaining contractual life of those options is 7.8
       years.


                                    Continued

                                       10
<PAGE>

                                  BioSeq, Inc.
                        (A Development Stage Enterprise)

                    NOTES TO FINANCIAL STATEMENTS, CONTINUED


       A summary of the Company's stock option activity and related information
for the years ended December 31 is as follows:

<TABLE>
<CAPTION>
                                               1997                         1996
                                  ---------------------------    ---------------------------
                                             Weighted-Average               Weighted-Average
                                  Options     Exercise Price     Options     Exercise Price
                                  -------     --------------     -------     --------------
<S>                                 <C>        <C>                 <C>             <C>
Oustanding - beginning of year       --             --             --              --
Granted                             781        $   516.01          --              --
Exercised                            --             --             --              --
Canceled                             --             --             --              --

Outstanding - end of year           781            516.01          --              --

Exercisable at end of year           66        $   523.54          --              --
                                  =====        ==========        ======          ======
</TABLE>

F.     Income Taxes:

       Since the Company has incurred net losses since inception, no provision
       for income taxes has been recorded. Deferred income taxes consist
       principally of deferred tax assets relating to net operating losses and
       research and development credits offset by deferred tax liabilities
       relating to depreciation. The net deferred tax asset is approximately
       $805,000 and $180,000 at December 31, 1997 and 1996, respectively, for
       which a full valuation allowance has been provided due to the uncertain
       realization of the benefit.

       The Company had approximately $1,738,000 and $406,000 of net operating
       loss carryforwards at December 31, 1997 and 1996, respectively, and
       $119,000 and $18,000 of federal and state tax credit carryforwards
       available for income tax purposes at December 31, 1997 and 1996,
       respectively. Of these net operating loss and credit carryforwards
       $1,332,000 and $406,000 will expire in 2012 and 2011, respectively.
       However, changes in the Company's ownership as defined in the Internal
       Revenue Code may limit the Company's ability to utilize net operating
       loss and tax credit carryforwards.


G.     Related Party Transactions:

       The Company is party to an agreement whereby it obtains substantially all
       of its operating resources from a related corporation (the "Related
       Entity") which is also a significant stockholder. At December 31, 1997
       and 1996, respectively, the Related Entity owns approximately 40% and 42%
       of the outstanding shares of the Company, respectively. During 1996, this
       Related Entity provided the Company with all personnel (including
       management), access to technology licenses, and operating facilities.
       Under the terms of this agreement, the Company paid $290,974 for the


                                    Continued

                                       11
<PAGE>

                                  BioSeq, Inc.
                        (A Development Stage Enterprise)

                    NOTES TO FINANCIAL STATEMENTS, CONTINUED


       year ended December 31, 1996 and has paid $534,602 for the period from
       inception (October 17, 1994) through December 31, 1997. Due to the
       related party nature of these entities, the amounts charged for these
       services may not be recorded at fair market value.

       Effective January 1, 1997, all of the employees of the Related Entity
       became employees of the Company and the Company agreed to pay the Related
       Entity $12,000 per month in exchange for all expenses related to certain
       leased facilities and related furniture, fixtures and equipment. Under
       the terms of this agreement, the Company paid $144,000 for the year ended
       December 31, 1997 and for the period from inception (October 17, 1994) to
       December 31, 1997.

       Additionally, in October 1996, the Company entered into a technology
       transfer agreement (the "Technology Agreement") with the Related Entity
       for the transfer of certain patent applications and technology in
       exchange for $100,000 which has been recorded as research and development
       expense. Amounts totaling $50,000 were paid in the years ended December
       31, 1997 and 1996.

       Under the terms of the Technology Agreement, the Company has also agreed
       to pay a royalty of 5% of net sales, if any, of developed products
       covered by the Technology Agreement. Minimum annual royalty payments
       under this Technology Agreement are $150,000 payable in equal
       installments on a quarterly basis commencing in calendar year 1997. Upon
       satisfactory completion of certain technical milestones, the minimum
       royalty payments to this Related Entity will increase to $250,000
       annually. Royalty payments totaling $75,000 and zero were paid in 1997
       and 1996, respectively.

       The Company has amounts due to related parties totaling $110,100 and
       $148,436 at December 31, 1997 and 1996, respectively. Of the 1996 amount,
       $56,857 relates to equipment and legal expenses paid by the Related
       Entity on behalf of the Company and $82,500 relates to a loan from the
       Related Entity. During the year ended December 31, 1996, the remaining
       amount of $9,079 related to operating services provided by the Related
       Entity for the Company. Of the 1997 amount, $75,000 relates to license
       fees, $32,500 relates to the loan from the Related Entity and the
       remaining $2,600 represents interest on the loan from the Related Entity.

       The loan from the Related Entity is payable on demand. Beginning on
       January 1, 1997, the loan bears interest at 8%. In addition, the unpaid
       portion of the Note is convertible at the option of the Related Entity
       into 217 shares of common stock.


H.     License Agreement:

       On October 7, 1996, the Company has entered into an agreement with the
       holder of the Series A, B, and C Stock, which grants the exclusive
       world-wide license under certain patents. The term of the agreement
       commences with the earlier of the closing of the Series C Stock or
       December 31, 1997 and corresponds with the life of the patents. The
       license becomes nonexclusive upon the first commercial sale of an
       instrument utilizing the patent by the Company. Under the terms of the
       agreement, the Company shall receive a royalty on the unaffiliated
       corporation's net revenues, if any, under the license. The royalty rate
       is 5% of net revenues during the three year period


                                    Continued

                                       12
<PAGE>

                                  BioSeq, Inc.
                        (A Development Stage Enterprise)

                    NOTES TO FINANCIAL STATEMENTS, CONTINUED


       commencing at the earlier of the first commercial sale of services or the
       end of the one year period following the commencement of the license
       term. The royalty shall increase to 8% during the next two years and to
       10% thereafter. Royalty rates are reduced by 50% for services provided in
       countries where no patent rights have been granted and reduced to zero
       upon the license becoming non-exclusive.


I.     Subsequent Events:

       On March 20, 1998, the Company entered into an agreement with the holder
       of Series A, B and C stock which grants the sole and exclusive right and
       license world-wide under the licensed patents to develop, market,
       manufacture, maintain, repair, use, offer to sell and sell licensed
       products and to use technical information. Under the terms of the
       agreement, the holder of Series A, B and C stock will pay the Company a
       license fee of $600,000. In addition, the holder of Series A, B and C
       stock will pay the Company a royalty equal to 5% of net sales on sales to
       nonaffiliate customers and 25% of net sales on sales to sublicensees
       during the first year of the agreement or $50,000, whichever is greater.
       For all subsequent years, the royalty will be equal to $50,000 and the
       prior year's royalty plus 5% not to exceed $125,000. On September 30,
       1998, the Company was acquired by Boston Biomedica, Inc. ("BBI") for
       $879,000 in cash (net of cash acquired of $121,000), warrants to purchase
       100,000 shares of BBI's stock at an exercise price of $2.50 per share,
       minimum long-term royalty payments to the owners of the Company of
       $424,000, debt and accrued interest owed by the Company at the time of
       acquisition of approximately $736,000 and other acquisition costs. The
       Company's stock options were exchanged for 46,623 BBI stock options with
       an average exercise price of $2.74. The aggregate purchase price of the
       Company, including the original 19% investment under the 1996 Purchase
       Agreement of $1,482,000, was approximately $4,226,000.


                                       13