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

# FORM 10-K

(Mark One)

[X]  Annual Report Pursuant to Section 13 or
15(d) of the Secutities Exchange Act of 1934

For the fiscal year ended December 31, 2001, 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 0-21615

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

Massachusetts           

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

375 West Street,        
             
             
            
             
             
             
             
             
             
             
     
West Bridgewater, Massachusetts           
           
           

             
             
  02379-1040
    (Address of Principal Executive Offices)
            
            
             
             
             
             
             


(Zip Code)

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

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 the  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. [X]

The aggregate market value of the voting common stock
held by affiliates of the  registrant at March 19, 2002 was $ 18,323,000,  based
on the closing price of the common stock as quoted on the Nasdaq National Market
on that date.

As  of March 19, 2002 there were  6,752,252  shares of the
registrant's common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrants  proxy statement for the
registrants  2002  annual  meeting  of  stockholders  to be filed with the
Securities  and Exchange  Commission  and within 120 days after the close of the
registrants fiscal year are incorporated by reference into Part III, Items
10-13 of this Form 10-K.

---

Part I
  Item 1. Business
  Item 2. Properties
  Item 3. Legal Proceedings
  Item 4. Submission of Matters to a Vote of Security Holders

Part II
  Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
  Item 6. Selected Financial Information
  Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
  Item 7a. Quantitative and Qualitative Disclosures About Market Risk
  Item 8. Financial Statements and Supplementary Data
    Consolidated Balance Sheets
    Consolidated Statements of Income
    Consolidated Statements of Changes in Stockholders's Equity
    Consolidated Statements of Cash Flows
    Notes to Consolidated Financial Statements
  Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Part III
  Item 10. Directors and Executive Officers of the Registrant
  Item 11. Executive Compensation
  Item 12. Security Ownership of Certain Beneficial Owners and Management
  Item 13. Certain Relationships and Transactions

Part IV
  Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

## 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. The Company was organized
in Massachusetts in 1978, and commenced significant operations in 1986. As of
March 1, 2002, the Company had four 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 developer and manufacturer of laboratory and
medical instruments.

In
addition, the Companys remaining segment 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: extraction of nucleic acids, inactivation of pathogens in human
plasma, food safety, and genomics. The Company believes major progress has been
made in year 2001 towards the goal of commercializing PCT products in year 2002;
the Company is presently manufacturing prototypes of the Barocycler
instrument and disposable PULSE tubes utilizing PCT technology.

In
late 2000, the Company elected to exit the clinical  laboratory  segment of
the business and accordingly,  in February 2001, the Company sold the business and certain assets and liabilities
of BBI Clinical Laboratories,  a wholly-owned subsidiary,  to a third party. The
Company has  substantially  completed its exit from this segment of the business
in the first quarter of 2002.

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 and in February 2002, 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 February 2002, the Company owns
approximately 16% 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 end-user market for quality control products, especially the 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.

## 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 complements rather than diminishes 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, plasma centers 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® 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® 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.

Through
its wholly-owned subsidiary, BBI Source Scientific, Inc., (BBI
Source), the Company designs, develops, manufactures and markets
Laboratory Instruments, primarily 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, including development of the
Barocycler and PULSE tubes, and related protocols to prepare specimens.  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 specialty reagents and
molecular and cellular biology services for laboratories and test kit manufacturers.

## 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® 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, Asia 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
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, usage and customers of Quality Control Panel products
currently offered by the Company:

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® Run Controls

End-users
of test kits use run controls to monitor test performance, in order to minimize
false negative test results and improve 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 assess whether the results of the other, unknown specimens may be
relied upon. 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 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® family of products is targeted at the
end-users of infectious disease test kits. The Company believes that
it offers the most comprehensive line of serological and nucleic acid based run
controls in the industry, and that its Accurun® products, in combination
with its Quality Control Panel and Accuchart 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® 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® Run Control products in the
fourth quarter of 1993 and has since developed and released for sale an
additional 52 Accurun® products. Eight products have been discontinued, for
a total of 48 run controls available as of December 31, 2001. Forty-four of
these products are available for clinical diagnostic purposes; the others
currently are limited to research use. Current Accurun® Run Control
products generally range in price from $5 to $60 per milliliter.

Diagnostic
   Components

Diagnostic
Components are processed human plasma and serum materials supplied to infectious
disease test kit manufacturers and combined (often after further processing by
the manufacturer) with other materials to become various reagents (fluid
components) of manufacturers test kits. The Company supplies Diagnostic
Components in three product lines: Normal Human Plasma and Serum, Basematrix,
and Characterized Disease State Serum and Plasma. Normal Human Plasma is the
clear liquid portion of blood which contains proteins, antibodies, hormones and
other substances, with the Normal Human Serum product also having 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.

## Laboratory
Instruments

BBI
Source, the Laboratory Instrumentation operating segment, designs, develops,
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. This segment also manufactures the Barocycler associated
with the Companys planned year 2002 introduction of PCT technology based
products.

Most
of the Laboratory Instrumentation products currently being offered have been
commercialized for a number of years and were primarily developed in conjunction
with in vitro diagnostics test kit manufacturers. The Barocycler
represents the Companys first major instrument based product launch. BBI
Source also seeks 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®
and MicroChemII® Photometers. A compact,
low-cost, single tube photometer designed for immunoassay and general chemistry
applications, including infectious disease immuno assays, food and water safety testing.

ChemStat®
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 of immunoassay and general
chemistry.

E/LUMINA®
II Luminescence Analyzer. A flexible luminometer for both "flash"
and "glow" luminescence methods, this automated system reads up to 114 samples
and reports final results.

EXECWASH®
Washing System. An automated immunoassay washing system that can
be quickly configured by the user to wash different solid-phase assay formats by
proprietary manifold designs. 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®
Windows and serves as the master programming center for EXEC-WASH systems to
create fluid handling protocols.

Verif-EYE®.A reflectance reader for fast, reliable results for use in
research and development or process inspection and verification by rapid test
kit manufacturers.

## 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.

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, genotyping, DNA library construction and
screening 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 and HBV therapies, identification and DNA sequencing of
human genes involved in neurological disorders and cancer, and development of PCR based assays.
Additional assays developed over the years include PCR based assays for HIV, Parvovirus B19,
Hepatitis B virus, West Nile Virus, Lyme Disease, Babesiosis, Ehrlichia and HSV.

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 2001, BBI Biotech was awarded a
follow on $10.3  million  NCI  repository  contract.  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. Subsequent funding has continued.
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, technology transfer, and distribution.

After-sales
Service. BBI Source also provides after-sales service, including
third party maintenance. Management believes that after-sales service provides a
marketing advantage in many of the Companys markets, since many of the
Companys customers do not maintain their own full service departments. 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 efforts are focused on (i) the ongoing
development of pressure cycling technology (PCT) for nucleic acid
extraction and pathogen inactivation, which the Company anticipates having a
commercially available extraction system for sale in year 2002; (ii) the
development of new and improved Quality Control Products (Panels and
Accurun®) for the end-user market and the in vitro
diagnostics market, (iii) the development of purified reagents and proteins and
nucleic acid based assays; and (iv) the design and development of new laboratory
instruments and mechanical and optical detection techniques, emphasizing its
Verif-EYE reflectance reader. 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, 2001. 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, and expects to continue to do so for the foreseeable
future. 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
supplement its research and development funding with 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 2001, the Company introduced 2 new
Seroconversion, Performance, and Sensitivity Panel products, and 4 new
Accurun® 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, controls for HIV drug resistant assays 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 2001.

Laboratory
Instruments. The Companys product development activities
related to laboratory instruments are centered on development of the
Barocycler and the PULSE tube, additional configurations of a
reflectance reader to produce objective results from rapid in
vitro diagnostic tests as well as an updated version of the
MicroChem®(the
MicroChem® II). In addition, the Company continues to work on
applications for existing products to broaden their utilization.

Pressure
Cycling Technology (PCT).The Company owns patented
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. Both of these areas of research have
been recently funded by Phase II Small Business Innovative Research Grants,
which provide $750,000 each, over a two year period. The company is currently
developing a pressure cycling system utilizing a computer controlled instrument,
the Barocycler NEP2017, and specialized PULSE tubes which are
capable of releasing biologically active nucleic acids and proteins from plant
and animal tissues, as well as other organisms, such as mycobateria, which are
not easily disrupted by standard chemical methods. The pressure cycling system
is expected to be available for sale in 2002.

## 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, 2001. The
Companys overall marketing strategy is to focus on the needs of its
customers in three broad areas: (i) diagnostic products to improve the
quality and accuracy of test results and kit components for the in vitrodiagnostic industry, (ii) life science products and services in
support of infectious disease researchers, and (iii) a sample preparation
system planned for introduction in year 2002 based on PCT technology.

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® 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®
line of run control products. In addition, the Company continues to expand the
Accurun® 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 independent distributors
located in Japan, Australia, North and 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, poster presentations, news 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. The Company utilizes a product information library
on its web site (www.bbii.com) allowing customers, 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, (sometimes 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 own 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.

## 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 and Ortho Diagnostics (Johnson &
Johnson); (2) regulatory agencies such as the United States FDA and CDC, 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, Edwards Life Science, Nihon Kohden,
Vysis 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 specific
purchases. Laboratory Instruments are generally sold on an OEM basis under
medium-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 2001, 2000, and 1999, sales (from continuing operations) to the
Companys three largest customers accounted for an aggregate of
approximately 30%, 20% and 24%, respectively, of the Companys net sales,
although the customers were not identical in each period. During the fiscal
years 2001, 2000, and 1999, the combined revenues from all branches of the
National Institutes of Health, a United States Government agency, accounted for
approximately 31%, 30% and 23%, respectively, of total consolidated revenues
from continuing operations of the Company. While these contracts contain
standard terms and conditions relative to audits and/or
termination, in whole or in part, without prior notice at the Governments
convenience the Company has never had any contracts
terminated and has no knowledge of any actions pending. 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 components
acquired come from a variety of local and/or national suppliers and distributors
who have multiple sources of supply. Both of these facilities are ISO 9001
certified.

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

## Competition

The
market for the Companys products and services is highly competitive. Many
of the Companys competitors are larger than the Company and have greater
financial, research, manufacturing, and marketing resources. Important
competitive factors for the Companys products include product quality,
price, ease of use, customer service and reputation. In a broader sense,
industry competition is based upon scientific and technical capability,
proprietary know-how, access to adequate capital, the ability to develop and
market products and processes, the ability to attract and retain qualified
personnel, and the availability of patent protection. To the extent that the
Companys products and services do not reflect technological advances, the
Companys ability to compete in 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, Ambion, Bio-Rad
Laboratories, Inc., Blackhawk Biosystems Inc. and MAS 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.), APW, and Plexus (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 ATTC, Cryonix, Corielle and 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 eight 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
the future relating to Pressure Cycling Technology. These patents expire between
2015 and 2019.

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.

BBI®,
Accurun®, MicroChem®,
MicroChemII®, Chemstat®,
EXECWASH® and Verif-EYE® 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® 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, 2002, a total of 15 products in the Accurun 1® line
and 29 single analyte Accurun® 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® 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, CA 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/QSR
requirement guidelines governing reagent and instrument manufacturing.

Once
cleared or approved, medical devices are subject to pervasive and continuing
regulation by the FDA, including, but not limited to cGMP/QSR 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/QSR 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 pre-market 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
pre-market 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, repository operations,
 contract research and instrumentation services) 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,
 and other national regulatory agencies. 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 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).

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, 2001 the Company employed 202 persons, all of whom were located
in the United States. Of these, 98 persons were employed by the West
Bridgewater, Massachusetts company, 3 (part time) by the New Britain,
Connecticut company (a discontinued operation), 78 at
its two Maryland facilities, and 23 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, 2001:

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 and Treasurer since June
2001.  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.

Dr.
Garrett is presently Senior Vice President  Strategic Programs, and
served as Senior Vice President and General Manager of BBI Clinical Laboratories
from 1999 through 2001. From 1988 to 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.

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.

## 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. As of February 2002, the Company leases
27,000 square feet of space in Garden Grove, California where its BBI Source
business unit manufactures laboratory instruments; this lease expires on January
31, 2005. 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 repository space under a
seven-year lease that is due to expire on November 30, 2006.

BBI Clinical  Laboratories,  a discontinued operation, operated from a 15,000 square foot facility in New
     Britain CT  pursuant to a lease  which  expires in July 2005.  The buyer of
the business and certain assets and  liabilities of BBICL  reimbursed the Company for essentially
all  rental-related  costs of this facility  during the period February 21, 2001
through December 31, 2001.

## ITEM 3.  LEGAL PROCEEDINGS.

In
August 1999, the Company sold 500,000 warrants to purchase the Companys
stock to Paradigm Group, LLC, a private investment company. 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. In the
fourth quarter of 2000, the Company expensed approximately $265,000 of costs
related to these warrants and the registration of the underlying shares. On June
15, 2001 the Company and Paradigm Group, LLC entered into an agreement to
permanently settle their disputes. Under the terms of the agreement, Paradigm
Group, LLC rescinded their exercise of the common stock purchase warrants, which
have since expired, and the Company retained the 500,000 shares associated with
their exercise. These shares were included in the total shares outstanding as
well as in the calculation of earnings (loss) per share from February 17, 2000
(the date of exercise) through June 15, 2001 (the date of the agreement). As of
September 30, 2001 these shares were cancelled by the Company.

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

No
matter was submitted during the fourth quarter of fiscal 2001 to a vote of
security holders of the Company.

# PART II

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

The
Company completed an initial public offering of its Common Stock, $.01 par
value, (the Common Stock) on October 31, 1996. The Common Stock is
listed on the Nasdaq National Market under the symbol BBII.

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

As
of March 19, 2002, there were 20,000,000 shares of Common Stock authorized of
which 6,752,252 shares were issued and outstanding, held of record by
approximately 3,800 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.

# Recent Sales
of Unregistered Securities

In
December 2001, the Company sold 600,000 shares of common stock of the Company
for an aggregate purchase price of $1,500,000 in a private placement to five
accredited investors. The shares were issued in the first quarter of fiscal 2002
and therefore were not included in the total shares outstanding as well as in
the calculation of earnings (loss) per share for the year ended December 31,
2001. The issuance of the shares was effected without registration under the
Securities Act of 1933, as amended, in reliance upon the exemption from
registration contained in Rule 506 of Regulation D promulgated under the
Securities Act.

## 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, 2001, and the balance sheet data as of December 31, 2001,
2000, 1999, 1998, and 1997, 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.

|(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
from BioSeq 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 in 2000 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 in 2000.
|(6) | Includes $1,135 in 2000 for establishment of a full valuation allowance on the
Company's deferred tax assets.                                                                                                                                                

## 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  currently  has four  operating  segments:
"Diagnostics,"  "Biotech," "Laboratory  Instrumentation" and "Pressure Cycling Technology,  ("PCT")".  Two of these,  "Diagnostics" and
"Laboratory  Instrumentation"  primarily manufacture products.  Within Diagnostics there are three major product lines: Quality Control
Panels,  Accurun(R)Run Controls,  and Diagnostic  Components.  The remaining two segments generate primarily service revenue and consist
of " Biotech", and "PCT" (research and development).  Within Biotech there are four major product lines: Contract Research,  Repository
Services,  Specialty Reagents and Research Services.  Revenue in the "PCT" segment consists of both private and National  Institutes of
Health  ("NIH")  funded  support for the research  activities  associated  with our  pressure  cycling  technology.  There was also NIH
funding in 2000 for the Company's  former drug discovery  operations  which were spun-off as an  independent  company in November 2000.
See Note 6 of Notes to  Financial  Statements  for a further  discussion  of the  activities  of these  segments and Note 2 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.
(Panacos), a wholly-owned subsidiary that the Company formed in
October 1999. In November 2000 and in February 2002, Panacos sold equity to
third party investors, reducing the Companys ownership to approximately
16% which is held in non-voting preferred stock. 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 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 the business
and certain assets and liabilities to a third party for an adjusted purchase
price of $8,958,000. The escrow account was terminated in December 2001 by
mutual agreement between the buyer and the Company, resulting of approximately
$358,000 being received by the Company from the escrow account. The Company has
retained certain other assets and liabilities of BBICL, primarily property,
plant and equipment, together with the facility lease subsequent to the closing
date, which the Company is attempting to sublease. The Company has written down
all of the retained assets not otherwise redistributed to other business units
to their estimated net realizable value. The Company recorded an after-tax gain
of $4,334,000 in 2001. The remaining estimate of closing costs included an
estimate of costs associated with disposing of all remaining assets and retiring
all existing liabilities including a facility lease. The Company will utilize in
year 2001 certain prior period net operating loss carryforwards, previously
reserved for by the Company, to partially offset the tax effect of this gain. In
accordance with a transition services agreement, the Company operated the
business in a normal fashion from the date of closing to December 2001, during
which substantially all costs associated with operation of the business
subsequent to the closing date were borne by the purchaser.

## 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 fixed overhead
costs, and should therefore significantly benefit from relatively small revenue
increases.

## 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, general and administrative costs
and a low percentage fee. Its financial goal has been to breakeven, (prior to
the allocation of corporate overhead) while contributing to the development of
future products and services for the Company. The PCT segments
R&D operation does not currently have any product or service revenue, but
expects to launch its first products in 2002. 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, patent costs and general management
expenses. . 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. 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. In February 2002, Panacos raised $5 million in additional equity
thereby diluting the Companys interest in non-voting preferred shares of
Panacos to 16%.

## 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 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 PCT
segment is 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 PCT and Panacos (2000 only). In the
past three years, the Companys BioSeq research subsidiary has incurred
approximately $3.2M of research and development expenses substantially related
to development of a unique instrument and disposable specimen processing tube in
conjunction with PCT. The Company has received eight patents for this technology
and intends to have commercial products, using this technology, available for
sale in year 2002. In addition to ongoing development of new Accurun Products
the Company has also incurred development costs on reagent purification
projects. Research and development expenses incurred in year 2000 also include
approximately $600,000 related to Panacos Pharmaceuticals drug discovery and
development program.

## EXPORT SALES

he
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, 2001, 2000, and 1999 were $3.4 million, $4.2 million,
and $4.0 million, respectively. The Company expects that export sales will
continue to be a significant source of revenue and gross profit.

## 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:

## YEARS ENDED
DECEMBER 31, 2001 AND 2000

Revenue

Total
revenue from continuing operations increased 12.1%, or $2,356,000, to
$21,826,000 in 2001 from $19,470,000 in 2000. The increase in revenue was the
result of an increase in product revenue of 5.7%, or $705,000 to $13,093,000 in
2001 from $12,387,000 in 2000, coupled with an increase in service revenue of
23.3%, or $1,651,000, to $8,733,000 in 2001 from $7,082,000 in 2000.

Product Revenue.  The product revenue increase was primarily  attributable to increased sales of basematrix and  characterized
specimens to IVD test kit manufacturers and continued strong domestic sales of Accurun controls in the Diagnostics segment.

Service  Revenue.  The Biotech segment  experienced a significant  increase in repository and research  services  revenue.  In
addition,  service  revenue  recognized  in year 2000 also  included  $161,000  of  funding  received  by  Panacos  for drug  discovery
activities; as noted above, the Company no longer consolidates the results of operations of Panacos.

Gross Profit

Overall
gross profit increased 31.5%, or $2,087,000, to $8,705,000 in 2001 from
$6,619,000 for year 2000. Product gross profit increased 32.0%, or $1,637,000,
to $6,755,000 in 2001 from $5,118,000 for 2000; product gross margin increased
to 51.6% in 2001 from 41.3% in 2000. Services gross profit increased $449,000 to
$1,950,000 in 2001 from $1,501,000 for 2000 and service gross margin increased
to 29.9% in 2001 from 21.2% in 2000.

Product Gross Margin.  The increase in product gross margin at the  Diagnostics  segment,  was derived from increased  sales
of higher  margin  catalog  products  coupled  with a higher  level of sales.  This was  coupled  with a gross  margin  increase at the
Laboratory  Instrumentation  segment  driven by the cost  reduction  plan  implemented  in September  2000.  In year 2000,  the Company
recorded charges for inventory valuation at both of these segments, thereby lowering gross margins.

Service Gross Margin.  The increase in service gross margin was due to an increase in higher margin commercial services as
well as increased repository revenue, both performed at the Biotech segment.

Research and Development

Research
and development expenditures decreased 5.7%, or $141,000, to $2,303,000 in 2001
from $2,444,000 in 2000. The year 2000 included $600,000 of research and
development expenses associated with Panacos, the results of which are no longer
included in the Companys results of operation as discussed above.
Exclusive of funding to Panacos in 2000, research and development expenses
increased $459,000 in 2001 most of which was driven by higher research and
development spending on the Companys PCT program activities.

Selling and Marketing

Selling
and marketing expenses increased by 9.6%, or $256,000, to $2,916,000 in 2001
from $2,660,000 in 2000. This increase was a result of filling several sales and
marketing positions in the latter part of 2000 as well as increased travel and
promotion costs at the Diagnostic segment.

General and Administrative

General
and administrative costs declined 19.2%, or $942,000, to $3,977,000 in 2001 from
$4,919,000 in 2000. This decrease was primarily a result of several factors.
First, there were headcount reductions at Corporate, and the Diagnostics and
Laboratory Instrumentation segments in the latter part of year 2000 and into
year 2001. Second, there was a significantly lower level of professional fees in
2001 compared to 2000, when the Company explored several strategic and financing
options; also in 2001, the Company reversed $80,000 of expenses previously
accrued in year 2000, based on the June 2001 legal settlement reached with
Paradigm Group, LLC, as discussed further in the accompanying footnotes to the
financial statements. Finally, a portion of the decline was associated with the
September 2000 write down of goodwill at the Laboratory Instrumentation segment,
thereby reducing amortization expense in year 2001 by $115,000 compared to the
year 2000.

Impairment of Intangible Asset

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 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 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 2000.

Operating Income (Loss)

Operating
loss from continuing operations decreased to $491,000 in 2001 versus $4,868,000
in 2000. The Diagnostics segments operating income increased to $1,674,000
in 2001 from $1,015,000 in 2000, due to an increase in product revenue coupled
with an increase in product gross margin, partially offset by an increased
absorption of corporate overhead by this segment as explained further hereunder.
The Laboratory Instrumentation segment had an operating loss of $(460,000) for
2001 versus a loss for 2000 of $(2,819,000); year 2000 results of operation
include a charge of $1,464,000 taken in the third quarter of 2000 related to
impairment of intangible assets as discussed further above, whereas year 2001
operating results reflect the impact of the September 2000 cost reduction plan.
The PCT segment had an operating loss of $(1,493,000) in 2001 as compared to an
operating loss of $(1,298,000) in year 2000; also in year 2000, Panacos incurred
a $1,027,000 pre-tax operating loss; the Company no longer consolidates the
results of operation of Panacos subsequent to November 2000 as previously
discussed. Effective January 2001, the Company adjusted its allocation of
corporate overhead based upon a revised corporate structure effective in 2001.
The present corporate structure reflects the Companys implementation, in
the latter part of 2000, of a cost reduction plan at the Laboratory
Instrumentation segment, the Companys spin-off of Panacos as an
independent company, and the Companys decision to exit the Clinical
Laboratory testing business. The latter item is reflected as discontinued
operations in the accompanying financial statements. In accordance with
generally accepted accounting principles, the Company ceased allocating
corporate overhead to the Clinical Laboratory testing business for all periods
presented. This adjustment results in the Diagnostics unit absorbing a large
portion of corporate overhead, which in prior years would have been allocated to
Panacos and the Clinical Laboratory testing business.

Interest Expense/Cumulative Change in Accounting Principle

Interest
expense decreased from $1,617,000 in 2000 to $438,000 in 2001. The large portion
of the decrease is associated with reduced interest expense incurred in 2001 on
the Companys line of credit, which was outstanding for all of 2000 but was
repaid and terminated by the Company in February 2001 as discussed further in
the section Discontinued Operations hereunder. Additional interest
expense was incurred in the year 2001 associated with the Company obtaining a
$2,447,000 (net) mortgage on its West Bridgewater MA facility in April 2000.

In
year 2000, the Company incurred a charge of $898,000 (including $190,223 for the
cumulative effect of change in accounting principle, see Note 7 of Notes to
Consolidated Financial Statements). In the first quarter of 2001, the
Company redeemed the remaining $2,040,000 (face value) of outstanding 3% Senior
Subordinated Convertible Debentures (the Debentures) plus accrued
interest and a premium of $190,000 (which was charged to interest expense). The
pro-rata portion of unamortized original issue discount, debt issuance and
warrant related costs associated with the redeemed Debentures, amounting to
approximately $377,000, is included in the loss on extinguishment of the
Debentures. Substantially offsetting this loss is the Companys reversal of
approximately $528,000 of interest expense in year 2001, previously recorded in
2000, associated with the amortization of the Debentures beneficial conversion
feature.

Income Taxes

In
the third quarter of 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;
accordingly, the Company has not subsequently recognized an income tax benefit
associated with the loss from continuing operations in either year 2000 nor 2001
as these tax assets have been fully reserved for. The Company has recorded
approximately $16,000 of state tax expense in year 2001.

Loss from Continuing Operations

Loss
from continuing operations decreased to $(887,000) for the year ended December
31, 2001 from $(7,804,000) for year 2000, as a result of the items discussed
above.

Discontinued Operations

On
February 20, 2001, the Company sold the business and certain assets and
liabilities of its wholly-owned subsidiary BBICL to a third party for an
adjusted purchase price of $8,958,000. The escrow account was terminated in
December 2001 by mutual agreement between the buyer and the Company, resulting
in approximately $358,000 being received by the Company from the escrow account.
The Company has retained certain other assets and liabilities of BBICL,
primarily property, plant and equipment, together with the facility lease
subsequent to the closing date, which the Company is attempting to sublease. The
Company has written down all of the retained assets not otherwise redistributed
to other business units to their estimated net realizable value.

The
Company has recorded a gain of $4,334,000 net of taxes of $969,000 in 2001.
The Company expects to utilize prior period net operating loss carryforwards,
previously reserved for by the Company, to partially offset the tax effect of
this gain. Additionally, the Company has taken a tax benefit of approximately
$364,000 related to stock option exercises that was not previously recorded as
the Company was in a loss position. This tax benefit was recorded as a credit to
additional paid-in capital in 2001.

The
Company has recorded its estimate of remaining short and long term accrued
liabilities to exit the Clinical Laboratory testing business, totaling
approximately $1,687,000 as of December 31, 2001. The major components of this
accrual are estimated income taxes ($420,000), severance and other employee
related costs ($75,000), estimated lease exit and facility related costs
($750,000) and potential health care claims and other related potential audit
adjustments ($318,000), with the remainder for other miscellaneous costs
associated with exiting this business segment.

Revenues
from discontinued operations, net of intercompany eliminations, were $973,000
for the period from January 1, 2001 to February 20, 2001 and $8,367,000 for
the year ended December 31, 2000. Operating (losses) from discontinued
operations were $(136,000) for the year ended December 31, 2001 and $(197,000)
for the year ended December 31, 2000. In summary, income (loss) from
discontinued operations was $4,334,000 for the year ended December 31, 2001 and
$(197,000) for the year ended December 31, 2000.

In
accordance with a transition services agreement, the Company operated the
business in a normal fashion during the period February 20, 2001 through
December 2001. All of the revenues generated by, and substantially all costs
associated with operating the business subsequent to the closing date of the
transaction are the responsibility of the purchaser. A portion of the proceeds
from this sale were used to redeem all outstanding Debentures and to retire the
Companys line of credit in the first quarter of 2001.

Summary

In
summary, the Company had net income of $3,448,000 for the year ended December
31, 2001 as compared to a net loss of $(8,001,000) for the year ended December
31, 2000. This improvement was driven by four factors: first and foremost, the
gain recognized on the sale of the Companys clinical laboratory business;
secondly, a significantly reduced operating loss in 2001 compared to 2000 as all
business units posted improved operating results, and Panacos (which incurred a
pretax loss of $1,027,000 in 2000) no longer being consolidated in 2001; thirdly, the impairment of
intangible assets at the Laboratory Instrumentation segment recorded in 2000,
which increased the loss for 2000; and fourthly, higher interest expense in 2000
due to the higher debt carried prior to the repayments that occurred after the
sale of the clinical laboratory business.

The
earnings per share computation for 2001 reflects both the issuance of 801,325
additional shares of common stock in the first quarter of 2001, as certain
holders of the Debentures exercised their rights to convert $1,210,000 of such
Debentures into shares of the Companys common stock, and the issuance of
178,877 additional shares of common stock associated with the exercise of stock
options, warrants and purchases made pursuant to the employee stock purchase
plan. In addition, on June 15, 2001, the Company and Paradigm Group, LLC entered
into an agreement to permanently settle their disputes. Under the terms of the
agreement, Paradigm Group, LLC rescinded their exercise of the common stock
purchase warrants, which have since expired, and the Company retained the
500,000 shares associated with their exercise. These shares were included in the
total shares outstanding as well as in the calculation of earnings (loss) per
share from February 17, 2000 (the date of exercise) through June 15, 2001 (the
date of the agreement). As of September 30, these shares were cancelled by the
Company. In December 2001, an additional 600,000 shares of common stock were
subscribed to and paid for by a group of investors for $1,500,000. These shares
were issued in the first quarter of 2002 and therefore were not included in the
total shares outstanding as well as in the calculation of earnings (loss) per
share for the year ended December 31, 2001.

## 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 increases 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  behind it and that
there are  growth  opportunities  within  both its  existing  business  as well as  providing  products  for rapid  test and chip based
technologies.

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 $161,000 in the Panacos  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 Panacos and PCT  segments'  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.

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  adjusted the inventory  valuations for both this segment
and the Diagnostic segment in year 2000.

Service Gross Margin.  The increase in service gross margin was due to small  increases in both the  Diagnostics and the
Panacos and PCT 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 PCT and Panacos business segments, the latter
being included during the period January 1, 2000 to November 14, 2000 as
discussed further hereunder. Research and development expenditures at these
segments 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 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.

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 PCT and Panacos segments combined 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 pre-tax
operating losses for the period January 1, 2000 to November 14, 2000 in the
amount of approximately $1,027,000.

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, see Note 7 of Notes to Consolidated Financial Statements)
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%.

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.

## LIQUIDITY AND FINANCIAL CONDITION

As
of December 31, 2001, the Company had existing cash balances of approximately
$2,858,000 compared with $1,782,000 at December 31, 2000. The Companys
working capital position increased to $9,407,000 as of December 31, 2001 from
$3,596,000 as of December 31, 2000. These improvements in both ending cash and
working capital position were the result of
utilizing proceeds generated by the sale of the clinical laboratory business in
February 2001 (as discussed above) thereby enabling the Company to pay off a
substantial portion of its debt, as further discussed below.

Net
cash used in operations for the year ended December 31, 2001 was $56,000 as
compared to $2,796,000 during the year ended December 31, 2000. The improvement
in cash used in operations during 2001 is primarily associated with the
decreased loss from continuing operations and the collection of an income tax
refund in the first quarter of 2001.

Net
cash used in investing activities was $381,000 in 2001 versus $1,025,000 in the
comparable prior year period. During 2000, the Companys BBI Biotech
segment invested $580,000 to build-out its new repository facility in Frederick,
Maryland. In addition, significant investments were made for laboratory and
manufacturing equipment. The decrease of cash used for investing was due to a
decision by management to control capital expenditures.

Cash used in financing activities was $6,110,000 in 2001 versus cash
provided of $4,783,000 for the year 2000. In 2001, the Company used proceeds
from the sale of the business and certain assets of BBICL to pay off in full the
remaining $5,762,635 balance on its line of credit and retire all remaining
Debentures. Partially offsetting this in 2001, the Company received proceeds
totaling $425,000 associated with the exercise of stock options and warrants,
which have resulted in 178,877 new shares of common stock being issued. In
December 2001, an additional 600,000 shares of common stock were subscribed to
and paid for by a group of investors for $1,498,000, net of issuance costs.
These shares were issued in the first quarter of 2002 and therefore were not
included in the total shares outstanding as well as in the calculation of
earnings (loss) per share for the year ended December 31, 2001. Cash provided by
financing in 2000 consisted of approximately $1,264,000 of cash received from
the exercise of stock options and warrants, net proceeds from a $2,447,000
mortgage on its West Bridgewater, MA facility in April 2000 and net proceeds of
$2,871,000 related to the issuance of 3% Senior Subordinated Convertible
Debentures. This was partially offset by $1,383,000 of repayments on the
Companys line of credit.

As of December 31, 2001, the Company had entered into a one year loan of $525,000 to its Chief Executive Officer (CEO), renewable
     at the  Companys  option,  and  collateralized  by 90,000 of his shares of
Boston Biomedica  common stock.  Interest on the loan was payable monthly at the
annual  rate of 7%.  The loan is shown on the  balance  sheet as a  decrease  to
stockholders  equity. In January 2002, the loan was repaid in full. The loan was
replaced by the Companys  pledge of a $1,000,000  interest bearing deposit at a
financial  institution to provide additional security for loans in the aggregate
amount of $2,418,000 from the financial  institution to an entity  controlled by
the CEO. The loans are personally guaranteed by the CEO. The Companys pledge is
secured  by a  junior  interest  in the  collateral  provided  by the CEO to the
financial  institution.  Such  collateral  includes all of his real property and
common stock holdings in Boston Biomedica, Inc. The original loan and subsequent
pledge of  $1,000,000  were made to assist the CEO in  refinancing  indebtedness
related to,  among other  things,  his divorce  settlement  and to enable him to
avoid the need to sell his common stock  holdings in Boston  Biomedica,  Inc. on
the open market to satisfy his debts. The Companys Board of Directors and, with
respect to the  decision to pledge the  $1,000,000  cash  collateral,  a special
committee of the independent  directors,  evaluated a number of alternatives and
concluded that the original loan to the CEO and the  subsequent  pledge were the
best alternative and in the best interests of the Companys stockholders because
it would,  among other things,  avoid selling  pressure on the Companys  common
stock and relieve the financial pressures on the CEO that could otherwise divert
his attention from the Company.

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. The Company has satisfactorily met the
conditions of these covenants for the year 2001. 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
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. In the fourth
quarter of 2000, the Company expensed approximately $265,000 of costs related to
these warrants and the registration of the underlying shares. On June 15, 2001
the Company and Paradigm Group, LLC entered into an agreement to permanently
settle their disputes. Under the terms of the agreement, Paradigm Group, LLC
rescinded their exercise of the common stock purchase warrants, which have since
expired, and the Company retained the 500,000 shares associated with their
exercise. These shares were included in the total shares outstanding as well as
in the calculation of earnings (loss) per share from February 17, 2000 (the date
of exercise) through June 15, 2001 (the date of the agreement). As of September
30, 2001, these shares were cancelled by the Company.

The
Company believes that its cash and working capital resources (exclusive of the
$1,000,000 pledge and loan guarantee discussed above), coupled with internally generated
funds from operations, 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.

## CONTRACTUAL OBLIGATIONS

The following is a summary of the Company's contractual obligations as of December 31, 2001

* Monthly payments on this
mortgage include principal and interest and are based on a 20-year amortization
schedule with a balloon payment representing the remaining balance due in full
on March 10, 2010.

In
January 2002, the Company made a $1,000,000 pledge and loan guarantee of certain indebtedness of a entity controlled by an
officer/director via a deposit of equal amount in an interest bearing account
with a lending institution. A description of this transaction is noted above.

## RECENT
ACCOUNTING PRONOUNCEMENTS

In
late 2000 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 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 for the year ended December 31, 2000.

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 believe the adoption of SFAS No. 140 has
had 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.

Statement
of Financial Accounting Standards No. 141, Business Combinations
(SFAS 141), is effective for all business combinations initiated after June 30,
2001. The new standard requires companies to record business combinations using
the purchase method of accounting. The Company has not done a business
combination since the issuance of SFAS 141.

Statement
of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets (SFAS 142), is effective for the Company beginning January 1, 2002.
SFAS 142 requires, among other things, the cessation of the amortization of
goodwill. In addition, the standard includes provisions for the reclassification
of certain existing recognized intangibles as goodwill, reassessment of the
useful lives of existing recognized intangibles, reclassification of certain
intangibles out of previously reported goodwill and the identification of
reporting units for purposes of assessing potential future impairments of
goodwill. SFAS 142 also requires companies to complete a transitional goodwill
impairment test six months from the date of adoption. The Company is assessing
the impact of this new statement on its consolidated financial position and
results of operations but does not believe its adoption will have a material
effect on the Companys financial statements.

Statement
of Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations (SFAS 143), is effective January 1, 2003. SFAS 143
addresses the financial accounting and reporting for obligations and retirement
costs related to the retirement of tangible long-lived assets. We do not expect
that the adoption of SFAS 143 will have a significant impact on our financial
statements.

Statement
of Financial Accounting Standards No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets (SFAS 144), is effective January 1, 2002.
SFAS 144 supersedes FASB Statement No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and the
accounting and reporting provisions relating to the disposal of long-lived
assets. We do not expect that the adoption of SFAS 144 will have a significant
impact on our financial statements.

## CRITICAL
ACCOUNTING POLICIES AND 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, the net realizable value of its
inventory, as well as an estimate for remaining liabilities associated with
discontinued operations. On an on-going basis, we evaluate our estimates,
including those related to collectability of accounts receivable, inventories,
intangible assets, deferred tax assets, and contingencies and litigation. We
base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
could differ from the estimates and assumptions used by management.

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 $610,000,
$562,000, and $1,998,000, for the years ended December 31, 2001, 2000, and 1999,
respectively. During the fiscal years 2001, 2000, and 1999, the combined
revenues from all branches of the National Institutes of Health, a United States
Government agency, accounted for approximately 31%, 30% and 23%, respectively,
of total consolidated revenues from continuing operations of the Company.
Additional future revenues originating from various branches of the National
Institutes of Health is subject to possible future changes in government funding
levels.

The
Company reviews inventory for estimated obsolescence or unmarketable
inventory and adjusts for the difference between the cost of inventory and the
estimated net realizable value based upon assumptions about future demand and
market conditions. If actual market conditions are less favorable than those
projected by management, additional inventory adjustments may be required.

Intangible
assets primarily relate to the value of acquired patents associated with the PCT
technology. The cost of these acquired patents is amortized on a straight-line
basis over the estimated life of the patent which is generally four to sixteen
years. Intangible assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable.

## 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: due to
operational, scientific or technical difficulties in the implementation of its
strategies and changes in customer demand, the Companys sales to IVD test
kit manufacturers and sales of ACCURUN and other quality control products may
not continue to be as strong as in 2001; the Company may not be successful in
developing Pressure Cycling Technology into commercially viable products and
services, including those in the areas of sample preparation and inactivation, or such activities
that may longer than currently expected; Pressure Cycling Technology may
also not be adaptable to any other commercially viable applications; certain
Pressure Cycling Technology applications may not fall within the claims of the
Companys eight issued U.S. patents; individuals and groups utilizing
Pressure Cycling Technology may not be required to license such technology from
the Company; the Companys inability to develop the end-user market for
quality control products; the Companys inability to integrate the business
of Source Scientific, Inc. into the Companys business and to grow the
sales of Source Scientific, Inc. to the extent anticipated; the uncertainty of
the renewal and full funding of contracts with National Institutes of Health
(NIH); the Companys inability to obtain an adequate supply of the
unique and rare specimens of plasma and serum necessary for certain of its
products; the potential for significant reductions in purchases by any of the
Companys major customers; and if expenses are higher than anticipated, or
if revenues are lower than anticipated, the Company will require additional
capital sooner than expected and there can be no assurance that the Company will
be able to obtain additional capital on acceptable terms. 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).

## 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, 2001 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, 2001, 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 31% of 2001 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.

# ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

# BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of the
Consolidated Financial Statements

# BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

The accompanying notes are an integral part of the
Consolidated Financial Statements

# BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

The accompanying notes are an integral part of the
Consolidated Financial Statements

# BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of the
Consolidated Financial Statements

# 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-vitrodiagnostic industry, government agencies, blood
banks, hospitals and other health care providers worldwide as of December 31,
2001. 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. As of
February 2002, the Company holds a 16% interest in non-voting preferred shares
of Panacos. All significant intercompany accounts and transactions have been
eliminated in the consolidation.

In
February 2001, the Company sold the business and certain assets and liabilities 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 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, the net realizable value of its
inventory, as well as an estimate for remaining liabilities associated with
discontinued operations.

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

(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 $610,000,
$562,000, and $1,998,000, for the years ended December 31, 2001, 2000, and 1999,
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 $5,062,000, $5,082,000,
and $4,457,000, for the years ended December 31, 2001, 2000, and 1999,
respectively. Total contract costs associated with these agreements were
approximately $4,911,000, $5,540,000, and $4,323,000, for the years ended
December 2001, 2000 and 1999, 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 $50,000 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 was
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,  which are comprised of costs incurred in
performing  research and development  activities  including wages and associated
employee   benefits,   facilities   and   overhead   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.

(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.

(viii)
   Intangible Assets

The
Company has classified as intangible assets, costs associated with the fair
value of certain assets of the businesses acquired. These intangible assets,
which primarily include patents, licenses, and intellectual property rights, are
being amortized on a straight-line basis over 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.

(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 9,531, 2,500, and 68,023 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, 2001, 2000
and 1999, 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

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 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 for the year ended December 31, 2000.

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 believe the adoption of SFAS No. 140 has
had 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.

Statement
of Financial Accounting Standards No. 141, Business Combinations
(SFAS 141), is effective for all business combinations initiated after June 30,
2001. The new standard requires companies to record business combinations using
the purchase method of accounting. The Company has not done a business
combination since the issuance of SFAS 141.

Statement
of Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets (SFAS 142), is effective for the Company beginning January 1, 2002.
SFAS 142 requires, among other things, the cessation of the amortization of
goodwill. In addition, the standard includes provisions for the reclassification
of certain existing recognized intangibles as goodwill, reassessment of the
useful lives of existing recognized intangibles, reclassification of certain
intangibles out of previously reported goodwill and the identification of
reporting units for purposes of assessing potential future impairments of
goodwill. SFAS 142 also requires companies to complete a transitional goodwill
impairment test six months from the date of adoption. The Company is assessing
the impact of this new statement on its consolidated financial position and
results of operations but does not believe its adoption will have a material
effect on the Companys financial statements.

Statement
of Financial Accounting Standards No. 143, Accounting for Asset Retirement
Obligations (SFAS 143), is effective January 1, 2003. SFAS 143
addresses the financial accounting and reporting for obligations and retirement
costs related to the retirement of tangible long-lived assets. We do not expect
that the adoption of SFAS 143 will have a significant impact on our financial
statements.

Statement
of Financial Accounting Standards No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets (SFAS 144), is effective January 1, 2002.
SFAS 144 supersedes FASB Statement No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and the
accounting and reporting provisions relating to the disposal of long-lived
assets. We do not expect that the adoption of SFAS 144 will have a significant
impact on our financial statements.

(xvi)
   Reclassifications

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

## (2)
Disposition of Assets

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 the business and certain assets
and liabilities to a third party for an adjusted purchase price
of $8,958,000. The escrow account was terminated in December 2001 by mutual
agreement between the buyer and the Company, resulting of approximately $358,000
being received by the Company from the escrow account. The Company has retained
certain other assets and liabilities of BBICL, primarily property, plant and
equipment, together with the facility lease subsequent to the closing date,
which the Company is attempting to sublease. The Company has written down all of
the retained assets not otherwise redistributed to other business units to their
estimated net realizable value. In accordance with a transition services
agreement, the Company operated the business until December 2001; substantially
all costs associated with operating the business subsequent to the closing date
were borne by the purchaser.

The
Company has recorded its estimate of remaining short and long term accrued
liabilities to exit the Clinical Laboratory testing business, totaling
approximately $1,687,000 as of December 31, 2001. The major components of this
accrual are estimated income taxes ($420,000), severance and other employee
related costs ($75,000), estimated lease exit and facility related costs
($750,000) and potential health care claims and other related potential audit
adjustments ($318,000), with the remainder for other miscellaneous costs
associated with exiting this business segment.

The
Company has recorded an after-tax gain of $4,334,000 in 2001, which may be
subject to future adjustments as the Company completes the process of exiting
this business and permanently closing the facility. The remaining closing costs
include an estimate to dispose of any remaining assets and retire all existing
liabilities including the facility lease. The Company will utilize in year 2001
certain prior period net operating loss carryforwards, previously reserved for
by the Company, to partially offset the income tax effect of this 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 $0, $197,287, and $368,979, were $973,000, $8,366,995, and
$9,472,741 in the period January 1, 2001 to February 20, 2001, the year 2000 and
the year 1999 respectively.

## (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® 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, 2001 and 2000 consisted of the following:

## (4) Property
and Equipment

Property
and equipment at December 31, 2001 and 2000 consisted of the following:

Depreciation
expense for the years ended December 31, 2001, 2000 and 1999 was approximately
$1,327,000, $1,410,000, and $1,126,000 respectively.

In
accordance with Statement of Position (SOP) 98-1, Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use,
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, $90,000 and $7,000
for the years ended December 31, 2001, 2000 and 1999, respectively.

## (5) Intangible
Assets

Intangible assets at December 31, 2001 and 2000 consisted of the following:

Amortization  expense for the years ended December 31, 2001, 2000, and 1999 was  approximately  $79,000,  $173,000,  and
$213,000, 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 net balance of the  remaining
intangible assets associated with the Laboratory Instrument segment is approximately $227,000 as of December 31, 2001.

## (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, 2001, 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
worldwide in vitro diagnostic industry on an OEM basis, and also performs
in-house instrument servicing. The PCT segment 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. While the PCT
segments research and development operation does not currently have any
significant product or service revenue, the Company expects to commercialize
certain PCT products in year 2002. Revenue to date consists of both private and
public (NIH) funding of segment research. Most of the expenditures incurred by
this segment are for research and development 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, 2001, 2000 and 1999 were as
follows:

Operating
segment income (loss) for the years ended December 31, 2001, 2000 and 1999 were
as follows:

Operating
segment depreciation and amortization expense for the years ended December 31,
2001, 2000 and 1999 were as follows:

(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, 2001 and 2000 were as follows:

Operating
segment capital expenditures for the years ended December 31, 2001, 2000 and
1999 were as follows:

Revenue
by geographic area for the years ended December 31, 2001, 2000 and 1999 are as
follows:

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, 2001, 2000 and 1999 were as follows:

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, 2001, 2000 and 1999. During the
 fiscal years 2001, 2000, and 1999, the combined revenues from all branches of
the NIH accounted for approximately 31%, 30%
and 23%, respectively, of total consolidated revenues from continuing operations
of the Company.

## (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 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 of 2000 when the Debentures were
issued. The additional amount of $489,000 was calculated in the fourth quarter
of 2000 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. 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.

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 in 2001. 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 was 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 reversed approximately $528,000 of expense previously
recorded in 2000 associated with the Debentures beneficial conversion feature.
Accordingly, the Company recorded 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.

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
$2,421,000 remains outstanding as of December 31, 2001. 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. 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 $54,000, $60,000, $66,000, $72,000 and $80,000 for
each of the years ended December 31, 2002, 2003, 2004 ,2005, and 2006,
respectively.

## (8) Other
Liabilities

Included
in long-term liabilities at December 31, 2001 and 2000 are the present value of
future minimum royalty payments of approximately $19,700 and $55,000 payable to
the former owners of BioSeq, Inc.

## (9) Income
Taxes

The
components of the (benefit) provision for income taxes from continuing
operations are as follows:

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

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 $2,700,000 and $7,550,000 at December 31, 2001 and 2000,
respectively. These net operating loss carryforwards expire at various dates
from 2012 through 2020. Included in this number are loss carryforwards of
approximately $1,350,000 that were obtained through the acquisition of BioSeq,
Inc. These carryforwards expire from 2012 through 2018.

The
Company had net operating loss carryforwards for state income tax purposes of
approximately $9,400,000 and $9,200,000 at December 31, 2001 and 2000,
respectively. These net operating loss carryforwards expire at various dates
from 2002 through 2021. 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.

As
of December 31, 2001, the Company had approximately $150,000 of alternative
minimum tax credits, which do not expire, and $372,000 of federal research
credits, which expire from 2011 to 2020.

Included
in the net operating loss and credit carryforwards discussed above is a deferred
tax asset of approximately $360,000 reflecting the benefit of deductions from
the exercise of stock options. The benefit from this deferred tax asset will be
recorded to additional paid-in capital when realized.

The
Company's effective income tax rate from continuing operations differs from the statutory federal income tax
rate as follows:

The
Companys federal income tax returns for fiscal years 1997 and 1998 are
currently under examination by the Internal Revenue Service. 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.

At
December 31, 2001, future minimum lease payments under non-cancelable leases,
excluding discontinued operations, is as follows:

The
Company has entered into a non-cancelable sublease agreement with a third party,
through January 2002, that will offset the future minimum lease payments by
$14,000. Rent expense, net of sublease income consisted of the following:

In
addition, as discussed further in Note 2, 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, and $94,000 in
2002, 2003, 2004, and 2005, respectively. The Company has included an estimate
of this 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, 2001 and 2000, the Company has recorded a long-term liability
of $306,000 and $262,000, respectively ($312,000 and $337,000 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.

## (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. As
of December 31, 2001, no such contributions have been made, however, subsequent
to December 31, 2001, the Company formally adopted a limited matching
contribution program. During 2001, 2000 and 1999 the Company recognized
administrative expense of approximately $23,000, $30,000, and $30,000,
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, 2001, 23,750
shares had been issued under this plan.

In
December 2001, an additional 600,000 shares of common stock were subscribed to
and paid for by a group of investors for $1,500,000. These shares were issued in
the first quarter of 2002 and therefore were not included in the total shares
outstanding as well as in the calculation of earnings (loss) per share for the
year ended December 31, 2001.

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, 2001, 1,770,163 shares were reserved for incentive stock options,
of which 1,072,738 are available for future grants. At December 31, 2001,
744,162 shares were reserved under the nonqualified stock option plans of which
314,800 are 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. In the fourth
quarter of 2000, the Company expensed approximately $265,000 of costs related to
these warrants and the registration of the underlying shares. On June 15, 2001
the Company and Paradigm Group, LLC entered into an agreement to permanently
settle their disputes. Under the terms of the agreement, Paradigm Group, LLC
rescinded their exercise of the common stock purchase warrants, which have since
expired, and the Company retained the 500,000 shares associated with their
exercise. These shares were included in the total shares outstanding as well as
in the calculation of earnings (loss) per share from February 17, 2000 (the date
of exercise) through June 15, 2001 (the date of the agreement). As of September
30,2001, these shares were cancelled by the Company.

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.

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 2001, 2000, and 1999.

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:

The
average fair value of options granted during 2001, 2000 and 1999 is estimated as
$1.75, $2.67, and $2.63, respectively.

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

The
 following table summarizes information concerning options outstanding and exercisable
as of December 31, 2001:

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 theses shares have been issued to date.

## (13) Related
Party Transaction

As of December 31, 2001, the Company had entered into a one year loan of $525,000 to its Chief Executive Officer (CEO), renewable
     at the  Companys  option,  and  collateralized  by 90,000 of his shares of
Boston Biomedica  common stock.  Interest on the loan was payable monthly at the
annual  rate of 7%.  The loan is shown on the  balance  sheet as a  decrease  to
stockholders  equity. In January 2002, the loan was repaid in full. The loan was
replaced by the Companys  pledge of a $1,000,000  interest bearing deposit at a
financial  institution to provide additional security for loans in the aggregate
amount of $2,418,000 from the financial  institution to an entity  controlled by
the CEO. The loans are personally guaranteed by the CEO. The Companys pledge is
secured  by a  junior  interest  in the  collateral  provided  by the CEO to the
financial  institution.  Such  collateral  includes all of his real property and
common stock holdings in Boston Biomedica, Inc. The original loan and subsequent
pledge of  $1,000,000  were made to assist the CEO in  refinancing  indebtedness
related to,  among other  things,  his divorce  settlement  and to enable him to
avoid the need to sell his common stock  holdings in Boston  Biomedica,  Inc. on
the open market to satisfy his debts. The Companys Board of Directors and, with
respect to the  decision to pledge the  $1,000,000  cash  collateral,  a special
committee of the independent  directors,  evaluated a number of alternatives and
concluded that the original loan to the CEO and the  subsequent  pledge were the
best alternative and in the best interests of the Companys stockholders because
it would,  among other things,  avoid selling  pressure on the Companys  common
stock and relieve the financial pressures on the CEO that could otherwise divert
his attention from the Company.

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

# 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 index appearing under Item 14(a) of
this Form 10-K, present fairly, in all material respects, the financial position
of Boston Biomedica, Inc. and its subsidiaries at December 31, 2001 and 2000,
and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001 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 index appearing under Item 14(a)
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 the 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 25, 2002

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

None.

## PART III

## ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information  called for by Item 10 is hereby  incorporated  by reference to the information  under Part I, Item 1 - Business
under the heading  "Executive  Officers of the  Registrant"  at page 15 of this  report,  and to the  information  in the  registrant's
definitive proxy statement, which is expected to be filed by the registrant within 120 days after the close of its fiscal year.

## ITEM 11. EXECUTIVE COMPENSATION

The information called for by Item 11 is hereby  incorporated by reference to the information in the registrant's  definitive
proxy statement under the heading "Executive  Compensation",  which is expected to be filed by the registrant within 120 days after the
close of its fiscal year.

## ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information  called for by Item 12 is hereby  incorporated by reference to the  information in the  registrant's  definitive
proxy statement under the heading "Security  Ownership of Directors,  Officers and Certain Beneficial  Owners," which is expected to be
filed by the registrant within 120 days after the close of its fiscal year.

## ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.

The information  called for by Item 13 is hereby  incorporated by reference to the information in the registrant's  definitive
proxy statement under the heading "Certain  Relationships  and Related  Transactions",  which is expected to be filed by the registrant
within 120 days after the close of its fiscal year.

## PART IV

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

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

(a) 3. Exhibits:

|Exhibit No. |                                                                                                                                                                                                                                                                                    | Reference     
|----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------
|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 Organization of the Company filed as Exhibit 3.1)                                                                                                                                                              | A**           
|4.3         | Form of warrants issued in connection with Paradigm Group                                                                                                                                                                                                                          | H**           
|4.4         | 3% Senior Subordinated Convertible Debenture issued to GCA Strategic Investment Fund Limited                                                                                                                                                                                       | K**           
|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 Biomedica, Inc.,
Wharton Capital Partners, Ltd., DP Securities, Inc. and GCA Strategic Investment Fund Limited                                                                                     | K**           
|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 Fund, L.P.                                                                                                                                                                                              | K**           
|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 Biomedica, Inc.,
Richard P. Kiphart and Shoreline Micro-Cap Fund, L.P.                                                                                                                              | K**           
|10.1        | Agreement, dated January 17, 1994, between Roche Molecular Systems, Inc. and the Company                                                                                                                                                                                           | A**           
|10.2        | Exclusive License Agreement, dated April 28, 1999, between the University of North Carolina at
Chapel Hill and the Company                                                                                                                                                         | A**           
|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 between MB Associates and the Company                                                                                                                                                                  | A**           
|10.4        | 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
each of Oscar Gruss & Son Incorporated and Kaufman Bros., L.P.                                                                                                                                         | B**           
|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
 between B.F. Saul Real Estate Investment Trust and the Company                                                                                                                                           | E**           
|10.13       | Lease Agreement dated January 30, 1995 for Garden Grove, California facility 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 | F**           
|10.14       | Contract, dated July 1, 1998, between the National Institutes of Health and the Company (NO1-A1-85341)                                                                                                                                                                             | G**           
|10.15       | Contract, dated July 1, 1998, between the National Heart Lung and Blood Institute and the Company (NO1-HB-87144)                                                                                                                                                                   | G**           
|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 warrants, dated September 30, 1999                                                                                                                                                                          | J**           
|10.19       | Lease Agreement dated September 30, 1999, for Frederick, Maryland facility, between MIE
Properties, Inc., and the Company.                                                                                                                                                         | J**           
|10.20       | Sponsored Research Agreement with the University of North Carolina, Chapel Hill
and the Company, dated, April 28, 1999 and the Company.                                                                                                                                            | J**           
|10.21       | Repository Contract with National Institute of Allergy and Infectious Disease,
Division of AIDS (NO1-A1-95381), dated August 16, 1999.                                                                                                                                             | J**           
|10.22       | Securities Purchase Agreement dated as of August 25, 2000, by and among Boston
Biomedica, Inc., and GCA Strategic Investment Fund Limited.                                                                                                                                         | K**           
|10.23       | Securities Purchase Agreement dated as of August 25, 2000, by and among Boston
Biomedica, Inc., Richard P. Kiphart and Shoreline Micro-Cap Fund, L.P.                                                                                                                              | K**           
|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
Laboratories, Inc., Boston Biomedica, Inc., and Specialty Laboratories, Inc.                                                                                                                         | M**           
|10.26       | Promissory Note dated July 10, 2001, as amended on October 4, 2001, by and among
Boston Biomedica, Inc. and Richard T. Schumacher.                                                                                                                                                 | N**           
|10.27       | Subscription Agreement dated as of December 6, 2001 by and between Boston Biomedica, Inc.,
Richard P. Kiphart, Andrew Gluck, David Valentine, Rebecca Kiphart and Arthur Hill.                                                                                                     | Filed herewith
|10.28       | Junior Participation Agreement dated as of January 15, 2002, by and between Commerce Bank and
Trust Company, Resorts Accommodations International, LLC, Richard T. Schumacher and Boston Biomedica, Inc.                                                                           | Filed herewith
|10.29       | Pledge and Security Agreement dated as of January 15, 2002, by and between Richard T. Schumacher, Boston Biomedica, Inc., and Commerce Bank and Trust Company.                                                                                                                     | Filed herewith
|10.30       | Pledge Agreement effective as of January 15, 2002, by and between Boston Biomedica, Inc. and Commerce Bank and Trust Company.                                                                                                                                                      | Filed herewith
|10.31       | Limited Guaranty dated as of January 15, 2002, by and between Boston Biomedica, Inc. and Commerce Bank and Trust Company.                                                                                                                                                          | Filed herewith
|21.1        | Subsidiaries of the registrant                                                                                                                                                                                                                                                     | Filed herewith
|23.1        | Consent of PricewaterhouseCoopers LLP, independent accountants                                                                                                                                                                                                                     | Filed herewith

|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 Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2001.                                                                                                                
|   |                                                                                                                                                                                                                                             
|*  | Management contract or compensatory plan or arrangement.                                                                                                                                                                                    
|** | In accordance with Rule 12b-32 under the Securities Exchange Act of 1934, as
amended, reference is made to the documents previously filed with the Securities
and Exchange Commission, which documents are hereby incorporated by reference.

(b) REPORTS ON FORM 8-K.

The Registrant did not file any Current Reports on Form 8-K during the quarter ended December 31, 2001.

# 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.

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.

## SCHEDULE II
                                                   BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
                                                      VALUATION AND QUALIFYING ACCOUNTS