**UNITED STATES**

 

**SECURITIES AND EXCHANGE COMMISSION**

 

**Washington, D.C. 20549**

 

**Form 10-Q**

 

**(Mark One)**

 

**ý****        Quarterly Report Pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934**

 

**For the quarterly period ended June 30, 2004**

 

**or**

 

**o****        Transition Report Pursuant to Section 13 or 15(d) of theSecurities 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 itsCharter)

 
| **Massachusetts**                                               | ** ** | **04-2652826**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State or Other Jurisdiction of  Incorporation or Organization) |       | (I.R.S. Employer  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 whetherthe Registrant: (1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (orfor 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.

 

ý Yes     o No

 

Indicate by check mark whetherthe registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

 

o Yes     ý No

 

The number of sharesoutstanding of the Registrant’s common stock as of June 30, 2004 was 6,853,646.

 

 

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**Part I.Financial Information**

 

**Item 1.****Financial Statements**

 

**BOSTON BIOMEDICA, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                                                                                                                                                                                                                                                        | ** ** | **For the three months ended  June 30,** | ** ** | **For the six months ended  June 30,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                                                                                                                                                                                                        | ** ** | **2004**                                 | ** ** | **2003**                               | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                                                                                                                                                                                                                                              |       |                                     |       |                                   |       |   |   |   |   |
| REVENUE:                                                                                                                                                                                                                                                          |       |                                     |       |                                   |       |   |   |   |   |
| PCT Products                                                                                                                                                                                                                                                      |       | $                                        | 5,540      |                                   | $          | 3,492 |   | $ | 10,556 |   | $ | 73,782 |   |
| Grant Revenues                                                                                                                                                                                                                                                    |       | 102,374                                  |       | 151,803                                |       | 225,536 |   | 334,118 |   |
| Total revenue                                                                                                                                                                                                                                                     |       | 107,914                                  |       | 155,295                                |       | 236,092 |   | 407,900 |   |
|                                                                                                                                                                                                                                                              |       |                                     |       |                                   |       |   |   |   |   |
| COSTS AND EXPENSES:                                                                                                                                                                                                                                               |       |                                     |       |                                   |       |   |   |   |   |
| Cost of products                                                                                                                                                                                                                                                  |       | 17,279                                   |       | 2,692                                  |       | 35,019 |   | 54,265 |   |
| Research and development                                                                                                                                                                                                                                          |       | 177,975                                  |       | 328,479                                |       | 432,771 |   | 657,121 |   |
| Selling and marketing                                                                                                                                                                                                                                             |       | 41,645                                   |       | 42,316                                 |       | 125,880 |   | 196,082 |   |
| General and administrative                                                                                                                                                                                                                                        |       | 279,620                                  |       | 319,734                                |       | 622,000 |   | 747,445 |   |
| Total operating costs and expenses                                                                                                                                                                                                                                |       | 516,519                                  |       | 693,221                                |       | 1,215,670 |   | 1,654,913 |   |
| Operating loss from continuing operations                                                                                                                                                                                                                         |       | (408,605                                 | )          | (537,926                               | )          | (979,578 | ) | (1,247,013 | ) |
| Other operating credits and (charges), net  (Note 5)                                                                                                                                                                                                              |       | (215,429                                 | )          | (201,903                               | )          | (302,996 | ) | (337,671 | ) |
| Interest income                                                                                                                                                                                                                                                   |       | 1,548                                    |       | 3,014                                  |       | 3,538 |   | 15,631 |   |
| Interest expense                                                                                                                                                                                                                                                  |       | (43,155                                  | )          | (13,165                                | )          | (50,970 | ) | (26,712 | ) |
| Loss from continuing operations before  income taxes                                                                                                                                                                                                              |       | (665,641                                 | )          | (749,980                               | )          | (1,330,006 | ) | (1,595,764 | ) |
| Income tax benefit                                                                                                                                                                                                                                                |       | 79,282                                   |       | 139,399                                |       | 244,036 |   | 233,462 |   |
| Loss from continuing operations                                                                                                                                                                                                                                   |       | (586,359                                 | )          | (610,581                               | )          | (1,085,970 | ) | (1,362,303 | ) |
| Discontinued operations (Note 4)                                                                                                                                                                                                                                  |       |                                     |       |                                   |       |   |   |   |   |
| Income from discontinued operations (net of  income taxes of $79,281 and $245,135 for the three and six months ended June  30, 2004 respectively and net of income taxes of $139,750 and $236,892 for the  three and six months ended June 30, 2003 respectively) |       | 237,283                                  |       | 385,277                                |       | 581,159 |   | 883,452 |   |
| Net loss                                                                                                                                                                                                                                                          |       | $                                        | (349,076   | )                                      | $          | (225,304 | ) | $ | (504,811 | ) | $ | (478,851 | ) |
| Loss per share from continuing operations,  basic & diluted                                                                                                                                                                                                   |       | $                                        | (0.09      | )                                      | $          | (0.09 | ) | $ | (0.16 | ) | $ | (0.20 | ) |
| Income per share from discontinued  operations, basic & diluted                                                                                                                                                                                               |       | $                                        | 0.04       |                                   | $          | 0.06 |   | $ | 0.09 |   | $ | 0.13 |   |
| Net loss per share, basic & diluted                                                                                                                                                                                                                           |       | $                                        | (0.05      | )                                      | $          | (0.03 | ) | $ | (0.07 | ) | $ | (0.07 | ) |
| Weighted average number of shares used to  calculate income (loss) per share basic and diluted                                                                                                                                                                    |       | 6,844,090                                |       | 6,801,157                              |       | 6,836,337 |   | 6,795,262 |   |

 

The accompanying notes are an integral part of these condensedconsolidated financial statements.

 

2

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**BOSTON BIOMEDICA, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

 
| ** **                                                                                                                | ** ** | **June 30,  2004** | ** ** | **December 31,  2003** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|------------------------|------------|
| ** **                                                                                                                | ** ** | **(Unaudited)**    | ** ** | ** **             | ** ** |
| ASSETS                                                                                                                    |       |               |       |                   |       |
| CURRENT ASSETS:                                                                                                           |       |               |       |                   |       |
| Cash and cash equivalents                                                                                                 |       | $                  | 425,984    |                   | $          | 967,185 |   |
| Marketable securities                                                                                                     |       | 3,827              |       | 4,071                  |       |
| Accounts receivable, net of allowances of  $250 and $0, respectively                                                      |       | 31,097             |       | 27,557                 |       |
| Inventories                                                                                                               |       | 282,112            |       | 298,351                |       |
| Prepaid expenses and other current assets                                                                                 |       | 52,461             |       | 105,048                |       |
| Restricted cash (Note 9)                                                                                                  |       | 33,049             |       | —                 |       |
| Assets held for sale (Note 3)                                                                                             |       | 13,944,887         |       | 13,522,893             |       |
| Total current assets                                                                                                      |       | 14,773,417         |       | 14,925,105             |       |
|                                                                                                                      |       |               |       |                   |       |
| Property and equipment, net                                                                                               |       | 64,937             |       | 117,422                |       |
|                                                                                                                      |       |               |       |                   |       |
| OTHER ASSETS:                                                                                                             |       |               |       |                   |       |
| Acquired PCT patent costs, net                                                                                            |       | 498,506            |       | 522,822                |       |
| Assets transferred under contractual  arrangements (Note 5)                                                               |       | 1,257,613          |       | 1,228,200              |       |
| Deferred costs (Note 1)                                                                                                   |       | 556,985            |       | 39,719                 |       |
| Other long-term assets                                                                                                    |       | 9,178              |       | 9,178                  |       |
| Total other assets                                                                                                        |       | 2,322,282          |       | 1,799,919              |       |
| TOTAL ASSETS                                                                                                              |       | $                  | 17,160,636 |                   | $          | 16,842,446 |   |
|                                                                                                                      |       |               |       |                   |       |
| LIABILITIES  AND STOCKHOLDERS’ EQUITY                                                                                |       |               |       |                   |       |
|                                                                                                                      |       |               |       |                   |       |
| CURRENT LIABILITIES:                                                                                                      |       |               |       |                   |       |
| Accounts payable                                                                                                          |       | $                  | 359,337    |                   | $          | 233,363 |   |
| Accrued employee compensation                                                                                             |       | 163,553            |       | 126,036                |       |
| Other accrued expenses                                                                                                    |       | 310,712            |       | 237,593                |       |
| Liabilities from discontinued operations  (Note 4(b) )                                                                    |       | 57,894             |       | 192,801                |       |
| Line of Credit (Note 9)                                                                                                   |       | 523,897            |       | —                 |       |
| Liabilities held for sale (Note 3)                                                                                        |       | 5,312,012          |       | 4,951,943              |       |
| Deferred revenue and other current  liabilities                                                                           |       | 2,700              |       | —                 |       |
| Total current liabilities                                                                                                 |       | 6,730,105          |       | 5,741,736              |       |
|                                                                                                                      |       |               |       |                   |       |
| LONG-TERM LIABILITIES:                                                                                                    |       |               |       |                   |       |
| Liabilities from discontinued operations  (Note 4(b) )                                                                    |       | 95,000             |       | 215,040                |       |
| Liabilities transferred under contractual  arrangements (Note 5)                                                          |       | 360,800            |       | 370,096                |       |
| Other liabilities                                                                                                         |       | —             |       | 100,364                |       |
| Total long-term liabilities                                                                                               |       | 455,800            |       | 685,500                |       |
| Total Liabilities                                                                                                         |       | 7,185,905          |       | 6,427,236              |       |
|                                                                                                                      |       |               |       |                   |       |
| COMMITMENTS AND CONTINGENCIES (Note 11)                                                                                   |       |               |       |                   |       |
|                                                                                                                      |       |               |       |                   |       |
| STOCKHOLDERS’ EQUITY:                                                                                                |       |               |       |                   |       |
| Common stock, $.01 par value; 20,000,000  shares authorized, 6,853,646 and 6,827,592 issued and outstanding  respectively |       | 68,536             |       | 68,276                 |       |
| Loan receivable from Director and CEO (Note  7)                                                                           |       | (1,000,000         | )          | (1,000,000             | )          |
| Additional paid-in capital                                                                                                |       | 21,952,307         |       | 21,888,235             |       |
| Accumulated deficit                                                                                                       |       | (11,046,112        | )          | (10,541,301            | )          |
| Total stockholders’ equity                                                                                           |       | 9,974,731          |       | 10,415,210             |       |
| TOTAL LIABILITIES & STOCKHOLDERS EQUITY                                                                               |       | $                  | 17,160,636 |                   | $          | 16,842,446 |   |

 

The accompanying notes are an integral part of these condensedconsolidated financial statements.

 

3

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**BOSTON BIOMEDICA, INC. AND SUBSIDIARIES**

###### **CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                                                                               | ** ** | **For the six months ended  June 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                                                                               | ** ** | **2004**                               | ** ** | **2003** | ** ** |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                                                                                |       |                                   |       |   |   |
| Net loss                                                                                                                                 |       | $                                      | (504,811   | ) | $ | (478,851 | ) |
| Less: income from discontinued operations                                                                                                |       | 581,159                                |       | 883,452 |   |
| Loss from continuing operations                                                                                                          |       | (1,085,970                             | )          | (1,362,301 | ) |
| Adjustments to reconcile loss from  continuing operations to net cash provided by (used in) operating activities:                        |       |                                   |       |   |   |
| Depreciation and amortization                                                                                                            |       | 76,801                                 |       | 101,819 |   |
| Provision for doubtful accounts                                                                                                          |       | 250                                    |       | — |   |
| Changes in operating assets and  liabilities:                                                                                            |       |                                   |       |   |   |
| Accounts receivable                                                                                                                      |       | (3,790                                 | )          | 40,249 |   |
| Marketable securities                                                                                                                    |       | 244                                    |       | — |   |
| Inventories                                                                                                                              |       | 16,239                                 |       | 43,849 |   |
| Prepaid expenses and other current assets                                                                                                |       | 52,587                                 |       | 789 |   |
| Assets and liabilities transferred under  contractual obligations, net                                                                   |       | (38,709                                | )          | (20,267 | ) |
| Accounts payable                                                                                                                         |       | 125,974                                |       | 36,777 |   |
| Accrued employee compensation                                                                                                            |       | 37,517                                 |       | (35,173 | ) |
| Other accrued expenses                                                                                                                   |       | 73,119                                 |       | (12,146 | ) |
| Deferred revenue and other current  liabilities                                                                                          |       | 2,700                                  |       | — |   |
| Other liabilities                                                                                                                        |       | (100,364                               | )          | — |   |
| Net cash used in operating activities                                                                                                    |       | (843,402                               | )          | (1,206,405 | ) |
| **CASH FLOWS FROM INVESTING ACTIVITIES:**                                                                                                |       |                                   |       |   |   |
| Net cash provided by investing activities                                                                                                |       | —                                 |       | — |   |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                                                                                |       |                                   |       |   |   |
| Proceeds from issuance of common stock                                                                                                   |       | 64,332                                 |       | 14,157 |   |
| Repayments of long-term debt                                                                                                             |       | —                                 |       | (34,227 | ) |
| Deferred costs                                                                                                                           |       | (517,266                               | )          | (70,000 | ) |
| Borrowings on line of credit, net of  $166,002 of related expenses                                                                       |       | 523,897                                |       | — |   |
| Restricted cash - line of credit                                                                                                         |       | (33,049                                | )          | — |   |
| Net cash provided by (used in) financing  activities                                                                                     |       | 37,914                                 |       | (90,071 | ) |
| **DECREASE IN CASH AND CASH EQUIVALENTS:**                                                                                               |       | (805,488                               | )          | (1,296,476 | ) |
| Cash provided by discontinued operations                                                                                                 |       | 264,287                                |       | 1,031,175 |   |
| Cash and cash equivalents, beginning of  year                                                                                            |       | 967,185                                |       | 975,649 |   |
| Cash and cash equivalents, end of period                                                                                                 |       | $                                      | 425,984    |   | $ | 710,348 |   |
| **SUPPLEMENTAL DISCLOSURE OF NON-CASH  INVESTING AND FINANCING ACTIVITIES:**                                                             |       |                                   |       |   |   |
| Issuance of 29,155 common shares associated  with prepaid stock subscription                                                             |       | $                                      | —     |   | $ | 175,000 |   |
| Conversion of Pledge of Restricted Cash as  Security for Loan from Bank to Director to a Loan Receivable from Director  and CEO (Note 7) |       | $                                      | —     |   | $ | 1,000,000 |   |

 

The accompanying notes are an integral part of these condensedconsolidated financial statements.

 

4

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**BOSTON BIOMEDICA, INC. AND SUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS,**

 

**(1)****         Basis of Presentationand Summary of Significant Accounting Policies**

 

*Overview*

 

The accompanying unaudited Condensed ConsolidatedFinancial Statements of Boston Biomedica, Inc (the “Company”, “BostonBiomedica” or “BBI”) have been prepared in accordance with generally acceptedaccounting principles for interim financial information and with theinstructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, theydo not include all of the information and footnotes required by generallyaccepted accounting principles for complete financial statements. In theopinion of management, all adjustments (consisting of only normal recurringadjustments) considered necessary for a fair presentation have been included.Operating results for the three and six months ended June 30, 2004 are notnecessarily indicative of the results that may be expected for the year endingDecember 31, 2004 as discussed further in the following paragraph.  For further information, refer to theconsolidated audited financial statements and footnotes thereto included in theCompany’s Form 10-K/A filing for the fiscal year ended December 31, 2003 and inthe Company’s Form 10-Q filing for the three months ended March 31, 2004; alsosee the Company’s Form 8-K filing dated April 16, 2004 and the Company’s Form8-K filing dated June 16, 2004.

 

On April 16, 2004, Boston Biomedica, Inc. announcedthat it had signed an Asset Purchase Agreement (the “Asset Purchase Agreement”)to sell substantially all of the assets and selected liabilities of its BBIDiagnostics and BBI Biotech Divisions to SeraCare Life Sciences, Inc. (“SeraCare”)of Oceanside, California (the “Asset Sale”). The closing, which is expected tooccur in the third quarter of 2004, is subject to a number of conditions,including the approval of the transaction by BBI stockholders and SeraCare’sreceipt of sufficient financing to complete the transaction.   In addition, if the above noted transactionoccurs as anticipated, operating results for the three and six months endedJune 30, 2004 may not be indicative of the results that may be expected for theyear ending December 31, 2004 or for subsequent years (see Notes 3 and 4).Results of operations for the BBI Diagnostics and BBI Biotech Divisions arereported under “Discontinued Operations”, and the related balance sheet itemsare classified as “Assets Held for Sale” and “Liabilities Held for Sale”.

 

In June 2004, Boston Biomedica, Inc. announced that ithad completed the sale of substantially all of the assets as well as selectedliabilities of BBI Source Scientific, Inc. (the Company’s laboratoryinstrumentation division) to Source Scientific, LLC, an entity owned 35% by Mr.Richard W. Henson, 35% by Mr. Bruce A. Sargeant, and 30% by Boston Biomedica(the “Agreement”).  Under the Agreement,BBI received notes receivable in the aggregate amount of $900,000 (the “Notes”)payable at the end of three years bearing 10% interest.  The Agreement provides for discounts on theNotes in the event of an early payoff. As part of the Agreement, Source Scientific, LLC will provideengineering, manufacturing, and other related services for BBI’s PressureCycling Technology (PCT) products until September 30, 2005.  The Agreement also offers Mr. Henson and Mr.Sargeant the opportunity to purchase BBI’s 30% ownership interest in SourceScientific, LLC until May 31, 2007 at an escalating premium (10-50%) over BBI’sinitial ownership value, provided that they have first paid off the Notes intheir entirety.  Although we expect thepromissory notes to be paid in full by Mr. Henson and Mr. Sargeant, the repaymentof the promissory notes may be viewed as being dependent on the futuresuccessful operations of the business of Source Scientific, LLC.  In addition, despite our intent to exit thatbusiness, we may be viewed as having a continuing involvement in the businessof Source Scientific, LLC due to the fact that we have the right (but not theobligation) to designate one or potentially all three members of the Board ofManagers, we are guaranteeing the facility lease payments until January 31,2005, and have retained a 30% interest. Because of these factors, even though the transaction is treated as adivestiture for legal purposes, we have not recognized the transaction as adivestiture for accounting purposes in accordance with Securities and ExchangeCommission (“SEC”) Staff Accounting Bulletin (“SAB”) Topic 5E, *Accounting for Divestiture of a Subsidiary or OtherBusiness Operation*.  Inaccordance with SAB Topic 5E, we have recorded the assets and liabilitiesassociated with Source Scientific, LLC on our condensed consolidated balancesheet as of June 30, 2004 under the captions “Assets transferred undercontractual arrangements” and “Liabilities transferred under contractualarrangements” and have recorded a charge to income under the caption “Otheroperating credits and charges, net “ in our condensed consolidated statement ofoperations for the three months and six months ended June 30, 2004 and 2003equal to 100% of the amount of the loss attributable to the business of SourceScientific,LLC for the respective periods presented.    In accordance with SAB Topic 5E, we willcontinue this accounting treatment until circumstances have changed or untilthe net assets of the Source Scientific, LLC business have been written down tozero (or a net liability is recognized in accordance with GAAP).

 

5

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As a result of the abovetransactions, the unaudited consolidated financial statements included herein,and the accompanying Notes to Condensed Consolidated Financial Statements,report the results of the Company’s remaining operations, which consist of all PCTrelated activities including BBIBioSeq, Inc., and the portion of corporate activities directly associated withthe Company’s remaining corporate functions including costs associated withbeing a public company.  Operatingresults of BBI Source Scientific, Inc., excluding any PCT relatedactivities, together with Source Scientific, LLC are reported as “OtherOperating Credits and Charges, net” hereunder. The operating results of theCompany’s BBI Diagnostics and BBI Biotech divisions, together with the resultsof the discontinued operations of the Company’s clinical laboratory testingservices segment, are reported as “Discontinued Operations” hereunder.  

 

*Reclassifications*

 

Certain amounts included in the prior period’sfinancial statements have been reclassified to conform to the current period’spresentation.

 

*Deferred Costs*

 

The Company has deferred approximately $410,000 oftransaction costs as of June 30, 2004 associated with the above noted AssetPurchase Agreement.  Assuming thetransaction contemplated by the Asset Purchase Agreement closes as anticipated,these deferred transaction costs will be included in the final gain computationassociated with the Asset Purchase Agreement; otherwise the Company may berequired to expense these costs if the transaction does not proceed asanticipated.  In addition, as discussedfurther in Note 9, the Company has deferred approximately $145,000 of costs asof June 30, 2004 associated with obtaining a line of credit. These costs arebeing amortized to expense on a straight-line basis over the three-year life ofthe agreement.

 

*Stock-Based Compensation*

 

Statementof Financial Accounting Standards No. 123, “Accounting for Stock-BasedCompensation” (SFAS 123), requires that companies either recognize compensationexpense for grants of stock options and other equity instruments based on fairvalue or provide pro forma disclosure of net income (loss) and net income(loss) per share in the notes to the financial statements.  Statement of Financial Accounting StandardsNo. 148, “Accounting for Stock-based Compensation – Transition and Disclosure –an amendment of FASB Statement No. 123,” (SFAS 148) amends SFAS 123 to providealternative methods of transition for a voluntary change to thefair-value-based method of accounting for stock-based employee compensation. Inaddition, SFAS 148 amends the disclosure requirements of SFAS 123 to requiredisclosures in both annual and interim financial statements about the method ofaccounting for stock-based employee compensation and the effect of the methodused on reported results.  At June  30, 2004, theCompany had six stock-based compensation plans, which are described in furtherdetail in the Company’s Annual Report on Form 10-K/A for the year endedDecember 31, 2003. The Company accounts for those plans under the recognitionand measurement principles of Accounting Principles Board Opinion No. 25“Accounting for Stock Issued to Employees” (APB 25) and related interpretations.  Accordingly, no compensation cost has beenrecognized under SFAS 123 for the Company’s employee stock option plans. Hadcompensation cost for awards under those plans been determined based on thegrant date fair values, consistent with the method required under SFAS 123, theCompany’s net income (loss) and net income (loss) per share would have beenadjusted to the pro forma amounts indicated below:

 
| ** **                                                                                                                               | ** ** | **For the Three Months Ended June 30,** | ** ** | **For the Six Months Ended June 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                                                               | ** ** | **2004**                                | ** ** | **2003**                              | ** ** | **2004** | ** ** | **2003** | ** ** |
| Net loss - as reported                                                                                                                   |       | $                                       | (349,076   | )                                     | $          | (225,304 | ) | $ | (504,811 | ) | $ | (478,851 | ) |
| Add back: Stock-based compensation in net  loss, as reported                                                                             |       | —                                  |       | —                                |       | — |   | — |   |
| Deduct: Stock-based employee compensation  expense determined under fair value based methods for all awards, net of  related tax effects |       | (96,839                                 | )          | (106,478                              | )          | (240,847 | ) | (235,598 | ) |
| Net loss - pro forma                                                                                                                     |       | $                                       | (445,915   | )                                     | $          | (331,782 | ) | $ | (745,658 | ) | $ | (714,449 | ) |
| Basic and Diluted net loss per share - as  reported                                                                                      |       | $                                       | (0.05      | )                                     | $          | (0.03 | ) | $ | (0.07 | ) | $ | (0.07 | ) |
| Basic and Diluted net loss per share - pro  forma                                                                                        |       | $                                       | (0.07      | )                                     | $          | (0.05 | ) | $ | (0.11 | ) | $ | (0.11 | ) |

 

6

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The Company has elected to follow APB 25 and relatedinterpretations in accounting for its employee stock options. Under APB 25,because the exercise price of employee stock options equals the market price ofthe underlying stock on the date of grant, no compensation expense is recorded.The Company has adopted the disclosure-only provisions of SFAS 123, as amendedby SFAS No. 148. Pro forma information regarding net income and earnings pershare is required by SFAS 123 and has been determined as if the Company hadaccounted for its employee stock options under the fair value method of thatstatement. The fair value of these options was estimated at the date of grantusing the Black-Scholes option pricing model. For purposes of pro forma disclosures, the estimated fair value of theoptions is amortized to expense over the options’ vesting period.

 

*Use of Estimates*

 

To prepare the condensed consolidated financialstatements in conformity with accounting principles generally accepted in theUnited States, management is required to make significant estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the condensedconsolidated financial statements and the reported amounts of revenues andexpenses during the reporting period. In addition, significant estimates weremade in determining the gain on the disposition of the Company’s discontinuedoperations including post-closing adjustments, in estimating future cash flowsto quantify impairment of assets, in determining the ultimate cost ofterminating a lease at a facility no longer being utilized, in estimatesregarding the collectability of accounts receivable, realizability of loans(plus accrued interest) made to a director/Chief Executive Officer includingsufficiency of collateral, deferred tax assets, the net realizable value of itsinventory, as well as an estimate for remaining liabilities associated withdiscontinued operations associated with the clinical laboratory testingservices segment. On an on-going basis, we evaluate our estimates.  We base our estimates on historical experienceand on various other assumptions that are believed to be reasonable under thecircumstances, the results of which form the basis for making judgments aboutthe carrying values of assets and liabilities that are not readily apparentfrom other sources. Actual results could differ from the estimates andassumptions used by management.

 

**(2)   Recent Accounting Standards**

 

In March 2004, the U.S. Securities and ExchangeCommission’s Office of the Chief Accountant and the Division of CorporateFinance released Staff Accounting Bulletin (“SAB”) No. 105, “Loan CommitmentsAccounted for as Derivative Instruments”. This bulletin contains specificguidance on the inputs to a valuation-recognition model to measure loancommitments accounted for at fair value, and requires that fair-valuemeasurement include only differences between the guaranteed interest rate inthe loan commitment and market interest rate, excluding any expected futurecash flows related to the customer relationship or loan servicing. In addition,SAB105 requires the disclosure of the accounting policy for loan commitments,including methods and assumptions used to estimate the fair value of loancommitments, and any associated hedging strategies. SAB 105 is effective forderivative instruments entered into subsequent to March 31, 2004 and shouldalso be applied to existing instruments as appropriate. The Company has not yetcompleted its evaluation of SAB 105, but does not anticipate a material impacton its consolidated financial statements.

 

**(3)   Assets and Liabilities Held for Sale**

 

On April 16, 2004, BBI announced that it signed anAsset Purchase Agreement to sell substantially all of the assets and selectedliabilities of its BBI Diagnostics and BBI Biotech business units to SeraCare(the “Asset Sale”). The purchase price is $30.0M in cash, plus the assumptionof certain liabilities related to the BBI Diagnostics and BBI Biotech businessunits, and is subject to adjustment at closing based on the value of the netassets being sold. Of the $30.0M purchase price, $2.5M will be held in escrowfor a period of 18 months following the closing.  The purchase price may be adjusted up or downon a dollar for dollar basis if the nets assets sold as of the closing date aregreater or less than $8.5M.  As of June30, 2004, the net book value of assets being sold is estimated to beapproximately $8.6M, plus adjustments per the Asset Purchase Agreement ofapproximately $300,000 for adjusted net assets held for sale of $8.9M. Theclosing, which is expected to occur in the third quarter of 2004, is subject toa number of conditions, including the approval of the transaction by BBIstockholders and SeraCare’s receipt of sufficient financing to complete thetransaction. SeraCare expects to finance the transaction primarily with debt,along with some equity financing, and has agreed to use commercially reasonableefforts to obtain the financing.  Asummary of assets and liabilities held for sale as of June 30, 2004 which arecontemplated to be sold pursuant to the Asset Purchase Agreement is as follows:

 

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| ** **                                                                                                    | ** ** | **Total**  | ** ** |
|---------------------------------------------------------------------------------------------------------------|------------|------------|------------|
| Assets and liabilities to be sold pursuant  to an Asset Purchase Agreement:                                   |       |       |       |
| Accounts Receivable, net                                                                                      |       | $          | 3,791,650  |   |
| Inventories                                                                                                   |       | 5,491,454  |       |
| Prepaid expenses                                                                                              |       | 159,249    |       |
| Property and Equipment, net                                                                                   |       | 4,361,992  |       |
| Other assets                                                                                                  |       | 140,542    |       |
| Assets held for sale                                                                                          |       | 13,944,887 |       |
|                                                                                                          |       |       |       |
| Accounts payable                                                                                              |       | (1,577,420 | )          |
| Accrued expenses and compensation                                                                             |       | (1,124,599 | )          |
| Short Term Debt/other                                                                                         |       | (380,413   | )          |
| Long Term Debt - Mortgage                                                                                     |       | (2,229,580 | )          |
| Liabilities held for sale                                                                                     |       | (5,312,012 | )          |
| Net Assets and Liabilities held for Sale,  excluding facility operating lease obligations also to be assumed: |       | $          | 8,632,875  |   |

 

Simultaneously with the announcement of the AssetSale, BBI stated its intention to commence an issuer tender offer to purchaseup to 6,000,000 shares of its common stock at a price of $3.50 per shareshortly following the completion of the Asset Sale. BBI expects to use up to$21.0 million of the after-tax net proceeds from the Asset Sale to purchaseshares of its common stock tendered in the tender offer. The remaining netproceeds from the Asset Sale, after taxes and transaction fees, which isestimated to be approximately $1.0 million, plus any portion of the escrowedamount released to BBI, are expected to be used primarily for working capitalfor the Company’s pressure cycling technology activities.

 

**(4)   Discontinued Operations**

 

(a) BBI Diagnosticsand BBI Biotech Segments

 

On April 16,2004, BBI announced that it signed an Asset Purchase Agreement to sellsubstantially all the assets and selected liabilities of its BBI Diagnosticsand BBI Biotech business units to SeraCare (the “Asset Sale”), as discussed inmore detail in Note 3. In accordance with paragraphs 30 and 42 of Statement ofFinancial Accounting Standards No. 144 “Accounting for the Impairment orDisposal of Long-Lived Assets”, the results of operations for these twooperating segments are reported as discontinued operations.  These segments had combined aggregaterevenues from discontinued operations, net of sales to other Company entities,of $5,826,883, $10,712,867, $5,428,179, and $10,304,369 for the three and sixmonths ended June 30, 2004 and ended June 30, 2003, respectively.

 

(b) Clinical LaboratoryTesting Services Segment

 

In December 2000, theCompany made a decision to exit the clinical laboratory testing servicessegment and in February 2001, BBI Clinical Laboratories, Inc. (“BBICL”), awholly-owned subsidiary of the Company, sold the business and certain assetsand liabilities of its clinical laboratory business to a third party for anadjusted purchase price of $8,958,000. The Company retained certain other assets and liabilities of BBICL,primarily property, plant and equipment, together with the facility leasesubsequent to the closing date.  TheCompany wrote down all of the retained assets not otherwise redistributed toother business units to their estimated net realizable value.

 

OnMarch 4, 2004, the Company entered into a lease termination agreement with thelandlord relative to the facility previously occupied by BBICL.  The agreement provides for a series ofreduced payments over a nine month period ending in late 2004 in return for theCompany vacating the facility on or before May 31, 2004, accordingly, theCompany recognized a $135,000 gain by virtue of a reduction in liabilities fromdiscontinued operations in the first quarter of 2004 associated with this leasetermination agreement and reduction of the related remaining liability.  The Company vacated the facility in the secondquarter of 2004.  The Company’s estimate of remaining short andlong term accrued liabilities to exit the clinical laboratory testing businessis approximately $153,000 as of June 30, 2004. The major component of this accrual is the remaining payments

 

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associated with the lease termination agreement and theremainder is for other miscellaneous costs associated with exiting thisbusiness segment. In prior years, the Company recorded an after-tax gain of$4,334,000 in 2001, and an additional $225,000 in 2002. These gains may besubject to future adjustments as the Company completes the process of exitingthis business.  The Company utilized in2001 certain prior period net operating loss carry-forwards, previouslyreserved for by the Company, to partially offset the income tax effect of thisgain.

 

Summary of Net Income fromDiscontinued Operations

 
| ** **                                     | ** ** | **Three months ended 6/30/04** | ** ** | **Six months ended 6/30/04** | ** ** |
|------------------------------------------------|------------|--------------------------------|------------|------------------------------|------------|
|                                           |       |                           |       |                         |       |
| BBI Diagnostics & BBI Biotech segments     |       | $                              | 316,564    |                         | $          | 691,295 |   |
| BBI Clinical lab testing services segment      |       | —                         |       | 135,000                      |       |
| Tax provision                                  |       | (79,281                        | )          | (245,136                     | )          |
|                                           |       |                           |       |                         |       |
| Total Net Income from Discontinued  Operations |       | $                              | 237,283    |                         | $          | 581,159 |   |

 

**(5)   Assets andLiabilities Transferred Under Contractual Arrangements**

 

In June 2004, BostonBiomedica, Inc. announced that it had completed the sale of substantially allof the assets as well as selected liabilities of BBI Source Scientific, Inc.(the Company’s laboratory instrumentation division) to Source Scientific, LLC,an entity owned 35% by Mr. Richard W. Henson, 35% by Mr. Bruce A. Sargeant, and30% by Boston Biomedica (the “Agreement”). Under the Agreement, BBI received notes receivable in the aggregateamount of $900,000 (the “Notes”), plus accrued interest, payable at the end ofthree years.  The Agreement provides fordiscounts on the Notes in the event of an early payoff.  As part of the agreement, Source Scientific,LLC will provide engineering, manufacturing, and other related services forBBI’s Pressure Cycling Technology (PCT) products until September 30, 2005.  The Agreement also offers Mr. Henson and Mr.Sargeant the opportunity to purchase BBI’s 30% ownership interest in SourceScientific, LLC until May 31, 2007 at an escalating premium (10-50%) over BBI’sinitial ownership value, provided that they have first paid off the Notes intheir entirety.  Although we expect thepromissory notes to be paid in full by Mr. Henson and Mr. Sargeant, the repaymentof the promissory notes may be viewed as being dependent on the futuresuccessful operations of the business of Source Scientific, LLC.  In addition, despite our intent to exit thatbusiness, we may be viewed as having a continuing involvement in the businessof Source Scientific, LLC due to the fact that we have the right to designateone or potentially three members of the Board of Managers and we areguaranteeing the facility lease payments until January 31, 2005.  Because of these factors, even though thetransaction is treated as a divestiture for legal purposes, we have notrecognized the transaction as a divestiture for accounting purposes inaccordance with Securities and Exchange Commission (“SEC”) Staff AccountingBulletin (“SAB”) Topic 5E, *Accounting forDivestiture of a Subsidiary or Other Business Operation*.  In accordance with SAB Topic 5E, we haverecorded the assets and liabilities associated with the Source Scientific, LLCoperation on our consolidated balance sheet as of June 30, 2004 under thecaptions “Assets transferred under contractual arrangements” and “Liabilitiestransferred under contractual arrangements” and have recorded a charge toincome under the caption “Other operating credits and charges, net” in ourconsolidated statement of operations for the three months and six months endedJune 30, 2004 and 2003 equal to the amount of the loss attributable to thebusiness Source Scientific for the respective periods presented.  In accordance with SAB Topic 5E, we willcontinue this accounting treatment until circumstances have changed or untilthe net assets of the Source Scientific, LLC business have been written down tozero (or a net liability is recognized in accordance with GAAP).

 

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**(6)  Computation of Net Income (Loss) per Share**

 

Basicearnings (loss) per share is computed by dividing income(loss) available to common shareholders by the weighted average number ofcommon shares outstanding. Diluted earnings (loss) per share is computed bydividing income (loss) available to common shareholders by the weighted averagenumber of common shares outstanding plus additional common shares that wouldhave been outstanding if dilutive potential common shares had been issued. Forpurposes of this calculation, stock options are considered common stockequivalents in periods in which they have a dilutive effect. Options andwarrants that are antidilutive are excluded from the calculation.  Potentially dilutive securities having a neteffect of 107,281 and 58,245 common shares for the three and six months endedJune 30, 2004 and 28,778 and 4 common shares for the three and six months endedJune 30, 2003 were not included in the computation of diluted loss per sharebecause to do so would have been antidilutive. The net loss per sharecomputation for the six months ended June 30, 2004 and 2003 reflects theissuance of 4,304 and 7,047 respectively, of additional shares of common stockpurchased by employees through their participation in the Company’s employeestock purchase plan.

 
| ** **                                                                                                 | ** ** | **Three Months Ended June 30,** | ** ** | **Six Months Ended June 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|-------------------------------|------------|
| ** **                                                                                                 | ** ** | **2004**                        | ** ** | **2003**                      | ** ** | **2004** | ** ** | **2003** | ** ** |
| Weighted Average Shares Outstanding, basic                                                                 |       | 6,844,090                       |       | 6,801,157                     |       | 6,836,337 |   | 6,795,262 |   |
| Net effect of dilutive common stock equivalents-based  on treasury stock method using average market price |       | —                          |       | —                        |       | — |   | — |   |
| Weighted Average Shares Outstanding,  diluted                                                              |       | 6,844,090                       |       | 6,801,157                     |       | 6,836,337 |   | 6,795,262 |   |
| Loss from continuing operations                                                                            |       | $                               | (586,359   | )                             | $          | (610,581 | ) | $ | (1,085,970 | ) | $ | (1,362,303 | ) |
| Income from discontinued operations                                                                        |       | 237,283                         |       | 385,277                       |       | 581,159 |   | 883,452 |   |
| Net loss                                                                                                   |       | $                               | (349,076   | )                             | $          | (225,304 | ) | $ | (504,811 | ) | $ | (478,851 | ) |
|                                                                                                       |       |                            |       |                          |       |   |   |   |   |
| Loss per share from continuing operations,  basic and diluted                                              |       | $                               | (0.09      | )                             | $          | (0.09 | ) | $ | (0.16 | ) | $ | (0.20 | ) |
| Income per share from discontinued  operations-basic & diluted                                         |       | 0.04                            |       | 0.06                          |       | 0.09 |   | 0.13 |   |
| Net loss per share-basic & diluted                                                                     |       | $                               | (0.05      | )                             | $          | (0.03 | ) | $ | (0.07 | ) | $ | (0.07 | ) |

 

**(7)   RelatedParty Transaction**

 

In January2002, the Company pledged a $1,000,000 interest bearing deposit at a financialinstitution to secure the Company’s limited guaranty of loans in the aggregateamount of $2,418,000 from the financial institution to an entity controlled byRichard T. Schumacher, a Director and the Company’s current Chief ExecutiveOfficer.  The loans from the financialinstitution to the entity controlled by Mr. Schumacher, which are personallyguaranteed by Mr. Schumacher, were originally secured by collateral whichincludes certain real property owned by Mr. Schumacher and all of his shares ofcommon stock held in the Company.  TheCompany’s pledge is secured by a junior subordinated interest in the collateralprovided by Mr. Schumacher to the financial institution. The Company’s pledgeof $1,000,000 was made to assist Mr. Schumacher in refinancing his indebtednessrelated to, among other things, his divorce settlement and to enable him toavoid the need to sell his Company common stock on the open market to satisfyhis debts.  The Company’s Board of Directorsand a special committee of the independent directors of the Board of Directors,evaluated a number of options and concluded that the pledge of the $1,000,000interest bearing deposit was the best option and in the best interests of theCompany’s stockholders in the belief that it would, among other things, avoidselling pressure on the Company’s common stock and relieve the financialpressures on Mr. Schumacher that could otherwise divert his attention from theCompany.

 

In January 2003, the$1,000,000 held in the interest bearing deposit account pledged to a financialinstitution to secure the Company’s limited guaranty was used by the financialinstitution to satisfy the Company’s limited guaranty obligation to thefinancial institution. The Company has no further obligations to the financialinstitution and has a loan receivable in the amount for $1,000,000, plusaccrued interest, from Mr. Schumacher. The Company continues to maintain itsjunior interest in collateral pledged by Mr. Schumacher to the financialinstitution. The Company reflected the $1,000,000 pledge as restricted cash onits balance sheet as of December 31, 2002 until the cash was used to satisfythe Company’s limited guaranty in January 2003 and since then has reflected a$1,000,000 loan receivable on its balance sheet in stockholders’ equity.

 

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As of June 30,2004, the Company evaluated the recoverability of the $1,000,000 loanreceivable (excluding $99,635 of accrued interest owed to the Company as ofJune 30, 2004 associated with this loan) from Mr. Schumacher. The Company’sreview includes an evaluation of the remaining collateral associated with theloan. The Company maintains a junior interest in this collateral.  The remaining collateral consists of commonstock of the Company.  When consideringthe adequacy of the collateral, the Company considers the balance of a loanoutstanding ($485,337 as of June 30, 2004) between an entity controlled by Mr.Schumacher with a financial institution and the fact that the Company has ajunior position in regards to the remaining collateral associated with thatloan, as well as the liquidity and net realizable value of the remaining assetsunderlying the collateral.

 

The ultimate value that maybe recovered by the Company is dependent on numerous factors including marketconditions relative to the value of and ability to sell the Company’s commonstock, and the financial status of Mr. Schumacher. At June 30, 2004, theCompany performed a test for impairment of the loan receivable by analyzing thevalue of the collateral, and determined that the loan receivable was notimpaired. While the loan receivable was not deemed impairedas of June 30, 2004, fluctuations inthe quoted market value of the Company’s common stock, which comprises theremaining collateral, may be an indicator of future impairment.If actual market conditions are less favorable or other factors arise that aresignificantly different than those anticipated by management, a write-down ofthis asset might be required.

 

**(8)   Segment Reporting and Related Information**

 

Operating segments arecomponents of an enterprise for which separate financial information isavailable that is evaluated regularly by senior management in deciding how toallocate resources and in assessing the performance of each segment.The Company is organized along legal entity lines and senior managementregularly reviews financial results for all entities, focusing primarily onrevenue and operating income. The Company’s underlying accounting records aremaintained on a legal entity basis for government and public reportingrequirements, as well as for segment performance and internal managementreporting. Inter-segment sales are recorded on a “third party best price” basisand are significant in measuring segment operating results.

 

As of June 30, 2004, andpending the close of the Asset Sale, the Company had two segments – Source andPCT.  The PCT segment consists ofresearch and development primarily in pressure cycling technology (“PCT”). TheCompany performs research in the development of PCT, with particular focus inthe areas of nucleic acid and protein extraction from cells and tissues, andpathogen inactivation.  The Companyannounced the availability for commercial sale of its PCT products in lateSeptember of 2002.  PCT Revenue to dateconsists primarily of both private and public (NIH) funding of segment researchand, commencing in late 2002, from the sale of PCT products.  Most of the expenditures incurred by thissegment are for ongoing research and development expenses, marketing and salesexpenses, and general management expenses including patent costs.

 

**(9)   Debt**

 

On February 5,2004, the Company entered into a three year, $2,500,000 revolving line ofcredit agreement with a private lender. The revolving line of credit bears interest at the base rate plus 3%,carries commercially standard unused line and collateral management fees(payable monthly), and is collateralized by trade accounts receivable andinventory of the Company.  Borrowingsunder the revolving line of credit are limited to commercially standard termsand percentages of accounts receivable. The revolving line of credit containsfinancial and other customary covenants, including a minimum debt servicecoverage ratio and certain restrictions on the payments of dividends andincurring additional debt. Theamount borrowed under this revolving line of credit was $523,897 as of June 30,2004.  In accordance with the provisionsof the revolving line of credit agreement, all cash receipts of the Companyassociated with trade accounts receivable are deposited into a restricted bankaccount.  This account balance of $33,049is reported as restricted cash on the accompanying balance sheet as of June 30,2004. The Company has deferred approximately $145,000 of costs as ofJune 30, 2004 associated with obtaining the revolving line of credit.  These costs are being amortized to expense ona straight-line basis over the three year life of the agreement.

 

In the second quarter of 2004, the Company was notified by the lenderunder this revolving line of credit that as a result of the Company committingto sell substantially all of its assets to SeraCare Life Sciences pursuant tothe

 

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Asset Purchase Agreementdescribed in Note 3, the Company was in technical default with respect to thisrevolving line of credit.  In May 2004,the lender agreed to waive this default in return for a $25,000 waiver feepayable immediately and an increase in the minimum termination fee should theCompany elect to terminate this agreement, at its option, during the first yearof the agreement.

 

**(10) Inventories**

 

Inventoriesare comprised of primarily component parts used in the manufacture of PCTproducts, and amounted to $282,112 at June 30, 2004 and $298,351 as of December31, 2003.

 

**(11) Commitments and Contingencies**

 

Various claims have been ormay be asserted against the Company in the ordinary course of business.  In certain instances, the amounts claimed oralleged may be significant.  While it ispossible that the Company’s results of operations and/or liquidity could bematerially affected by these contingent liabilities, based upon informationcurrently available, management believes that resolution of any of thefollowing outstanding claims will not have a material adverse impact on thefinancial position of the Company.

 

*Licensing Agreements/Customer Claims*

 

In the firstquarter of 2004, the Company received unrelated communications from two partiesrelative to licensing and royalty issues. One party has requested additional information to determine whether theCompany may owe additional royalties on products sold under a patent licenseagreement; the Company believes it has made all required royalty payments underits patent license agreement with this entity.  Another party has alleged that certain products sold by the Company usedcomponent materials patented by that third party.  The Company is in the process of investigatingand gathering additional information in order to respond to theseinquiries.  While the Company cannotestimate the amount of a loss, if any, associated with the resolution of theseallegations, the Company disputes all of these allegations and intends tovigorously pursue all defenses available to the Company.

 

*Environmental Matters*

 

The Companyhas received correspondence addressed to Source Scientific, Inc. originatingfrom the U.S. Environmental Protection Agency (“EPA”).  In 1997, the Company acquired certain assetsand liabilities of Source Scientific, Inc. The correspondence identifies SourceScientific, Inc. as having a potential liability for waste disposal by apurported predecessor entity. The Company has not yet determined if it actuallyhas liability for this matter, however should the Company and the EPA agree onresolution of this matter, it is estimated that such costs could range from aminimal amount up to $42,000.  No accrualhas been made since no specific amount can be reasonably estimated at thistime.

 

*Leases*

 

On March 1, 2004, the Companyentered into an eleven year facility lease agreement with an existing landlordfor approximately 65,160 sq. ft. of new repository space located in Frederick,MD; this lease is scheduled to take effect in two stages, August 1, 2004 andAugust 1, 2005.  The landlord has agreedto terminate in full the Company’s remaining obligations pursuant to anexisting facility lease which was scheduled to terminate in November 2006.   Incremental minimum lease payments pursuantto the new lease (which are net of savings associated with the concurrenttermination of the existing lease) would amount to $55,900 in year 2004,$885,000 in years 2005-2006, $1,755,000 in years 2007-2008, and $6,563,000thereafter.  Pursuant to the terms andconditions of an Asset Purchase Agreement dated April 16, 2004 between theCompany and SeraCare Life Sciences, Inc., it is anticipated that allobligations pursuant to this lease, together with all remaining obligationsassociated with the existing facility lease at the Company’s Gaithersburg MD facility,will transfer to SeraCare Life Sciences, Inc., assuming the transaction closesas anticipated.

 

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*Purchase Commitments*

 

In June 2004, BostonBiomedica, Inc. announced that it had completed the sale of substantially allof the assets as well as selected liabilities of BBI Source Scientific, Inc.(the Company’s laboratory instrumentation division) to Source Scientific, LLC, an entity owned 35% by Mr. Richard W. Henson, 35% by Mr.Bruce A. Sargeant, and 30% by Boston Biomedica. As part of the Agreement, Source Scientific, LLC will provideengineering, manufacturing, and other related services for BBI’s PressureCycling Technology (PCT) products until September 30, 2005.  Reimbursement to Source Scientific, LLC bythe Company is expected to be at the rate of $25,000 per month; however,payment by the Company to Source Scientific, LLC is contingent upon actual servicesbeing rendered to the Company by Source Scientific, LLC.

 

In March 2004,the Company entered into an eleven year lease agreement with an existinglandlord for approximately 65,160 sq ft of new repository space located inFrederick, MD; this lease is scheduled to take effect in two stages, August 1,2004 and August 1, 2005.  The most recentcost estimate to build out the facility is approximately $2,600,000, of which the new lease agreement callsfor the landlord to contribute approximately $1,950,000.  Assuming the transaction with SeraCare iscompleted as anticipated, it is expected that a portion or all of these costswould be assumed by SeraCare; however if the transactions does not close asanticipated, the Company would be responsible for these costs to the extent theyare incurred.

 

*Guaranty of Rent Payments on Transferred FacilityLease*

 

The Company also leased27,000 square feet of space in Garden Grove, California where its BBI SourceScientific, Inc. business unit previously manufactured laboratory instruments.The lease for this facility expires January 31, 2005 and there is currently noextension or renewal option.In June 2004, the Company announced it had completed the sale ofsubstantially all of the assets as well as selected liabilities of BBI SourceScientific, Inc. (the Company’s laboratory instrumentation division) to SourceScientific, LLC, an entity owned 35% by Mr. Richard W.Henson, 35% by Mr. Bruce A. Sargeant, and 30% by Boston Biomedica, Inc.   Asof June 30, 2004 the Company has received approval of the landlord to assignthis facility lease to Source Scientific, LLC. The remaining obligation of theCompany is in the form of a guarantee to the landlord for the remaining sevenmonthly rent payments, approximating $225,000 in total, should Source Scientific,LLC not meet its obligations.

 

**(12) Investments**

 

As of June 30,2004, the Company is the owner of approximately 4.45% of PanacosPharmaceuticals, which is recorded on the Company’s books at a cost of $9,178as of both December 31, 2003 and June 30, 2004. In the second quarter of 2004, Panacos Pharmaceuticals entered into adefinitive merger agreement with V.I. Technologies, Inc. (Nasdaq:VITX, market price per share was $0.72 on August 13, 2004), abiotechnology company dedicated to developing novel anti-infectivetechnologies. The transaction is expected to close in the third quarter of 2004and is subject to the approval by shareholders of both companies (scheduled forAugust 20, 2004) and other customary closing conditions. Should the abovenoted transaction be approved by the shareholders of both V. I. Technologies,Inc. and Panacos Pharmaceuticals, the Company’s existing common stock ownershipin Panacos Pharmaceuticals of 1,500,000 shares will be converted intoapproximately 1,110,000 common shares of V.I. Technologies, Inc. (a publiclytraded company) at the close of the transaction, with the possibility of anadditional 225,000 shares if a certain milestone is achieved, and an additional660,000 shares if an additional milestone is achieved.

 

**(13) Fixed Assets **

 

Fixed assets are comprisedprimarily of PCT related demonstration equipment, of which one PCT BarocyclerTM unit has been placed with a third partypursuant to a short term rental agreement. Depreciation on PCT demonstration units is allocated over the expecteduseful life of approximately two years.

 

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**(14) Intangible Assets**

 

The Companyhas classified as intangible assets those costs associated with the fair valueof certain assets of the PCT and related businesses previously acquired by theCompany.  The remaining net book value ofintangible assets as of June 30, 2004 and December 31, 2003 is comprised ofapproximately $499,000 and $523,000, respectively, of acquired PCT patents whichis being amortized to expense on a straight line basis at the rate of $48,635per year over the remaining useful life.

 

The Company’s policy is toexpense all patent related legal costs as incurred.

 

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**ITEM2.****   MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**

 

**RECENT DEVELOPMENTS**

 

In June 2004, BostonBiomedica, Inc. announced that it had completed the sale of substantially allof the assets as well as selected liabilities of BBI Source Scientific, Inc.(the Company’s laboratory instrumentation division) to Source Scientific, LLC,an entity owned 35% by Mr. Richard W. Henson, 35% by Mr. Bruce A. Sargeant, and30% by Boston Biomedica (the “Agreement”). Under the Agreement, BBI received notes receivable in the aggregateamount of $900,000 (the “Notes”), plus accrued interest, payable at the end ofthree years.  The Agreement provides fordiscounts on the Notes in the event of an early payoff.  As part of the Agreement, Source Scientific,LLC will provide engineering, manufacturing, and other related services forBBI’s Pressure Cycling Technology (PCT) products until September 30, 2005.  The Agreement also offers Mr. Henson and Mr. Sargeantthe opportunity to purchase BBI’s 30% ownership interest in Source Scientific,LLC until May 31, 2007 at an escalating premium (10-50%) over BBI’s initialownership value, provided that they have first paid off the Notes in theirentirety.  Although we expect thepromissory notes to be paid in full by Mr. Henson and Mr. Sargeant, therepayment of the promissory notes may be viewed as being dependent on thefuture successful operations of the business of Source Scientific, LLC.  In addition, despite our intent to exit thatbusiness, we may be viewed as having a continuing involvement in the businessof Source Scientific, LLC due to the fact that we have the right to designateone or potentially all three members of the Board of Managers and we areguaranteeing the facility lease payments until January 31, 2005.  Because of these factors, even though thetransaction is treated as a divestiture for legal purposes, we have notrecognized the transaction as a divestiture for accounting purposes in accordancewith Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin(“SAB”) Topic 5E, *Accounting for Divestitureof a Subsidiary or Other Business Operation*.  In accordance with SAB Topic 5E, we haverecorded the assets and liabilities associated with the Source Scientific, LLCoperation on our consolidated balance sheet as of June 30, 2004 under thecaptions “Assets transferred under contractual arrangements” and “Liabilitiestransferred under contractual arrangements” and have recorded a charge toincome under the caption “Other operating credits and charges, net” in ourconsolidated statement of operations for the three months and six months endedJune 30, 2004 and 2003 equal to the amount of the loss attributable to thebusiness Source Scientific for the respective periods presented.  In accordance with SAB Topic 5E, we willcontinue this accounting treatment until circumstances have changed or untilthe net assets of the Source Scientific, LLC business have been written down tozero (or a net liability is recognized in accordance with GAAP).

 

On April 16,2004, Boston Biomedica, Inc. (“BBI” or the “Company”) announced that it hadsigned an Asset Purchase Agreement (the “Asset Purchase Agreement”) to sellsubstantially all of the assets its BBI Diagnostics and BBI Biotech businessunits to SeraCare Life Sciences, Inc. (“SeraCare”) of Oceanside, California(the “Asset Sale”). The purchase price is $30.0 million in cash, plus theassumption of certain liabilities related to the BBI Diagnostics and BBIBiotech business units, and is subject to adjustment at closing based on thevalue of the net assets being sold. Of the $30.0 million purchase price, $2.5million will be held in escrow for a period of 18 months following the closing.The purchase price may be adjusted up or down on a dollar for dollar basis ifthe net assets sold as of the closing date are greater or less than $8.5M. Theclosing, which is expected to occur in the third quarter of 2004, is subject toa number of conditions, including the approval of the transaction by BBI stockholdersand SeraCare’s receipt of sufficient financing to complete the transaction.SeraCare expects to finance the transaction primarily with debt, along withsome equity financing, and has agreed to use commercially reasonable efforts toobtain the financing.

 

On April 16, 2004, SeraCareentered into voting agreements (the “Voting Agreements”) with each of Mr.Richard T. Schumacher, BBI’s founder, a Director and its CEO, and Mr. RichardKiphart, his daughter and Shoreline Micro-Cap Fund I LP, a fund of which Mr.Kiphart serves as general partner and has the sole power to vote and dispose ordirect the disposition of shares held by such fund. Under the VotingAgreements, these stockholders, who collectively hold an aggregate ofapproximately 32% of BBI’s total outstanding shares entitled to vote at thestockholders meeting, have agreed to vote their shares in favor of the AssetSale in accordance with the Voting Agreements. The foregoing description of the Asset Purchase Agreement and VotingAgreements does not purport to be complete and is qualified in its entirety byreference to the Asset Purchase Agreement and Voting Agreements.

 

BBI has amended itsShareholder Rights Agreement to provide that none of the following events willtrigger the rights under that agreement: (i) the execution and delivery of theAsset Purchase Agreement, (ii) the execution of the Voting Agreements, (iii)the granting of proxies to vote common stock of BBI by each of Richard T.Schumacher

 

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andRichard Kiphart (together with his related parties) to SeraCare pursuant to theVoting Agreements, and (iv) the completion of the transactions under the AssetPurchase Agreement and the taking of actions under the Voting Agreements. Theforegoing description of the amendment to the Rights Agreement does not purportto be complete and is qualified in its entirety by reference to Amendment No. 1to the Rights Agreement.

 

Simultaneously with theannouncement of the Asset Sale, BBI stated its intention to commence a tenderoffer to purchase up to 6,000,000 shares of its common stock at a price of$3.50 per share shortly following the completion of the Asset Sale. BBI expectsto use up to $21.0 million of the after-tax net proceeds from the Asset Sale topurchase shares of its common stock tendered in the tender offer. The remainingnet proceeds from the Asset Sale, after taxes and transaction fees, which isestimated to be approximately $1.0 million, plus any portion of the escrowedamount released to BBI, are expected to be used for working capital for theCompany’s pressure cycling technology activities.

 

OnApril 20, 2004, the Board of Directors of BBI announced the appointment ofMr.  Richard T.Schumacher to the Company’s open position of Chief Executive Officer (CEO),effective immediately.  Mr.Schumacher, the Founder of the Company, has served as a member of the Board ofDirectors of BBI since 1978, was the Company’s President from 1986 to 1999, andwas CEO and Chairman of the Board from 1992 to February 2003. Mr. Schumacher isworking as an employee of the Company pursuant to the terms of his existingconsulting agreement.

 

**OVERVIEW**

 

The results of operations discussed below report the results of theCompany’s remaining operations, which consist of all PCT related activities including BBI BioSeq,Inc., and the portion of corporate activities directly associated with theCompany’s remaining corporate functions including costs associated with being apublic company.  Operating results ofBBI Source Scientific, Inc., excluding any PCT related activities, togetherwith Source Scientific, LLC are reported as “Other Operating Credits andCharges” hereunder. The operating results of the Company’s BBI Diagnostics andBBI Biotech divisions, together with the results of the discontinued operationsof the Company’s clinical laboratory testing services segment, are reported as“Discontinued Operations” hereunder.  Certain amounts included in the prior period’s financial statements havebeen reclassified to conform to the current period’s presentation.

 

**THREEMONTHS ENDED JUNE 30, 2004 AND 2003**

 

*Revenue*

 

PCT related revenues amountedto $108,000 in the second quarter of 2004, as compared to $155,000 in thesecond quarter of 2003.

 

Product Revenue.  The Company had no PCT BarocyclerÔunit sales in the second quarter of 2004 nor any in the second quarterof 2003.  The Company is continuing towork on the development of a less expensive and smaller bench top version ofthe PCT Barocyclerä, which the Company presently plans to have readyfor commercial sale in the fourth quarter of 2004.

 

Service andGrant Revenue. A decrease in PCT grant revenue was primarily related to a lower levelof research conducted under SBIR research grants in the second quarter of 2004($102,000) as compared to the second quarter of 2003 ($152,000). During thesecond quarter of 2003, work was conducted on two Phase-II SBIR grants; work onone of the two grants was completed in the first quarter of 2004, thusresulting in a lower level of work required during the second quarter of 2004.Work on the one remaining Phase-II SBIR grant is nearly complete, with theexpectation that all work will be completed during the third quarter of 2004.The Company has submitted three new SBIR research grant proposals to fundadditional research.

 

*Cost of Products*

 

Thecost of PCT products sold increased to $17,000 in the second quarter of 2004from $3,000 in the second quarter of 2003, a change of $14,000.  The increase was primarily due to higherinventory and warranty reserves, as

 

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well as depreciationexpense on a PCT Barocyclerä unit that iscurrently being leased.

 

*Research and Development*

 

PCT relatedresearch and development expenditures decreased 45.7%, or $150,000, to $178,000in the second quarter of 2004 from $328,000 in the second quarter of 2003.  The decreased level of expenditures wasassociated primarily with the completion of one Phase-II SBIR grant during thefirst quarter of 2004, resulting in less research and development workperformed in Q2 of 2004. During Q2 of 2003, work was conducted on two Phase-IISBIR grants. Work on the one remaining Phase II SBIR grant is nearly complete,with the expectation that all work will be completed during the third quarterof 2004.

 

*Selling and Marketing*

 

PCT relatedselling and marketing expenses of $42,000 in the second quarter of 2004remained unchanged from the second quarter of 2003.

 

*General and Administrative*

 

General andadministrative costs totaled $280,000 in the second quarter of 2004, a decreaseof $40,000, or $12.5%, from $320,000 in the second quarter of 2003. The secondquarter of 2003 included non-recurring costs associated with legal and directorfees incurred by the Special Oversight Committee of the Company’s Board ofDirectors, formed in February 2003 to oversee the management of the affairs ofthe Company until such time as a new Chief Executive Officer was employed.  The second quarter of 2004 included certainmonthly commitment and servicing fees associated with a new line of creditwhich became effective in February 2004.

 

*OperatingLoss from Continuing Operations*

 

The operatingloss of the PCT business amounted to $409,000 in the second quarter of 2004 ascompared to an operating loss of $538,000 in the second quarter of 2003. Thedecrease was primarily due to decreased research and development activities,and lower general and administrative costs.

 

#### ***Other Operating Credits and Charges***

 

BBI Source Scientific, Inc.,together with Source Scientific, LLC, had an operating loss of $215,000 in thesecond quarter of 2004, an increase of $13,000 or 6.4% from an operating lossof $202,000 in the second quarter of 2003. The increase was the result of lowerrevenues in the second quarter of 2004 than in the second quarter of 2003.  See also Notes #1 and #5 to the CondensedConsolidated Financial Statements.

 

*NetInterest Expense*

 

Net interestexpense totaled $43,000 in the second quarter of 2004 as compared to $13,000 inthe second quarter of 2003.  The secondquarter of 2004 included interest expense associated with borrowings on theCompany’s line of credit, which became effective on February 5, 2004; a portionof the increased borrowings on the line of credit was due to payment of certaintransactions costs associated with the Company entering into an Asset PurchaseAgreement in April 2004.  In the second quarter of 2004, the Companywas notified by the lender under its revolving line of credit that as a resultof the Company committing to sell substantially all of its assets to SeraCareLife Sciences pursuant to the Asset Purchase Agreement described in Note 3 ofNotes to Condensed Consolidated Financial Statements preceding, the Company wasin technical default with respect to this revolving line of credit.  In May 2004, the lender agreed to waive thisdefault in return for certain changes to terminations provisions of the lineplus a $25,000 waiver fee, which was paid by the Company in the second quarterof 2004 and charged to interest expense.

 

### *Loan Receivable from Director and ChiefExecutive Officer*

 

As of June 30,2004, the Company evaluated the recoverability of a $1,000,000 loan receivable plusaccrued interest from Mr. Richard T. Schumacher, a Director and the Company’scurrent Chief Executive Officer, which is reflected on its balance sheet instockholders’ equity as a loan receivable as of December 31, 2003 and June 30,2004. The Company’s review includes an evaluation of the collateral associatedwith the loan. The Company maintains a junior

 

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interest in thiscollateral.  As of June 30, 2004, theremaining collateral consists of common stock of the Company.  When considering the adequacy of thecollateral for the Company’s $1,000,000 receivable plus accrued interest , the Company considers the balance of a loanoutstanding ($485,337 as of June 30, 2004) between an entity controlled by Mr.Schumacher with a financial institution and the fact that the Company has ajunior position in regards to the remaining collateral associated with thatloan, as well as the liquidity and net realizable value of the remaining assetsunderlying the collateral.  The ultimatevalue that may be recovered by the Company is dependent on numerous factors includingmarket conditions relative to the value of and ability to sell the Company’scommon stock, and the financial status of Mr. Schumacher. At June 30, 2004, theCompany performed a test for impairment of its loan receivable by analyzing thevalue of the collateral, and determined that the loan receivable was notimpaired. While the loan receivable was not impaired as of June 30, 2004,fluctuations in the quoted market value of the Company’s common stock, whichcomprises the remaining collateral, may be an indicator of impairment.  Based on the Company’s assessment as of andthrough July 2004, the Company estimates that the value of the collateralapproximates the amount of the Company’s recorded loan.  If actual market conditions are lessfavorable or other factors arise that are significantly different than thoseanticipated by management, a write-down of this asset might be required.

 

*IncomeTaxes*

 

In the year2000, the Company established a full valuation allowance for its deferred taxassets in accordance with Statement of Financial Accounting Standards No. 109and in consideration of three consecutive years of losses; accordingly, theCompany has not recognized a consolidated income tax benefit associated withthe net loss in the second quarter of 2004 and the second quarter of 2003.  However, consistent with our presentation ofdiscontinued operations in accordance with paragraphs 30 and 42 of Statement ofFinancial Accounting Standards No. 144 “Accounting for the Impairment orDisposal of Long-Lived Assets,” the Company is showing a tax benefit from thelosses incurred on its unprofitable continuing operations, offset by a taxprovision for its profitable discontinued operations.

 

#### ***Discontinued Operations***

 

Operating income fromdiscontinued operations was $237,000 in the second quarter of 2004, a decreaseof $148,000 or 38.4% from income of $385,000 for the second quarter of2003.  The decrease was primarily due tomore aggressive pricing for diagnostic component products, resulting in lowermargins and lower gross profit.

 

#### ***Net Loss***

#### ** **

The Companyhad a net loss of $349,000 in the second quarter of 2004 as compared to a netloss of $225,000 in the second quarter of 2003, primarily due to a lower profitin the second quarter of 2004 from discontinued operations as explained infurther detail above.

 

**RESULTSOF OPERATIONS**

 

**SIXMONTHS ENDED JUNE 30, 2004 AND 2003**

 

*Revenue*

 

PCT related revenues amountedto $236,000 in the first half of 2004, as compared to $408,000 in the firsthalf of 2003.

 

Product Revenue. The Company had no PCT Barocycleräunit sales in the first half of 2004 as compared to one unit sale of a PCTBarocyclerä in the first half of 2003.  The Company is continuing to work on thedevelopment of a less expensive and smaller bench top version of the PCTBarocyclerä, which the Company presently plans to have readyfor commercial sale in the fourth quarter of 2004.

 

Service and Grant Revenue.  A decrease in PCT grant revenue was primarilyrelated to a lower level of research conducted under SBIR research grants inthe first half of 2004 ($226,000) as compared to the first half of

 

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2003($334,000). During the first half of 2003, work wasconducted on two Phase-II SBIR grants; work on one of the two grants wascompleted in the first quarter of 2004, thus resulting in a lower level of workrequired during the first half of 2004. Work on the one remaining Phase II SBIRgrant is nearly complete, with the expectation that all work will be completedduring the third quarter of 2004.  TheCompany has submitted three new SBIR research grant proposals to fundadditional research.

 

*Cost of Products*

 

The cost of PCT products sold decreased to$35,000 in the first six months of 2004 from $54,000 in the first six months of2003, a change of $19,000, or 35.2%.  Thedecrease was primarily related to the sale of a PCT Barocycleräunit during the first six months of 2003.

 

*Research and Development*

 

Research anddevelopment expenditures decreased 34.1%, or $224,000, to $433,000 in the firstsix months of 2004 from $657,000 in the first six months of 2003.  The decreased level of expenditures wasassociated primarily with the completion of one Phase-II SBIR grant during thefirst quarter of 2004, resulting in less research and development workperformed in the first six months of 2004. During the first six months of 2003,work was conducted on two Phase-II SBIR grants. Work on the one remaining PhaseII SBIR grant is nearly complete, with the expectation that all work will becompleted during the third quarter of 2004.

 

*Selling and Marketing*

 

PCT relatedselling and marketing expenses decreased by 35.7%, or $70,000, to $126,000 inthe first half of 2004 from $196,000 in the first half of 2003. This decreasewas associated with a reduced level of trade show expenditures, coupled withvacant sales positions in the first half of 2004. In the first half of 2003,the Company had two full time sales representatives employed for PCT relatedsales and marketing activities.  At present,the PCT segment does not employ any sales representatives, but is expected todo so in the near future.

 

*General and Administrative*

 

General andadministrative costs totaled $622,000, a decrease of $125,000 or 16.7% from$747,000 in the first six months of 2003. The first six months of 2003 includednon-recurring costs associated with legal and director fees incurred by theSpecial Oversight Committee of the Company’s Board of Directors, formed inFebruary 2003 to oversee the management of the affairs of the Company untilsuch time as a new Chief Executive Officer was employed. The Company alsoincurred increased legal fees during the first six months of 2003 associatedwith the March 2003 adoption of a Shareholders Purchase Rights Plan.  The second quarter of 2004 included certainmonthly commitment and servicing fees associated with a new line of crediteffective February 2004.

 

*OperatingLoss from Continuing Operations*

 

The operatingloss of the PCT business decreased to $980,000 in the first six months of 2004from $1,247,000 in the first six months of 2003. The decrease was primarily dueto decreased research and development activities and lower general andadministrative costs.

 

#### ***Other Operating Credits and Charges***

 

BBI Source Scientific, Inc.,together with Source Scientific, LLC, recognized an operating loss of $303,000in the first six months of 2004, a decrease of $35,000 or 10.4% from anoperating loss of $338,000 in the first six months of 2003. The decrease wasthe result of slightly higher margins on product sales. See also Notes #1 and#5 to the Condensed Consolidated Financial Statements.

 

*NetInterest Expense*

 

Net interestexpense increased to $51,000 in the first six months of 2004 as compared to$27,000 in the first six months of 2003. The first six months of 2004 includedinterest expense associated with borrowings on the Company’s line of credit,which became effective on February 5, 2004; a portion of the increasedborrowings on the line of credit was due to payment of certain transactionscosts associated with the Company entering into an Asset Purchase Agreement inApril 2004. In the secondquarter of 2004, the Company was notified by the lender under its

 

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revolvingline of credit that as a result of the Company committing to sell substantiallyall of its assets to SeraCare Life Sciences pursuant to the Asset PurchaseAgreement described in Note 3 of Notes to Condensed Consolidated FinancialStatements preceding, the Company was in technical default with respect to thisrevolving line of credit.  In May 2004,the lender agreed to waive this default in return for certain changes toterminations provisions of the line plus a $25,000 waiver fee, which was paidby the Company in the second quarter of 2004 and charged to interest expense.

 

### *Loan Receivable from Director and ChiefExecutive Officer*

 

As of June 30,2004, the Company evaluated the recoverability of a $1,000,000 loan receivableplus accrued interest from Mr. Richard T. Schumacher, a Director and theCompany’s current Chief Executive Officer, which is reflected on its balancesheet in stockholders’ equity as a loan receivable as of December 31, 2003 andJune 30, 2004. The Company’s review includes an evaluation of the collateral associatedwith the loan. The Company maintains a junior interest in this collateral.  As of June 30, 2004, the remaining collateralconsists of common stock of the Company. When considering the adequacy of the collateral for the Company’s$1,000,000 receivable, the Company considers the balance of a loan outstanding($485,337 as of June 30, 2004) between an entity controlled by Mr. Schumacherwith a financial institution and the fact that the Company has a juniorposition in regards to the remaining collateral associated with that loan, aswell as the liquidity and net realizable value of the remaining assetsunderlying the collateral.  The ultimatevalue that may be recovered by the Company is dependent on numerous factorsincluding market conditions relative to the value of and ability to sell theCompany’s common stock, and the financial status of Mr. Schumacher. At June 30,2004, the Company performed a test for impairment of its loan receivable byanalyzing the value of the collateral, and determined that the loan receivablewas not impaired. While the loan receivable was not impaired as of June 30,2004, fluctuations in the quoted market value of the Company’s common stock,which comprises the remaining collateral, may be an indicator of impairment.  Based on the Company’s assessment as of andthrough July 2004, the Company estimates that the value of the collateralapproximates the amount of the Company’s recorded loan.  If actual market conditions are less favorableor other factors arise that are significantly different than those anticipatedby management, a write-down of this asset might be required.

 

*IncomeTaxes*

 

In the year 2000, theCompany established a full valuation allowance for its deferred tax assets inaccordance with Statement of Financial Accounting Standards No. 109 and inconsideration of three consecutive years of losses; accordingly, the Companyhas not recognized a consolidated income tax benefit associated with the netloss from the first six months of 2004 and the first six months of 2003.However, consistent with our presentation of discontinued operations inaccordance with paragraphs 30 and 42 of Statement of FinancialAccounting Standards No. 144 “Accounting for the Impairment or Disposal ofLong-Lived Assets,” the Company is showing a tax benefit from the lossesincurred on its unprofitable continuing operations, offset by a tax provisionfor its profitable discontinued operations. Income tax expense in the first six months of both 2004 and 2003relates to various state income taxes. 

 

*Discontinued Operations*

 

Operating income fromdiscontinued operations was $581,000 in the first six months of 2004, adecrease of $302,000 or 34.2% from income of $883,000 for the first six monthsof 2003.  The decrease was primarily dueto more aggressive pricing for diagnostic component products, resulting inlower margins and lower gross profit.

 

#### **On March 4, 2004, the Company entered into a leasetermination agreement with the landlord of the facility previously occupied byBBI Clinical Laboratories, Inc., formerly a wholly-owned subsidiary of theCompany in the clinical laboratory testing services segment.  The agreement calls for a series of reducedpayments over the next nine months in return for the Company vacating thefacility; the Company vacated the facility in the second quarter of 2004.Accordingly, the Company recognized a $135,000 gain in the first quarter of2004 associated with this favorable early termination lease agreement. TheCompany’s estimate of remaining short and long term accrued liabilities to exitthe clinical laboratory testing business is approximately $151,000 as of July2004.**

 

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#### ***Net Loss***

 

The Company had a net loss of $505,000 in the first six months of 2004as compared to a net loss of $479,000 in the first six months of 2003. Theincreased loss was primarily due to the lower profits in the first six monthsof 2004 from discontinued operations as explained in further detail above.

 

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**LIQUIDITY AND FINANCIAL CONDITION**

 

The Company’s working capital position, excluding restricted cash of$33,000 as of June 30, 2004, decreased to $8.0 million as of June 30,2004 from $9.2 million as of December 31, 2003.

 

Net cash used by operations for the six months ended June 30, 2004was $843,000 as compared to net cash used by operations of $1,206,000 for thesix months ended June 30, 2003. The cash used in operations for both yearswas primarily a result of losses incurred.

 

With respect tothe Company’s discontinued operations, the Company entered into a new facilitylease for its repository operations in Frederick MD in the first half of 2004;occupancy is anticipated in the third quarter of 2004. The Company has recentlycommitted to incur construction costs in order to complete the facility, in theestimated amount of $2,600,000, of which the landlord has agreed to provide anallowance of $1,950,000 towards these costs. The landlord contribution isexpected to cover projected construction outlays through the third quarter of2004; accordingly, approximately $650,000 of unreimbursed construction costsmay occur in the fourth quarter of 2004. A portion or all of these costs may be either assumed by SeraCare(assuming the transaction closes as anticipated), or remitted to the Company bySeraCare via reimbursement pursuant to the existing purchase price adjustmentclause, whereby the purchase price is to be adjusted up or down on a dollar fordollar basis if the net assets sold as of the closing date are greater or lessthan $8.5M. If the SeraCare transaction does not close as anticipated, theCompany expects the unreimbursed costs would be funded by cash generated fromoperations, and utilization of the Company’s existing $2.5M line of credit.

 

Net cash provided by financing activities for the six months endedJune 30, 2004 was $38,000 compared to cash used of $90,000 during the sixmonths ended June 30, 2003.  TheCompany has drawn approximately $524,000 (excluding $166,000 of related expenses)on its line of credit to finance costs on its pending transactions.

 

*Line ofCredit*

 

On February 5, 2004, the Company entered into a three year,$2,500,000 revolving line of credit agreement with a private lender.  The revolving line of credit bears interestat the base rate plus 3%, carries commercially standard unused line andcollateral management fees (payable monthly), and is collateralized by tradeaccounts receivable and inventory of the Company.  Borrowings under the revolving line of creditare limited to commercially standard terms and percentages of accountsreceivable at present. The revolving line of credit contains financial andother covenants, including a minimum debt service coverage ratio and certainrestrictions on the payments of dividends and incurring additional debt. The amount borrowed pursuant to thisrevolving line of credit was $523,897 as of June 30, 2004.  In accordance with the provisions of therevolving line of credit agreement, all cash receipts of the Company associatedwith trade accounts receivable are deposited into a restricted bankaccount.  This account balance ofapproximately $33,000 is reported as restricted cash on the accompanyingbalance sheet as of June 30, 2004. In the second quarter of 2004, the Company was notified by the lenderunder this revolving line of credit that as a result of the Company committingto sell substantially all of its assets to SeraCare Life Sciences pursuant tothe Asset Purchase Agreement described in Note 3 of Notes to Condensed ConsolidatedFinancial Statements preceding, the Company was in technical default withrespect to this revolving line of credit. In May 2004, the lender agreed to waive this default in return for a$25,000 waiver fee payable immediately and an increase in the minimumtermination fee should the Company elect to terminate this agreement, at itsoption, during the first year of the agreement.

 

*Investment in Panacos Pharmaceuticals*

 

As of June 30, 2004, the Company is the owner of approximately4.45% of Panacos Pharmaceuticals, which is recorded on the Company’s books at acost of $9,178 as of both December 31, 2003 and June 30, 2004.  In the second quarter of 2004, PanacosPharmaceuticals entered into a definitive merger agreement with V.I.Technologies, Inc. (Nasdaq: VITX, market price pershare was $0.72 on August 13, 2004), a biotechnology company dedicated todeveloping novel anti-infective technologies. The transaction is expected toclose in the third quarter of 2004 and is subject to the approval by shareholdersof both companies (scheduled for August 20, 2004) and other customaryclosing conditions. Should the above noted transaction be approved by theshareholders of both V. I. Technologies, Inc. and Panacos Pharmaceuticals, theCompany’s existing stock ownership in Panacos Pharmaceuticals could beconverted into approximately 1,110,000 shares of common stock of V.I.Technologies, Inc., with the possibility of an additional 885,000 shares ofcommon stock in the event that certain milestones are achieved.

 

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*Summary*

 

Based on current forecasts and the recent establishment of a threeyear, $2,500,000 line of credit, management believes the Company has sufficientliquidity to finance operations for the next twelve months. Management’sforecasts involve assumptions that could prove to be incorrect. If the Companycontinues to incur operating losses or negative cash flows, it may need toraise additional funds. There can be no assurance that these funds will beavailable when required on terms acceptable to the Company, if at all. Ifadequate funds are not available when needed, the Company may be required tofurther reduce certain of its costs and delay, scale back, or eliminate certainof its activities, including its construction activities, any of which couldhave a material adverse long term effect on its business, financial conditionand results of operations.

 

The Company has considered various sources of additional financing,including but not limited to, sale of business segments, strategic alliancesand private placements of debt or equity securities, which could result indilution to the Company’s stockholders.  On October 25, 2002, theCompany retained an investment banking firm to advise the Company in theevaluation of strategic opportunities aimed at increasing shareholder value andliquidity by increasing the capital needed for growth.  As described previously, onApril 16, 2004, the Company entered into an Asset Purchase Agreement tosell substantially all of its assets, which consists of the assets of its BBIDiagnostics and BBI Biotech business units to SeraCare.  The purchase price is $30.0 million incash, plus the assumption of certain liabilities related to the BBI Diagnosticsand BBI Biotech business units, and is subject to adjustment at closing basedon the value of the net assets being sold. Of the $30.0 million purchase price,$2.5 million will be held in escrow for a period of 18 months following theclosing.  The purchase price may be adjusted up or down on a dollar for dollarbasis if the nets assets sold as of the closing date are greater or less than$8.5M.  As of June 30, 2004, the netbook value of assets being sold is estimated to be approximately $8.9M (whichincludes approximately $300,000 of adjustments per the Asset PurchaseAgreement).  Simultaneously withthe announcement of the Asset Sale, BBI stated its intention to commence anissuer tender offer to purchase up to 6,000,000 shares of its common stock at aprice of $3.50 per share shortly following the completion of the sale toSeraCare. BBI expects to use up to $21.0 million of the after-tax net proceedsfrom the sale to SeraCare to purchase shares of its common stock tendered inthe tender offer. The remaining net proceeds from the sale to SeraCare, aftertaxes and transaction fees, which is estimated to beapproximately $1.0M, plus any portion of the escrowed amount released to BBI,are expected to be used primarily for working capital for the Company’spressure cycling technology activities. Accordingly, if the above notedtransactions occur as anticipated, the remaining entity will be comprisedprimarily of PCT related assets and liabilities. Operating results for the three months ended March 31, 2004 are notexpected to be indicative of the results that may be expected for the yearending December 31, 2004 or in subsequent years.

 

InJune 2004, Boston Biomedica, Inc. announced that it had completed the saleof substantially all of the assets as well as selected liabilities of BBISource Scientific, Inc. (the Company’s instrumentation division) to SourceScientific, LLC, an entity owned 35% by Mr. Richard W. Henson, 35% by Mr. BruceA. Sargeant, and 30% by Boston Biomedica, Inc (the “Agreement”).  The Agreement calls for BBI to receive notesin the aggregate amount of $900,000 (the “Notes”), plus accrued interest,payable at the end of three years.  TheAgreement provides for discounts on the Notes in the event of an early payoff.  As a result of this transaction, the Companyceased funding all day-to-day cash operating requirements of BBI SourceScientific, Inc. effective June 2, 2004. As part of the Agreement, SourceScientific LLC will provide engineering, manufacturing, and other relatedservices for BBI’s Pressure Cycling Technology (PCT) products untilSeptember 30, 2005, at the rate of $25,000 per month.**  **Payment by the Company to Source Scientific LLC is contingent uponactual services being rendered to the Company by Source Scientific LLC.  See also Notes #1 and #5 to the CondensedConsolidated Financial Statements.

 

*Related Party Transaction*

 

In January 2002, the Company pledged a $1,000,000 interest bearingdeposit at a financial institution to secure the Company’s limited guaranty ofloans in the aggregate amount of $2,418,000 from the financial institution toan entity controlled by Richard T. Schumacher, a Director and the Company’scurrent Chief Executive Officer.  Theloans from the financial institution to the entity controlled by Mr.Schumacher, which are personally guaranteed by Mr. Schumacher, were originallysecured by collateral which includes certain real property owned by Mr.Schumacher and all of his shares of common stock held in the Company.  The Company’s pledge is secured by a juniorsubordinated interest in the collateral provided by Mr. Schumacher to thefinancial institution. The Company’s pledge of $1,000,000 was made to assistMr. Schumacher in refinancing his indebtedness related to, among other things,his divorce settlement and to enable him to avoid the need to sell his Companycommon stock

 

23

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on the open market to satisfy hisdebts.  The Company’s Board of Directorsand a special committee of the independent directors of the Board of Directors,evaluated a number of options and concluded that the pledge of the $1,000,000interest bearing deposit was the best option and in the best interests of theCompany’s stockholders in the belief that it would, among other things, avoidselling pressure on the Company’s common stock and relieve the financialpressures on Mr. Schumacher that could otherwise divert his attention from theCompany.  In January 2003, the$1,000,000 held in the interest bearing deposit account pledged to a financialinstitution to secure the Company’s limited guaranty was used by the financialinstitution to satisfy the Company’s limited guaranty obligation to thefinancial institution. The Company has no further obligations to the financialinstitution and has a loan receivable in the amount for $1,000,000 (plusaccrued interest) from Mr. Schumacher. The Company continues to maintain itsjunior interest in collateral pledged by Mr. Schumacher to the financialinstitution. The Company reflected the $1,000,000 pledge as restricted cash onits balance sheet as of December 31, 2002 until the cash was used tosatisfy the Company’s limited guaranty in January 2003 and since then hasreflected a $1,000,000 loan receivable on its balance sheet in stockholders’equity.

 

On February 14, 2003, the Company announced that its Board ofDirectors terminated Mr. Schumacher as Chairman and Chief Executive Officer,effective immediately.  Mr. Schumacherremained as a Director of the Company. Kevin W. Quinlan, President and ChiefOperating Officer, continued to lead day-to-day operations.  A special committee of the Board of Directorswas appointed to oversee the management of the affairs of the Company untilsuch time as a new Chief Executive Officer was employed.

 

OnJuly 9, 2003, the Company announced that Mr. Schumacher agreed to acceptan engagement with the Company as an Executive Project Consultant to advise theCompany with respect to the strategic direction of the Company’s PCT and BBISource Scientific activities and the Company’s ownership interest in PanacosPharmaceuticals, Inc.  BBI SourceScientific, Inc. is the Company’s California-based instrument subsidiary, whichdeveloped and manufactures the PCT BarocyclerTM instrument.  As part of this engagement, Mr. Schumachercontinued to reevaluate the ongoing business prospects for both the Company’sLaboratory Instrumentation segment and PCT activities. On February 9,2004, the Company announced it had extended until December 31, 2004 theExecutive Consultant Agreement it had with Mr. Schumacher.  Under the terms of the Consulting Agreement,Mr. Schumacher served in an advisory role directing the Company’s PCT and BBISource Scientific activities, the Company’s interest in PanacosPharmaceuticals, Inc. and such other duties as the President or the Board ofDirectors of the Company assigned to him. In addition to these responsibilities, Mr. Schumacher also continued hislead role in working with William Blair & Co. the Chicago, an Illinoisbased investment banking firm retained by the Company inOctober 2002.   In connection withhis Consulting Agreement, Mr. Schumacher was paid an annualized salary of$250,000.  In addition to his salary, Mr.Schumacher was eligible to receive, at the discretion of the Company’s Board ofDirectors, a bonus in an amount to be determined by the Board of Directors inrecognition of the successful completion of his duties and responsibilitiesunder the agreement, and he was also eligible to participate in the Company’shealth and medical insurance, disability insurance, group life insurance andgroup travel insurance, and 401(k) retirement plans.

 

On April 20, 2004, the Board of Directors ofBBI announced the appointment of Mr. Schumacher to the Company’s open positionof Chief Executive Officer (CEO), effective immediately.  Mr. Schumacher, the Founder of the Company,has served as a member of the Board of Directors of BBI since 1978, was theCompany’s President from 1986 to 1999, and was CEO and Chairman of the Boardfrom 1992 to February 2003. Mr. Schumacher is working as an employee ofthe Company pursuant to the terms of his existing consulting agreement.

 

**CRITICAL ACCOUNTING POLICIES**

 

The critical accounting policies utilized by the Company in thepreparation of the accompanying financial statements are set forth in Part I,Item 7 of the Company’s Form 10-K/A for the year ended December 31, 2003,under the heading “Management’s Discussion and Analysis of Financial Conditionand Results of Operations”.  There have been no material changes to thesepolicies since December 31, 2003.

 

OnApril 16, 2004, Boston Biomedica, Inc. (“BBI”) announced that it hadsigned an Asset Purchase Agreement (the “Asset Purchase Agreement”) to sellsubstantially all of the assets and selected liabilities of its BBI Diagnosticsand BBI Biotech Divisions to SeraCare Life Sciences, Inc. (“SeraCare”) ofOceanside, California (the “Asset Sale”). Accordingly, in the second quarter of 2004, the Company reclassified theabove referenced assets and liabilities into separate balance sheet categoriesentitled “Assets Held for Sale” and “Liabilities held for Sale”, in accordancewith

 

24

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the provisions of Statement of Financial Accounting StandardsNo. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”.  The Company ceased depreciation andamortization, estimated at approximately $250,000 per quarter, on such longlived assets held for sale effective April 16, 2004, in accordance withthe provisions of this accounting pronouncement.

 

Deferred Costs

 

TheCompany has deferred approximately $410,000 of transaction costs as ofJune 30, 2004 associated with the above noted Asset Purchase Agreement.Assuming the transaction closes as anticipated, these costs will be included inthe final gain computation associated with the Asset Purchase Agreement,otherwise the Company may be required to write off these costs if thetransaction does not proceed as anticipated. In addition, as discussed in Note 9 of Notes to Condensed ConsolidatedFinancial Statements, the Company has deferred approximately $145,000 of costsas of June 30, 2004 associated with obtaining a line of credit. Thesecosts are being amortized to expense on a straight-line basis over the threeyear life of the agreement commencing February 2004.

 

Patent Costs

 

The Company’s policy is to expense all new patentrelated legal costs as incurred.

 

Research & Development Costs

 

The Company’s policy is to expense substantially allnew PCT related research and development costs as incurred.

 

**CONTRACTUAL OBLIGATIONS**

 

Thefollowing is a summary of the Company’s future contractual obligations as ofJune 30, 2004.  The items noted inthe first five lines below, which are entitled “mortgage payments, operating lease obligations, note payable, realestate facility leases and construction purchase commitment” are all associatedwith assets and liabilities anticipated to be assumed by SeraCare pursuant tothe terms and conditions of the Asset Purchase Agreement.  Items noted in the last five lines below,which are entitled “minimum future royalty payments, obligations relating todiscontinued operations – clinical laboratory testing services segment,revolving line of credit, PCT related purchase commitment, and CA real estatefacility lease guarantee” are expected to remain with the Company. 

 

25

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| ** **                                                                                        | ** ** | **Payments Due by Period** | ** **     |
|---------------------------------------------------------------------------------------------------|------------|----------------------------|----------------|
| **Contractual  Obligations**                                                                      | ** ** | **Total**                  | ** **     | **Less than  1 year** | ** ** | **1-3  years** | ** ** | **4 - 5  years** | ** ** | **More than  5  years** | ** ** |
|                                                                                              |       |                       |           |   |   |   |   |   |   |   |   |
| Obligations expected to be assumed by  SeraCare:                                                  |       |                       |           |   |   |   |   |   |   |   |   |
| Mortgage payments (1)                                                                             |       | $                          | 3,510,000      |   | $ | 287,000 |   | $ | 575,000 |   | $ | 575,000 |   | $ | 2,073,000 |   |
| Operating Lease Obligations                                                                       |       | 46,000                     |           | 20,000 |   | 26,000 |   | — |   | — |   |
| Note Payable                                                                                      |       | 13,000                     |           | 5,000 |   | 8,000 |   | — |   | — |   |
| Real Estate Facility Leases  (2)                                                             |       | 12,077,000                 |           | 1,050,000 |   | 2,920,000 |   | 1,997,000 |   | 6,110,000 |   |
| Construction purchase commitment (3)                                                              |       | 650,000                    |           | 650,000 |   | — |   | — |   | — |   |
| subtotal – obligations expected to be  assumed by SeraCare                                   |       | $                          | 16,296,000     |   | $ | 2,012,000 |   | $ | 3,529,000 |   | $ | 2,572,000 |   | $ | 8,183,000 |   |
|                                                                                              |       |                       |           |   |   |   |   |   |   |   |   |
| Obligations expected to be retained by the  Company:                                              |       |                       |           |   |   |   |   |   |   |   |   |
| Minimum future royalty payments (4)                                                               |       | —                     |           | — |   | — |   | — |   | — |   |
| Obligations relating to Discontinued  Operations – clinical lab testing services segment (5) |       | 153,000                    |           | 58,000 |   | 60,000 |   | 10,000 |   | 25,000 |   |
| Revolving Line of Credit (6)                                                                      |       | 524,000                    |           | 524,000 |   | — |   | — |   | — |   |
| PCT related purchase commitment (7)                                                               |       | 375,000                    |           | 300,000 |   | 75,000 |   |   |   |   |   |
| CA Real Estate Facility Lease Guarantee (8)                                                       |       | —                     |           | — |   | — |   | — |   | — |   |
| subtotal – obligations expected to be  retained by the Company                               |       | $                          | 1,052,000      |   | $ | 882,000 |   | $ | 135,000 |   | $ | 10,000 |   | $ | 25,000 |   |
| **Total Contractual  Obligations**                                                                |       | **$**                      | **17,348,000** | ** ** | **$** | **2,894,000** | ** ** | **$** | **3,664,000** | ** ** | **$** | **2,582,000** | ** ** | **$** | **8,208,000** | ** ** |

 

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(1)  Future monthly payments on this mortgageinclude principal and interest, based on a 20-year amortizationschedule with a balloon payment representing the remaining balance due infull on March 10, 2010.  During the first five years, the note carriesan interest rate of 9.75%; after five years (March 2005), the rate chargedwill be .75% greater than theCorporate Base Rate then in effect. The information presented in the tableabove is presented using an assumed annual mortgage interest rate of 9.75% forall periods presented.

 

(2)  The Company leases certainoffice space, repository, research and manufacturing facilities in Marylandunder operating leases with various terms through October 2007. The realestate leases for facilities located in Maryland include renewal options ateither market or increasing levels of rent. In March 2004, the Company entered into an eleven year leaseagreement with an existing landlord for approximately 65,160 sq ft of newrepository space located in Frederick, MD; this lease is scheduled to takeeffect in two stages, August 1, 2004 and August 1, 2005.  The landlord has agreed to terminate in fullthe Company’s remaining obligations pursuant to an existing facility lease inFrederick, MD which was scheduled to terminate in November 2006.Incremental minimum lease payments pursuant to the new lease (which are net ofsavings associated with the concurrent termination of the existing lease) wouldamount to $55,900 in year 2004, $885,000 in years 2005-2006, $1,755,000 inyears 2007-2008, and $6,563,000 thereafter; these amounts are included in thetable above.

 

(3)  Asdiscussed further in Note 2 above, in March 2004, the Company entered intoan eleven year lease agreement with an existing landlord for approximately65,160 sq ft of new repository space located in Frederick, MD; this lease isscheduled to take effect in two stages, August 1, 2004 and August 1,2005.  The costs tobuild out the facility is estimated to be approximately $2,600,000, ofwhich the new lease agreement calls for the landlord to contributeapproximately $1,950,000.  The remainderof costs expected to be incurred is shown in the table above, based upon theCompany’s most recent estimate to completion. Assuming the transaction withSeraCare is completed as anticipated, it is expected that a portion or all ofthese costs would be assumed by SeraCare.

 

(4)  TheCompany acquired in 1998 all the remaining outstanding common stock of BioSeq,Inc., a development stage company involved with PCT. In accordance with theprovisions of a technology transfer agreement assumed in

 

26

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the transaction, the Company is obligated to paya 5% royalty on net sales (until March 2016) of future sales by any entityof the Company utilizing PCT, with required minimum royalty payments havingended in 2003. The Company announced the availability of its PCT products forcommercial sale in the latter part of year 2002.

 

(5)  In December 2000,the Company made a decision to exit the clinical laboratory testing servicessegment and in February 2001, BBI Clinical Laboratories, Inc., awholly-owned subsidiary of the Company. The Company’s estimate of remaining short and long term accruedliabilities to exit the clinical laboratory testing business is $151,000 as ofJune 30, 2004.   See also Note 8 ofNotes to Condensed Consolidated Financial Statements hereunder, included inPart I, Item 1 of this Form 10-Q; amounts due pursuant to a lease terminationagreement entered into in March 2004 are reflected in the above table.

 

(6)  In February 2004, theCompany entered into a three year, $2,500,000 revolving line of creditagreement with a private lender.  Thebalance outstanding on this line of credit was $523,897 as of June 30,2004.

 

(7)  Source Scientific, LLC will provideengineering, manufacturing, and other related services for BBI’s PressureCycling Technology (PCT) products until September 30, 2005, at the rate ofapproximately $25,000 per month.**  **Payment iscontingent upon actual services being rendered to the Company by SourceScientific LLC. The chart above assumes a $25,000 per month payment.

 

(8)  The Company also leases27,000 square feet of space in Garden Grove, California where its BBI Sourcebusiness unit previously manufactured laboratory instruments. The lease forthis facility expires January 31, 2005 and there is currently no extensionor renewal option. In June 2004, Boston Biomedica, Inc. announced that ithad completed the sale of substantially all of the assets as well as selectedliabilities of BBI Source Scientific, Inc. (the Company’s instrumentationdivision) to Source Scientific, LLC, an entity owned35% by Mr. Richard W. Henson, 35% by Mr. Bruce A. Sargeant, and 30% by BostonBiomedica. In June 2004, theCompany received approval of the landlord to assign this lease to SourceScientific, LLC. As of August 2004, the remaining obligation of theCompany is in the form of a guarantee to the landlord for five monthly rentpayments, covering the period September 2004 through January 2005 atapproximately $32,000 per month, should Source Scientific, LLC not meet itsobligations. The schedule above assumes that no additional payments willbe required to be made by the Company pursuant to this lease.

 

**FORWARD-LOOKING STATEMENTS**

 

This Quarterly Report on Form 10-Q contains forward-looking statementswhich involve risks and uncertainties, including statements regarding theCompany’s plans, objectives, expectations and intentions.  In some cases, forward-looking statements areidentified by terms such as “may”, “will”, “should”, “could”, “would”,“expects”, “plans”, “anticipates”, “believes”, “estimates”, “projects”,“predicts”, “potential”, and similar expressions intended to identifyforward-looking statements. Such statements include, without limitation,statements made regarding the expected recovery and value of the loanreceivable from the Company’s Chief Executive Officer; the Company’s beliefthat it has sufficient liquidity to finance operations over the next twelvemonths; the Company’s expectation to complete the sale of its Diagnostics andBiotech business units to SeraCare; the expected payment of the promissory notereceived from the sale of its BBI Source Scientific business unit; the proceedsremaining from the purchase price received from SeraCare after payment of taxesand transaction fees and related costs; the Company’s plans following theclosing of the sale of its Diagnostics, Biotech and BBI Source Scientific businessunits; the Company’s intent to commence an issuer tender offer following thecompletion of the sale of its Diagnostics and Biotech business units; and theanticipated future financial performance of the Company and its products.  These forward-looking statements are onlypredictions and involve known and unknown risks, uncertainties, and otherfactors that may cause the Company’s actual results, levels of activity,performance, or achievements to be materially different from any futureresults, levels of activity, performance, or achievements expressed or impliedby such forward-looking statements. Also, these forward-looking statementsrepresent the Company’s best estimates and assumptions only as of the date ofthis Report.  Except as otherwise requiredby law, the Company expressly disclaims any obligation or undertaking torelease publicly any updates or revisions to any forward-looking statementcontained in the Report to reflect any change in the Company’s expectations orany change in events, conditions, or circumstances on which any of theCompany’s forward-looking statements are based.

 

Factors, risks and uncertainties which might cause actual results todiffer materially from those projected in the forward-looking statementscontained herein include the following:

 

27

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•                  due tooperational, scientific or technical difficulties in the implementation of theCompany’s strategies and changes in customer demand, the Company’s sales to IVDtest kit manufacturers and sales of ACCURUN and other quality control productsmay decline;

•                  the Company may not be successful incommercializing its Pressure Cycling Technology (“PCT”) products and services,or such activities may take longer than currently expected;

•                  the Companymay not have sufficient resources to develop new or improved PCT products;

•                  demand forcommercial applications of PCT may not materialize as expected or may takelonger than expected to materialize;

•                  PCT may also not be adaptable to any othercommercially viable applications;

•                  certain PCTapplications may not fall within the claims of the Company’s twelve issued U.S.patents;

•                  individualsand groups utilizing PCT may be able to license such technology from entitiesother than the Company;

•                  the Companymay be unable to develop the end-user market for its quality control products;

•                  theuncertainty of the renewal and full funding of contracts with NationalInstitutes of Health (NIH);

•                  the Companymay be unable to obtain an adequate supply of the unique and rare specimens ofplasma and serum necessary for certain of its products;

•                  thepotential for significant reductions in purchases by any of the Company’s majorcustomers;

•                  the Companymay be unable to obtain the necessary government approvals for certain of itsproducts;

•                  the Companymay be unable to compete effectively due to rapid changes in technology;

•                  the collateral securing the Company’sloan receivable plus accrued interest from its Chief Executive Officer (as ofJune 30, 2004) may be impaired, and the Company may not be able to fullycollect the principal and interest due on a $1,000,000 receivable (excludingaccrued interest) from its Chief Executive Officer;

•                  the Companymay be unable to comply with the financial and other covenants contained in theCompany’s revolving line of credit;

•                  the risk that thetransaction with SeraCare may not be completed due to the failure to satisfy orwaive conditions to closing;

•                  the risk that the continuity of theCompany’s operations will be disrupted in the event the proposed transaction withSeraCare is not completed;

•                  the costs ofcompleting the proposed asset sale transaction may exceed management’sestimates;

•                  the risk that the timing and amountof the tender offer purchase price may differ from what is presentlyanticipated or that the tender may not be able to be completed at all due tounanticipated events or other circumstances beyond the Company’s control,including unforeseen liabilities or contingencies reducing the amount of proceedsavailable for the tender offer;

•                  the riskthat the Company will not have sufficient funds to operate its remainingbusiness following the closing; and

•                  the risk that if expenses are higherthan anticipated, or if revenues are lower than anticipated or if the Companyis unable to complete the assets sale transaction, the Company may requireadditional capital sooner than expected and there can be no assurance that theCompany will be able to obtain additional financing or capital on acceptableterms, or that it will be successful in eliminating or scaling back certain ofits activities.

 

Certain of these and other factors which might cause actual results todiffer materially from those projected are more fully set forth under thecaption “Risk Factors” in the Company’s Annual Report to the United StatesSecurities and Exchange Commission on Form 10-K/A for the year endedDecember 31, 2003 and in the Company’s other reports and statements theCompany files from time to time with the SEC.

 

**ITEM 3.****  QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

There have been no materialchanges in the reported market risks since December 31, 2003.

 

28

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**ITEM 4.****  CONTROLS ANDPROCEDURES**

 

The Companymaintains disclosure controls and procedures that are designed to ensure thatinformation required to be disclosed in its Securities Exchange Act reports isrecorded, processed, summarized and reported within the time periods specifiedin the SEC’s rules and forms, and that such information is accumulated andcommunicated to the Company’s management, including the Company’s PrincipalExecutive Officer and Principal Financial Officer, as appropriate, to allowtimely decisions regarding required disclosure. In designing and evaluating thedisclosure controls and procedures, management recognized that any controls andprocedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving the desired control objectives, as theCompany’s are designed to do, and management necessarily was required to applyits judgment in evaluating the cost-benefit relationship of possible controlsand procedures.

 

As ofJune 30, 2004, the Company carried out an evaluation, under thesupervision and with the participation of its management, including itsPrincipal Executive Officer and Principal Financial Officer of theeffectiveness of the design and operation of our disclosure controls andprocedures, as defined in Rules 13a-15(e) and 15d-15(e) under the SecuritiesExchange Act of 1934. Based upon that evaluation, the Company’s PrincipalExecutive Officer and Principal Financial Officer concluded that the Company’sdisclosure controls and procedures are effective in enabling the Company torecord, process, summarize and report information required to be included inour periodic SEC filings within the required time period.

 

There have been no changes in the Company’s internal control overfinancial reporting that occurred during the period covered by this report thathave materially affected, or are reasonably likely to materially affect, theCompany’s internal control over financial reporting. 

 

29

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##### **PART II.**  OTHERINFORMATION

#####  

**ITEM 1.****    LEGALPROCEEDINGS**

 

None.

 

#### **ITEM 2.** CHANGES IN SECURITIES AND USE OF PROCEEDS

#### ** **

In connection with the execution and delivery of the Asset PurchaseAgreement dated April 16, 2004 between the Company, BBI Biotech ResearchLaboratories, Inc. and SeraCare, on April 16, 2004, SeraCare enteredinto voting agreements (the “Voting Agreements”) with each of Mr. Richard T.Schumacher, BBI’s founder, Chief Executive Officer and a Director, and Mr.Richard Kiphart, his daughter and Shoreline Micro-Cap Fund I LP, a fund inwhich Mr. Kiphart serves as general partner and has the sole power to vote anddispose or direct the disposition of shares held by such fund. Under the VotingAgreements, these stockholders, who collectively hold an aggregate ofapproximately 32% of BBI’s total outstanding shares entitled to vote at thestockholders meeting, have agreed to vote their shares in favor of the sale ofassets of the Company’s Diagnostics and Biotech business units contemplated bythe Asset Purchase Agreement, in accordance with the Voting Agreements.

 

Prior to the execution and delivery of the Asset Purchase Agreement andthe Voting Agreements, BBI amended its Rights Agreement dated February 27,2003 to provide that none of the following events will trigger the preferredshare purchase rights under that agreement: (i) the execution and delivery ofthe Asset Purchase Agreement, (ii) the execution of the Voting Agreements,(iii) the granting of proxies to vote common stock of BBI by each of Richard T.Schumacher and Richard Kiphart (together with his daughter and ShorelineMicro-Cap Fund I LP, a fund in which Mr. Kiphart serves as general partner ) toSeraCare pursuant to the Voting Agreements, and (iv) the completion of thetransactions under the Asset Purchase Agreement and the taking of actions underthe Voting Agreements. The foregoing description of the preferred sharepurchase rights and the amendment to the Rights Agreement is qualified in itsentirety by reference to Amendment No. 1 to Rights Agreement, which was filedwith SEC on Form 8-A/A on April 16, 2004.

 

**ITEM 3.****  DEFAULTS UPON SENIOR SECURITIES**

 

OnApril 5, 2000, the Company borrowed $2,447,000, net of related costs,under a mortgage agreement on its West Bridgewater, MA facility, of whichapproximately $2,290,000 remains outstanding as of June 30, 2004. Pursuantto this mortgage agreement the Companyis subject to certain financial covenants. The Company failed to meet its debtservice coverage covenant for the year ended December 31, 2003, but in thefirst quarter of 2004 the financial institution waived this default withoutpenalty.

 

On February 5, 2004, the Company entered into a three year,$2,500,000 revolving line of credit agreement with a private lender.  The revolving line of credit bears interestat the base rate plus 3%, carries commercially standard unused line andcollateral management fees (payable monthly), and is collateralized by tradeaccounts receivable and inventory of the Company.  Borrowings under the revolving line of creditare limited to commercially standard terms and percentages of accountsreceivable at present. The revolving line of credit contains a covenantregarding a minimum debt service coverage ratio, provides certain restrictionson the payments of dividends and incurring additional debt, and contains otherstandard covenants. In thesecond quarter of 2004, the Company was notified by the lender under thisrevolving line of credit that as a result of the Company committing to sellsubstantially all of its assets to SeraCare Life Sciences pursuant to the AssetPurchase Agreement described in Note 3 of Notes to Condensed ConsolidatedFinancial Statements preceding, the Company is in technical default withrespect to this revolving line of credit. In May 2004, the lender agreed to waive this default in return for a$25,000 waiver fee payable immediately and an increase in the minimumtermination fee should the Company elect to terminate this agreement, at itsoption, during the first year of the agreement.

 

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

#####  

Not applicable.

 

**ITEM 5.****  OTHER INFORMATION**

None.

 

30

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##### **ITEM 6.** EXHIBITS AND REPORTS ON FORM 8-K

 

**(a)  Exhibits:**

 

**EXHIBIT INDEX **

 
| **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**           |
|            |                                                                                                                                                                                                   |       |          |
| 3.3             | Amendment  to Amended and Restated Bylaws of the Company                                                                                                                                               |       | C**           |
|            |                                                                                                                                                                                                   |       |          |
| 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.   L.P.                         |       | K**           |
|            |                                                                                                                                                                                                   |       |          |
| 4.14            | Rights  Agreement dated as of February 27, 2003 between Boston Biomedica,Inc., and Computershare Trust  Company, Inc.                                                                             |       | P**           |
|            |                                                                                                                                                                                                   |       |          |
| 4.15            | Amendment  No. 1 to Rights Agreement dated April 16, 2004                                                                                                                                         |       | S**           |
|            |                                                                                                                                                                                                   |       |          |
| 10.1            | Lease  Agreement, dated July 28, 1995, for New Britain, Connecticut Facility  between MB Associates and the Company                                                                               |       | A**           |
|            |                                                                                                                                                                                                   |       |          |
| 10.2            | 1987  Non-Qualified Stock Option Plan*                                                                                                                                                                 |       | A**           |
|            |                                                                                                                                                                                                   |       |          |
| 10.3            | Employee  Stock Option Plan*                                                                                                                                                                           |       | A**           |
|            |                                                                                                                                                                                                   |       |          |
| 10.4            | 1999  Non-Qualified Stock Option Plan*                                                                                                                                                                 |       | I**           |
|            |                                                                                                                                                                                                   |       |          |
| 10.5            | 1999  Employee Stock Purchase Plan*                                                                                                                                                                    |       | I**           |
|            |                                                                                                                                                                                                   |       |          |
| 10.6            | Underwriters  Warrants, each dated November 4, 1996, between the Company and each of  Oscar Gruss & Son Incorporated and Kaufman Bros., L.P.                                                  |       | B**           |

 

31

----

 
| 10.7   | Loan  Agreement dated March 31, 2000                                                                                                                                                                                                                                                        |   | C**    |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.8   | First  Amendment to lease dated as of December 12, 2001 by and between Cabot  Industrial Properties, L. P. and BBI Source Scientific, Inc.                                                                                                                                                  |   | D**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.9   | Lease  Agreement, dated May 16, 1997, for Gaithersburg, Maryland facility between  B.F. Saul Real Estate Investment Trust and the Company                                                                                                                                                        |   | E**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.10  | 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**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.11  | Contract,  dated July 1, 1998, between the National Institutes of Health and the  Company (NO1-A1-85341)                                                                                                                                                                                    |   | G**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.12  | Contract,  dated July 1, 1998, between the National Heart Lung and Blood Institute  and the Company (NO1-HB-87144)                                                                                                                                                                          |   | G**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.13  | Agreement  with Paradigm Group for the purchase of warrants dated August 18, 1999                                                                                                                                                                                                           |   | H**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.14  | Agreement  with MDBio for the purchase of common stock and common stock warrants, dated  September 30, 1999                                                                                                                                                                                 |   | J**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.15  | Lease  Agreement dated September 30, 1999, for Frederick, Maryland facility,  between MIE Properties, Inc., and the Company.                                                                                                                                                                |   | J**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.16  | Repository  Contract with National Institute of Allergy and Infectious Disease, Division  of AIDS (NO1-A1-95381), dated August 16, 1999.                                                                                                                                                    |   | J**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.17  | Securities  Purchase Agreement dated as of August 25, 2000, by and among Boston  Biomedica, Inc., and GCA Strategic Investment Fund Limited.                                                                                                                                                |   | K**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.18  | 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**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.19  | Mortgage  and Security Agreement dated March 31, 2000                                                                                                                                                                                                                                       |   | L**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.20  | Asset  Purchase Agreement dated February 20, 2001, by and between  BBI Clinical Laboratories, Inc., Boston  Biomedica, Inc., and Specialty  Laboratories, Inc.                                                                                                                    |   | M**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.21  | Promissory  Note dated July 10, 2001, as amended on October 4, 2001, by and  among Boston Biomedica, Inc. and Richard T. Schumacher.                                                                                                                                                   |   | N**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.22  | 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.                                                                                                |   | O**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.23  | Junior  Participation Agreement dated as of January 15, 2002, by and betweenCommerce Bank and Trust  Company, Resorts Accommodations International, LLC, Richard T. Schumacher and Boston Biomedica, Inc.                                                                              |   | O**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.24  | 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.                                                                                                                           |   | O**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.25  | Pledge  Agreement effective as of January 15, 2002, by and between Boston  Biomedica, Inc. and Commerce Bank and Trust Company.                                                                                                                                                             |   | O**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.26  | Limited  Guaranty dated as of January 15, 2002, by and between Boston Biomedica,  Inc. and Commerce Bank and Trust Company.                                                                                                                                                                 |   | O**    |

 

32

----

 
| 10.27  | Description  of Compensation for Certain Directors*                                                                                                                                  |   | D**            |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|
|   |                                                                                                                                                                                 |   |           |
| 10.28  | Consultant  Agreement between Boston Biomedica, Inc. and Richard T. Schumacher                                                                                                       |   | Q*             |
|   |                                                                                                                                                                                 |   |           |
| 10.29  | Agreement  between Boston Biomedica, Inc. and Richard T. Schumacher                                                                                                                  |   | Q*             |
|   |                                                                                                                                                                                 |   |           |
| 10.30  | Revolving  Credit and Security Agreement dated as of February 5, 2004                                                                                                           |   | R**            |
|   |                                                                                                                                                                                 |   |           |
| 10.31  | Consultant  Agreement between Boston Biomedica, Inc. and Richard T. Schumacher entered  into as of December 31, 2003                                                            |   | R**            |
|   |                                                                                                                                                                                 |   |           |
| 10.32  | Contract  effective 06/01/2001, between the National Cancer Institute and the Company  (NO2-CP-11001)                                                                                |   | R**            |
|   |                                                                                                                                                                                 |   |           |
| 10.33  | Lease  Termination Agreement dated March 4, 2004 between Manafort Family LLCand Boston Biomedica, Inc.                                                                          |   | T**            |
|   |                                                                                                                                                                                 |   |           |
| 10.34  | Description  of Severance Agreement between Boston Biomedica, Inc. and Richard  D’Allessandro as of March 21 2001.                                                         |   | T*             |
|   |                                                                                                                                                                                 |   |           |
| 10.35  | Lease  Agreement dated March 1, 2004 by and between MIE Properties, Inc.  and BBI Biotech Research Laboratories, Inc.                                                      |   | T**            |
|   |                                                                                                                                                                                 |   |           |
| 10.36  | Early  Termination of Lease Agreement dated March 1, 2004 by and between MIE  Properties, Inc. and BBI Biotech Research Laboratories, Inc.                                      |   | T**            |
|   |                                                                                                                                                                                 |   |           |
| 10.37  | Asset  Purchase Agreement dated April 16, 2004, by and between Boston  Biomedica, Inc., BBI Biotech Research Laboratories, Inc. and Seracare Life  Sciences, Inc.               |   | S**            |
|   |                                                                                                                                                                                 |   |           |
| 10.38  | LLC  Membership Interest Purchase Agreement by and among BBI Source Scientific,  Inc., Boston Biomedica, Inc., Richard W. Henson, and Bruce A. Sargeant dated  June 2, 2004.    |   | U**            |
|   |                                                                                                                                                                                 |   |           |
| 31.1   | Principal  Executive Officer Certification Pursuant to Item 601(b)(31) of Regulation  S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of  2002                |   | Filed herewith |
|   |                                                                                                                                                                                 |   |           |
| 31.2   | Principal  Financial and Accounting Officer Certification Pursuant to Item 601(b)(31) of  Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002 |   | Filed herewith |
|   |                                                                                                                                                                                 |   |           |
| 32.1   | Principal  Executive Officer Certification Pursuant to Item 601(b)(32) of Regulation  S-K, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of  2002                |   | Filed herewith |
|   |                                                                                                                                                                                 |   |           |
| 32.2   | Principal  Financial and Accounting Officer Certification Pursuant to Item 601(b)(32) of  Regulation S-K, as adopted pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002 |   | Filed herewith |

 

----

(A)      Incorporatedby reference to the registrant’s Registration Statement on Form S-1(Registration No. 333-10759) (the “Registration Statement”). The number setforth herein is the number of the Exhibit in said Registration Statement.

(B)        Incorporatedby reference to Exhibit No. 10.17 of the Registration Statement.

(C)        Incorporatedby reference to the registrant’s Annual Report on Form 10-K for the fiscal yearended December 31, 2002.

(D)       Incorporatedby reference to the registrant’s Quarterly Report on Form 10-Q for the fiscalquarter ended March 31, 2002.

(E)         Incorporatedby reference to the registrant’s Quarterly Report on Form 10-Q for the fiscalquarter ended June 30, 1997.

 

33

----

 

(F)         Incorporatedby reference to the registrant’s Annual Report on Form 10-K for the fiscal yearended December 31, 1997.

(G)        Incorporatedby reference to the registrant’s Quarterly Report on Form 10-Q for the fiscalquarter ended June 30, 1998.

(H)       Incorporatedby reference to the registrant’s Quarterly Report on Form 10-Q for the fiscalquarter ended September 30, 1999.

(I)            Incorporated byreference to the registrant’s proxy statement, filed with the Securities andExchange Commission on June 14, 1999.

(J)           Incorporatedby reference to the registrant’s Annual Report on Form 10-K/A for the fiscalyear ended December 31, 1999.

(K)       Incorporatedby reference to the registrant’s Report on Form 8-K filed September 8,2000.

(L)         Incorporatedby reference to the registrant’s Quarterly Report on Form 10-Q for the fiscalquarter ended June 30, 2000.

(M)    Incorporatedby reference to the registrant’s Report on Form 8-K filed March 8, 2001.

(N)       Incorporatedby reference to the registrant’s Quarterly Report on Form 10-Q for the fiscalquarter ended September 30, 2001.

(O)       Incorporatedby reference to the registrant’s Annual Report on Form 10-K for the fiscal yearended December 31, 2001.

(P)         Incorporatedby reference to Exhibit 4 of the registrant’s Current Report on Form 8-K filedMarch 12, 2003.

(Q)       Incorporatedby reference to the registrant’s Quarterly Report on Form 10-Q for the fiscalquarter ended September 30, 2003.

(R)        Incorporatedby reference to the registrant’s Annual Report on Form 10-K for the fiscal yearended December 31, 2003.

(S)         Incorporatedby reference to the registrant’s Current Report on Form 8-K filedApril 16, 2004.

(T)        Incorporatedby reference to the registrant’s Quarterly Report on Form 10-Q for the fiscalquarter ended March 31, 2004.

(U)       Incorporatedby reference to the registrant’s Current Report on Form 8-K filed June 16,2004.

 

*                 Management contract or compensatory plan orarrangement.

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

 

**(b) Reports on Form 8-K.**

 

TheCompany filed a Form 8-K, dated April 16, 2004, relative to itsannouncement that it has signed an Asset Purchase Agreement to sellsubstantially all of the assets and selected liabilities of its BBI Diagnosticsand BBI Biotech Divisions to SeraCare Life Sciences, Inc. of Oceanside,California.

 

TheCompany filed a Form 8-K dated June 16, 2004 relative to its announcementthat it has completed the sale of substantially all of the assets as well asselected liabilities of BBI Source Scientific, Inc. (the Company’sinstrumentation division) to Source Scientific, LLC, an entity owned 35% by Mr.Richard W. Henson, 35% by Mr. Bruce A. Sargeant, and 30% by Boston Biomedica.

 

34

----

 

**SIGNATURES**

 

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 
|   |                 | BOSTON BIOMEDICA, INC.                                                                          |   |
|--------|----------------------|-------------------------------------------------------------------------------------------------|--------|
|   |                 | (Registrant)                                                                                    |   |
|   |                 |                                                                                            |   |   |
|   |                 |                                                                                            |   |   |
| Date:  | August 16, 2004 |                                                                                            | By:    | */s/  Kevin W. Quinlan* |   |
|   |                 | Kevin  W. Quinlan,                                                                              |   |
|   |                 | President,  Chief Operating Officer and Treasurer  (Principal Financial and Accounting Officer) |
|        |                      |                                                                                                 |        |  |  |  |  |

 

35

----

 

**EXHIBITINDEX**

 
| **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**           |
|            |                                                                                                                                                                                                   |   |          |
| 3.3             | Amendment  to Amended and Restated Bylaws of the Company                                                                                                                                               |   | C**           |
|            |                                                                                                                                                                                                   |   |          |
| 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.   L.P.                         |   | K**           |
|            |                                                                                                                                                                                                   |   |          |
| 4.14            | Rights  Agreement dated as of February 27, 2003 between Boston Biomedica,Inc., and Computershare Trust  Company, Inc.                                                                             |   | P**           |
|            |                                                                                                                                                                                                   |   |          |
| 4.15            | Amendment  No. 1 to Rights Agreement dated April 16, 2004                                                                                                                                         |   | S**           |
|            |                                                                                                                                                                                                   |   |          |
| 10.2            | 1987  Non-Qualified Stock Option Plan*                                                                                                                                                                 |   | A**           |
|            |                                                                                                                                                                                                   |   |          |
| 10.3            | Employee  Stock Option Plan*                                                                                                                                                                           |   | A**           |
|            |                                                                                                                                                                                                   |   |          |
| 10.4            | 1999  Non-Qualified Stock Option Plan*                                                                                                                                                                 |   | I**           |
|            |                                                                                                                                                                                                   |   |          |
| 10.5            | 1999  Employee Stock Purchase Plan*                                                                                                                                                                    |   | I**           |
|            |                                                                                                                                                                                                   |   |          |
| 10.6            | Underwriters  Warrants, each dated November 4, 1996, between the Company and each of  Oscar Gruss & Son Incorporated and Kaufman Bros., L.P.                                                  |   | B**           |
|            |                                                                                                                                                                                                   |   |          |
| 10.7            | Loan  Agreement dated March 31, 2000                                                                                                                                                              |   | C**           |
|            |                                                                                                                                                                                                   |   |          |
| 10.8            | First  Amendment to lease dated as of December 12, 2001 by and between Cabot  Industrial Properties, L. P. and BBI Source Scientific, Inc.                                                        |   | D**           |
|            |                                                                                                                                                                                                   |   |          |
| 10.9            | Lease  Agreement, dated May 16, 1997, for Gaithersburg, Maryland facility between  B.F. Saul Real Estate Investment Trust and the Company                                                              |   | E**           |

 

36

----

 
| 10.10  | 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**    |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.11  | Contract,  dated July 1, 1998, between the National Institutes of Health and the  Company (NO1-A1-85341)                                                                                                                                                                                    |   | G**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.12  | Contract,  dated July 1, 1998, between the National Heart Lung and Blood Institute  and the Company (NO1-HB-87144)                                                                                                                                                                          |   | G**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.13  | Agreement  with Paradigm Group for the purchase of warrants dated August 18, 1999                                                                                                                                                                                                           |   | H**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.14  | Agreement  with MDBio for the purchase of common stock and common stock warrants, dated  September 30, 1999                                                                                                                                                                                 |   | J**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.15  | Lease  Agreement dated September 30, 1999, for Frederick, Maryland facility,  between MIE Properties, Inc., and the Company.                                                                                                                                                                |   | J**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.16  | Repository  Contract with National Institute of Allergy and Infectious Disease, Division  of AIDS (NO1-A1-95381), dated August 16, 1999.                                                                                                                                                    |   | J**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.17  | Securities  Purchase Agreement dated as of August 25, 2000, by and among Boston  Biomedica, Inc., and GCA Strategic Investment Fund Limited.                                                                                                                                                |   | K**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.18  | 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**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.19  | Mortgage  and Security Agreement dated March 31, 2000                                                                                                                                                                                                                                       |   | L**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.20  | Asset  Purchase Agreement dated February 20, 2001, by and between  BBI Clinical Laboratories, Inc., Boston  Biomedica, Inc., and Specialty  Laboratories, Inc.                                                                                                                    |   | M**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.21  | Promissory  Note dated July 10, 2001, as amended on October 4, 2001, by and  among Boston Biomedica, Inc. and Richard T. Schumacher.                                                                                                                                                   |   | N**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.22  | 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.                                                                                                |   | O**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.23  | Junior  Participation Agreement dated as of January 15, 2002, by and betweenCommerce Bank and Trust  Company, Resorts Accommodations International, LLC, Richard T. Schumacher and Boston Biomedica, Inc.                                                                              |   | O**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.26  | 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.                                                                                                                           |   | O**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.27  | Pledge  Agreement effective as of January 15, 2002, by and between Boston  Biomedica, Inc. and Commerce Bank and Trust Company.                                                                                                                                                             |   | O**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.26  | Limited  Guaranty dated as of January 15, 2002, by and between Boston Biomedica,  Inc. and Commerce Bank and Trust Company.                                                                                                                                                                 |   | O**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.27  | Description  of Compensation for Certain Directors*                                                                                                                                                                                                                                              |   | D**    |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.28  | Consultant  Agreement between Boston Biomedica, Inc. and Richard T. Schumacher                                                                                                                                                                                                                   |   | Q*     |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.29  | Agreement  between Boston Biomedica, Inc. and Richard T. Schumacher                                                                                                                                                                                                                              |   | Q*     |
|   |                                                                                                                                                                                                                                                                                             |   |   |
| 10.30  | Revolving  Credit and Security Agreement dated as of February 5, 2004                                                                                                                                                                                                                       |   | R**    |

 

37

----

 
| 10.31  | Consultant  Agreement between Boston Biomedica, Inc. and Richard T. Schumacher entered  into as of December 31, 2003                                                            |   | R**            |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|
|   |                                                                                                                                                                                 |   |           |
| 10.32  | Contract  effective 06/01/2001, between the National Cancer Institute and the Company  (NO2-CP-11001)                                                                                |   | R**            |
|   |                                                                                                                                                                                 |   |           |
| 10.33  | Lease  Termination Agreement dated March 4, 2004 between Manafort FamilyLLC and Boston Biomedica, Inc.                                                                     |   | T**            |
|   |                                                                                                                                                                                 |   |           |
| 10.34  | Description  of Severance Agreement between Boston Biomedica, Inc and Richard  D’Allessandro as of March 21, 2001.                                                         |   | T*             |
|   |                                                                                                                                                                                 |   |           |
| 10.35  | Lease  Agreement dated March 1, 2004 by and between MIE Properties, Inc. and  BBI Biotech Research Laboratories, Inc.                                                           |   | T**            |
|   |                                                                                                                                                                                 |   |           |
| 10.36  | Early  Termination of Lease Agreement dated March 1, 2004 by and between MIE  Properties, Inc. and BBI Biotech Research Laboratories, Inc.                                      |   | T**            |
|   |                                                                                                                                                                                 |   |           |
| 10.37  | Asset  Purchase Agreement dated April 16, 2004, by and between Boston  Biomedica, Inc., BBI Biotech Research Laboratories, Inc. and Seracare Life  Sciences, Inc.               |   | S**            |
|   |                                                                                                                                                                                 |   |           |
| 10.38  | LLC  Membership Interest Purchase Agreement by and among BBI Source Scientific, Inc.,  Boston Biomedica, Inc., Richard W. Henson, and Bruce A. Sargeant dated  June 2, 2004.    |   | U**            |
|   |                                                                                                                                                                                 |   |           |
| 31.1   | Principal  Executive Officer Certification Pursuant to Item 601(b)(31) of Regulation  S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of  2002                |   | Filed herewith |
|   |                                                                                                                                                                                 |   |           |
| 31.2   | Principal  Financial and Accounting Officer Certification Pursuant to Item 601(b)(31) of  Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002 |   | Filed herewith |
|   |                                                                                                                                                                                 |   |           |
| 32.1   | Principal  Executive Officer Certification Pursuant to Item 601(b)(32) of Regulation  S-K, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of  2002                |   | Filed herewith |
|   |                                                                                                                                                                                 |   |           |
| 32.2   | Principal  Financial and Accounting Officer Certification Pursuant to Item 601(b)(32) of  Regulation S-K, as adopted pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002 |   | Filed herewith |

 

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(A)      Incorporatedby reference to the registrant’s Registration Statement on Form S-1(Registration No. 333-10759) (the “Registration Statement”). The number setforth herein is the number of the Exhibit in said Registration Statement.

(B)        Incorporatedby reference to Exhibit No. 10.17 of the Registration Statement.

(C)        Incorporatedby reference to the registrant’s Annual Report on Form 10-K for the fiscal yearended December 31, 2002.

(D)       Incorporatedby reference to the registrant’s Quarterly Report on Form 10-Q for the fiscalquarter ended March 31, 2002.

(E)         Incorporatedby reference to the registrant’s Quarterly Report on Form 10-Q for the fiscalquarter ended June 30, 1997.

(F)         Incorporatedby reference to the registrant’s Annual Report on Form 10-K for the fiscal yearended December 31, 1997.

(G)        Incorporatedby reference to the registrant’s Quarterly Report on Form 10-Q for the fiscalquarter ended June 30, 1998.

(H)       Incorporatedby reference to the registrant’s Quarterly Report on Form 10-Q for the fiscalquarter ended September 30, 1999.

(I)            Incorporated byreference to the registrant’s proxy statement, filed with the Securities andExchange Commission on June 14, 1999.

(J)           Incorporatedby reference to the registrant’s Annual Report on Form 10-K/A for the fiscalyear ended December 31, 1999.

(K)       Incorporatedby reference to the registrant’s Report on Form 8-K filed September 8,2000.

 

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(L)         Incorporatedby reference to the registrant’s Quarterly Report on Form 10-Q for the fiscalquarter ended June 30, 2000.

(M)    Incorporatedby reference to the registrant’s Report on Form 8-K filed March 8, 2001.

(N)       Incorporatedby reference to the registrant’s Quarterly Report on Form 10-Q for the fiscalquarter ended September 30, 2001.

(O)       Incorporatedby reference to the registrant’s Annual Report on Form 10-K for the fiscal yearended December 31, 2001.

(P)         Incorporatedby reference to Exhibit 4 of the registrant’s Current Report on Form 8-K filedMarch 12, 2003.

(Q)       Incorporatedby reference to the registrant’s Quarterly Report on Form 10-Q for the fiscalquarter ended September 30, 2003.

(R)        Incorporatedby reference to the registrant’s Annual Report on Form 10-K for the fiscal yearended December 31, 2003.

(S)         Incorporatedby reference to the registrant’s Current Report on Form 8-K filedApril 16, 2004.

(T)        Incorporatedby reference to the registrant’s Quarterly Report on Form 10-Q for the fiscalquarter ended March 31, 2004.

(U)       Incorporatedby reference to the registrant’s Current Report on Form 8-K filed June 16,2004.

 

*                 Management contract or compensatory plan orarrangement.

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

 

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