**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 the Securities Exchange Act of 1934** |
|                                                 |   |   |
| **For the quarterly period ended March 31, 2004 or** |
|                                                 |   |   |
| **o**                                                |   | **Transition  Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934** |
|                                                 |   |   |
|                                                 |   | **For the  transition period  from                  to                  ** |

** **

**Commission file number   0-21615**

 

| **BOSTON BIOMEDICA, INC.**                                      |
|-----------------------------------------------------------------|
| (Exact Name of Registrant as Specified in its Charter)          |
|                                                            |   |   |
| **Massachusetts**                                               |
| (State or Other Jurisdiction of  Incorporation or Organization) |
|                                                            |   |   |
| **375 West Street,**                                            |
| **West Bridgewater, Massachusetts**                             |
| (Address of Principal Executive Offices)                        |
|                                                            |   |   |
| **04-2652826**                                                  |
| (I.R.S. Employer  Identification No.)                           |
|                                                            |   |   |
| **02379-1040**                                                  |
| (Zip Code)                                                      |
|                                                            |   |   |
| Registrant’s telephone number, including area code         |
| **(508) 580-1900**                                              |

 

Indicateby check mark whether the Registrant: (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the Registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

 

ý  Yes  o  No

 

Indicateby check mark whether the registrant is an accelerated filer (as defined inExchange Act Rule 12b-2).

 

o  Yes  ý  No

 

Thenumber of shares outstanding of the Registrant’s common stock as of April 30,2004 was 6,846,896.

 

 

----

 

**Part I. Financial Information**

 

**Item 1. Financial Statements**

 

**BOSTON BIOMEDICA, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(Unaudited)**

 
|                                                                                                    |   | **For the  three months ended  March 31,** |      |
|---------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|-----------|
|                                                                                                    |   | **2004**                                   |      | **2003** |   |
|                                                                                                    |   |                                       |      |   |   |
| REVENUE:                                                                                                |   |                                       |      |   |   |
| Products                                                                                                |   | $                                          | 3,263,548 |   | $ | 3,288,257 |   |
| Services                                                                                                |   | 2,287,253                                  |      | 2,354,617 |   |
| Total revenue                                                                                           |   | 5,550,801                                  |      | 5,642,874 |   |
|                                                                                                    |   |                                       |      |   |   |
| COSTS AND EXPENSES:                                                                                     |   |                                       |      |   |   |
| Cost of products                                                                                        |   | 1,748,139                                  |      | 1,618,631 |   |
| Cost of services                                                                                        |   | 1,626,748                                  |      | 1,838,151 |   |
| Research and development                                                                                |   | 489,447                                    |      | 400,680 |   |
| Selling and marketing                                                                                   |   | 721,672                                    |      | 808,294 |   |
| General and administrative                                                                              |   | 1,192,403                                  |      | 1,167,194 |   |
| Total operating costs and expenses                                                                      |   | 5,778,409                                  |      | 5,832,950 |   |
| Operating loss from continuing operations                                                               |   | (227,608                                   | )         | (190,076 | ) |
| Interest income                                                                                         |   | 1,990                                      |      | 12,617 |   |
| Interest expense                                                                                        |   | (64,016                                    | )         | (73,008 | ) |
| Loss from continuing operations before  income taxes                                                    |   | (289,634                                   | )         | (250,467 | ) |
| Provision for income taxes                                                                              |   | (1,100                                     | )         | (3,080 | ) |
| Loss from continuing operations                                                                         |   | (290,734                                   | )         | (253,547 | ) |
| Discontinued operations (Note 8)                                                                        |   |                                       |      |   |   |
| Income from discontinued operations of  Clinical Laboratory segment (net of income taxes of $0 in 2004) |   | 135,000                                    |      | — |   |
| Net loss                                                                                                |   | $                                          | (155,734  | ) | $ | (253,547 | ) |
| Loss per share from continuing operations,  basic & diluted                                         |   | $                                          | (0.04     | ) | $ | (0.04 | ) |
| Income per share from discontinued  operations, basic & diluted                                     |   | $                                          | 0.02      |   | $ | — |   |
| Net loss per share, basic & diluted                                                                 |   | $                                          | (0.02     | ) | $ | (0.04 | ) |
| Number of shares used to calculate net loss  per share, basic and diluted                               |   | 6,828,585                                  |      | 6,789,389 |   |

 

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**

 

 
|                                                                                                                                                               |   | **March 31,  2004** |       | **December  31,  2003** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|------------|-------------------------|--------|
|                                                                                                                                                               |   | **(Unaudited)**     |       |                    |   |
| ASSETS                                                                                                                                                             |   |                |       |                    |   |
| CURRENT ASSETS:                                                                                                                                                    |   |                |       |                    |   |
| Cash and cash equivalents                                                                                                                                          |   | $                   | 1,284,860  |                    | $      | 967,185 |   |
| Marketable securities                                                                                                                                              |   | 3,827               |       | 4,071                   |   |
| Accounts receivable, less allowances of  $130,783 in 2004 and $124,283 in 2003                                                                                     |   | 3,497,405           |       | 3,495,839               |   |
| Inventories                                                                                                                                                        |   | 6,633,829           |       | 6,525,018               |   |
| Prepaid expenses and other current assets                                                                                                                          |   | 286,566             |       | 200,695                 |   |
| Restricted cash (Note 9)                                                                                                                                           |   | 69,990              |       | —                  |   |
| Total current assets                                                                                                                                               |   | 11,776,477          |       | 11,192,808              |   |
|                                                                                                                                                               |   |                |       |                    |   |
| Property and equipment, net                                                                                                                                        |   | 4,501,636           |       | 4,725,523               |   |
|                                                                                                                                                               |   |                |       |                    |   |
| OTHER ASSETS:                                                                                                                                                      |   |                |       |                    |   |
| Goodwill and other intangible assets, net                                                                                                                          |   | 737,749             |       | 749,907                 |   |
| Other long-term assets                                                                                                                                             |   | 452,356             |       | 174,208                 |   |
| Total other assets                                                                                                                                                 |   | 1,190,105           |       | 924,115                 |   |
| TOTAL ASSETS                                                                                                                                                       |   | $                   | 17,468,218 |                    | $      | 16,842,446 |   |
|                                                                                                                                                               |   |                |       |                    |   |
| LIABILITIES  AND STOCKHOLDERS’ EQUITY                                                                                                                         |   |                |       |                    |   |
|                                                                                                                                                               |   |                |       |                    |   |
| CURRENT LIABILITIES:                                                                                                                                               |   |                |       |                    |   |
| Accounts payable                                                                                                                                                   |   | $                   | 2,022,590  |                    | $      | 1,633,263 |   |
| Accrued employee compensation                                                                                                                                      |   | 1,168,502           |       | 1,010,512               |   |
| Other accrued expenses                                                                                                                                             |   | 500,309             |       | 541,857                 |   |
| Liabilities from discontinued operations  (Note 8)                                                                                                                 |   | 106,880             |       | 192,801                 |   |
| Line of Credit (Note 9)                                                                                                                                            |   | 518,952             |       | —                  |   |
| Current maturities of long term debt (Note  9)                                                                                                                     |   | 58,180              |       | 58,180                  |   |
| Deferred revenue and other current  liabilities                                                                                                                    |   | 87,558              |       | 97,508                  |   |
| Total current liabilities                                                                                                                                          |   | 4,462,971           |       | 3,534,121               |   |
|                                                                                                                                                               |   |                |       |                    |   |
| LONG-TERM LIABILITIES:                                                                                                                                             |   |                |       |                    |   |
| Long term debt, less current maturities  (Note 9)                                                                                                                  |   | 2,254,084           |       | 2,271,299               |   |
| Liabilities from discontinued operations  (Note 8)                                                                                                                 |   | 95,000              |       | 215,040                 |   |
| Other liabilities                                                                                                                                                  |   | 387,030             |       | 406,777                 |   |
| Total Liabilities                                                                                                                                                  |   | 7,199,085           |       | 6,427,237               |   |
|                                                                                                                                                               |   |                |       |                    |   |
| COMMITMENTS AND CONTINGENCIES (Note 10)                                                                                                                            |   |                |       |                    |   |
|                                                                                                                                                               |   |                |       |                    |   |
| STOCKHOLDERS’ EQUITY:                                                                                                                                         |   |                |       |                    |   |
| Common stock, $.01 par value; 20,000,000  shares authorized, 6,831,896 and 6,827,592 issued and outstanding at March  31, 2004 and December 31, 2003, respectively |   | 68,319              |       | 68,276                  |   |
| Loan receivable from Director and former  CEO (Note 7)                                                                                                             |   | (1,000,000          | )          | (1,000,000              | )      |
| Additional paid-in capital                                                                                                                                         |   | 21,897,849          |       | 21,888,234              |   |
| Accumulated deficit                                                                                                                                                |   | (10,697,035         | )          | (10,541,301             | )      |
| Total stockholders’ equity                                                                                                                                    |   | 10,269,133          |       | 10,415,209              |   |
| TOTAL LIABILITIES & STOCKHOLDERS’  EQUITY                                                                                                                 |   | $                   | 17,468,218 |                    | $      | 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  three months ended  March 31,** |      |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|-----------|
|                                                                                                                                            |   | **2004**                                   |      | **2003** |   |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                                                                                       |   |                                       |      |   |   |
| Net loss                                                                                                                                        |   | $                                          | (155,734  | ) | $ | (253,547 | ) |
| Less: income from discontinued operations                                                                                                       |   | 135,000                                    |      | — |   |
| Loss from continuing operations                                                                                                                 |   | (290,734                                   | )         | (253,547 | ) |
| Adjustments to reconcile net loss to net  cash provided by (used in) operating activities:                                                      |   |                                       |      |   |   |
| Depreciation and amortization                                                                                                                   |   | 316,397                                    |      | 328,975 |   |
| Provision for doubtful accounts                                                                                                                 |   | 6,500                                      |      | — |   |
| Changes in operating assets and  liabilities:                                                                                                   |   |                                       |      |   |   |
| Accounts receivable                                                                                                                             |   | (12,017                                    | )         | 612,008 |   |
| Inventories                                                                                                                                     |   | (108,811                                   | )         | 169,100 |   |
| Prepaid expenses and other assets                                                                                                               |   | (81,676                                    | )         | (145,056 | ) |
| Other long-term assets                                                                                                                          |   | (121,345                                   | )         | (51,615 | ) |
| Accounts payable                                                                                                                                |   | 389,327                                    |      | (188,988 | ) |
| Accrued employee compensation                                                                                                                   |   | 157,990                                    |      | 131,051 |   |
| Other accrued expenses                                                                                                                          |   | (41,549                                    | )         | 151,945 |   |
| Deferred revenue and other current  liabilities                                                                                                 |   | (9,950                                     | )         | (4,302 | ) |
| Other liabilities                                                                                                                               |   | (19,747                                    | )         | (10,366 | ) |
| Net cash provided by operating activities                                                                                                       |   | 184,385                                    |      | 739,205 |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES:**                                                                                                       |   |                                       |      |   |   |
| Payments for additions to property and  equipment                                                                                               |   | (71,153                                    | )         | (20,304 | ) |
| Net cash used in investing activities                                                                                                           |   | (71,153                                    | )         | (20,304 | ) |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                                                                                       |   |                                       |      |   |   |
| Proceeds from issuance of common stock                                                                                                          |   | 9,658                                      |      | 14,157 |   |
| Repayments of long-term debt                                                                                                                    |   | (17,214                                    | )         | (24,378 | ) |
| Borrowings on line of credit, net of  $166,002 of related expenses                                                                              |   | 352,950                                    |      | — |   |
| Restricted cash - line of credit                                                                                                                |   | (69,990                                    | )         | — |   |
| Net cash provided (used) in financing  activities                                                                                               |   | 275,404                                    |      | (10,221 | ) |
| **INCREASE IN CASH AND CASH EQUIVALENTS:**                                                                                                      |   | 388,636                                    |      | 708,680 |   |
| Cash used in discontinued operations                                                                                                            |   | (70,961                                    | )         | (71,169 | ) |
| Cash and cash equivalents, beginning of  year                                                                                                   |   | 967,185                                    |      | 975,649 |   |
| Cash and cash equivalents at end of period                                                                                                      |   | $                                          | 1,284,860 |   | $ | 1,613,160 |   |
| **SUPPLEMENTAL DISCLOSURE OF NON-CASH  INVESTING AND FINANCING ACTIVITIES:**                                                                    |   |                                       |      |   |   |
| Conversion of Pledge of Restricted Cash as  Security for Loan from Bank to Director to a Loan Receivable from Director  and former CEO (Note 6) |   | $                                          | —    |   | $ | 1,000,000 |   |

 

The accompanying notes are an integral partof these condensed consolidated financial statements.

 

4

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**BOSTON BIOMEDICA, INC. AND SUBSIDIARIES**

**NOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS**

 

**(1)   Basis ofPresentation**

*Overview*

 

The accompanying unauditedCondensed Consolidated Financial Statements of Boston Biomedica, Inc (the“Company”, “Boston Biomedica, Inc.” or “BBI”) have been prepared in accordancewith generally accepted accounting principles for interim financial informationand with the instructions to Form 10-Q and Article 10 of Regulation S-X.Accordingly, they do not include all of the information and footnotes requiredby generally accepted accounting principles for complete financial statements.In the opinion of management, all adjustments (consisting of only normalrecurring adjustments) considered necessary for a fair presentation have beenincluded. Operating results for the three months ended March 31, 2004 are notnecessarily indicative of the results that may be expected for the year endingDecember 31, 2004 as discussed further hereunder in the followingparagraph.  For further information,refer to the consolidated financial statements and footnotes thereto includedin the Form 10-K filing for the fiscal year ended December 31, 2003; also seethe Company’s Form 8-K filing dated April 16, 2004.  

 

On April 16, 2004, BostonBiomedica, Inc. announced that it has signed an Asset Purchase Agreement (the“Asset Purchase Agreement”) to sell substantially all of the assets andselected liabilities of its BBI Diagnostics and BBI Biotech Divisions toSeraCare Life Sciences, Inc. (“SeraCare”) of Oceanside, California (the “AssetSale”). The closing, which is expected to occur by August 15, 2004, is subjectto a number of conditions, including the approval of the transaction by BBIstockholders and SeraCare’s receipt of sufficient financing to complete thetransaction.   In addition,  BBI also announced on April 16, 2004 that ithas entered into a non-binding Letter of Intent (“LOI”) to sell the assets andselected liabilities of its BBI Source Scientific Division (BBI’sCalifornia-based Laboratory Instrumentation Division) to an entity to bejointly owned 70% by Mr. Richard W. Henson and Mr. Bruce A. Sargeant and 30% byBBI.   Accordingly, if the above notedtransactions occur as anticipated, operating results for the three months endedMarch 31, 2004 are not expected to be indicative of the results that may beexpected for the year ending December 31, 2004 nor subsequent years.  See Note 3 of Notes to CondensedConsolidated Financial Statements hereunder.

 

*Deferred Costs*

 

The Company has deferredapproximately $51,000 of transaction costs as of March 31, 2004 associated withthe above noted Asset Purchase Agreement. Assuming the transaction contemplatedby the Asset Purchase Agreement closes as anticipated, these deferredtransaction costs will be included in the final gain computation associatedwith the Asset Purchase Agreement, otherwise the Company may be required towrite off these costs if the transaction does not proceed as anticipated.  In addition, as discussed further in Note 9of Notes to Condensed Consolidated Financial Statements hereunder, the Companyhas deferred approximately $157,000 of costs as of March 31, 2004 associatedwith obtaining a line of credit. These costs are being amortized to expense ona straight-line basis over the three year life of the agreement.

* *

*Stock-Based Compensation*

 

Statement of FinancialAccounting Standards No. 123, “Accounting for Stock-Based Compensation” (SFAS123), requires that companies either recognize compensation expense for grantsof stock options and other equity instruments based on fair value or providepro forma disclosure of net income (loss) and net income (loss) per share inthe notes to the financial statements. Statement of Financial Accounting Standards No. 148, “Accounting forStock-based Compensation – Transition and Disclosure – an amendment of FASBStatement No. 123,” (SFAS 148) amends SFAS 123 to provide alternative methodsof transition for a voluntary change to the fair-value-based method ofaccounting for stock-based employee compensation. In addition, SFAS 148 amendsthe disclosure requirements of SFAS 123 to require disclosures in both annualand interim financial statements about the method of accounting for stock-basedemployee compensation and the effect of the method used on reportedresults.  At March 31, 2004, the Companyhas six stock-based compensation plans, which are described in further detailin the Company’s Annual Report on Form 10-K to the United States Securities andExchange Commission for the year ended December 31, 2003. The Company accountsfor those plans under the recognition and measurement principles of AccountingPrinciples Board Opinion No. 25 “Accounting for Stock Issued to Employees” (APB25) and related interpretations. Accordingly, no compensation cost has been recognized under SFAS 123 forthe Company’s employee stock option plans. Had compensation cost for awardsunder those plans been determined based on the grant date fair values,consistent with the method required under SFAS 123, the Company’s net (loss)and net (loss) per share would have been adjusted to the pro forma amountsindicated below:

 

5

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|                                                                                                                                     |   | **For the  Three Months Ended March 31,** |     |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|----------|
|                                                                                                                                     |   | **2004**                                  |     | **2003** |   |
| Net loss - as reported                                                                                                                   |   | $                                         | (155,734 | ) | $ | (253,547 | ) |
| 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 |   | (144,008                                  | )        | (129,120 | ) |
| Net loss - pro forma                                                                                                                     |   | $                                         | (299,742 | ) | $ | (382,667 | ) |
| Basic and Diluted net loss per share - as  reported                                                                                      |   | $                                         | (0.02    | ) | $ | (0.04 | ) |
| Basic and Diluted net loss per share - pro  forma                                                                                        |   | $                                         | (0.04    | ) | $ | (0.06 | ) |

 

TheCompany has elected to follow APB 25 and related interpretations in accountingfor its employee stock options. Under APB 25, because the exercise price ofemployee stock options equals the market price of the underlying stock on thedate of grant, no compensation expense is recorded. The Company has adopted thedisclosure-only provisions of SFAS 123, as amended by SFAS No. 148. Pro formainformation regarding net income and earnings per share is required by SFAS 123and has been determined as if the Company had accounted for its employee stockoptions under the fair value method of that statement. The fair value of theseoptions was estimated at the date of grant using a Black-Scholes option pricingmodel.  For purposes of pro formadisclosures, the estimated fair value of the options is amortized to expenseover the options’ vesting period.

 

*Use of Estimates*

 

To prepare the financialstatements in conformity with generally accepted accounting principles,management is required to make significant estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reporting period. Inaddition, significant estimates were made in determining the gain on thedisposition of the Company’s discontinued operations including post-closingadjustments, in estimating future cash flows to quantify impairment of assets,in determining the ultimate cost of abandoning a lease (associated with discontinued operations) at a facility nolonger being utilized, in estimates regarding the collectability of accountsreceivable, realizability of loans made to a director and former ChiefExecutive Officer  including sufficiencyof collateral, deferred tax assets, the net realizable value of its inventory,as well as an estimate for remaining liabilities associated with discontinuedoperations. On an on-going basis, we evaluate our estimates.  We base our estimates on historicalexperience and on various other assumptions that are believed to be reasonableunder the circumstances, the results of which form the basis for makingjudgments about the carrying values of assets and liabilities that are notreadily apparent from other sources. Actual results could differ from theestimates and assumptions used by management.

 

**(2) Recent Accounting Standards**

 

InApril 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 onDerivative Instruments and Hedging Activities.” This Statement amends andclarifies financial accounting and reporting for derivative instruments,including certain derivative instruments embedded in other contracts(collectively referred to as derivatives) and for hedging activities under FASBStatement No. 133, “Accounting for Derivative Instruments and HedgingActivities.”  This Standard is effectivefor contracts entered into or modified after June 30, 2003. The application ofSFAS No. 149 has not had a material effect on the Company’s condensedconsolidated financial statements.

 

InMay 2003, the FASB issued SFAS No. 150, “Accounting for Certain FinancialInstruments with Characteristics of both Liabilities and Equity.” This Statementestablishes standards for how an issuer classifies and measures certainfinancial instruments with characteristics of both liabilities and equity.  This Standard is effective for financialinstruments entered into or modified after May 31, 2003. The application ofSFAS No. 150 has not had a material effect on the Company’s condensedconsolidated financial statements.

 

6

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**(3)  Subsequent Events**

 

On April 16, 2004, BBIannounced that it signed an Asset Purchase Agreement   to sell substantially all the assets and selected liabilities ofits BBI Diagnostics and BBI Biotech business units to SeraCare (the “AssetSale”). The purchase price is $30 million in cash, plus the assumption ofcertain 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 $30.0 million purchase price, $2.5 million will beheld in escrow for a period of 18 months following the closing.  The closing, which is expected to occur byAugust 15, 2004, is subject to a number of conditions, including the approvalof the transaction by BBI stockholders and SeraCare’s receipt of sufficient financingto complete the transaction. SeraCare expects to finance the transactionprimarily with debt, along with some equity financing, and has agreed to usecommercially reasonable efforts to obtain the financing through August 15,2004.  A proforma summary of net assetsand liabilities held for sale which are contemplated to be sold pursuant to theAsset Purchase Agreement is as follows, assuming the commitment to a plan ofaction had occurred as of March 31, 2004 :

 
|                                                                                                          |   | **BBI  Diagnostics** |      | **BBI  Biotech** |   |
|---------------------------------------------------------------------------------------------------------------|--------|----------------------|-----------|------------------|--------|
| Assets and liabilities to be sold pursuant  to an Asset Purchase Agreement:                                   |   |                 |      |             |   |
| Accounts Receivable, net                                                                                      |   | $                    | 1,619,804 |             | $      | 1,603,329 |   |
| Inventory                                                                                                     |   | 5,289,254            |      | 516,676          |   |
| Prepaid assets                                                                                                |   | 78,550               |      | 86,291           |   |
| Fixed Assets, net                                                                                             |   | 2,543,475            |      | 1,794,020        |   |
| Other assets                                                                                                  |   | 38,626               |      | 167,008          |   |
| Accounts payable                                                                                              |   | (1,087,583           | )         | (630,982         | )      |
| Accrued expenses and compensation                                                                             |   | (749,960             | )         | (336,927         | )      |
| Short Term Debt/other                                                                                         |   | (67,649              | )         | (340,595         | )      |
| Long Term Debt - Mortgage                                                                                     |   | (2,244,856           | )         | —           |   |
| Net Assets and Liabilities held for Sale,  excluding facility operating lease obligations also to be assumed: |   | $                    | 5,419,661 |             | $      | 2,858,820 |   |

 

In addition, BBI announcedon April 16, 2004 that it has entered into a non-binding Letter of Intent(“LOI”) to sell certain assets and selected liabilities of its BBI SourceScientific Division (BBI’s California-based Laboratory InstrumentationDivision) to a newly formed entity to be jointly owned 70% by Mr. Richard W.Henson and Mr. Bruce A. Sargeant and 30% by BBI.  The LOI calls for BBI to receive a three year promissory note inthe aggregate principal amount of $900,000. The LOI also calls for the newinstrumentation company to provide engineering, manufacturing and other relatedservices for BBI’s pressure cycling technology products until September 30,2005.   Negotiations remain ongoing as ofMay 2004.

 

Simultaneously with theannouncement of the Asset Sale, BBI stated its intention to commence an issuertender offer to purchase up to 6,000,000 shares of its common stock at a priceof $3.50 per share shortly following the completion of the Asset Sale. BBIexpects to use up to $21.0 million of the after-tax net proceeds from the AssetSale to purchase shares of its common stock tendered in the tender offer. Theremaining net proceeds from the Asset Sale, after taxes and transaction fees,which is estimated to be between $1.0 million and $2.0 million, plus anyportion of the escrowed amount released to BBI, are expected to be usedprimarily for working capital for the Company’s pressure cycling technologyactivities.

 

7

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**(4)  Inventories**

 

Inventories,which include component parts used in the manufacture of laboratoryinstrumentation and PCT products, consisted of the following:

 

|            |   | **March 31,  2004** |      | **December  31,  2003** |   |
|-----------------|--------|---------------------|-----------|-------------------------|--------|
|            |   |                |      |                    |   |
| Raw materials   |   | $                   | 3,468,558 |                    | $      | 3,549,826 |   |
| Work-in-process |   | 1,347,968           |      | 1,124,883               |   |
| Finished goods  |   | 1,817,303           |      | 1,850,309               |   |
|            |   | $                   | 6,633,829 |                    | $      | 6,525,018 |   |

 

**(5)  SegmentReporting and Related Information**

 

Operatingsegments are components of an enterprise for which separate financialinformation is available that is evaluated regularly by senior management indeciding how to allocate resources and in assessing the performance of eachsegment. The Company is organized along legal entity lines and seniormanagement regularly reviews financial results for all entities, focusingprimarily on revenue and operating income.

 

As of March 31, 2004, theCompany had four operating segments. The Diagnostics segment serves the worldwide in vitro diagnosticsindustry, including users and regulators of their test kits, with qualitycontrol products, and test kit components. The Biotech segment pursues thirdparty contracts to help fund the development of products and services for theother segments, primarily with agencies of the United States Government.   The Laboratory Instrumentation segment (BBISource Scientific, Inc.) sells diagnostic instruments primarily to theworldwide in vitro diagnostic industry on an OEM basis, and also performsin-house instrument servicing. The PCT segment consists of research anddevelopment primarily in pressure cycling technology (“PCT”). The Companyperforms research in the development of PCT, with particular focus in the areasof nucleic acid and protein extraction from cells and tissues, and pathogen inactivation.  The Company announced the availability forcommercial sale of its PCT products in late September of 2002.  PCT Revenue to date consists primarily ofboth private and public (NIH) funding of segment research and, commencing inlate 2002, from the sale of PCT products. Most of the expenditures incurred by this segment are for ongoingresearch and development expenses, marketing and sales expenses, and generalmanagement expenses including patent costs.  See also Note 3 of Notesto Condensed Consolidated Financial Statements.

 

TheCompany’s underlying accounting records are maintained on a legal entity basisfor government and public reporting requirements, as well as for segmentperformance and internal management reporting. Inter-segment sales are recordedon a “third party best price” basis and are significant in measuring segmentoperating results. The following segment information has been prepared inaccordance with the internal accounting policies of the Company, as describedabove.

 

Operating segmentrevenue was as follows:

 

|                       |   | **Three  Months Ended March 31,** |      |
|----------------------------|--------|-----------------------------------|-----------|
| **Segment revenue:**       |   | **2004**                          |      | **2003** |   |
| Diagnostics                |   | $                                 | 2,855,000 |   | $ | 2,869,000 |   |
| Biotech                    |   | 2,312,000                         |      | 2,287,000 |   |
| Laboratory Instrumentation |   | 537,000                           |      | 514,000 |   |
| PCT                        |   | 133,000                           |      | 253,000 |   |
| Eliminations               |   | (286,000                          | )         | (280,000 | ) |
| Total Revenue              |   | $                                 | 5,551,000 |   | $ | 5,643,000 |   |

 

8

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Operatingsegment income (loss) was as follows:

 
|                                      |   | **Three  Months Ended March 31,** |     |
|-------------------------------------------|--------|-----------------------------------|----------|
| **Segment operating income (loss):**      |   | **2004**                          |     | **2003** | ** ** |
| Diagnostics                               |   | $                                 | 390,000  |   | $ | 458,000 |   |
| Biotech                                   |   | (77,000                           | )        | (57,000 | ) |
| Laboratory Instrumentation                |   | (146,000                          | )        | (209,000 | ) |
| PCT                                       |   | (395,000                          | )        | (382,000 | ) |
| Operating loss from continuing operations |   | $                                 | (228,000 | ) | $ | (190,000 | ) |

 

Identifiablecorporate and operating segment assets are all located in the United States asfollows:

 
| **Identifiable corporate and segment assets:** |   | **March 31,  2004** |       | **December  31,  2003** |   |
|------------------------------------------------|--------|---------------------|------------|-------------------------|--------|
| Corporate                                      |   | $                   | 1,532,000  |                    | $      | 1,277,000 |   |
| Diagnostics                                    |   | 9,537,000           |       | 9,447,000               |   |
| Biotech                                        |   | 4,276,000           |       | 3,903,000               |   |
| Laboratory Instrumentation                     |   | 1,215,000           |       | 1,234,000               |   |
| PCT                                            |   | 908,000             |       | 981,000                 |   |
| Total assets                                   |   | $                   | 17,468,000 |                    | $      | 16,842,000 |   |

 

Certainamounts included in the prior period’s financial statements have beenreclassified to conform to the current period’s presentation.

 

**(6)  Computation ofNet Income (Loss) per Share**

 

Basicearnings (loss) per share is computed by dividing income (loss) available tocommon shareholders by the weighted average number of common sharesoutstanding. Diluted earnings (loss) per share is computed by dividing income(loss) available to common shareholders by the weighted average common sharesoutstanding plus additional common shares that would have been outstanding ifdilutive potential common shares had been issued. For purposes of thiscalculation, stock options are considered common stock equivalents in periodsin which they have a dilutive effect. Options and warrants that areantidilutive are excluded from the calculation.    Potentially dilutive securities having a net effect of 14,599and 7 common shares were not included in the computation of diluted loss pershare because to do so would have been antidilutive for the three months endedMarch 31, 2004 and 2003, respectively.  The net loss per share computation for the three months ended March 31,2004 and 2003 reflects the issuance of 4,034 and 7,047, respectively, ofadditional shares of common stock purchased by employees through theirparticipation in the Company’s employee stock purchase plan.

 
|                                                                                                       |   | **Three  Months Ended March 31,** |     |
|------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|----------|
|                                                                                                       |   | **2004**                          |     | **2003** |   |
| Weighted Average Shares Outstanding, basic                                                                 |   | 6,828,585                         |     | 6,789,389 |   |
| Net effect of dilutive common stock  equivalents-based on treasury stock method using average market price |   | —                            |     | — |   |
| Weighted Average Shares Outstanding,  diluted                                                              |   | 6,828,585                         |     | 6,789,389 |   |
| Loss from continuing operations                                                                            |   | $                                 | (290,734 | ) | $ | (253,547 | ) |
| Income from discontinued operations                                                                        |   | 135,000                           |     | — |   |
| Net loss                                                                                                   |   | $                                 | (155,734 | ) | $ | (253,547 | ) |
| Loss per share from continuing operations,  basic and diluted                                              |   | $                                 | (0.04    | ) | $ | (0.04 | ) |
| Income per share from discontinued  operations-basic & diluted                                         |   | 0.02                              |     | — |   |
| Net loss per share-basic & diluted                                                                     |   | $                                 | (0.02    | ) | $ | (0.04 | ) |

 

9

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**(7)  Related PartyTransaction**

 

InJanuary 2002, the Company pledged a $1,000,000 interest bearing deposit at afinancial institution to secure the Company’s limited guaranty of loans in theaggregate amount of $2,418,000 from the financial institution to an entitycontrolled by Richard T. Schumacher, a Director and the Company’s current ChiefExecutive Officer.  The loans from thefinancial institution to the entity controlled by Mr. Schumacher, which arepersonally guaranteed by Mr. Schumacher, were originally secured by collateralwhich includes certain real property owned by Mr. Schumacher and all of hisshares of common stock held in the Company. The Company’s pledge is secured by a junior subordinated interest in thecollateral provided by Mr. Schumacher to the financial institution. TheCompany’s pledge of $1,000,000 was made to assist Mr. Schumacher in refinancinghis indebtedness related to, among other things, his divorce settlement and toenable him to avoid the need to sell his Company common stock on the openmarket to satisfy his debts.  TheCompany’s Board of Directors and a special committee of the independentdirectors of the Board of Directors, evaluated a number of options andconcluded that the pledge of the $1,000,000 interest bearing deposit was thebest option and in the best interests of the Company’s stockholders in thebelief that it would, among other things, avoid selling pressure on theCompany’s common stock and relieve the financial pressures on Mr. Schumacherthat could otherwise divert his attention from the Company.

 

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 on its balance sheet as of December 31,2002 until the cash was used to satisfy the Company’s limited guaranty inJanuary 2003 and since then has reflected a $1,000,000 loan receivable on itsbalance sheet in stockholders’ equity.

 

As of March 31, 2004, theCompany evaluated the recoverability of the $1,000,000 loan receivable from Mr.Schumacher. The Company’s review includes an evaluation of the remainingcollateral associated with the loan. The Company maintains a junior interest inthis collateral.  The remainingcollateral consists of common stock of the Company.  When considering the adequacy of the collateral, the Companyconsiders the balance of a loan outstanding ($494,830 as of March 31, 2004)between an entity controlled by Mr. Schumacher with a financial institution andthe fact that the Company has a junior position in regards to the remainingcollateral associated with that loan, as well as the liquidity and net realizablevalue of the remaining assets underlying 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 March 31, 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 impaired as of March 31, 2004,fluctuations in the quoted market value of the Company’s common stock, whichcomprises the remaining collateral, may be an indicator of impairment. Based onthe Company’s assessment as of and through May 2004, the Company estimates thatthe value of the collateral approximates or exceeds the amount of the Company’srecorded loan.  If actual marketconditions are less favorable or other factors arise that are significantlydifferent than those anticipated by management, a write-down of this assetmight be required.

 

**(8) Disposition of Assets**

 

InDecember 2000, the Company made a decision to exit the clinical laboratorytesting services segment and in February 2001, BBI Clinical Laboratories, Inc.(“BBICL”), a wholly-owned subsidiary of the Company, sold the business andcertain assets and liabilities of its clinical laboratory business to a thirdparty for an adjusted purchase price of $8,958,000.  The Company retained certain other assets and liabilities ofBBICL, primarily property, plant and equipment, together with the facilitylease subsequent to the closing date. The Company wrote down all of the retained assets not otherwiseredistributed to other business units to their estimated net realizablevalue.  In accordance with a transitionservices agreement, the Company operated the business until December 2001;substantially all costs associated with operating the business subsequent tothe closing date were borne by the purchaser.

 

On March 4, 2004, theCompany entered into a lease termination agreement with the landlord relativeto the facility previously occupied by BBICL. The agreement provides for a series of reduced payments over a nine

 

10

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monthperiod ending in late 2004 in return for the Company vacating the facility onor before May 31, 2004.   Accordingly,the Company recognized a $135,000 gain in the first quarter of 2004 associatedwith this lease termination agreement and reduction of the related liability.The Company’s estimate of remaining short and long term accrued liabilities toexit the clinical laboratory testing business is approximately $202,000 as ofMarch 31, 2004.  The major component ofthis accrual is the remaining payments associated with the lease terminationagreement and the remainder for other miscellaneous costs associated withexiting this business segment. In prior years, the Company recorded anafter-tax gain of $4,334,000 in 2001, and an additional $225,000 in 2002. Thesegains may be subject to future adjustments as the Company completes the processof exiting this business.  The Companyutilized in 2001 certain prior period net operating loss carryforwards,previously reserved for by the Company, to partially offset the income tax effectof this gain.

 

**(9) Debt**

 

On February 5, 2004, theCompany entered into a three year, $2,500,000 revolving line of creditagreement with a private lender.  Therevolving line of credit bears interest at the base rate plus 3%, carriescommercially standard unused line and collateral management fees (payablemonthly), and is collateralized by trade accounts receivable and inventory ofthe Company.  Borrowings under therevolving line of credit are limited to commercially standard terms andpercentages 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. The amount borrowed under this revolving line ofcredit was $518,952 as of March 31, 2004 and is classified as short term debton the accompanying balance sheet as of March 31, 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 of$69,990 is reported as restricted cash on the accompanying balance sheet as ofMarch 31, 2004. The Company has incurred approximately $157,000 of costs as ofMarch 31, 2004 associated with obtaining the revolving line of credit.  These costs have been deferred and are beingamortized to expense on a straight-line basis over the three year life of theagreement.

 

Subsequent to the end of thequarter, the Company was notified by the lender under this revolving line ofcredit that as a result of the Company committing to sell substantially all ofits assets to SeraCare Life Sciences pursuant to the Asset Purchase Agreementdescribed in Note 3 of Notes to Condensed Consolidated Financial Statementspreceding, the Company is in technical default with respect to this revolvingline of credit. The lender, however, has advised the Company it is not takingany immediate action at this time. The Company is continuing discussions withthe lender at this time.

 

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**(10) 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 first quarter of2004, the Company received unrelated communications from three parties relativeto licensing, royalty and product performance issues.  One party has requested additional information to determinewhether the Company may owe additional royalties on products sold under apatent license agreement; the Company believes it has made all required royaltypayments under its patent license agreement with this entity.  Another party has alleged that certainproducts sold by the Company used component materials patented by that thirdparty.  A customer has alleged that theCompany supplied defective products that were subsequently incorporated intothe customer’s end user products that were recalled.  The Company is in the process of investigating and gatheringadditional information in order to respond to these inquiries.  While the Company cannot estimate the amountof a loss, if any, associated with the resolution of these allegations, theCompany disputes all of these allegations and intends to vigorously pursue alldefenses available to the Company.

 

*Environmental Matters*

 

The Company has receivedcorrespondence addressed to Source Scientific, Inc. originating from the U.S.Environmental Protection Agency (“EPA”). In 1997, the Company acquired certain assets and liabilities of SourceScientific, Inc. The correspondence identifies Source Scientific, Inc. ashaving a potential liability for waste disposal by a purported predecessorentity. The Company has not yet determined if it actually has liability forthis matter, however should the Company and the EPA agree on resolution of thismatter, it is estimated that such costs could range from a minimal amount up to$42,000.

 

*Leases*

 

On March 1, 2004, theCompany entered into an eleven year 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.  Assuming occupancy ofthe new facility by the Company on August 1, 2004, the landlord has agreed toterminate in full the Company’s remaining obligations pursuant to an existingfacility 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.

 

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** **

**ITEM 2.   MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**

 

**RECENT DEVELOPMENTS**

 

On April 16, 2004, BostonBiomedica, Inc. (“BBI” or the “Company”) announced that it has signed an AssetPurchase Agreement (the “Asset Purchase Agreement”) to sell substantially allof its assets, which consist of the assets of its BBI Diagnostics and BBIBiotech business units to SeraCare Life Sciences, Inc. (“SeraCare”) ofOceanside, California (the “Asset Sale”). The purchase price is $30 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 closing, which isexpected to occur by August 15, 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. SeraCare expectsto finance the transaction primarily with debt, along with some equityfinancing, and has agreed to use commercially reasonable efforts to obtain thefinancing through August 15, 2004.

 

On April 16, 2004, SeraCareentered into voting agreements (the “Voting Agreements”) with each of Mr.Richard T. Schumacher, BBI’s founder and a Director, and Mr. Richard Kiphart,his daughter and Shoreline Micro-Cap Fund I LP, a fund of which Mr. Kiphartserves as general partner and has the sole power to vote and dispose or directthe disposition of shares held by such fund. Under the Voting Agreements, thesestockholders, who collectively hold an aggregate of approximately 32% of BBI’stotal outstanding shares entitled to vote at the stockholders meeting, haveagreed to vote their shares in favor of the Asset Sale in accordance with theVoting Agreements.  The foregoingdescription of the Asset Purchase Agreement and Voting Agreements does notpurport to be complete and is qualified in its entirety by reference to theAsset Purchase Agreement.

 

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 and Richard Kiphart (together with his related parties) to SeraCarepursuant to the Voting Agreements, and (iv) the completion of the transactionsunder the Asset Purchase Agreement and the taking of actions under the VotingAgreements. The foregoing description of the amendment to the Rights Agreementdoes not purport to be complete and is qualified in its entirety by referenceto Amendment No. 1 to 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 between $1.0 and $2.0 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.

 

BBI also announced on April16, 2004 that it has entered into a non-binding Letter of Intent (“LOI”) tosell the assets and selected liabilities of its BBI Source Scientific Division(BBI’s California-based Laboratory Instrumentation Division) to a newly formedentity to be jointly owned 70% by Mr. Richard W. Henson and Mr. Bruce A.Sargeant and 30% by BBI.  The LOI callsfor BBI to receive a three year promissory note for the aggregate principalamount of $900,000. The LOI also calls for the new instrumentation company toprovide engineering, manufacturing and other related services for BBI’spressure cycling technology products until September 30, 2005.   Negotiations remain ongoing at this time.

 

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**RESULTS OF OPERATIONS**

 

**THREE MONTHS ENDED MARCH 31, 2004 AND 2003**

 

*Revenue*

 

Totalrevenue amounted to $5,551,000 in the first quarter of 2004, a decrease of$92,000 or 1.6% from $5,643,000 in the first quarter of 2003. The decrease inrevenue was the result of a slight decrease in product revenue of $24,000 or0.7% to $3,264,000 in the first quarter of 2004 from $3,288,000 in the firstquarter of 2003, coupled with a 2.9% or $68,000 decrease in service revenue to$2,287,000 in the first quarter of 2004 as compared to service revenue of$2,355,000 in the first quarter of 2003.

 

Product Revenue.  The decrease in product revenue occurredprimarily in the PCT segment, which had no unit sales in the first quarter of2004. In addition, the Diagnostics segment had slightly lower sales tointernational customers as European distributors had increased purchases in thefourth quarter of 2003 in advance of the December 8, 2003 deadline forimporting non-CE marked products.  TheCompany continues to have very limited sales of its PCT products, as sales ofthese products continues to be slower than expected.

 

Service Revenue.  The decrease in service revenue occurred atthe PCT segment and was primarily related to a lower level of SBIR researchgrants partially offset by an increase in commercial service work performed atits Biotech segment.

 

G*ross Profit*

 

Overallgross profit decreased 0.5% or $10,000, to $2,176,000 in the first quarter of2004 from $2,186,000 in the first quarter of 2003.  Product gross profit decreased $155,000 or 9.3%, to $1,515,000 inthe first quarter of 2004 from $1,670,000 in the first quarter of 2003; productgross margin decreased to 46.4% in the first quarter of 2004 from 50.8% in thefirst quarter of 2003.  Services grossprofit increased $145,000 or 28.1% to $661,000 in the first quarter of 2004from $516,000 in the first quarter of 2003, while service gross marginincreased to 28.9% in the first quarter of 2004 from 21.9% in the first quarterof 2003.

 

ProductGross Margin.  Thedecrease in product gross margin was primarily due to a product mix shift tolower margin products sold by the Diagnostics segment.

 

ServiceGross Margin.  The service gross margin increase was primarily due to servicerevenues at the Biotech segment associated with higher margin commercialservices, partially offset by higher facility related costs.

 

*Research and Development*

 

Research and developmentexpenditures increased 21.9%, or $88,000, to $489,000 in the first quarter of2004 from $401,000 in the first quarter of 2003.  The increased level of expenditures was associated primarily withongoing work associated with development of a less expensive and smaller, benchtop version of the PCT BarocyclerTM which the Company presently plans to haveready for commercial sale in the third quarter of 2004.

 

*Selling and Marketing*

 

Selling and marketingexpenses decreased by 10.6%, or $86,000, to $722,000 in the first quarter of2004 from $808,000 in the first quarter of 2003, associated with a reducedlevel of trade show activities in the first quarter of 2004 coupled withseveral temporarily vacant sales positions in the first quarter of 2004 at boththe PCT and  Diagnostics segments.

 

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*General and Administrative*

 

General and administrativecosts, totaled $1,192,000, an increase of $25,000 or 2.1% from $1,167,000 inthe first quarter of 2003.   The firstquarter of 2004 included increased leased facility expenses, certain monthlycommitment and servicing fees associated with a new line of credit effectiveFebruary 2004, and increased legal fees associated with PCT patent relatedwork.  The first quarter of 2003included costs associated with legal and director fees incurred by the SpecialOversight Committee of the Company’s Board of Directors, formed in February2003, to oversee the management of the affairs of the Company until such timeas a new Chief Executive Officer was employed. The Company also incurred increased legal fees associated with the March2003 adoption of a Shareholders Purchase Rights Plan.

#  

*Operating Loss from Continuing Operations*

 

Operating loss fromcontinuing operations amounted to $228,000 in the first quarter of 2004 ascompared to an operating loss of $190,000 in the first quarter of 2003. TheDiagnostics segment’s operating income decreased to $390,000 in the firstquarter of 2004 from $458,000 in the first quarter of 2003, associated with a0.5% decline in product revenue and a sales mix shift to lower marginproducts.  The operating loss of the PCTsegment increased to $395,000 in the first quarter of 2004 from $382,000 in thefirst quarter of 2003 primarily due to increased research and developmentactivities associated with development of a less expensive and smaller, benchtop version of the PCT BarocyclerTM,  consulting fees paid to theCompany’s former Chairman and Chief Executive Officer, and increased legal feesassociated with PCT patent related work. The Laboratory Instrumentation segment’s operating loss decreased to$146,000 in the first quarter of 2004 from $209,000 in the first quarter of2003; this segment recorded a slight increase in revenue associated withdevelopment services for a less expensive and smaller, bench top version of thePCT BarocyclerTM.  Operating income at the Biotech segment wasrelatively unchanged.

 

*Interest Expense*

 

Netinterest expense decreased to $64,000 in the first quarter of 2004 as comparedto $73,000 in the first quarter of 2003. The first quarter of 2004 included interest expense associated withborrowings on the Company’s line of credit, which became effective on February5, 2004.   Interest expense incurred inthe first quarter of 2003 included $13,000 of increased fees due to theCompany’s default of a mortgage covenant in 2003; the Company failed to meetits debt service coverage covenant for the year ended December 31, 2002, but inthe first quarter of 2003 the financial institution waived this default and theCompany’s other defaults relating to reports and the termination of theCompany’s former Chairman and Chief Executive Officer. The fees were incurredto waive these defaults. The Company also failed to meet its debt servicecoverage covenant for the year ended December 31, 2003, but in the firstquarter of 2004 the financial institution waived this default without penalty.

 

### *LoanReceivable from Director and Former Chairman and Chief Executive Officer*

 

Asof March 31, 2004, the Company evaluated the recoverability of a $1,000,000loan receivable 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 March 31,2004. The Company’s review includes an evaluation of the collateral associatedwith the loan. The Company maintains a junior interest in this collateral.  As of March 31, 2004, the remainingcollateral consists 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($494,830 as of March 31, 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.   Theultimate value that may be recovered by the Company is dependent on numerousfactors including market conditions relative to the value of and ability tosell the Company’s common stock, and the financial status of Mr. Schumacher. AtMarch 31, 2004, the Company performed a test for impairment of its loanreceivable by analyzing the value of the collateral, and determined that theloan receivable was not impaired. While the loan receivable was not impaired asof March 31, 2004, fluctuations in the quoted market value of the Company’scommon stock, which comprises the remaining collateral, may be an indicator ofimpairment.  Based on the

 

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Company’s assessment as of and through April2004, the Company estimates that the value of the collateral approximates theamount of the Company’s recorded loan. If actual market conditions are less favorable or other factors arisethat are significantly different than those anticipated by management, awrite-down of this asset might be required.

 

*Income Taxes*

 

Inthe year 2000, the Company established a full valuation allowance for itsdeferred tax assets in accordance with Statement of Financial AccountingStandards No. 109 and in consideration of three consecutive years of losses;accordingly, the Company has not recognized an income tax benefit associatedwith the loss from operations in the first quarter of 2004 and the firstquarter of 2003.  Income tax expense inthe first quarter of both 2004 and 2003 relates to various state income taxes.

####  

#### *DiscontinuedOperations*

####  

On March 4, 2004, theCompany entered into a lease termination agreement with the landlord of thefacility previously occupied by BBI Clinical Laboratories, Inc., formerly awholly-owned subsidiary of the Company. The agreement calls for a series of reduced payments over the next ninemonths in return for the Company vacating the facility on or before May 31,2004.   Accordingly, the Companyrecognized a $135,000 gain in the first quarter of 2004 associated with thisfavorable early termination lease agreement. The Company’s estimate ofremaining short and long term accrued liabilities to exit the clinicallaboratory testing business is approximately $202,000 as of March 31, 2004.

 

#### *Net Loss*

 

TheCompany had a net loss of $156,000 in the first quarter of 2004 as compared toa net loss of $254,000 in the first quarter of 2003 as explained in furtherdetail above.

 

**LIQUIDITY AND FINANCIAL CONDITION**

 

The Company’s workingcapital position, excluding restricted cash of $69,990 as of March 31, 2004,decreased to $7,314,000 as of March 31, 2004 from $7,659,000 as of December 31,2003.

 

Net cash provided byoperations for the three months ended March 31, 2004 was $184,000 as comparedto net cash provided by operations of $739,000 for the three months ended March31, 2003.  Cash provided by operationsduring the first three months of 2004 was primarily the result of an increasein trade accounts payable, partially offset by cash used by operationsprimarily due to increases in inventory, costs associated with obtaining a lineof credit in the first quarter of 2004, and a security deposit requirementassociated with entering into a new facility lease agreement in Frederick MD inMarch 2004.   Cash provided byoperations during the first three months of 2003 was primarily the result offavorable cash collections of certain governmental contract receivables as wellas reduced inventory purchases.

 

Net cash used in investingactivities for the three months ended March 31, 2004 was $71,000 compared to$20,000 for the three months ended March 31, 2003.  The Company made certain purchases of laboratory equipment in thefirst quarter of 2004 whereas in year 2003, the Company curtailed capitalexpenditures in conjunction with its efforts to seek additional capital.

 

Net cash provided byfinancing activities for the three months ended March 31, 2004 was $275,000compared to cash used of $10,000 during the three months ended March 31,2003.  The Company has drawnapproximately $519,000 (excluding $166,000 of related expenses) on a new lineof credit which became effective in February 2004 as discussed furtherhereunder.

 

*Revolving Line of Credit*

 

On February 5, 2004, theCompany entered into a three year, $2,500,000 revolving line of creditagreement with a private lender.  Therevolving line of credit bears interest at the base rate plus 3%, carriescommercially standard unused line and collateral management fees (payablemonthly), and is collateralized by trade accounts receivable and inventory ofthe Company.  Borrowings under therevolving line of credit are limited to commercially standard

 

16

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terms and percentages of accounts receivableat present. The revolving line of credit contains financial and othercovenants, including a minimum debt service coverage ratio and certainrestrictions on the payments of dividends and incurring additional debt. Theamount borrowed pursuant to this revolving line of credit was $518,952 as ofMarch 31, 2004.  In accordance with theprovisions of the revolving line of credit agreement, all cash receipts of theCompany associated with trade accounts receivable are deposited into arestricted bank account.  This accountbalance of $69,990 is reported as restricted cash on the accompanying balancesheet as of March 31, 2004.  The Companyhas incurred approximately $157,000 of costs as of March 31, 2004 associatedwith obtaining the revolving line of credit. These costs have been deferred and are being amortized to expense on astraight-line basis over the three year life of the agreement.  On April 30, 2004, the Company was notifiedby the lender under this revolving line of credit that as a result of theCompany committing to sell substantially all of its assets to SeraCare pursuantto the Asset Purchase Agreement between the Company, BBI Biotech ResearchLaboratories and SeraCare that it is in technical default with respect to thisrevolving line of credit.  The lender,however, has advised the Company it is not taking any immediate action at thistime. The Company is continuing discussions with the lender at this time.

 

*Summary*

 

Based on current forecastsand the recent establishment of a three year, $2,500,000 line of credit,management believes the Company has sufficient liquidity to finance operationsfor the next twelve months.  Management’s forecasts involve assumptions that could prove to be incorrect.If the Company continues to incur operating losses or negative cash flows, itmay need to raise additional funds. There can be no assurance that these funds will be available whenrequired on terms acceptable to the Company, if at all.  If adequate funds are not available whenneeded, the Company may be required to further reduce certain of its  costs and delay, scale back, or eliminatecertain of its activities, any of which could have a material adverse long termeffect on its business, financial condition and results of operations.

 

The Company has consideredvarious sources of additional financing, including but not limited to, sale ofbusiness segments, strategic alliances and private placements of debt or equitysecurities, which could result in dilution to the Company’s stockholders.  On October 25, 2002, the Company retained aninvestment banking firm to advise the Company in the evaluation of strategicopportunities aimed at increasing shareholder value and liquidity by increasingthe capital needed for growth.  Asdescribed previously, on April 16, 2004, the Company entered into an Asset Purchase Agreement  to sell substantially all of its assets,which consists of the assets of its BBI Diagnostics and BBI Biotech businessunits to SeraCare.  The purchase priceis $30 million in cash, plus the assumption of certain liabilities related tothe BBI Diagnostics and BBI Biotech business units, and is subject toadjustment at closing based on 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 periodof 18 months following the closing.  Inaddition,  BBI also announced on April16, 2004 that it has entered into a non-binding Letter of Intent (“LOI”) tosell the assets and selected liabilities of its BBI Source Scientific businessunit (BBI’s California-based Laboratory Instrumentation Division) to a newlyformed entity to be jointly owned 70% by Mr. Richard W. Henson and Mr. Bruce A.Sargeant and 30% by BBI.  Simultaneously with the announcement of the Asset Sale, BBI stated itsintention to commence an issuer tender offer to purchase up to 6,000,000 sharesof its common stock at a price of $3.50 per share shortly following thecompletion of the sale to SeraCare. BBI expects to use up to $21.0 million ofthe after-tax net proceeds from the sale to SeraCare to purchase shares of itscommon stock tendered in the tender offer. The remaining net proceeds from thesale to SeraCare, after taxes and transaction fees, which is estimated to be between$1.0 and $2.0 million, 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

 

17

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for the three months ended March 31, 2004 arenot expected to be indicative of the results that may be expected for the yearending December 31, 2004 nor subsequent years.

 

*Related Party Transaction*

 

In January 2002, the Companypledged a $1,000,000 interest bearing deposit at a financial institution tosecure the Company’s limited guaranty of loans in the aggregate amount of$2,418,000 from the financial institution to an entity controlled by Richard T.Schumacher, a Director and the Company’s current Chief Executive Officer.  The loans from the financial institution tothe entity controlled by Mr. Schumacher, which are personally guaranteed by Mr.Schumacher, were originally secured by collateral which includes certain realproperty owned by Mr. Schumacher and all of his shares of common stock held inthe Company.  The Company’s pledge is securedby a junior subordinated interest in the collateral provided by Mr. Schumacherto the financial institution. The Company’s pledge of $1,000,000 was made toassist Mr. Schumacher in refinancing his indebtedness related to, among otherthings, his divorce settlement and to enable him to avoid the need to sell hisCompany common stock on the open market to satisfy his debts.  The Company’s Board of Directors and aspecial 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 on its balance sheet as of December 31,2002 until the cash was used to satisfy the Company’s limited guaranty inJanuary 2003 and since then has reflected a $1,000,000 loan receivable on itsbalance sheet in stockholders’ equity.

 

OnFebruary 14, 2003, the Company announced that its Board of Directors terminatedMr. Schumacher as Chairman and Chief Executive Officer, effectiveimmediately.  Mr. Schumacher remained asa Director of the Company. Kevin W. Quinlan, President and Chief OperatingOfficer, continued to lead day-to-day operations.  A special committee of the Board of Directors was appointed tooversee the management of the affairs of the Company until such time as a newChief Executive Officer was employed.

 

OnJuly 9, 2003, the Company announced that Mr. Schumacher agreed to accept anengagement 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 Panacos Pharmaceuticals,Inc.  BBI Source Scientific, Inc. is theCompany’s California-based instrument subsidiary, which developed andmanufactures the PCT BarocyclerTM instrument. As part of this engagement, Mr. Schumacher continued to reevaluate theongoing business prospects for both the Company’s Laboratory Instrumentationsegment and PCT activities. On February 9, 2004, the Company announced it hadextended until December 31, 2004 the Executive Consultant Agreement it had withMr. Schumacher.  Under the terms of theConsulting Agreement, Mr. Schumacher served in an advisory role directing theCompany’s PCT and BBI Source Scientific activities, the Company’s interest inPanacos Pharmaceuticals, Inc. and such other duties as the President or theBoard of Directors of the Company assigned to him.  In addition to these responsibilities, Mr. Schumacher alsocontinued his lead role in working with William Blair & Co. the Chicago, anIllinois based investment banking firm retained by the Company in October2002.    In connection with hisConsulting 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’sBoard of Directors, a bonus in an amount to be determined by the Board ofDirectors in recognition of the successful completion of his duties andresponsibilities under the agreement, and he was also eligible to participatein the Company’s health and medical insurance, disability insurance, group lifeinsurance and group travel insurance, and 401(k) retirement plans.

 

OnApril 20, 2004, the Board of Directors of BBI announced the appointment ofMr.  Schumacher to the Company’s openposition of 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

 

18

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working as an employee of the Companypursuant to the terms of his existing consulting agreement.

 

**CRITICAL ACCOUNTING POLICIES**

 

Thecritical accounting policies utilized by the Company in the preparation of theaccompanying financial statements are set forth in Part I, Item 7 of theCompany’s Form 10-K for the year ended December 31, 2003, under the heading“Management’s Discussion and Analysis of Financial Condition and Results ofOperations”.  There have been nomaterial changes to these policies since December 31, 2003 except as notedbelow.

 

OnApril 16, 2004, Boston Biomedica, Inc. (“BBI”) announced that it has signed anAsset Purchase Agreement (the “Asset Purchase Agreement”) to sell substantiallyall of the assets and selected liabilities of its BBI Diagnostics and BBIBiotech Divisions to SeraCare Life Sciences, Inc. (“SeraCare”) of Oceanside,California (the “Asset Sale”). Accordingly, in the second quarter of 2004, the Company intends toreclassify the above referenced assets and liabilities as a separate balancesheet category entitled “Assets Held for Sale” in accordance with the provisions of Statement of Financial AccountingStandards No. 144 “Accounting for the Impairment or Disposal of Long-LivedAssets”.   It is further anticipated theCompany will cease depreciation and amortization, estimated at approximately$250,000 per quarter, on such long lived assets held for sale effective April16, 2004, in accordance with the provisions of this accounting pronouncement.

 

*Deferred costs*

 

TheCompany has deferred approximately $51,000 of transaction costs as of March 31,2004 associated with the above noted Asset Purchase Agreement. Assuming thetransaction closes as anticipated, these costs will be included in the finalgain computation associated with the Asset Purchase Agreement, otherwise theCompany may be required to write off these costs if the transaction does notproceed as anticipated.  In addition, asdiscussed  in Note 9 of Notes toCondensed Consolidated Financial Statements hereunder, the Company has deferredapproximately $157,000 of costs as of March 31, 2004 associated with obtaininga line of credit. These costs are being amortized to expense on a straight-linebasis over the three year life of the agreement commencing February 2004.

** **

**CONTRACTUAL OBLIGATIONS**

 

Thefollowing is a summary of the Company’s future contractual obligations as ofMarch 31, 2004:

 
|                                                 |   | **Payments  Due by Period** |           |
|------------------------------------------------------|--------|-----------------------------|----------------|
| **Contractual Obligations**                          |   | **Total**                   |           | **Less than  1 year** |   | **1-3  years** |   | **4 - 5  years** |   | **More than  5  years** |   |
|                                                 |   |                        |           |   |   |   |   |   |   |   |   |
| Mortgage payments*                                   |   | $                           | 3,582,000      |   | $ | 287,000 |   | $ | 575,000 |   | $ | 575,000 |   | $ | 2,145,000 |   |
| Operating Lease Obligations                          |   | 51,000                      |           | 21,000 |   | 30,000 |   | — |   | — |   |
| Note Payable                                         |   | 15,000                      |           | 5,000 |   | 10,000 |   | — |   | — |   |
| Real Estate Facility Leases  **                 |   | 12,563,000                  |           | 1,263,000 |   | 2,818,000 |   | 2,146,000 |   | 6,336,000 |   |
| Revolving Line of Credit*****                        |   | —                      |           | — |   | — |   | — |   | — |   |
| Minimum future royalty payments***                   |   | —                      |           | — |   | — |   | — |   | — |   |
| Obligations relating to Discontinued  Operations**** |   | 201,880                     |           | 106,880 |   | 60,000 |   | 10,000 |   | 25,000 |   |
| **Total Contractual Obligations**                    |   | **$**                       | **16,412,880** | ** ** | **$** | **1,682,880** | ** ** | **$** | **3,493,000** | ** ** | **$** | **2,731,000** | ** ** | **$** | **8,506,000** | ** ** |

 

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*Future monthly payments on this mortgage include principal and interest, basedon a 20-year amortization schedule with a balloon payment representing theremaining balance due in full on March 10, 2010.  During the first five years, the note carries an interest rate of9.75%; after five years (March 2005), the rate charged will be .75% greaterthan the Corporate Base Rate then in effect. The information presented in thetable above is presented using an assumed annual mortgage interest rate of9.75% for all periods presented.

 

**The Company leases certain office space, repository, research and manufacturingfacilities under operating leases with various terms through October 2007. Thereal estate leases for facilities located in Maryland include renewal optionsat either market or increasing levels of rent. The Company leases 27,000 squarefeet of space in

 

19

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GardenGrove, California where its BBI Source business unit manufactures laboratoryinstruments. The lease for this facility expires January 31, 2005 and there iscurrently no extension or renewal option.  In March 2004, the Company entered into an eleven year lease agreementwith an existing landlord for approximately 65,160 sq ft of new repositoryspace located in Frederick, MD; this lease is scheduled to take effect in twostages, August 1, 2004 and August 1, 2005. Assuming occupancy of the new facility by the Company on August 1, 2004,the landlord has agreed to terminate in full the Company’s remainingobligations pursuant to an existing facility lease in Frederick, MD which wasscheduled to terminate in November 2006.  Incremental minimum lease payments pursuant to the new lease (which arenet of savings associated with the concurrent termination of the existinglease) would amount to $55,900 in year 2004, $885,000 in years 2005-2006,$1,755,000 in years 2007-2008, and $6,563,000 thereafter; these amountsare  included in the table above.

 

***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 the transaction, theCompany is obligated to pay a 5% royalty on net sales (until March 2016) offuture sales by any entity of the Company utilizing PCT, with required minimumroyalty payments having ended in 2003. The Company announced the availabilityof its PCT products for commercial sale in the latter part of year 2002.

 

****In December 2000, the Company made a decision to exit the clinical laboratorytesting services segment and in February 2001, BBI Clinical Laboratories, Inc.,a wholly-owned subsidiary of the Company. The Company’s estimate of remaining short and long term accruedliabilities to exit the clinical laboratory testing business is $201,880 as ofMarch 31, 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.

 

*****In February 2004, the Company enteredinto a three year, $2,500,000 revolving line of credit agreement with a privatelender; any amounts due pursuant to this agreement are not included in thetable.  The balance outstanding on thisline of credit was $518,952 as of March 31, 2004.

 

**FORWARD-LOOKING STATEMENTS**

 

ThisQuarterly Report on Form 10-Q contains forward-looking statements which involverisks and uncertainties, including statements regarding the Company’s plans,objectives, expectations and intentions. In some cases, forward-looking statements are identified by terms suchas “may”, “will”, “should”, “could”, “would”, “expects”, “plans”,“anticipates”, “believes”, “estimates”, “projects”, “predicts”, “potential”,and similar expressions intended to identify forward-looking statements. Suchstatements include, without limitation, statements made regarding the expectedrecovery and value of the loan receivable from the Company’s Chief ExecutiveOfficer; the Company’s belief that it has sufficient liquidity to financeoperations over the next twelve months; the Company’s expectation to completethe sale of its Diagnostics and Biotech business units to SeraCare and theCompany’s expectation to complete the sale of its BBI Source Scientificbusiness unit; the proceeds remaining from the purchase price received fromSeraCare after payment of taxes and transaction fees and related costs; theCompany’s plans following the closing of the sale of its Diagnostics, Biotechand BBI Source Scientific business units; the Company’s intent to commence an issuertender offer following the completion of the sale of its Diagnostics andBiotech business units; and the anticipated future financial performance of theCompany and its products.  Theseforward-looking statements are only predictions and involve known and unknownrisks, uncertainties, and other factors that may cause the Company’s actualresults, levels of activity, performance, or achievements to be materiallydifferent from any future results, levels of activity, performance, orachievements expressed or implied by such forward-looking statements. Also,these forward-looking statements represent the Company’s best estimates andassumptions only as of the date of this Report.  Except as otherwise required by law, the Company expresslydisclaims any obligation or undertaking to release publicly any updates orrevisions to any forward-looking statement contained in the Report to reflectany change in the Company’s expectations or any change in events, conditions,or circumstances on which any of the Company’s forward-looking statements arebased.

 

Factors,risks and uncertainties which might cause actual results to differ materiallyfrom those projected in the forward-looking statements contained herein includethe following:

 

•                  due to operational, scientific or technicaldifficulties in the implementation of the Company’s strategies and changes incustomer demand, the Company’s sales to IVD test kit manufacturers and sales ofACCURUN and other quality control products may decline;

 

20

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

•                  the Company may not have sufficient resourcesto develop new or improved PCT products;

•                  demand for commercial applications of PCT maynot materialize as expected or may take longer than expected to materialize;

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

•                  certain PCT applications may not fall withinthe claims of the Company’s twelve issued U.S. patents;

•                  individuals and groups utilizing PCT may beable to license such technology from entities other than the Company;

•                  the Company may be unable to develop the end-usermarket for its quality control products;

•                  the Company may be unable to  grow the sales of its BBI Source Scientificbusiness unit to the extent anticipated; 

•                  the uncertainty of the renewal and fullfunding of contracts with National Institutes of Health (NIH);

•                  the Company may be unable to obtain anadequate supply of the unique and rare specimens of plasma and serum necessaryfor certain of its products;

•                  the potential for significant reductions inpurchases by any of the Company’s major customers;

•                  the Company may be unable to obtain thenecessary government approvals for certain of its products;

•                   the Company may be unable to competeeffectively due to rapid changes in technology;

•                  the collateral securing the Company’s loanreceivable from its Chief Executive Officer (as of April 20, 2004) may beimpaired, and the Company may not be able to fully collect the principal andinterest due on a $1,000,000 receivable from its Chief Executive Officer;

•                  the Company may be unable to comply with thefinancial and other covenants contained in the Company’s revolving line ofcredit;

•                  the risk that the transaction with SeraCaremay not be completed due to the failure to satisfy or waive conditions toclosing;

•                  the risk that the Company may be unable to agreeon a definitive agreement to sell the assets of its BBI Source Scientificbusiness unit or otherwise complete the sale of those assets;

•                  the risk that the continuity of the Company’soperations will be disrupted in the event the proposed transactions are notcompleted;

•                  the costs of completing the proposed assetsale transactions may exceed management’s estimates;

•                  the risk that the timing and amount of thetender offer purchase price may differ from what is presently anticipated orthat the tender may not be able to be completed at all due to unanticipatedevents or other circumstances beyond the Company’s control, includingunforeseen liabilities or contingencies reducing the amount of proceedsavailable for the tender offer;

•                  the risk that the Company will not havesufficient funds to operate its remaining business following the closing; and

•                    the risk that if expenses are higher thananticipated, or if revenues are lower than anticipated or if the Company isunable to complete the assets sale transactions, 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.

 

Certainof these and other factors which might cause actual results to differmaterially from those projected are more fully set forth under the caption“Risk Factors” in the Company’s Annual Report to the United States Securitiesand Exchange Commission on Form 10-K for the year ended December 31, 2003 andin the Company’s other reports and statements the Company files from time totime with the SEC.

 

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

 

Therehave been no material changes in the reported market risks since December 31,2003.

 

**ITEM 4.  CONTROLS ANDPROCEDURES**

 

The Company maintainsdisclosure controls and procedures that are designed to ensure that informationrequired to be disclosed in its Securities Exchange Act reports is recorded,processed, summarized and reported

 

21

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within the time periods specified in theSEC’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.

 

Asof March 31, 2004,  the Company carriedout an evaluation, under the supervision and with the participation of itsmanagement, including its Principal Executive Officer and Principal FinancialOfficer of the effectiveness of the design and operation of our disclosurecontrols and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under theSecurities Exchange Act of 1934. Based upon that evaluation, the Company’sPrincipal Executive Officer and Principal Financial Officer concluded that theCompany’s disclosure controls and procedures are effective in enabling theCompany to record, process, summarize and report information required to beincluded in our periodic SEC filings within the required time period.

 

Therehave been no changes in the Company’s internal control over financial reportingthat occurred during the period covered by this report that have materiallyaffected, or are reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

 

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##### **PARTII.  OTHER INFORMATION**

 

**ITEM 1.    LEGALPROCEEDINGS**

 

None.

 

#### **ITEM2.  CHANGES IN SECURITIES AND USE OFPROCEEDS**

 

Inconnection with the execution and delivery of the Asset Purchase Agreementdated April 16, 2004 between the Company, BBI Biotech Research Laboratories,Inc. and SeraCare, on April 16, 2004, SeraCare   entered into voting agreements (the “Voting Agreements”) witheach of Mr. Richard T. Schumacher, BBI’s founder, Chief Executive Officer and aDirector, and Mr. Richard Kiphart, his daughter and Shoreline Micro-Cap Fund ILP, a fund in which Mr. Kiphart serves as general partner and has the solepower to vote and dispose or direct the disposition of shares held by suchfund. Under the Voting Agreements, these stockholders, who collectively hold anaggregate of approximately 32% of BBI’s total outstanding shares entitled tovote at the stockholders meeting, have agreed to vote their shares in favor ofthe sale of assets of the Company’s Diagnostics and Biotech business unitscontemplated by the Asset Purchase Agreement, in accordance with the VotingAgreements.

 

Priorto the execution and delivery of the Asset Purchase Agreement and the VotingAgreements, BBI amended its Rights Agreement dated February 27, 2003 to providethat none of the following events will trigger the preferred share purchaserights under that agreement: (i) the execution and delivery of the AssetPurchase Agreement, (ii) the execution of the Voting Agreements, (iii) thegranting 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 amortgage agreement on its West Bridgewater, MA facility, of which approximately$2,304,000 remains outstanding as of March 31, 2004. Pursuant to this mortgageagreement the Company is subject to certain financial covenants. The Companyfailed to meet its debt service coverage covenant for the year ended December31, 2003, but in the first quarter of 2004 the financial institution waivedthis default without penalty.

 

OnFebruary 5, 2004, the Company entered into a three year, $2,500,000 revolvingline of credit agreement with a private lender.  The revolving line of credit bears interest at the base rate plus3%, 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 at present. The revolving line of creditcontains a covenant regarding a minimum debt service coverage ratio,  provides certain restrictions on thepayments of dividends and incurring additional debt, and contains otherstandard covenants. On April 30, 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 pursuant to the AssetPurchase Agreement between the Company, BBI Biotech Research Laboratories and SeraCarethat it is in technical default with respect to this revolving line ofcredit.  The lender, however, has alsoadvised the Company of its decision to not take any immediate action at thistime and the Company remains in ongoing discussions with the lender.

 

##### **ITEM4.  SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS**

 

    Notapplicable.

 

**ITEM 5.  OTHERINFORMATION**

 

None.

 

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**ITEM 6.  EXHIBITS ANDREPORTS 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**           |

 

24

----

 
| 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 between Commerce  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**    |

 

25

----

 
| 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 LLC and  Boston Biomedica, Inc.                                                                        |   | Filed herewith  |
|   |   |                                                                                                                                                                            |   |            |
| 10.34  |   | Description  of Severance Agreement between Boston Biomedica, Inc. and Richard  D’Allessandro as of  March 21 2001.                                              |   | Filed herewith* |
|   |   |                                                                                                                                                                            |   |            |
| 10.35  |   | Lease  Agreement dated March 1, 2004 by and between MIE Properties, Inc. and BBI  Biotech Research Laboratories, Inc.                                                           |   | Filed herewith  |
|   |   |                                                                                                                                                                            |   |            |
| 10.36  |   | Early  Termination of Lease Agreement dated March 1, 2004  by and between MIE Properties, Inc. and BBI Biotech Research  Laboratories, Inc.                                |   | Filed herewith  |
|   |   |                                                                                                                                                                            |   |            |
| 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**             |
|   |   |                                                                                                                                                                            |   |            |
| 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                          Incorporated by reference to the registrant’sRegistration Statement on Form S-1 (Registration No. 333-10759) (the“Registration Statement”). The number set forth herein is the number of theExhibit in said Registration Statement.

B                            Incorporated by reference to Exhibit No.10.17 of the Registration Statement.

C                            Incorporated by reference to the registrant’sAnnual Report on Form 10-K for the fiscal year ended December 31, 2002.

D                           Incorporated by reference to the registrant’sQuarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2002.

E                             Incorporated by reference to the registrant’sQuarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997.

F                             Incorporated by reference to the registrant’sAnnual Report on Form 10-K for the fiscal year ended December 31, 1997.

G                            Incorporated by reference to the registrant’sQuarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1998.

H                           Incorporated by reference to the registrant’sQuarterly Report on Form 10-Q for the fiscal quarter ended

 

26

----

 

September 30, 1999.

I                                Incorporated by reference to the registrant’sproxy statement, filed with the Securities and Exchange Commission on June 14,1999.

J                               Incorporated by reference to the registrant’sAnnual Report on Form 10-K/A for the fiscal year ended December 31, 1999.

K                           Incorporated by reference to the registrant’sReport on Form 8-K filed September 8, 2000.

L                             Incorporated by reference to the registrant’sQuarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000.

M                        Incorporated by reference to the registrant’sReport on Form 8-K filed March 8, 2001.

N                           Incorporated by reference to the registrant’sQuarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001.

O                           Incorporated by reference to the registrant’sAnnual Report on Form 10-K for the fiscal year ended December 31, 2001.

P                             Incorporated by reference to Exhibit 4 of theregistrant’s Current Report on Form 8-K filed March 12, 2003.

Q                           Incorporated by reference to the registrant’sQuarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2003.

R                            Incorporated by reference to the registrant’sAnnual Report on Form 10-K for the fiscal year ended December 31, 2003.

S                             Incorporated by reference to the registrant’sCurrent Report on Form 8-K filed April 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 no reports on Form 8-Kwith the Securities and Exchange Commission during the three months ended March31, 2004.

 

 

**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:  | May  14, 2004                                                                                             |                                  | By: | *  /s/ Kevin W. Quinlan* |   |
|        | Kevin  W. Quinlan,                                                                                        |
|        | President,  Chief Operating Officer and Treasurer                                                         |
|        |                                                                                                      |
|        |                                                                                                      |
|        | By:                                                                                                       | *  /s/ Michael N. Avallone* |   |
|        | Michael  N. Avallone                                                                                      |
|        | Vice  President, Finance and  Chief  Financial Officer  (Principal Financial and Accounting Officer) |
|             |                                                                                                           |                                       |  |  |  |  |  |

 

27

----

 

**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**           |
|            |   |                                                                                                                                                                                              |   |          |
| 10.2            |   | 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**           |

 

28

----

 
| 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 between Commerce  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**    |
|   |   |                                                                                                                                                                                                                                                                                   |   |   |
| 10.31  |   | Consultant  Agreement between Boston Biomedica, Inc. and Richard T. Schumacher entered  into as of December 31, 2003                                                                                                                                                                   |   | R**    |

 

29

----

 
| 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 LLC and  Boston Biomedica, Inc.                                                                        |   | Filed herewith  |
|   |   |                                                                                                                                                                            |   |            |
| 10.34  |   | Description  of Severance Agreement between Boston Biomedica, Inc and Richard  D’Allessandro as of March 21, 2001.                                                         |   | Filed herewith* |
|   |   |                                                                                                                                                                            |   |            |
| 10.35  |   | Lease  Agreement dated March 1, 2004 by and between MIE Properties, Inc. and BBI  Biotech Research Laboratories, Inc.                                                           |   | Filed herewith  |
|   |   |                                                                                                                                                                            |   |            |
| 10.36  |   | Early  Termination of Lease Agreement dated March 1, 2004  by and between MIE Properties, Inc. and BBI Biotech Research  Laboratories, Inc.                                |   | Filed herewith  |
|   |   |                                                                                                                                                                            |   |            |
| 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**             |
| 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                          Incorporated by reference to the registrant’sRegistration Statement on Form S-1 (Registration No. 333-10759) (the“Registration Statement”). The number set forth herein is the number of theExhibit in said Registration Statement.

B                            Incorporated by reference to Exhibit No.10.17 of the Registration Statement.

C                            Incorporated by reference to the registrant’sAnnual Report on Form 10-K for the fiscal year ended December 31, 2002.

D                           Incorporated by reference to the registrant’sQuarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2002.

E                             Incorporated by reference to the registrant’sQuarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997.

F                             Incorporated by reference to the registrant’sAnnual Report on Form 10-K for the fiscal year ended December 31, 1997.

G                            Incorporated by reference to the registrant’sQuarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1998.

H                           Incorporated by reference to the registrant’sQuarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1999.

I                                Incorporated by reference to the registrant’sproxy statement, filed with the Securities and Exchange Commission on June 14,1999.

J                               Incorporated by reference to the registrant’sAnnual Report on Form 10-K/A for the fiscal year ended December 31, 1999.

K                           Incorporated by reference to the registrant’sReport on Form 8-K filed September 8, 2000.

L                             Incorporated by reference to the registrant’sQuarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000.

M                        Incorporated by reference to the registrant’sReport on Form 8-K filed March 8, 2001.

N                           Incorporated by reference to the registrant’sQuarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001.

O                           Incorporated by reference to the registrant’sAnnual Report on Form 10-K for the fiscal year ended December 31, 2001.

P                             Incorporated by reference to Exhibit 4 of theregistrant’s Current Report on Form 8-K filed March 12, 2003.

 

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Q                           Incorporated by reference to the registrant’sQuarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2003.

R                            Incorporated by reference to the registrant’sAnnual Report on Form 10-K for the fiscal year ended December 31, 2003.

S                             Incorporated by reference to the registrant’sCurrent Report on Form 8-K filed April 16, 2004.

 

 

*                             Management contract or compensatory plan orarrangement.

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

 

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