**UNITED STATES**

 

**SECURITIES AND EXCHANGE COMMISSION**

 

**Washington, D.C. 20549**

 

## **Form 10-Q**

## ** **

**(Mark One)**

 

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

 

**For the quarterly period endedSeptember 30, 2003 or**

 

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

 

**For the transition periodfrom            to            **

 

**Commission file number   0-21615**

 

**BOSTON BIOMEDICA, INC.**

(Exact Name of Registrant as Specified in itsCharter)

 

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

 

Indicate by check mark whetherthe Registrant: (1) has filed all reports required to be filed bySection 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

 

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

 

o Yes      ý No

 

The number of shares outstandingof the Registrant’s common stock as of October 31, 2003 was 6,827,592.

 

 

----

 

**PartI. Financial Information**

 

**Item1. Financial Statements**

 

**BOSTON BIOMEDICA, INC. AND SUBSIDIARIES**

 

**CONDENSED CONSOLIDATED STATEMENTS OFOPERATIONS**

 

**(Unaudited)**

 
|                                                                                     |   | **For the  three months ended  September 30,** |      | **For the  nine months ended  September 30,** |   |
|------------------------------------------------------------------------------------------|--------|------------------------------------------------|-----------|-----------------------------------------------|--------|
|                                                                                     |   | **2003**                                       |      | **2002**                                      |   | **2003** |   | **2002** |   |
|                                                                                     |   |                                           |      |                                          |   |   |   |   |   |
| REVENUE:                                                                                 |   |                                           |      |                                          |   |   |   |   |   |
| Products                                                                                 |   | $                                              | 3,524,740 |                                          | $      | 2,868,300 |   | $ | 10,186,266 |   | $ | 9,431,905 |   |
| Services                                                                                 |   | 2,304,295                                      |      | 3,007,672                                     |   | 7,308,630 |   | 7,253,277 |   |
| Total revenue                                                                            |   | 5,829,035                                      |      | 5,875,972                                     |   | 17,494,896 |   | 16,685,182 |   |
|                                                                                     |   |                                           |      |                                          |   |   |   |   |   |
| COSTS AND EXPENSES:                                                                      |   |                                           |      |                                          |   |   |   |   |   |
| Cost of products                                                                         |   | 1,892,686                                      |      | 1,542,111                                     |   | 5,406,894 |   | 4,832,634 |   |
| Cost of services                                                                         |   | 1,914,442                                      |      | 2,315,721                                     |   | 5,734,411 |   | 5,571,661 |   |
| Research and development                                                                 |   | 491,190                                        |      | 708,284                                       |   | 1,311,757 |   | 2,097,083 |   |
| Selling and marketing                                                                    |   | 827,688                                        |      | 803,956                                       |   | 2,418,182 |   | 2,534,297 |   |
| General and administrative                                                               |   | 986,489                                        |      | 1,016,087                                     |   | 3,253,526 |   | 3,242,397 |   |
| Total operating costs and expenses                                                       |   | 6,112,495                                      |      | 6,386,159                                     |   | 18,124,770 |   | 18,278,072 |   |
| Operating loss from continuing operations                                                |   | (283,460                                       | )         | (510,187                                      | )      | (629,874 | ) | (1,592,890 | ) |
| Interest income                                                                          |   | 1,988                                          |      | 9,966                                         |   | 17,619 |   | 34,744 |   |
| Interest expense                                                                         |   | (74,284                                        | )         | (66,957                                       | )      | (218,921 | ) | (189,791 | ) |
| Loss from continuing operations before income taxes                                      |   | (355,756                                       | )         | (567,178                                      | )      | (831,176 | ) | (1,747,937 | ) |
| Provision for income taxes                                                               |   | —                                         |      | —                                        |   | (3,431 | ) | — |   |
| Loss from continuing operations                                                          |   | (355,756                                       | )         | (567,178                                      | )      | (834,607 | ) | (1,747,937 | ) |
| Discontinued operations (Note 8)                                                         |   |                                           |      |                                          |   |   |   |   |   |
| Income from discontinued operations of Clinical Laboratory segment,  net of income taxes |   | —                                         |      | 225,000                                       |   | — |   | 225,000 |   |
| Net loss                                                                                 |   | $                                              | (355,756  | )                                             | $      | (342,178 | ) | $ | (834,607 | ) | $ | (1,522,937 | ) |
|                                                                                     |   |                                           |      |                                          |   |   |   |   |   |
| Loss per share from continuing operations, basic & diluted                           |   | $                                              | (0.05     | )                                             | $      | (0.08 | ) | $ | (0.12 | ) | $ | (0.26 | ) |
| Income per share from discontinued operations, basic & diluted                       |   | $                                              | —    |                                          | $      | 0.03 |   | $ | — |   | $ | 0.03 |   |
| Net loss per share, basic & diluted                                                  |   | $                                              | (0.05     | )                                             | $      | (0.05 | ) | $ | (0.12 | ) | $ | (0.23 | ) |
| Number of shares used to calculate net income (loss) per share, basic  and diluted       |   | 6,824,075                                      |      | 6,782,175                                     |   | 6,804,972 |   | 6,618,338 | ** ** |

 

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**

 
|                                                                                                                                                                   |   | **(Unaudited)**          |       |                    |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|------------|-------------------------|--------|
|                                                                                                                                                                   |   | **September  30,  2003** |       | **December  31,  2002** |   |
|                                                                                                                                                                   |   |                     |       |                    |   |
| ASSETS                                                                                                                                                                 |   |                     |       |                    |   |
| CURRENT ASSETS:                                                                                                                                                        |   |                     |       |                    |   |
| Cash and cash equivalents                                                                                                                                              |   | $                        | 1,255,572  |                    | $      | 975,649 |   |
| Accounts receivable, less allowances of $124,283 in 2003 and $117,671  in 2002                                                                                         |   | 3,294,912                |       | 3,701,105               |   |
| Inventories                                                                                                                                                            |   | 6,507,934                |       | 7,094,053               |   |
| Prepaid expenses and other current assets                                                                                                                              |   | 312,150                  |       | 303,396                 |   |
| Restricted cash (Note 6)                                                                                                                                               |   | —                   |       | 1,000,000               |   |
| Total current assets                                                                                                                                                   |   | 11,370,568               |       | 13,074,203              |   |
|                                                                                                                                                                   |   |                     |       |                    |   |
| Property and equipment, net                                                                                                                                            |   | 4,967,139                |       | 5,826,817               |   |
|                                                                                                                                                                   |   |                     |       |                    |   |
| OTHER ASSETS:                                                                                                                                                          |   |                     |       |                    |   |
| Goodwill and other intangible assets, net                                                                                                                              |   | 762,066                  |       | 798,542                 |   |
| Other long-term assets                                                                                                                                                 |   | 228,178                  |       | 143,807                 |   |
| Total other assets                                                                                                                                                     |   | 990,244                  |       | 942,349                 |   |
| TOTAL ASSETS                                                                                                                                                           |   | $                        | 17,327,951 |                    | $      | 19,843,369 |   |
|                                                                                                                                                                   |   |                     |       |                    |   |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                                                                                             |   |                     |       |                    |   |
|                                                                                                                                                                   |   |                     |       |                    |   |
| CURRENT LIABILITIES:                                                                                                                                                   |   |                     |       |                    |   |
| Accounts payable                                                                                                                                                       |   | $                        | 1,377,487  |                    | $      | 1,970,517 |   |
| Accrued employee compensation                                                                                                                                          |   | 1,116,786                |       | 898,449                 |   |
| Other accrued expenses                                                                                                                                                 |   | 571,102                  |       | 506,823                 |   |
| Liabilities from discontinued operations (Note 8)                                                                                                                      |   | 195,660                  |       | 302,436                 |   |
| Current maturities of long term debt (Note 9)                                                                                                                          |   | 56,092                   |       | 79,875                  |   |
| Deferred rent and other current liabilities                                                                                                                            |   | 83,512                   |       | 118,609                 |   |
| Total current liabilities                                                                                                                                              |   | 3,400,639                |       | 3,876,709               |   |
|                                                                                                                                                                   |   |                     |       |                    |   |
| LONG-TERM LIABILITIES:                                                                                                                                                 |   |                     |       |                    |   |
| Long term debt, less current maturities (Note 9)                                                                                                                       |   | 2,288,388                |       | 2,337,874               |   |
| Liabilities from discontinued operations (Note 8)                                                                                                                      |   | 260,998                  |       | 408,005                 |   |
| Other liabilities                                                                                                                                                      |   | 561,190                  |       | 593,735                 |   |
| Total liabilities                                                                                                                                                      |   | 6,511,215                |       | 7,216,323               |   |
|                                                                                                                                                                   |   |                     |       |                    |   |
| STOCKHOLDERS’ EQUITY:                                                                                                                                             |   |                     |       |                    |   |
| Common stock, $.01 par value; 20,000,000 shares authorized, 6,827,592  and 6,786,335 issued and outstanding at September 30, 2003 and December 31,  2002, respectively |   | 68,276                   |       | 67,863                  |   |
| Additional paid-in capital                                                                                                                                             |   | 21,835,146               |       | 21,811,262              |   |
| Accumulated deficit                                                                                                                                                    |   | (10,086,686              | )          | (9,252,079              | )      |
| Loan receivable from Director and former CEO (Note 6)                                                                                                                  |   | (1,000,000               | )          | —                  |   |
| Total stockholders’ equity                                                                                                                                        |   | 10,816,736               |       | 12,627,046              |   |
| TOTAL LIABILITIES & STOCKHOLDERS’ EQUITY                                                                                                                      |   | $                        | 17,327,951 |                    | $      | 19,843,369 |   |

 

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 CASHFLOWS**

 

**(Unaudited)**

 
|                                                                                                                                           |   | **For the  nine months ended  September 30,** |      |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|-----------|
|                                                                                                                                           |   | **2003**                                      |      | **2002** |   |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                                                                                      |   |                                          |      |   |   |
| Net loss                                                                                                                                       |   | $                                             | (834,607  | ) | $ | (1,522,937 | ) |
| Less: income from discontinued operations                                                                                                      |   | —                                        |      | 225,000 |   |
| Loss from continuing operations                                                                                                                |   | (834,607                                      | )         | (1,747,937 | ) |
| Adjustments to reconcile loss from continuing operations to net cash  provided by (used in) operating activities:                              |   |                                          |      |   |   |
| Depreciation and amortization                                                                                                                  |   | 971,170                                       |      | 968,902 |   |
| Gain on disposal of property and equipment                                                                                                     |   | (548                                          | )         | — |   |
| Provision for doubtful accounts                                                                                                                |   | 8,000                                         |      | — |   |
| Changes in operating assets and liabilities:                                                                                                   |   |                                          |      |   |   |
| Accounts receivable                                                                                                                            |   | 398,193                                       |      | 295,821 |   |
| Inventories                                                                                                                                    |   | 586,119                                       |      | (619,460 | ) |
| Prepaid expenses and other current assets                                                                                                      |   | (8,754                                        | )         | (53,272 | ) |
| Other long-term assets                                                                                                                         |   | (84,371                                       | )         | 9,530 |   |
| Accounts payable                                                                                                                               |   | (593,030                                      | )         | 817,209 |   |
| Accrued employee compensation                                                                                                                  |   | 218,337                                       |      | 132,872 |   |
| Other accrued expenses                                                                                                                         |   | 64,279                                        |      | (58,544 | ) |
| Deferred rent and other current liabilities                                                                                                    |   | (35,097                                       | )         | (37,157 | ) |
| Other liabilities                                                                                                                              |   | (32,545                                       | )         | 29,153 |   |
| Net cash provided by (used in) operating activities                                                                                            |   | 657,146                                       |      | (262,883 | ) |
| **CASH FLOWS FROM INVESTING ACTIVITIES:**                                                                                                      |   |                                          |      |   |   |
| Payments for additions to property and equipment                                                                                               |   | (88,468                                       | )         | (578,417 | ) |
| Proceeds from sale of property and equipment                                                                                                   |   | 14,000                                        |      | — |   |
| Net cash used in investing activities                                                                                                          |   | (74,468                                       | )         | (578,417 | ) |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                                                                                      |   |                                          |      |   |   |
| Proceeds from issuance of common stock                                                                                                         |   | 24,297                                        |      | 149,739 |   |
| Repayments of long-term debt                                                                                                                   |   | (73,269                                       | )         | (60,784 | ) |
| Repayment of Loan by Director and former CEO                                                                                                   |   | —                                        |      | 525,000 |   |
| Pledge of restricted cash as security for loan from bank to Director  and former CEO (Note 6)                                                  |   | —                                        |      | (1,010,659 | ) |
| Net cash used in financing activities                                                                                                          |   | (48,972                                       | )         | (396,704 | ) |
| **INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:**                                                                                          |   | 533,706                                       |      | (1,238,004 | ) |
| Cash used in discontinued operations                                                                                                           |   | (253,783                                      | )         | (606,699 | ) |
| Cash and cash equivalents, beginning of year                                                                                                   |   | 975,649                                       |      | 2,857,916 |   |
| Cash and cash equivalents at end of period, excluding restricted cash  of $1,010,659 at September 30, 2002                                     |   | $                                             | 1,255,572 |   | $ | 1,013,213 |   |
| **SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND  FINANCING ACTIVITIES:**                                                                   |   |                                          |      |   |   |   |   |
| Issuance of 29,155 and 600,000 common shares, respectively, associated  with prepaid stock subscriptions                                       |   | $                                             | 175,000   |   | $ | 1,500,000 |   |
| 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 part of these condensedconsolidated financial statements.

 

4

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**BOSTON BIOMEDICA, INC.AND SUBSIDIARIES**

**NOTES TO CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

 

**1)    Basisof Presentation**

 

The accompanying unaudited condensed consolidated financial statementshave been prepared in accordance with generally accepted accounting principlesfor interim financial information and with the instructions to Form 10-Q andArticle 10 of Regulation S-X. Accordingly, they do not include all of theinformation and footnotes required by generally accepted accounting principlesfor complete financial statements. In the opinion of management, all adjustments(consisting of only normal recurring adjustments) considered necessary for afair presentation have been included. Operating results for the three and ninemonths ended September 30, 2003 are not necessarily indicative of theresults that may be expected for the year ending December 31, 2003. Forfurther information, refer to the consolidated financial statements andfootnotes thereto included in the Annual Report on Form 10-K filing for thefiscal year ended December 31, 2002 for Boston Biomedica, Inc. andSubsidiaries (“the Company” or “Boston Biomedica”) and the Company’s Form 10-Qfilings for the three months ended March 31, 2003 and three and six monthsended June 30, 2003, respectively.

 

***Stock-BasedCompensation***

 

Statement of Financial Accounting Standards No.123, “Accounting for Stock-Based Compensation” (SFAS 123), requires thatcompanies either recognize compensation expense for grants of stock options andother equity instruments based on fair value or provide pro forma disclosure ofnet income (loss) and net income (loss) per share in the notes to the financialstatements.  Statement of FinancialAccounting Standards No. 148, “Accounting for Stock-based Compensation —Transition and Disclosure — an amendment of FASB Statement No. 123,” (SFAS 148)amends SFAS 123 to provide alternative methods of transition for a voluntarychange to the fair-value-based method of accounting for stock-based employeecompensation. In addition, SFAS 148 amends the disclosure requirements of SFAS123 to require disclosures in both annual and interim financial statementsabout the method of accounting for stock-based employee compensation and theeffect of the method used on reported results. At September 30, 2003, the Company has six stock-based compensationplans, which are described in further detail in the Company’s Annual Report onForm 10-K for the year ended December 31, 2002. The Company accounts forthose 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 expense has been recognized under SFAS 123for the Company’s employee stock option plans. Had compensation expense forawards under 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:

 
|                                                                                                                                    |   | **For the  Three Months Ended September 30,** |     | **For the  Nine Months Ended September 30,** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|----------|----------------------------------------------|--------|
|                                                                                                                                    |   | **2003**                                      |     | **2002**                                     |   | **2003** |   | **2002** |   |
| Net loss - as reported                                                                                                                  |   | $                                             | (355,756 | )                                            | $      | (342,178 | ) | $ | (834,607 | ) | $ | (1,522,937 | ) |
| Deduct: Stock-based employee compensation expense determined under  fair value based methods for all awards, net of related tax effects |   | (180,116                                      | )        | (91,425                                      | )      | (415,714 | ) | (618,223 | ) |
| Net loss - pro forma                                                                                                                    |   | $                                             | (535,872 | )                                            | $      | (433,603 | ) | $ | (1,250,321 | ) | $ | (2,141,160 | ) |
| Basic and Diluted net loss per share - as reported                                                                                      |   | $                                             | (0.05    | )                                            | $      | (0.05 | ) | $ | (0.12 | ) | $ | (0.23 | ) |
|                                                                                                                                    |   |                                          |     |                                         |   |   |   |   |   |
| Basic and Diluted net loss per share - pro forma                                                                                        |   | $                                             | (0.08    | )                                            | $      | (0.06 | ) | $ | (0.18 | ) | $ | (0.32 | ) |

 

Pro forma information regarding net income(loss) and earnings (loss) per share is required by SFAS 123 and has beendetermined as if the Company had accounted for its employee stock options underthe fair value method of SFAS 123. The fair value of these options wasestimated at the date of grant using the Black-Scholes option pricing model.

 

For purposes of pro forma disclosures, theestimated fair value of the options is amortized to expense over the options’vesting period. 

 

5

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**(2)   RecentAccounting Standards**

 

In May 2003, the FASB issued SFAS No.150, “Accounting for Certain Financial Instruments with Characteristics of BothLiabilities and Equity,” which establishes standards for how an issuerclassifies and measures certain financial instruments with characteristics ofboth liabilities and equity. It requires that an issuer classify a financialinstrument that is within its scope as a liability (or an asset in somecircumstances). The Company does not expect the adoption of this new standardto have a material impact on its consolidated financial statements.

 

In April 2003, the FASB issued SFAS No.149, “Amendment of Statement 133 on Derivative Instruments and HedgingActivities,” which amends and clarifies financial accounting and reporting forderivative instruments, including certain derivative instruments embedded inother contracts and for hedging activities under FASB Statement No. 133,“Accounting for Derivative Instruments and Hedging Activities.”  The Company does not expect the adoption ofthis new standard to have a material impact on its consolidated financial statements.

 

In June 2002, the FASB issued SFAS No.146, “Accounting for Costs Associated with Exit or Disposal Activities,” whichsupersedes Emerging Issues Task Force Issue (EITF) 94-3, “Liability Recognitionfor Certain Employee Termination Benefits and Other Costs to Exit an Activity(Including Certain Costs Incurred in a Restructuring).” The standard affectsthe accounting for restructuring charges and related activities and generallywill lengthen the timeframe for reporting of expenses relating to restructuringactivities beyond the period in which a plan is initiated. The provisions ofthis statement are required to be adopted for exit or disposal activities thatare initiated after 2002. The provisions of EITF 94-3 will continue to applywith regard to the Company’s previously announced restructuring plans.

 

In November 2002, the FASB issued FASBInterpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements forGuarantees, Including Indirect Guarantees of Indebtedness of Others,” (Aninterpretation of FASB Statements No. 5, 57, and 107 and rescission of FASBInterpretation No. 34”) (“FIN 45”). FIN 45 requires that a guarantor recognize,at the inception of a guarantee, a liability for the fair value of theobligation undertaken by issuing the guarantee. The Interpretation also requiresadditional disclosures to be made by a guarantor in its interim and annualfinancial statements about its obligations under certain guarantees it hasissued. The accounting requirements for the initial recognition of guaranteesare applicable on a prospective basis for guarantees issued or modified afterDecember 31, 2002. The disclosure requirements are effective for allguarantees outstanding, regardless of when they were issued or modified, forannual periods that end after December 15, 2002. The adoption of FIN No.45 did not have a material impact on the Company’s Condensed ConsolidatedFinancial Statements.  See Note 6 ofNotes to Consolidated Financial Statements hereunder for additional informationon the Company’s limited guaranty and pledge of a $1,000,000 interest bearingdeposit, as of December 31, 2002, at a financial institution to provideadditional security for loans in the aggregate amount of $2,418,000 from thefinancial institution to an entity controlled by the former Chairman and ChiefExecutive Officer of the Company.  Inaddition, BBI Clinical Laboratories, a discontinued operation, operated from a15,000 square foot facility in New Britain CT pursuant to a lease which expiresin July 2005 and which was guaranteed by the Company.  In connection with the Company’s decision toexit this business segment, the Company assumed the obligation to make theremaining lease payments, which is included in the Company’s estimate ofremaining liabilities associated with discontinued operations.  See Note 8 of Notes to CondensedConsolidated Financial Statements.

 

In January 2003, the FASB issued FIN No.46, “Consolidation of Variable Interest Entities, an Interpretation of ARB 51.”The primary objectives of FIN No. 46 are to provide guidance on theidentification of entities for which control is achieved through means otherthan through voting rights (“variable interest entities” or “VIEs”) and how todetermine when and which business enterprise should consolidate the VIE. Thisnew model for consolidation applies to an entity for which either: (a) theequity investors (if any) do not have a controlling financial interest; or (b)the equity investment at risk is insufficient to finance that entity’sactivities without receiving additional subordinated financial support fromother parties. In addition, FIN No. 46 requires that both the primarybeneficiary and all other enterprises with a significant variable interest in aVIE make additional disclosures. The Company is required to apply FIN No. 46 toall new variable interest entities created or acquired after January 31,2003. For variable interest entities created or acquired prior toFebruary 1, 2003, the Company was required to apply FIN No. 46 onJuly 1, 2003.  The Company does nothave any VIE’s.

 

6

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In November 2002, the EITF reached afinal consensus on EITF Issue No. 00-21, “Accounting for Revenue Arrangementswith Multiple Deliverables.” The provisions of EITF 00-21 are required to beadopted for revenue arrangements entered into by the Company afterJune 28, 2003.  EITF 00-21addresses arrangements with customers that have multiple deliverables, such asequipment and installation, and provides guidance as to when recognition ofrevenue for each deliverable is appropriate. The Company adopted  EITF 00-21 as of July 1, 2003; suchadoption did not have a material impact on the Company’s consolidated financialposition or statements of operations.

 

**(3)   Inventories**

 

Inventories, which include component partsused in the manufacture of laboratory instrumentation and PCT products,consisted of the following:

 

|            |   | **September  30,  2003** |      | **December  31,  2002** |   |
|-----------------|--------|--------------------------|-----------|-------------------------|--------|
|            |   |                     |      |                    |   |
| Raw materials   |   | $                        | 3,161,702 |                    | $      | 3,170,988 |   |
| Work-in-process |   | 1,728,097                |      | 1,988,585               |   |
| Finished goods  |   | 1,618,135                |      | 1,934,480               |   |
|            |   | $                        | 6,507,934 |                    | $      | 7,094,053 |   |

 

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

 

Operating segments are components of anenterprise for which separate financial information is available that isevaluated regularly by senior management in deciding how to allocate resourcesand in assessing the performance of each segment. The Company is organized intosegments along business lines and senior management regularly reviews financialresults for all business lines, focusing primarily on revenue and operatingincome.

 

The Company had four operating segments as of September 30,2003.  The Diagnostics segment servesthe worldwide in vitro diagnostics industry, including users and regulators oftheir test kits, with quality control products, and test kit components. TheBiotech segment is a research and development center providing support for theother BBI business segments, as well as contract research, molecular and cellbiology services, and repository services for the government and life sciencesindustry.  The LaboratoryInstrumentation segment sells diagnostic instruments primarily to the worldwidein vitro diagnostic industry on an OEM basis, and also performs in-houseinstrument servicing.  The PCT segmentconsists of research and development primarily in pressure cycling technology(“PCT”).  The Company performs researchin the development of PCT, with particular focus in the areas of nucleic acidextraction and pathogen inactivation. The Company announced the availability for commercial sale of its PCTproducts in late September 2002. PCT revenue to date consists primarily ofboth private and public (National Institutes of Health) funding of segmentresearch and, commencing in late 2002, the sale of PCT products.  Most of the expenditures incurred by thissegment are for research and development expenses, general management expensesand patent costs.  See also Note 8 ofNotes to Condensed Consolidated Financial Statements with respect to discontinuedoperations, which are no longer classified as an operating segment of theCompany.

 

The Company’s underlying accounting recordsare maintained on a legal entity basis for government and public reportingrequirements.  Inter-segment sales arerecorded on a “third party best price” basis and are significant in measuringsegment operating results. The following segment information has been preparedin accordance with the internal accounting policies of the Company, asdescribed above.

 

7

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Operating segment revenuewas as follows:

 
|                       |   | **Three  Months Ended September 30,** |      | **Nine Months  Ended September 30,** |   |
|----------------------------|--------|---------------------------------------|-----------|--------------------------------------|--------|
|                       |   | **2003**                              |      | **2002**                             |   | **2003** |   | **2002** |   |
| Segment revenue:           |   |                                  |      |                                 |   |   |   |   |   |
| Diagnostics                |   | $                                     | 3,142,000 |                                 | $      | 2,623,000 |   | $ | 9,048,000 |   | $ | 8,600,000 |   |
| Biotech                    |   | 2,404,000                             |      | 2,982,000                            |   | 7,283,000 |   | 7,308,000 |   |
| Laboratory Instrumentation |   | 427,000                               |      | 536,000                              |   | 1,380,000 |   | 1,889,000 |   |
| PCT                        |   | 90,000                                |      | 166,000                              |   | 498,000 |   | 547,000 |   |
| Eliminations               |   | (234,000                              | )         | (431,000                             | )      | (714,000 | ) | (1,659,000 | ) |
| Total Revenue              |   | $                                     | 5,829,000 |                                 | $      | 5,876,000 |   | $ | 17,495,000 |   | $ | 16,685,000 |   |

 

Operating segment income(loss) from continuing operations was as follows:

 
|                                      |   | **Three  Months Ended September 30,** |     | **Nine Months  Ended September 30,** |   |
|-------------------------------------------|--------|---------------------------------------|----------|--------------------------------------|--------|
|                                      |   | **2003**                              |     | **2002**                             |   | **2003** |   | **2002** |   |
| Segment operating income (loss):          |   |                                  |     |                                 |   |   |   |   |   |
| Diagnostics                               |   | $                                     | 489,000  |                                 | $      | 206,000 |   | $ | 1,348,000 |   | $ | 893,000 |   |
| Biotech                                   |   | (104,000                              | )        | (29,000                              | )      | (149,000 | ) | (405,000 | ) |
| Laboratory Instrumentation                |   | (260,000                              | )        | (197,000                             | )      | (737,000 | ) | (352,000 | ) |
| PCT                                       |   | (408,000                              | )        | (490,000                             | )      | (1,092,000 | ) | (1,729,000 | ) |
| Operating loss from continuing operations |   | $                                     | (283,000 | )                                    | $      | (510,000 | ) | $ | (630,000 | ) | $ | (1,593,000 | ) |

 

Identifiable corporate andoperating segment assets are all located in the United States as follows:

 
|                                       |   | **September  30 ,  2003** |       | **December 31  ,  2002** |   |
|--------------------------------------------|--------|---------------------------|------------|--------------------------|--------|
| Identifiable corporate and segment assets: |   |                      |       |                     |   |
| Corporate                                  |   | $                         | 1,493,000  |                     | $      | 2,141,000 |   |
| Diagnostics                                |   | 9,420,000                 |       | 10,281,000               |   |
| Biotech                                    |   | 3,984,000                 |       | 4,844,000                |   |
| Laboratory Instrumentation                 |   | 1,347,000                 |       | 1,359,000                |   |
| PCT                                        |   | 1,084,000                 |       | 1,218,000                |   |
| Total assets                               |   | $                         | 17,328,000 |                     | $      | 19,843,000 |   |

 

Certain amounts included in the prior period’s financial statementshave been reclassified to conform to the current period’s presentation.

 

**(5)   Computationof Net Income (Loss) per Share**

 

Basic earnings (loss) per share is computed bydividing net income (loss) by the weighted average number of common sharesoutstanding.  Diluted earnings (loss)per share is computed by dividing net income (loss) by the weighted averagenumber of common shares outstanding plus additional common shares that wouldhave been   outstanding if potentiallydilutive common shares had been issued. For the purposes of this calculation, stock options are consideredcommon stock equivalents in periods in which they have a dilutive effect. Stockoptions that are antidilutive are excluded from the calculation. Potentiallydilutive securities having a net effect of 46,540 and 6,001 common shares forthe three and nine months ended September 30, 2003 and 132,855 and 215,259common shares for the three and nine months ended September 30, 2002 werenot included in the computation of diluted earnings (loss) per share because todo so would have been antidilutive.

 

8

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The net loss per share computation for thefirst nine months of 2003 and 2002 reflects the issuance of 12,102 and 9,749additional shares of common stock, respectively, purchased by employees throughtheir participation in the Company’s employee stock purchase plan.  Additionally, the net (loss) per sharecomputation for the first nine months of 2002 reflects the issuance of 600,000additional shares of common stock in the first quarter of 2002. InDecember 2001, these shares of common stock were subscribed to and paidfor by a group of investors for $1,500,000 (before expenses).

 
|                                                                                                       |   | **Three  Months Ended September 30,** |     | **Nine Months  Ended September 30,** |   |
|------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|----------|--------------------------------------|--------|
|                                                                                                       |   | **2003**                              |     | **2002**                             |   | **2003** |   | **2002** |   |
| Weighted Average Shares Outstanding, basic                                                                 |   | 6,824,075                             |     | 6,782,175                            |   | 6,804,972 |   | 6,618,338 |   |
| Net effect of dilutive common stock equivalents-based on treasury  stock method using average market price |   | —                                |     | —                               |   |   |   | — |   |
| Weighted Average Shares Outstanding, diluted                                                               |   | 6,824,075                             |     | 6,782,175                            |   | 6,804,972 |   | 6,618,338 |   |
|                                                                                                       |   |                                  |     |                                 |   |   |   |   |   |
| Loss from continuing operations                                                                            |   | $                                     | (355,756 | )                                    | $      | (567,178 | ) | $ | (834,607 | ) | $ | (1,747,937 | ) |
| Income from discontinued operations                                                                        |   | —                                |     | 225,000                              |   | — |   | 225,000 |   |
| Net loss                                                                                                   |   | $                                     | (355,756 | )                                    | $      | (342,178 | ) | $ | (834,607 | ) | $ | (1,522,937 | ) |
|                                                                                                       |   |                                  |     |                                 |   |   |   |   |   |
| Loss per share from continuing operations, basic & diluted                                             |   | $                                     | (0.05    | )                                    | $      | (0.08 | ) | $ | (0.12 | ) | $ | (0.26 | ) |
| Income per share from discontinued operations-basic & diluted                                          |   | —                                |     | 0.03                                 |   | — |   | 0.03 |   |
|                                                                                                       |   |                                  |     |                                 |   |   |   |   |   |
| Net loss per share-basic & diluted                                                                     |   | $                                     | (0.05    | )                                    | $      | (0.05 | ) | $ | (0.12 | ) | $ | (0.23 | ) |

 

**(6)   RelatedParty Transaction**

 

As of December 31, 2001, the Company hadentered into a one-year loan of $525,000 to Richard T. Schumacher, theCompany’s former Chairman and Chief Executive Officer and a current Director ofthe Company, renewable at the Company’s option, and collateralized by 90,000 ofMr. Schumacher’s shares of Boston Biomedica common stock. This loan constitutedan increase from the $350,000 that had been loaned as of September 30,2001.  Interest on the loan was payablemonthly at the annual rate of 7%.  InJanuary 2002, the principal of the loan was repaid in full with a portionof the proceeds of the loans described in the next sentence. The Company’s loanwas replaced by the Company’s limited guaranty and pledge of a $1,000,000interest bearing deposit at a financial institution to secure the Company’s limitedguaranty of loans in the aggregate amount of $2,418,000 from the financialinstitution to an entity controlled by Mr. Schumacher.  The loans are personally guaranteed by Mr.Schumacher.  The Company’s pledge issecured by a junior subordinated interest in the collateral provided by Mr.Schumacher to the financial institution. Such collateral includes certain ofhis real property and all of his Company common stock.  The Company’s original loan and subsequent pledgeof $1,000,000 were made to assist Mr. Schumacher in refinancing indebtednessrelated to, among other things, his divorce settlement and to enable him toavoid the need to sell his Company common stock on the open market to satisfyhis debts.  The Company’s Board ofDirectors and, with respect to the decision to pledge the $1,000,000 cashcollateral, a special committee of the independent directors, evaluated anumber of options and concluded that the original loan to Mr. Schumacher andthe subsequent pledge were 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 account was used by the financial institution to satisfy theCompany’s limited guaranty obligation to the financial institution. The Companyhas now satisfied its obligation under the limited guaranty and pledge with thefinancial institution through the financial institution’s calling of theCompany’s pledged cash. The Company continues to maintain its junior interestin the collateral pledged by Mr. Schumacher to the financial institution.  The Company reflected the $1,000,000 pledgeas restricted cash on its balance sheet until the cash was used to satisfy theCompany’s limited guaranty in January 2003 and through September 30,2003 has recorded a $1,000,000 loan receivable on its balance sheet as areduction of stockholders’ equity.

 

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At the end of each fiscal quarter, the Companyreevaluates the recoverability of the loan receivable from Mr. Schumacher. TheCompany’s review included an evaluation of the adequacy of the collateralassociated with the loan. As described above, the collateral consists ofcertain real estate holdings and common stock of the Company and the Company’ssecurity interest in the collateral is a junior interest subordinated to thefinancial institution that provided the loan to the entity controlled by Mr.Schumacher.  In evaluating the adequacyof the collateral, the Company considered the outstanding balance of thefinancial institution’s loan to the entity controlled by Mr. Schumacher and thefact that the Company has a junior position in the collateral, as well as theliquidity and net realizable value of the assets underlying the collateral. TheCompany’s analysis assumes transaction costs to sell the properties, andapplies a liquidity discount to the trading value of the common stock.  The ultimate value that may be recovered bythe Company is dependent on numerous factors including market conditionsrelative to the real estate, the value of and ability to sell the Company’scommon stock, and the financial status of Mr. Schumacher. At December 31,2002, the Company performed a test for impairment of the restricted cash byanalyzing the value of the collateral, and determined that the restricted cashwas not impaired. While the restricted cash was not impaired as ofDecember 31, 2002, the terminationof Mr. Schumacher as the Company’s Chairman and Chief Executive Officerby the Board of Directors in February 2003, together with the decline inthe quoted market value of the Company’s common stock subsequent toDecember 31, 2002, which comprises a major element of the collateral, areindicators of impairment. The Company reevaluated the adequacy of the value ofthe collateral as of September 30, 2003 and through October 31, 2003.The value of the collateral as of October 31, 2003 approximates the amountof the Company’s recorded loan (including interest) as of September 30,2003; the value of the collateral is based primarily on the changing marketvalue of the Company’s common stock which is pledged as collateral.Accordingly, the Company has not recorded any permanent impairment of loanvalue in the first nine months of 2003. If actual market conditions are lessfavorable or other factors arise in the future that are significantly differentthan those anticipated by management, the establishment of a valuation reserveagainst this asset might be required. Mr. Schumacher notified the Company of a payment to the financialinstitution against the loan during the second quarter of 2003 utilizing personalassets that were not pledged as collateral, thereby increasing the collateralto loan ratio.

 

On July 9, 2003, the Company announced Mr. Schumacher, theCompany’s former Chairman and Chief Executive Officer, 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 PanacosPharmaceuticals, Inc.  BBI SourceScientific is the Company’s California-based instrument subsidiary, whichdeveloped and manufactures the PCT Barocycler instrument.  As part of this engagement, Mr. Schumacheris expected to reevaluate the ongoing business prospects for both theLaboratory Instrumentation segment and PCT activities prior to the end of year2003.

 

**(7)   Stockholders’Equity**

 

*Shareholders Purchase Rights Plan*

 

On March 3, 2003, the Company’s Board of Directors adopted ashareholder purchase rights plan and has declared a distribution of one Rightfor each outstanding share of the Company’s Common Stock to shareholders ofrecord at the close of business on March 21, 2003. Initially, the Rightswill trade automatically with the Common Stock and separate Right Certificateswill not be issued.

 

The Rights Plan is designed to deter coercive or unfair takeovertactics and to ensure that all of the Company’s shareholders receive fair andequal treatment in the event of an unsolicited attempt to acquire the Company.The Rights Plan was not adopted in response to any effort to acquire theCompany, and the Board is not aware of any such effort. The Rights will expireon February 27, 2013 unless earlier redeemed or exchanged.  Each Right entitles the registered holder,subject to the terms of a Rights Agreement, to purchase from the Company oneone-thousandth of a share of the Company’s Series A Junior ParticipatingPreferred Stock at a purchase price of $45.00 per one one-thousandth of ashare, subject to adjustment. In general, the Rights will not be exercisableuntil a subsequent distribution date which will only occur if a person or groupacquires beneficial ownership of 15% or more of the Company’s Common Stock orannounces a tender or exchange offer that would result in such person or groupowning 15% or more of the Common Stock. With respect to any person or group whocurrently beneficially owns 15% or more of the Company’s Common Stock, theRights will not become exercisable unless and until such

 

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person or group acquires beneficial ownershipof additional shares of Common Stock.

 

Subject to certain limited exceptions, if a person or group acquiresbeneficial ownership of 15% or more of the Company’s outstanding Common Stockor if a current 15% beneficial owner acquires additional shares of CommonStock, each holder of a Right (other than the 15% holder whose Rights becomevoid once such holder reaches the 15% threshold) will thereafter have a rightto purchase, upon payment of the purchase price of the Right, that number ofshares of the Company’s Common Stock which at the time of such transaction willhave a market value equal to two times the purchase price of the Right   In the event that, at any time after aperson or group acquires 15% or more of the Company’s Common Stock, the Companyis acquired in a merger or other business combination transaction or 50% ormore of its consolidated assets or earning power are sold, each holder of aRight will thereafter have the right to purchase, upon payment of the purchaseprice of the Right, that number of shares of common stock of the acquiringcompany which at the time of such transaction will have a market value of twotimes the purchase price of the Right.

 

The Board of Directors of the Company may exchange the Rights (otherthan Rights owned by such person or group which have become void), in whole orin part, at an exchange ratio of one share of Common Stock per Right (subjectto adjustment).  At any time prior tothe time any person or group acquires 15% or more of the Company’s CommonStock, the Board of Directors of the Company may redeem the Rights in whole,but not in part, at a price of $0.001 per Right.

 

*Warrants*

 

In November 1999, the Company sold 29,155equity units to MDBio, Inc. a Maryland not-for profit corporation. Each equityunit consists of one share of common stock and a warrant to purchase one shareof common stock with an exercise price of $10.00 per share.  MDBio paid the Company $175,000 for theequity units. These warrants expired unexercised at the close of businessSeptember 30, 2003.

 

On September 30, 1998 the Company acquired the remainingoutstanding common stock (approximately 81%) of BioSeq, Inc., a developmentstage company with patent pending technology based on pressure cyclingtechnology for $879,000 in cash (net of cash acquired of $121,000). Inconnection with the Company’s acquisition of BioSeq, Inc., the Company issuedwarrants to purchase 100,000 shares of the Company’s common stock at a purchaseexercise price of $2.50 per share (subject to annual increases). As ofDecember 31, 2002, warrants to purchase 67,192 shares of common stockremained outstanding at an exercise price of $3.66 per share.  Subsequent to the quarter endedSeptember 30, 2003, all remaining warrants outstanding that were issuedpursuant to this transaction expired unexercised at the close of businessOctober  8, 2003.

 

**(8) Disposition of Assets**

 

In December 2000, the Company made a decision to exit the clinicallaboratory testing services segment and in February 2001, BBI ClinicalLaboratories, Inc. (“BBICL”), a wholly-owned subsidiary of the Company, soldthe business and certain assets and liabilities of its clinical laboratorybusiness to a third party for an adjusted purchase price of $8,958,000.  The escrow account was terminated inDecember 2001 by mutual agreement between the buyer and the Company,resulting in approximately $358,000 being received by the Company from theescrow account.  The Company hasretained certain other assets and liabilities of BBICL, primarily property,plant and equipment, together with the facility lease subsequent to the closingdate, which the Company is attempting to sublease.  The Company has written down all of the retained assets nototherwise redistributed to other business units to their estimated netrealizable value.  In accordance with atransition services agreement, the Company operated the business untilDecember 2001; substantially all costs associated with operating thebusiness subsequent to the closing date were borne by the purchaser.

 

The Company’s estimate of remaining short and long term accruedliabilities to exit the clinical laboratory testing business is $457,000 as ofSeptember 30, 2003.  The majorcomponent of this accrual is estimated lease exit and facility related costs($350,000), with the remainder for other miscellaneous costs associated withexiting this business segment. The Company recorded an after-tax gain of$4,334,000 in 2001, and an additional $225,000 in the third quarter of 2002;the remaining accrual may be subject to future adjustments as the Companycompletes the process of exiting this business and permanently closing thefacility.

 

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**(9) Debt**

 

On April 5, 2000, the Company borrowed $2,447,000, net of relatedcosts, under a mortgage agreement on its West Bridgewater, MA facility, ofwhich approximately $2,334,000 remains outstanding as of September 30,2003.  The Company used the funds toreduce the outstanding balance of its then existing line of credit. Theprincipal amount of the note issued in connection with the mortgage is due onMarch 31, 2010. During the first five years the note carries an interestrate of 9.75%; after five years the rate charged will be .75% greater than the Corporate Base Rate then in effect.Monthly payments on this mortgage are based on a twenty year amortizationschedule with a balloon payment representing the remaining balance due in fullin March 2010. The mortgage precludes the payment of dividends on theCompany’s common stock and contains certain other restrictive covenants.  Under this mortgage agreement the Company issubject to certain financial covenants.

 

The Company failed to meet its debt servicecoverage covenant for the year ended December 31, 2002, but in the firstquarter of 2003 the financial institution waived this default and otherdefaults relating to reports and the termination of the Company’s formerChairman and Chief Executive Officer. The mortgage is collateralized by the Company’s West Bridgewater, MAfacility, which has a net book value of approximately $1,945,000 as ofSeptember 30, 2003.

 

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**ITEM2.  MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**

 

**RECENT DEVELOPMENTS**

 

On February 14, 2003, the Company announced that the Company’sBoard of Directors had terminated Mr. Richard T. Schumacher as Chairman andChief Executive Officer, effective immediately.  Mr. Schumacher remains a Director of the Company.  William A. Wilson, a Director, was namedChairman of the Board.  Kevin W.Quinlan, President and Chief Operating Officer, continues to lead day-to-dayoperations. A Special Oversight Committee of the Board of Directors wasappointed for the purpose of overseeing the management of the affairs of theCompany until such time as a new Chief Executive Officer is employed.

 

On July 9, 2003, the Company announced Mr. Richard T. Schumacher,the Company’s former Chairman and Chief Executive Officer, agreed to accept anengagement with the Company as an Executive Consultant to advise the Companywith respect to the strategic direction of the Company’s PCT and BBI SourceScientific activities and the Company’s ownership interest in Panacos Pharmaceuticals,Inc.  BBI Source Scientific is theCompany’s California-based instrument subsidiary which developed andmanufactures the PCT Barocycler instrument. As part of this engagement, Mr. Schumacher is expected to reevaluate theongoing business prospects for both the Laboratory Instrumentation segment andPCT activities prior to the end of year 2003.

 

Mr.  R.Wayne Fritzsche and Calvin A. Saravis were elected Directors of the Company atits Special Meeting in Lieu of Annual Meeting of Stockholders held on Thursday,October 2, 2003.  Mr. FrancisCapitanio’s term expired at that time. Both Mr. Fritzsche and Dr. Saravis will serve until the Company’s AnnualMeeting in 2006.  At a Directors’meeting immediately following the Stockholders Meeting, Mr. Fritzsche waselected Chairman of the Board.  Mr.William A. Wilson, a Director since 2001 and Chairman of the Board sinceFebruary 2003, resigned from the Board on October 3, 2003 in order topursue other activities.

 

**CRITICALACCOUNTING POLICIES**

 

The critical accounting policies utilized by the Company in thepreparation of the accompanying financial statements are set forth in Part I,Item 7 of the Company’s Form 10-K for the year ended December 31, 2002,under the heading “Management’s Discussion and Analysis of Financial Conditionand Results of Operations”.  There have been no material changes to thesepolicies since December 31, 2002.

 

**RESULTSOF OPERATIONS**

 

**THREEMONTHS ENDED SEPTEMBER 30, 2003 AND 2002**

 

*Revenue*

 

Total revenue decreased 0.8%, or $47,000, to $5,829,000 in the thirdquarter of 2003 from $5,876,000 in the third quarter of 2002. The decrease inrevenue was the result of a decline in service revenue of 23.4% or $704,000 to$2,304,000 in the third quarter of 2003 from $3,008,000 in the third quarter of2002, substantially offset by an increase in product revenue of 22.9% or$657,000 to $3,525,000 in the third quarter of 2003 as compared to productrevenue of $2,868,000 in the third quarter of 2002.

 

Product Revenue.  An increase in product revenue at theDiagnostics segment was associated with higher sales of Accurun® and Basematrixproducts in the third quarter of 2003 as compared to the third quarter of 2002,driven by strong sales of controls for nucleic acid testing and customBasematrix.

 

Service Revenue.  The decrease in service revenue wasassociated with a higher level of clinical trial activity in the third quarterof 2002 as compared to the current quarter on two service contracts related toHIV vaccine development (as a result of increased activity from asubcontractor) and Hepatitis C work at the Biotech segment. This was partiallyoffset by an increase in repository services in the third quarter of 2003.

 

G*ross Profit*

 

Overall gross profit increased 0.2%, or$4,000, to $2,022,000 in the third quarter of 2003 from $2,018,000 in the

 

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third quarter of 2002.  Product gross profit increased 23.1%, or$306,000, to $1,632,000 in the third quarter of 2003 from $1,326,000 in thethird quarter of 2002; product gross margin increased slightly to 46.3% in thethird quarter of 2003 from 46.2% in the third quarter of 2002.  Service gross profit decreased $302,000 or43.6% to $390,000 in the third quarter of 2003 from $692,000 in the thirdquarter of 2002; service gross margin declined to 16.9% in the third quarter of2003 as compared to 23.0% in the third quarter of 2002.

 

Product Gross Margin.   The slight increase in product gross marginwas due to a more favorable overhead absorption performance.

 

Service Gross Margin.   Service gross margin declined due to lessprofitable government research contracts at the Biotech segment in the thirdquarter of 2003 as compared to the third quarter of 2002. The third quarter of2002 also benefited from increased service revenues at the Biotech segmentassociated with increased subcontract charges on two vaccine contracts.

 

*Research and Development*

 

Research and development expenditures declined30.6%, or $217,000, to $491,000 in the third quarter of 2003 from $708,000 inthe third quarter of 2002.  Thedecreased level of expenditures was associated primarily with a reduced levelof activity on PCT related projects, which included work on optimizationprotocols for various tissue types performed in the third quarter of 2002.  In addition, in the third quarter of 2002,there was an increase in development work on software and purified reagents.

 

*Selling and Marketing*

 

Selling and marketing expenses increased by3.0%, or $24,000, to $828,000 in the third quarter of 2003 from $804,000 in thethird quarter of 2002.  The Company hasincurred a slightly higher level of marketing and promotion related costs inthe third quarter of 2003 associated with both its Diagnostics and PCT segments,including the consulting costs of its former Chief Executive Officer.

 

*General and Administrative*

 

General and administrative expenses decreased3.0%, or $30,000, to $986,000 in the third quarter of 2003 from $1,016,000 inthe third quarter of 2002. The decrease is due primarily to a decline inemployee health care costs.

 

*Operating Loss from Continuing Operations*

 

Operating loss from continuing operationsamounted to $283,000 in the third quarter of 2003 compared to an operating lossfrom continuing operations of $510,000 in the third quarter of 2002. TheDiagnostics segment’s operating income increased to $489,000 in the thirdquarter of 2003 from $206,000 in the third quarter of 2002, associated with a26.4% increase in product revenue at the Diagnostics segment as explainedabove.  The Biotech segment’s operatingloss amounted to $104,000 in the third quarter of 2003 as compared to anoperating loss of $29,000 in the third quarter of 2002, due to reduced revenuesin the third quarter of 2003 associated with work on two vaccine development contractscompared to the third quarter of 2002. The operating loss of the PCT segment decreased to $408,000 in the thirdquarter of 2003 from $490,000 in the third quarter of 2002 primarily due toreduced patents, trade show and research and development costs. The PCTsegment, which includes both private and public (National Institutes of Health)funding of segment research, continues to experience lower than expectedproduct sales since commercial launch in September 2002 associated with alonger than expected selling cycle.  TheLaboratory Instrumentation segment’s operating loss increased to $260,000 inthe third quarter of 2003 from $197,000 in the third quarter of 2002, due to adecline in revenue.

 

*Interest Expense*

 

Interest expense is incurred primarily fromthe Company’s outstanding mortgage and increased $7,000 as compared to thethird quarter of 2002. This increase was a result of a mortgage covenant waiverfee as the Company failed tomeet its debt service coverage and other covenants for the year endedDecember 31, 2002.

 

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*Evaluation of Financial Asset*

 

As of September 30, 2003, the Companyreevaluated the recoverability of the loan receivable from Mr. Richard T.Schumacher, the Company’s former Chairman and Chief Executive Officer asdiscussed further in Note 6 of Notes to Condensed Consolidated FinancialStatements.  The Company’s reviewincluded an evaluation of the adequacy of the collateral associated with theloan.  The Company’s security interestin this collateral is a junior interest subordinated to the financialinstitution that provided the loan to the entity controlled by Mr.Schumacher.  The collateral consists ofreal estate holdings and common stock of the Company.  In evaluating the adequacy of the collateral, the Companyconsidered the outstanding balance of the financial institution’s loan to theentity controlled by Mr. Schumacher and the fact that the Company has a juniorposition in the collateral, as well as the liquidity and net realizable valueof the assets underlying the collateral. The Company’s analysis assumestransaction costs to sell the properties, and applies a liquidity discount tothe trading value of the common stock. The ultimate value that may be recovered by the Company is dependent onnumerous factors including market conditions relative to the real estate, thevalue of and ability to sell the Company’s common stock, and the financialstatus of Mr. Schumacher. At December 31, 2002, the Company performed atest for impairment of the restricted cash by analyzing the value of thecollateral, and determined that the restricted cash was not impaired. TheCompany has reevaluated the adequacy of the value of the collateral as ofSeptember 30, 2003 and through October 31, 2003. The value of thecollateral as of October 31, 2003 approximates the amount of the Company’srecorded loan (including interest) as of September 30, 2003; the value ofthe collateral is based primarily on the changing market value of the Company’scommon stock which is pledged as collateral. Accordingly, the Company has notrecorded any permanent impairment of loan value in the first nine months of2003. If actual market conditions are less favorable or other factors arise inthe future that are significantly different than those anticipated bymanagement, the establishment of a valuation reserve against this asset mightbe required.  Mr. Schumacher notifiedthe Company of a payment to the financial institution against the loan duringthe second quarter of 2003 utilizing personal assets that were not pledged ascollateral, thereby increasing the collateral to loan ratio.

 

*Income Taxes*

 

In 2000, the Company established a fullvaluation allowance for its deferred tax assets in accordance with Statement ofFinancial Accounting Standards No. 109 and in consideration of threeconsecutive years of losses; accordingly, the Company has not recognized anincome tax benefit associated with the loss from operations in the thirdquarter of 2003 and the third quarter of 2002.

 

*Loss from Continuing Operations*

 

Loss from continuing operations amounted to$356,000 for the quarter ended September 30, 2003 as compared to a loss of$567,000 for the quarter ended September 30, 2002, as a result of theitems discussed above.

 

*Income from Discontinued Operations*

 

In the third quarter of 2002, the Companyadjusted its estimate of remaining accrued liabilities to exit the clinicallaboratory testing business based upon new developments.  The liability was reduced to $855,000 as ofSeptember 30, 2002.  The majorcomponent of the remaining accrual as of September 30, 2002 was estimatedlease exit and facility related costs ($532,000) with the remainder for healthcare claims, other regulatory audit adjustments, and for other miscellaneouscosts associated with exiting this business segment. This resulted in recordingan after tax gain of $225,000 in the third quarter of 2002.

 

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

#### ** **

The Company had a net loss of $356,000 in thethird quarter of 2003 as compared to a net loss of $342,000 in the thirdquarter of 2002.

 

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**RESULTSOF OPERATIONS**

 

**NINEMONTHS ENDED SEPTEMBER 30, 2003 AND 2002**

 

*Revenue*

 

Total revenue increased 4.9%, or $810,000, to $17,495,000 in the firstnine months of 2003 from $16,685,000 in the first nine months of 2002. Theincrease in revenue was the result of an increase in product revenue of 8.0% or$754,000, to $10,186,000 in the first nine months of 2003 from $9,432,000 inthe first nine months of 2002, coupled with a 0.8% or $56,000 increase inservice revenue to $7,309,000 in the first nine months of 2003 as compared toservice revenue of $7,253,000 in the first nine months of 2002.

 

Product Revenue.  The increase in product revenue occurred inthe Diagnostics segment and was due primarily to sales associated with newlyreleased AccuRun products and custom (OEM) panels, which included one largecustom order from an international distributor. In the first nine months of2002, product revenue was adversely impacted by delays from several customersat the Diagnostics segment in getting final customer approval forshipment.  The increase in productrevenues was partially offset by a lower level of contract manufacturing workat the Laboratory Instrumentation segment.

 

Service Revenue.  The increase in service revenue wasprimarily related to higher revenues associated with increased repositoryservice work combined with an increased level of billable hours associated withgovernment contract reimbursable work at the Biotech segment, partially offsetby lower levels of contract research and instrument development activities and a lower level of grantrevenues associated with PCT related activities.

 

G*ross Profit*

 

Overall gross profit increased 1.2%, or$73,000 to $6,354,000 in the first nine months of 2003 from $6,281,000 in thefirst nine months of 2002.  Productgross profit increased 4.0%, or $185,000, to $4,779,000 in the first ninemonths of 2003 from $4,594,000 in the first nine months of 2002; product grossmargin decreased to 46.9% in the first nine months of 2003 from 48.7% in thefirst nine months of 2002.  Servicegross profit decreased $113,000 or 6.7% to $1,574,000 in the first nine monthsof 2003 from $1,687,000 in the first nine months of 2002, while service grossmargin decreased to 21.5% in the first nine months of 2003 from 23.2% in thefirst nine months of 2002.

 

Product Gross Margin.    The decline in product gross margin was dueto a lower level of product sales at both the Laboratory Instrumentation andBiotech segments, partially offset by an increased level of product sales atthe Diagnostics segment.

 

Service Gross Margin.   The service gross margin decrease wasprimarily due to a lower level of  PCTrelated grant revenue coupled with less profitable research contracts at theBiotech segment.

 

*Research and Development*

 

Research and development expenditures declined37.4%, or $785,000, to $1,312,000 in the first nine months of 2003 from$2,097,000 in the first nine months of 2002. The decreased level of expenditures was associated primarily with areduced level of activity on PCT related projects. The Company announced theavailability for commercial sale of its PCT products in lateSeptember 2002.

 

*Selling and Marketing*

 

Selling and marketing expenses decreased by4.6%, or $116,000, to $2,418,000 in the first nine months of 2003 from$2,534,000 in the first nine months of 2002. The Company incurred significant marketing and promotion related costsin the first nine months of 2002 associated with its introduction of the PCTBarocyclerTM at an industry trade show as compared to the first ninemonths of 2003.

 

*General and Administrative*

 

General and administrative costs increased0.4%, or $12,000, to $3,254,000 in the first nine months of 2003 from $3,242,000in the first nine months of 2002. This slight increase is associated withlegal, audit and director fees

 

16

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incurred by the SpecialOversight Committee of the Company’s Board of Directors, formed inFebruary 2003, in conjunction with the termination of the Company’sChairman and Chief Executive Officer, for the purpose of overseeing themanagement of the affairs of the Company. The Company also incurred increasedlegal fees associated with the March 2003 adoption of a ShareholderPurchase Rights Plan.  These increaseswere substantially offset by reduced compensation costs due to the eliminationof the salary that would have been paid to the Company’s former Chairman andChief Executive Officer who was terminated in February 2003, and loweremployee health care costs.

 

*Operating Loss from Continuing Operations*

 

Operating loss from continuing operationsamounted to $630,000 in the first nine months of 2003 compared to an operatingloss from continuing operations of $1,593,000 in the first nine months of 2002.The Diagnostics segment’s operating income increased to $1,348,000 in the firstnine months of 2003 from $893,000 in the first nine months of 2002, due to anincrease in product sales associated with newly released AccuRun products andcustom (OEM) panels, which included one large order from an internationaldistributor in the first nine months of 2003. The Biotech segment’s operating loss decreased to $149,000 in the firstnine months of 2003 from $405,000 in the first nine months of 2002; higherrevenues associated with increased repository services combined with anincreased level of billable hours associated with government contractreimbursable work was partially offset by higher wages, supplies and facilitiescosts.  The operating loss of the PCTsegment decreased to $1,092,000 in the first nine months of 2003 from$1,729,000 in the first nine months of 2002 primarily due to reduced patents,trade show and research and development costs, partially offset by a lowerlevel of PCT related grant revenues. The PCT segment, which includes both private and public (NationalInstitutes of Health) funding of segment research, continues to experiencelower than expected product sales since commercial launch inSeptember 2002 associated with a longer than expected selling cycle. TheLaboratory Instrumentation segment’s operating loss increased to $737,000 inthe first nine months of 2003 from $352,000 in the first nine months of 2002.This segment recorded a 25.7% decline in revenue due to a lower level of bothcontract manufacturing work and instrument development services for PCT coupledwith increased costs associated with a facility lease renewal effectiveFebruary 1, 2002.

 

*Interest Expense*

 

Interest expense is incurred primarily on theCompany’s outstanding mortgage and increased $29,000 in the first nine monthsof 2003 as compared to the first nine months of 2002.  The increase was a result of a mortgage covenant waiver fee as the Company failed to meet its debt servicecoverage and other covenants for the year ended December 31, 2002.

 

*Evaluation of Financial Asset*

 

As of September 30, 2003, the Companyreevaluated the recoverability of the loan receivable from Mr. Richard T.Schumacher, the Company’s former Chairman and Chief Executive Officer asdiscussed further in Note 6 of Notes to Condensed Consolidated FinancialStatements.  The Company’s reviewincluded an evaluation of the adequacy of the collateral associated with theloan.  The Company’s security interestin this collateral is a junior interest subordinated to the financialinstitution that provided the loan to the entity controlled by Mr.Schumacher.  The collateral consists ofreal estate holdings and common stock of the Company.  In evaluating the adequacy of the collateral, the Companyconsidered the outstanding balance of the financial institution’s loan to theentity controlled by Mr. Schumacher and the fact that the Company has a juniorposition in the collateral, as well as the liquidity and net realizable valueof the assets underlying the collateral. The Company’s analysis assumestransaction costs to sell the properties, and applies a liquidity discount tothe trading value of the common stock. The ultimate value that may be recovered by the Company is dependent onnumerous factors including market conditions relative to the real estate, thevalue of and ability to sell the Company’s common stock, and the financialstatus of Mr. Schumacher. At December 31, 2002, the Company performed atest for impairment of the restricted cash by analyzing the value of thecollateral, and determined that the restricted cash was not impaired. TheCompany has reevaluated the adequacy of the value of the collateral as ofSeptember 30, 2003 and through October 31, 2003. The value of thecollateral as of October 31, 2003 approximates the amount of the Company’srecorded loan (including interest) as of September 30, 2003; the value ofthe collateral is based primarily on the changing market value of the Company’scommon stock which is pledged as collateral. Accordingly, the Company has notrecorded any permanent impairment of loan value in the first nine months of2003. If actual market conditions are less favorable or other factors arise inthe future that are significantly different than those anticipated bymanagement, the establishment of a valuation reserve against this asset mightbe required.  Mr. Schumacher notifiedthe Company of a payment to the financial institution against the loan duringthe second quarter of 2003 utilizing personal assets that were not pledged ascollateral,

 

17

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thereby increasing thecollateral to loan ratio.

 

*Income Taxes*

 

In 2000, the Company established a fullvaluation allowance for its deferred tax assets in accordance with Statement ofFinancial Accounting Standards No. 109 and in consideration of threeconsecutive years of losses; accordingly, the Company has not recognized anincome tax benefit associated with the loss from operations in the first ninemonths of 2003 and the first nine months of 2002.

 

*Loss from Continuing Operations*

 

Loss from continuing operations amounted to$835,000 for the nine months ended September 30, 2003 as compared to aloss of $1,748,000 for the nine months ended September 30, 2002 as aresult of the items discussed above.

 

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

#### ** **

In the third quarter of 2002, the Companyadjusted its estimate of remaining accrued liabilities to exit the clinicallaboratory testing business based upon new developments.  The liability was reduced to $855,000 as ofSeptember 30, 2002.  The majorcomponent of the remaining accrual as of September 30, 2002 was estimatedlease exit and facility related costs ($532,000) with the remainder for healthcare claims, other regulatory audit adjustments, and for other miscellaneouscosts associated with exiting this business segment. This resulted in recordingan after tax gain of $225,000 in the third quarter of 2002.

 

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

#### ** **

The Company had a net loss of $835,000 in thefirst nine months of 2003 as compared to a net loss of $1,523,000 in the firstnine months of 2002.

 

**LIQUIDITYAND FINANCIAL CONDITION**

 

The Company’s working capital positiondecreased slightly to $7,969,000 as of September 30, 2003 from $8,197,000(excluding $1,000,000 of restricted cash) as of December 31, 2002.

 

Net cash provided by operations for the ninemonths ended September 30, 2003 was $657,000 as compared to net cash usedby operations of $263,000 for the nine months ended September 30,2002.  The improved cash flow fromoperations during the first nine months of 2003 was primarily the result of alower year to date loss from operations as compared to the same period lastyear coupled with a continued reduced level of inventory purchases andfavorable cash collections of accounts receivable. This was partially offset bya reduction in trade accounts payable. The operational use of cash during the first nine months of 2002 wasprimarily the result of the year to date loss and the buildup of raw materialsinventory partially offset by an increase in trade accounts payable.

 

Net cash used in investing activities for thenine months ended September 30, 2003 was $74,000 compared to $578,000 forthe nine months ended September 30, 2002. The Company has significantly curtailed current year capitalexpenditures to improve cash flow and in conjunction with its efforts to seekadditional capital as discussed further hereunder.

 

Net cash used in financing activities for thenine months ended September 30, 2003 was $49,000 compared to cash used of$397,000 during the nine months ended September 30, 2002.  In the first nine months of 2002, asdiscussed further under “Related Party Transaction” below, the Company pledged$1,000,000 via a deposit in an interest bearing account at a financialinstitution in early 2002; this was partially offset by a $525,000 repayment in2002 to the Company of a loan by its former Chief Executive Officer (“CEO”).

 

Based on current forecasts, managementbelieves the Company has sufficient liquidity to finance operations for thenext twelve months.  Management’s forecasts involve assumptions that couldprove to be incorrect. If the Company continues to incur operating losses ornegative cash flows, it may need to raise additional funds.  There can beno assurance that these funds will be available when required on termsacceptable to the Company, if at all.  If adequate funds are not availablewhen needed, 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

 

18

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term effect on its business, financialcondition and results of operations. The Company is considering various sources of additional financing,including but not limited to, sale of business segments, strategic alliancesand private placements of debt or equity securities, which could result indilution to the Company’s stockholders. On    October 25, 2002, theCompany retained an investment banking firm to advise the Company in theevaluation of strategic opportunities aimed at increasing shareholder value andliquidity by increasing the capital needed for growth; their engagement continuesat this date.

 

The Company continues toevaluate the performance of the Laboratory Instrumentation segment and the PCTsegment, both of which continue to experience significant operatinglosses.  As discussed further in Note 4of Notes to Condensed Consolidated Financial Statements included in Part I ofthis Form 10-Q, the net book value of assets associated with these two businesssegments is approximately $2,431,000 as of September 30, 2003.  The PCT segment, which includes both privateand public (National Institutes of Health) funding of segment research,continues to experience lower than expected product sales since commerciallaunch in September 2002 associated with a longer than expected sellingcycle.  On July 9, 2003, theCompany announced Mr. Richard T. Schumacher, the Company’s former Chairman andChief Executive Officer, agreed to accept an engagement with the Company as anExecutive Project Consultant to advise the Company with respect to thestrategic direction of the Company’s PCT and BBI Source Scientific activitiesand the Company’s ownership interest in Panacos Pharmaceuticals, Inc.  BBI Source Scientific is the Company’sCalifornia-based instrument subsidiary which developed and manufactures the PCTBarocycler instrument.  As part of this engagement,Mr. Schumacher is expected to reevaluate the ongoing business prospects forboth the Laboratory Instrumentation segment and PCT activities prior to the endof year 2003.  If these segments do notbecome profitable, the Company may need to write off some or all of the currentnet book value of these assets.

 

*RelatedParty Transaction*

 

As of December 31,2001, the Company had entered into a one year loan of $525,000 to Mr. RichardT. Schumacher, the Company’s former Chairman and Chief Executive Officer and acurrent Director of the Company, renewable at the Company’s option, and collateralized by 90,000 of Mr.Schumacher’s shares of the Company’s common stock. This loan constituted anincrease from the $350,000 that had been loaned as of September 30,2001.  Interest on the loan was payablemonthly at the annual rate of 7%.  InJanuary 2002, the principal of these loans was repaid in full with aportion of the proceeds of the loans described in the following sentence. TheCompany’s loans were replaced by the Company’s pledge of a $1,000,000 interestbearing deposit at a financial institution to secure the Company’s limitedguaranty of loans in the aggregate amount of $2,418,000 from the financialinstitution to an entity controlled by Mr. Schumacher.  The loans are personally guaranteed by Mr.Schumacher.  The Company’s pledge issecured by a junior subordinated interest in the collateral provided by Mr.Schumacher to the financial institution. Such collateral includes certain ofhis real property and all of his common stock holdings in the Company.  The Company’s original loan and subsequentpledge of $1,000,000 were made to assist Mr. Schumacher in refinancingindebtedness related to, among other things, his divorce settlement and toenable him to avoid the need to sell his common stock holdings in the Companyon the open market to satisfy his debts. The Company’s Board of Directors and, with respect to the decision topledge the $1,000,000 cash collateral, a special committee of the independentdirectors, evaluated a number of options and concluded that the original loanto Mr. Schumacher and the subsequent pledge were the best option and in thebest interests of the Company’s stockholders in the belief that it would, amongother things, avoid selling pressure on the Company’s common stock and relievethe financial pressures on Mr. Schumacher that could otherwise divert hisattention from the Company.  InJanuary 2003, the $1,000,000 account was used to satisfy the Company’slimited guaranty obligation. The Company has now satisfied its obligation underthe limited guaranty and pledge with the financial institution.  The Company continues to maintain its juniorinterest in the collateral pledged by Mr. Schumacher to the financialinstitution.  The Company reflected the$1,000,000 pledge as restricted cash on its balance sheet until the cash wasused to satisfy the Company’s limited guaranty in January 2003 and sincethen has recorded a $1,000,000 loan receivable on its balance sheet as areduction of stockholders’ equity.  Asdiscussed further above, the Company has reevaluated the adequacy of the valueof the collateral as of September 30, 2003 and through October 31,2003. The value of the collateral as of October 31, 2003 approximates theamount of the Company’s recorded loan (including interest) as ofSeptember 30, 2003; the value of the collateral is based primarily on thechanging market value of the Company’s common stock which is pledged ascollateral. Accordingly, the Company has not recorded any permanent impairmentof loan value in the first nine months of 2003. If actual market conditions areless favorable or other factors arise in the future that are significantlydifferent than those anticipated by management, the establishment of a valuationreserve against this asset might be required. Mr. Schumacher notified the Company of a payment to the financialinstitution against the loan during the second quarter of 2003 utilizingpersonal assets that were not pledged

 

19

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as collateral, thereby increasing thecollateral to loan ratio.

 

On February 14, 2003,the Company announced that the Company’s Board of Directors had terminated Mr.Schumacher as Chairman and Chief Executive Officer, effective immediately.  Mr. Schumacher remains a Director of theCompany.  William A. Wilson, a Director,was named Chairman of the Board.  Kevin W.Quinlan, President and Chief Operating Officer, continues to lead day-to-dayoperations.  A special committee of theBoard of Directors was appointed for the purpose of overseeing the managementof the affairs of the Company until such time as a new Chief Executive Officeris employed.

 

On July 9, 2003, theCompany announced Mr. Richard T. Schumacher, the Company’s former Chairman andChief Executive Officer, agreed to accept an engagement with the Company as anExecutive Project Consultant to advise the Company with respect to thestrategic direction of the Company’s PCT and BBI Source Scientific activitiesand the Company’s ownership interest in Panacos Pharmaceuticals, Inc.  BBI Source Scientific is the Company’sCalifornia-based instrument subsidiary, which developed and manufactures thePCT Barocycler instrument.  As part ofthis engagement, Mr. Schumacher is expected to reevaluate the ongoing businessprospects for both the Laboratory Instrumentation segment and PCT activitiesprior to the end of year 2003.

 

**CONTRACTUALOBLIGATIONS**

 

As of September 30,2003, there have been no significant changes in the Company’s contractualobligations or commitments previously disclosed as of December 31, 2002.

 

**FORWARD-LOOKINGSTATEMENTS**

 

This Quarterly Report onForm 10-Q contains forward-looking statements which involve risks anduncertainties, including statements regarding the Company’s plans, objectives,expectations and intentions.  In somecases, forward-looking statements are identified by terms such as “may”,“will”, “should”, “could”, “would”, “expects”, “plans”, “anticipates”, “believes”,“estimates”, “projects”, “predicts”, “potential”, and similar expressionsintended to identify forward-looking statements. Such statements include,without limitation, statements made regarding the expected recovery and valueof the loan receivable from the Company’s former Chairman and Chief ExecutiveOfficer, the Company’s belief that it has sufficient liquidity to financeoperations over the next twelve months, and the anticipated future financialperformance or prospects of the Company and its products.  These forward-looking statements are onlypredictions and involve known and unknown risks, uncertainties, and otherfactors that may cause the Company’s actual results, levels of activity,performance, or achievements to be materially different from any futureresults, levels of activity, performance, or achievements expressed or impliedby such forward-looking statements. Also, these forward-looking statementsrepresent the Company’s best estimates and assumptions only as of the date ofthis Report.  Except as otherwiserequired by law, the Company expressly disclaims any obligation or undertakingto release publicly any updates or revisions to any forward-looking statementcontained in the Report to reflect any change in the Company’s expectations orany change in events, conditions, or circumstances on which any of theCompany’s forward-looking statements are based.

 

Factors which might causeactual results to differ materially from those projected in the forward-lookingstatements contained herein include the following: the Company may not besuccessful in commercializing its PCT products and services, or such activitiesmay take longer than currently expected; the Company may not have sufficientresources to develop new or improved PCT products; demand for commercialapplications of PCT may not materialize as expected or may take longer thanexpected 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 nine issued U.S. patents; individuals and groupsutilizing PCT may be able to license such technology from entities other thanthe Company; due to operational, scientific or technical difficulties in theimplementation of the Company’s strategies and changes in customer demand, theCompany’s sales to IVD test kit manufacturers and sales of ACCURUN and otherquality control products may decline; the Company may be unable to develop theend-user market for its quality control products; the Company may be unable to  grow the sales of Source Scientific, Inc. tothe extent anticipated; the uncertainty of the renewal and full funding ofcontracts with National Institutes of Health (NIH);  the Company may be unable to obtain an adequate supply of theunique and rare specimens of plasma and serum necessary for certain of itsproducts; the potential for significant reductions in purchases by any of theCompany’s major customers; the Company may be unable to obtain the necessarygovernment approvals for certain of its products; the Company may be unable tocompete effectively due to rapid changes in technology; the Company may beunable to attract and retain a qualified individual to serve as Chief ExecutiveOfficer; the

 

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collateral securing the Company’s loanreceivable from its former Chairman and Chief Executive Officer may beimpaired,  and the Company may not beable to fully collect the principal and interest due on a $1,000,000 receivablefrom the former Chairman and Chief Executive Officer; and if expenses arehigher than anticipated, or if revenues are lower than anticipated, the Companymay require additional capital sooner than expected and  there can be no assurance that the Companywill be able to obtain additional financing or capital on acceptable terms, orthat it will be successful in eliminating or scaling back certain of itsactivities.  Certain of these and otherfactors which might cause actual results to differ materially from thoseprojected are more fully set forth under the caption “Risk Factors” in theCompany’s Annual Report on Form 10-K for the year ended December 31, 2002.

 

**ITEM 3.****                            ****QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

 

There have been no materialchanges in the reported market risks since December 31, 2002.

 

**ITEM 4.****                            ****CONTROLS AND PROCEDURES**

 

We maintain disclosurecontrols and procedures that are designed to ensure that information requiredto be disclosed in our Securities Exchange Act reports is recorded, processed,summarized and reported within the time periods specified in the SEC’s rulesand forms, and that such information is accumulated and communicated to ourmanagement, including our Principal Executive Officer/Principal FinancialOfficer, as appropriate, to allow timely decisions regarding requireddisclosure. In designing and evaluating the disclosure controls and procedures,management recognized that any controls and procedures, no matter how welldesigned and operated, can provide only reasonable assurance of achieving thedesired control objectives, as ours are designed to do, and managementnecessarily was required to apply its judgment in evaluating the cost-benefitrelationship of possible controls and procedures.

 

As of September 30,2003, we carried out an evaluation, under the supervision and with theparticipation of our management, including our Principal ExecutiveOfficer/Principal Financial Officer, of the effectiveness of the design andoperation of our disclosure controls and procedures, as defined in Rules13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. Based uponthat evaluation, our Principal Executive Officer/Principal Financial Officerconcluded that our disclosure controls and procedures are effective in enablingus to record, process, summarize and report information required to be includedin our periodic SEC filings within the required time period.

 

There have been no changesin our internal control over financial reporting that occurred during theperiod covered by this report that have materially affected, or are reasonablylikely to materially affect, our internal control over financial reporting.

 

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##### ** **

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

##### ** **

**ITEM 1.****                            ****LEGAL PROCEEDINGS**

 

None.

 

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

#### ** **

*Warrants*

 

In November 1999, theCompany sold 29,155 equity units to MDBio, Inc. a Maryland not-for profitcorporation. Each equity unit consists of one share of common stock and awarrant to purchase one share of common stock with an exercise price of $10.00per share.  MDBio paid the Company$175,000 for the equity units. These warrants expired unexercised at the closeof business September 30, 2003.

 

On September 30, 1998the Company acquired the remaining outstanding common stock (approximately 81%)of BioSeq, Inc., a development stage company with patent pending technologybased on pressure cycling technology for $879,000 in cash (net of cash acquiredof $121,000). In connection with the Company’s acquisition of BioSeq, Inc., theCompany issued warrants to purchase 100,000 shares of the Company’s commonstock at a purchase exercise price of $2.50 per share (subject to annualincreases). As of December 31, 2002, warrants to purchase 67,192 shares ofcommon stock remained outstanding at an exercise price of $3.66 per share.  Subsequent to the quarter endedSeptember 30, 2003, all remaining warrants outstanding that were issuedpursuant to this transaction expired unexercised at the close of businessOctober  8, 2003.

 

#### **ITEM3.  DEFAULTS UPON SENIOR SECURITIES**

#### ** **

None.

 

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

##### ** **

There were no matterssubmitted to a vote of security holders in the third quarter of 2003.

 

Subsequent toSeptember 30, 2003, the Company held a Special Meeting in Lieu of AnnualMeeting of Stockholders on October 2, 2003 (the “Meeting”).  A total of 6,071,106 shares, or 88.99%, ofthe Company’s Common Stock issued, outstanding and entitled to vote as of therecord date, were represented in person or by proxy, at the Meeting.  At the Meeting, one proposal was actedupon.  The result of the proposal was asfollows:

 

1.                                       Dr. Calvin A. Saravis and Mr. R. WayneFritzsche were elected as Class I Directors of the Company, to serve as suchuntil the 2006 Annual Meeting of Stockholders and until their successors havebeen duly elected and qualified, with 4,895,357 shares voting in favor,1,175,749 votes withheld for Dr. Saravis, and 4,896,907 shares voting in favor,1,174,199 votes withheld for Mr. Fritzsche, respectively.

 

The terms of office ofDirectors Richard T. Schumacher, Kevin W. Quinlan and William A. Wilsoncontinued immediately after the Meeting. Mr. Francis Capitanio, a Director of the Company since 1986, did notstand for reelection as a Director and accordingly, his term expired on October2, 2003 when his successor was duly elected and qualified.  See also Part II, Item 5 “OtherInformation”  hereunder.

 

Dr.Calvin A Saravis was not nominated pursuant to any arrangement or understandingwith any person.  Mr. R. Wayne Fritzschewas nominated to the Board of Directors pursuant to an Agreement dated as ofJune 30, 2003 between the Company and Richard T. Schumacher (the “NomineeAgreement”’).  In April 2003, Mr.Schumacher nominated Mr. Fritzsche and Russell B. Richardson for election asdirectors at the Company’s forthcoming Annual Meeting of Stockholders.  At the time of their nomination, Mr.Schumacher’s nominees agreed to support the reinstatement of Mr. Schumacher asChief Executive Officer of the Company. Pursuant to the Nominee Agreement the Company agreed that Mr. Capitaniowould not stand for reelection, and following a further review andconsideration of the candidates, the Board of Directors would select one of Mr.Fritzsche or Dr. Richerson as the nominee to fill the vacancy on the Board ofDirectors created by Mr. Capitanio not standing for reelection.  Under the Nominee Agreement, Mr. Schumacherwithdrew his two nominees and agreed not to proceed with or undertake any proxysolicitation for the Meeting.  The Boardof Directors selected Mr. Fritzsche as the nominee.

 

**ITEM5.  OTHER INFORMATION**

 

At a Directors’ meetingimmediately following the Special Meeting in Lieu of Annual Meeting ofStockholders held on October 2, 2003, Mr. R. Wayne Fritzsche was elected Chairman of the Board.   Mr. William A. Wilson, a Director since2001 and Chairman of the Board since February 2003, resigned from theBoard on October 3, 2003 in order to pursue other activities.  The Company is presently seeking to fill onevacancy on its Board of Directors.

 

Boston Biomedica, Inc. wasnotified on August 22, 2003 that PricewaterhouseCoopers LLP (“PwC”) hadresigned as the Company’s independent accountants, effective August 22,2003. The Company  had a close workingrelationship with PwC over the past ten years since their engagement in 1993 asthe Company’s independent accountants, and the Company expressed itsdisappointment at this development. During the fiscal years ended December 31, 2000, December 31,2001 and December 31, 2002, and through August 22, 2003, there wereno

 

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disagreementswith PwC on any matter of accounting principles or practices, financialstatement disclosure, or auditing scope or procedure, which disagreements, ifnot resolved to the satisfaction of PwC, would have caused PwC to makereference thereto in their reports on the financial statements for suchyears.  On November 5, 2003, the AuditCommittee of the Board of Directors of the Company engaged Weinberg & Company,P. A. to act as the Company’s independent accountants for the remainder offiscal 2003 effective immediately. During the fiscal years ended December 31, 2001 and 2002 andthrough the date hereof, neither the Company nor anyone on its behalf consultedwith Weinberg & Company P.A. with respect to any matters or eventsincluding any matters or events set forth in Items 304 (a) (2) (i) and (ii) ofRegulation S-K.

 

#### **ITEM6.  EXHIBITS AND REPORTS ON FORM 8-K**

#### ** **

**(a)  Exhibits:**

** **
| **Exhibit  No.** |   |                                                                                                                                                                                                   |   | **Reference** |
|------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|
|             |   |                                                                                                                                                                                                   |   |          |
| 3.1              |   | Amended and Restated  Articles of Organization of the Company                                                                                                                                          |   | A**           |
|             |   |                                                                                                                                                                                                   |   |          |
| 3.2              |   | Amended and Restated  Bylaws of the Company                                                                                                                                                            |   | A**           |
|             |   |                                                                                                                                                                                                   |   |          |
| 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**           |
| 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**           |

 

23

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| 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**    |
|   |   |                                                                                                                                                                                                                                                                                             |   |   |
| 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**    |

 

24

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| 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**            |
|   |   |                                                                                                                                                                  |   |           |
| 10.27  |   | Description of  Compensation for Certain Directors*                                                                                                                   |   | D**            |
|   |   |                                                                                                                                                                  |   |           |
| 10.28  |   | Consultant Agreement  between Boston Biomedica, Inc. and Richard T. Schumacher                                                                                        |   | Filed Herewith |
|   |   |                                                                                                                                                                  |   |           |
| 10.29  |   | Agreement between Boston  Biomedica, Inc. and Richard T. Schumacher                                                                                                   |   | Filed Herewith |
|   |   |                                                                                                                                                                  |   |           |
| 31.1   |   | 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   |   | 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”).

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 onJune 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.

 

----

*                             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.

 

25

----

 

**(b) Reportson Form 8-K.**

 

The Company filed a Form8-K, dated August 15, 2003, relative to the Company’s issuance of a pressrelease on August 15, 2003 announcing its financial results for the secondquarter ended June 30, 2003.  TheCompany filed a Form 8-K, dated August 22, 2003, relative to theresignation of PricewaterhouseCoopers LLP (“PwC”), as the Company’s  independent accountants.

 

**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:  | November 14, 2003                                                                             |   | By: | *  /s/  Kevin W. Quinlan* |   |
|   | Kevin W. Quinlan                                                                                   |
|   | President and Chief  Operating Officer and Treasurer  (Principal Accounting and Financial Officer) |
|        |                                                                                                    |        |  |  |  |  |

 

26

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**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**           |
|            |   |                                                                                                                                                                                                   |   |          |
| 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**           |
|            |   |                                                                                                                                                                                                   |   |          |
| 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**           |

 

27

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| 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**            |
|   |   |                                                                                                                                                                                                                                                                                             |   |           |
| 10.27  |   | Description of  Compensation for Certain Directors*                                                                                                                                                                                                                                              |   | D**            |
|   |   |                                                                                                                                                                                                                                                                                             |   |           |
| 10.28  |   | Consultant Agreement  between Boston Biomedica, Inc. and Richard T. Schumacher                                                                                                                                                                                                                   |   | Filed Herewith |
|   |   |                                                                                                                                                                                                                                                                                             |   |           |
| 10.29  |   | Agreement between Boston  Biomedica, Inc. and Richard T. Schumacher                                                                                                                                                                                                                              |   | Filed Herewith |
|   |   |                                                                                                                                                                                                                                                                                             |   |           |
| 31.1   |   | 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   |   | 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 |

 

28

----

 

A                          Incorporated by reference to the registrant’sRegistration Statement on Form S-1 (Registration No. 333-10759) (the“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 onJune 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.

 

----

*                             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.

 

29

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