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

# FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31,
2001, or

[  ] Transition Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from  to

Commission file number 0-21615

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

Massachusetts           

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

375 West Street,        
             
             
            
             
             
             
             
             
             
             
     
West Bridgewater, Massachusetts           
           
           

             
             
  02379-1040
    (Address of Principal Executive Offices)
            
            
             
             
             
             
             


(Zip Code)

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

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X]     No [  ]

The number of shares outstanding of the Registrants only
class of common stock as of May 9, 2001, was 6,462,167.

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Part I  FINANCIAL INFORMATION
  Item 1. Financial Statements
    Consolidated Statements of Operations:
        Three Months Ended March 31, 2001
    Balance Sheet
    Statement of Cash Flows
    Notes to Financial Statements
  Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Item 3. Quantitative and Qualitative Disclosures About Market Risk

Part II  OTHER INFORMATION
  Item 1. Legal Proceedings
  Item 2. Changes in Securities and Use of Proceeds
  Item 3. Defaults Upon Senior Securities
  Item 4. Submission of Matters to a Vote of Security Holders
  Item 5. Other Information
  Item 6. Exhibits and Reports on Form 8-K
  Signature

# BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

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

# BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)

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

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

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

# BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS

## (1) Basis of
Presentation

The
accompanying unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for the interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of only normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three months ended
March 31, 2001 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2001. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Form 10-K/A filing for the fiscal year ended December 31, 2000 for Boston
Biomedica, Inc. and Subsidiaries (the Company or Boston
Biomedica).

In
February 2001, the Company sold certain assets of BBI Clinical Laboratories,
Inc. (BBICL), a wholly-owned subsidiary of the Company, to a third
party in conjunction with its decision to exit the clinical laboratory testing
business. Accordingly, the accompanying financial statements have been
reclassified to present BBICLs net assets and results of operations as
discontinued operations.

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

## (2) Recent
Accounting Standards

Statement of Financial Accounting  Standards No. 133,  "Accounting for Derivative  Instruments and Hedging Activities" (SFAS 133),
     as amended,  is effective for the first  quarter of fiscal years  beginning
after June 15, 2000. The new standard requires  companies to record  derivatives
on the balance sheet as assets or liabilities,  measured at fair value. Gains or
losses  resulting from changes in the values of those  derivatives are accounted
for depending on the use of the  derivatives  and whether they qualify for hedge
accounting.  The  key  criterion  for  hedge  accounting  is  that  the  hedging
relationship  must be highly effective in achieving  offsetting  changes in fair
value or cash flows. The Company does not currently engage in derivative trading
or hedging activities so the adoption of SFAS 133 did not have a material effect
on its financial statements.

## (3)
Inventories

## (4) Segment
Reporting and Related Information (in thousands)

Operating
segments are components of an enterprise for which separate financial
information is available that is evaluated regularly by senior management in
deciding how to allocate resources and in assessing the performance of each
segment. The Company is organized into segments along legal entity lines and
senior management regularly reviews financial results for all entities, focusing
primarily on revenue and operating income.

The
     Company  had four  operating  segments as of March 31,  2001:  Diagnostics;
Biotech; Laboratory Instrumentation and Pressure Cycling Technology ("PCT"). For
most of fiscal year 2000 the Company also had a drug discovery segment which was
Panacos Pharmaceuticals. In November 2000, Panacos sold a majority of its equity
to third party investors and as a result, the Company no longer consolidates the
results of Panacos in its financial  reporting.  The Diagnostics  segment serves
the worldwide in vitro diagnostics  industry,  including users and regulators of
their test kits, with quality  control  products,  and test kit components.  The
Biotech  segment  provides  research and  development  support for the other BBI
segments as well as contract  research and  repository  services for agencies of
the  United  States  Government,  and  industry  and other  third  parties.  The
Laboratory  Instrumentation  segment sells  diagnostic  instruments  and medical
devices primarily to the worldwide in vitro diagnostic industry on an OEM basis,
and also  performs  in-house  instrument  servicing.  The PCT  segment  conducts
research  and  development   using  the  Company's   patented  Pressure  Cycling
Technology,  with particular focus in the areas of nucleic acid purification and
pathogen  inactivation.  This segment does not  currently  have any  significant
product or service  revenue.  The revenue to date  consists of both  private and
public funding of specific research  projects.  Most of the expenditures by this
segment are for R&D expenses and general management  expenses,  including patent
costs.

The
Companys underlying accounting records are maintained on a legal entity
basis for government and public reporting requirements, as well as for segment
performance and internal management reporting. Inter-segment sales are recorded
on a third party best price basis and are significant in measuring
segment operating results. The following segment information has been prepared
in accordance with the internal accounting policies of the Company, as described
above. Prior year data has been restated to conform to the current year
presentation format.

In
     the first quarter of 2001, the Company adjusted its absorption of corporate
overhead based upon a revised  corporate  structure  effective in year 2001. The
present corporate structure reflects the Companys  implementation,  in the
latter  part  of  year  2000,  of  a  cost  reduction  plan  at  the  Laboratory
Instrumentation  segment,  the  Companys  reduced ownership  percentage of
Panacos, and the Companys decision to exit the clinical laboratory testing
business. The latter item is reflected as discontinued  operations in the
accompanying  financial  statements;   in  accordance  with  generally  accepted
accounting  principles,  the Company has ceased allocating corporate overhead to
this segment.  This adjustment results in the Diagnostics unit absorbing a large
portion of corporate  overhead which in prior years would have been allocated to
Panacos and the Clinical Laboratory testing business.

## (5)
Computation of Net Income (Loss) per Share

Basic
earnings per share is computed by dividing net income (loss) by the weighted
average number of common shares outstanding. Diluted earnings per share is
computed by dividing net income (loss) by the weighted average number of common
shares outstanding plus additional common shares that would have been
outstanding if dilutive potential common shares had been issued. For the
purposes of this calculation, stock options are considered common stock
equivalents in periods in which they have a dilutive effect. Stock options that
are antidilutive are excluded from the calculation. Potentially dilutive
securities having a net effect of 1,124,040 and 400,475 common shares, for the
three months ended March 31, 2001 and 2000, respectively, were not included in
the computation of diluted earnings per share because to do so would have been
antidilutive. Also included in total shares outstanding for both periods
presented are 500,000 shares associated with the exercise of certain warrants by
Paradigm Group LLC.

## (6) Debt

In
February 2001, the Company utilized a portion of the proceeds from the sale of
its Clinical Laboratory business segment to pay off in full the outstanding
balance of $5,762,635 (plus accrued interest) on its line of credit, at which
time the bank released all liens associated with this line of credit and
terminated the line of credit.

In the first quarter of 2001,  certain holders of the Debentures  exercised their rights to convert  $1,210,000 of such Debentures
     into shares of the Company's common stock.  These  conversions  resulted in
the issuance of 801,325  shares of common  stock.  The  pro-rata  portion of the
unamortized  original issue  discount,  debt issuance and warrant  related costs
amounting to  approximately  $231,000  was charged  against  additional  paid-in
capital. In addition, the Company redeemed the remaining $2,040,000 (face value)
of Debentures plus accrued interest and a premium of $190,000 (which was charged
to  interest  expense).  The  pro-rata  portion of  unamortized  original  issue
discount,  debt issuance and warrant related costs  associated with the redeemed
Debentures amounting to approximately  $377,000 has been included in the loss on
extinguishment  of  the  Debentures.  Partially  offsetting  this  loss  is  the
Company's  reversal of  approximately  $528,000 of interest  expense  previously
recorded in 2000 associated with the  amortization of the Debentures  beneficial
conversion   feature.   Accordingly,   the  Company  has   recorded  a  loss  of
approximately $(39,000) relative to the early extinguishment of the Debentures.

As a result of the conversions and
redemptions noted above, none of the 3%, Senior Subordinated Convertible
Debentures remain outstanding subsequent to February 27, 2001.

## (7)
Discontinued Operations

On
     February 20, 2001, BBI Clinical Laboratories,  Inc. (BBICL),  a
wholly-owned  subsidiary of the Company,  sold certain assets and liabilities of
its clinical laboratory business to a third party for an original purchase price
of  $9,500,000,  of which  $900,000 was placed in escrow subject to certain post
closing adjustments. The escrow amount has been reduced by $206,000 to reflect a
post  closing  adjustment  in favor of the  purchaser.  The Company has retained
certain other assets and  liabilities  of BBICL,  primarily  property  plant and
equipment  together with a facility lease  subsequent to the closing date, which
the Company  intends to liquidate  throughout the remainder of year 2001 as part
of its  decision to exit this segment of the  business.  The Company has written
all of the retained  assets down to their  estimated net  realizable  value.  In
accordance  with a  transition  services  agreement,  the Company is required to
operate the business in a normal fashion for a minimum of six months  subsequent
to the  sale but in no event  beyond  December  31,  2001;  all of the  revenues
generated by, and substantially all costs associated with operating the business
subsequent to the closing date of this transaction will belong to the purchaser.

The
Company has recorded a gain of $4,100,000 net of taxes of $1,364,000 in the
first quarter of 2001, subject to post closing adjustments. The Company expects
to utilize approximately $5,200,000 of prior period net operating loss
carryforwards, previously reserved for by the Company in year 2000, to partially
offset the tax effect of this gain. Additionally, the Company has taken a tax
benefit of $564,000 related to stock option exercises that was not previously
recorded as the Company was in a loss position. This tax benefit was recorded as
a credit to additional paid-in capital in the first quarter of 2001.

The
     Company has recorded  short and long term accrued  liabilities  to exit the
Clinical  Laboratory  testing business totaling  approximately  $3,014,000.  The
major  components  of  this  accrual  are  estimated  income  taxes  ($800,000),
severance  costs and other employee  related costs  ($828,000),  estimated lease
exit costs  ($773,000) and potential health care claim  adjustments  ($220,000);
with the remainder for  professional  fees,  potential  additional  post-closing
adjustments, and other miscellaneous costs associated with exiting this business
segment.

Revenues
from discontinued operations net of intercompany eliminations were $973,000 for
the period from January 1, 2001 to February 20, 2001 and $2,292,000 for the
three months ended March 31, 2000. Operating losses from discontinued operations
were $136,000 and $64,000 for the three months ended March 31, 2001 and 2000,
respectively. In summary, income (loss) from discontinued operations was
$3,964,000 and $(64,000) for the three months ended March 31, 2001 and 2000,
respectively.

## ITEM 2.  MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
                AND RESULTS OF OPERATIONS
                THREE MONTHS
ENDED MARCH 31, 2001 AND 2000

Overview

On
     February 20, 2001, the Company sold certain  assets and  liabilities of its
wholly-owned  subsidiary,  BBI Clinical Laboratories  (BBICL),  to a
third party for an original purchase price of $9,500,000,  of which $900,000 was
placed in escrow subject to certain post closing adjustments.  The escrow amount
has been  reduced by $206,000 to reflect a post closing  adjustment  in favor of
the purchaser.  Additional information relative to this transaction is contained
hereunder in the caption  entitled  Discontinued  Operations.  Prior
period  data  has  been  reclassified  to  conform  to  the  current  format  of
presentation.

In
November 2000, Panacos Pharmaceuticals, Inc (Panacos), formerly a
subsidiary of the Company, sold a majority of its equity to third party
investors. This transaction reduced the Companys ownership in Panacos to
30.5% all of which is held in non-voting preferred stock. As a result, the
Company no longer consolidates the results of Panacos in its financial
reporting.

Revenue

Total
revenue from continuing operations increased 9.8%, or $443,000, to $4,982,000 in
2001 from $4,539,000 in 2000. The increase in revenue was the result of an
increase in product revenue of 21.7%, or $565,000, to $3,162,000 in 2001 from
$2,597,000 in 2000. This increase in revenue was partially offset by a decline
in service revenue of 6.3%, or $122,000, to $1,820,000 in 2001 from $1,942,000
in 2000.

Product  Revenue.  The product revenue increase was primarily  attributable to a $537,000  increase in the
     Diagnostics  segment.  The Diagnostics  increase was the result of a higher
level of sales of diagnostic component products and OEM panels.

Service  Revenue.  The Biotech  segment  experienced a 43% increase in repository  services,  however this
     increase was more than offset by reduced  levels of new  contract  research
funding.  Service revenue  recognized in the first quarter of 2000 also included
$69,000 of funding received by Panacos for drug discovery  activities;  as noted
above,  the  Company  no  longer  consolidates  the  results  of  operations  of
Panacos.

Gross Profit

Overall
gross profit increased 30.1%, or $491,000, to $2,122,000 in the first quarter of
2001 from $1,631,000 for the same period last year. Product gross profit
increased 21.3%, or $278,000, to $1,581,000 in 2001 from $1,303,000 for 2000;
product gross margin was relatively unchanged at 50.0% in 2001 from 50.2% in
2000. Services gross profit increased $212,000 to $541,000 in 2001 from $329,000
for 2000 and service gross margin increased to 29.7% in 2001 from 16.9% in 2000.

Product Gross Margin

A
     slight decline in product gross margin at the  Diagnostics  segment,  which
was due  substantially  to a higher  mix of lower  margin  diagnostic  component
products, was offset by an increase at the Laboratory  Instrumentation  segment.
This increase was associated  with the September 2000  implementation  of a cost
reduction  plan at the  Laboratory  Instrumentation  segment  which  included  a
headcount reduction and sublease of excess manufacturing space, thereby lowering
manufacturing overhead and improving margins.

Service Gross Margin

A substantial
     portion of the Companys  service revenues are derived from government
contracts  associated  with the Biotech  segment.  The increase in service gross
margin was due to lower than usual  gross  margins in the first  quarter of 2000
due to supplies purchased for repository contracts.

Research and Development

Research
and development expenditures decreased 14.7%, or $102,000, to $591,000 in 2001
from $693,000 in 2000. The first quarter of 2000 included research and
development expenses associated with Panacos, the results of which are no longer
included in the Companys results of operation as discussed above. In
addition, there was a reduced level of research and development expenditures in
the first quarter of 2001 at the Laboratory Instrumentation segment associated
with the September 2000 implementation of a cost reduction plan (as discussed
above).

Selling and Marketing

Selling
and marketing expenses increased by 17.5%, or $112,000, to $751,000 in 2001 from
$639,000 in 2000. This increase was a result of filling several sales and
marketing positions in the latter part of 2000 at the Diagnostic segment.

General and Administrative

General
and administrative costs declined 8.5%, or $96,000, to $1,029,000 in 2001 from
$1,125,000 in 2000. A large portion of the decline was associated with the
September 2000 implementation of a cost reduction plan at the Laboratory
Instrumentation segment (as noted above). In addition, the Laboratory
Instrumentation segments goodwill was written down by approximately
$1,464,000 in the third quarter of fiscal year 2000, resulting in lower
amortization expense in the first quarter of 2001 as compared to the same period
last year.

Operating Loss

Operating
     loss from continuing  operations  decreased to $(249,000) in 2001 versus an
$(826,000)  loss  in  2000.  The  Diagnostics  segments  operating  income
decreased  to  $203,000  in 2001 from  $242,000  in 2000,  due to an increase in
revenue  achieved  from lower margin  products and an  increased  absorption  of
corporate overhead by this segment as explained further  hereunder.  The Biotech
segments  operating loss decreased to $(51,000) in 2001 from $(151,000) in
2000,  due  to  increased  gross  margins  associated  with  service  work.  The
Laboratory  Instrumentation segment had an operating loss of $(122,000) for 2001
versus  a loss for 2000 of  $(286,000);  the  first  quarter  of 2001  operating
results  reflect  implementation  in September  2000 of a cost  reduction  plan,
together with lower amortization  expense associated with the write down of this
segments  goodwill in the third quarter of 2000. The operating loss of the
PCT segment  decreased to  $(279,000)  in 2001 from  $(330,000) in 2000 due to a
lower level of research and development and patent related costs. The Company no
longer  consolidates the results of operation of Panacos  subsequent to November
2000 as  discussed  further  above.  In the first  quarter of 2001,  the Company
adjusted its  absorption of corporate  overhead  based upon a revised  corporate
structure  effective in year 2001. The present corporate  structure reflects the
Companys  implementation,  in the  latter  part  of year  2000,  of a cost
reduction plan at the Laboratory  Instrumentation  segment,  the  Companys
reduced ownership percentage of Panacos, and the Companys decision to exit
the  Clinical  Laboratory  testing  business.  The latter item is  reflected  as
discontinued operations in the accompanying financial statements;  in accordance
with generally accepted accounting principles, the Company has ceased allocating
corporate  overhead to this segment.  This adjustment results in the Diagnostics
unit absorbing a large portion of corporate  overhead which in prior years would
have been allocated to Panacos and the Clinical Laboratory testing business.

Interest Expense

Interest
     expense  increased  from $194,000 in 2000 to $247,000 in 2001. In the first
quarter of 2001, the Company redeemed the remaining $2,040,000 of outstanding 3%
Senior  Subordinated  Convertible  Debentures  at face  value  plus a premium of
$190,000 and accrued  interest.  The pro-rata  portion of  unamortized  original
issue  discount,  debt issuance and warrant  related costs  associated  with the
redeemed  Debentures,  amounting to approximately  $377,000,  is included in the
loss on extinguishment of the Debentures.  Substantially offsetting this loss is
the  Companys  reversal of  approximately  $528,000  of  interest  expense
previously  recorded in 2000 associated with the  amortization of the Debentures
beneficial conversion feature.  Additional interest expense was incurred in 2001
associated  with  the  Company  obtaining  a  $2,447,000  mortgage  on its  West
Bridgewater MA facility in April 2000, as well as the interest on the Debentures
through their  conversion / redemption.  These increases in the first quarter of
2001 were partially  offset by reduced  interest  expense on the  Companys
line of credit which was in effect for the entire first  quarter of 2000 but was
terminated by the Company in February 2001.

Income Taxes

In
the third quarter of 2000, the Company established a full valuation allowance
for its deferred tax assets in accordance with Statement of Financial Accounting
Standards No. 109 and in consideration of three consecutive years of losses;
accordingly, the Company has not recognized an income tax benefit associated
with the loss from continuing operations in the first quarter of 2001 as these
tax assets have been fully reserved for. The Company has made estimated state
income tax payments of $9,800 in the first quarter of 2001. In the first quarter
of 2000, the Company recorded an income tax benefit at a rate of 38%.

Loss from Continuing Operations

Loss
from continuing operations decreased to $(486,000) for the quarter ended March
31, 2001 from $(608,000) for the same period last year, as a result of the items
discussed above.

Discontinued Operations

On
     February 20, 2001, the Company sold certain  assets and  liabilities of its
wholly-owned subsidiary BBICL to a third party for an original purchase price of
$9,500,000,  of which  $900,000  was placed in escrow  subject  to certain  post
closing adjustments. The escrow amount has been reduced by $206,000 to reflect a
post  closing  adjustment  in favor of the  purchaser.  The Company has retained
certain other assets and  liabilities  of BBICL,  primarily  property  plant and
equipment  together with a facility lease  subsequent to the closing date, which
the Company  intends to liquidate  throughout the remainder of year 2001 as part
of its  decision to exit this segment of the  business.  The Company has written
all of the  retained  assets  down to  their  estimated  net  realizable  value.

The
Company has recorded a gain of $4,100,000 net of taxes of $1,364,000 in the
first quarter of 2001, subject to post closing adjustments. The Company expects
to utilize approximately $5,200,000 of prior period net operating loss
carryforwards, previously reserved for by the Company in year 2000, to partially
offset the tax effect of this gain. Additionally, the Company has taken a tax
benefit of $564,000 related to stock option exercises that was not previously
recorded as the Company was in a loss position. This tax benefit was recorded as
a credit to additional paid-in capital in the first quarter of 2001.

The
     Company has recorded  short and long term accrued  liabilities  to exit the
Clinical  Laboratory  testing business totaling  approximately  $3,014,000.  The
major  components  of  this  accrual  are  estimated  income  taxes  ($800,000),
severance  costs and other employee  related costs  ($828,000),  estimated lease
exit costs  ($773,000) and potential health care claim  adjustments  ($220,000);
with the remainder for  professional  fees,  potential  additional  post-closing
adjustments, and other miscellaneous costs associated with exiting this business
segment.

Revenues
from discontinued operations net of intercompany eliminations were $973,000 for
the period from January 1, 2001 to February 20, 2001 and $2,292,000 for the
three months ended March 31, 2000. Operating losses from discontinued operations
were $136,000 and $64,000 for the three months ended March 31, 2001 and 2000,
respectively. In summary, income (loss) from discontinued operations was
$3,964,000 and $(64,000) for the three months ended March 31, 2001 and 2000,
respectively.

In
accordance with a transition services agreement, the Company is required to
operate the business in a normal fashion for a minimum of six months subsequent
to the sale but in no event beyond December 31, 2001; all of the revenues
generated by, and substantially all costs associated with operating the business
subsequent to the closing date of the transaction are the responsibility of the
purchaser. A portion of the proceeds from this sale were used to redeem all
outstanding 3% Senior Subordinated Convertible Debentures
(Debentures) and to retire the Companys line of credit.

Summary

The
Company had net income $3,478,000 in 2001 as compared to a net loss of
$(671,000) in 2000. In the first quarter of 2001, the Company recorded an
after-tax gain of $3,964,000 associated with discontinued operations, coupled
with a reduced operating loss. In the first quarter of last year, the Company
incurred a higher operating loss, which was partially offset by a benefit from
income taxes, which the Company fully reserved and ceased recording in the third
quarter of 2000. The earnings (loss) per share computation reflects the issuance
of 801,325 additional shares of common stock in the first quarter of 2001, as
certain holders of the Debentures exercised their rights to convert $1,210,000
of such Debentures into shares of the Companys common stock.

## LIQUIDITY AND
FINANCIAL CONDITION

The
Companys working capital position increased to $8,010,000 as of March 31,
2001 from $3,596,000 as of December 31, 2000. From March 31, 2000 through
February 2001 the Companys working capital position was adversely affected
by the classification of its line-of-credit as short-term debt. The Company
reclassified the debt to short term because in the first quarter of 2000, it
violated a financial covenant limiting the amount of allowable losses. In
February 2001, utilizing proceeds generated by the sale of certain assets of
BBICL as discussed above, the Company paid off in full the $5,763,000
outstanding balance (plus accrued interest), thereby terminating this line of
credit. There were no payment defaults at any time on this line of credit.

In
     August  2000,  the  Company  issued  $3,250,000  of 3% Senior  Subordinated
Convertible Debentures due August 25, 2003. Net proceeds to the Company amounted
to  approximately  $2,871,000  after  deduction  of original  issue  discount of
$162,500 and associated closing costs of $216,500.  For accounting  purposes,  a
portion of the cash proceeds,  amounting to $327,000,  has been allocated to the
relative fair value of warrants issued in conjunction with these Debentures.  In
the first quarter of 2001,  certain  holders of the Debentures  exercised  their
rights  to  convert   $1,210,000   of  such   Debentures   into  shares  of  the
Companys  common stock,  in accordance  with the conversion  formula.  The
conversion of a portion of these  outstanding  Debentures and/or the exercise of
outstanding  warrants to purchase  the  Companys  common stock will have a
dilutive  impact on our  security  holders.  These  conversions  resulted in the
issuance of 801,325  additional  shares of common stock in the first  quarter of
2001.

In the first quarter of 2001,  certain holders of the Debentures  exercised their rights to convert  $1,210,000 of such Debentures
     into shares of the Company's common stock.  These  conversions  resulted in
the issuance of 801,325  shares of common  stock.  The  pro-rata  portion of the
unamortized  original issue  discount,  debt issuance and warrant  related costs
amounting to  approximately  $231,000  was charged  against  additional  paid-in
capital. In addition, the Company redeemed the remaining $2,040,000 (face value)
of Debentures plus accrued interest and a premium of $190,000 (which was charged
to  interest  expense).  The  pro-rata  portion of  unamortized  original  issue
discount,  debt issuance and warrant related costs  associated with the redeemed
Debentures amounting to approximately  $377,000 has been included in the loss on
extinguishment  of  the  Debentures.  Partially  offsetting  this  loss  is  the
Company's  reversal of  approximately  $528,000 of interest  expense  previously
recorded in 2000 associated with the  amortization of the Debentures  beneficial
conversion   feature.   Accordingly,   the  Company  has   recorded  a  loss  of
approximately   $(39,000)   relative   to  the  early   extinguishment   of  the
Debentures.

As
     a result of both the  conversions  and  redemptions,  which occurred in the
first quarter of 2001, none of the Debentures remain  outstanding  subsequent to
February 27, 2001.

Net
cash used in operations for the three months ended March 31, 2001 was $82,000 as
compared to $1,296,000 during the same period last year. The large operational
use of cash during the first quarter of last year was primarily the result of
significant payments that were made from accounts payable associated with the
build-out of the Frederick, MD repository facility, whereas, in the first
quarter of 2001, the Company received a $212,000 income tax refund.

Net
cash used in investing activities was $80,000 in the first quarter of 2001
versus $182,000 in the comparable prior year period. The decrease of cash used
for investing was due to a conscious decision by management to reduce capital
expenditures as many of the Companys significant capital improvement
projects reached their final stages in year 2000.

Cash
used in financing activities was $7,434,000 in the first quarter of 2001 versus
cash provided of $1,499,000 for the prior year period. In the first quarter of
2001, the Company used proceeds from the sale of certain assets of BBICL to pay
off in full the remaining $5,762,635 balance on its line of credit and retire
all remaining Debentures. Cash provided by financing in the first quarter of
2000 was primarily made up of $1,171,000 of proceeds of debt as the Company
borrowed against its line of credit and approximately $328,000 of cash received
from the exercise of stock options and warrants.

As
of April 30, 2001, the Company had existing cash balances approximating
$2,062,000 (excluding $694,000 of cash held in escrow relating to the sale of
certain BBICL assets as discussed herein) and believes this amount, coupled with
cash flows from operations, will be sufficient to fund operations and
anticipated capital expenditures for the remainder of the year. The Company
continually evaluates financing options, as well as other strategic
alternatives, in order to maximize shareholder value.

## FORWARD-LOOKING
STATEMENTS

This
Quarterly Report on Form 10-Q contains forward-looking statements concerning the
Companys financial performance and business operations. The Company wishes
to caution readers of this Quarterly Report on Form 10-Q that actual results
might differ materially from those projected in any forward-looking statements.

Factors
     which might cause actual results to differ  materially from those projected
in the forward-looking statements contained herein include the following: due to
difficulties in the  implementation  of its  strategies,  the Company may not be
able to return to operating  profitability in 2001; the financial results of the
quarter ended March 31, 2001 are not  necessarily  indicative of future  results
because  future  revenues may not meet  expectations  due to changes in customer
needs and technological  innovations and expenses may be higher than anticipated
because  costs may  increase;  the Company may not be  successful  in developing
Pressure Cycling Technology (PCT) into commercially successful products, or such
development  may take longer than  expected;  the  Companys  inability  to
develop the end-user market for quality  control  products;  the  Companys
inability  to  integrate  the  business  of  Source  Scientific,  Inc.  into the
Companys business and to grow the sales of Source Scientific,  Inc. to the
extent  anticipated  by the  September  2000  downsizing  of this segment of the
business;  the  uncertainty  of the renewal and full funding of  contracts  with
National  Institutes of Health (NIH),  National Heart,  Lung and Blood Institute
(NHLBI) and other government agencies; the Companys inability to obtain an
adequate  supply of the unique and rare specimens of plasma and serum  necessary
for certain of its products;  and the potential  for  significant  reductions in
purchases by any of the  Companys  major  customers.  Certain of these and
other factors which might cause actual results to differ  materially  from those
projected are more fully set forth under the caption Risk Factors in
the  Companys  most recent  Registration  Statements on Form S-3 (SEC File
No.s 333-94379 and 333-46426).

## ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There
have been no material changes in the reported market risks since December 31,
2000.

## PART II. OTHER
INFORMATION

## ITEM 1. LEGAL
PROCEEDINGS

Not Applicable

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

In
     the first  quarter of 2001,  certain  holders of the  Debentures  exercised
their  rights  to  convert  $1,210,000  of such  Debentures  into  shares of the
Companys  common  stock.  These  conversions  resulted in the  issuance of
801,325 shares of common stock. The pro-rata portion of the unamortized original
issue   discount,   debt  issuance  and  warrant   related  costs  amounting  to
approximately  $231,000  was charged  against  additional  paid-in  capital.  In
addition,  the  Company  redeemed  the  remaining  $2,040,000  (face  value)  of
Debentures plus accrued interest and a premium of $190,000 (which was charged to
interest expense).  The pro-rata portion of unamortized original issue discount,
debt issuance and warrant related costs associated with the redeemed  Debentures
amounting  to   approximately   $377,000  has  been  included  in  the  loss  on
extinguishment  of  the  Debentures.  Partially  offsetting  this  loss  is  the
Companys reversal of approximately $528,000 of interest expense previously
recorded in 2000 associated with the  amortization of the Debentures  beneficial
conversion  feature.  Accordingly,  the  Company  has  recorded  a net  loss  of
approximately   $(39,000)   relative   to  the  early   extinguishment   of  the
Debentures.

As a result of the conversions and
redemptions noted above, none of the 3%, Senior Subordinated Convertible
Debentures remain outstanding subsequent to February 27, 2001.

In
accordance with the terms of the Companys mortgage with a bank, payment of
dividends on common stock is not permitted. See also Item 3 hereunder.

## ITEM 3.
DEFAULTS UPON SENIOR SECURITIES

The
March 31, 2001 balance sheet reflects the classification of the Companys
outstanding mortgage balance in the amount of $2,407,513 as long-term debt
(excluding $46,800 of debt due in one year). The Company violated a covenant in
the Mortgage Agreement pertaining to maintenance of a certain level of debt
service coverage on a rolling twelve-month basis, however the Company has
received a waiver from the lender for this violation.

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

Not Applicable

## ITEM 5. OTHER
INFORMATION

Not Applicable

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

## (a) Exhibits

## EXHIBIT NO.

|2   | Asset Purchase Agreement dated
February 20, 2001, by and between BBI Clinical Laboratories, Inc., Boston
Biomedica, Inc. and Specialty Laboratories, Inc. (Annexes, Exhibits and
Schedules are omitted pursuant to Item 601(b)(2) of Regulation S-K. Boston
Biomedica, Inc. agrees, however, to furnish supplementary a copy of such omitted
items to the Commission upon request.) *
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1 | Amended and Restated Articles of
Organization of the Company**                                                                                                                                                                                                                                                                                                                       
|3.2 | Amended and Restated Bylaws of the
Company**                                                                                                                                                                                                                                                                                                                                         
|4.1 | Specimen Certificate for Shares of
the Company's Common Stock**                                                                                                                                                                                                                                                                                                                      
|4.2 | Description of Capital Stock
(contained in the Restated Articles of Organization of the Company filed as
Exhibit 3.1)**                                                                                                                                                                                                                                                              

|*  | In  accordance with Rule 12b-32
under the Securities Exchange Act of 1934, as amended,  reference is made to the
documents  previously  filed with the  Securities  and Exchange  Commission,  as
exhibits  to the  Company's  Report  on Form  8-K  filed  March 8,  2001,  which
documents are hereby  incorporated by reference.  The number set forth herein is
the number of the Exhibit in said Form 8-K.                              
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|** | In  accordance with Rule 12b-32
under the Securities Exchange Act of 1934, as amended,  reference is made to the
documents  previously  filed with the  Securities  and Exchange  Commission,  as
exhibits to the Company's  Registration  Statement on Form S-1 (Registration No.
333-10759), which documents are hereby incorporated by reference. The number set
forth herein is the number of the Exhibit in said registration statement.

## (b) Reports on
Form 8-K

The
Company filed a Form 8-K, dated March 7, 2001, relative to the Companys
sale of certain assets and liabilities of its wholly owned subsidiary, BBI
Clinical Laboratories, Inc., to a third party and the utilization of a portion
of those sale proceeds to retire the remaining amounts outstanding of both the
Companys 3% Senior Subordinated Convertible Debentures and its existing
line of credit.

# SIGNATURES

Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

BOSTON BIOMEDICA, INC.


             
             
             
             
             
             
             
             
             
    (Registrant)



        Date:  
May 15, 2001          
         
             
             
             
         
By:/s/ Kevin W. Quinlan


            
             
             
             
             
             
             
             
     Kevin W. Quinlan,
            
             
             
             
             
             
             
             
     President and Chief Operating Officer
            
             
             
             
             
             
             
             
     (Principal Accounting and Financial Officer)