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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 September 30, 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 October 31, 2001, was 6,107,718.

---

Part I  FINANCIAL INFORMATION
  Item 1. Financial Statements
    Consolidated Statements of Operations:
        Three and Nine Months Ended September 30, 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 and nine  months  ended  September  30,  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) and the Companys Form 10-Q
filings for the three and six months  ended  March 31,  2001 and June 30,  2001,
respectively.

In  February  2001,  the  Company  sold the
business   and   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.

Statement of Financial Accounting Standards
No. 141,  Business  Combinations  (SFAS 141),  is effective  for all
business  combinations  initiated after June 30, 2001. The new standard requires
companies  to  record  business   combinations  using  the  purchase  method  of
accounting.  The  Company  does not  expect the  adoption  of SFAS 141 to have a
material effect on its financial statements.

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

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

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

## (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 September 30, 2001:  Diagnostics;  Biotech;  Laboratory  Instrumentation  and
Pressure Cycling Technology  (PCT).  In addition, 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 end 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,  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  spin-off  of
Panacos  as an  independent  company,  and the  Companys  decision  to exit the
Clinical   Laboratory  testing  business.   The  latter  item  is  reflected  as
discontinued operations in the accompanying financial statements.  In accordance
with generally  accepted  accounting  principles,  the Company ceased allocating
corporate  overhead to the Clinical  Laboratory testing business for all periods
presented.  This adjustment  results in the  Diagnostics  unit absorbing a large
portion of corporate  overhead which in prior years would have been allocated to
Panacos and the Clinical Laboratory testing business.

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

Basic earnings (loss) per share is computed
by dividing net income  (loss) by the weighted  average  number of common shares
outstanding.  Diluted  earnings  (loss) 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 stock options having a net effect of 479,839
and 207,596  common  shares,  for the three months ended  September 30, 2001 and
2000,  respectively,  and 951,119 and 2,500 common  shares,  for the nine months
ended  September  30,  2001 and 2000,  respectively,  were not  included  in the
computation  of  diluted  earnings  per share  because  to do so would have been
antidilutive.  Additionally, 481,901 and 478,737 common stock purchase warrants,
outstanding  at September 30, 2001 and 2000,  respectively  were not included in
the  computation of diluted  earnings per share because to do so would have been
antidilutive.  Included in total shares  outstanding for the period February 17,
2000 to June 15, 2001 are 500,000 shares associated with the exercise of certain
warrants by Paradigm Group, LLC, as discussed further on Note 8 hereunder.

## (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 Companys 3% Senior Subordinated Convertible Debentures (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  which  is  included  in  interest  expense.
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 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  adjusted by $206,000 to reflect a post  closing  adjustment  in
favor of the purchaser and for $19,000 interest earned. 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 BBICL
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 $364,000 related to
stock option exercises that was not previously  recorded as the Company was in a
loss position.  This tax benefit was recorded as a credit to additional  paid-in
capital in the first half of 2001.

As of September 30, 2001, the Companys
most recent estimate of its remaining short and long term accrued liabilities to
exit the Clinical Laboratory testing business, is approximately $2,564,000.  The
major  components  of  this  accrual  are  estimated  income  taxes  ($586,000),
severance and other  employee  related costs  ($335,000),  estimated  lease exit
costs ($723,000) and potential health care claim  adjustments  ($218,000);  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  $1,967,000  and  $6,478,000 for the three and nine months
ended  September  30, 2000,  respectively.  Operating  losses from  discontinued
operations  were $0 and $(136,000) for the three and nine months ended September
30, 2001,  respectively,  and  $(71,000) and  $(149,000)  for the three and nine
months ended September 30, 2000,  respectively.  In summary,  income (loss) from
discontinued  operations  was $0 and  $3,964,000  for the three and nine  months
ended  September 30, 2001,  respectively,  and $(71,000) and  $(150,000) for the
three and nine months ended September 30, 2000, respectively.

## (8)
Legal Proceedings

In August  1999,  the Company  sold 500,000
warrants to purchase the Companys  stock to Paradigm Group, LLC, a private
investment  company. In February 2000, the Company received notice that Paradigm
Group, LLC exercised all of their warrants to purchase the Companys common
stock.  The holders of the warrants were required to pay the exercise price when
the registration of the underlying shares became effective which was in December
2000. In August 2000, the Company received a summons and complaint from Paradigm
Group,  LLC naming the Company as a  defendant.  The suit,  filed in the Circuit
Court of Cook  County,  Illinois,  alleged  breach of contract  claims and fraud
against the Company in  connection  with the sale by the Company to the Paradigm
Group,  LLC of the above  warrants,  the exercise of those  warrants by Paradigm
Group,  LLC and a delay  in the  registration  of  those  shares  with the U. S.
Securities  and Exchange  Commission.  In December  2000,  Paradigm  Group,  LLC
withdrew  this  lawsuit.  In the fourth  quarter of 2000,  the Company  expensed
approximately  $265,000 of costs related to these warrants and the  registration
of the underlying  shares.  On June 15, 2001 the Company and Paradigm Group, LLC
entered into an agreement to permanently settle their disputes.  Under the terms
of the agreement,  Paradigm  Group,  LLC rescinded  their exercise of the common
stock purchase warrants,  which have since expired, and the Company retained the
500,000 shares associated with their exercise. These shares were included in the
total shares  outstanding as well as in the  calculation of earnings  (loss) per
share from  February 17, 2000 (the date of exercise)  through June 15, 2001 (the
date of the  agreement).  As of September 30, these shares were cancelled by the
Company.

## (9)
Related Party Transaction

The  Companys  Board of Directors has
authorized   the   Company  to  provide  a  loan,   of  up  to  $450,000  to  an
officer/director  of the  Company.  The loan is in the form of a one-year  note,
renewable  at  the  Companys  option,  at  a  market  interest  rate,  and
collateralized by a pledge of 90,000 shares of common stock of the Company owned
by the  officer/director.  Interest on the note, currently 7%, is either payable
monthly  or can be  added to the  principal  of the  note at the  option  of the
borrower,  up to the amount available under this note.  During the third quarter
of  2001,  $350,000  was  loaned  pursuant  to the  terms  of the  note,  and an
additional $100,000 was loaned in October 2001. The note is shown on the balance
sheet as a decrease to stockholders equity.

## ITEM 2.  MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
            
    AND RESULTS OF OPERATIONS

Overview

On February 20, 2001,  the Company sold the
business and 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  adjusted  by
$206,000 to reflect a post closing  adjustment in favor of the purchaser and for
$19,000 of interest earned.  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.

## THREE MONTHS
ENDED SEPTEMBER 30, 2001 AND 2000

Revenue

Total   revenue  from  continuing  operations
increased 19.2%, or $875,000, to $5,409,000 in 2001 from $4,534,000 in 2000. The
increase in revenue  was the result of an increase in product  revenue of 28.6%,
or $757,000,  to  $3,401,000 in 2001 from  $2,644,000  in 2000,  coupled with an
increase in service  revenue of 6.2%,  or $118,000,  to  $2,008,000 in 2001 from
$1,890,000 in 2000.

Product  Revenue.  The  product  revenue  increase  was
primarily  attributable  to a  $667,000  increase  at  the  Diagnostics  segment
associated with an increased level of sales of AccuRun and OEM products.

Service   Revenue.   The  Biotech  segment  experienced
continued  strong growth in  repository  services,  as the company  aggressively
seeks out new business.

Gross Profit

Overall gross profit  increased  43.3%,  or
$665,000,  to $2,202,000 in the third  quarter of 2001 from  $1,537,000  for the
same period last year.  Product gross profit  increased  61.8%, or $674,000,  to
$1,765,000 in 2001 from  $1,091,000 for 2000 on a higher level of product sales,
and product gross margin increased to 51.9% in 2001 from 41.3% in 2000. Services
gross profit  declined  slightly by $8,000 to $437,000 in 2001 from $445,000 for
2000 and service  gross  margin  decreased  to 21.8% in 2001 from 23.5% in 2000.

Product  Gross  Margin.  The increase in product  gross
margin was achieved at both manufacturing  segments. At the Diagnostics segment,
the margin increase was derived by higher revenues from increased  product sales
as  discussed  above.  This was  coupled  with a gross  margin  increase  at the
Laboratory  Instrumentation  segment  driven by both higher revenue and the cost
reduction plan implemented last September.

Service  Gross  Margin.  The slight decrease in service
gross  margin from 23.5% to 21.8% was due  primarily  to a higher level of wages
and an increase in laboratory supplies at the Biotech segment.

Research and Development

Research    and   development    expenditures
decreased  18.5%,  or $122,000,  to $537,000 in 2001 from $659,000 in 2000.  The
third quarter of 2000  included  $163,000 of research and  development  expenses
associated  with  Panacos,  the  results of which are no longer  included in the
Companys  results of operation as discussed above. This was partially offset by
a higher  level of  research  and  development  spending  on the  Companys  PCT
activities.

Selling and Marketing

Selling and marketing expenses increased by
7.6%, or $53,000, to $753,000 in 2001 from $700,000 in 2000,  associated with an
increase in headcount as several open sales and marketing  positions were filled
in the latter part of 2000 at the Diagnostic segment.

General and Administrative

General and  administrative  costs declined
17.9%, or $233,000,  to $1,070,000 in 2001 from  $1,303,000 in 2000.  There have
been  headcount  reductions at Corporate,  and the  Diagnostics  and  Laboratory
Instrumentation   segments,   coupled  with  a  significantly   lower  level  of
professional  fees than were incurred in connection with financing  transactions
in 2000. A portion of the decline is also  associated  with the  September  2000
write down of goodwill at the Laboratory Instrumentation segment, resulting in a
lower level of amortization expense as compared to the third quarter of 2000.

Impairment of Intangible Asset

As  part  of an  ongoing  strategic  review
process,  the  Companys  Board of Directors met in late  September 2000 to
review  the  progress  of  its  Laboratory  Instrumentation  segment,  and  that
segments  prospects  for the  future  to  determine  if any  impairment  of the
segments goodwill had occurred.  Based on information presented at that meeting
and subsequent analyses showing lower revenue expectations,  management approved
a cost  reduction  plan  including a headcount  reduction,  salary  freeze,  and
sublease of excess  manufacturing  space.  Using the lower  revenue  projections
associated  with  this  plan,  the  Laboratory  Instrumentation   segments
undiscounted future cash flows were projected to be less than the carrying value
of  that  segments   goodwill.   In  accordance  with  the  provisions  of
Statement of Financial  Accounting  Standards No. 121 - Accounting for the
Impairment  of  Long-Lived  Assets  and for  Long-Lived  Assets  to Be  Disposed
Of,  this  segments  goodwill  was  written  down  by  approximately
$1,464,000 as of the end of the third quarter of 2000.

Operating Income (Loss)

The Company recorded an operating loss from
continuing  operations  of  $(157,000)  in the third  quarter of 2001  versus an
operating  loss from  continuing  operations  of  $(2,589,000)  in 2000 with the
Diagnostics  and Biotech  segments  achieving an  operating  profit prior to the
allocation  of corporate  overhead.  The  Diagnostics  segments  operating
income after allocation of corporate overhead increased to $477,000 in the third
quarter of 2001 from  $167,000 in 2000 as an increase  in product  revenue  from
AccuRun  and OEM  panels,  coupled  with an  increase  in product  gross  margin
associated with the mix of higher margin product items,  partially  offset by an
increased absorption of corporate overhead by this segment (as explained further
hereunder).  The  Biotech  segments  operating  loss after  allocation  of
corporate  overhead was $(52,000) in 2001 as compared to $(151,000) in 2000, due
to  increased  service  revenues  partially  offset by  increased  research  and
development  expenditures  and  increased  absorption  of corporate  overhead as
explained  further  hereunder.  The  Laboratory  Instrumentation  segments
operating loss after  allocation of corporate  overhead  decreased to $(165,000)
for 2001 as compared to a loss for 2000 of $(527,000)  exclusive of a $1,464,000
charge  for  impairment  of  intangible  assets,  due to a higher  level of both
product  and  services  revenue  and the  impact  in the third  quarter  of 2001
operating  results of the  September  2000 cost  reduction  plan which  improved
margins.  In the third quarter of 2000, Panacos incurred a $(352,000)  operating
loss;  the Company no longer  consolidates  the results of  operation of Panacos
subsequent  to November 2000 as  previously  discussed.  In the first quarter of
2001,  the Company  adjusted its  absorption of corporate  overhead based upon a
revised corporate  structure  effective in 2001. The present corporate structure
reflects the  Companys  implementation,  in the latter part of 2000,  of a
cost   reduction   plan  at  the   Laboratory   Instrumentation   segment,   the
Companys   spin-off  of  Panacos  as  an  independent   company,  and  the
Companys  decision to exit the Clinical  Laboratory testing business.  The
latter  item  is  reflected  as  discontinued  operations  in  the  accompanying
financial   statements.   In  accordance  with  generally  accepted   accounting
principles,  the Company ceased  allocating  corporate  overhead to the Clinical
Laboratory testing business for all periods  presented.  This adjustment results
in the Diagnostics unit absorbing a large portion of corporate overhead which in
prior years would have been  allocated  to Panacos and the  Clinical  Laboratory
testing business.

Interest Expense

Interest expense decreased from $381,000 in
the third quarter of 2000 to $53,000 in the third quarter of 2001.  The decrease
is  associated  with interest  expense  incurred on the  Companys  line of
credit,  which was in effect  for the third  quarter  of 2000 but was repaid and
terminated  by the  Company  in  February  2001.  In the third  quarter of 2000,
amortization  of the  beneficial  conversion  feature,  warrant  costs  and debt
issuance  costs  associated  with the  Companys  August  2000  issuance of
$3,250,000  3%  senior  subordinated   convertible   debentures  contributed  an
additional $153,000 of interest expense.

Income Taxes

In the third  quarter of 2000,  the Company
established a full valuation allowance for its deferred tax assets in accordance
with Statement of Financial Accounting Standards No. 109 and in consideration of
three consecutive years of losses; accordingly, the Company has not subsequently
recognized  an  income  tax  benefit  associated  with  losses  from  continuing
operations as these tax assets have been fully reserved for.

Loss from Continuing Operations

Loss  from continuing  operations amounted to
$(211,000)  for the quarter  ended  September  30, 2001 as compared to a loss of
$(2,970,000)  for the same period last year, as a result of the items  discussed
above.

Discontinued Operations

Operating  income (loss) from  discontinued
operations amounted to $0 and $(71,000) for the three months ended September 30,
2001 and 2000, respectively. In accordance with a transition services agreement,
the Company is required to operate the Clinical Laboratory testing business in a
normal  fashion  for a  minimum  of six  months  (with 30 day  renewal  options)
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  February  20,  2001  are  the  responsibility  of  the
purchaser.

Summary

The   Company   incurred  a  net  loss  of
$(211,000)  in  the  third  quarter  of  2001  as  compared  to a  net  loss  of
$(4,766,000)  in the third  quarter of 2000.  The third  quarter of 2001 did not
include  operating  results  for  Panacos,  whereas  the third  quarter  of 2000
included an operating loss of $(351,000) associated with Panacos; the Company no
longer  consolidates the results of operation of Panacos  subsequent to November
2000 as  previously  discussed.  In  addition,  the third  quarter  of 2000 also
included  1)  a  $1,464,000   write-down  of  the   Laboratory   Instrumentation
segments  goodwill and 2) the establishment of 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. The
net income per share  computation  for the third  quarter of 2001  reflects  the
issuance  of  79,016  additional  shares  of common  stock  associated  with the
exercise  of stock  options  and  warrants.  In  addition,  on June 15, 2001 the
Company and Paradigm Group, LLC entered into an agreement to permanently  settle
their disputes. Under the terms of the agreement,  Paradigm Group, LLC rescinded
their exercise of the common stock purchase warrants,  which have since expired,
and the Company  retained the 500,000  shares  associated  with their  exercise.
These  shares were  included in the total shares  outstanding  as well as in the
calculation  of earnings  (loss) per share from  February  17, 2000 (the date of
exercise) through June 15, 2001 (the date of the agreement). As of September 30,
these shares were cancelled by the Company.

## NINE MONTHS
ENDED SEPTEMBER 30, 2001 AND 2000

Revenue

Total  revenue from  continuing  operations
increased 8.8%, or $1,283,000,  to $15,891,000 in 2001 from $14,608,000 in 2000.
The  increase in revenue  was the result of an  increase  in product  revenue of
12.1%, or $1,062,000 to $9,843,000 in 2001 from $8,781,000 in 2000, coupled with
an increase in service revenue of 3.8%, or $221,000,  to $6,048,000 in 2001 from
$5,826,000 in 2000.

Product  Revenue.  The  product  revenue  increase  was
primarily  attributable  to an increased  level of sales of  basematrix  and OEM
panel products in the Diagnostics  segment,  coupled with an increase in product
sales at the Laboratory Instrumentation segment.

Service  Revenue.  The Biotech  segment  experienced  a
significant  increase in repository and  commercial  service  revenue.  This was
partially  offset  by  lower  revenue  from  contract  research  and  instrument
services.  In addition,  service revenue  recognized in the first nine months of
2000 also included  $151,000 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  23.1%,  or
$1,234,000,  to $6,562,000 in the first nine months of 2001 from  $5,328,000 for
the same period last year. Product gross profit increased 21.3%, or $898,000, to
$5,108,000 in 2001 from $4,210,000 for 2000;  product gross margin  increased to
51.9% in 2001 from 48.0% in 2000.  Services gross profit  increased  $337,000 to
$1,454,000 in 2001 from  $1,117,000 for 2000 and service gross margin  increased
to 24.0% in 2001 from 19.2% in 2000.

Product  Gross  Margin.  The increase in product  gross
margin at the  Diagnostics  segment,  was derived from increased sales of higher
margin catalog products  coupled with a higher level of sales.  This was coupled
with a gross margin increase at the Laboratory Instrumentation segment driven by
the cost reduction plan implemented last September.

Service  Gross  Margin.  The increase in service  gross
margin  was due to higher  commercial  services  and  repository  revenue at the
Biotech segment.

Research and Development

Research  and   development   expenditures
decreased 15.5%, or $312,000, to $1,696,000 in 2001 from $2,008,000 in 2000. The
first nine months of 2000 included $537,000 of research and development expenses
associated  with  Panacos,  the  results of which are no longer  included in the
Companys  results of operation as discussed above. This was partially offset by
higher  research  and   development   spending  on  the  Companys  PCT  program
activities.

Selling and Marketing

Selling and marketing expenses increased by
7.0%, or $144,000,  to $2,194,000 in 2001 from $2,050,000 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
13.7%, or $474,000, to $2,990,000 in 2001 from $3,464,000 in 2000. This decrease
was  primarily a result of several  factors.  First,  there have been  headcount
reductions at Corporate,  and the  Diagnostics  and  Laboratory  Instrumentation
segments,  coupled with a lower level of professional fees. Second, a portion of
the decline was associated with the September 2000 write down of goodwill at the
Laboratory  Instrumentation  segment,  saving  $85,000 of  amortization  expense
compared to the first half of 2000.  Third,  in the second  quarter of 2001, the
company  increased  its  provision  for doubtful  accounts by $82,000 based on a
significant  deterioration  in the  financial  condition  of a  customer  of the
Diagnostics  segment.  Finally,  in the  second  quarter  of 2001,  the  Company
reversed $80,000 of expenses  previously accrued in year 2000, based on the June
2001 legal settlement  reached with Paradigm Group, LLC, as discussed further in
the accompanying footnotes to the financial statements.

Impairment of Intangible Asset

As  part  of an  ongoing  strategic  review
process,  the  Companys  Board of Directors met in late  September 2000 to
review  the  progress  of  its  Laboratory  Instrumentation  segment,  and  that
segments  prospects  for the future to determine if any  impairment of the
segments  goodwill had occurred.  Based on  information  presented at that
meeting and subsequent analyses showing lower revenue  expectations,  management
approved a cost reduction plan including a headcount  reduction,  salary freeze,
and sublease of excess  manufacturing space. Using the lower revenue projections
associated  with  this  plan,  the  Laboratory  Instrumentation   segments
undiscounted future cash flows were projected to be less than the carrying value
of  that  segments   goodwill.   In  accordance  with  the  provisions  of
Statement of Financial  Accounting  Standards No. 121 - Accounting for the
Impairment  of  Long-Lived  Assets  and for  Long-Lived  Assets  to Be  Disposed
Of,  this  segments  goodwill  was  written  down  by  approximately
$1,464,000 as of the end of the third quarter of 2000.

Operating Income (Loss)

Operating loss from  continuing  operations
decreased to $(318,000) in 2001 versus  $(3,659,000)  in 2000.  The  Diagnostics
segments operating income increased to $1,146,000 in 2001 from $884,000 in
2000, due to an increase in product  revenue coupled with an increase in product
gross  margin  and a  decrease  in  segment  general  and  administrative  costs
partially  offset by an  increased  absorption  of  corporate  overhead  by this
segment as explained further hereunder.  The Laboratory  Instrumentation segment
had an  operating  loss  of  $(322,000)  for  2001  versus  a loss  for  2000 of
$(1,117,000)  exclusive of a charge of $1,464,000  taken in the third quarter of
2000 related to impairment of intangible  assets as discussed further above; the
first nine months of 2001 operating  results reflect the impact of the September
2000 cost reduction plan. In the first nine months of 2000,  Panacos incurred an
$(884,000)  operating  loss; the Company no longer  consolidates  the results of
operation  of Panacos  subsequent  to  November  2000 as  previously  discussed.
Effective  January  2001,  the Company  adjusted  its  absorption  of  corporate
overhead based upon a revised corporate structure effective in 2001. The present
corporate  structure reflects the Companys  implementation,  in the latter
part  of  2000,  of a cost  reduction  plan  at the  Laboratory  Instrumentation
segment,  the Companys  spin-off of Panacos as an independent company, and
the  Companys  decision to exit the Clinical  Laboratory testing business.
The latter item is  reflected as  discontinued  operations  in the  accompanying
financial   statements.   In  accordance  with  generally  accepted   accounting
principles,  the Company ceased  allocating  corporate  overhead to the Clinical
Laboratory testing business for all periods  presented.  This adjustment results
in the Diagnostics unit absorbing a large portion of corporate  overhead,  which
in prior years would have been allocated to Panacos and the Clinical  Laboratory
testing business.

Interest Expense

Interest expense decreased from $784,000 in
2000 to $326,000 in 2001.  The major portion of the decrease is associated  with
reduced  interest  expense  incurred  in the  first  nine  months of 2001 on the
Companys line of credit,  which was in effect for the first nine months of 2000
but was repaid and  terminated  by the  Company in  February  2001 as  discussed
further in the section Discontinued  Operations  hereunder. Also, in
the third quarter of 2000,  amortization of the beneficial  conversion  feature,
warrant costs and debt issuance costs associated with the Companys  August
2000  issuance  of  $3,250,000  3% Senior  Subordinated  Convertible  Debentures
contributed an additional  $153,000 of interest expense. In the first quarter of
2001, the Company redeemed the remaining  $2,040,000 (face value) of outstanding
3% Senior Subordinated Convertible Debentures (the  Debentures) plus
accrued  interest  and a premium  of  $190,000  (which was  charged to  interest
expense).  The pro-rata  portion of unamortized  original issue  discount,  debt
issuance and warrant  related  costs  associated  with the redeemed  Debentures,
amounting to approximately  $377,000,  is included in the loss on extinguishment
of the  Debentures.  Substantially  offsetting  this loss is the  Companys
reversal of approximately  $528,000 of interest expense  previously  recorded in
2000 associated with the  amortization of the Debentures  beneficial  conversion
feature.  Additional  interest  expense was incurred in the first nine months of
2001  associated  with the Company  obtaining a $2,447,000  mortgage on its West
Bridgewater MA facility in April 2000.

Income Taxes

In the third  quarter of 2000,  the Company
established a full valuation allowance for its deferred tax assets in accordance
with Statement of Financial Accounting Standards No. 109 and in consideration of
three consecutive years of losses; accordingly, the Company has not subsequently
recognized  an income  tax  benefit  associated  with the loss  from  continuing
operations  in the first nine months of 2001 as these tax assets have been fully
reserved for. The Company has recorded approximately $16,000 of state income tax
expense in the first nine months of 2001.

Loss from Continuing Operations

Loss from continuing operations decreased to
$(659,000) for the nine months ended  September 30, 2001 from  $(5,579,000)  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  adjusted by $206,000 to reflect a post closing  adjustment in favor of the
purchaser  and for  approximately  $19,000 of interest  earned.  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 and in early  2002 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 $364,000  related to stock option  exercises  that was not previously
recorded as the Company was in a loss position. This tax benefit was recorded as
a credit to additional paid-in capital in the first nine months of 2001.


               The  Company  has
recorded its estimate of remaining  short and long term accrued  liabilities  to
exit the Clinical Laboratory testing business, totaling approximately $2,564,000
as of September  30, 2001.  The major  components  of this accrual are estimated
income taxes ($800,000),  severance and other employee related costs ($600,000),
estimated  lease  exit  costs   ($773,000)  and  potential   health  care  claim
adjustments  ($218,000);  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  $1,967,000  and $6,478,000
for the three and nine months ended September 30, 2000, respectively.  Operating
(losses) from  discontinued  operations were $0 and $(136,000) for the three and
nine months ended September 30, 2001, respectively, and $(71,000) and $(149,000)
for the three  and nine  months  ended  September  30,  2000,  respectively.  In
summary,  income (loss) from  discontinued  operations was $0 and $3,964,000 for
the three and nine months ended September 30, 2001, respectively,  and $(71,000)
and  $(150,000)  for the  three  and  nine  months  ended  September  30,  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 (with 30
day renewal  options)  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  Debentures  and to retire the Companys line of
credit.

Summary

The Company had net income of $3,305,000 for
the first nine months of 2001 as compared to a net loss of $(5,729,000)  for the
same period in 2000. In the first nine months of 2001,  the Company  recorded an
after-tax gain of $3,964,000  associated with discontinued  operations,  coupled
with a  significantly  lower  operating loss at the  Laboratory  Instrumentation
segment.  In the first nine months of last year,  the Company  incurred a higher
level of operating losses which included $(883,000) associated with Panacos; the
Company no longer consolidates the results of operation of Panacos subsequent to
November  2000  as  discussed   further   above.   The   Laboratory   Instrument
segments  goodwill was written down by approximately  $1,464,000 as of the
end of the  third  quarter  of 2000 as  discussed  further  above.  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.


               The income (loss)
     per share  computation  for the first nine months of 2001 reflects both the
issuance of 801,325  additional  shares of common stock in the first  quarter of
2001, as certain  holders of the  Debentures  exercised  their rights to convert
$1,210,000 of such  Debentures into shares of the  Companys  common stock,
and the issuance of 147,377  additional  shares of common stock  associated with
the exercise of stock  options,  warrants  and  purchases  made  pursuant to the
employee  stock  purchase  plan. In addition,  on June 15, 2001, the Company and
Paradigm  Group,  LLC entered  into an  agreement  to  permanently  settle their
disputes. Under the terms of the agreement,  Paradigm Group, LLC rescinded their
exercise of the common stock purchase  warrants,  which have since expired,  and
the Company  retained the 500,000 shares  associated with their exercise.  These
shares  were  included  in  the  total  shares  outstanding  as  well  as in the
calculation  of earnings  (loss) per share from  February  17, 2000 (the date of
exercise) through June 15, 2001 (the date of the agreement). As of September 30,
these shares were cancelled by the Company.

## LIQUIDITY AND
FINANCIAL CONDITION

The  Company's  working  capital  position
increased to $7,892,000 as of September 30, 2001 from  $3,596,000 as of December
31, 2000. 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   (the
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,  was  allocated  to the
relative fair value of warrants issued in conjunction with these Debentures.  In
the first quarter of 2001,  certain holders of these 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
Debentures remain outstanding subsequent to February 27, 2001.

Net cash  used in  operations  for the nine
months ended  September 30, 2001 was $160,000 as compared to  $1,710,000  during
the same period last year.  The decrease in cash used in  operations  during the
first nine months of 2001 is primarily  associated  with the decreased loss from
continuing operations, increased cash collections on accounts receivable and the
collection of an income tax refund in the first quarter of 2001.

Net cash used in investing  activities  was
$556,000  in the first nine months of 2001  versus  $984,000  in the  comparable
prior  year  period.  The  decrease  of cash used for  investing  was due to the
completion of the second phase of improvements at the Companys  Frederick,
MD and West  Bridgewater,  MA facilities and a decision by management to control
capital expenditures  partially off-set by a loan made to an officer/director of
the company as discussed further below.

Cash  used  in  financing  activities  was
$7,129,000  in the first nine months of 2001 versus cash  provided of $4,592,000
for the prior year  period.  In the first nine months of 2001,  the Company used
proceeds from the sale of the business and certain assets of BBICL to pay off in
full the  remaining  $5,762,635  balance  on its line of credit  and  retire all
remaining  Debentures.  Cash  provided by  financing in the first nine months of
2000 consisted of  approximately  $675,000 of cash received from the exercise of
stock options and warrants,  net proceeds from a $2,447,000 mortgage on its West
Bridgewater, MA facility in April 2000 and net proceeds of $2,871,000 related to
the  issuance  of  3%  Senior  Subordinated  Convertible  Debentures.  This  was
partially  offset by  $1,383,000 of  repayments  on the  Companys  line of
credit.

The  Companys  Board of Directors has
authorized   the   Company  to  provide  a  loan,   of  up  to  $450,000  to  an
officer/director  of the  Company.  The loan is in the form of a one-year  note,
renewable  at  the  Companys  option,  at  a  market  interest  rate,  and
collateralized by a pledge of 90,000 shares of common stock of the Company owned
by the  officer/director.  Interest on the note, currently 7%, is either payable
monthly  or can be  added to the  principal  of the  note at the  option  of the
borrower,  up to the amount available under this note.  During the third quarter
of  2001,  $350,000  was  loaned  pursuant  to the  terms  of the  note,  and an
additional $100,000 was loaned in October 2001. The note is shown on the balance
sheet as a decrease to stockholders equity.

In the period from  January 1, 2001 through
September  30,  2001  the  Company  has  received   proceeds  totaling  $335,000
associated with the exercise of stock options and warrants,  which have resulted
in 132,079 new shares of common stock being  issued.  As of September  30, 2001,
the Company had  existing  cash  balances  approximating  $1,353,000  (excluding
$713,000 of cash held in escrow  relating to the sale of certain BBICL assets as
discussed  herein) and believes this amount,  coupled with internally  generated
funds from  operations,  will be sufficient to fund  operations and  anticipated
capital expenditures for the remainder of the year and in year 2002. 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  for the full year 2001;  the financial  results of the
quarter and nine months ended September 30, 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;  the  potential  for  significant  reductions  in
purchases by any of the Company's  major  customers;  and if expenses are higher
than anticipated,  or if revenues are lower than  anticipated,  the Company will
require  additional  capital  sooner than expected and there can be no assurance
that the Company will be able to obtain additional  capital on acceptable terms.
Certain of these and other  factors  which might cause actual  results to differ
materially from those projected are more fully set forth under the caption "Risk
Factors" in the Company's most recent  Registration  Statements on Form S-3 (SEC
File No.s  333-94379 and  333-46426)  and in its annual report on Form 10-K for
the year ended December 31, 2000 and its quarterly  reports on Form 10-Q for the
quarter ended March 31, 2001 and the quarter ended June 30, 2001.

## 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

In  August  1999,  the  Company  sold
500,000  warrants to purchase  the  Companys  stock to Paradigm  Group,  LLC, a
private investment  company.  In February 2000, the Company received notice that
Paradigm  Group,  LLC exercised all of their  warrants to purchase the Companys
common  stock.  The holders of the  warrants  were  required to pay the exercise
price when the registration of the underlying  shares became effective which was
in December 2000. In August 2000,  the Company  received a summons and complaint
from Paradigm Group,  LLC naming the Company as a defendant.  The suit, filed in
the Circuit Court of Cook County,  Illinois,  alleged breach of contract  claims
and fraud against the Company in connection  with the sale by the Company to the
Paradigm  Group,  LLC of the above  warrants,  the exercise of those warrants by
Paradigm Group,  LLC and a delay in the registration of those shares with the U.
S. Securities and Exchange  Commission.  In December 2000,  Paradigm Group,  LLC
withdrew  this  lawsuit.  In the fourth  quarter of 2000,  the Company  expensed
approximately  $265,000 of costs related to these warrants and the  registration
of the underlying  shares.  On June 15, 2001 the Company and Paradigm Group, LLC
entered into an agreement to permanently settle their disputes.  Under the terms
of the agreement,  Paradigm  Group,  LLC rescinded  their exercise of the common
stock purchase warrants,  which have since expired, and the Company retained the
500,000 shares associated with their exercise. These shares were included in the
total shares  outstanding as well as in the  calculation of earnings  (loss) per
share from  February 17, 2000 (the date of exercise)  through June 15, 2001 (the
date of the  agreement).  As of September 30, these shares were cancelled by the
Company.

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

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

## ITEM 3.
DEFAULTS UPON SENIOR SECURITIES

Not Applicable

## 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)**                                                                                                                                                                                                                                                              
|10.26 | Promissory Note dated July 10,
     2001,  as amended on October 4, 2001, by and among Boston  Biomedica,  Inc.
and Richard T. Schumacher - (filed herewith)                                                                                                                                                                                                                         

|*  | 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

None.

# 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:  
November 14, 2001          
         
             
             
             
         
By:/s/ Kevin W. Quinlan


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