<PAGE>

                     U.S. Securities and Exchange Commission
                             Washington, D.C. 20549
                                   Form 10-QSB


(Mark One)

[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

       For the quarterly period ended December 31, 2001

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT

       For the transition period from _______________ to ______________

                         Commission file number 0-11480

                           BIOVEST INTERNATIONAL, INC.
        (Exact name of small business issuer as specified in its charter)

                   Delaware                             41-1412084
                   --------                             ----------
         (State or other jurisdiction      (IRS Employer Identification Number)
       of incorporation or organization)

                  540 Sylvan Avenue, Englewood Cliffs, NJ 07632
                    (Address of principal executive offices)

Issuer's telephone number: 201-816-8900

            Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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

            At February 12, 2002, there were 9,629,696 shares of the
registrant's Common Stock, $.01 par value, issued and outstanding.

                  Transitional Small Business Disclosure Format
                           (check one) Yes [ ] No [X]

<PAGE>

INDEX
BIOVEST INTERNATIONAL, INC.

                                                                            PAGE

PART I.    FINANCIAL INFORMATION

     ITEM 1.  Financial Statements

          Balance Sheet as of December 31, 2001.............................  3

          Statements of Operations for the Three Months ended
               December 31, 2001 and 2000...................................  4

          Statements of Cash Flows for the Three Months ended
               December 31, 2001 and 2000...................................  5

          Notes to Financial Statements.....................................  6

     ITEM 2.  Management's Discussion and Analysis or Plan
                     of Operations.......................................... 15

PART II.   OTHER INFORMATION

     ITEM 6.  Exhibits and Reports on Form 8-K.............................. 18

                                                                               2
<PAGE>

PART I - FINANCIAL INFORMATION

 ITEM 1.  FINANCIAL STATEMENTS - BIOVEST INTERNATIONAL, INC.


<TABLE>
<CAPTION>
                                  BALANCE SHEET                                        DECEMBER 31, 2001
                                     ASSETS                                               (UNAUDITED)
                                                                                         -------------
<S>                                                                                      <C>
Current assets
  Cash                                                                                   $     264,000
  Accounts receivable, net of $125,000 allowance for doubtful accounts                       2,042,000
  Costs and estimated earnings in excess of billings on uncompleted contracts                  137,000
  Inventories                                                                                1,942,000
  Other                                                                                        241,000
                                                                                         -------------
    Total current assets                                                                     4,626,000
Property, plant and equipment, net                                                           1,004,000
Other assets
  Inventories                                                                                   63,000
  Patents and trademarks, net                                                                  848,000
  Other assets                                                                                  21,000
  Reorganization value in excess of amounts allocable to identifiable assets, net            2,226,000
                                                                                         -------------
                                                                                         $   8,788,000
                                                                                         =============
                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Notes payable                                                                          $   1,968,000
  Current portion of long-term debt                                                            142,000
  Accounts payable                                                                           1,555,000
  Customer deposits                                                                            400,000
  Accrued liabilities
     Compensation and related taxes                                                          1,324,000
     Other                                                                                     614,000
  Billings in excess of costs and estimated earnings on uncompleted contracts                   73,000
                                                                                         -------------
     Total current liabilities                                                               6,076,000
Long-term debt                                                                                 302,000
Commitments and contingencies                                                                       --
Shareholders' equity
   Preferred stock, $ .01 par value, 10,000,000 shares authorized; none issued and
     outstanding                                                                                    --
  Common stock, $.01 par value, 50,000,000 shares authorized;
     9,629,696 shares issued and outstanding                                                    96,000
  Additional paid-in capital                                                                12,010,000
  Accumulated deficit                                                                       (9,446,000)
  Stock subscription receivable                                                               (250,000)
                                                                                         -------------
    Total shareholders' equity                                                               2,410,000
                                                                                         -------------
                                                                                         $   8,788,000
                                                                                         =============
</TABLE>


The accompanying notes are an integral part of this financial statement.

                                                                               3
<PAGE>

                           BIOVEST INTERNATIONAL, INC.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                  Three Months          Three Months
                                                     Ended                 Ended
                                               December 31, 2001     December 31, 2000
                                               -----------------     -----------------
<S>                                                <C>                 <C>
Revenues
  Contract production services                     $ 1,817,000         $ 1,669,000
  Consumable sales                                     291,000             457,000
  System sales                                         464,000             468,000
  Other                                                 94,000             144,000
                                                   -----------         -----------
  Total revenues                                     2,666,000           2,738,000

Operating costs and expenses
  Cost of sales                                      1,946,000           1,729,000
  Research and development                           1,053,000             342,000
  Marketing, general and administrative              1,094,000           1,037,000
                                                   -----------         -----------
  Total operating costs and expenses                 4,093,000           3,108,000
                                                   -----------         -----------
Loss from operations                                (1,427,000)           (370,000)

Other income (expense)
  Interest expense                                    (106,000)            (11,000)
                                                   -----------         -----------
Net loss                                           $(1,533,000)        $  (381,000)
                                                   ===========         ===========
Net loss per common share-basic and diluted        $      (.16)        $      (.04)
                                                   ===========         ===========
Weighted average number of common shares
  outstanding- basic and diluted                     9,628,609           9,138,977
                                                   ===========         ===========
</TABLE>

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

                                                                               4
<PAGE>

                           BIOVEST INTERNATIONAL, INC.
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                      THREE MONTHS ENDED      THREE MONTHS ENDED
                                                                                       DECEMBER 31, 2001      DECEMBER 31, 2000
                                                                                       -----------------      -----------------
<S>                                                                                       <C>                     <C>
Cash flows from operating activities
   Net loss                                                                               $(1,533,000)            $  (381,000)
   Adjustments to reconcile net loss to net cash used in operating activities
     Depreciation                                                                              48,000                  30,000
     Amortization                                                                              63,000                  56,000
     Issuance of common stock, options and warrants for services                               55,000                 137,000
     Amortization of warrants related to debt                                                  58,000                      --
     Changes in current operating items
         Accounts receivable                                                                 (451,000)               (234,000)
         Costs and estimated earnings in excess of billings on uncompleted contracts          451,000                 (23,000)
         Inventories                                                                           41,000                 (25,000)
         Other                                                                                239,000                  57,000
         Accounts payable and accrued liabilities                                             496,000                 (57,000)
         Customer deposits                                                                    354,000                   1,000
         Billings in excess of costs and estimated earnings on uncompleted contracts          (44,000)                179,000
                                                                                          -----------             -----------
           Net cash used in operating activities                                             (223,000)               (260,000)
                                                                                          -----------             -----------
Cash flows from investing activities
   Capital expenditures                                                                       (38,000)                (73,000)
                                                                                          -----------             -----------
           Net cash used in investing activities                                              (38,000)                (73,000)
                                                                                          -----------             -----------
Cash flows from financing activities
   Proceeds from short-term borrowings                                                        775,000                 100,000
   Repayment of short-term borrowings                                                        (200,000)                     --
   Principal payments on long-term debt                                                       (34,000)                (31,000)
   Financing costs                                                                            (16,000)                     --
   Stock subscription                                                                              --                 (35,000)
                                                                                          -----------             -----------
          Net cash provided by financing activities                                           525,000                  34,000
                                                                                          -----------             -----------
Net increase (decrease) in cash                                                               264,000                (299,000)
Cash at beginning of period                                                                        --                 548,000
                                                                                          -----------             -----------
Cash at end of period                                                                     $   264,000             $   249,000
                                                                                          -----------             -----------
Cash paid for interest                                                                    $    21,000             $    11,000
                                                                                          ===========             ===========
</TABLE>

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

                                                                               5
<PAGE>

BIOVEST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

(1) DESCRIPTION OF THE COMPANY

    Except as indicated otherwise, the term the "Company" refers to Biovest
International, Inc.

    The Company is a biotechnology company focused on production and contract
manufacturing of biologic drugs and products from small through commercial
scale. It has historically developed, manufactured and marketed patented cell
culture systems and equipment to pharmaceutical, diagnostic and biotechnology
companies, as well as leading research institutions worldwide, and has provided
contract cell production services to those institutions. While continuing this
business, management has chosen to re-orient the Company's focus, assets and
operations to increase contract cell production and biologic drug development
and ownership. The Company's first drug product, a personalized vaccine for the
most common and fastest-growing form of hematologic cancer, known as B-cell
Non-Hodgkins lymphoma, is currently in a Phase III FDA-approved pivotal
licensing trial.

(2) SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

    The accompanying unaudited condensed financial statements have been derived
from unaudited interim financial information prepared in accordance with the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to those
rules and regulations, although the Company believes that the disclosures made
are adequate to make the information presented not misleading. The financial
statements of the Company, in the opinion of management, include all normal and
recurring adjustments necessary for a fair presentation of results as of the
dates and for the periods covered by the financial statements.

    Operating results for the three months ended December 31, 2001 are not
necessarily indicative of the results that may be expected for the entire fiscal
year. For further information, refer to the financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-KSB for the fiscal
year ended September 30, 2001.

    As of July 31, 1999, the Company adopted fresh start reporting in accordance
with the American Institute of Certified Public Accountants' Statement of
Position 90-7 Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code.

    Fresh-start reporting resulted in material changes to the Company's balance
sheet, including

                                                                               6
<PAGE>

BIOVEST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

valuation of assets at fair value in accordance with principles of the purchase
method of accounting, valuation of liabilities pursuant to provisions of the
Company's Modified First Amended Plan of Reorganization (Plan) and valuation of
equity based on the reorganization value of the ongoing business.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

    The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures about contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.

NET INCOME (LOSS) PER COMMON SHARE

    Basic net income (loss) per share of common stock is computed by dividing
net income (loss) by the weighted average number of outstanding common shares.
Diluted net income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of outstanding common shares and common
share equivalents relating to stock options and warrants, when dilutive. For the
three months ended December 31, 2001 and 2000 no common share equivalents would
have been included in the computation of diluted net income per share had net
income been achieved. Options and warrants to purchase 7,319,000 and 2,600,000
shares of common stock with a weighted average exercise price of $2.24 and $1.92
were outstanding at December 31, 2001 and 2000, and were not included in the
computation of common stock equivalents because their exercise price was higher
than the estimated fair market value of the common shares during the reporting
period. In addition, diluted net income (loss) per share does not include
725,000 shares issuable upon the conversion of notes payable to common stock
because the effect would have been antidilutive.

RECENT ACCOUNTING PRONOUNCEMENT

    On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 142, Goodwill and Intangible
Assets. SFAS 142 is effective for fiscal years beginning after December 15,
2001, though earlier adoption is permitted. Under the new pronouncement, among
other provisions, goodwill, including reorganization value in excess of amounts
allocable to identifiable assets, and intangible assets with indefinite lives
will no longer be amortized and will be tested for impairment annually and
whenever there is an impairment indicator.

    The Company will continue to amortize the reorganization value in excess of
amounts allocable to identifiable assets under its current method until the date
of adoption, which is no later than October 1,

                                                                               7
<PAGE>

BIOVEST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

2002, at which time amortization will no longer be recognized. By the end of the
year of implementation the Company will have completed a transitional fair value
based impairment test of goodwill. Impairment losses, if any, resulting from the
transitional testing will be recognized as a cumulative effect of a change in
accounting principle.

    The Company has not yet determined when it will adopt SFAS 142, nor what
will be the effect on its financial statements.

(3) GOING CONCERN

    During the three months ended December 31, 2001 the Company incurred a net
loss of $1,533,000. At December 31, 2001 the Company had a deficit in working
capital of $1,450,000. The Company has been meeting its cash requirements
through the use of cash on hand, the sale of common stock and short-term
borrowings, primarily from affiliates.

    In September 2001 the Company successfully entered into a definitive
Cooperative Research and Development Agreement ("CRADA") with the National
Cancer Institute ("NCI") for the development and ultimate commercialization of
patient-specific vaccines for the treatment of non-Hodgkin's low-grade
follicular lymphoma. The terms of the CRADA include, among other things, a
requirement for the Company to pay $530,000 quarterly to NCI for expenses
incurred in connection with the ongoing Phase III clinical trials. The Company
is currently in negotiations with the NCI to reduce this and other financial
requirements and has not yet made the second quarterly payment for the quarter
ended December 31, 2001. Successful development of the vaccine, if approved by
the FDA, from Phase III clinical trials through commercialization will commit
the Company to several years of significant expenditures before revenues will be
realized, if ever.

    The Company's ability to continue its present operations and meet its
obligations under the CRADA is dependent upon its ability to obtain significant
additional funding. Such additional financing could be sought from a number of
sources, including the sale of equity or debt securities, strategic
collaborations or recognized research funding programs. Management is currently
in the process of exploring various financing alternatives to meet the Company's
cash needs, including additional short-term loans from shareholders and others
and the sale of equity securities. Management believes they will be able to
raise the necessary funds to continue operations in the near term.

    There is no assurance that the additional required funds can be obtained on
terms acceptable or favorable to the Company, if at all. The net losses incurred
and the need for additional funding raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

                                                                               8
<PAGE>

BIOVEST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

(4) DETAILS TO BALANCE SHEET

CONCENTRATION OF CREDIT RISK

    The Company grants credit to customers in the normal course of business, but
generally does not require collateral or any other security to support amounts
due. Management performs on-going credit valuations of its customers. Two
customers accounted for 23% and 12% of revenues for the three months ended
December 31, 2001, one of which accounted for 32% and a different customer
accounted for 14% of the Company's trade accounts receivable balance at December
31, 2001. One customer accounted for 20% of revenues for the three months ended
December 31, 2000.

    A significant amount of the Company's revenue has been derived from export
sales. The Company's export sales were 47% and 34% for the three months ended
December 31, 2001, and 2000, respectively. For the three months ended December
31, 2001, two foreign countries accounted for 13% and 11% of total revenues. For
the three months ended December 31, 2000, one foreign country accounted for 14%
of total revenues.

INVENTORIES

    Inventories consist of the following:

                                                 DECEMBER 31, 2001
                                                 -----------------
         Finished goods..........                   $  281,000
         Work-in-process.........                      306,000
         Raw materials...........                    1,418,000
                                                    ----------
                                                     2,005,000
         Less non-current portion                      (63,000)
                                                    ----------
                                                    $1,942,000
                                                    ==========

    The Company has inventory quantities in excess of anticipated sales
requirements for the twelve months subsequent to December 31, 2001. Accordingly,
a portion of the Company's inventory balance is classified as a non-current
asset as of that date.

(5) NOTES PAYABLE

    During September 2001, four of seven loans made in fiscal 2001 were renewed
with new loans

                                                                               9
<PAGE>

BIOVEST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

bearing interest at 10%, due on September 1, 2002 and convertible into shares of
the Company's common stock at $3.00 per share at the holder's option. In
connection with the renewals, the Company issued each party warrants to purchase
25,000 shares of the Company's common stock with an exercise price of $5.00 per
share, exercisable from September 1, 2001 through September 30, 2006. The
aggregate value of the warrants using the Black-Scholes pricing model, assuming
zero dividend yield; a risk-free rate of 4.47%; expected volatility of 84%; and
term of five years, was estimated to be $54,000 and is being amortized over the
life of the loans which results in a higher effective interest rate.

    In August 2001, a shareholder loaned the Company $1,000,000 due on August
19, 2002, with interest at 7.5% per annum. This loan is also convertible, at the
holder's option, into shares of the Company's common stock at $3.00 per share if
the Company wishes to pay amounts under the loan before August 19, 2002. In
connection with the issuance of the debt, the Company issued 100,000 warrants
with an exercise price of $5.00 per share and 100,000 warrants with an exercise
price of $10.00 per share, exercisable on or before August 1, 2006. The
aggregate value of the warrants using the Black-Scholes pricing model, assuming
zero dividend yield; a risk-free rate of 4.55%; expected volatility of 84%; and
term of five years, was estimated to be $92,000 and is being amortized over the
life of the loan which results in a higher effective interest rate.

    During the three months ended December 31, 2001 the Company obtained
additional loans aggregating approximately $625,000; these loans bear interest
at 7.5%, are due on various dates through October 15, 2002 and are also
convertible into shares of the Company's common stock at $3.00 per share, at the
holder's option, if the Company wishes to pay amounts under the loans before
maturity. The Company issued 52,500 warrants with an exercise price of $2.50 per
share and 52,500 warrants with an exercise price of $5.00 per share to a third
party who assisted in the financing. The warrants are exercisable immediately
and have a term of five years. The aggregate value of the warrants using the
Black-Scholes pricing model, assuming zero dividend yield; risk-free interest
rates ranging from 3.47% to 4.38%; expected volatility of 100%; and term of five
years, was estimated to be $80,000. The Company also paid a commission of
$16,000 to the third party who assisted with the financing. The value of the
warrants and commission are being amortized over the life of the loans which
results in a higher effective interest rate.

    In December 2001 an individual loaned the Company $150,000, under a note
payable that bears interest at 7.5%, is due December 19, 2003 and is convertible
into shares of the Company's common stock at $3.00 per share at the holder's
option, if the Company wishes to pay amounts under the loan before maturity. In
connection with the note the Company issued warrants to purchase 50,000 shares
of the Company's common stock at $5.00 per share. The warrants are exercisable
immediately and have a term of five years. The aggregate value of the warrants
using the Black-Scholes pricing model, assuming zero dividend yield; a risk-free
interest rate of 4.45%; expected volatility of 100%; and a term of five

                                                                              10
<PAGE>

BIOVEST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

years, was estimated to be $35,000 and is being amortized over the life of the
loans which results in a higher effective interest rate.

(6) LONG-TERM DEBT

    Long-term debt was entered into pursuant to the Company's reorganization and
consists of the following at December 31, 2001:

<TABLE>
<CAPTION>
<S>                                                                         <C>
Promissory note payable to Internal Revenue
   Service, with interest of 8% per annum, payable in monthly
   installments of $11,095, including interest through February 1,
   2004 and $320 per month thereafter through February 1, 2005......        $267,000
Promissory note payable to State of Minnesota, with interest of
   8% per annum, payable in monthly installments of $2,700,
   including interest through February 1, 2005......................          90,000
Amounts payable to regulatory agencies (i)..........................          87,000
                                                                            --------
                                                                             444,000

Less current portion of long-term debt..........                             142,000
                                                                            --------
                                                                            $302,000
                                                                            ========
</TABLE>

    (i)  Pursuant to the Plan, the Company was obligated to repay certain
         regulatory agencies an aggregate amount of approximately $94,000 in
         equal monthly installments for six years from the date of assessment
         with interest at the rate of 8% per annum. During fiscal 2001, the
         Company was assessed $7,000, which was paid in full, by one of these
         agencies, but promissory notes with the others have not been signed.

    At December 31, 2001, the aggregate maturities of long-term debt by fiscal
year are as follows: remainder of 2002-$105,000; 2003-$151,000; 2004-$87,000;
2005-$14,000; 2006 and subsequent years- $87,000.

                                                                              11
<PAGE>

BIOVEST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

(7) SHAREHOLDERS' EQUITY

STOCK OPTIONS AND WARRANTS

    During the three months ended December 31, 2001 the Company granted
2,084,000 stock options to certain executive officers and employees. The options
have an exercise price of $1.50 per share and a five year term. With respect to
the options granted to certain executive officers, half are exercisable six
months from the date of grant and the remaining options are exercisable one year
from the date of the grant. Those granted to other employees are exercisable
over a ten year term and vest one-third each year, on the anniversary of the
grant, after the first year.

    During October 2001 the Company granted 100,000 stock options to an outside
director for consulting services rendered during fiscal 2001. The options have
an exercise price of $1.50 per share and a five year term; half are exercisable
six months from the date of grant and the remaining options are exercisable one
year from the date of grant. Compensation expense for services rendered was
recognized in the amount of $82,000 during the year ended September 30, 2001
based upon the estimated fair value of the options. The options were valued
using the Black-Scholes pricing model with the following assumptions: zero
dividend yield; risk-free interest rate of 3.94%; expected volatility of 84%;
and expected life of five years.

    During December 2001 the Company's Board of Directors approved the issuance
of warrants to purchase 50,000 shares of its common stock at $2.50 per share to
a shareholder for consulting services to be rendered to the Company. The
warrants are exercisable immediately and have a term of five years. The warrants
were valued using the Black-Scholes pricing model with the following
assumptions: zero dividend yield; risk-free interest rate of 4.49%; expected
volatility of 100%; and expected life of five years. Based upon the fair value
of the warrants, the Company recorded $42,000 of expense during the three months
ended December 31, 2001. The Board of Directors also approved entering into an
agreement with the consultant whereby the consultant would be issued additional
warrants if certain events occur.

    During the three months ended December 31, 2001 the Company issued 155,000
warrants in connection with various notes payable - see Note 5.

                                                                              12
<PAGE>

BIOVEST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

COMMON STOCK ISSUED FOR SERVICES

    During the three months ended December 31, 2001, the Company issued 10,000
shares of common stock as employee compensation. The shares were valued at $1.25
per share, which resulted in approximately $13,000 of expense.

(8) INCOME TAXES

    No provision for income taxes has been recorded for the three months ended
December 31, 2001 and 2000 due to the losses incurred during the periods. At
December 31, 2001, the Company has net operating loss carryforwards of
approximately $48,000,000 (expiring 2003 to 2020) and a capital loss
carryforward of approximately $14,000,000 (expiring in 2003). Due to various
changes in ownership of the Company, a significant portion of these
carryforwards are subject to significant restrictions with respect to the
ability of the Company to use these amounts to offset future taxable income. Use
of the Company's net operating loss carryforwards may be further limited as a
result of future equity transactions. The Company has fully offset deferred tax
assets resulting from differences in accounting between income tax and financial
statement treatment with a valuation allowance. These differences consist almost
entirely of net operating and capital loss carryforwards.

(9) COMMITMENTS AND CONTINGENCIES

COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENT

    In September 2001 the Company successfully entered into a definitive CRADA
with the NCI for the development and ultimate commercialization of
patient-specific vaccines for the treatment of non-Hodgkin's low-grade
follicular lymphoma. The terms of the CRADA include, among other things, a
requirement for the Company to pay $530,000 quarterly to NCI for expenses
incurred in connection with the ongoing Phase III clinical trials and a
requirement to meet certain staffing commitments. The Company is currently in
negotiations with the NCI to reduce this and other financial requirements and
has not yet made the second quarterly payment for the quarter ended December 31,
2001. The terms of the CRADA provide for the Company to be granted an exclusive
option to negotiate with the NCI for a license to commercialize certain
intellectual property resulting from the research conducted pursuant to the
CRADA. There can be no assurance that research under the CRADA will be
successful or, if it is successful, that the Company will be able to negotiate a
license on favorable terms. In addition, the Company may not be able to derive
any revenue from a license for a number of years, if at all.

    The agreement expires in September 2009, but may be unilaterally terminated
by either party by giving thirty days written notice. Certain termination costs,
as defined in the CRADA, will be the

                                                                              13
<PAGE>

BIOVEST INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)

Company's responsibility if the CRADA is terminated.

LEGAL PROCEEDINGS

    During fiscal 2001 the Company entered into a settlement agreement in
connection with a legal matter. The terms of the settlement agreement provide
for the Company and another plaintiff to be jointly paid an aggregate principal
amount of $1,000,000 plus interest at prime. The principal amount is to be paid
in increments of $50,000, $100,000 and $200,000 payable on various dates
beginning July 2001 and ending June 2004, when all interest accrued on the
principal shall be due and payable.

    The payments received from the defendant are to be shared by the Company and
the other plaintiff pursuant to a separate agreement, which provides for the
other plaintiff to receive up to $350,000 in the aggregate.

    During fiscal 2001 the Company received one payment of $50,000, which was
recorded as other income in the statement of operations. The Company also
recorded $50,000 of other expense related to professional fees that were
contingent upon a settlement being negotiated and paid.

    The Company and the defendant also entered into a royalty agreement whereby
the defendant is to pay a royalty to the Company of three percent of its product
sales up to an aggregate of $3,000,000 in total royalty payments.

    The Company is uncertain about future collections and is not able to assess
the defendant's ability to perform under the settlement agreement. As a result,
the Company will record additional payments as income when received.

    From time to time the Company is subject to various legal proceedings in the
normal course of business. Management believes that these proceedings will not
have a material adverse effect on the financial statements.

                                                                              14
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

OVERVIEW

    On July 31, 1999, we emerged from Chapter 11 Bankruptcy Reorganization with
new management, officers and directors.

    As of July 31, 1999, we adopted fresh start reporting in accordance with the
American Institute of Certified Public Accountants' Statement of Position 90-7
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code".

    Fresh-start reporting resulted in material changes to our balance sheet,
including valuation of assets at fair value in accordance with principles of the
purchase method of accounting, valuation of liabilities pursuant to provisions
of the Plan and valuation of equity based on the reorganization value of the
ongoing business. In addition, our capital structure was recast in conformity
with the Plan.

    In September 2001 we successfully entered into the CRADA with the NCI for
the development and ultimate commercialization of patient-specific vaccines for
the treatment of non-Hodgkin's low-grade follicular lymphoma. The terms of the
CRADA include, among other things, a requirement for us to pay $530,000
quarterly to the NCI for expenses incurred in connection with the ongoing Phase
III clinical trials. The Company is currently in negotiations with the NCI to
reduce this and other financial requirements and has not yet made the second
quarterly payment for the quarter ended December 31, 2001. Successful
development of the vaccine, if approved by the FDA, from Phase III clinical
trials through commercialization will commit us to several years of significant
expenditures before revenues will be realized, if ever.

    Our ability to continue our present operations and meet our obligations
under the CRADA is dependent upon our ability to obtain significant additional
funding. We are currently in the process of exploring various financing
alternatives to meet our cash needs, including additional short-term loans from
shareholders and others and the sale of equity securities. Our management
believes we will be able to raise the necessary funds to continue operations in
the near term.

    There is no assurance that the additional required funds can be obtained on
terms acceptable or favorable to the Company, if at all. The net losses we have
incurred and the need for additional funding raise substantial doubt about our
ability to continue as a going concern. Our financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

RESULTS OF OPERATIONS

    REVENUES. Revenues for the three months ended December 31, 2001 of
$2,666,000 were down 3% from

                                                                              15
<PAGE>

$2,738,000 for the three months ended December 31, 2000. Contract cell culture
production services for the three months ended December 31, 2001 increased 9%
from $1,669,000 to $1,817,000. The increases are primarily due to higher
physical volume. The other components of revenues for the three months ended
December 31, 2001 were lower than the comparable periods for last year.
Consumable sales for the three months ended December 31, 2001 decreased 36% from
$457,000 to $291,000 when compared with last year. Much of the shortfall in
consumable revenues in the first fiscal quarter versus last year is expected to
be realized in the second fiscal quarter as production moves through to
completion. Systems sales decreased 1% from the prior year.

    GROSS MARGIN. The overall gross margin for the first quarter of fiscal year
2002 decreased versus the comparable quarter last year from 37% to 27%, but is
comparable to the 27% margin experienced for the full fiscal year ended
September 30, 2001. The decrease for the first fiscal quarter of 2002 is due to
production interruptions initiated by customers combined with certain facility
rearrangements.

    OPERATING EXPENSES. Research and development expenses for the three months
ended December 31, 2001 increased approximately $711,000 or 208% over last year,
reflecting increased expenses for the CRADA. CRADA expenses for the three months
ended December 31, 2001 were approximately $992,000 versus $220,000 for the
prior year. CRADA related expenses could nearly double in this fiscal year
versus last year, if our plan is realized. These expenses are associated
primarily with increased patient accrual expenses from the clinical trial and
design engineering expense associated with designing a more efficient bioreactor
for vaccine production. Marketing, general and administrative expenses increased
$57,000 in the three months ended December 31, 2001 versus the same period in
fiscal 2000. The increase is attributed largely to increased compensation costs
and expenses related to the Company's financing activities.

    OTHER EXPENSE, NET. Other Expense, Net consists of interest expense on the
Company's long-term debt that was assumed pursuant to the Company's
reorganization and interest on the short-term loans, primarily from affiliates.
Interest expense for the first three months of fiscal 2001 was $105,000 higher
than for the first three months of fiscal 2000 due to the increase in the amount
of debt between the periods.

LIQUIDITY AND CAPITAL RESOURCES

    On December 31, 2001 the Company had a working capital deficit of $1,450,000
compared to a working capital deficit of $126,000 at September 30, 2001.

    During the three months ended December 31, 2001 and 2000, we utilized
$38,000 and $73,000 of cash for capital expenditures.

    We have incurred significant losses and cash flow deficits in previous
years. During fiscal year 2001 and 2000 we incurred losses of $5,832,000 and
$1,884,000. During fiscal year 2001 and 2000, we used $2,070,000

                                                                              16
<PAGE>

and $2,216,000 of cash flow for operations. During the quarter ended December
31, 2001 we incurred a loss of $1,533,000 and used $223,000 of cash flow for
operations. We have been meeting our cash requirements through the use of cash
on hand, the sale of common stock and short-term borrowings, primarily from
affiliates.

    During the three months ended December 31, 2001 the Company obtained
additional loans aggregating approximately $625,000; these loans bear interest
at 7.5%, are due on various dates through October 15, 2002 and are also
convertible into shares of the Company's common stock at $3.00 per share, at the
holder's option, if the Company wishes to pay amounts under the loans before
maturity. The Company issued 52,500 warrants with an exercise price of $2.50 per
share and 52,500 warrants with an exercise price of $5.00 per share to a third
party who assisted in the financing.

    In December 2001 an individual loaned the Company $150,000, under a note
payable that bears interest at 7.5%, is due December 19, 2003 and is convertible
into shares of the Company's common stock at $3.00 per share at the holder's
option, if the Company wishes to pay amounts under the loan before maturity. In
connection with the note the Company issued warrants to purchase 50,000 shares
of the Company's common stock at $5.00 per share.

    In September 2001, we successfully entered into a definitive CRADA with the
NCI for the development and ultimate commercialization of patient specific
vaccines for the treatment of non-Hodgkin's low-grade follicular lymphoma. The
terms of the CRADA include, among other things, a requirement for us to pay
$530,000 quarterly to NCI for expenses incurred in connection with the ongoing
Phase III clinical trials. The Company is currently in negotiations with the NCI
to reduce this and other financial requirements and has not yet made the second
quarterly payment for the quarter ended December 31, 2001. Successful
development of the vaccine, if approved by the FDA, from Phase III clinical
trials through commercialization will commit us to several years of significant
expenditures before revenues will be realized, if ever.

    Our ability to continue our present operations and meet our obligations
under the CRADA is dependent upon our ability to obtain significant additional
funding. Such additional financing could be sought from a number of sources,
including the sale of equity or debt securities, strategic collaborations or
recognized research funding programs. Management is currently in the process of
exploring various financing alternatives to meet our cash needs, including
additional short-term loans from our shareholders and others and the sale of
equity securities. We believe that we will be able to raise the necessary funds
to continue operations in the near term.

    There is no assurance that the additional funds, which are required, can be
obtained on terms acceptable or favorable to us, if at all. Substantial delays
in obtaining such financing would have an adverse effect on our ability to
perform under the CRADA.



                                                                              17
<PAGE>

FLUCTUATIONS IN OPERATING RESULTS

    The Company's operating results may vary significantly from quarter to
quarter or year to year, depending on factors such as timing of
biopharmaceutical development and commercialization of products by the Company's
customers, the timing of increased research and development and sales and
marketing expenditures, the timing and size of orders and the introduction of
new products or processes by the Company. Consequently, revenues, profits or
losses may vary significantly from quarter to quarter or year to year, and
revenue or profits in any period will not necessarily be indicative of results
in subsequent periods.

PART II. OTHER INFORMATION

    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

            (a)   Exhibits

                  None

            (b)   Reports on Form 8-K

                  None

SIGNATURES

    In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereto duly
authorized.


                                    BIOVEST INTERNATIONAL, INC.

Date:   February 13, 2002           /s/ Dr. Christopher Kyriakides
        -----------------           -------------------------------
                                    Dr. Christopher Kyriakides
                                    Chief Executive Officer and Director
                                    (Principal Executive Officer)

Date:   February 13, 2002           /s/ Thomas F. Belleau
        -----------------           ----------------------
                                    Thomas F. Belleau
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)

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