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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 SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2002

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 0-22879

BIORELIANCE CORPORATION(Exact name of the registrant as specified in its charter)

|                                         |  |                    
|---------------------------------------- |  | -------------------
|Delaware                                 |  | 52-1541583         
|(State or other jurisdiction of          |  | (I.R.S. Employer   
|incorporation or organization)           |  | Identification No.)
|                                        
|14920 Broschart Road                     |  |                    
|Rockville, Maryland                      |  | 20850              
|(Address of principal executive offices) |  | (Zip code)         

Registrants telephone number, including area code:(301) 738-1000

---

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

As of April 30, 2002, 8,425,997 shares of registrants common stock, par value
$.01 per share, were outstanding.

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BIORELIANCE CORPORATION

TABLE OF CONTENTS

|                                     |  |                                                                                                  |                                                                                                      |        |    |   | 
|------------------------------------ |  | ------------------------------------------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------- | ------ | -- | - | 
|                                     |  |                                                                                                  |                                                                                                      | Page  
|                                     |  |                                                                                                  |                                                                                                      | Number
|                                     |  |                                                                                                  |                                                                                                      |       
|PART I         FINANCIAL INFORMATION |  |                                                                                                  |                                                                                                      |       
|                                    
|                                     |  | Item 1    Financial Statements:                                                                 |                                                                                                      |        |    |  
|                                    
|                                     |  |                                                                                                  | Consolidated Balance Sheets as of December 31, 2001 and
March 31, 2002 (Unaudited)                   |        |    | 3 | 
|                                    
|                                     |  |                                                                                                  | Consolidated (Unaudited) Statements of Income for the Three
Months Ended March 31, 2001 and 2002     |        |    | 4 | 
|                                    
|                                     |  |                                                                                                  | Consolidated (Unaudited) Statements of Cash Flows for the Three
Months Ended March 31, 2001 and 2002 |        |    | 5 | 
|                                    
|                                     |  |                                                                                                  | Notes to Consolidated (Unaudited) Financial Statements                                               |        |    | 6 | 
|                                    
|                                     |  | Item 2    Managements Discussion and Analysis of Financial
Condition and Results of Operations |                                                                                                      |        | 9  |  
|                                    
|                                     |  | Item 3    Quantitative and Qualitative Disclosures About Market Risks                           |                                                                                                      |        | 20 |  
|                                    
|PART II         OTHER INFORMATION    |  |                                                                                                  | 21                                                                                                   |       
|                                    
|SIGNATURES                           |  |                                                                                                  | 22                                                                                                   |       
|                                    
|EXHIBIT INDEX                        |  |                                                                                                  | 23                                                                                                   |       

2



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##### 



BIORELIANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

|                                             |                                                                                                                   |                                            |        |        |        |              |        |             |        |           |  | 
|-------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------ | ------ | ------ | ------------ | ------ | ----------- | ------ | --------- |  | 
|                                             |                                                                                                                   |                                            |        |        |        |              |        |             |        | March 31,
|                                             |                                                                                                                   |                                            |        |        |        | December 31, |        | 2002       
|                                             |                                                                                                                   |                                            |        |        |        | 2001         |        | (Unaudited)
|                                             |                                                                                                                   |                                            |        |        |        |              |        |            
|Assets                                      
|Current assets:                              |                                                                                                                   |                                            |        |        |        |              |        |            
|                                             | Cash and cash equivalents                                                                                         |                                            | $      | 27,536 |        |              | $      | 28,626      |       
|                                             | Accounts receivable, net                                                                                          |                                            |        | 22,335 |        |              |        | 20,221      |       
|                                             | Other current assets                                                                                              |                                            |        | 1,747  |        |              |        | 1,960       |       
|                                             |                                                                                                                   |                                            |        |        |        |              |        |            
|                                             |                                                                                                                   | Total current assets                       |        |        | 51,618 |              |        |             | 50,807 |          
|Property and equipment, net                  |                                                                                                                   |                                            | 39,177 |        |        |              | 39,406 |            
|Deposits and other assets                    |                                                                                                                   |                                            | 280    |        |        |              | 514    |            
|Deferred income taxes                        |                                                                                                                   |                                            | 1,062  |        |        |              | 1,062  |            
|                                             |                                                                                                                   |                                            |        |        |        |              |        |            
|                                             |                                                                                                                   | Total assets                               |        | $      | 92,137 |              |        | $           | 91,789 |          
|                                             |                                                                                                                   |                                            |        |        |        |              |        |            
|Liabilities and Stockholders Equity        
|Current liabilities:                         |                                                                                                                   |                                            |        |        |        |              |        |            
|                                             | Current portion of long-term debt and capital lease obligations                                                   |                                            | $      | 919    |        |              | $      | 918         |       
|                                             | Accounts payable                                                                                                  |                                            |        | 2,312  |        |              |        | 1,663       |       
|                                             | Accrued employee compensation and benefits                                                                        |                                            |        | 5,323  |        |              |        | 2,486       |       
|                                             | Other accrued liabilities                                                                                         |                                            |        | 2,544  |        |              |        | 3,692       |       
|                                             | Customer advances                                                                                                 |                                            |        | 4,972  |        |              |        | 4,896       |       
|                                             | Deferred income taxes                                                                                             |                                            |        | 4,102  |        |              |        | 4,102       |       
|                                             |                                                                                                                   |                                            |        |        |        |              |        |            
|                                             |                                                                                                                   | Total current liabilities                  |        |        | 20,172 |              |        |             | 17,757 |          
|Long-term debt and capital lease obligations |                                                                                                                   |                                            | 10,977 |        |        |              | 10,644 |            
|                                             |                                                                                                                   |                                            |        |        |        |              |        |            
|                                             |                                                                                                                   | Total liabilities                          |        |        | 31,149 |              |        |             | 28,401 |          
|                                             |                                                                                                                   |                                            |        |        |        |              |        |            
|Commitments and contingencies                |                                                                                                                   |                                            |        |        |        |              |        |            
|                                            
|Stockholders equity:                        |                                                                                                                   |                                            |        |        |        |              |        |            
|                                             | Preferred stock, $.01 par value: 6,900,000 shares authorized;
no shares issued and outstanding                    |                                            |        |       |        |              |        |            |       
|                                             | Common stock, $.01 par value: 15,000,000 shares authorized;
8,362,040 and 8,420,125 shares issued and outstanding |                                            |        | 84     |        |              |        | 84          |       
|                                             | Additional paid-in capital                                                                                        |                                            |        | 55,018 |        |              |        | 55,359      |       
|                                             | Retained earnings                                                                                                 |                                            |        | 7,782  |        |              |        | 9,879       |       
|                                             | Accumulated other comprehensive income (expense)                                                                  |                                            |        | (1,896 | )      |              |        | (1,934      | )     
|                                             |                                                                                                                   |                                            |        |        |        |              |        |            
|                                             |                                                                                                                   | Total stockholders equity                 |        |        | 60,988 |              |        |             | 63,388 |          
|                                             |                                                                                                                   |                                            |        |        |        |              |        |            
|                                             |                                                                                                                   | Total liabilities and stockholders equity |        | $      | 92,137 |              |        | $           | 91,789 |          
|                                             |                                                                                                                   |                                            |        |        |        |              |        |            

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

3



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BIORELIANCE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)

|                           |                                     |   |                    |        |      |   |        |        |  
|-------------------------- | ----------------------------------- | - | ------------------ | ------ | ---- | - | ------ | ------ | -
|                           |                                     |   | Three Months Ended
|                           |                                     |   | March 31,         
|                           |                                     |   |                   
|                           |                                     |   | 2001               |        | 2002
|                           |                                     |   |                    |        |     
|Revenue                    |                                     | $ | 15,268             |        |      | $ | 19,013 |       
|                           |                                     |   |                    |        |      |   |        |       
|Expenses:                  |                                     |   |                    |        |      |   |        |       
|                           | Cost of sales                       |   |                    | 10,513 |      |   |        | 11,022 |  
|                           | Selling, general and administrative |   |                    | 3,758  |      |   |        | 4,189  |  
|                           | Research and development            |   |                    | 381    |      |   |        | 262    |  
|                           |                                     |   |                    |        |      |   |        |       
|                           |                                     |   | 14,652             |        |      |   | 15,473 |       
|                           |                                     |   |                    |        |      |   |        |       
|                          
|Income from operations     |                                     |   | 616                |        |      |   | 3,540  |       
|                           |                                     |   |                    |        |      |   |        |       
|Other (income) expense:    |                                     |   |                    |        |      |   |        |       
|                           | Interest income                     |   |                    | (258   | )    |   |        | (130   | )
|                           | Interest expense                    |   |                    | 228    |      |   |        | 154    |  
|                           | Other expense                       |   |                    | 158    |      |   |        | 209    |  
|                           |                                     |   |                    |        |      |   |        |       
|                           |                                     |   | 128                |        |      |   | 233    |       
|                           |                                     |   |                    |        |      |   |        |       
|                          
|Income before income taxes |                                     |   | 488                |        |      |   | 3,307  |       
|Income tax provision       |                                     |   | 100                |        |      |   | 1,210  |       
|                           |                                     |   |                    |        |      |   |        |       
|Net income                 |                                     | $ | 388                |        |      | $ | 2,097  |       
|                           |                                     |   |                    |        |      |   |        |       
|Net income per share :     |                                     |   |                    |        |      |   |        |       
|                           | Basic                               |   | $                  | 0.05   |      |   | $      | 0.25   |  
|                           |                                     |   |                    |        |      |   |        |       
|                           | Diluted                             |   | $                  | 0.05   |      |   | $      | 0.24   |  
|                           |                                     |   |                    |        |      |   |        |       

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

4



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BIORELIANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

|                                                             |                                                                                   |                                                       |        |     |        |                    |        |       |        |      |        |  
|------------------------------------------------------------ | --------------------------------------------------------------------------------- | ----------------------------------------------------- | ------ | --- | ------ | ------------------ | ------ | ----- | ------ | ---- | ------ | -
|                                                             |                                                                                   |                                                       |        |     |        | Three Months Ended
|                                                             |                                                                                   |                                                       |        |     |        | March 31,         
|                                                             |                                                                                   |                                                       |        |     |        |                   
|                                                             |                                                                                   |                                                       |        |     |        | 2001               |        | 2002 
|                                                             |                                                                                   |                                                       |        |     |        |                    |        |      
|Cash flows from operating activities:                        |                                                                                   |                                                       |        |     |        |                    |        |      
|                                                             | Net income                                                                        |                                                       | $      | 388 |        |                    | $      | 2,097 |       
|                                                             | Adjustments to reconcile net income to net cash provided
by operating activities: |                                                       |        |     |        |                    |        |       |       
|                                                             |                                                                                   | Depreciation                                          |        |     |        |                    | 1,171  |       |        |      | 1,137  |  
|                                                             |                                                                                   | Amortization expense                                  |        |     |        |                    | 17     |       |        |      |       |  
|                                                             |                                                                                   | Amortization of bond discounts                        |        |     |        |                    | (96    | )     |        |      |       |  
|                                                             |                                                                                   | Loss on disposal                                      |        |     |        |                    |       |       |        |      | 66     |  
|                                                             |                                                                                   | Deferred income taxes, net                            |        |     |        |                    | (230   | )     |        |      |       |  
|                                                             |                                                                                   | Changes in current assets and liabilities:            |        |     |        |                    |        |       |        |      |        |  
|                                                             |                                                                                   | Accounts receivable, net                              |        |     |        |                    | 798    |       |        |      | 2,026  |  
|                                                             |                                                                                   | Other current assets                                  |        |     |        |                    | (636   | )     |        |      | (218   | )
|                                                             |                                                                                   | Accounts payable                                      |        |     |        |                    | (418   | )     |        |      | (626   | )
|                                                             |                                                                                   | Accrued employee compensation and benefits            |        |     |        |                    | (826   | )     |        |      | (2,829 | )
|                                                             |                                                                                   | Other accrued liabilities                             |        |     |        |                    | (73    | )     |        |      | 1,156  |  
|                                                             |                                                                                   | Customer advances                                     |        |     |        |                    | 579    |       |        |      | 10     |  
|                                                             |                                                                                   | Increase in deposits and other assets                 |        |     |        |                    | (117   | )     |        |      | (251   | )
|                                                             |                                                                                   |                                                       |        |     |        |                    |        |      
|                                                             |                                                                                   | Net cash provided by operating activities             |        |     |        |                    | 557    |       |        |      | 2,568  |  
|                                                             |                                                                                   |                                                       |        |     |        |                    |        |      
|Cash flows from investing activities:                        |                                                                                   |                                                       |        |     |        |                    |        |      
|                                                             |                                                                                   | Purchases of marketable securities                    |        |     | (2,455 | )                  |        |       |       |     
|                                                             |                                                                                   | Proceeds from the maturities of marketable securities |        |     | 6,500  |                    |        |       |       |     
|                                                             |                                                                                   | Purchases of property and equipment                   |        |     | (714   | )                  |        |       | (1,429 | )   
|                                                             |                                                                                   |                                                       |        |     |        |                    |        |      
|                                                             |                                                                                   | Net cash provided by (used in) investing activities   |        |     |        |                    | 3,331  |       |        |      | (1,429 | )
|                                                             |                                                                                   |                                                       |        |     |        |                    |        |      
|Cash flows from financing activities:                        |                                                                                   |                                                       |        |     |        |                    |        |      
|                                                             |                                                                                   | Proceeds from exercise of stock options               |        |     |        | 59                 |        |       |        | 341  |       
|                                                             |                                                                                   | Payments on debt and capital lease obligations        |        |     |        | (301               | )      |       |        | (229 | )     
|                                                             |                                                                                   |                                                       |        |     |        |                    |        |      
|                                                             |                                                                                   | Net cash provided (used in) financing activities      |        |     |        |                    | (242   | )     |        |      | 112    |  
|                                                             |                                                                                   |                                                       |        |     |        |                    |        |      
|Effect of exchange rate changes on cash and cash equivalents |                                                                                   |                                                       | (136   | )   |        |                    | (161   | )    
|                                                             |                                                                                   |                                                       |        |     |        |                    |        |      
|Net increase in cash and cash equivalents                    |                                                                                   |                                                       | 3,510  |     |        |                    | 1,090  |      
|Cash and cash equivalents, beginning of period               |                                                                                   |                                                       | 8,231  |     |        |                    | 27,536 |      
|                                                             |                                                                                   |                                                       |        |     |        |                    |        |      
|Cash and cash equivalents, end of period                     |                                                                                   | $                                                     | 11,741 |     |        | $                  | 28,626 |      
|                                                             |                                                                                   |                                                       |        |     |        |                    |        |      

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

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BIORELIANCE CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(1) Description of the Business

BioReliance Corporation (the Corporation) is a contract service
organization that provides testing and development, and manufacturing services
for biologics and other biomedical products to biotechnology and pharmaceutical
companies worldwide.

(2) Interim Financial Statements Presentation

The accompanying interim financial statements are unaudited and have been
prepared by the Corporation pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC) regarding interim financial
reporting. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements, and therefore these consolidated financial statements
should be read in conjunction with the audited consolidated financial
statements, and related notes thereto, included in the Corporations Annual
Report on Form 10-K. In the opinion of management, the unaudited consolidated
financial statements for the three-month periods ended March 31, 2001 and 2002
include all normal and recurring adjustments that are necessary for a fair
presentation of the results of the interim period. The results of operations
for the three-month periods ended March 31, 2001 and 2002 are not necessarily
indicative of the results for the entire year ending December 31, 2002.

(3) Net Income Per Share

The Corporation calculates earnings per share (EPS) on both a basic and
diluted basis. Dilutive securities are excluded from the computation in
periods which they have an anti-dilutive effect. Net income available to
common stockholders and common equivalent stockholders is equal to net income
for all periods presented.

The following table represents reconciliations between the weighted
average common stock outstanding used in basic EPS and the weighted average
common and common equivalent shares outstanding used in diluted EPS for each of
the periods presented:

|                                                                |  |                 |       |      |  |  |       | 
|--------------------------------------------------------------- |  | --------------- | ----- | ---- |  |  | ----- | 
|                                                                |  | Three Months   
|                                                                |  | Ended March 31,
|                                                                |  | 2001            |       | 2002
|                                                                |  |                 |       |     
|                                                                |  | (In thousands) 
|Weighted average common stockoutstanding                        |  |                 | 8,194 |      |  |  | 8,399 | 
|Stock options, as if converted                                  |  |                 | 375   |      |  |  | 432   | 
|                                                                |  |                 |       |      |  |  |       | 
|Weighted average common and commonequivalent
shares outstanding |  |                 | 8,569 |      |  |  | 8,831 | 
|                                                                |  |                 |       |      |  |  |       | 

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(4) Segment Information

Summarized financial information concerning the Corporations reportable
segments, for the three months ended March 31, is shown in the following table:

|              |                         |       |       |        |                 |        |      |        |       |        | 
|------------- | ----------------------- | ----- | ----- | ------ | --------------- | ------ | ---- | ------ | ----- | ------ | 
|              |                         |       |       |        | Three Months   
|              |                         |       |       |        | Ended March 31,
|              |                         |       |       |        | 2001            |        | 2002
|              |                         |       |       |        |                 |        |     
|              |                         |       |       |        | (In thousands) 
|Revenue:      |                         |       |       |        |                 |        |      |       
|              | Testing and Development |       | $     | 13,208 |                 |        | $    | 15,771 |      
|              | Manufacturing           |       |       | 2,060  |                 |        |      | 3,242  |      
|              |                         |       |       |        |                 |        |      |       
|              |                         |       | Total |        | $               | 15,268 |      |        | $     | 19,013 | 
|              |                         |       |       |        |                 |        |      |       
|Gross Profit: |                         |       |       |        |                 |        |      |       
|              | Testing and Development |       | $     | 5,316  |                 |        | $    | 7,705  |      
|              | Manufacturing           |       |       | (561   | )               |        |      | 286    |      
|              |                         | Total |       | $      | 4,755           |        |      | $      | 7,991 |       
|              |                         |       |       |        |                 |        |      |       

Summarized financial information concerning the Corporations revenue and
gross profit by geographic region for the three months ended March 31, is shown
in the following table:

|              |               |       |   |                 |        |      |   |        |        | 
|------------- | ------------- | ----- | - | --------------- | ------ | ---- | - | ------ | ------ | 
|              |               |       |   | Three Months   
|              |               |       |   | Ended March 31,
|              |               |       |   |                
|              |               |       |   | 2001            |        | 2002
|              |               |       |   |                 |        |     
|              |               |       |   | (In thousands) 
|Revenue:      |               |       |   |                 |        |      |   |       
|              | United States |       | $ | 12,841          |        |      | $ | 15,667 |       
|              | Europe        |       |   | 2,427           |        |      |   | 3,346  |       
|              |               |       |   |                 |        |      |   |       
|              |               | Total |   | $               | 15,268 |      |   | $      | 19,013 | 
|              |               |       |   |                 |        |      |   |       
|Gross Profit: |               |       |   |                 |        |      |   |       
|              | United States |       | $ | 3,596           |        |      | $ | 6,192  |       
|              | Europe        |       |   | 1,159           |        |      |   | 1,799  |       
|              |               |       |   |                 |        |      |   |       
|              |               | Total |   | $               | 4,755  |      |   | $      | 7,991  | 
|              |               |       |   |                 |        |      |   |       

(5) New Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (FAS) 141, Business Combinations
(FAS 141) and FAS No. 142, Goodwill and Other Intangible Assets (FAS 142).
FAS 141 addresses the initial recognition and measurement of goodwill and other
intangible assets acquired in a business combination. FAS 142 addresses the
initial recognition and measurement of intangible assets acquired outside of a
business combination, whether acquired individually or with a group of other
assets, and the accounting and reporting for goodwill and other intangibles
subsequent to their acquisition. These standards require all future business
combinations to be accounted for using the purchase method of accounting.
Goodwill will no longer be amortized but instead will be subject to impairment
tests at least annually. The Corporation adopted FAS 141 and FAS 142 on a
prospective basis as of January 1, 2002. The initial adoption of this guidance
is not anticipated to have a material impact on the Corporations results of
operations or financial position;

7



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however, the guidance may impact the way in which the Corporation would account
for future transactions. No such future transactions are contemplated at this
time.

In October 2001, the FASB issued FAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (FAS 144). FAS 144 supercedes FASB
Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of. FAS 144 applies to all long-lived assets
(including discontinued operations) and consequently amends Accounting
Principles Board Opinion No. 30, Reporting Results of Operations-Reporting the
Effects of Disposal of a Segment of a Business. The Corporation adopted FAS
144 on January 1, 2002. The initial adoption of this guidance is not
anticipated to have a material impact on the Corporations results of
operations or financial position.

In April 2002, the FASB issued FAS No. 145 Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections
(FAS 145). FAS 145 rescinds FAS No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that statement, FAS No. 64,
Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. FAS No.
145 also rescinds FAS No. 44, Accounting for Intangible Assets of Motor
Carriers and amends FAS No. 13, Accounting for Leases, to eliminate an
inconsistency between the required accounting for sale-leaseback transactions
and the required accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. FAS 45 also amends
other existing authoritative pronouncements to make various technical
corrections, clarify meanings, or describe their applicability under changed
conditions. The Corporation does not believe that adoption of FAS No. 145 will
have a material impact on its results of operations or financial position.

8



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Item 2.    Managements Discussion and Analysis of Financial Condition and Results of Operations

Certain statements made in this Report on Form 10-Q are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements include, without limitation, any statement
that may predict, forecast, indicate, or imply future results, performance, or
achievements, which generally are not historical in nature, and may contain the
words believe, anticipate, expect, estimate, project, will be,
will continue, will likely result, or similar words or phrases.
Forward-looking statements in this Report on Form 10-Q include, among others,
statements regarding:



| |  |  | the anticipated growth of revenue and improvement in profit
margins,                                                                                                          
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | the Corporations ability to use additional capacity in its
manufacturing facility and the effect on earnings of underutilization
of this facility,                           
| |  |  | the Corporations plans to expand capacity in both its testing and
development and manufacturing business segments, including the timing
and completion of any such expansion,
| |  |  | the anticipated increase in selling, general and administrative
expenses and the hiring of new employees,                                                                     
| |  |  | plans to improve the Corporations information systems and sales and marketing infrastructure,                                                                                
| |  |  | the anticipated leveling off of research and development expenses ,                                                                                                           
| |  |  | the amount and impact of a change in tax rates,                                                                                                                               
| |  |  | the Corporations ability to fund its operations with existing
cash, cash flows from operations and its line of credit,                                                       
| |  |  | the Corporations plans to repay debt, and                                                                                                                                    
| |  |  | the impact of foreign currency exchange rate fluctuations on the Corporation.                                                                                                 

Forward-looking statements involve risks and uncertainties which may cause
actual results to differ materially from the forward-looking statements. The
risks and uncertainties are detailed from time to time in reports filed by
BioReliance with the SEC, including in its Forms 10-K.

As and when made, management believes that these forward-looking
statements are reasonable. The Corporation undertakes no obligation to revise
or publicly release the results of any revision to these forward-looking
statements. Therefore, readers are cautioned not to place undue reliance on
these forward-looking statements since new risk factors emerge from time to
time and it is not possible for management to predict all such risk factors,
nor can it assess the impact of all such risk factors on the Corporations
business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in any
forward-looking statements.

The following discussion and analysis of the Corporations financial
condition and results of operations should be read in conjunction with the
Corporations consolidated financial statements and related notes thereto
included elsewhere in this Form 10-Q.

9



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##### 



Results of Operations
(Dollars in tables are in thousands)

For the three months ended March 31, 2002, the Corporation had gross
revenue of $19.0 million, an increase of 25% over gross revenue of $15.3
million for the three months ended March 31, 2001. Earnings per share for the
three months ended March 31, 2002 were $0.24 (diluted) compared with $0.05
(diluted) for the three months ended March 31, 2001.

Gross Revenue by Segment

The following table shows a comparison of revenue by operational segment
for the three months ended March 31, 2001 and 2002:

|                        |  |                    |        |      |  |           |        |  |  |  |    |  
|----------------------- |  | ------------------ | ------ | ---- |  | --------- | ------ |  |  |  | -- | -
|                        |  | Three Months Ended
|                        |  |                    |        |      |  | March 31, |        |  |  | 
|                        |  |                   
|                        |  | 2001               |        | 2002 |  | % Change 
|                        |  |                    |        |      |  |          
|Testing and Development |  | $                  | 13,208 |      |  | $         | 15,771 |  |  |  | 19 | %
|Manufacturing           |  |                    | 2,060  |      |  |           | 3,242  |  |  |  | 57 | %
|                        |  |                   
|Total                   |  | $                  | 15,268 |      |  | $         | 19,013 |  |  |  | 25 | %
|                        |  |                   

The increase in testing and development revenue for the three months ended
March 31, 2002 is primarily due to the continued increase in the rate of new
orders in both the U.S. and Europe. The increase in U.S. testing and
development revenue resulted from increases in both biologics testing services
and toxicology services. The increase in European testing and development
revenue was driven by increases in revenue generated in all major service
areas.

The increase in manufacturing revenue in the three months ended March 31,
2002, is attributable to increases in both U.S. and European manufacturing
revenue. The U.S. increase is primarily attributable to an increase in orders
for Phase III (large scale) manufacturing services, as the U.S. manufacturing
facility continues to ramp-up. However, project delays resulting from client
requests for additional process development and regulatory issues offset some
of the increase in U.S. manufacturing revenue for the three months ended March
31, 2002.

Price increases provided a relatively minor portion of the revenue
increases in both of the Corporations business segments for the three months
ended March 31, 2002.

Approximately 6% of U.S. testing and development, and manufacturing revenue
for the three months ended March 31, 2002 resulted from work performed under
the Corporations major smallpox vaccine contracts. Work under these contracts
is subject to government and prime contractor-issued task orders, contract
amendments and potential expansion and acceleration; thus, the related revenues
cannot be predicted with certainty. As with all government contracts, these
contracts are subject to termination by the government at any time.

10



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##### 



Gross Revenue by Geographic Regions

The following table shows a comparison of revenue by geographic region for
the three months ended March 31, 2001 and 2002:

|              |  |                    |        |      |  |          |        |  |  |  |    |  
|------------- |  | ------------------ | ------ | ---- |  | -------- | ------ |  |  |  | -- | -
|              |  | Three Months Ended
|              |  | March 31,         
|              |  |                   
|              |  | 2001               |        | 2002 |  | % Change
|              |  |                    |        |      |  |         
|United States |  | $                  | 12,841 |      |  | $        | 15,667 |  |  |  | 22 | %
|Europe        |  |                    | 2,427  |      |  |          | 3,346  |  |  |  | 38 | %
|              |  |                   
|Total         |  | $                  | 15,268 |      |  | $        | 19,013 |  |  |  | 25 | %
|              |  |                   

The increase in revenue generated in the United States for the three
months ended March 31, 2002 resulted from increases in orders, which fueled
increased revenue for both the testing and development and manufacturing
segments.

The increase in revenue generated in Europe for the three months ended
March 31, 2002 reflects ratable increases in revenue generated from all
sectors: U.K. testing and development services, U.K. manufacturing services and
German manufacturing services.

The Corporation expects that testing and development revenue will continue
to increase in the foreseeable future, and it expects that manufacturing
revenue in the U.S. will increase with the Corporations vaccine contracts and
the ramp-up of projects in the U.S. manufacturing facility, but there can be no
assurance that such expectations will prove to be correct. The Corporation is
planning for laboratory expansions that would become available to meet
anticipated growth in the U.S. and Europe. German manufacturing services
continue to run near capacity, and, therefore, further revenue growth in that
facility will likely be modest, if at all, for the remainder of 2002.
Management expects German manufacturing capacity expansion to be completed in
stages in 2003 and 2004.

11



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Gross Profit by Operating Segment

The following table compares gross profit and gross margin by operational
segment for the three months ended March 31, 2001 and 2002:

|                        |              |              |   |                       |       |      |   |           |       |  |  |      |     | 
|----------------------- | ------------ | ------------ | - | --------------------- | ----- | ---- | - | --------- | ----- |  |  | ---- | --- | 
|                        |              |              |   | Three Months Ended   
|                        |              |              |   |                       |       |      |   | March 31, |       |  |  |     
|                        |              |              |   |                      
|                        |              |              |   | 2001                  |       | 2002 |   | % Change 
|                        |              |              |   |                       |       |      |   |          
|Testing and Development |              |              |   |                       |       |      |   |           |       |  |  |     
|                        | Gross Profit |              | $ | 5,316                 |       |      | $ | 7,705     |       |  |  | 45%  |    
|                        | Gross Margin |              |   | 40%                   |       |      |   | 49%       |       |  |  |      |    
|Manufacturing           |              |              |   |                       |       |      |   |           |       |  |  |     
|                        | Gross Profit |              |   | (561)                 |       |      |   | 286       |       |  |  | N.M. |    
|                        | Gross Margin |              |   | (27%)                 |       |      |   | 9%        |       |  |  |      |    
|Totals                  |              |              |   |                       |       |      |   |           |       |  |  |     
|                        |              |              |   |                      
|                        |              | Gross Profit |   | $                     | 4,755 |      |   | $         | 7,991 |  |  |      | 68% | 
|                        |              |              |   |                      
|                        | Gross Margin |              |   | 31%                   |       |      |   | 42%       |       |  |  |      |    
|                        |              |              |   |                      
|                        |              |              |   | N.M. = not meaningful

The increase in testing and development gross margins for the three months
ended March 31, 2002 was driven by increased gross profit generated in both the
U.S. and the U.K. Increased revenue was only partially offset by an increase
in variable costs relating to labor and direct materials.

The improvement in manufacturing gross margins for the three months ended
March 31, 2002 is related to a decrease in the loss generated in the U.S. and
an increase in the gross profit generated in Europe. The losses generated in
the U.S. decreased due to increases in revenue, only partially offset by
increased costs for labor, direct materials and capacity costs related to the
U.S. manufacturing facility. Future revenue growth is expected to exceed cost
increases related to the U.S. manufacturing facility, thereby improving gross
margins. However, the build-out and validation of the U.S. manufacturing
facility has demanded and will continue to demand considerable time and
resources, and there are high fixed costs related to the facility. The
Corporation is utilizing substantially less than full capacity in this
facility. This facility will likely constrain earnings for the Corporation at
least for the foreseeable future. Management cannot predict when, if ever, the
facility will generate positive cash flow. Without the results of operations
of this facility, consolidated gross margins would have been 47% for the three
months ended March 31, 2002, as compared to 39% for the three months ended
March 31, 2001.

12



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Gross Profit by Geographic Region

The following table compares gross profit and gross margin by geographic
region for the three months ended March 31, 2001 and 2002:

|              |              |              |   |                    |       |      |   |           |       |  |  |     |     | 
|------------- | ------------ | ------------ | - | ------------------ | ----- | ---- | - | --------- | ----- |  |  | --- | --- | 
|              |              |              |   | Three Months Ended
|              |              |              |   |                    |       |      |   | March 31, |       |  |  |    
|              |              |              |   |                   
|              |              |              |   | 2001               |       | 2002 |   | % Change 
|              |              |              |   |                    |       |      |   |          
|United States |              |              |   |                    |       |      |   |           |       |  |  |    
|              | Gross Profit |              | $ | 3,596              |       |      | $ | 6,192     |       |  |  | 72% |    
|              | Gross Margin |              |   | 28%                |       |      |   | 40%       |       |  |  |     |    
|             
|Europe        |              |              |   |                    |       |      |   |           |       |  |  |    
|              | Gross Profit |              |   | 1,159              |       |      |   | 1,799     |       |  |  | 55% |    
|              | Gross Margin |              |   | 48%                |       |      |   | 54%       |       |  |  |     |    
|             
|Totals        |              |              |   |                    |       |      |   |           |       |  |  |    
|              |              |              |   |                   
|              |              | Gross Profit |   | $                  | 4,755 |      |   | $         | 7,991 |  |  |     | 68% | 
|              |              |              |   |                   
|              |              | Gross Margin |   |                    | 31%   |      |   |           | 42%   |  |  |     |     | 
|              |              |              |   |                   

The increase in U.S. gross margins for the three months ended March 31,
2002 resulted from increased revenue in both the testing and development and
manufacturing segments, only partially offset by increased cost of sales
related to the U.S. manufacturing facility, discussed above, and the increased
cost of sales resulting from the cost of labor and materials for the testing
and development segment. Without the results of operations of the U.S.
manufacturing facility, U.S. gross margins would have been 46% for the three
months ended March 31, 2002, as compared to 38% for the three months ended
March 31, 2001.

The improvement in European gross margins for the three months ended March
31, 2002 is primarily attributable to increased profit generated by both the
testing and development and manufacturing segments, resulting from continued
efficient utilization of capacity and higher revenue. The higher margins in
the European segment are also impacted by a more favorable product mix.

The Corporation expects margins in the testing and development segment,
both in the U.S. and Europe, to improve slightly with economies of scale in the
foreseeable future. The rate of improvement is expected to be impacted by
expenditures related to planned additions to capacity beginning in 2003.

13



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Operating Expenses

The following table shows a comparison of operating expenses, other than
cost of sales, for the three months ended March 31, 2001 and 2002:

|                                    |  |                    |       |      |  |           |       |  |  |  |     |   
|----------------------------------- |  | ------------------ | ----- | ---- |  | --------- | ----- |  |  |  | --- | --
|                                    |  | Three Months Ended
|                                    |  |                    |       |      |  | March 31, |       |  |  | 
|                                    |  |                   
|                                    |  | 2001               |       | 2002 |  | % Change 
|                                    |  |                    |       |      |  |          
|Selling, General and Administrative |  | $                  | 3,758 |      |  | $         | 4,189 |  |  |  | 11  | % 
|                                   
|Research and Development            |  |                    | 381   |      |  |           | 262   |  |  |  | (31 | %)
|                                    |  |                   
|Total                               |  | $                  | 4,139 |      |  | $         | 4,451 |  |  |  | 8   | % 
|                                    |  |                   

Selling, general and administrative expenses increased for the three
months ended March 31, 2002, due primarily to an increase in labor and fringe
costs. Selling, general and administrative expenses are expected to increase
as the Corporation hires additional administrative staff, implements additional
applications for its information systems and makes additional investments for
technical sales support and its marketing infrastructure. As a percentage of
revenue, selling, general and administrative expenses decreased to 22% for the
three months ended March 31, 2002 from 25% for the three months ended March 31,
2001. The decrease can be attributed principally to increased revenues and the
successful integration of past enhancements and expansion in sales, marketing
and information systems.

Research and development expenses represent the investment of internal
resources to develop new methods and tests to support the Corporations
services. The decrease in these expenses is related to a shift in the
corporate priorities from undertaking long-term research projects to the
development of tests that can be delivered to the clients in a relatively
shorter period. The Corporation expects these expenses to remain near these
levels for the foreseeable future.

Non-Operating Expenses

The following table shows a comparison of non-operating expenses for the
three months ended March 31, 2001 and 2002:

|                           |                |   |                    |     |      |   |          |       |  |  |     |       | 
|-------------------------- | -------------- | - | ------------------ | --- | ---- | - | -------- | ----- |  |  | --- | ----- | 
|                           |                |   | Three Months Ended
|                           |                |   | March 31,         
|                           |                |   |                   
|                           |                |   | 2001               |     | 2002 |   | % Change
|                           |                |   |                    |     |      |   |         
|Net Other (Income) Expense |                | $ | 128                |     |      | $ | 233      |       |  |  | 82% |      
|                           |                |   |                   
|Income Taxes               |                |   |                    |     |      |   |          |       |  |  |     |      
|                           | Provision      |   | $                  | 100 |      |   | $        | 1,210 |  |  |     | 1110% | 
|                           | Effective Rate |   |                    | 20% |      |   |          | 37%   |  |  |     |       | 
|                           |                |   |                   

14



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The increase in net interest and other expense for the three months ended
March 31, 2002 reflects a decrease in interest income only partially offset by
a decrease in interest expense. Other expense remained relatively constant.
The decrease in interest income is a result of the decrease in interest rates.
Interest expense was affected by a decrease in the Corporations capital lease
obligations and a decrease in the effective interest rate in its debt
obligations triggered by improvements in certain financial ratios.

The increase in the effective tax rate for the three months ended March
31, 2002 is the result of the Corporations reversion in 2002 to a tax rate
more in line with the Corporations historical rates. The lower tax rate for
the three months ended March 31, 2001 resulted from the utilization of tax
credits and carryforwards in 2001. The Corporation expects tax rates to remain
at current levels for the remainder of 2002. Since the Corporation has
international operations, its effective tax rate may vary from quarter to
quarter due to changes in the distribution of its pre-tax earnings, among other
factors.

Liquidity and Capital Resources

The Corporation has funded its business through existing cash, cash flows
from operations, long-term bank loans and capital leases. At March 31, 2002,
the Corporation had cash and cash equivalents of $28.6 million, compared to
$27.5 million at December 31, 2001.

The Corporation generated cash flows from operations of $2.6 million for
the three months ended March 31, 2002, compared to $0.6 million for the three
months ended March 31, 2001. Net income, as adjusted for depreciation,
amortization, loss on disposal and deferred income taxes, provided $3.3
million and $1.2 million for the three months ended March 31, 2002 and 2001,
respectively. Changes in other assets and liabilities provided cash of $0.7
million for the three months ended March 31, 2002, primarily due to decreases
in accounts receivable and increases in other liabilities only partially offset
by decreases in accrued employee compensation and benefits and accounts
payable, and increases in deposits and other assets and other current assets.
Changes in other assets and liabilities used cash of $0.7 million for the three
months ended March 31, 2001, primarily due to decreases in accounts payable and
accrued employee compensation and benefits and an increase in other current
assets, partially offset by a decrease in accounts receivable and an increase
in customer advances.

Working capital increased to $33.0 million at March 31, 2002 from $31.4
million at December 31, 2001. This increase was due to a decrease in current
liabilities, only partially offset by a decrease in current assets. The
decrease in current liabilities results from decreases in accrued employee
compensation and benefits, accounts payable and customer advances, partially
offset by an increase in other accrued liabilities. The decrease in current
assets results from a decrease in accounts receivable, partially offset by an
increase in cash and cash equivalents and other current assets.

The Corporation believes that its existing cash and cash equivalents of
$28.6 million at March 31, 2002, forecasted operating cash flows for 2002, and
available borrowings of $2.0 million under its revolving loan agreement will
provide sufficient liquidity to meet the Corporations operating plan, planned
capital expenditures, and interest and principal payments on the Corporations
debt for 2002. The Corporation has announced plans to repay on an accelerated
basis substantial portions of its debt, capital lease and related interest rate
swap obligations. The Corporation expects that such repayments will reduce
interest expense net of interest income by approximately $0.5 million per year.

15



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A decrease in demand for the Corporations services could reduce operating
cash flows, which in turn would impact liquidity. The key factors that could
affect the Corporations sources of cash include the following:



| |  |  | the Corporations ability to generate orders for new contracts;                                        
| | - |  | -------------------------------------------------------------------------------------------------------
| |  |  | the ability of the Corporation to utilize its facilities,
particularly the U.S. manufacturing facility;
| |  |  | the size and growth of the overall markets for biopharmaceuticals; and,                                
| |  |  | the economy in the U.S. and Europe.                                                                    

Additionally, a deterioration in the Corporations financial ratios could
accelerate the maturity of principal outstanding under the Corporations loans.

Capital Leases

The Corporations manufacturing facility in Rockville, Maryland became
operational in the second quarter of 2000. The Corporation leases this
facility under three capital leases that require it to make net noncancelable
lease payments totaling approximately $10.6 million through 2019. The
Corporation has also guaranteed indebtedness related to the construction of
this facility of approximately $4.4 million at March 31, 2002. A portion of
the lease payments is equivalent to the interest and principal due on the
indebtedness.

Under an interest rate swap with respect to one of these capital leases,
the variable interest rate portion of the indebtedness was effectively
converted into debt with a fixed rate of 6.14% per annum. This swap expires on
November 1, 2009. Amounts paid or received under the interest rate swap are
recognized as interest income or expense in the periods in which they accrued
and are recorded in the same category as that arising from the indebtedness.
As a result of a decrease in the variable interest rate, for the three months
ended March 31, 2002, the Corporation recorded $46,000 of additional interest
expense related to this interest rate swap. In accordance with the Statement
of Financial Accounting Standard (FAS) 133, the Corporation adjusted the
liability for the change in the fair value of this swap from $232,000 at
December 31, 2001 to $161,000 at March 31, 2002. The corresponding amount is
reflected in other comprehensive expense, as the Corporation has met the
criteria of FAS 133 to record the contract as a cash flow hedge. This hedge
will be extinguished with the lease obligation to which it pertains.

The Corporation accounts for the leases and subleases of the manufacturing
facility as capital leases. The assets underlying the capital leases are
included with the Corporations owned property and equipment at March 31, 2002.
Property and equipment at March 31, 2002 included approximately $7.1 million,
net of accumulated depreciation and amortization, related to these capital
leases. The related obligation is included in the Corporations liabilities at
March 31, 2002.

Capital Expenditures

During the three months ended March 31, 2002 and 2001, the Corporation
invested $1.4 million and $0.7 million, respectively, for capital expenditures.
These capital expenditures were for additional equipment related to the new
U.S. manufacturing facility and other operating needs.

Estimated capital expenditures of $13 million for the remainder of 2002
include capacity expansions in U.S. biologics testing, U.S. manufacturing and
German manufacturing. The Corporations plans also include additional
investments in information systems, as well as normal replacements.

16



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The Corporation expects to continue expanding its operations through
internal growth, and expansion of capacity in most or all of its operating
facilities. The Corporation expects to fund its growth and its planned capital
expenditures from existing cash, cash flows from operations, bank borrowings
and lease or other financing to the extent that funds are available on
favorable terms and conditions. While the Corporation remains confident that
expansion of its capacity will contribute to growth, there can be no assurance
that such expansion will be fully utilized or that funding for the plans will
meet with the Corporations expectations.

Although the Corporation has no agreements or arrangements in place with
respect to any future acquisition, there may be acquisition or other growth
opportunities that require additional external financing, and the Corporation
may, from time to time, seek to obtain funds from public or private issuances
of equity or debt securities on a strategic basis. There can be no assurances
that such financing will be available on terms acceptable to the Corporation.

Borrowings and Credit Facilities

The Corporation has a mortgage loan of $4.3 million from Bank of America
with a maturity date of November 30, 2009 that was used to finance the
construction of one of its facilities in Rockville, Maryland. In addition to a
principal payment of $10,576 per month, the mortgage loan bears interest at the
London Inter-Bank Offering Rate (LIBOR) plus the applicable LIBOR Rate
Additional Percentage (LIBOR Rate Option). The LIBOR Rate Option ranges from
1.0% to 2.15% depending on the Corporation achieving certain funded debt to
EBITDA ratios. At March 31, 2002, the applicable interest rate on the mortgage
loan was 3.28% and the LIBOR Rate Option was 1.40%. At March 31, 2002,
approximately $2.3 million was outstanding on the mortgage loan.

Under an interest rate swap, the variable interest rate portion of the
mortgage loan was effectively converted into debt with a fixed rate of 6.14%
per annum. This swap expires November 1, 2009. Amounts paid or received under
the interest rate swap are recognized as interest income or expense in the
periods in which they accrued and are recorded in the same category as that
arising from the mortgage loan. As a result of a decrease in the variable
interest rate, for the three months ended March 31, 2002, the Corporation
recorded $23,000 of additional interest expense related to the interest rate
swap. In accordance with FAS 133, the Corporation adjusted the liability for
the change in the fair value of this swap from $116,000 at December 31, 2001 to
$81,000 at March 31, 2002. The corresponding amount is reflected in other
comprehensive expense, as the Corporation has met the criteria of FAS 133 to
record the contract as a cash flow hedge. This hedge will be extinguished with the mortgage loan to which it pertains.

The Corporation has available borrowings up to $2.0 million under a
revolving loan agreement with Bank of America. The revolving loan agreement
requires monthly interest payments on the unpaid principal. The unpaid
principal and all unpaid accrued interest is payable in full on May 31, 2003,
and the line of credit expires at that time. Amounts borrowed under the
revolving loan agreement bear interest at the LIBOR rate plus the applicable
LIBOR Rate Option that ranges from 0.85% to 2.0% depending on the Corporation
achieving certain funded debt to EBITDA ratios. During the three months ended
March 31, 2002, no amounts were borrowed under this revolving loan agreement.

All of the Corporations agreements with Bank of America are cross
collateralized and are secured by a deed of trust on one of the Corporations
laboratory facilities in Rockville, Maryland. The agreements require the
Corporation to comply with financial and restrictive covenants, including fixed
charge coverage and funded debt to EBITDA ratios. Specifically:

17



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| |  |  | Maintain a ratio of total funded indebtedness to EBITDA not
greater than 3.50 to 1.00 as of the end of each fiscal quarter,
calculated on the preceding four-quarter period. EBITDA is defined
as earnings before interest, taxes, depreciation and amortization.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Maintain a fixed charge coverage ratio as of the end of each
quarter of at least 1.25 to 1.00. This ratio is determined by
dividing EBITDA by the sum of interest expense and
current-maturities of long-term debt and capital leases.                           

At March 31, 2002, the Corporation was in compliance with all covenants
under its loan agreements.

The Corporation has a $3.0 million loan from the Department of Business
and Economic Development, a department of the State of Maryland. The
Corporation was required to use the proceeds to expand and relocate its
activities in Rockville, Maryland. The loan requires quarterly principal
payments of $107,143 plus accrued interest and matures on June 30, 2006. The
loan bears interest at rates from 0.0% to 7.5% based on the Corporations
achieving specific employment levels over the next six years. The current
interest rate is 0.0%. The terms of the loan contain annual reporting
requirements, including the reporting of employment data. At March 31, 2002,
approximately $1.9 million was outstanding on the loan.

Foreign Currency

The accounts of the Corporations international subsidiaries are measured
using local currency as the functional currency. Assets and liabilities of
these subsidiaries are translated into United States dollars at period-end
exchange rates, and revenue and expense accounts are translated at average
monthly exchange rates. Net exchange gains and losses resulting from these
translations are excluded from net income and are accumulated in a separate
component of stockholders equity. Translation gains and losses that arise
from some intercompany transactions denominated in a currency other than the
functional currency are included in the results of operations as incurred. The
Corporation recorded net exchange losses of $0.1 million and $0.3 million for
the three months ended March 31, 2002 and 2001, respectively.

Since the revenues and expenses of the Corporations international
operations generally are denominated in local currencies, exchange rate
fluctuations between such local currencies and the United States dollar will
subject the Corporation to currency translation risk with respect to the
reported results of its international operations as well as to other risks
sometimes associated with international operations. The Corporation derived
17.6% and 15.9% of its revenue for the three months ended March 31, 2002 and
2001, respectively, from services performed in the United Kingdom and Germany.
In addition, the Corporation may be subject to currency risk when the
Corporations service contracts are denominated in a currency other than the
currency in which the Corporation incurs expenses related to such contracts.

There can be no assurance that the Corporation will not experience
fluctuations in financial results from the Corporations operations outside the
United States, and there can be no assurance the Corporation will be able,
contractually or otherwise, to reduce the currency risks associated with its
operations. At the present time, the Corporation does not use derivative
financial instruments to manage or control foreign currency risk because most
of its revenue and related expenses are in the same functional currencies.
However, there can be no assurance that the Corporation will not use such
financial instruments in the future or that any such use will be successful in
managing or controlling foreign currency risk.

18



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European Monetary Union

Within Europe, the European Economic and Monetary Union (the EMU)
introduced a new currency, the Euro, on January 1, 1999. The new currency is
in response to the EMUs policy of economic convergence to harmonize trade
policy, eliminate business costs associated with currency exchange and to
promote the free flow of capital, goods and services.

On January 1, 1999, the participating countries adopted the Euro as their
local currency, initially available for currency trading on currency exchanges
and non cash (banking) transactions. On or before July 1, 2002, the
participating countries are planned to withdraw all legacy currency and use the
Euro exclusively. The introduction of the Euro has not had a material adverse
effect on the Corporation, and the Corporation does not anticipate any material adverse
effects as other currencies are phased out. However, unforeseen legislation,
changes in commercial cross-border practices or a significant devaluation of
the Euro could have an adverse effect on the future results of operations and
financial position of the Corporation.

19



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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk

The Corporation is exposed to market risk from adverse changes in interest
rates and foreign currency exchange rates.

Interest Rate Risks

The Corporation is exposed to interest rate risk primarily through its
investments in short-term marketable securities and cash equivalents and its
debt agreements. The Corporations investment policy stipulates investment in
short-term, low risk instruments. At March 31, 2002, the Corporation did not
have any investments in government securities, governmental agency securities,
and commercial paper. At March 31, 2002, the Corporation had $28.6 million in
cash and cash equivalents. A rise in interest rates would have an adverse
impact on the fair market value of fixed rate securities. If interest rates
fall, floating rate securities may generate less interest income. The
Corporation manages its exposure to interest rate risks through investing in
securities with maturities of one year or less.

Additionally, the Corporation is exposed to risk from changes in interest
rates as a result of its borrowing activities. At March 31, 2002, the
Corporation had total debt of $11.6 million. The Corporations debt consists
of a mortgage loan with approximately $2.3 million outstanding; a State of
Maryland loan with approximately $1.9 million outstanding; and capital lease
obligations of approximately $7.3 million. The Corporation has announced plans
to repay a substantial portion of this debt.

The Corporation is a party to an interest rate swap, whereby the variable
interest rate portion of the Corporations mortgage loan was effectively
converted into debt with a fixed rate of 6.14% per annum. The Corporation is
also a party to a separate interest rate swap whereby the variable interest
rate portion of the indebtedness relating to a capital lease for its U.S.
manufacturing facility was also converted into debt with a fixed rate of 6.14%.
Both agreements expire on November 1, 2009.

Foreign Currency Exchange Risk

The Corporations international operations are subject to foreign exchange
rate fluctuations. The Corporation derived 17.6% of its revenue for the three
months ended March 31, 2002 from services performed in the United Kingdom and
Germany. The Corporation does not hedge its foreign currency exposure.
Management does not believe that the Corporations exposure to foreign currency
rate fluctuations is material. See Foreign Currency in Managements
Discussion and Analysis of Financial Condition and Results of Operations for a
more detailed discussion of our foreign currency risks and exposures.

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PART II   OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 2. Changes in Securities and Use of Proceeds

As of March 31, 2002, the Corporation had used approximately $17.9 million
of the net proceeds from its initial public offering toward planning and
construction for manufacturing expansion, purchases of laboratory equipment and
information systems hardware and software, and debt repayments.

At March 31, 2002, approximately $14.3 million of the net proceeds of the
initial public offering was invested in money market funds.

Item 3. Defaults upon Senior Securities

None

Item 4. Submission of Matters to Vote of Security Holders

None

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

The documents required to be filed as exhibits to this report under Item
601 of Regulation S-K are listed in the Exhibit Index included elsewhere in
this report, which list is incorporated herein by reference.

(b)  Reports on Form 8-K

None

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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.

Dated: May 15, 2002

| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | BioReliance Corporation
      (Registrant)                                                                                              
|
| | By  /s/Capers W. McDonald                                                                                                               
|
| | Capers W. McDonald
President and Chief Executive Officer                                                                                
|
| | By  /s/John L. Coker                                                                                                                    
|
| | John L. Coker                                                                                                                           
| | Vice President, Finance and Administration,Chief
Financial Officer, Treasurer and Secretary
(Principal Financial and Accounting Officer)

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EXHIBIT INDEX

|            |  |                                           
|----------- |  | ------------------------------------------
|EXHIBIT NO. |  | DESCRIPTION                               
|            |  |                                           
|           
|10.1        |  | Employment Agreement  Ronald R. Baker    
|           
|10.2        |  | Employment Agreement  David Jacobson-Kram
|           
|10.3        |  | Employment Agreement  Allan J. Darling   

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