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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, 2003

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



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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 ______

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

YES X    NO ______

As of April 30, 2003, 8,513,419 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, 2002                  |    |  |    |       
|                                                                                   |  | and March
          31, 2003(Unaudited)                                        |    |  | 3  |       
|                                                                                   |  |                                                                                |    |  |    |        |  | 
|                                                                                   |  | Consolidated
          (Unaudited) Statements of Income for the Three          |    |  |    |       
|                                                                                   |  | Months Ended
          March 31, 2002 and 2003                                 |    |  | 4  |       
|                                                                                   |  |                                                                                |    |  |    |        |  | 
|                                                                                   |  | Consolidated
          (Unaudited) Statements of Cash Flows for the Three      |    |  |    |       
|                                                                                   |  | Months Ended
          March 31, 2002 and 2003                                 |    |  | 5  |       
|                                                                                   |  |                                                                                |    |  |    |        |  | 
|                                                                                   |  | Notes to
          Consolidated (Unaudited) Financial Statements               |    |  | 6  |       
|                                                                                   |  |                                                                                |    |  |    |        |  | 
|                                                                                   |  | Item 2 -
          Management's Discussion and Analysis of Financial           |    |  |    |       
|                                                                                   |  | Condition
          and Results of Operations                                  |    |  | 10 |       
|                                                                                   |  |                                                                                |    |  |    |        |  | 
|                                                                                   |  | Item 3 -
          Quantitative and Qualitative Disclosures About Market Risks |    |  | 21 |       
|                                                                                   |  |                                                                                |    |  |    |        |  | 
|                                                                                   |  | Item 4 -
          Controls and Procedures                                     |    |  | 22 |       
|                                                                                   |  |                                                                                |    |  |    |        |  | 
|PART
          II                                                                  |  | OTHER
          INFORMATION                                                    |    |  | 23 |       
|                                                                                   |  |                                                                                |    |  |    |        |  | 
|SIGNATURES                                                                         |  |                                                                                | 24 | 
|                                                                                   |  |                                                                                |    |  |    |        |  | 
|CERTIFICATIONS PURSUANT TO SECTION
          302 OF THE SARBANES-OXLEY ACT OF 2002 |  |                                                                                | 25 | 
|                                                                                   |  |                                                                                |    |  |    |        |  | 
|EXHIBIT
          INDEX                                                            |  |                                                                                | 27 | 

2



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BIORELIANCE CORPORATION

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

|                                             |                                                                                                                   |                                            |                                      |        |         |              |        |             |         |           |  | 
|-------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------------------ | ------ | ------- | ------------ | ------ | ----------- | ------- | --------- |  | 
|                                             |                                                                                                                   |                                            |                                      |        |         |              |        |             |         | March 31,
|                                             |                                                                                                                   |                                            |                                      |        |         | December 31, |        | 2003       
|                                             |                                                                                                                   |                                            |                                      |        |         | 2002         |        | (Unaudited)
|                                             |                                                                                                                   |                                            |                                      |        |         |              |        |            
|                                             |                                                                                                                   |                                            |                                      | Assets |         |              |        |             |         |           |  | 
|Current assets:                              |                                                                                                                   |                                            |                                      |        |         |              |        |            
|                                             | Cash and cash equivalents                                                                                         |                                            | $                                    | 37,739 |         |              | $      | 35,547      |        
|                                             | Accounts receivable, net                                                                                          |                                            |                                      | 24,704 |         |              |        | 24,430      |        
|                                             | Other current assets                                                                                              |                                            |                                      | 2,988  |         |              |        | 3,144       |        
|                                             |                                                                                                                   |                                            |                                      |        |         |              |        |            
|                                             |                                                                                                                   | Total current assets                       |                                      |        | 65,431  |              |        |             | 63,121  |          
|Property and equipment, net                  |                                                                                                                   |                                            | 41,148                               |        |         |              | 42,377 |            
|Deposits and other assets                    |                                                                                                                   |                                            | 136                                  |        |         |              | 129    |            
|Deferred income taxes                        |                                                                                                                   |                                            | 642                                  |        |         |              | 543    |            
|                                             |                                                                                                                   |                                            |                                      |        |         |              |        |            
|                                             |                                                                                                                   | Total assets                               |                                      | $      | 107,357 |              |        | $           | 106,170 |          
|                                             |                                                                                                                   |                                            |                                      |        |         |              |        |            
|                                             |                                                                                                                   |                                            | Liabilities and Stockholders Equity |        |         |              |        |             |         |           | 
|Current liabilities:                         |                                                                                                                   |                                            |                                      |        |         |              |        |            
|                                             | Current portion of long-term debt and capital lease
obligations                                                   |                                            | $                                    | 918    |         |              | $      | 985         |        
|                                             | Accounts payable                                                                                                  |                                            |                                      | 2,872  |         |              |        | 3,100       |        
|                                             | Accrued employee compensation and benefits                                                                        |                                            |                                      | 5,065  |         |              |        | 2,842       |        
|                                             | Other accrued
liabilities                                                                                         |                                            |                                      | 4,656  |         |              |        | 4,102       |        
|                                             | Customer advances                                                                                                 |                                            |                                      | 5,152  |         |              |        | 5,422       |        
|                                             | Deferred income taxes                                                                                             |                                            |                                      | 4,589  |         |              |        | 4,732       |        
|                                             |                                                                                                                   |                                            |                                      |        |         |              |        |            
|                                             |                                                                                                                   | Total current liabilities                  |                                      |        | 23,252  |              |        |             | 21,183  |          
|Long-term debt and capital lease
obligations |                                                                                                                   |                                            | 10,628                               |        |         |              | 10,302 |            
|                                             |                                                                                                                   |                                            |                                      |        |         |              |        |            
|                                             |                                                                                                                   | Total liabilities                          |                                      |        | 33,880  |              |        |             | 31,485  |          
|                                             |                                                                                                                   |                                            |                                      |        |         |              |        |            
|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;
8,485,722 and 8,513,419 shares issued and outstanding |                                            |                                      | 85     |         |              |        | 85          |        
|                                             | Additional paid-in capital                                                                                        |                                            |                                      | 56,144 |         |              |        | 56,325      |        
|                                             | Retained earnings                                                                                                 |                                            |                                      | 18,576 |         |              |        | 20,833      |        
|                                             | Treasury stock, 0 and 75,300 shares at
cost                                                                       |                                            |                                      |       |         |              |        | (1,239      | )      
|                                             | Accumulated other comprehensive income (expense)                                                                  |                                            |                                      | (1,328 | )       |              |        | (1,319      | )      
|                                             |                                                                                                                   |                                            |                                      |        |         |              |        |            
|                                             |                                                                                                                   | Total stockholders equity                 |                                      |        | 73,477  |              |        |             | 74,685  |          
|                                             |                                                                                                                   |                                            |                                      |        |         |              |        |            
|                                             |                                                                                                                   | Total liabilities and stockholders equity |                                      | $      | 107,357 |              |        | $           | 106,170 |          
|                                             |                                                                                                                   |                                            |                                      |        |         |              |        |            

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,         
|                                     |                                               |   |        | 2002               |        | 2003
|                                     |                                               |   |        |                    |        |     
|Revenue                              |                                               | $ | 19,013 |                    |        | $    | 20,798 |       
|                                     |                                               |   |        |                    |        |      |        |       
|Expenses:                            |                                               |   |        |                    |        |      |        |       
|                                     | Cost
          of sales                       |   |        | 11,022             |        |      |        | 12,546 |       
|                                     | Selling,
          general and administrative |   |        | 4,189              |        |      |        | 4,316  |       
|                                     | Research
          and development            |   |        | 262                |        |      |        | 216    |       
|                                     |                                               |   |        |                    |        |      |        |       
|                                     |                                               |   |        |                    | 15,473 |      |        |        | 17,078 | 
|                                     |                                               |   |        |                    |        |      |        |       
|Income
          from operations     |                                               |   | 3,540  |                    |        |      | 3,720  |       
|Other
          (income) expense:    |                                               |   |        |                    |        |      |        |       
|                                     | Interest
          income                     |   |        | (130               | )      |      |        | (184   | )     
|                                     | Interest
          expense                    |   |        | 154                |        |      |        | 206    |       
|                                     | Other
          expense                       |   |        | 209                |        |      |        | 111    |       
|                                     |                                               |   |        |                    |        |      |        |        |        | 
|                                     |                                               |   |        |                    | 233    |      |        |        | 133    | 
|                                     |                                               |   |        |                    |        |      |        |       
|Income
          before income taxes |                                               |   | 3,307  |                    |        |      | 3,587  |       
|Income
          tax provision       |                                               |   | 1,210  |                    |        |      | 1,327  |       
|                                     |                                               |   |        |                    |        |      |        |       
|Net
          income                 |                                               | $ | 2,097  |                    |        | $    | 2,260  |       
|                                     |                                               |   |        |                    |        |      |        |       
|Net
          income per share :     |                                               |   |        |                    |        |      |        |       
|                                     | Basic                                         |   | $      | 0.25               |        |      | $      | 0.27   |       
|                                     |                                               |   |        |                    |        |      |        |       
|                                     | Diluted                                       |   | $      | 0.24               |        |      | $      | 0.26   |       
|                                     |                                               |   |        |                    |        |      |        |       

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

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BIORELIANCE CORPORATION

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

|                                                                       |                                                                                             |                                               |                                                          |                                                      |        |                    |        |       |        |        |        |  
|---------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | --------------------------------------------- | -------------------------------------------------------- | ---------------------------------------------------- | ------ | ------------------ | ------ | ----- | ------ | ------ | ------ | -
|                                                                       |                                                                                             |                                               |                                                          |                                                      |        | Three Months Ended
|                                                                       |                                                                                             |                                               |                                                          |                                                      |        | March 31,         
|                                                                       |                                                                                             |                                               |                                                          |                                                      |        |                   
|                                                                       |                                                                                             |                                               |                                                          |                                                      |        | 2002               |        | 2003 
|                                                                       |                                                                                             |                                               |                                                          |                                                      |        |                    |        |      
|Cash
          flows from operating activities:                        |                                                                                             |                                               |                                                          |                                                      |        |                    |        |      
|                                                                       | Net
          income                                                                        |                                               | $                                                        | 2,097                                                |        |                    | $      | 2,260 |       
|                                                                       | Adjustments
          to reconcile net income to net cash provided by operating activities: |                                               |                                                          |                                                      |        |                    |        |       |       
|                                                                       |                                                                                             |                                               |                                                          | Depreciation                                         |        |                    | 1,137  |       |        |        | 1,245  |  
|                                                                       |                                                                                             |                                               |                                                          | Loss
          on disposal                           |        |                    | 66     |       |        |        | 122    |  
|                                                                       |                                                                                             |                                               |                                                          | Deferred
          income taxes, net                 |        |                    |       |       |        |        | 242    |  
|                                                                       |                                                                                             |                                               |                                                          | Changes
          in current assets and liabilities: |        |                    |        |       |        |        |        |  
|                                                                       |                                                                                             |                                               |                                                          | Accounts receivable, net                             |        |                    | 2,026  |       |        |        | 155    |  
|                                                                       |                                                                                             |                                               |                                                          | Other current assets                                 |        |                    | (218   | )     |        |        | (148   | )
|                                                                       |                                                                                             |                                               |                                                          | Accounts payable                                     |        |                    | (626   | )     |        |        | 211    |  
|                                                                       |                                                                                             |                                               |                                                          | Accrued employee compensation and benefits           |        |                    | (2,829 | )     |        |        | (2,224 | )
|                                                                       |                                                                                             |                                               |                                                          | Other accrued liabilities                            |        |                    | 1,156  |       |        |        | (554   | )
|                                                                       |                                                                                             |                                               |                                                          | Customer advances                                    |        |                    | 10     |       |        |        | 356    |  
|                                                                       |                                                                                             |                                               |                                                          | Increase
          in deposits and other assets      |        |                    | (251   | )     |        |        | 40     |  
|                                                                       |                                                                                             |                                               |                                                          |                                                      |        |                    |        |      
|                                                                       |                                                                                             |                                               |                                                          | Net cash provided by operating activities            |        |                    | 2,568  |       |        |        | 1,705  |  
|                                                                       |                                                                                             |                                               |                                                          |                                                      |        |                    |        |      
|Cash
          flows from investing activities:                        |                                                                                             |                                               |                                                          |                                                      |        |                    |        |      
|                                                                       |                                                                                             | Purchases
          of property and equipment |                                                          |                                                      | (1,429 | )                  |        |       | (2,595 | )     
|                                                                       |                                                                                             |                                               |                                                          |                                                      |        |                    |        |      
|                                                                       |                                                                                             |                                               |                                                          | Net cash provided by (used in) investing activities  |        |                    | (1,429 | )     |        |        | (2,595 | )
|                                                                       |                                                                                             |                                               |                                                          |                                                      |        |                    |        |      
|Cash
          flows from financing activities:                        |                                                                                             |                                               |                                                          |                                                      |        |                    |        |      
|                                                                       |                                                                                             |                                               | Proceeds
          from exercise of stock options        |                                                      |        | 341                |        |       |        | 182    |       
|                                                                       |                                                                                             |                                               | Purchases
          of treasury stock                    |                                                      |        |                   |        |       |        | (1,239 | )     
|                                                                       |                                                                                             |                                               | Payments
          on debt and capital lease obligations |                                                      |        | (229               | )      |       |        | (245   | )     
|                                                                       |                                                                                             |                                               |                                                          |                                                      |        |                    |        |       |        |        |        |  
|                                                                       |                                                                                             |                                               |                                                          | Net cash provided (used in) financing activities     |        |                    | 112    |       |        |        | (1,302 | )
|                                                                       |                                                                                             |                                               |                                                          |                                                      |        |                    |        |      
|Effect
          of exchange rate changes on cash and cash equivalents |                                                                                             |                                               | (161                                                     | )                                                    |        |                    |       |      
|                                                                       |                                                                                             |                                               |                                                          |                                                      |        |                    |        |      
|Net
          increase in cash and cash equivalents                    |                                                                                             |                                               | 1,090                                                    |                                                      |        |                    | (2,192 | )    
|Cash
          and cash equivalents, beginning of period               |                                                                                             |                                               | 27,536                                                   |                                                      |        |                    | 37,739 |      
|                                                                       |                                                                                             |                                               |                                                          |                                                      |        |                    |        |      
|Cash
          and cash equivalents, end of period                     |                                                                                             | $                                             | 28,626                                                   |                                                      |        | $                  | 35,547 |      
|                                                                       |                                                                                             |                                               |                                                          |                                                      |        |                    |        |      

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, 2002 and 2003 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 period
ended March 31, 2003 are not necessarily indicative of the results for the
entire year ending December 31, 2003.

(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 in 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 (in thousands):

|                                                                 |  |                              |       |      |  |  |       | 
|---------------------------------------------------------------- |  | ---------------------------- | ----- | ---- |  |  | ----- | 
|                                                                 |  | Three Months Ended March 31,
|                                                                 |  | 2002                         |       | 2003
|                                                                 |  |                              |       |     
|Weighted average common stock outstanding                        |  |                              | 8,399 |      |  |  | 8,483 | 
|Effect of dilutive securities: stock options                     |  |                              | 432   |      |  |  | 356   | 
|                                                                 |  |                              |       |      |  |  |       | 
|Weighted average common and common equivalent
shares outstanding |  |                              | 8,831 |      |  |  | 8,839 | 
|                                                                 |  |                              |       |      |  |  |       | 

6



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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
(in thousands):

|              |                         |       |       |        |                 |        |      |        |       |        | 
|------------- | ----------------------- | ----- | ----- | ------ | --------------- | ------ | ---- | ------ | ----- | ------ | 
|              |                         |       |       |        | Three Months   
|              |                         |       |       |        | Ended March 31,
|              |                         |       |       |        | 2002            |        | 2003
|              |                         |       |       |        |                 |        |     
|Revenue:      |                         |       |       |        |                 |        |      |       
|              | Testing and Development |       | $     | 15,771 |                 |        | $    | 16,717 |      
|              | Manufacturing           |       |       | 3,242  |                 |        |      | 4,081  |      
|              |                         |       |       |        |                 |        |      |       
|              |                         |       | Total |        | $               | 19,013 |      |        | $     | 20,798 | 
|              |                         |       |       |        |                 |        |      |       
|Gross Profit: |                         |       |       |        |                 |        |      |       
|              | Testing and Development |       | $     | 7,705  |                 |        | $    | 7,904  |      
|              | Manufacturing           |       |       | 286    |                 |        |      | 348    |      
|              |                         |       |       |        |                 |        |      |       
|              |                         | Total |       | $      | 7,991           |        |      | $      | 8,252 |       
|              |                         |       |       |        |                 |        |      |       

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 (in thousands):

|              |               |       |   |                 |        |      |   |        |        | 
|------------- | ------------- | ----- | - | --------------- | ------ | ---- | - | ------ | ------ | 
|              |               |       |   | Three Months   
|              |               |       |   | Ended March 31,
|              |               |       |   | 2002            |        | 2003
|              |               |       |   |                 |        |     
|Revenue:      |               |       |   |                 |        |      |   |       
|              | United States |       | $ | 15,667          |        |      | $ | 16,172 |       
|              | Europe        |       |   | 3,346           |        |      |   | 4,626  |       
|              |               |       |   |                 |        |      |   |       
|              |               | Total |   | $               | 19,013 |      |   | $      | 20,798 | 
|              |               |       |   |                 |        |      |   |       
|Gross Profit: |               |       |   |                 |        |      |   |       
|              | United States |       | $ | 6,192           |        |      | $ | 5,675  |       
|              | Europe        |       |   | 1,799           |        |      |   | 2,577  |       
|              |               |       |   |                 |        |      |   |       
|              |               | Total |   | $               | 7,991  |      |   | $      | 8,252  | 
|              |               |       |   |                 |        |      |   |       

(5)  Stock Based Compensation

The Corporation has stock-based compensation plans, described more fully
in Note 5 to our audited consolidated financial statements included in our
Annual Report on Form 10-K for the year ended December 31, 2002. Effective
January 1, 2003, BioReliance adopted FASB Statement No. 148 (FAS 148),
Accounting for Stock-Based Compensation  Transition and Disclosure. FAS
148 amends FASB Statement No. 123 (FAS 123), Accounting for Stock-Based
Compensation, to provide, among other things, prominent disclosure of the
effects of an entitys accounting policy with respect to stock-based employee
compensation on reported net income and earnings per share in annual and
interim financial statements. As permitted by FAS 123 and amended by FAS 148,
the Corporation has chosen to continue accounting for stock options at their
intrinsic value. Accordingly, no compensation expense has been recognized for
its stock option compensation plans. To determine fair value under FAS 123,
the

7



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Corporation used the Black-Scholes option-pricing model and the following
respective weighted average
assumptions for the three months ended March 31, 2002 and 2003: a
risk-free interest rate of 4.10% and 3.32%; expected lives of 6 years; expected
volatility of 67% and 61%; and expected dividends of zero. Had the fair value
method of accounting been applied to the Corporations stock option plans
utilizing the valuation method currently recognized, the impact would have been
as follows:

|                                                                                                                       |  |                 |       |      |  |   |       |  
|---------------------------------------------------------------------------------------------------------------------- |  | --------------- | ----- | ---- |  | - | ----- | -
|                                                                                                                       |  | Three Months   
|                                                                                                                       |  | Ended March 31,
|                                                                                                                       |  | 2002            |       | 2003
|                                                                                                                       |  |                 |       |     
|Net income as reported                                                                                                 |  | $               | 2,097 |      |  | $ | 2,260 |  
|Stock based employee compensation expense determined
under fair value method for all
awards, net of related tax effect |  |                 | (225  | )    |  |   | (349  | )
|                                                                                                                       |  |                 |       |      |  |   |       |  
|Pro-forma net income                                                                                                   |  |                 | 1,872 |      |  |   | 1,911 |  
|                                                                                                                       |  |                 |       |      |  |   |       |  
|Basic net income per share  as reported                                                                               |  | $               | 0.25  |      |  | $ | 0.27  |  
|Basic net income per share  pro-forma                                                                                 |  | $               | 0.22  |      |  | $ | 0.23  |  
|                                                                                                                       |  |                 |       |      |  |   |       |  
|Diluted net income per share  as reported                                                                             |  | $               | 0.24  |      |  | $ | 0.26  |  
|Diluted net income per share  pro-forma                                                                               |  | $               | 0.21  |      |  | $ | 0.22  |  

(6)  Stock Repurchase

On March 5, 2003, the Corporations Board of Directors authorized the
repurchase of up to 500,000 shares of the Corporations common stock over the
following two years. The repurchase is being funded using the Corporations
working capital. During the quarter ended March 31, 2003, the Corporation has
repurchased 75,300 shares for $1.2 million.

(7)  New Accounting Pronouncements

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 145 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.

In June 2002, the FASB issued FAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities (FAS 146). FAS 146 addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). The provisions of this Statement are effective for exit or
disposal activities that are initiated after December 31, 2002, with early
application encouraged. The

8



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##### 



Corporation does not expect adoption of this
Statement to have a material impact on the Corporations results of operations
or financial position.

In November 2002, the FASB issued Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN 45 elaborates on the
existing disclosure requirements for most guarantees. The initial recognition
and measurement provisions apply on a prospective basis to guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective
for financial statements of interim of annual period ending after December 15,
2002. The initial adoption of FIN 45 is not anticipated to have a material
impact on the Corporations results of operations or financial position.

On December 31, 2002, the FASB issued FAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure (FAS 148). FAS 148
amends FAS 123, Accounting for Stock-Based Compensation, to provide
alternative methods of transition to FAS 123s fair value method of accounting
for stock-based employee compensation for an entity that voluntarily changes to
the fair value based method of accounting for stock-based employee
compensation. FAS 148 also requires prominent disclosure of the effects of an
entitys accounting policy with respect to stock-based employee compensation on
reported net income and earnings per share in annual and interim financial
statements. The Corporation intends to continue to follow the disclosure-only
provisions of FAS 123 and, accordingly, will continue to apply APB 25 and its
related interpretations in accounting for its plans. The adoption of FAS 148
is not anticipated to have a material impact on the Corporations results of
operations or financial position.

9



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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 anticipated growth of revenue to exceed cost increases related
to the Corporations U.S. manufacturing facility,                                                                                                     
|
| |  |  | the Corporations ability to use additional capacity in its
manufacturing facility, or to expand its manufacturing capacity,                                                                                             
|
| |  |  | the anticipated increase in selling, general and administrative
expenses and the hiring of new employees,                                                                                                                
|
| |  |  | the Corporations ability to maintain selling, general and
administrative expenses as a percentage of revenue relatively constant
or below 20%,                                                                          
|
| |  |  | the Corporations ability to maintain research and development
expenses and tax rates at constant levels,                                                                                                                
|
| |  |  | the Corporations ability to fund its operations, capital
expenditures, stock repurchases and interest and principal payments on
debt for 2003 with existing cash, cash flows from operations and its
line of credit, and
|
| |  |  | the Corporations expansion plans.                                                                                                                                                                                       

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 Securities and Exchange Commission, including in its
Form10-K filed on March 31, 2003.

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.

10



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##### 



Results of Operations
(Dollars in tables are in thousands)

For the three months ended March 31, 2003, the Corporation had gross
revenue of $20.8 million, an increase of 9% over gross revenue of $19.0 million
for the three months ended March 31, 2002. Earnings per share for the three
months ended March 31, 2003 were $0.26 (diluted) compared with $0.24 (diluted)
for the three months ended March 31, 2002.

Continuing increases in orders fueled revenue growth in nearly all of the
Corporations segments and geographic regions, with revenues in U.S.
manufacturing remaining essentially unchanged. These higher revenues also
drove higher gross profits in all sectors, with the exception of U.S.
manufacturing. Gross margins were hampered in most segments by certain cost
increases, except in European manufacturing, where significant gross margin
improvements were generated. Although selling, general, and administrative
costs were up, as a percentage of sales these costs decreased to 21% of sales
as a result of continuing successful programs to control expenses. Income tax
rates remained steady at 37%, in line with the Corporations historical rates.

Gross Revenue by Segment

The following table shows a comparison of revenue by operational segment
for the three months ended March 31, 2002 and 2003:

|                        |  |                    |        |      |  |        |        |  |  |  |    |  
|----------------------- |  | ------------------ | ------ | ---- |  | ------ | ------ |  |  |  | -- | -
|                        |  | Three Months Ended
|                        |  | March 31,         
|                        |  |                   
|                        |  | 2002               |        | 2003 |  | Fav. %
|                        |  |                    |        |      |  |       
|Testing and Development |  | $                  | 15,771 |      |  | $      | 16,717 |  |  |  | 6  | %
|Manufacturing           |  |                    | 3,242  |      |  |        | 4,081  |  |  |  | 26 | %
|                        |  |                    |        |     
|Total                   |  | $                  | 19,013 |      |  | $      | 20,798 |  |  |  | 9  | %
|                        |  |                    |        |     

The increase in testing and development revenue for the three months ended
March 31, 2003 is due primarily to the continued increase in new orders. These
new orders included those arising from global arrangements with some major
clients. The increase in U.S. testing and development revenue results from
increases in biologics testing services partially offset by decreases in
toxicology services. The increase in European testing and development revenue
was driven by increases in revenue generated in virtually all major service
areas.

The increase in manufacturing revenue for the three months ended March 31,
2003 represents significant increases in Europe, with revenue in the U.S.
remaining essentially flat. European increases are attributable to increases
in both U.K. and German facilities. Both European facilities benefited by
increased orders and capacity expansion also aided German revenue.

11



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Approximately 18% of the Corporations manufacturing revenue for the three
months ended March 31, 2003 resulted from work performed under the
Corporations smallpox vaccine contracts. Approximately 10% of the
Corporations total revenue for the three months ended March 31, 2003 resulted
from work performed under these smallpox vaccine contracts.

Gross Revenue by Geographic Region

The following table shows a comparison of revenue by geographic region for
the three months ended March 31, 2002 and 2003:

|              |  |                    |        |      |  |        |        |  |  |  |    |  
|------------- |  | ------------------ | ------ | ---- |  | ------ | ------ |  |  |  | -- | -
|              |  | Three Months Ended
|              |  | March 31,         
|              |  |                   
|              |  | 2002               |        | 2003 |  | Fav. %
|              |  |                    |        |      |  |       
|United States |  | $                  | 15,667 |      |  | $      | 16,172 |  |  |  | 3  | %
|Europe        |  |                    | 3,346  |      |  |        | 4,626  |  |  |  | 38 | %
|              |  |                    |        |     
|Total         |  | $                  | 19,013 |      |  | $      | 20,798 |  |  |  | 9  | %
|              |  |                    |        |     

The increase in revenue generated in the United States for the three
months ended March 31, 2003 resulted from increases in orders, which fueled
increased revenue in biologics testing services, partially offset by
a decrease
in toxicology services. As previously mentioned, U.S. Manufacturing revenue
remained essentially unchanged.

The increase in revenue generated in Europe for the three months ended
March 31, 2003 reflects an increase in revenue generated both in the
Corporations U.K. and German facilities, which have benefited from increased
penetration into the growing European biopharmaceutical market. As the German
facility continues to run near capacity, revenue fluctuations in that facility
are primarily attributable to incremental improvement in throughput
efficiencies and different pricing structures among contracts. Revenue growth,
if any, will likely be modest for the remainder of 2003.

The Corporation expects that testing and development revenue will continue
to increase in both the U.S. and Europe in the foreseeable future, and it
expects that U.S. manufacturing revenue will increase with the Corporations
smallpox vaccine and commercial contracts, as well as with additional service
offerings in the U.S. manufacturing facility. There can be no assurance that
such expectations will prove to be correct. The Corporation expects European
revenue to continue to grow more rapidly than revenue in the U.S. to the extent
that the European markets continue to outpace U.S. markets. The Corporation is
planning for laboratory expansions that would become available to meet
anticipated growth in the U.S. and Europe over a two-year to three-year period.

12



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Gross Profit by Operating Segment

The following table
compares gross profit and gross margin by operating
segment for the three months ended March 31, 2002 and 2003:

|                        |              |  |                    |       |      |  |        |       |   |  |  |    |  
|----------------------- | ------------ |  | ------------------ | ----- | ---- |  | ------ | ----- | - |  |  | -- | -
|                        |              |  | Three Months Ended
|                        |              |  | March 31,         
|                        |              |  |                   
|                        |              |  | 2002               |       | 2003 |  | Fav. %
|                        |              |  |                    |       |      |  |       
|Testing and Development |              |  |                    |       |      |  |        |       |   |  |  |   
|                        | Gross Profit |  | $                  | 7,705 |      |  | $      | 7,904 |   |  |  | 3  | %
|                        | Gross Margin |  |                    | 49    | %    |  |        | 47    | % |  |  |    |  
|                        |              |  |                    |       |      |  |        |       |   |  |  |   
|Manufacturing           |              |  |                    |       |      |  |        |       |   |  |  |   
|                        | Gross Profit |  |                    | 286   |      |  |        | 348   |   |  |  | 22 | %
|                        | Gross Margin |  |                    | 9     | %    |  |        | 9     | % |  |  |    |  
|Totals                  |              |  |                    |       |      |  |        |       |   |  |  |   
|                        |              |  |                    |       |     
|                        | Gross Profit |  | $                  | 7,991 |      |  | $      | 8,252 |   |  |  | 3  | %
|                        |              |  |                    |      
|                        | Gross Margin |  |                    | 42    | %    |  |        | 40    | % |  |  |    |  
|                        |              |  |                    |      

The decrease in testing and development gross margin for the three months
ended March 31, 2003 reflects decreased margins in both the U.S. and the U.K.
Although gross profits in both geographic regions increased, increases in
certain cost of sales resulted in decreased margins. Those increased costs
were primarily related to quality assurance and quality control costs in the
U.S., and direct material and labor related costs in Europe.

Manufacturing gross margin for the three months ended March 31, 2003
remained essentially unchanged, with increases in European gross profit only
partially offset by decreases in the U.S. gross profit. The throughput
efficiencies and pricing structures mentioned earlier allowed European
manufacturing to grow revenues at a much greater rate than cost of sales, thus
resulting in increased margin. However, relatively flat sales and increased
direct materials and labor related costs contributed to a decrease in U.S.
manufacturing gross profit.

The Corporation expects future revenue growth to exceed cost increases
related to its U.S. manufacturing facility, thereby improving gross margins.
Revenue growth, if any, will likely come from expanding manufacturing
capabilities and service offerings. However, the build-out and validation of
this facility has demanded and will continue to demand considerable time and
resources, and there are high fixed costs related to the facility. The
Corporation continues to utilize 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 profits.

13



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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, 2002 and 2003:

|              |              |  |                    |       |      |  |            |       |   |  |     |    |   
|------------- | ------------ |  | ------------------ | ----- | ---- |  | ---------- | ----- | - |  | --- | -- | --
|              |              |  | Three Months Ended
|              |              |  | March 31,         
|              |              |  |                   
|              |              |  |                    |       |      |  |            |       |   |  | Fav
|              |              |  | 2002               |       | 2003 |  | (Unfav.) %
|              |              |  |                    |       |      |  |           
|United States |              |  |                    |       |      |  |            |       |   |  |     |   
|              | Gross Profit |  | $                  | 6,192 |      |  | $          | 5,675 |   |  |     | (8 | %)
|              | Gross Margin |  |                    | 40    | %    |  |            | 35    | % |  |     |    |   
|              |              |  |                    |       |      |  |            |       |   |  |     |   
|Europe        |              |  |                    |       |      |  |            |       |   |  |     |   
|              | Gross Profit |  |                    | 1,799 |      |  |            | 2,577 |   |  |     | 43 | % 
|              | Gross Margin |  |                    | 54    | %    |  |            | 56    | % |  |     |    |   
|Totals        |              |  |                    |       |      |  |            |       |   |  |     |   
|              |              |  |                    |      
|              | Gross Profit |  | $                  | 7,991 |      |  | $          | 8,252 |   |  |     | 3  | % 
|              |              |  |                    |      
|              | Gross Margin |  |                    | 42    | %    |  |            | 40    | % |  |     |    |   
|              |              |  |                    |      

The decrease in U.S. gross margin for the three months ended March 31,
2003 reflects decreases in both U.S. testing and development and U.S.
manufacturing margins. The decrease in U.S. testing and development was
minimal, thus the increased revenue actually resulted in an increased gross
profit for the quarter. Losses generated by U.S. manufacturing increased as a
result of the cost increases discussed above.

The improvement in European gross margins for the three months ended March
31, 2003 is attributable to significant European manufacturing gross margin
increase outpacing a decrease in European testing and development margin.
Gross profits increased in both the testing and development and manufacturing
segments. While cost of sales increases in European testing and development
negatively impacted gross profit, European manufacturing revenue increased at a
much faster rate than its related cost of sales, thus significantly increasing
the gross profit. The U.S. testing and development segment also includes
several units with relatively lower margins, which are not part of the U.K.
testing and development business.

The Corporation expects margins in the testing and development segment,
both in the U.S. and Europe, to improve moderately 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 in
Europe and the U.S.

14



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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, 2002 and 2003:

|                                    |  |                    |       |      |  |            |       |  |  |     |    |   
|----------------------------------- |  | ------------------ | ----- | ---- |  | ---------- | ----- |  |  | --- | -- | --
|                                    |  | Three Months Ended
|                                    |  | March 31,         
|                                    |  |                   
|                                    |  |                    |       |      |  |            |       |  |  | Fav
|                                    |  | 2002               |       | 2003 |  | (Unfav.) %
|                                    |  |                    |       |      |  |           
|Selling, General and Administrative |  | $                  | 4,189 |      |  | $          | 4,316 |  |  |     | (3 | %)
|Research and Development            |  |                    | 262   |      |  |            | 216   |  |  |     | 18 | % 
|                                    |  |                    |       |     
|Total                               |  | $                  | 4,451 |      |  | $          | 4,532 |  |  |     | (2 | %)
|                                    |  |                    |       |     

Selling, general and administrative (SG&A) expenses increased for the
three months ended March 31, 2003 due primarily to increases in labor, fringe
and insurance costs. These increases were partially offset by a reduction in
the Corporations bad debt expense, legal fees and sales commissions. SG&A
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
marketing infrastructure, including investments in U.S. manufacturing business
development.

As a percentage of revenue, SG&A expenses decreased slightly to 21% for
the three months ended March 31, 2003 from 22% for the three months ended March
31, 2002. The decrease can be attributed principally to increased revenues,
continued programs to control expenses, and the successful integration of past
enhancements and expansion in sales, marketing and information systems. The
Corporation believes it can maintain SG&A as a percentage of revenue relatively
near or below 20% for the foreseeable future.

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
Corporations 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.

15



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##### 



Income Taxes and Other Expenses

The following table
shows a comparison of income taxes and other expenses for the
three months ended March 31, 2002 and 2003:

|                           |                |   |                    |       |      |   |            |       |   |  |     |     |   
|-------------------------- | -------------- | - | ------------------ | ----- | ---- | - | ---------- | ----- | - |  | --- | --- | --
|                           |                |   | Three Months Ended
|                           |                |   | March 31,         
|                           |                |   |                   
|                           |                |   |                    |       |      |   |            |       |   |  | Fav
|                           |                |   | 2002               |       | 2003 |   | (Unfav.) %
|                           |                |   |                    |       |      |   |           
|Net Other (Income) Expense |                | $ | 233                |       |      | $ | 133        |       |   |  | 43  | %  
|                           |                |   |                    |      
|Income Taxes               |                |   |                    |       |      |   |            |       |   |  |     |    
|                           | Provision      |   | $                  | 1,210 |      |   | $          | 1,327 |   |  |     | (10 | %)
|                           | Effective Rate |   |                    | 37    | %    |   |            | 37    | % |  |     |     |   
|                           |                |   |                    |      

The Corporations net other expense improved to $133,000 for the three
months ended March 31, 2003 compared to $233,000 for the three months ended
March 31, 2002. The improvement was primarily due to foreign currency
translation gains and a reduction in net interest expense, partially offset by
increased losses on the disposal of fixed assets.

For the three months ended March 31, 2003, the income tax rate remained
unchanged and is in line with the Corporations long-term historical rates,
excluding 2001. The Corporation expects tax rates to remain at current levels
for the remainder of 2003 and into the foreseeable future. However, since the
Corporation has international operations in jurisdictions with different rates,
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, 2003,
the Corporation had cash and cash equivalents of $35.5 million, compared to
$37.7 million at December 31, 2002.

The Corporation generated cash flows from operations of $1.7 million for
the three months ended March 31, 2003, compared to $2.6 million for the three
months ended March 31, 2002. Changes in other assets and liabilities used cash
of $2.2 million for the three months ended March 31, 2003 primarily due to a
reduction in accrued compensation and benefits and other accrued liabilities.
Changes in other assets and liabilities used cash of $0.7 million for the three
months ended March 31, 2002 primarily due to a reduction in accounts payable
and accrued employee compensation and benefits, partially offset by a decrease
in accounts receivable and an increase in other accrued liabilities.

The Corporation used $1.2 million of cash for the quarter ended March 31,
2003 to repurchase shares of its common stock, which the Corporation now holds
as treasury stock. These shares are available for reissuance in connection
with any lawful purposes. There were no such repurchases during the quarter
ended March 31, 2002.

Working capital decreased slightly to $41.9 million at March 31, 2003 from
$42.2 million at December 31, 2002 as a result of a decrease in current assets
of $2.3 million, partially offset by a decrease in current liabilities. The
decrease in current assets was primarily due to a decrease in cash. The
decrease in current liabilities was primarily a result of the decrease in
accrued employee compensation and benefits.

16



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##### 



The Corporation believes that its existing cash and cash equivalents of
$35.5 million at March 31, 2003, cash flows from operations for 2003, 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, its planned stock repurchases, and interest and
principal payments on the Corporations debt for 2003.

A decrease in demand for the Corporations services could reduce operating
cash flows, but would also decrease the need for any capital expansion. 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 economies in the U.S. and Europe.                                                                  

These and other factors are more fully described in the Risk Factors
section in the Corporations Form 10-K filed on March 31, 2003. Additionally,
a significant deterioration in the Corporations financial performance and
ratios could accelerate the maturity of principal outstanding under the
Corporations loans.

Operating Leases

The Corporation leases facilities and equipment under operating leases
that expire at various dates through 2024. The Corporation is required to make
noncancelable lease payments totaling approximately $27.2 million under these
leases.

Capital Leases

The Corporations U.S. manufacturing facility in Rockville, Maryland has
been operational since late 2000. The Corporation leases this facility under
three capital leases that require it to make net noncancelable lease payments
totaling approximately $9.8 million through 2034. The Corporation has also
guaranteed indebtedness related to the construction of this facility of
approximately $4.1 million at March 31, 2003. 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 and 2003, the Corporation recorded $46,000 and $52,000,
respectively 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 $653,000 at December 31, 2002 to $645,000 at March 31, 2003. 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 its U.S.
manufacturing facility as capital leases. The assets underlying the capital
leases are included with the Corporations owned property and equipment at
March 31, 2003. Property and equipment, net of accumulated depreciation and
amortization,

17



---



##### 



at March 31, 2003 included approximately $6.9 million related to
these capital leases. The related obligation is included in the Corporations
liabilities at March 31, 2003.

The Corporation also leases land for one of its facilities and certain
office equipment under terms that require the leases to be accounted for as
capital leases. At March 31, 2003, property and equipment, net of accumulated
depreciation and amortization, included $2.0 million related to these capital
leases. The related lease obligation of $0.5 million is included in the
Corporations liabilities at March 31, 2003.

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, 2003, the applicable interest rate on the mortgage
loan was 1.31% and the LIBOR Rate Option was 1.40%. At March 31, 2003,
approximately $2.1 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 expensed 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 and 2003, the
Corporation recorded $23,000 and $26,000, respectively 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 $306,000 at December 31, 2002 to $301,000 at March 31, 2003. 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 first three months
of 2003, 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:



| |  |  | 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.                           

18



---



##### 



At March 31, 2003, 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 is 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 through 2005. 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, 2003, approximately
$1.4 million was outstanding on the loan.

Capital Expenditures

During the three months ended March 31, 2003 and 2002, the Corporation
invested $2.6 million and $1.4 million, respectively, for capital expenditures.
These capital expenditures were primarily for leasehold improvements and
investments in new equipment.

Estimated capital expenditures for the remainder of 2003 include capacity
expansions in U.S. testing and development operations, U.S. manufacturing and
U.K. manufacturing operations. The Corporations plans also include additional
investments in information systems, as well as in normal equipment
replacements.

The Corporation expects to fund its growth and its planned capital
expenditures from existing cash and cash flows from operations, but may also
enter into arrangements for bank borrowings and leases or other financing from
third party sources, 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.

Repurchase of Common Stock

On March 5, 2003, the Corporations Board of Directors authorized the
repurchase of up to 500,000 shares of the Corporations common stock over the
following two years. The repurchase is being funded using the Corporations
working capital. During the quarter ended March 31, 2003, the Corporation has
repurchased 75,300 shares for $1.2 million.

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. Transaction 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s net exchange loss was

19



---



##### 



insignificant for the three months ended
March 31, 2003 and was $0.1 million for the three months ended March 31, 2002.

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
22.2% and 17.6% of its revenue for the three months ended March 31, 2003 and
2002, 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.

The Corporation may experience fluctuations in financial results from the
Corporations operations outside the United States, and the Corporation may not
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. While the Corporation may use such financial instruments in the
future, these financial instruments may not be successful in managing or
controlling foreign currency risk.

20



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##### 



Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk

The Corporation is exposed to credit 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 cash equivalents. The Corporations investment policy stipulates
investment in short-term, low-risk instruments. At March 31, 2003, the
Corporation had $35.5 million in cash and cash equivalents. If interest rates
fall, floating rate securities may generate less interest income. The
Corporation does not believe that it is exposed to any material interest rate
risk as a result of its investments in cash equivalents.

At March 31, 2003, the Corporation had total debt of $11.3 million, most
of which bears interest at a fixed interest rate. Thus, the Corporation does
not believe that it is exposed to any material interest rate risk as a result
of borrowing activities.

Foreign Currency Exchange Risk

The Corporations international operations are subject to foreign exchange
rate fluctuations. The Corporation derived 22.2% of its revenue for the three
months ended March 31, 2003, 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 Operation for a
more detailed discussion of our foreign currency risks and exposures.

21



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##### 



Item 4. Controls and Procedures

Within 90 days prior to the filing date of this Quarterly Report on Form
10-Q, the Corporations management, including its Chief Executive Officer and
Chief Financial Officer, evaluated the effectiveness of the Corporations
design and operation of its disclosure controls and procedures pursuant to Rule
13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934. Based upon
that evaluation, such officers concluded that the Corporations disclosure
controls and procedures are effective in timely alerting them to material
information relating to the Corporation, required to be included in this
Quarterly Report on Form 10-Q.

The Corporations management has also evaluated the Corporations internal
controls and there have been no significant changes in the Corporations
internal controls or in other factors, which could significantly affect
internal controls subsequent to the date that the Corporation carried out its
evaluation.

22



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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, 2003, the Corporation had used approximately $24.2 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, 2003, approximately $8.0 million of the net proceeds of the
initial public offering were 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



| | 10.1 |  | Employment Agreement  David E. Jackson         
| | ---- |  | ------------------------------------------------
|
| | 99.1 |  | Officer Certification of Chief Executive Officer
|
| | 99.2 |  | Officer Certification of Chief Financial Officer

(b)  Reports on Form 8-K



| |                                                                                                                                   
| | ----------------------------------------------------------------------------------------------------------------------------------
| | Report dated March 7, 2003 announcing the stock repurchase program
and filing the related press release issued by the Corporation.

23



---



##### 



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, 2003 |  |                                                                                                                                                        
|                   
|                    |  | 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)

24



---



##### 



BIORELIANCE CORPORATION

CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Capers W. McDonald, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of BioReliance
Corporation;                                                                                                                                                                                                                                           
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;              
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                 



| | a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 15, 2003

/s/ Capers W. McDonald
Capers W. McDonald
President and Chief Executive Officer

25



---



##### 



BIORELIANCE CORPORATION

CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, John L. Coker, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of BioReliance
Corporation;                                                                                                                                                                                                                                           
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;              
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                 



| | a) |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management
or other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 15, 2003

/s/ John L. Coker
John L. Coker
Vice President, Finance and Administration
and Chief Financial Officer

26



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##### 



EXHIBIT INDEX

|            |  |                                                 
|----------- |  | ------------------------------------------------
|EXHIBIT NO. |  | DESCRIPTION                                     
|           
|10.1        |  | Employment Agreement  David E. Jackson         
|           
|99.1        |  | Officer Certification of Chief Executive Officer
|           
|99.2        |  | Officer Certification of Chief Financial Officer

27