<PAGE>   1
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   (Mark One)

           [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 2001

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
              For the transition period from _________ to _________

                           Commission File No. 0-19842
                                    ---------

                             PolyMedica Corporation
                             ----------------------
             (Exact name of registrant as specified in its charter)

    Massachusetts                                               04-3033368
-------------------------------------                        ------------------
 State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization                             Identification No.)

  11 State Street, Woburn, Massachusetts                           01801
-------------------------------------------                     -----------
   (Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code            (781) 933-2020
                                                              --------------


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


         The number of shares issued of the registrant's class of Common Stock
as of August 13, 2001 was 13,284,803, which includes 699,977 shares held in
treasury.
<PAGE>   2
                             POLYMEDICA CORPORATION
                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                               Page
                                                                               ----
<S>                                                                            <C>
PART I  -      FINANCIAL INFORMATION

Item 1  -      Financial Statements

                  Consolidated Balance Sheets as of
                      June 30 (unaudited) and March 31, 2001                    3

                  Unaudited Consolidated Statements of Operations
                      for the three months ended June 30, 2001 and 2000         5

                  Unaudited Consolidated Statements of Cash Flows
                      for the three months ended June 30, 2001 and 2000         6

                  Notes to Consolidated Financial Statements                    7

Item 2  -      Management's Discussion and Analysis of Financial Condition
               and Results of Operations                                       13

Item 3  -      Quantitative and Qualitative Disclosures About Market Risk      24

PART II -      OTHER INFORMATION

Item 1 -       Legal Proceedings                                               25

Item 6  -      Exhibits and Reports on Form 8-K                                25

Signatures                                                                     26
</TABLE>


                                       2
<PAGE>   3
PART I - FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS


                             POLYMEDICA CORPORATION
                           CONSOLIDATED BALANCE SHEETS
               (In thousands, except share and per share amounts)


<TABLE>
<CAPTION>
                                                       JUNE 30,
                                                         2001          MARCH 31,
                                                     (UNAUDITED)         2001
                                                     -----------       --------
<S>                                                  <C>               <C>
ASSETS

Current assets:
      Cash and cash equivalents                        $ 32,842        $ 39,571
      Marketable securities                               5,499            --
      Accounts receivable (net of allowances of
         $15,107 and $13,729 as of June 30 and
         March 31, 2001, respectively)                   33,794          31,969
      Inventories                                        20,047          22,791
      Deferred tax asset                                  9,558           9,558
      Prepaid expenses and other
         current assets                                   1,362           1,073
                                                       --------        --------

              Total current assets                      103,102         104,962

Property, plant and equipment, net                       23,321          22,199
Intangible assets, net                                   32,154          32,723
Direct response advertising, net                         42,667          39,940
Other assets                                              2,870           1,740
                                                       --------        --------
              Total assets                             $204,114        $201,564
                                                       ========        ========
</TABLE>


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


                                       3
<PAGE>   4
                             POLYMEDICA CORPORATION
                           CONSOLIDATED BALANCE SHEETS
               (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>

                                                                    JUNE 30,
                                                                      2001           MARCH 31,
                                                                   (UNAUDITED)         2001
                                                                   -----------      -----------
<S>                                                                <C>              <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                                $   9,672         $  13,118
    Accrued expenses                                                    7,737             8,277
    Current portion, capital lease obligations                            631               587
                                                                    ---------         ---------

              Total current liabilities                                18,040            21,982

Long-term capital lease and other obligations                           2,878             2,576
Deferred income taxes                                                  17,551            17,551
                                                                    ---------         ---------

              Total liabilities                                        38,469            42,109

Minority interest                                                       1,119               805
Commitments

Shareholders' equity:
      Preferred stock, $0.01 par value; 2,000,000 shares
        authorized, none issued or outstanding                             --                --
      Common stock, $.01 par value; 50,000,000 shares
        authorized; 13,284,803 and 13,275,993 shares issued
        as of June 30 and March 31, 2001, respectively                    133               133
      Treasury stock, at cost (330,129 and 205,325 shares as
        of June 30 and March 31, 2001, respectively)                   (8,495)           (5,526)
      Additional paid-in capital                                      118,910           118,710
      Retained earnings                                                53,978            45,333
                                                                    ---------         ---------

              Total shareholders' equity                              164,526           158,650
                                                                    ---------         ---------

              Total liabilities and shareholders' equity            $ 204,114         $ 201,564
                                                                    =========         =========
</TABLE>

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


                                       4
<PAGE>   5
                             POLYMEDICA CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                       THREE MONTHS ENDED
                                                                    JUNE 30,         JUNE 30,
                                                                      2001            2000
                                                                   --------         --------
<S>                                                                <C>              <C>
Net revenues                                                       $ 63,021         $ 50,368

Cost of sales                                                        21,265           18,989
                                                                   --------         --------

Gross margin                                                         41,756           31,379

Selling, general and administrative
  expenses                                                           27,905           22,339
                                                                   --------         --------

Income from operations                                               13,851            9,040

Other income and expense:
   Investment income                                                    540              634
   Interest expense                                                     (43)             (69)
   Other income and expense                                              --               15
   Minority interest                                                   (314)             (24)
                                                                   --------         --------
                                                                        183              556

Income before income taxes                                           14,034            9,596
Income tax provision                                                  5,389            3,579
                                                                   --------         --------

Income before cumulative effect of change in
     accounting principle                                             8,645            6,017

Cumulative effect of change in accounting
    principle, net of taxes of $4,121                                    --           (6,926)
                                                                   --------         --------

Net income/(loss)                                                  $  8,645         $   (909)
                                                                   ========         ========

Net income/(loss) per weighted average share
    before cumulative effect of change in
    accounting principle:

    Basic                                                          $   0.67         $   0.46
    Diluted                                                        $   0.65         $   0.44

Cumulative effect of change in accounting principle:

    Basic                                                                --         $  (0.53)
    Diluted                                                              --         $  (0.51)

Net income/(loss) per weighted average share:

    Basic                                                          $   0.67         $  (0.07)
    Diluted                                                        $   0.65         $  (0.07)

    Weighted average shares, basic                                   12,955           13,133
    Weighted average shares, diluted, used in the
       calculation of net income/(loss) per weighted
       average share                                                 13,284           13,133
</TABLE>


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


                                       5
<PAGE>   6
                             POLYMEDICA CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED JUNE 30,
                                                                          2001             2000
                                                                        ---------        ---------
<S>                                                                     <C>              <C>
Cash flows from operating activities:
    Net income/(loss)                                                   $  8,645         $   (909)
    Adjustments to reconcile net income/(loss) to net
      cash flows from operating activities:
        Depreciation and amortization                                      1,338            1,208
        Amortization of direct-response advertising                        6,578            3,881
        Direct-response advertising                                       (9,305)          (8,522)
        Minority interest                                                    314              (48)
        Provision for bad debts                                            4,805            3,223
        Provision for sales allowances                                     3,046            2,746
        Provision for inventory obsolescence                                  --            1,200
        Changes in assets and liabilities:
           Accounts receivable                                            (9,676)           8,191
           Inventories                                                     2,744           (6,382)
           Prepaid expenses and other assets                                (339)             205
           Accounts payable                                               (3,446)             904
           Accrued expenses and other long-term liabilities                 (273)          (2,622)
                                                                        --------         --------

                Total adjustments                                         (4,214)           3,984
                                                                        --------         --------

                Net cash flows from operating activities                   4,431            3,075
                                                                        --------         --------

Cash flows from investing activities:
    Purchase of marketable securities                                     (5,499)              --
    Purchase of property, plant and equipment                             (1,724)          (4,024)
                                                                        --------         --------

                Net cash flows from investing activities                  (7,223)          (4,024)
                                                                        --------         --------

Cash flows from financing activities:
    Proceeds from issuance of common and treasury stock                      205              547
    Repurchase of common stock                                            (2,974)              --
    Contributions to deferred compensation plan                           (1,016)          (1,306)
    Reduction of obligations under capital leases                           (152)            (129)
    Repayment of senior debt and notes payable                                --              (13)
                                                                        --------         --------

                Net cash flows from financing activities                  (3,937)            (901)
                                                                        --------         --------
                Net decrease in cash and cash equivalents                 (6,729)          (1,850)

                Cash and cash equivalents at beginning of period          39,571           40,687
                                                                        --------         --------
                Cash and cash equivalents at end of period              $ 32,842         $ 38,837
                                                                        ========         ========

Supplemental disclosure of cash flow information:
    Assets purchased under capital lease                                $    167         $    116
</TABLE>

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

                                       6
<PAGE>   7
                             POLYMEDICA CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.       The unaudited consolidated financial statements included herein have
been prepared by PolyMedica Corporation ("PolyMedica" or the "Company") pursuant
to the rules and regulations of the Securities and Exchange Commission and
include, in the opinion of management, all adjustments, consisting of normal,
recurring adjustments, necessary for a fair presentation of interim period
results. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The results for the interim periods presented are not necessarily
indicative of results to be expected for the full fiscal year. It is suggested
that these interim consolidated financial statements be read in conjunction with
the audited consolidated financial statements included in the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 2001.

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reported
period. Estimates and judgments are used for, but not limited to, determination
of appropriate Medicare reimbursement rates, the allowance for doubtful
accounts, valuation of inventory, accrued expenses and depreciation and
amortization. Actual results could differ from those estimates. In addition,
certain amounts in the prior period financial statements have been reclassified
to conform with the current year presentation.

2.       Included in other assets are restricted investments of $2.71 million
and $1.63 million as of June 30 and March 31, 2001, respectively, which
represents amounts set aside by the Company under executive deferred
compensation plans. The related liability is included in long-term liabilities.

3.       In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements", subsequently updated by SAB 101A and SAB 101B ("SAB 101"). SAB 101
summarizes certain areas of the Staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements. Prior to
the implementation of SAB 101, the Company recognized revenue upon receipt of a
customer order and shipment of the related product, provided that the required
verbal authorizations had been received. Under the new accounting method adopted
retroactive to April 1, 2000, revenue related to product shipments to customers
who have placed orders is recognized upon shipment, provided that risk of loss
has passed to the customer and the Company has received and verified the
required written forms, such as an Authorization of Benefits form and Doctor's
Order, to bill Medicare and other third-party payers. The Company records
revenue at amounts expected to be collected from Medicare, other third-party
payers, and directly from customers.

         The Company delays revenue recognition for product shipments for which
the Company has not yet received a written Authorization of Benefits form and
Doctor's Order until the period in which

                                       7
<PAGE>   8
those documents are collected and verified. During the fourth quarter ended
March 31, 2001, the Company implemented the SEC's SAB 101 guidelines,
retroactive to the beginning of the fiscal year. The cumulative effect of the
change in accounting principle on prior years resulted in a charge to income of
$6.93 million (net of income taxes of $4.12 million), or $0.51 per diluted
common share, which was applied retroactively as of April 1, 2000 and is
included in net income for the quarter ended June 30, 2000.

         Due to the medical nature of the products the Company provides,
customers sometimes request supplies before the Company has received the
required written forms to bill Medicare and recognize revenue. As a result,
included in inventories as of June 30 and March 31, 2001, is $4.89 million and
$6.07 million, respectively, of inventory shipped to customers for which the
Company has received an order but has not yet received the required written
documents.

4.       In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No.
141 requires that all business combinations be accounted for under the purchase
method only and that certain acquired intangible assets in a business
combination be recognized as assets apart from goodwill. SFAS No. 142 requires
that ratable amortization of goodwill be replaced with periodic tests of the
goodwill's impairment and that intangible assets other than goodwill be
amortized over their useful lives. SFAS No. 141 is effective for all business
combinations initiated after June 30, 2001 and for all business combinations
accounted for by the purchase method for which the date of acquisition is after
June 30, 2001. The provisions of SFAS No. 142 will be effective for fiscal years
beginning after December 15, 2001, and will thus be adopted by the Company, as
required, on April 1, 2002. The impact of SFAS No. 141 and SFAS No. 142 on the
Company's financial statements has not yet been determined.

5.       Inventories consist of the following:
        (In thousands)

<TABLE>
<CAPTION>
                                   June 30,       March 31,
                                     2001          2001
                                   -------        -------
<S>                                <C>            <C>
            Raw materials          $   592        $   685
            Work in process            698            783
            Finished goods          18,757         21,323
                                   -------        -------
                                   $20,047        $22,791
                                   =======        =======
</TABLE>


6.       In accordance with Statement of Position 93-7 ("SOP 93-7"), the Company
incurred and capitalized direct-response advertising of $9.31 million and $8.52
million in the three months ended June 30, 2001 and 2000, respectively. The
Company expenses in the period incurred all other advertising that does not meet
the capitalization requirements of SOP 93-7. A total of $6.58 million and $3.88
million in direct-response advertising was amortized and charged to selling,
general and administrative expense for the three months ended June 30, 2001 and
2000, respectively. Management assesses the realizability of the amounts of
direct-response advertising costs reported as assets at each balance sheet date
by comparing the carrying amounts of such assets to the probable remaining
future net benefits expected to result directly from such advertising.


                                       8
<PAGE>   9
7.       Sales allowances are recorded for estimated product returns using
historical return trends and are recorded as a reduction of revenue. These
allowances are adjusted to reflect actual returns and collection history. During
the three months ended June 30, 2001 and 2000, the Company provided for sales
allowances at a rate of approximately 4.6% and 5.1% of gross sales,
respectively.

8.       Approximately $46.25 million and $36.39 million of net revenues for the
three months ended June 30, 2001 and 2000, respectively, were Medicare-related.

9.       Calculations of earnings per share are as follows:

<TABLE>
<CAPTION>

(In thousands, except per share data)                               Three Months Ended
                                                                  June 30,        June 30,
                                                                    2001          2000
                                                                  -------        --------
<S>                                                               <C>            <C>
Net income/(loss)                                                 $ 8,645        $   (909)

BASIC:
Weighted average common stock outstanding, net of treasury
  stock, end of period                                             12,955          13,133
Net income/(loss) per weighted average share, basic               $   .67        $   (.07)
                                                                  =======        ========

DILUTED:
Weighted average common stock outstanding, net of treasury
        stock, end of period                                       12,955          13,133
Weighted average dilutive common stock equivalents                    329              --
                                                                  -------        --------
Weighted average common stock and dilutive common stock
        equivalents outstanding, net of treasury stock             13,284          13,133
Net income/(loss) per weighted average share, diluted             $   .65        $   (.07)
                                                                  =======        ========
</TABLE>


         Options to purchase 661,599 shares of common stock were outstanding
during the three months ended June 30, 2001, but were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the common shares. Options to
purchase 882,000 shares of common stock were outstanding as of June 30, 2000,
but were not included in the computation of net income/(loss) per weighted
average share, diluted, because their impact would have been anti-dilutive.
Weighted average common stock equivalents of 483,000 were used in the
calculation of net income/(loss) per weighted average share before the
cumulative effect of a change in accounting principle in the quarter ended June
30, 2000, as the effect was not anti-dilutive.

10.      The Company's total net income/(loss) and comprehensive income was
$8.65 million and $(909,000) for the three months ended June 30, 2001 and 2000,
respectively.

11.      The Company has three reportable segments:

         Chronic Care - The Company sells diabetes supplies and related products
through its Chronic Care segment. The Company offers a wide array of diabetes
products from a full range of name-brand manufacturers, contacts the patient's
doctor to obtain the required prescription information and written
documentation, files the appropriate insurance forms and bills Medicare and
private insurers

                                       9
<PAGE>   10
directly. This service frees the patient from paying for his or her chronic
disease-related upfront expenses and offers the convenience of free home
delivery of supplies.

         Professional Products - The Company sells respiratory products to
Medicare-eligible seniors and develops, manufactures, and distributes
prescription urology products.

         Consumer Healthcare - The Company offers the AZO line of products which
includes over-the-counter female urinary tract discomfort products and home
medical diagnostic kits; and, until September 2000, was a distributor of
private-label and branded digital thermometers. In September 2000, the Company
sold certain assets of its Consumer Healthcare segment. See Note 14 for
information on the sale.

         Depreciation and amortization expense attributable to the Company's
corporate headquarters is allocated to the operating segments according to the
segments' relative percentage of total revenue. However, segment assets
belonging to the Company's corporate headquarters are not allocated, as they are
considered separately for management evaluation purposes. As a result of these
allocations, the segment information may not be indicative of the financial
position or results of operations that would have been achieved had these
segments operated as unaffiliated entities. The depreciation and amortization
amounts below include amortization of direct-response advertising. The Company
does not organize its units geographically, as its products and services are
sold throughout the United States only. There are no intersegment sales for the
periods presented. Information concerning the operations in these reportable
segments is as follows:

<TABLE>
<CAPTION>

                                                Three Months Ended
(In thousands)                                June 30,       June 30,
                                                2001          2000
                                              -------        -------
<S>                                           <C>            <C>
NET REVENUES:
Chronic Care                                  $47,330        $38,974
Professional Products                          13,838          8,648
Consumer Healthcare                             1,853          2,746
                                              -------        -------
Total                                         $63,021        $50,368
                                              =======        =======

DEPRECIATION AND AMORTIZATION EXPENSE:
Chronic Care                                  $ 4,314        $ 3,326
Professional Products                           3,601          1,748
Consumer Healthcare                                 1             15
                                              -------        -------
Total                                         $ 7,916        $ 5,089
                                              =======        =======

INCOME BEFORE INCOME TAXES:
Chronic Care                                  $ 9,374        $ 6,689
Professional Products                           3,954          2,744
Consumer Healthcare                               706            163
                                              -------        -------
Total                                         $14,034        $ 9,596
                                              =======        =======
</TABLE>



                                       10
<PAGE>   11
<TABLE>
<CAPTION>
                              June 30,         March 31,
                               2001             2001
                              -------         ---------
<S>                           <C>             <C>
SEGMENT ASSETS:
Chronic Care                  $ 99,167        $ 97,559
Professional Products           55,754          56,158
Consumer Healthcare              1,706           1,611
Corporate Headquarters          47,487          46,236
                              --------        --------
Total                         $204,114        $201,564
                              ========        ========
</TABLE>


12.     The Company holds certain marketable securities and certain investments
related to executive deferred compensation plans, see Note 2, both of which are
accounted for  pursuant to SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Marketable securities, which have been classified
as current assets in the accompanying balance sheet, are reported at fair value
and have been classified as available for sale. The difference between amortized
cost and fair market value, net of tax effect, is shown as a separate component
of shareholders' equity. Realized and unrealized gains on marketable securities
were not material for any period presented. Investments related to the executive
deferred compensation plans, which have been classified as trading, are included
in long-term other assets and are recorded at fair value. At June 30, 2001 the
fair value of these investments was not materially different from cost.

13.      In June 2000, the Company's Board of Directors authorized the
repurchase of up to 1,000,000 shares of the Company's common stock on the open
market, with any shares repurchased to be held in treasury. No shares were
repurchased under this program in the quarter ended June 30, 2000. In the
quarter ended June 30, 2001, 125,000 shares were repurchased under this program
for $2.97 million. As of June 30, 2001, 362,000 shares had been cumulatively
repurchased under this program for $9.61 million. From July 1, 2001 to August
13, 2001, 375,000 shares were repurchased under the June 2000 authorized share
repurchase program for $6.81 million. As of August 13, 2001, 737,000 shares had
been cumulatively repurchased under this program for $16.42 million. In August
2001 the Company's Board of Directors authorized the repurchase of an additional
1,000,000 shares. To date no shares have been repurchased under this
supplemental repurchase program.

14.      In September 2000, the Company sold certain assets of its thermometry
and compliance products business which were included in the Consumer Healthcare
segment. Under the terms of the sale, the purchaser paid the Company $300,000 in
cash and issued to the Company a promissory note in the face amount of $1.12
million at a 7% interest rate, maturing September 20, 2003. In March 2001, the
Company accepted $900,000 as final settlement of this note in consideration of
the financial position of the borrower.

15.      In November 2000, the Company filed an amendment to a shelf
registration statement it had originally filed in April 2000, to enable it to
offer from time to time, shares of its common stock having an aggregate value of
up to $100 million. The SEC declared the shelf registration statement effective
during the quarter ended December 31, 2000. No shares of common stock had been
sold under this shelf registration statement as of June 30, 2001.

16.      The Company is subject to risks and uncertainties common to companies
in the healthcare industry, including but not limited to, receipt of third-party
healthcare reimbursement, and compliance with government regulations. The
regulations that govern Medicare reimbursement are complex and our compliance
with those regulations may be reviewed by federal agencies and third-party
reimbursement organizations. The Company has confirmed that its Liberty Medical
Supply subsidiary ("Liberty") is being investigated by the U.S. Attorney's
Office for the Southern District of Florida. One inquiry is of a civil nature
and PolyMedica has been cooperating fully with the inquiry. The other inquiry is
of a criminal nature. The Company only learned of this inquiry in August 2001
and intends to cooperate fully.

         The SEC is currently conducting an informal inquiry of the Company. The
Company is voluntarily complying with the inquiry by providing information and
documents to the SEC.

         The Company cannot accurately predict the outcome of these inquiries at
this time.


                                       11
<PAGE>   12
         On November 27, 2000, Richard Bowe SEP-IRA filed a purported class
action lawsuit in the United States District Court for the District of
Massachusetts (the "Bowe Complaint") against the company and one of its
officers. The Bowe Complaint claims violations of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5
promulgated thereunder and seeks unspecified damages, attorneys' fees and costs.
The Bowe Complaint also refers to a magazine article published in November 2000
reporting an alleged investigation by the Federal Bureau of Investigation of the
Company and Liberty. On December 19, 2000, Trust Advisors Equity Plus LLC filed
a purported class action lawsuit in the United States District Court for the
District of Massachusetts (the "Trust Advisors Complaint") against the Company
and one of its officers. The Trust Advisors Complaint asserts the same claims,
makes the same allegations and seeks the same relief as the Bowe Complaint. On
January 26, 2001, the plaintiffs in the Bowe and Trust Advisors Complaints moved
to consolidate the Bowe and Trust Advisors Complaints and to be appointed as
lead plaintiffs in the consolidated action pursuant to the Section 21D(a)(3)(B)
of the Exchange Act. On July 30, 2001, the court granted these motions. Although
no filing has yet been made, the Company believes, based on public statements
made by plaintiffs' counsel that plaintiffs' counsel plans to move to amend
their complaint to extend the class period through August 3, 2001. The Company
believes it has meritorious defenses to the existing claims made in the Bowe and
Trust Advisors Complaints and intends to contest these claims vigorously. The
Company has not seen the amended complaint and therefore cannot comment on its
merits. Although the Company does not consider an unfavorable outcome to the
existing claims probable, the Company cannot accurately predict their ultimate
disposition.


                                       12
<PAGE>   13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

Business

         PolyMedica Corporation is a leading provider of direct-to-consumer
specialty medical products and services, conducting business in the Chronic
Care, Professional Products and Consumer Healthcare markets. We sell diabetes
supplies and related products through our Chronic Care segment. We also provide
direct-to-consumer prescription respiratory supplies and services to
Medicare-eligible seniors suffering from chronic obstructive pulmonary disease
("COPD") and market, manufacture and distribute a line of prescription
urological and suppository products through our Professional Products segment.
Our AZO brand holds a leading position in the over-the-counter ("OTC") urinary
health market. Our AZO products are distributed primarily to food and drug
retailers and mass merchandisers nationwide, through our Consumer Healthcare
segment.

         Under the change in accounting principle for revenue recognition as
described in Note 3 in the financial statements, we recognize revenue upon
shipment for product sales to customers who have placed orders, provided that
risk of loss has passed to the customer and we have received and verified the
required written forms to bill Medicare and other third-party payers. We record
revenue at amounts expected to be collected from Medicare, other third-party
payers, and directly from customers. Revenue recognition is delayed for
shipments for which we have not yet received a written Authorization of Benefits
form and Doctor's Order, until the period in which those documents are collected
and verified. This policy represents a change as of April 1, 2000 from our
previous policy of recognizing revenue, when third-party payers were involved,
upon receipt of a customer order and shipment of the related product, provided
that the required verbal authorizations had been received. The cumulative effect
of this change in accounting principle resulted in a one-time net charge of
$6.93 million for the quarter ended June 30, 2000.

         Expense items include cost of sales and selling, general and
administrative expenses.

         -        Cost of sales consists primarily of purchased finished goods
                  for sale in our markets and, to a lesser extent, materials and
                  overhead costs for products that we manufacture in our
                  facility and shipping and handling fees; and

         -        Selling, general and administrative expenses consist primarily
                  of expenditures for personnel and benefits, as well as
                  allowances for bad debts, rent, amortization of capitalized
                  direct-response advertising costs and other amortization and
                  depreciation.

         We have confirmed that our Liberty Medical Supply subsidiary
("Liberty") is being investigated by the U.S. Attorney's Office for the
Southern District of Florida. One inquiry is of a civil nature and we have been
cooperating fully with the inquiry. The other inquiry is of a criminal nature.
We only learned of this inquiry in August 2001 and intend to cooperate fully.

         The Securities and Exchange Commission ("SEC") is currently conducting
an informal inquiry of the Company. The Company is voluntarily complying with
the inquiry by providing information and documents to the SEC.

         We cannot accurately predict the outcome of these inquiries at this
time.


                                       13
<PAGE>   14
Chronic Care

         We are a national direct-mail provider of diabetes supplies and related
products through our Chronic Care segment. Since acquiring Liberty in September
1996, we have devoted a large part of our resources to the growth of our Chronic
Care segment, resulting in substantial increases in revenues and earnings
generated from the segment in each of the years since 1996.

         We have a database of over 315,000 active Medicare-eligible diabetes
customers, many of whom suffer from other chronic diseases, to whom we sell
name-brand products. We deliver products to customers' homes and bill Medicare
and private insurance directly for those supplies that are reimbursable. We meet
the needs of seniors suffering from these diseases by:

         -        providing mail order delivery of supplies direct to our
                  customers' homes;

         -        billing Medicare and/or private insurance companies directly;

         -        providing 24-hour telephone support to customers; and

         -        using sophisticated software and advanced order fulfillment
                  systems to provide products and support quickly and
                  efficiently.

         In the United States, there are approximately 6.3 million seniors who
have diabetes. With our database of over 315,000 active Medicare-eligible
diabetes customers, we serve approximately 5.0% of the diabetes marketplace.
While many of the 6.3 million seniors with diabetes are covered by managed care
or reside in extended care facilities, we believe that the balance are potential
customers of ours.

Professional Products

         We are a national direct-mail provider of prescription respiratory
supplies and also market, manufacture, and distribute a broad line of
prescription urological and suppository products through our Professional
Products segment. Similar to the service we provide in our Chronic Care segment,
we deliver products to customers' homes and bill Medicare and private insurance
directly for those prescription respiratory supplies that are reimbursable. As a
participating Medicare provider and third-party insurance biller, we provide a
simple, reliable way for seniors to obtain their supplies for respiratory
disease treatment. As of June 30, 2001, we had over 30,000 active customers for
our respiratory disease supplies.

         We also own one of the broadest lines of branded prescription urology
products (excluding anti-infectives). Our urology products include urinary
analgesics, anti-spasmodics, local anesthetics and suppositories. URISED(R),
CYSTOSPAZ(R) and CYSTOSPAZ-M(R) analgesics and anti-spasmodics provide effective
symptomatic relief for urinary pain, burning and spasms. Many urology offices,
as well as hospitals, purchase the local anesthetic ANESTACON(R) for use in
diagnostic procedures and the catheterization process. B&O(R) and AQUACHLORAL(R)
suppositories are used by patients unable to tolerate oral dosages of systemic
analgesics and sedatives. Our primary customers for these urology products are
large drug wholesalers in the United States.


                                       14
<PAGE>   15
Consumer Healthcare

         Our Consumer Healthcare products are focused on female urinary tract
discomfort products and, until September 2000, included private-label and
branded digital thermometers. In September 2000, we sold certain assets of our
Consumer Healthcare segment, including our thermometry products. See Note 14 in
the financial statements for information on the sale. Our female urinary tract
discomfort products include AZO-STANDARD(R), which provides relief from urinary
tract discomfort, AZO-CRANBERRY(R), a dietary supplement which helps maintain a
healthy urinary tract and AZO TEST STRIPS(R), an in-home urinary tract infection
testing kit which allows patients to call their doctors with testing results. In
April 1999, we began shipping two new homeopathic botanical products, AZO
MENOPAUSE(TM) and AZO CONFIDENCE(TM). AZO MENOPAUSE offers relief from hot
flashes and related menopausal symptoms. AZO CONFIDENCE is used for the relief
of symptoms of incontinence. An additional two products, AZO YEAST(TM) and AZO
PMS(TM) were introduced in the fiscal year ended March 31, 2000. These products
are designed to provide relief from yeast infections and pre-menstrual syndrome,
respectively.

Growth Strategy

         Our growth strategy includes the following elements:

         -        continue growth in our Chronic Care and Professional Products
                  segments by expanding our customer base and product offerings;

         -        expand non-Medicare initiatives;

         -        continue e-commerce marketing; and

         -        add complementary products and businesses.

Other

         We do not believe our net product sales, in the aggregate, are subject
to material seasonal fluctuations.

         In accordance with Statement of Position 93-7, direct response
advertising and associated costs for all periods presented are capitalized and
amortized to selling, general and administrative expenses on an accelerated
basis. Management assesses the realizability of the amounts of direct-response
advertising costs reported as assets at each balance sheet date by comparing the
carrying amounts of such assets to the probable remaining future net benefits
expected to result directly from such advertising.

         Other advertising, promotional, and marketing costs are charged to
earnings in the period in which they are incurred. Promotional and sample costs
whose benefit is expected to assist future sales are expensed as the related
materials are used.

         We operate from manufacturing and distribution facilities located in
Massachusetts and Florida. Virtually all of our product sales are denominated in
U.S. dollars.


                                       15
<PAGE>   16
         Period to period comparisons of changes in net revenues are not
necessarily indicative of results to be expected for any future period.


                                       16
<PAGE>   17
RESULTS OF OPERATIONS

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000

         Total net revenues increased 25.1% to $63.02 million in the three
months ended June 30, 2001, as compared with $50.37 million in the three months
ended June 30, 2000. This increase was primarily the result of the growth in net
revenues from our Chronic Care and Professional Products segments which
increased 21.4% and 60.0%, respectively, in the three months ended June 30,
2001, as compared with the three months ended June 30, 2000. See Note 11 in the
financial statements for segment information.

         Net revenues in the Chronic Care segment increased 21.4% to $47.33
million in the three months ended June 30, 2001, as compared with $38.97 million
in the three months ended June 30, 2000. This growth was due to new customer
sales as a result of our direct-response advertising spending, as well as
recurring shipments to existing customers. We currently expect our promotional
and direct-response advertising spending to continue in order to further the
expansion of our Chronic Care segment.

         Net revenues in the Professional Products segment increased 60.0% to
$13.84 million in the three months ended June 30, 2001, as compared with $8.65
million in the three months ended June 30, 2000. This increase was primarily
attributable to the growth in shipments of respiratory products in the three
months ended June 30, 2001, as compared with the three months ended June 30,
2000, due to new customer sales as a result of our direct-response advertising
spending, as well as recurring shipments to existing customers. As with our
Chronic Care segment, we currently expect our promotional and direct-response
advertising spending to continue in order to further the expansion of our
Professional Products segment.

         Net revenues from Consumer Healthcare products decreased 32.5% to $1.85
million in the three months ended June 30, 2001, as compared with $2.75 million
in the three months ended June 30, 2000, due primarily to the September 2000
sale of certain assets of our Consumer Healthcare segment.

         As a percentage of total net revenues, overall gross margins were 66.3%
in the three months ended June 30, 2001, and 62.3% in the three months ended
June 30, 2000. This increase was due primarily to favorable product mix within
segments, increased sales in our high margin Professional Products segment, and
a reduced inventory obsolescence provision in our Consumer Healthcare segment.

         As a percentage of total net revenues, selling, general and
administrative expenses were 44.3% in the three months ended June 30, 2001, as
compared with 44.4% in the three months ended June 30, 2000. Selling, general
and administrative expenses increased 24.9% in the three months ended June 30,
2001 to $27.91 million, as compared with $22.34 million in the three months
ended June 30, 2000. This increase was primarily attributable to our continued
expansion efforts combined with an increase in direct-response advertising
amortization of $2.70 million to $6.58 million in the quarter ended June 30,
2001, from $3.88 million in the quarter ended June 30, 2000.


                                       17
<PAGE>   18
         Investment income decreased 14.9% to $540,000 in the three months ended
June 30, 2001, as compared with $634,000 in the three months ended June 30,
2000, due primarily to a decline in interest rates. Interest expense decreased
37.3% to $43,000 in the three months ended June 30, 2001, as compared with
$69,000 in the three months ended June 30, 2000, due primarily to the December
2000 repayment of Liberty's Port St. Lucie facility mortgage for $1.36 million.

         Pretax income before the cumulative effect of a change in accounting
principle was $14.03 million in the three months ended June 30, 2001, a 46.2%
increase as compared with $9.60 million in the three months ended June 30, 2000.
This increase was primarily the result of greater net revenues and improved
gross margins, partially offset by increased selling, general and administrative
expenses incurred to further our expansion efforts.

         Our income before the cumulative effect of a change in accounting
principle, net of taxes, increased 43.7% to $8.65 million, or $0.65 per diluted
weighted average share, for the quarter ended June 30, 2001, as compared with
$6.02 million, or $0.44 per diluted weighted average share, for the quarter
ended June 30, 2000. Net income/(loss) was $8.65 million, or $0.65 per diluted
weighted average share, for the three months ended June 30, 2001, as compared
with $(909,000), or $(0.07) per diluted weighted average share, for the three
months ended June 30, 2000.

Liquidity and Capital Resources

         We have generated positive cash flow from operations in each of the
last 10 quarters and have reported positive annual cash flows from operations in
each of the last 3 fiscal years. Our cash and cash equivalents balance decreased
$6.73 million to $32.84 million as of June 30, 2001, as compared with $39.57
million as of March 31, 2001, due primarily to cash used for investing and
financing activities that offset cash flows generated from operations. Cash
flows from operations of $4.43 million for the quarter ended June 30, 2001 were
generated by net income of $8.65 million offset by cash used to fund certain
areas of our operations, such as increasing spending for direct-response
advertising to further expand our customer base, both for diabetes testing and
respiratory supplies and decreasing levels of accrued expenses and accounts
payable to take advantage of cash discounts offered by vendors.

         In the quarters ended June 30, 2001 and June 30, 2000, we used $7.22
million and $4.02 million of cash for investing activities, respectively. Gross
property, plant and equipment purchases totaled $1.72 million and $4.02 million
for the three months ended June 30, 2001 and June 30, 2000, respectively. The
Company's higher spending for property, plant and equipment in the prior year
was related to the opening of the Company's Port St. Lucie facility. The
decrease in property, plant and equipment purchases was offset by the purchase
of $5.50 million of marketable securities in the quarter ended June 30, 2001,
resulting in a total decrease in cash flows from investing activities of $3.20
million in the quarter ended June 30, 2001, as compared with the quarter ended
June 30, 2000.

         In the quarter ended June 30, 2001, we used $3.94 million of cash for
financing activities, $2.97 million of which was used to repurchase 125,000
shares of our common stock. In June 2000, our Board of Directors approved a
1,000,000 share repurchase program which allows us to repurchase shares in the
open market. As of June 30, 2001, 362,000 shares had been repurchased under this
program for $9.61 million.


                                       18
<PAGE>   19
         In August 2001 our Board of Directors approved a repurchase program for
an additional 1,000,000 shares. To date no shares have been repurchased under
this supplemental repurchase program. Other financing activities included sales
of common stock, repayments of capital lease obligations and funding of
executive deferred compensation plans.

         Since our inception, we have raised $109.34 million in gross equity
capital, of which $7.16 million was from venture capital financings before our
initial public offering, $39.00 million from our March 1992 initial public
offering, $4.55 million from a November 1995 public offering of common stock,
$2.75 million from the March 1996 sale of 431,937 shares of our common stock
pursuant to Regulation S promulgated under the Securities Act of 1933, and
$55.88 million from the October 1999 sale of 2,629,599 shares of common stock.

         In November 2000, we filed an amendment to a shelf registration
statement we had originally filed in April 2000, to enable us to offer from time
to time, shares of our common stock having an aggregate value of up to $100
million. The Securities and Exchange Commission declared the shelf registration
statement effective during the quarter ended December 31, 2000. No shares of
common stock had been sold under this shelf registration statement as of June
30, 2001.

         We believe that our cash and cash equivalents balance as of June 30,
2001 of $32.84 million, together with other sources of funds, including funds
from maturing marketable securities and cash flow generated from operations,
will be sufficient to meet working capital, capital expenditure and financing
needs for the foreseeable future. In the event that we undertake to make
acquisitions of complementary businesses, products or technologies, we may
require substantial additional funding beyond currently available working
capital and funds generated from operations. We are conducting an active search
for the strategic acquisition of complementary businesses, products or
technologies which leverage our marketing, sales and distribution
infrastructure. We currently have no commitments or agreements with respect to
any such acquisition.

         We hold certain marketable securities and certain investments related
to executive deferred compensation plans, see Note 2, both of which are
accounted for pursuant to Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities." Marketable
securities, which have been classified as current assets in the accompanying
balance sheet, are reported at fair value and have been classified as available
for sale. The difference between amortized cost and fair market value, net of
tax effect, is shown as a separate component of shareholders' equity. Realized
and unrealized gains on marketable securities were not material for any period
presented. Investments related to the executive deferred compensation plans,
which have been classified as trading, are included in long term other assets
and are recorded at fair value. At June 30, 2001 the fair value of these
investments was not materially different from cost.



                                       19
<PAGE>   20
FACTORS AFFECTING FUTURE OPERATING RESULTS

         The statements contained in this Report that are not purely historical
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
including, but not limited to, statements regarding our expectations, hopes,
intentions or strategies regarding the future. Forward-looking statements
include, among others: statements regarding future benefits from our advertising
and promotional expenditures; statements regarding future net revenue levels;
statements regarding product development, introduction and marketing; and
statements regarding future acquisitions. All forward-looking statements
included in this Report are based on information available to us on the date
hereof, and we assume no obligation to update any such forward-looking
statements. It is important to note that our actual results could differ
materially from those in such forward-looking statements.

         Our future operating results remain difficult to predict. We continue
to face many risks and uncertainties which could affect our operating results,
including without limitation, those described below.

We could experience significantly reduced profits if Medicare changes, delays or
denies reimbursement

         Sales of a significant portion of our Chronic Care and Professional
Products supplies will depend on the continued availability of reimbursement of
our customers by government and private insurance plans. Any reduction in
Medicare reimbursement currently available for our products would reduce our
revenues. Without a corresponding reduction in the cost of such products, the
result would be a reduction in our overall profit margin. Similarly, any
increase in the cost of such products would reduce our overall profit margin
unless there was a corresponding increase in Medicare reimbursement. Our profits
could also be affected by the imposition of more stringent regulatory
requirements for Medicare reimbursement. The regulations that govern Medicare
reimbursement are complex and our compliance with those regulations may be
reviewed by federal agencies, including the Department of Health and Human
Services, the Department of Justice, and the Food and Drug Administration. Any
failure to comply with required Medicare reimbursement procedures could result
in delays or loss of reimbursement, fines or penalties, and other sanctions.

         The Department of Justice is currently conducting both a civil and a
criminal inquiry of our Liberty Medical Supply subsidiary ("Liberty").

         The Securities and Exchange Commission ("SEC") is currently conducting
an informal inquiry of the Company. The Company is voluntarily complying with
the inquiry by providing information and documents to the SEC.

         We cannot accurately predict the outcome of these inquiries at this
time.

We plan to continue our rapid expansion; if we do not manage our growth
successfully, our growth and profitability may slow or stop

         We have expanded our operations rapidly and plan to continue to expand.
This expansion has created significant demand on our administrative, operational
and financial personnel and other resources. Additional expansion in existing or
new markets could strain these resources and increase our need for capital. Our
personnel, systems, procedures, controls and existing space may not be adequate
to support further expansion.

The profitability of our Chronic Care and Professional Products segments will
decrease if we do not receive recurring orders from customers


                                       20
<PAGE>   21
         We generally incur losses and negative cash flow with respect to the
first order from a new customer for Chronic Care products and respiratory
products, included in our Professional Products segment, due primarily to the
marketing and regulatory compliance costs associated with initial customer
qualification. Accordingly, the profitability of these segments depends, in
large part, on recurring and sustained reorders. Reorder rates are inherently
uncertain due to several factors, many of which are outside our control,
including changing customer preferences, competitive price pressures, customer
transition to extended care facilities, customer mortality and general economic
conditions.

We could experience significantly reduced profits from our Chronic Care segment
if improved technologies that eliminate the need for consumable testing supplies
are developed for glucose monitoring

         The majority of our Chronic Care net revenues are from consumable
testing supplies, used to draw and test small quantities of blood for the
purpose of measuring and monitoring glucose levels. Numerous research efforts
are underway to develop more convenient and less intrusive glucose measurement
techniques. The commercialization and widespread acceptance of new technologies
that eliminate or reduce the need for consumable testing supplies could
negatively affect our Chronic Care business.

We could be liable for harm caused by products that we sell

         The sale of medical products entails the risk that users will make
product liability claims. A product liability claim could be expensive. While
management believes that our insurance provides adequate coverage, no assurance
can be made that adequate coverage will exist for these claims.

We could lose customers and revenues to new or existing competitors who have
greater financial or operating resources

         Competition from other sellers of products offered through our Chronic
Care, Professional Products and Consumer Healthcare segments, manufacturers of
healthcare products, pharmaceutical companies and other competitors is intense
and expected to increase. Many of our competitors and potential competitors are
large companies with well-known names and substantial resources. These companies
may develop products and services that are more effective or less expensive than
any that we are developing or selling. They may also promote and market these
products more successfully than we promote and market our products.

Loss of use of manufacturing or data storage facilities would significantly
reduce revenues and profits from our Consumer Healthcare and Professional
Products businesses

         We manufacture substantially all of our Professional Products and many
of our AZO products at our facility in Woburn, Massachusetts. In addition, we
process and store most of our customer data in our facility in Port St. Lucie,
Florida. If we cannot use any of these facilities as a result of the FDA,
Occupational Safety and Health Administration or other regulatory action, fire,
natural disaster or other event, our revenues and profits will decrease
significantly. We might also incur significant expense in remedying the problem
or securing an alternative manufacturing or data storage source.


                                       21
<PAGE>   22
If we or our suppliers do not comply with applicable government regulations, we
may be prohibited from selling our products

         Many of the products that we sell are regulated by the FDA and other
regulatory agencies. If any of these agencies mandate a suspension of production
or sales of our products or mandate a recall, we may lose sales and incur
expenses until we are in compliance with the regulations or change to another
acceptable supplier.

We could have difficulty selling our Consumer Healthcare and Professional
Products if we cannot maintain and expand our sales to distributors

         We rely on third-party distributors to market and sell our Consumer
Healthcare and Professional Products. Our sales of these products will therefore
depend in part on our maintaining and expanding marketing and distribution
relationships with pharmaceutical, medical device, personal care and other
distributors and on the success of those distributors in marketing and selling
our products.

Shortening or eliminating amortization of our direct-response advertising costs
could adversely affect our operating results

         Any change in existing accounting rules or business change that reduces
revenue or earnings or that shortens or eliminates the amortization period of
our direct-response advertising costs, currently four years for our diabetes
products and two years for our respiratory products, could result in accelerated
charges against our earnings.

Our quarterly revenues or operating results could vary, which may cause the
market price of our securities to decline

         We have experienced fluctuations in our quarterly operating results and
anticipate that such fluctuations could continue. Results may vary significantly
depending on a number of factors, including:

         -        changes in reimbursement guidelines and amounts;

         -        changes in regulations affecting the healthcare industry;

         -        changes in the mix or cost of our products;

         -        the timing of customer orders;

         -        the timing and cost of our advertising campaigns; and

         -        the timing of the introduction or acceptance of new products
                  and services offered by us or our competitors.

We may make acquisitions that will strain our financial and operational
resources

         We regularly review potential acquisitions of businesses and products.
Acquisitions involve a number of risks that might adversely affect our financial
and operational resources, including:

         -        diversion of the attention of senior management from important
                  business matters;

         -        amortization of substantial intangible assets;

         -        difficulty in retaining key personnel of an acquired business;

         -        failure to assimilate operations of an acquired business;


                                       22
<PAGE>   23
         -        failure to retain the customers of an acquired business;

         -        possible operating losses and expenses of an acquired
                  business;

         -        exposure to legal claims for activities of an acquired
                  business prior to acquisition; and

         -        incurrence of debt and related interest expense.

Our stock price could be volatile, which could result in substantial changes in
share price

         The trading price of our common stock has been volatile and is likely
to continue to be volatile. The stock market in general, and the market for
healthcare-related companies in particular, has experienced extreme volatility.
This volatility has often been unrelated to the operating performance of
particular companies. Investors may not be able to sell their common stock at or
above the price at which they purchased the stock. Prices for the common stock
will be determined in the marketplace and may be influenced by many factors,
including variations in our financial results, changes in earnings estimates by
industry research analysts, investors' perceptions of us and general economic,
industry and market conditions.

We may issue preferred stock with rights senior to the common stock

         Our articles of organization authorize the issuance of up to 2,000,000
shares of preferred stock without stockholder approval. The shares may have
dividend, voting, liquidation and other rights and preferences that are senior
to the rights of the common stock. The rights and preferences of any such class
or series of preferred stock would be established by our Board of Directors in
its sole discretion.


                                       23
<PAGE>   24
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          We own certain money market funds, mutual funds, and commercial paper
that are sensitive to market risks as part of our investment portfolio. The
investment portfolio is used to preserve our capital until it is required to
fund operations. We do not own derivative financial instruments in our
investment portfolio.


                                       24
<PAGE>   25
PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

         On November 27, 2000, Richard Bowe SEP-IRA filed a purported class
action lawsuit in the United States District Court for the District of
Massachusetts (the "Bowe Complaint") against the Company and one of its
officers. The Bowe Complaint claims violations of Sections 10(b) and 20(a) of
the Securities Exchange Act of 1934 ("the "Exchange Act") and Rule 10b-5
promulgated thereunder and seeks unspecified damages, attorneys' fees and costs.
The Bowe Complaint also refers to a magazine article published in November 2000
reporting an alleged investigation by the Federal Bureau of Investigation of the
Company and its Liberty Medical Supply subsidiary ("Liberty"). On December 19,
2000, Trust Advisors Equity Plus LLC filed a purported class action lawsuit in
the United States District Court for the District of Massachusetts (the "Trust
Advisors Complaint") against the Company and one of its officers. The Trust
Advisors Complaint asserts the same claims, makes the same allegations and seeks
the same relief as the Bowe Complaint. On January 26, 2001, the plaintiffs in
the Bowe and Trust Advisors Complaints moved to consolidate the Bowe and Trust
Advisors Complaints and to be appointed as lead plaintiffs in the consolidated
action pursuant to the Section 21D(a)(3)(B) of the Exchange Act. On July 30,
2001 the court granted these motions. Although no filing has yet been made, the
Company believes, based on public statements made by plaintiffs' counsel that
plaintiffs' counsel plans to move to amend their complaint to extend the class
period through August 3, 2001. The Company believes it has meritorious defenses
to the existing claims made in the Bowe and Trust Advisors Complaints and
intends to contest these claims vigorously. The Company has not seen the amended
complaint and therefore cannot comment on its merits. Although the Company does
not consider an unfavorable outcome to the existing claims probable, the Company
cannot accurately predict their ultimate disposition.

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)      There are no exhibits following this report.

(b)      There were no reports on Form 8-K filed during the three months ended
         June 30, 2001.


                                       25
<PAGE>   26
                                   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.


                                        PolyMedica Corporation
                                        --------------------------------------
                                        (registrant)


                                        /s/ Steven J. Lee
                                        --------------------------------------
                                        Steven J. Lee
                                        Chairman and Chief Executive Officer
                                        (Principal Executive Officer)



                                        /s/ Eric G. Walters
                                        ---------------------------------------
                                        Eric G. Walters
                                        Executive Vice President and Clerk
                                        (Principal Financial Officer)



                                        /s/ Stephen C. Farrell
                                        ---------------------------------------
                                        Stephen C. Farrell
                                        Chief Financial Officer
                                        (Principal Accounting Officer)

Dated: August 14, 2001


                                       26