<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934 for the quarterly period ended March 30, 2002 or

[ ]  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 for the transition period from         to         .
                                                         -------    -------

                         Commission file number 0-17885

                        BEI MEDICAL SYSTEMS COMPANY, INC.
             (Exact name of Registrant as specified in its charter)

             Delaware                                   71-0455756
---------------------------------        ---------------------------------------
    (State of incorporation)                (I.R.S. Employer Identification No.)

                               100 Hollister Road
                           Teterboro, New Jersey 07608
                           ---------------------------
                    (Address of principal executive offices)

                                 (201) 727-4900
                                 ---------------
                         (Registrant's telephone number)

     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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

              Common Stock:  $.001 Par Value, 9,857,691 shares as of May 2, 2002


                                      ----
                                       1

<PAGE>

                                      INDEX

PART 1.     FINANCIAL INFORMATION   (Unaudited)                            PAGE
                                                                           ----

Item 1.   Financial Statements

            Condensed Consolidated Balance Sheets -- March 30,
              2002 (unaudited) and September 29, 2001                        3

            Condensed Consolidated Statements of Operations --
              Three Months Ended March 30, 2002 (unaudited) and
              March 31, 2001 (unaudited) and Six Months Ended
              March 30, 2002 (unaudited) and March 31, 2001                  4
             (unaudited)

            Condensed Consolidated Statements of Cash Flows -- Six
              Months Ended March 30, 2002 (unaudited) and March
              31, 2001 (unaudited)                                           5

            Notes to Condensed Consolidated Financial Statements --
              March 30, 2002                                                 6

Item 2.   Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                         7

PART II.    OTHER INFORMATION

Item 4.   Submission of Matters to Vote of Security Holders                 13

Item 5.   Other Information                                                 13

            Subsequent Events                                               13

            Risk factor                                                     13

Item 6.   Exhibits and Reports on Form 8-K                                  23

             (a)   Exhibits

             (b)   Reports on Form 8-K

       SIGNATURES                                                           24


                                      ----
                                       2

<PAGE>

                              FINANCIAL INFORMATION

Item 1.  Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS
BEI Medical Systems Company, Inc. and Subsidiaries

<TABLE>
<CAPTION>
(dollars in thousands)                                              March 30,        September 29,
                                                                      2002               2001
                                                                   (Unaudited)     (See note below)
---------------------------------------------------------------------------------------------------
<S>                                                                  <C>                <C>
 ASSETS
 Current assets
   Cash and cash equivalents                                         $   5,298          $   9,846
   Restricted cash                                                         159                159
   Marketable securities                                                   473                452
   Trade receivables, net                                                  441                284
   Inventories                                                             906                720
   Income taxes                                                             --                284
   Other current assets                                                    339                158
---------------------------------------------------------------------------------------------------
 Total current assets                                                    7,616             11,903
   Plant and equipment, net                                                603                446
   Patents, net                                                            156                164
   Other assets                                                             68                 68
---------------------------------------------------------------------------------------------------
 Total assets                                                        $   8,443          $  12,581
===================================================================================================

 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities
   Trade accounts payable                                            $   1,106          $     626
   Accrued expenses and other liabilities                                1,352              1,313
   Current portion of lease obligation                                      27                 26
---------------------------------------------------------------------------------------------------
 Total current liabilities                                               2,485              1,965
   Long term lease obligation, less current portion                        109                123
   Stockholders' equity                                                  5,849             10,493
---------------------------------------------------------------------------------------------------
 Total liabilities and stockholders' equity                          $   8,443          $  12,581
===================================================================================================
</TABLE>

See notes to condensed consolidated financial statements.

Note: The balance sheet at September 29, 2001 has been derived from the audited
consolidated balance sheet at that date but does not include all the information
and footnotes required by generally accepted accounting principles for complete
financial statements.


                                      ----
                                       3

<PAGE>

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
BEI Medical Systems Company, Inc. and Subsidiaries
(Unaudited)

<TABLE>
<CAPTION>
                                                             Quarter Ended                   Six Months Ended
 (amounts in thousands except per share amounts)       March 30,        March 31,        March 30,       March 31,
                                                        2002              2001              2002            2001
 -------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>             <C>               <C>
    Revenues                                             $731             $40            $1,252             $71
    Cost of revenues                                      584             177             1,032             310
 -------------------------------------------------------------------------------------------------------------------
        Gross profit (loss)                               147            (137)              220            (239)

    Selling, general and administrative
      expenses                                          2,219             853             4,365           1,566
    Research, development and related
      expenses                                            312             528               602             822
 -------------------------------------------------------------------------------------------------------------------
                                                        2,531           1,381             4,967           2,388
 -------------------------------------------------------------------------------------------------------------------
        Loss from operations                           (2,384)         (1,518)           (4,747)         (2,627)

    Interest income                                        25              62                73             119
    Interest expense                                       (4)             --                (8)             (1)
 -------------------------------------------------------------------------------------------------------------------
        Loss before income taxes                       (2,363)         (1,456)           (4,682)         (2,509)

    Income taxes                                           --              --                --              --
 -------------------------------------------------------------------------------------------------------------------
        Net loss                                      ($2,363)        ($1,456)          ($4,682)        ($2,509)
 ===================================================================================================================

Loss per Common Share
        Net loss per common share                      ($0.24)         ($0.19)           ($0.48)         ($0.33)
 ===================================================================================================================

    Weighted average shares outstanding                 9,766           7,660             9,756           7,648
 ===================================================================================================================
</TABLE>

See notes to condensed consolidated financial statements.


                                      ----
                                       4

<PAGE>

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
BEI Medical Systems Company, Inc. and Subsidiaries
 (Unaudited)

<TABLE>
<CAPTION>

                                                                                   Six Months Ended
                                                                        -------------------------------------
(dollars in thousands)                                                    March 30, 2002       March 31, 2001
-------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                  <C>
Net cash used in operating activities                                        ($4,281)             ($2,055)

Cash flows from investing activities:
  Capital expenditures                                                          (260)                 (10)
  Purchase of marketable securities                                              (15)                 (97)
  Reduction in long-term security deposit                                                              23
-------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                           (275)                 (84)

Cash flows from financing activities:
  Proceeds from stock option and warrant exercises                                21                   --
  Repayment of lease obligation                                                  (13)                  --
  Net proceeds from issuance of Series A Convertible Preferred Stock              --                3,701
-------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                          8                3,701

-------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                          (4,548)               1,562

Cash and cash equivalents at beginning of period                               9,846                4,228
-------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period                                    $5,298               $5,790
=============================================================================================================
</TABLE>

See notes to condensed consolidated financial statements.


                                      ----
                                       5

<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, Continued
BEI Medical Systems Company, Inc. and Subsidiaries
(Unaudited)

March 30, 2002

Note 1
Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the interim periods presented are not
necessarily indicative of the results that may be expected for the year ending
September 28, 2002. For further information, refer to the consolidated financial
statements and footnotes thereto in the Company's Annual Report on Form 10-K for
the year ended September 29, 2001.

Note 2
Inventories
      (dollars in thousands)              March 30, 2002      September 29, 2001
--------------------------------------------------------------------------------
     Finished products                          $781                 $602
     Work in process                             125                  118
--------------------------------------------------------------------------------
     Inventories                                $906                 $720
================================================================================

Note 3
Loss Per Share

     As a result of the net loss for all periods presented, weighted average
shares used in the calculation of basic and diluted loss per share are the same.
Weighted average shares exclude unvested restricted stock, which amounted to
approximately 77,250 and 31,000 shares for the periods ended March 30, 2002, and
March 31, 2001, respectively. Common stock equivalents are excluded from the
loss per share for all periods presented because the effect would be
anti-dilutive.

Note 4
Subsequent events

On May 14, 2002, Boston Scientific Corporation and BEI Medical Systems Company,
Inc. announced the signing of a definitive agreement for Boston Scientific to
acquire BEI in an all-cash transaction for a purchase price of approximately $95
million, or $6.84 per common share equivalent. The transaction, which will be
accomplished by a cash tender offer and follow-on merger, is expected to close
in the second quarter of calendar year 2002. The tender offer for all common and
preferred shares of BEI is expected to commence later this month and is
conditioned upon the tender of a majority of the outstanding shares of BEI and
other customary conditions. Management and certain other stockholders of BEI
have agreed to support the acquisition by tendering their shares into the tender
offer, voting their shares in favor of the transaction at any shareholder
meeting or selling their securities to Boston Scientific. The BEI board has
unanimously voted to recommend the tender offer to its shareholders.


                                      ----
                                       6

<PAGE>

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

     The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements that involve risks
and uncertainties. Such forward-looking statements may be deemed to include
information that is not historical, including without limitation, statements
based on our current expectations, assumptions, estimates and projections about
our company and our industry, including statements with respect to the timely
development, acceptance, commercialization and pricing of our Hydro
ThermAblater(R) or HTA(R), the impact of competitive products and pricing, our
ability to satisfy the conditions of the Food and Drug Administration "FDA"
approval and on-going regulatory requirements, the adequacy of anticipated
sources of cash to fund our future capital requirements, our ability to raise
additional capital on terms favorable to the Company, or at all, the
availability or realization of strategic alternatives, general economic
conditions as they affect our customers and the timing and scale of anticipated
product cost reduction programs. Words such as "believes," "anticipates,"
"expects," "intends" and similar expressions are intended to identify
forward-looking statements, but are not the exclusive means of identifying such
statements. Readers are cautioned that the forward-looking statements reflect
management's analysis only as of the date hereof, and we assume no obligation to
update these statements. Actual events or results may differ materially from the
results discussed in or implied by the forward-looking statements. Factors that
might cause such a difference include, but are not limited to, those risks and
uncertainties discussed below under the caption "Risk Factors" and elsewhere in
this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the
period ended September 29, 2001. The following discussion should be read in
conjunction with the Financial Statements and the Notes thereto included in Item
1 of this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K
for the fiscal year ended September 29, 2001.

Critical Accounting Policies

     Our financial statements are based on the selection and application of
significant accounting policies, which require management to make significant
estimates and assumptions. We believe that the following are some of the more
critical judgment areas in the application of our accounting policies that
currently affect our financial condition and results of operations.

     Revenue Recognition: We recognize revenue on our proprietary Hydro
ThermAblator(R) or HTA(R) control units and the disposable procedure sets as
products are shipped, provided that a purchase order has been received or a
contract has been executed, there are no uncertainties regarding customer
acceptance, the sales price is fixed and determinable and collectibility is
deemed probable.

     Accounts Receivable: We are required to estimate the collectibility of our
trade receivables, which requires a considerable amount of judgment in assessing
the ultimate realization of these receivables, including the current
credit-worthiness of each customer. Significant changes in required reserves may
occur in the future as the Company continues to expand its customer base.

     Inventory: We are required to state our inventories at the lower of cost or
market. In assessing the ultimate realization of inventories, we are required to
make judgments as to future demand requirements and compare that with the
current inventory levels. It is possible that changes in required inventory
reserves may occur in the future due to changes in market conditions and the
extent to which the HTA gains market acceptance.

     Deferred Taxes: We account for deferred income taxes based upon differences
between


                                      ----
                                       7

<PAGE>

the financial reporting and income tax bases of our assets and liabilities. The
measurement of deferred tax assets is adjusted by a valuation allowance, if
necessary, to recognize the extent to which, more likely than not, the future
tax benefits will be recognized.

     We have recognized no income tax benefit for the three or six month periods
ended March 30, 2002 and March 31, 2001. The cumulative net operating loss
carryforwards as of March 30, 2002 were approximately $14.9 million. We project
losses to continue through fiscal year 2002. These losses remain available to us
on a carryforward basis to offset any future earnings, but have been fully
offset by a valuation allowance in the financial statements, as their future
realization is uncertain.

     Overview: BEI Medical Systems Company, Inc. is a medical device technology
company focused on commercializing its proprietary Hydro ThermAblator(R)
(HTA(R)) for women's health. This therapeutic system is designed to ablate the
endometrial lining of the uterus in pre-menopausal women with menorrhagia
(excessive uterine bleeding) due to benign causes for whom child bearing is
complete. The HTA was approved by the Food and Drug Administration (FDA) to be
marketed in the United States in April 2001. The approval is subject to standard
FDA conditions, including labeling and advertising requirements, expiration
dating of the procedure sets, use by physicians having received training in
diagnostic hysteroscopy, and three-year follow-up of pivotal trial study
patients.

     The HTA was specifically designed for use in performing endometrial
ablation, which entails the destruction under controlled conditions of the
endometrium, the lining of the uterus. Endometrial ablation is an alternative to
hysterectomy for women with menorrhagia due to benign causes. The HTA is a
portable treatment unit, which utilizes low-pressure gravity-fed, and externally
heated physiologic saline under microprocessor control to continuously circulate
heated fluid within the uterine cavity under direct hysteroscopic visual
control. The HTA treatment using the hysteroscopic approach can be performed on
an outpatient basis in a hospital, ambulatory surgical center or in a doctor's
office using a local anesthetic. The procedure typically takes less than thirty
minutes.

     Menorrhagia, often occurs in the absence of uterine fibroids or tumors, and
hormonal treatment is often unsatisfactory. The condition is responsible for
approximately 150,000 of the 600,000 hysterectomies performed annually in the
United States, but many women who do not seek hysterectomy for relief may suffer
in silence until the occurrence of menopause.

     In the Company's Phase III clinical trial, treatment using the HTA
completely eliminated uterine bleeding in 40% of the patients whose condition
was reviewed 12 months following treatment, while an additional 42% exhibited a
decrease in uterine bleeding to normal levels or less, as defined by the FDA. In
addition, HTA treatment resulted in an overall average reduction in uterine
bleeding of 84.8%. As announced in November 2001, for those women who were
available for follow-up and whose condition was reviewed 24 months following
treatment, 47.0% had complete cessation of uterine bleeding and an additional
45.1% had a reduction in uterine bleeding to normal levels or less, as defined
by the FDA. In addition, at 24 months following treatment, 94.0% of patients
were satisfied with the results of their HTA treatment and 92.5% of patients
reported alleviation of menstrual discomfort.

     BEI's sales and marketing strategy is primarily focused on the use of
existing distribution channels that are well established in the medical device
industry within the United States. Using these distribution channels, BEI has
been and will be able to gain access to experienced sales representatives
working with the gynecological community, BEI's target audience.

     When seeking reimbursement from health insurance companies, managed-care
organizations and other payors of the HTA treatment, gynecologists are able to
use an existing CPT-4 Procedure Code for endometrial ablation using
hysteroscopic control. BEI Medical


                                      ----
                                       8

<PAGE>

Systems believes this should accelerate the process of acceptance of the Hydro
ThermAblator by the gynecological community and healthcare institutions.

Three Months Ended March 30, 2002 and March 31, 2001

     Revenues for the three months ended March 30, 2002, were $731,000, an
increase of $691,000 from the comparable three-month period of fiscal 2001 and
were 40.3% higher than the first quarter of fiscal 2002. The higher revenue
reflects the impact of the FDA approval to market the HTA in the United States
in April 2001. Prior to the FDA approval, the Company had no HTA related
domestic revenue. Domestic revenue from the HTA was $664,000 in the second
quarter of fiscal 2002 due primarily to increased shipments of the HTA
single-use procedure sets, which represented approximately 80% of the total
domestic revenue. International revenue for the HTA was $67,000 in the second
quarter of fiscal 2002 compared to $40,000 in 2001.

     The gross profit was $147,000 for the second quarter of fiscal 2002
compared to the negative gross profit of $137,000 in the second quarter of
fiscal 2001. Overhead expenses for the second quarter of fiscal 2002 were
approximately $165,000, compared to $132,000 in the same period of fiscal 2001,
reflecting higher spending for personnel, operating materials and outside
services as a result of the increased volume of commercial activity. However,
the higher revenue resulted in a favorable absorption of fixed overhead
expenditures and improved gross profit. The Company received FDA approval in the
first quarter of fiscal 2002 for a Premarket Approval Application (PMA)
supplement permitting modifications to the assembly of the sheath used in the
HTA procedure set. This approval allows BEI to incorporate more cost-effective
manufacturing practices in the manufacture of the HTA procedure set. The Company
anticipates that the adaptations to the new sheath assembly in the HTA procedure
set will be implemented by the end of the third quarter of fiscal year 2002,
once sterilization validation and the transition to manufacturing of the
modified design are completed.

     Selling, general and administrative expenses increased to $2,219,000 for
the three months ended March 30, 2002, from $853,000 for the three months ended
March 31, 2001. The increase in expenses reflects higher sales and marketing
investment spending of $1,120,000 in fiscal 2002. The Company increased selling
and marketing activities to $1,415,000 for the three months ended March 30,
2002, from $295,000 for the three months ended March 31, 2001, following the
April 2001 FDA approval to market the HTA in the United States. Areas of
increased investment spending include: the addition of a vice president of
sales, field zone sales management, and other administrative, reimbursement and
customer service support personnel, plus include related travel and training
expenses; commission expenses resulting from the higher domestic revenue;
outside marketing and promotional services for the development of product and
promotional materials; and expenses related to the Company's participation in
physician trade shows, the support of clinical education, the sponsorship of
physician training workshops and the training of field sales representatives.
Administrative expenses increased $246,000 or 44.1% to $804,000, due primarily
to higher professional fees, plus increased personnel and insurance costs.

     Research, development and related expenses were $312,000 in the second
quarter of fiscal 2002, a decline of $216,000 or 40.9% from the comparable
period of fiscal 2001. The lower expenses reflect the absence of a one-time
non-cash charge of $143,000 in the second quarter of fiscal 2001 related to the
issuance of a warrant to purchase shares of common stock in exchange for a
reduction in the future royalty payments on certain disposable components of


                                      ----
                                       9

<PAGE>

the Company's HTA. In addition, a lower rate of spending is sufficient to
support the Phase III FDA clinical trial on a post-approval basis as compared to
the levels that were required during the prior year prior to FDA approval.
Mandatory post-approval surveys of patients treated during the Phase III FDA
clinical trial at twenty-four and thirty-six months following treatment will
require continued spending through the end of calendar 2002, at lower levels
than those required prior to FDA approval. Partially offsetting the lower rate
of spending related to the clinical trial is increased spending for engineering
services related to the Company's cost reduction program for the HTA single-use
procedure set.

     Interest income declined to $25,000 in the three month period ended March
30, 2002 compared to $62,000 in the three month period ended March 31, 2001,
principally as a result of lower average interest rates earned on cash balances
on hand during the quarter.

     Interest expense increased to $4,000 in the second quarter of fiscal 2002
compared to zero for the comparable quarter of fiscal 2001 reflecting cost
related to the Company's long-term lease obligation.

     The Company recognized no income tax benefit for the three-month periods
ended March 30, 2002 and March 31, 2001. The cumulative net operating loss
carryforwards as of March 30, 2002 were approximately $15.6 million. The Company
projects losses to continue at least through fiscal year 2002. These losses
remain available to the Company on a carryforward basis to offset any future
earnings, but they have been fully offset by a valuation allowance in the
financial statements, as their future realization is uncertain. There is no
remaining loss carryback available to the Company.

Six Months Ended March 30, 2002 and March 31, 2001

     Revenues for the six months ended March 30, 2002, were $1,252,000, an
increase of $1,181,000 from the comparable six-month period of fiscal 2001. The
higher revenue reflects the impact of the FDA approval to market the HTA in the
United States in April 2001. Domestic revenue from the HTA was $1,153,000 in the
for the six months ended March 30, 2002, due primarily to shipments of the HTA
single-use procedure sets, which represented over 85% of the total domestic
revenue. International revenue for the HTA was $99,000 in fiscal 2002 compared
to $69,000 in 2001.

     The gross profit was $220,000 for the first six months of fiscal 2002
compared to the negative gross profit of $239,000 in the comparable period of
fiscal 2001. Overhead expenses for the first six months of fiscal 2002 were
approximately $313,000, compared to $232,000 in the same period of fiscal 2001,
reflecting higher spending for personnel and operating materials as a result of
the increased volume of commercial activity. However, the higher revenue
resulted in a favorable absorption of fixed overhead expenditures and improved
gross profit.

     Selling, general and administrative expenses increased to $4,365,000 for
the six months ended March 30, 2002, from $1,566,000 for the six months ended
March 31, 2001. The increase in expenses primarily reflects higher sales and
marketing investment spending in fiscal 2002. Sales and marketing spending in
fiscal 2002 was $2,910,000 compared to $502,000 in the same period of fiscal
2001. The Company increased selling and marketing activities following the April
2001 FDA approval to market the HTA in the United States. Areas of increased
investment spending include: the addition of a vice president of sales, field
zone sales management, and other administrative, reimbursement and customer
service support personnel, plus related travel and training expenses; commission
expenses resulting from the


                                      ----
                                       10

<PAGE>

higher domestic revenue; outside marketing and promotional services for the
development of product and promotional materials; and expenses related to the
Company's participation in physician trade shows, the support of clinical
education, the sponsorship of physician training workshops and the training of
outside independent field sales representatives. Administrative expenses
increased $391,000 or 36.7% to $1,455,000, due primarily to higher professional
fees, plus increased personnel and insurance costs.

     Research, development and related expenses were $602,000 in the first six
months of fiscal 2002, a decline of $220,000 or 26.8% from the comparable period
of fiscal 2001. The lower expenses reflects the absence of a one-time non-cash
charge of $143,000 in the second quarter of fiscal 2001 related to the issuance
of a warrant to purchase shares of common stock in exchange for a reduction in
the future royalty payments on certain disposable components of the Company's
HTA. In addition, a lower rate of spending is currently necessary to support the
clinical trial on a post-approval basis than the levels that were required prior
to approval during the prior year. Partially offsetting the lower rate of
spending related to the clinical trial is increased spending for engineering
services related to the Company's cost reduction program for the HTA single-use
procedure set.

     Interest income declined to $73,000 in the six month period ended March 30,
2002 compared to $119,000 in the six month period ended March 31, 2001,
principally as a result of lower average interest rates earned on cash balances
on hand during the period.

     Interest expense increased to $8,000 in the first six months of fiscal 2002
compared to $1,000 for the comparable quarter of fiscal 2001 reflecting cost
related to the Company's long-term lease obligation.

     The Company recognized no income tax benefit for the six-month periods
ended March 30, 2002 and March 31, 2001.

Liquidity and Capital Resources

     BEI has incurred significant operating losses and the Company expects
losses to continue for at least the next one to two years. The Company is
dependent on a single platform of technology, the HTA, to achieve commercial
success and generate sufficient future revenues and profits to fulfill capital
needs. In addition, the Company expects that it will continue to expend
substantial resources in expansion of marketing and sales activities and
research and development. BEI's future revenues will depend upon, among other
factors, its ability to cost effectively commercialize the HTA. The Company's
capital requirements to complete the commercialization of the HTA depend on
numerous factors, including the resources required to successfully commercialize
the HTA in the United States and the extent to which the HTA gains market
acceptance and sales.

     The Company believes that existing cash balances, anticipated future
revenues and funds anticipated from the exercise of outstanding common stock
warrants will provide adequate funding to meet the Company's minimum capital
requirements until the end of the calendar year. The Company is considering
options to secure additional financing at this time. The timing and amount of
such capital requirements cannot be predicted accurately. In addition, in order
to attempt to maximize the return on assets the Board of Directors is evaluating
various strategic alternatives that may be available to the Company. In addition
to the effect of general market conditions on our ability to obtain additional
capital, such factors as the performance of the HTA, competing technologies and
the extent to which physicians accept the HTA may become factors that affect our
ability to obtain additional capital. We may not be able to obtain additional
financing on favorable terms or at all. In the event the Company is unable to
secure additional sources of


                                      ----
                                       11

<PAGE>

capital when we need them, its ability to continue as a going concern will be
seriously impaired and we may be required to scale back our operations,
research, marketing or sales efforts or obtain funds through arrangements with
collaborative partners or others that may require us to license or relinquish
rights to technologies or products. If we raise additional funds by issuing
equity securities, further dilution to our stockholders may result, and new
investors could have rights superior to existing stockholders.

     There can be no assurance that the Company will successfully commercialize
the HTA or that the Company will achieve significant revenue from either
international or domestic sales of the HTA. In addition, there can be no
assurance that the Company will achieve or sustain profitability in the future.
In the event the Company is unable to achieve profitability or secure additional
sources of capital, its ability to continue as a going concern may be severely
impaired. The accompanying financial statements have been prepared on a going
concern basis and do not include any adjustments relating to recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result should the Company be unable to continue as a
going concern.

     During the first six months of fiscal 2002 cash used in operating
activities was $4,281,000 reflecting the net loss of $4,682,000 which was
partially offset by the receipt of $284,000 from the sale of a portion of the
Company's New Jersey net operating loss carryforwards, as well as increases in
accounts payable and accrued liabilities of $519,000 and adjustments to
reconcile the net loss to net cash used in operations of $147,000. Increases in
working capital for accounts receivable, inventory and other current assets of
$182,000, $186,000 and $181,000, respectively, partially offset the above.

     Cash used in investing activities during the first six months of fiscal
2002 was $275,000 primarily reflecting the purchase of manufacturing molds,
field placement equipment and office equipment plus increased purchases of
marketable securities related to the Company's deferred compensation plan.

     Net cash provided by financing activities of $8,000 reflects proceeds from
the exercise of common stock options and warrants of $21,000 partially offset by
payment of long-term lease obligations of $13,000.

     As of March 30, 2002, in anticipation of future revenue growth, the Company
has placed non-cancelable purchase orders for HTA control units, HTA procedure
sets and related inventory totaling approximately $1,500,000 with projected
delivery dates scheduled over the next six months. In addition, to support the
Company's cost reduction program and the Company's domestic marketing launch of
the HTA, the Company has made non-cancelable commitments for the purchase of
sales and marketing materials and services, manufacturing molds and engineering
support totaling over $100,000. The Company had no other material capital or
other commitments as of March 30, 2002. As discussed above, the Company's
capital requirements to complete the commercialization of the HTA depend on
numerous factors including the amount of resources that will be required to
successfully commercialize the HTA in the United States and the extent to which
the HTA gains market acceptance and sales.

     The Company leases certain office equipment and facilities under operating
and capital lease agreements expiring through fiscal year 2006. Total
commitments under these lease agreements are as follows:

                                   2002     $ 163
                                   2003     $ 209
                                   2004     $ 154
                                   2005     $  55
                                   2006     $  27

Effects of Inflation

     Management believes that, for the periods presented, inflation has not had
a material effect on the Company's operations.


                                      ----
                                       12

<PAGE>

                                    PART II.
                                OTHER INFORMATION

Item 4.  Submission of Matters to Vote of Security Holders

               1.   The Annual Meeting of Stockholders of the Company (the
                    "Meeting") was held on March 12, 2002. At the meeting,
                    Charles Crocker and Ralph Richart, M.D. were elected to
                    serve as Class I directors of the Company for a three-year
                    term expiring at the Company's 2005 Annual Meeting and
                    Jordan Davis was elected to serve as the Series A director
                    until the 2003 Annual Meeting. The Class I directors were
                    elected by a vote of 9,706,409 votes in favor and 40,165
                    withheld for Mr. Crocker, 9,734,205 votes in favor and
                    12,369 votes withheld for Dr. Richart. Mr. Davis was elected
                    as the Series A director by a vote of 581,151 votes in favor
                    and zero votes withheld.

                    In addition, the following directors continued in office:
                    Richard W. Turner, Ph.D., and Gary D. Wrench (until the
                    Company's 2003 Annual Meeting); and Lawrence A. Wan, Ph.D.
                    (until the Company's 2004 Annual Meeting).

               2.   The other matters presented at the Meeting and the votes of
                    the stockholders with respect thereto are as follows:

                    The selection of Ernst & Young LLP as the Company's
                    independent auditors for the fiscal year ending September
                    28, 2002 was ratified by a vote of 9,712,082 votes in favor,
                    2,721 against and 31,771 abstentions.

Item 5.  Other Information

Subsequent events

     On May 14, 2002, Boston Scientific Corporation and BEI Medical Systems
Company, Inc. announced the signing of a definitive agreement for Boston
Scientific to acquire BEI in an all-cash transaction for a purchase price of
approximately $95 million, or $6.84 per common share equivalent. The
transaction, which will be accomplished by a cash tender offer and follow-on
merger, is expected to close in the second quarter of calendar year 2002. The
tender offer for all common and preferred shares of BEI is expected to commence
later this month and is conditioned upon the tender of a majority of the
outstanding shares of BEI and other customary conditions. Management and certain
other stockholders of BEI have agreed to support the acquisition by tendering
their shares into the tender offer, voting their shares in favor of the
transaction at any shareholder meeting or selling their securities to Boston
Scientific. The BEI board has unanimously voted to recommend the tender offer to
its shareholders.

     This report is neither an offer to purchase nor a solicitation of an offer
to sell securities of BEI. The tender offers will be made solely by an offer to
purchase and a related letter of transmittal to be disseminated upon the
commencement of the tender offer. Holders of BEI securities should read the
Tender Offer Statement on Schedule TO filed by Boston Scientific when it becomes
available, as well as the Schedule 14D-9 to be filed by BEI, as they will
contain important information about the tender offer. Investors can obtain -- at
no cost -- the Tender Offer Statement on Schedule TO, the Schedule 14D-9, and
other filed documents, from the Securities and Exchange Commission's website
HTTP://WWW.SEC.GOV.

                                  RISK FACTORS

     The risks and uncertainties described below are not the only ones facing
our company. Additional risks and uncertainties not presently known to us or
those we currently deem immaterial may impair our business operations. If any of
the following risks actually occur, our business could be harmed.

We have a history of operating losses and anticipate future losses and we may
never be profitable.

     Historically, we have incurred significant losses in our medical device
business and we expect to incur increasing and significant losses in the future
for at least the next one to two years as we expend substantial resources:

     o    for expansion of marketing and sales activities;

     o    for research and development;

     o    start-up manufacturing costs; and

     o    in support of regulatory and reimbursement approvals.

     If we are able to commercialize the HTA, we cannot guarantee we will
achieve significant revenues from either international or domestic sales of the
HTA. In addition, we cannot assure


                                      ----
                                       13

<PAGE>

you that we will achieve or sustain profitability in the future. In the event we
are unable to achieve profitability or secure additional sources of capital, our
ability to continue as a going concern may be severely impaired.

We have a limited operating history on which you can base an evaluation of our
business and prospects.

     We have only a limited medical device operating history on which you can
base an evaluation of our business and prospects. As an early stage medical
device company, you must consider our prospects in light of the risks, expenses
and difficulties frequently encountered by entrants into the medical device
industry, which is characterized by an increasing number of participants,
intense competition and a high failure rate. We cannot be certain that we will
be able to overcome the risks and difficulties that we face and successfully
compete with other medical device companies that have competing products or
treatments.

We may not be able to commercialize the HTA profitably.

     Our ability to successfully commercialize the HTA will depend upon, among
other factors, acceptance by the medical community of the HTA. We believe that
physicians will not use the HTA unless they determine, based on clinical data
and other factors, that the HTA:

     o    is an attractive safe treatment alternative for dysfunctional uterine
          bleeding;

     o    offers clinical utility in a cost-effective manner; and

     o    does not require extensive physician training prior to use.

     Even though we have received approval from the FDA to market the HTA in the
United States, we cannot guarantee that the HTA will be competitive with respect
to these factors or that it will gain any significant degree of market
acceptance among physicians, patients and healthcare payors. We believe that
recommendations and endorsements by physicians will be essential for market
acceptance of the HTA and we cannot be certain that any such recommendations or
endorsements will be obtained. If we fail to achieve significant market
acceptance of the HTA, our business, financial condition and results of
operations will suffer.

We have limited capital resources to fund our operations and we may be unable to
complete the commercialization of the HTA.

     Our capital requirements to complete the commercialization of the HTA
depend on numerous factors including:

     o    the resources required to manufacture and successfully commercialize
          the HTA in the United States; and

     o    the extent to which the HTA gains market acceptance and sales.

     We believe that our existing cash balances, anticipated future revenues and
funds anticipated from the exercise of outstanding common stock warrants will
provide adequate funding to meet our minimum capital requirements until the end
of the calendar year. We are considering options to secure additional financing
at this time. The timing and amount of such capital requirements cannot be
predicted accurately. In addition, in order to attempt to maximize the return on
assets we are evaluating various strategic alternatives that may be available to
the Company. In addition to the effect of general market conditions on our
ability to obtain additional capital, such factors as the performance of the
HTA, competing technologies and the extent to which physicians accept the HTA
may become factors that affect our ability to obtain additional capital. We may
not be able to obtain additional financing on favorable terms or at all. In the
event we are unable to secure additional sources of capital when we need them,
our


                                      ----
                                       14

<PAGE>

ability to continue as a going concern will be seriously impaired and we may be
required to scale back our operations, research, marketing or sales efforts or
obtain funds through arrangements with collaborative partners or others that may
require us to license or relinquish rights to technologies or products. If we
raise additional funds by issuing equity securities, further dilution to our
stockholders may result, and new investors could have rights superior to
existing stockholders.

Our revenues are dependent upon a single platform of technology, the HTA. If we
are unable to commercialize the HTA profitably, we may not have any other source
of revenue and our business will fail.

     We are dependent on a single platform of technology, the HTA, to achieve
commercial success and generate sufficient future revenues and profits to
fulfill capital needs. We cannot guarantee you that the HTA will achieve
commercial acceptance. We do not have an alternative source of revenue or
profits to meet capital needs in the event the HTA does not achieve commercial
acceptance. If we are unable to commercialize the HTA profitably, and we do not
have any other sources of revenue, our business will fail.

We have no manufacturing experience and rely on contract manufacturers. If we
are unable to successfully manufacture our HTA in commercial quantities, we may
not be able to generate revenue and become profitable.

     We have no experience in managing the manufacture and assembly of the HTA
in commercial quantities and we rely on third party contract manufacturers to
manufacture the HTA and its disposable components. In order to commercialize the
HTA successfully, we must manufacture or assemble the HTA through third parties
in accordance with FDA requirements in commercial quantities, at high quality
levels and at commercially reasonable costs. In addition, the third party
manufacturers are responsible for registering and maintaining their own facility
regulatory and compliance approvals. Any regulatory or compliance actions
against a third party vendor by either the FDA or any other regulatory body
could affect the third party vendor's ability to supply us, which in turn could
harm our business. The HTA has not yet been manufactured in commercial
quantities at commercially reasonable costs, and we cannot guarantee you that it
will be. As a result, we cannot be certain that we will not encounter
difficulties in scaling up manufacturing, including problems involving:

     o    production yields;

     o    quality control;

     o    component supply; and

     o    shortages of qualified manufacturing personnel.

     In addition, we cannot be certain that we will be able to enter into
satisfactory agreements with third party manufacturers to manufacture the HTA.
If we fail to enter into agreements with third-party manufacturers on reasonable
terms, if at all, or if we are unable to produce the HTA in commercial
quantities at high quality levels and at commercially reasonable prices our
business, financial condition and results of operations will suffer.

We rely on single-source suppliers for a number of the HTA's components, and if
we are unable to obtain components, our business would be harmed and our
operating results would suffer.

     We currently depend on single-source vendors for a number of the HTA's
significant components. Because the HTA has not yet been manufactured in
significant commercial quantities, we cannot be certain that our current vendors
of these components will be able or willing to meet our future demands.
Establishing additional sources of supply for these components could take a
substantial amount of time and expense. If we need to switch to a


                                      ----
                                       15

<PAGE>

replacement vendor, the manufacture and delivery of our HTA could be interrupted
for an extended period. Although we will try to maintain sufficient quantities
of inventory of such components to minimize production delays or interruptions,
we cannot guarantee you that we will find suitable alternatives at reasonable
prices, if at all, or that any such alternatives will remain available to us. If
we are not able to obtain acceptable suppliers of components in a timely manner
or to find and maintain suitable replacement suppliers of components, our
business, financial condition and results of operations will suffer.

We have limited sales experience. If we fail to establish marketing and direct
sales capabilities sufficient to support commercial sales of the HTA, our
business will suffer.

     We have no direct international or domestic field sales force, and have
only a limited number of relationships with international distributors and
domestic manufacturing sales representatives to market the HTA. We have been
limited to marketing of the HTA internationally with a group of specialty
distributors in selected international markets and we have recently entered into
marketing and sales representative agreements with a number of marketing
specialty organizations to promote the HTA in the United States. We cannot
guarantee you that these relationships or agreements will result in sales of the
HTA or that we will be successful in establishing additional partnership
relationships on commercially reasonable terms, if at all. Achieving market
acceptance for the HTA may require us to establish additional marketing and
direct sales capability sufficient to support sales in commercial quantities.
Establishing such capability will require significant financial and human
resources. We cannot be certain that we will be able to recruit and retain
additional qualified marketing or sales personnel or that our future sales
efforts will be successful. If we fail to establish and maintain an effective
distribution channel for the HTA or to establish and retain qualified and
effective sales personnel to support commercial sales of the HTA, our business,
financial condition and results of operations will suffer.

We may be unable to adequately protect or enforce our intellectual property
rights or secure rights to third-party patents.

     Our ability to compete effectively will depend substantially on our ability
to develop and maintain the proprietary aspects of our technology. We cannot be
certain that any of our issued patents, or any future patents that may be
issued, will offer any degree of protection to the HTA against competitive
products. Further, we cannot be certain that any patents that may be issued or
licensed to us or any of our patent applications will not be challenged,
invalidated or circumvented in the future. In addition, we cannot assure you
that competitors, many of whom have substantial resources and have made
substantial investments in competing technologies, will not seek to apply for
and obtain patents that will prevent, limit or interfere with our ability to
make, use or sell the HTA either in the United States or in international
markets.

     The medical device industry has been characterized by extensive litigation
regarding patents and other intellectual property disputes, and some companies
in the industry have employed intellectual property litigation to gain a
competitive advantage. We cannot assure you that we will not in the future
become subject to patent infringement claims and litigation or interference or
other proceedings in the United States Patent Office or USPTO. The defense and
prosecution of intellectual property suits, USPTO proceedings and related legal
and administrative proceedings are both costly and time consuming. Litigation
may be necessary to enforce patents issued or licensed to us, to protect our
trade secrets or know-how or to determine the enforceability, scope and validity
of the proprietary rights of others.

     Any litigation or USPTO proceedings involving us will result in substantial
expense to us and significant diversion of effort by our technical and
management personnel. An adverse


                                      ----
                                       16

<PAGE>

determination in litigation or USPTO proceedings to which we may become a party
could subject us to significant liabilities to third parties or require us to
seek licenses from third parties. Although some patent and intellectual property
disputes in the medical device area have been settled through licensing or
similar arrangements, costs associated with such arrangements may be substantial
and could include substantial ongoing royalties. Furthermore, we cannot be
certain that necessary licenses would be available to us on satisfactory terms,
if at all. If we are subjected to an adverse determination in a judicial or
administrative proceeding or if we fail to obtain necessary licenses, we could
be prevented from manufacturing and selling the HTA, which would harm our
business, financial condition and results of operations.

     In addition to patents, we rely on trade secrets and proprietary know-how,
which we seek to protect, in part, through appropriate confidentiality and
proprietary information agreements. These agreements generally provide that all
confidential information developed or made known to an individual by us during
the course of the individual's relationship with us is to be kept confidential
and not disclosed to third parties or utilized by the individual, except in
specific circumstances. The agreements also generally provide that all
inventions conceived by the individual in the course of rendering services to us
shall be the exclusive property of BEI. We cannot guarantee you that our
proprietary information will not be misused or confidentiality agreements with
employees, consultants and others will not be breached, that we will become
aware of such breach or will have adequate remedies for any breach, or that our
trade secrets will not otherwise become known to or independently developed by
competitors.

We are subject to uncertainties regarding healthcare reimbursement and reform.
If patients are not reimbursed by third parties for the cost of the therapeutic
procedure in which the HTA is used or there are adverse changes in government
and private third party payors' policies toward reimbursement for such
procedures, our business will be harmed.

     Our ability to successfully commercialize the HTA in the United States
depends in part on the extent to which patients are reimbursed by governmental
agencies, private health insurers and other organizations, such as health
maintenance organizations, for the cost of such treatments. Although
reimbursement for diagnostic and therapeutic procedures to treat uterine
disorders such as menorrhagia, or dysfunctional uterine bleeding and fibroid
treatment have generally been available in the United States, we cannot
guarantee you that it will continue to be the case or that the fees currently
allowed for these procedures will not be reduced. Our business could also be
harmed by changes in reimbursement policies of government or private healthcare
payors, particularly to the extent that any such changes affect reimbursement
for diagnostic or therapeutic procedures in which the HTA is used. Failure by
physicians, hospitals and other users of our products to obtain sufficient
reimbursement from healthcare payors for procedures in which the HTA is used, or
adverse changes in government and private third-party payors' policies toward
reimbursement for such procedures, could harm our business, financial condition
and results of operations.

     We expect that there will be continued pressure on cost-containment
throughout the United States healthcare system. Reforms may include mandated
basic healthcare benefits, controls on healthcare spending through limitations
on the growth of private health insurance premiums and Medicare and Medicaid
spending, the creation of large insurance purchasing groups and fundamental
changes to the healthcare delivery system. We anticipate that Congress and state
legislatures will continue to review and assess alternative healthcare delivery
systems and payment methodologies and public debate of these issues will likely
continue in the future. Due to uncertainties regarding the ultimate features of
reform initiatives and their enactment and implementation, we cannot predict
which, if any, of such reform proposals will be adopted, when they may be
adopted or what impact they may have on us.


                                      ----
                                       17

<PAGE>

     Market acceptance of the HTA in international markets may be dependent in
part upon the availability of reimbursement within prevailing healthcare payment
systems. Reimbursement and healthcare payment systems in international markets
vary significantly by country, and include both government sponsored and private
healthcare insurance. Although we will seek international reimbursement
approvals, obtaining such approvals can require 12 to 18 months or longer and we
cannot be certain that any such approvals will be obtained in a timely manner,
that we will obtain sufficient reimbursement, or that we will obtain any
reimbursement at all. The failure to receive additional international
reimbursement approvals would have a significant effect on the market acceptance
of the HTA in the international markets in which we are seeking approvals and
could harm our business, financial condition and results of operations.

We face intense competition in our industry, and if our competitors develop new
technologies or products that are more effective than ours, our opportunity to
commercialize the HTA will be reduced or eliminated.

     Competition in the treatment of dysfunctional uterine bleeding is intense
and is accentuated by the rapid pace of technological development. Research and
development of products or treatments by others may result in breakthroughs,
which render the HTA obsolete even before we generate revenue. There are other
products that have received regulatory approvals that will compete with the HTA
and many of our competitors have significantly greater resources than we do. The
principal competitive products for our HTA that have received regulatory
approvals include:

     o    ThermaChoice balloon, a product of Gynecare, a subsidiary of Ethicon,
          Inc./Johnson & Johnson, a device for endometrial ablation, was cleared
          to be marketed in the United States by the FDA in December 1997;

     o    Her Option, a product of CryoGen, which is a cryogenic probe that
          creates an iceball within the uterus, was approved by the FDA in April
          2001; and

     o    NovaSure, a product of Novacept, which utilizes a bipolar
          electrosurgical probe that incorporates an expandable conductive mesh
          that is brought into contact with the lining of the uterus through the
          application of suction, was approved by the FDA in October 2001.

     Other products of principal competitors that we believe are currently
undergoing clinical trials in the United States include:

     o    MEA, a product of Microsulis PLC, which employs a hand-held applicator
          to apply low power microwaves to the uterine cavity; and

     o    Gynelase, a product of Sharplan, which is a diode laser thermal
          therapy device.

     Another competitive technology that is being sold internationally but not
domestically is Cavaterm, a product of Wallsten Medical SA, which is a hand held
balloon similar to that of the ThermaChoice balloon.

     Other large healthcare companies may enter the market in the future.
Competing companies may succeed in developing technologies and products that are
efficacious or more cost effective than the HTA. We cannot guarantee you that
these companies will not succeed in developing technologies and products that
are more effective than the HTA or that would render our technologies or the HTA
obsolete or not competitive. We expect competition for devices and services to
treat dysfunctional menstrual bleeding to increase. Such competition could harm
our business, financial condition and results of operations.

If product liability lawsuits are successfully brought against us, we may incur
substantial liabilities and may be


                                      ----
                                       18

<PAGE>

required to limit commercialization of the HTA or other products that we may
develop.

     We face an inherent business risk of financial exposure to product
liability claims in the event that the use of the HTA or other products we may
develop result in personal injury. The HTA is complex and will be used in
medical procedures and in situations where there is a potential risk of serious
injury, adverse side effects or death. If we cannot successfully defend
ourselves against such claims, we may incur substantial liabilities or be
required to limit the commercialization of the HTA or other products we may
develop. We currently maintain product liability insurance with coverage limits
of $10,000,000 per occurrence and in the aggregate. We cannot predict, however,
whether such insurance is sufficient, or if not, whether we will be able to
obtain such insurance as is sufficient, to cover the risks associated with our
business or whether such insurance will be available at premiums that are
commercially reasonable. A successful claim against or settlement by BEI in
excess of its insurance coverage or our inability to maintain insurance in the
future could harm our business, financial condition and results of operations.

Our business is regulated by the government. We cannot guarantee that we will
obtain regulatory approvals to commercialize the HTA or other products that we
may develop.

     Our products are medical devices subject to extensive regulation by the
U.S. Food and Drug Administration, or FDA, under the Federal Food, Drug, and
Cosmetic Act. Each medical device that we wish to commercially distribute in the
U.S. will likely require FDA to grant either 510(k) clearance or premarket
application approval, or PMA approval, prior to marketing. The FDA's 510(k)
clearance pathway usually takes from 4 to 12 months, but it can last longer. The
PMA approval pathway is much more costly, lengthy and uncertain. It generally
takes from one to three years or even longer. In April 2001, we received PMA
approval of the HTA for treatment of menorrhagia or dysfunctional uterine
bleeding; in July 31, 2001, we received approval from the FDA to market a
lighter weight, smaller, and more portable version of the HTA Control Unit and
on December 7, 2001, we received approval from the FDA for a PMA supplement
permitting modifications to the assembly of the sheath used in the HTA procedure
set. A new PMA or PMA supplement will be required in the event of a modification
to the HTA, its labeling or its manufacturing process that affects safety or
effectiveness. We cannot guarantee that such approvals will be granted in a
timely fashion or at all.

     After a device such as the HTA is placed on the market, numerous regulatory
requirements apply. These include: the Quality System Regulation, or QSR, which
requires manufacturers to follow elaborate design, testing, control,
documentation and other quality assurance procedures during the manufacturing
process; labeling regulations; the FDA's general prohibition against promoting
products for unapproved or "off-label" uses; and the Medical Device Reporting
regulation, which requires that manufacturers report to the FDA if their device
may have caused or contributed to a death or serious injury or malfunctioned in
a way that would likely cause or contribute to a death or serious injury if it
were to recur.

     We are subject to inspection and marketing surveillance by the FDA to
determine our compliance with regulatory requirements. Noncompliance can result
in enforcement action which may include warning letters, recalling products,
ceasing product marketing, paying significant fines and penalties, and similar
FDA actions which could limit product sales, delay or halt product shipment,
delay new product clearance or approvals, and adversely affect our
profitability. Unanticipated changes in existing regulatory requirements or
adoption of new requirements could hurt our business, financial condition, and
results of operations.


                                      ----
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<PAGE>

Risks associated with international sales may harm our business.

     Our international sales are dependent upon the marketing efforts of, and
sales by, international distributors. We may also rely on these distributors to
assist us in obtaining reimbursement approvals from both government and private
insurers in certain international markets. In general, we have chosen to operate
through small distribution firms because of the belief that these firms will
devote greater attention to the HTA. However, the use of small distributors
increases the risks associated with financial instability of distributors, which
includes the risk that distributors will cease operations or will be unable to
satisfy financial obligations to us. If a distributor were to fail to invest
adequate capital promoting the HTA or were to cease operation, we would likely
be unable to achieve significant revenues in the territory. In addition, because
we have limited resources directed at supporting international sales, we have
only limited sell-through with many of our distributors. We also do not
currently have distributors in a number of significant international markets
that we have targeted and will need to establish additional international
distribution relationships. We cannot be certain that we will engage qualified
distributors on commercially reasonable terms in a timely manner. If we fail to
engage distributors or if the distributors fail to achieve significant revenues
from sales of the HTA, our business, financial condition and results of
operations would be harmed. In addition, our international revenues and
operations may be limited or disrupted by:

     o    government and regulatory controls;

     o    export license requirements;

     o    political instability;

     o    trade restrictions;

     o    changes in tariffs and other local taxes;

     o    difficulties in managing international operations;

     o    fluctuations in foreign currency exchange rates; and

     o    freight and transportation costs.

     We cannot guarantee you that we will be able to successfully commercialize
the HTA in any international market.

Our operating results may fluctuate, and failure to meet financial expectations
may disappoint securities analysts or investors and result in a decline in our
stock price.

     We expect that our operating results will fluctuate significantly from
quarter to quarter in the future and will depend on a number of factors, many of
which are outside our control. Some of these factors include:

     o    actions relating to reimbursement and regulatory matters;

     o    the extent to which the HTA gains market acceptance; and

     o    timing of regulatory approval of competitive products and the rate of
          market penetration of competing products.

We rely on the expertise of key personnel. If any of these individuals leave,
our operations could suffer.

     We are dependent upon a number of key management and technical personnel.
The loss of the services of one or more key employees would harm our business,
financial condition and results of operations. Our ability to manage our
transition to commercial-scale operations, and


                                      ----
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<PAGE>

hence our success, will depend on the efforts of these individuals. Our success
will also depend on our ability to attract and retain additional highly
qualified management and technical personnel. We face intense competition for
qualified personnel, and we cannot guarantee that we will be able to attract and
retain such personnel. We do not currently have key person insurance on the life
of any employee.

We are subject to significant amount of control by our existing stockholders and
management and thus investors will have less influence on our stockholder
decisions.

     Our directors, officers and their affiliates beneficially own approximately
28.4% of the outstanding common stock (assuming exercise of vested stock
options) as of May 2, 2002. As a result of such common stock ownership, our
directors, officers and their affiliates, if they voted together, would be able
to exercise significant influence over the election of members of our Board of
Directors and other corporate actions requiring stockholder approval.

We have adopted several antitakeover measures that may deter, delay or prevent
change of control or other transactions that could be beneficial to our
stockholders.

     We have taken a number of actions that could have the effect of
discouraging a takeover attempt that might be beneficial to our stockholders who
wish to receive a premium for their shares from a potential bidder. For example,
we are subject to the anti-takeover provisions of Section 203 of the Delaware
General Corporation Law, or the Delaware Law, and our Certificate of
Incorporation contains a fair price provision, the combined effect of which
prohibits us from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. The application of Section 203
and the fair price provision could have the effect of delaying or discouraging a
change of control of BEI. We have also adopted a Stockholder Rights Plan that
would cause substantial dilution to a person who attempts to acquire us on terms
not approved by our Board of Directors. In addition, our Board of Directors has
the authority to issue up to approximately 3,700,000 shares of preferred stock
and to determine the price, rights, preferences and privileges of those shares
without any further vote or action by our stockholders. Any such preferred stock
could contain dividend rights, conversion rights, voting rights, terms of
redemption, redemption prices, liquidation preferences or other rights superior
to the rights of holders of common stock. The Board of Directors has no present
intention of issuing any additional shares of preferred stock (1,114,485 shares
of Series A convertible preferred stock were outstanding as of May 2, 2002), but
reserves the right to do so in the future. Further, our Certificate of
Incorporation provides for staggered terms for the members of the Board of
Directors. The staggered Board of Directors and certain other provisions of our
Certificate of Incorporation and Bylaws may have the effect of delaying or
discouraging changes in control or management of BEI, which could adversely
affect the market price of our common stock.

Our stockholders will suffer dilution upon the conversion of our outstanding
preferred stock.

     The 1,114,485 shares of Series A convertible preferred stock issued on
February 14, 2001 are convertible at any time into an aggregate of 2,228,970
shares of our common stock at an initial conversion price of $1.88 per share.
The initial conversion price will be adjusted for stock splits, combinations,
certain dividends and distributions and other similar events and could also be
adjusted on a weighted average basis in the event we issue additional securities
at a per share price below $1.88. Accordingly, if all of the shares of Series A
convertible preferred stock were converted into common stock, there would be
dilution of at least 2,228,970 shares of


                                      ----
                                       21

<PAGE>

common stock, or approximately 18.4% of the 9,857,691 million shares of common
stock outstanding on May 2, 2002.



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                                       22

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Item 6.  Exhibits and Reports on Form 8-K

               (a)  Index to Exhibits


                    10.8   Registrant's 1992 Restricted Stock Plan, as amended,
                           and form of Restricted Stock Agreement.

                    10.36  Employment Agreement between the Registrant and
                           Richard W. Turner dated October 7, 1999, as amended
                           April 19, 2000.

                    10.45  Amendment to Rights Agreement dated August 20, 2001,

                    10.46  Description of Transaction Bonus Plan.

                    10.47  Description of Management Incentive Bonus Plan.

                    21.1   Subsidiaries of the Registrant

               (b)  Reports on Form 8-K

                    (i)    The Company filed no reports on Form 8-K during the
                           quarter ended March 30, 2002.


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<PAGE>

                                   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 on May 14, 2002.



                                    BEI Medical Systems Company, Inc.

                                    By:  /s/ Thomas W. Fry
                                       ------------------------------------
                                       Thomas W. Fry
                                       Vice President of Finance and
                                       Administration, Secretary and Treasurer
                                       (Chief Financial Officer)



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                                       24

<PAGE>

                                INDEX TO EXHIBITS


  Exhibit
  Number
  -------

   10.8     Registrant's 1992 Restricted Stock Plan, as amended, and form of
            Restricted Stock Agreement.

   10.37    Employment Agreement between the Registrant and Richard W. Turner
            dated October 7, 1999, as amended April 19, 2002.

   10.45    Amendment to Rights Agreement dated August 30, 2001.

   10.46    Description of Transaction Bonus Plan.

   10.47    Description of Management Incentive Bonus Plan.

    21.1    Subsidiaries of the Registrant


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