SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

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


For Quarter Ended       September 30, 2000          Commission File No.  0-24866


                             ISOLYSER COMPANY, INC.
             (Exact name of Registrant as specified in its charter)


           Georgia                                                 58-1746149
(State or other jurisdiction of                                  (IRS Employer
 incorporation or organization)                              Identification No.)

                           4320 International Blvd NW
                             Norcross, Georgia 30093
                    (Address of principal executive offices)

                                 (770) 806-9898
              (Registrant's telephone number, including area code)

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 at least the past 90 days.

Yes   X     No

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

Class                                           Outstanding at November 13, 2000

Common Stock, $.001 par value                              41,595,214




<PAGE>
<TABLE>
<CAPTION>
<S>                                                   <C>                        <C>
                             ISOLYSER COMPANY, INC.
                      Condensed Consolidated Balance Sheets
                                 (in thousands)

                                                          (unaudited)
                                ASSETS                 SEPTEMBER 30, 2000         DECEMBER 31, 1999
                                                      ---------------------------------------------
Current assets
    Cash and cash equivalents                               $        15,437        $        17,006
    Accounts receivable, net                                         13,899                 12,313
    Disposition escrow account                                          -                    3,130
    Inventories, net                                                 21,207                 24,036
    Prepaid expenses and other assets                                 1,973                  1,298
                                                      ---------------------------------------------
          Total current assets                                       52,516                 57,783
                                                      ---------------------------------------------

Property, plant and equipment                                        22,243                 21,583
    Less accumulated depreciation                                   (14,568)               (12,990)
                                                      ---------------------------------------------
     Property, plant, and equipment, net                              7,675                  8,593
                                                      ---------------------------------------------

Investment in equity securities                                       4,223                  3,605
Intangibles and other assets, net                                    23,790                 25,358
                                                      ---------------------------------------------
          Total assets                                      $        88,204        $        95,339
                                                      =============================================


            LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
   Accounts payable                                         $         2,846        $         4,340
   Bank overdraft                                                       846                    565
   Current installments of long term debt                                31                  2,615
   Current portion of deferred licensing revenue                      2,012                  3,000
   Current portion of product financing arrangement                     520                    520
   Accrued expenses                                                   2,152                  2,653
                                                      ---------------------------------------------
          Total current liabilities                         $         8,407        $        13,693
                                                      ---------------------------------------------

Long term deferred licensing revenue                                  2,500                  6,000
Other liabilities                                                       589                    924
                                                      ---------------------------------------------
          Total liabilities                                 $        11,496      $          20,617
                                                      ---------------------------------------------

Shareholders' equity
   Common stock;                                                         42                     41
   Additional paid in capital                                       208,580                206,600
   Accumulated deficit                                             (131,078)              (131,283)
   Unrealized gain on available for sale securities                     369                    -
   Cumulative translation adjustment                                   (221)                   (22)
   Unearned shares restricted to employee
     stock ownership plan                                              (180)                  (180)
                                                      ---------------------------------------------
                                                                     77,512                 75,156
Treasury shares, at cost                                               (804)                  (434)
                                                      ---------------------------------------------
     Total shareholders' equity                                      76,708                 74,722
                                                      ---------------------------------------------
          Total liabilities and shareholders' equity       $         88,204                 95,339
                                                      =============================================
</TABLE>
                                     2
<PAGE>
<TABLE>
<CAPTION>
<S>                                  <C>                    <C>                      <C>                   <C>

                                                          ISOLYSER COMPANY, INC.
                         Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
                                              (in thousands, except per share data)
                                                           (unaudited)

                                      THREE MONTHS ENDED      THREE MONTHS ENDED      NINE MONTHS ENDED     NINE MONTHS ENDED
                                      SEPTEMBER 30, 2000      SEPTEMBER 30, 1999      SEPTEMBER 30, 2000    SEPTEMBER 30, 1999
                                      -----------------------------------------------------------------------------------------

Net product sales                     $           13,662      $           16,303      $          40,606     $         83,323
Licensing revenue                                    506                     750                  2,006                  750
                                      ----------------------- ----------------------- ---------------------- ------------------
          Total revenues                          14,168                  17,053                 42,612               84,073

Cost of products sold                              7,982                   9,713                 23,655               52,936
                                      -----------------------------------------------------------------------------------------
          Gross profit                             6,186                   7,340                 18,957               31,137

Operating expenses
  Selling, general and administrat                 5,106                   5,046                 15,423               22,810
  Research and development                         1,016                     710                  2,667                2,122
  Amortization of intangible                         279                     311                    838                1,208
  Impairment loss                                      -                       -                      -                  1,590
                                      -----------------------------------------------------------------------------------------
         Total operating expenses                  6,400                   6,067                 18,928               27,730
                                      -----------------------------------------------------------------------------------------
Income (loss) from operations                       (214)                  1,273                     29                3,407
Interest income                                      387                     171                    748                  253
Interest expense                                     (52)                   (130)                  (400)              (1,342)
Gain on sale of assets                                20                     124                    -                     20
                                      -----------------------------------------------------------------------------------------
Income before income tax expense                     141                   1,438                    377                2,442
Income tax expense                                    48                     128                    172                  515
                                      -----------------------------------------------------------------------------------------
Net income                              $             93      $            1,310        $           205     $          1,927
                                      =========================================================================================

Other comprehensive income
(loss)
  Foreign currency translation
  gain (loss)                                        (81)                     80                   (199)                  95
  Unrealized gain on available for
  sale securities                                     25                     -                      369                  -
                                      -----------------------------------------------------------------------------------------
Comprehensive income                    $             37      $            1,390     $              375        $       2,022
                                      =========================================================================================

Net income per common share
  - basic and diluted                   $           0.00      $             0.03     $             0.00        $        0.05
                                      =========================================================================================

Basic weighted average number of
common shares outstanding                         41,442                  40,499                 41,230               40,190
                                      =========================================================================================

Diluted weighted average number of
common shares outstanding                         43,141                  42,030                 44,012               40,943
                                      =========================================================================================
</TABLE>

                                       3
<PAGE>
<TABLE>
<CAPTION>
<S>                                                                            <C>                  <C>

                             ISOLYSER COMPANY, INC.
                 Condensed Consolidated Statements of Cash Flows
                                 (in thousands)
                                   (unaudited)
                                                                               NINE MONTHS ENDED     NINE MONTHS ENDED
                                                                               SEPTEMBER 30, 2000    SEPTEMBER 30, 1999
                                                                               ------------------    ------------------
Cash flows from operating activities:
   Net income                                                                   $            205     $          1,927

Adjustments to reconcile net income to net cash used in operating activities:
   Depreciation                                                                            1,768                2,696
   Amortization                                                                            1,172                1,197
   Provision for doubtful accounts                                                            90                  134
   Licensing revenue                                                                      (2,006)                (750)
   Provision for obsolete and slow moving inventory                                          134                1,590
   Stock option compensation expense                                                          73                  -
   Changes in assets and liabilities, net of effects from disposed businesses               (734)               2,622
                                                                              -----------------------------------------
NET CASH SUPPLIED BY OPERATING ACTIVITIES                                                    702                9,416
                                                                              -----------------------------------------
Cash flows from investing activities:
   Purchase of and deposits for property, plant and equipment                               (997)               1,562)
   Investment in available for sale securities                                              (249)                 -
   Investment in other securities                                                            (44)                 -
   Disposition proceeds                                                                      167               25,395
                                                                              -----------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                                       (1,123)              23,833
                                                                              -----------------------------------------
Cash flows from financing activities:
   Net repayments under credit agreements                                                    -                (25,213)
   Changes in bank overdraft                                                                 281                  756
   Net repayments under notes payable                                                     (2,768)                 -
   Proceeds from exercise of stock options                                                 1,507                  590
   Purchase of treasury stock                                                               (371)                 -
   Proceeds from issuance of common stock                                                    402                1,752
                                                                              -----------------------------------------
NET CASH USED IN FINANCING ACTIVITIES                                                       (949)             (22,115)
                                                                              -----------------------------------------
Effect of exchange rate changes on cash                                                     (199)                  95
Net increase (decrease) in cash and cash equivalents                                      (1,569)              11,229
Cash and cash equivalents at beginning of period                                          17,006                7,325
                                                                              -----------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                     $          15,437     $         18,554
                                                                              =========================================
</TABLE>

                                       4

<PAGE>

                             ISOLYSER COMPANY, INC.
                   Notes to Consolidated Financial Statements
                                   (unaudited)

1)   In the  opinion of  management,  the  information  furnished  reflects  all
     adjustments (consisting only of normal recurring adjustments) necessary for
     a fair  presentation of the financial  position,  results of operations and
     cash flows for the  interim  periods  presented.  Results  for the  interim
     periods are not  necessarily  indicative  of results to be expected for the
     full year. The consolidated  financial  statements herein should be read in
     conjunction  with the consolidated  financial  statements and notes thereto
     contained in the  Company's  Annual  Report on Form 10-K for the year ended
     December 31, 1999.

2)   Inventories are stated at the lower of cost or market and are summarized as
     follows:

      (in thousands)             September 30, 2000            December 31, 1999

Raw materials and supplies        $    10,738                  $    12,056
Work in process                           950                        1,389
Finished goods                         10,623                       12,199
                                 ------------------            -----------------
         Total                         22,311                       25,644

Reserve for excess, slow moving
     and obsolete inventory           (1,104)                      (1,608)
                                 ------------------            -----------------
         Total                    $   21,207                   $    24,036
                                 ==================            =================

At  September  30,  2000  and  December  31,  1999 the net  OREX  inventory  was
approximately $6.8 million and $7.2 million, respectively.

3)   The  remaining  net assets of the MedSurg  subsidiary  at December 31, 1999
     were classified as held for sale in the accompanying condensed consolidated
     financial  statements.  Title to these  assets  transferred  to  Allegiance
     Healthcare  Corporation  ("Allegiance")  on  January  31,  2000.  They were
     comprised of the following:

         (in thousands)                                        December 31, 1999
                                                      --------------------------
Assets:
         Inventory                                 $                       4,846
                                                      --------------------------
                   Total Assets                                            4,846
Liabilities:
         Accounts payable                                                  3,211
         Accrued liabilities                                               1,635
                                                      --------------------------
                   Total Liabilities                                       4,846

         Net assets held for sale                  $                           -
                                                      ==========================

                                       5
<PAGE>

On March 31, 1999, the Company disposed of its former corporate headquarters for
proceeds of  approximately  $1.9 million.  Effective  May 31, 1999,  the Company
disposed  of the stock of its  White  Knight  subsidiary  ("White  Knight")  for
proceeds of  approximately  $8.2  million.  These  proceeds  were used to reduce
outstanding borrowings under the Company's Credit Agreement.

On July 12, 1999, the Company disposed of substantially all of the assets of its
MedSurg  subsidiary  and entered into an OREX License and Supply  Agreement (the
"License  Agreement")  with  Allegiance  for  net  proceeds  of  $28.6  million,
consisting of $25.5 million in cash and a $3.1 million  escrow  receivable  (the
"Disposition  Escrow Account").  A portion of these proceeds was used to pay-off
the remaining balance of the Company's Credit Agreement.  As part of the sale of
MedSurg assets,  title to certain MedSurg assets and liabilities  transferred to
Allegiance  on January 31, 2000. On February 16, 2000,  Allegiance  deposited an
additional $1.2 million into the Disposition Escrow Account related to costs the
Company incurred in 2000 on Allegiance's behalf.

On July 21, 2000, the Company  completed a settlement  agreement with Allegiance
and  disbursed  the entire  proceeds  of the  Disposition  Escrow  Account.  The
settlement  called for the  disbursement  to Allegiance of $2.5 million from the
escrow  funds  with  the  balance  returned  to the  Company.  Amounts  paid  to
Allegiance  as a result of the  settlement  will be recorded  as a reduction  to
deferred  royalties.  On July 21, 2000,  the Company  received the proceeds from
this settlement of $1.8 million plus accumulated interest.

The following  represents  the results of operations of the above noted disposed
entities for the three months and nine months ended September 30, 1999:

                                         Three months ended    Nine months ended
(in thousands, except per share data)    September 30, 1999   September 30, 1999


Net revenues                                   $ 1,536             $ 38,673
Net profit (loss)                                 (44)                (518)
Net profit (loss) per share - basic            $   -               $ (0.01)

4)   Basic per share  earnings  (loss) is computed  using the  weighted  average
     number of common  shares  outstanding  for the  period.  Diluted  per share
     earnings   (loss)  is  computed   including  the  dilutive  effect  of  all
     contingently  issuable  shares.  The  difference  between basic and diluted
     weighted  average  shares is  attributable  to 1.7  million and 2.8 million
     stock  options for the three  months and nine months  ended  September  30,
     2000,  respectively.  There were 1.5  million and  753,000  dilutive  stock
     options  outstanding  for the three months and nine months ended  September
     30, 1999, respectively.

5)   On February 11, 2000 the Company  paid  $249,000  for  approximately  13.0%
     interest in Consolidated  Ecoprogress  Technology,  Inc. ("CES").  CES is a
     Canadian  environmental  technology  company  focused  on being a leader in
     developing and selling biodegradable and disposable absorbent products such
     as diapers,  feminine hygiene, adult incontinence and other products.  This
     investment  is  classified  in  accordance   with  Statement  of  Financial
     Accounting  Standards ("SFAS") 115,  Accounting for Certain  Investments in


                                       6
<PAGE>

     Debt and Equity  Securities as available for sale  securities and is stated
     at market value.  Any change in market value between periods is included as
     a component of  shareholders'  equity.  The value of this  investment as of
     September 30, 2000 was $619,000.

Item 2.

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations

Results of Operations

Net revenues for the three months ended  September 30, 2000 (the "2000 Quarter")
were  $14.2  million  compared  to $17.1  million  for the  three  months  ended
September 30, 1999 (the "1999  Quarter"),  a decrease of 16.9%. Net revenues for
the nine month period ended  September  30, 2000 (the "2000  Period") were $42.6
million  compared to $84.1 million for the nine month period ended September 30,
1999 (the "1999 Period"), a decrease of 49.3%. Excluding sales of the healthcare
division of White Knight  ("White Knight  Healthcare")  which was sold as of May
31, 1999, and MedSurg which was sold on July 12, 1999, net revenues for the 2000
Quarter and Period  decreased  8.7% and 9.1%,  respectively,  as compared to the
1999 Quarter and Period.  Sales of Microtek  products  declined to $11.2 million
during the 2000 Quarter as compared to $12.1 million during the 1999 Quarter,  a
decrease of 7.1%,  and declined to $33.2  million in the 2000 Period as compared
to $38.2  million in the 1999  Period,  a decrease  of 13.1%.  This  decline was
primarily  a  result  of  sales   during  the  1999  Period  from  a  short-term
manufacturing  contract  arrangement with a customer during the 1999 Period with
no comparable  sales in the 2000 Period,  and a decrease in  Microtek's  OEM and
International businesses. Sales of safety products declined to $2.0 million from
$2.2 million or 7.8% during the 2000 Quarter as compared to the 1999 Quarter and
decreased  to $5.9  million  from $6.4 million or 6.8% during the 2000 Period as
compared to the 1999 Period.  The quarter and period  decline in safety  product
sales  primarily  reflects  reduced  production  caused by supplier  performance
problems.

Included  in the  foregoing  sales  figures  are $1.3  million  in sales of OREX
Degradables and Enviroguard  products during the 2000 Period as compared to $1.5
million  during the  corresponding  period of 1999.  During  1997,  the  Company
substantially  reduced selling and marketing efforts related to OREX Degradables
and  focused on  preserving  its  existing  base of  hospitals  purchasing  OREX
Degradables  and  evaluating  means  to  exploit  the  market  position  of OREX
Degradables  within its various  market  potentials.  During  1998,  the Company
substantially  revised its strategy to  commercialize  its OREX  products.  As a
result of these  efforts,  in April 1999 the Company  introduced  new degradable
products to the healthcare industry under the Enviroguard trademark,  which uses
a  hydroentanglement  manufacturing  process to produce a spunlaced fabric.  The
Company's  future  performance  will depend to a substantial  degree upon market
acceptance   of  this  product  and  the  Company's   ability  to   successfully
manufacture,  market,  deliver and expand its OREX  Degradables  and Enviroguard
lines of products at acceptable profit margins.  In connection with the July 12,
1999 sale by the  Company of the assets of MedSurg to  Allegiance,  the  Company


                                       7
<PAGE>

granted to  Allegiance  a worldwide  exclusive  license to  Isolyser's  OREX and
Enviroguard  proprietary  technologies  to make, use and sell products made from
material  which can be dissolved and disposed of through a sanitary sewer system
for  healthcare  applications.  Net  revenues  for the 2000  Quarter  and Period
include  $500,000  and  $2.0  million,   respectively,   of  licensing  revenues
attributable  to the  License  Agreement.  Licensing  revenue  under the License
Agreement is now $500,000 per quarter.  The Company  recorded  $402,000 and $1.3
million in net sales of OREX  products  during the 2000 Quarter and 2000 Period,
respectively.  For the 2000 Period, net sales of OREX Products were comprised of
$910,000  in sales to  Allegiance,  $76,000 in sales  related  to the  Company's
emerging nuclear  business,  $96,000 in sales related to the Company's  emerging
automotive business and $245,000 in other  miscellaneous  sales. There can be no
assurances  that OREX  Degradables  or  Enviroguard  products  will  achieve  or
maintain substantial acceptance in their target markets. See the risks described
under "Risk Factors" in the Company's  Annual Report on Form 10-K for the period
ending  December  31,  1999  (the  "1999  Annual  Report")  including,   without
limitation,  "Risk Factors- History of Net Losses,"  "-Marketing Risks Affecting
OREX  Products" and  "-Manufacturing  and Supply  Risks" in the  Company's  1999
Annual Report.

Gross profit for the 2000 Quarter was $6.2 million,  or 43.7% of net revenue, as
compared to $7.3  million,  or 43.0% of net revenue in the 1999  Quarter.  Gross
profit  for the 2000  Period  was $19.0  million,  or 44.5% of net  revenue,  as
compared to $31.1 million, or 37.0% of net revenue for the 1999 Period. Included
as a  reduction  in cost  of  sales  during  the  1999  Period  was a  favorable
adjustment  of  approximately  $1.6  million of excess  OREX  inventory  reserve
primarily due to anticipated  usage under the License Agreement with Allegiance,
which increased gross profit.  Exclusive of these adjustments,  gross profit was
35.1% of net revenues for the 1999 Period.  The  improvement  in gross profit is
attributable  to  increased  licensing  revenues  from  the  Allegiance  License
Agreement, reduced costs associated with the sale of the White Knight Healthcare
and MedSurg  businesses and the cessation of sales of lower margin  products due
to these divestiture transactions. Microtek's gross profit declined 13.4% in the
2000  Quarter as compared to the 1999  Quarter and  declined  19.2% for the 2000
Period as compared to the 1999 Period.  The decline in the quarterly  comparison
was  primarily  due to  lower  sales  performance  in the OEM and  International
businesses and the decline in the nine month period comparison was primarily due
to lower sales resulting from a short-term  manufacturing  agreement which ended
in the 1999 Period.

Selling,  general and administrative expenses were $5.1 million, or 36.0% of net
revenue in the 2000 Quarter as compared to $5.0 million, or 29.6% of net revenue
in the 1999 Quarter.  Selling,  general and  administrative  expenses were $15.4
million,  or 36.2%  of net  revenue  in the 2000  Period  as  compared  to $22.8
million,  or 27.1% of net revenue in the 1999 Period.  The reduction in selling,
general and administrative expenses was due primarily to the sale by the Company
of  White  Knight  Healthcare  and  certain  assets  of  the  Company's  MedSurg
subsidiary.  The  increase in selling,  general  and  administrative  costs as a
percentage of sales was due to sales mix. The Company's White Knight and MedSurg
subsidiaries  traditionally  had lower  sales  costs as a  percentage  of sales.
Although  Microtek's selling cost to sales ratio is higher than White Knight and
MedSurg,  Microtek's  gross margins are  significantly  higher.  During the 2000
Quarter and Period,  Microtek increased its selling,  general and administrative
cost as a percentage of sales by 2.7% and 3.1%, respectively, as compared to the
1999 Quarter and Period.

Research and  development  expenses  were $1.0 million or 7.2% of net revenue in
the 2000  Quarter as  compared to  $710,000,  or 4.2% of net revenue in the 1999
Quarter.  Research and  development  expenses were $2.7 million,  or 6.3% of net


                                       8
<PAGE>

revenue in the 2000 Period, as compared to $2.1 million,  or 2.5% of net revenue
in the 1999  Period.  The  increased  expenditure  commitment  in  research  and
development expense reflects the Company's  commitment to continuing the pursuit
of expanding its intellectual property and technology base.

On July 12, 1999,  the Company  completed the sale of  substantially  all of the
assets of its MedSurg subsidiary for approximately  $20.8 million.  Concurrently
with the sale of MedSurg,  the Company and  Allegiance  entered into the License
Agreement  described above.  Effective May 31, 1999, the Company disposed of the
stock of its White Knight Healthcare  subsidiary for approximately  $8.2 million
in cash. In conjunction with this disposition,  the Company recorded  impairment
charges of approximately $1.6 million in the 1999 Period.

Amortization  of  intangibles  was $279,000 and $838,000 in the 2000 Quarter and
Period,  respectively,   as  compared  to  $311,000  and  $1.2  million  in  the
corresponding  periods  of  1999.  The  decline  in  amortization  expenses  was
primarily due to the sale of White Knight  Healthcare and disposition of certain
assets of the Company's MedSurg subsidiary.

The resulting  income/(loss)  from operations was $(214,000) and $29,000 for the
2000 Quarter and Period, respectively,  as compared to income from operations of
$1.3 million and $3.4 million for the 1999 Quarter and Period, respectively.

Interest income,  net of interest  expense,  was $335,000 in the 2000 Quarter as
compared to a net expense of $41,000 in the 1999  Quarter.  For the 2000 Period,
interest income,  net of interest  expense,  was $348,000.  For the 1999 Period,
interest  expense,  net of  interest  income,  was $1.1  million.  The change in
interest, from expense to income, is attributed to reduced borrowings during the
2000  Quarter and Period as a result of the  disposition  of the  aforementioned
assets during 1999 together with increased  interest earned on the proceeds from
the sale and licensing transactions.

During the 1999 Quarter and Period,  the Company  recorded a gain on the sale of
certain assets of its MedSurg subsidiary in the amount of $124,000.

Provision for income taxes reflects expenses of $48,000 and $172,000 in the 2000
Quarter and Period,  respectively,  as compared to $128,000  and $515,000 in the
corresponding periods of 1999.

The  resulting  net income was $93,000  and  $205,000  for the 2000  Quarter and
Period, respectively, as compared to net income of $1.3 million and $1.9 million
in the 1999 Quarter and Period, respectively.

Liquidity and Capital Resources

At September  30, 2000,  the  Company's  cash and  equivalents  totaled $15.4 as
compared to $17.0 million at December 31, 1999.

During the 2000 Period,  the  Company's  operating  activities  supplied cash of
$702,000 as compared to $9.4 million in the 1999 Period.  The  reduction of cash
supplied by operating activities in the 2000 Period is primarily attributable to
an increase in working capital investment and lower operating  earnings.  In the
2000 Period, the Company invested $1.0 million in capital equipment and $293,000
in technology  businesses.  The Company  generated  $23.8 million from investing


                                       9
<PAGE>

activities during the 1999 Period consisting primarily of $25.4 million from the
disposition of certain MedSurg assets, White Knight Healthcare and the Company's
former headquarters.  These amounts were offset by approximately $1.6 million in
capital  expenditures  during the 1999 Period. The Company used $949,000 in cash
for financing  activities in the 2000 Period as compared to $22.1 million in the
1999  Period.  In the 1999  Period,  the Company  utilized  cash  proceeds  from
dispositions to reduce amounts outstanding under its Credit Agreement.  The cash
used for  financing  activities  in the 2000 Period was due to the  repayment of
$2.8 million of  long-term  debt,  offset by the  proceeds  from the issuance of
capital  stock ($1.9  million)  attributable  to the exercise of stock  options.
Purchases of treasury stock under the stock  repurchase  program approved by the
Company's Board of Directors in December, 1999 were $371,000 in the 2000 Period.

As more fully  described  in the  Company's  1999  Annual  Report,  the  Company
maintains a $10.0  million  credit  agreement  (as amended to date,  the "Credit
Agreement")  consisting of a revolving credit facility which matures on June 30,
2001.  There were no outstanding  borrowings under the revolving credit facility
at September 30, 2000. The Credit  Agreement  provides for the issuance of up to
$1.0 million in letters of credit.  There were no outstanding  letters of credit
at September 30, 2000. At September 30, 2000, the Company was in compliance with
the covenants contained in its Credit Agreement.

On March 31, 1999, the Company disposed of its former corporate headquarters for
proceeds of $1.9 million in cash.  Effective May 31, 1999, the Company  disposed
of the stock of White  Knight  Healthcare  for proceeds of $8.2 million in cash.
These proceeds were subsequently used to reduce outstanding borrowings under the
Company's  Credit  Agreement.  On July 12,  1999,  the  Company  disposed of its
MedSurg  subsidiary  and entered into an OREX License and Supply  Agreement with
Allegiance for net cash proceeds of $28.6  million.  A portion of these proceeds
were  subsequently  used to repay the remaining  balance of the Company's Credit
Agreement.  A $2.5 million  portion of these  proceeds was paid to Allegiance in
connection  with  the  July  21,  2000  settlement  of  certain  claims  made by
Allegiance.

Based upon its current  business plan, the Company  currently  expects that cash
equivalents  and short term  investments on hand, the Company's  existing credit
facility and funds budgeted to be generated from  operations will be adequate to
meet its  liquidity  and capital  requirements  through the next twelve  months.
Although  the Company  has no plans to initiate  additional  debt  financing  or
issuance  of  additional  capital  stock,  unforeseen  future  developments  and
increased working capital  requirements  could require additional debt financing
or issuance of common stock.

Forward Looking Statements

Statements  made in this  Management's  Discussion  and  Analysis  of  Financial
Condition  and Results of Operations  include  forward-looking  statements  made
under the  provisions  of the Private  Securities  Litigation  Reform  Act.  The
Company's  actual  results  could differ  materially  from such  forward-looking


                                       10
<PAGE>

statements and such results will be affected by risks described in the Company's
1999 Annual Report including,  without  limitation,  those described under "Risk
Factors - History of Net Losses,"  "-Marketing  Risks  Affecting OREX Products,"
"-Manufacturing  &  Supply  Risks,"  "-Regulatory  Risks,"  "-Competition,"  and
"-Claims Arising from Divestitures."

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

The Company's greatest  sensitivity with respect to market risk is to changes in
the  general  level of U.S.  interest  rates and its effect  upon the  Company's
interest  expense.  At  September  30,  2000,  the Company had no  long-term  or
short-term  debt that bears  interest at  floating  rates.  However,  should the
Company incur borrowings under its Credit Agreement,  such borrowings would bear
interest at variable  rates.  Because these rates are  variable,  an increase in
interest  rates would result in additional  interest  expense and a reduction in
interest rates would result in reduced interest expense.


                                       11
<PAGE>


                                     PART II

                                OTHER INFORMATION


Item 1. Legal Proceedings

Not applicable.

Item 2. Changes in Securities and Use of Proceeds

During the  quarter  for which  this  report is filed,  there  were no  material
modifications in the instruments defining the rights of shareholders. During the
quarter  for which this  report is filed,  none of the rights  evidenced  by the
shares of the Company's common stock were materially limited or qualified by the
issuance or  modification  of any other class of securities.  During the quarter
for which this report is filed,  the Company  sold no equity  securities  of the
Company that were not registered under the Securities Act of 1933, as amended.

Item 3. Default Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Securityholders

None.

Item 5. Other Information

None.

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits:

Exhibit No.          Description

3.1(1)    Articles of Incorporation of Isolyser Company, Inc.

3.2(2)    Articles  of  Amendment  to  Articles  of  Incorporation  of  Isolyser
          Company, Inc.

3.3(1)    Amended and Restated Bylaws of Isolyser Company, Inc.

3.4(3)    First  Amendment to Amended and Restated  Bylaws of Isolyser  Company,
          Inc.

3.5(4)    Second  Amendment to Amended and Restated Bylaws of Isolyser  Company,
          Inc.

                                       12
<PAGE>

4.1(1)    Specimen Certificate of Common Stock

27.1      Financial Data Schedule

------------------


(1)  Incorporated by reference to the Company's  Registration  Statement on Form
     S-1 (File No. 33-83474).

(2)  Incorporated by reference to Exhibit 3.2 of the Company's  Annual Report on
     Form 10-K for the year ended December 31, 1996.

(3)  Incorporated by reference to Exhibit 3.1 to the Company's Current Report on
     Form 8-K filed July 29, 1996.

(4)  Incorporated by reference to Exhibit 3.1 to the Company's Current Report on
     Form 8-K filed December 20, 1996.


(b)  No current reports on Form 8-K were filed during the quarter for which this
     report is filed.


                                       13
<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has caused  this  quarterly  report on Form 10-Q to be signed on its
behalf by the undersigned thereunto duly authorized on November 13, 2000.


                                            ISOLYSER COMPANY, INC.



                                            By:    /s/ Migirdic Nalbantyan
                                                   -----------------------------
                                                   Migirdic Nalbantyan
                                                   President & CEO
                                                   (principal executive officer)


                                            By:    /s/ J. C. Rushing, III
                                                   -----------------------------
                                                   J. C. Rushing, III
                                                   Chief Financial Officer
                                                   (principal financial officer)




                                       14