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

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

                                    FORM 10-Q

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

(Mark One)

     X            Quarterly report pursuant to Section 13 or 15(d) of the
----------        Securities Exchange Act of 1934 for the Quarterly Period Ended
                  September 30, 2001 or

                  Transition Report pursuant to Section 13 or 15(d) of the
----------        Securities Exchange Act of 1934

Commission File Number:  0-24736

                    BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC
                            (Exact name of registrant
                          as specified in its charter)

            Nevada                                        88-0361701
(State of other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization

9055 Huntcliff Trace
Atlanta, Georgia                                         30350-1735
(Address of principal executive offices)                 (Zip code)

                                 (770) 641-0264
              (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 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:

As of November 10, 2001, there were 45,861,877 shares of the registrant's common
stock outstanding.

<PAGE>

                                TABLE OF CONTENTS


                                                                            PAGE
PART I - FINANCIAL INFORMATION.................................................1

Item 1.  Financial Statements (Unaudited)......................................1

         Consolidated Balance Sheets for September 30, 2001 and
         December 31, 2000.....................................................1

         Consolidated Statement of Operations for the three months ended
         September 30, 2001 and 2000...........................................2

         Consolidated Statement of Operations for the nine months ended
         September 30, 2001 and 2000...........................................3

         Consolidated Statement of Cash Flows for the nine months ended
         September 30, 2001 and 2000...........................................4

         Notes to Financial Statements (unaudited).............................6

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk...........17

PART II - OTHER INFORMATION...................................................17

Item 6.  Exhibits and Reports on Form 8-K.....................................17

         SIGNATURES..........................................................S-1

<PAGE>

PART I - FINANCIAL INFORMATION
------------------------------

ITEM 1.    FINANCIAL STATEMENTS

           BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES
           -----------------------------------------------------------

                           CONSOLIDATED BALANCE SHEETS
                         (UNAUDITED) SEPTEMBER 30, 2001

<TABLE>
<CAPTION>
                                                               September 30, 2001    December 31, 2000
                                                               ------------------    -----------------
                                                                       $                    $
<S>                                                                       <C>                <C>
CURRENT ASSETS
Cash and cash equivalents                                                 169,661            3,818,717
Marketable securities                                                     242,084              362,423
Accounts receivable                                                       224,001              826,251
Amounts due from related parties                                          679,400              167,705
Prepaid expenses and other current assets                                 565,908            1,789,172
                                                                        ---------            ---------

Total current assets                                                    1,881,054            6,964,268

FIXED ASSETS
Property, plant and equipment, net                                      1,437,573              881,463

EQUITY INVESTMENTS, net                                                   572,951              218,482

INTANGIBLE ASSETS
Trademarks, licenses, patents, net                                        992,277            1,094,506
Goodwill, net                                                           5,084,463            5,425,389
                                                                       ----------            ---------
TOTAL ASSETS                                                            9,968,318           14,584,108
                                                                        =========             ========
CURRENT LIABILITIES
Bank overdraft                                                            262,099                    -
Accounts payable                                                          630,917              173,185
Accrued expenses and other current liabilities                            819,078              422,230
Deferred revenue                                                        1,360,300            1,763,305
                                                                        ---------            ---------
Total current liabilities                                               3,072,394            2,358,720
                                                                        ---------            ---------
Redeemable convertible preferred stock, Series A, par value                 3,120                3,120
$1.00
Redeemable convertible preferred stock, Series B, par value             1,517,174              338,040
$2.50
                                                                        ---------           ----------
                                                                        1,520,294              341,160
                                                                        ---------           ----------

STOCKHOLDERS' EQUITY Common stock, $0.001 par value:
75,000,000 shares authorized (2000: 50,000,000)
45,861,877 shares issued and outstanding (2000: 45,611,541)                45,862               45,612

Additional paid-in capital                                             22,235,525           23,195,285
Accumulated deficit                                                  (16,938,555)         (11,421,592)
Accumulated other comprehensive gain                                       32,798               64,923
                                                                       ----------            ---------
TOTAL STOCKHOLDERS' EQUITY                                              5,375,630           11,884,228
                                                                       ----------            ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                              9,968,318           14,584,108
                                                                        =========             ========
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THESE STATEMENTS.

</TABLE>

                                       1

<PAGE>

           BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES
           -----------------------------------------------------------


                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                    Three Months Ended September 30
                                                                        2001               2000
                                                                         $                   $

<S>                                                                          <C>               <C>
Net revenues                                                                 71,486            395,634

COSTS AND EXPENSES

Costs of revenues                                                           150,807            171,422

Professional fees                                                           133,246            220,773

Realized and unrealized  loss on marketable securities                      211,331             41,660

General and administrative expenses                                         658,579            852,809
                                                                          ---------           --------

Total cost and expenses                                                   1,153,963          1,286,664
                                                                          ---------           --------

Loss from operations                                                    (1,082,477)          (891,030)

Share of loss from equity investment                                      (112,541)                  -
                                                                         ----------           --------

Net loss                                                                (1,195,018)         (891,030)

Dividend payable and accretion of preferred stock                         (167,963)          (271,916)
                                                                          ---------           --------
Net loss applicable to common stockholders                              (1,362,981)        (1,162,946)
                                                                           ========            =======

Net loss per common share                                                    (0.03)             (0.03)
                                                                           ========            =======
Weighted average number of common shares                                 45,665,184         40,490,853
                                                                           ========           ========





THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THESE STATEMENTS.

</TABLE>

                                       2

<PAGE>

           BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES
           -----------------------------------------------------------

                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                     Nine Months Ended September 30
                                                                         2001              2000
                                                                          $                  $

<S>                                                                         <C>                <C>
Net revenues                                                                724,774            631,648

COSTS AND EXPENSES

Costs of revenues                                                         1,170,871            184,210

Professional fees                                                         1,068,821            441,499

Realized and unrealized loss (profit)  on marketable securities             444,060          (286,370)

Management fee                                                                    -            150,000


General and administrative expenses                                       2,967,405          2,895,781
                                                                          ---------           --------

Total cost and expenses                                                   5,651,157          3,385,120
                                                                          ---------           --------

Loss from operations                                                    (4,926,383)        (2,753,472)

Share of loss from equity investment                                      (322,443)                  -
                                                                          ---------          ---------

Net loss                                                                (5,248,826)        (2,753,472)

Dividend payable and accretion of preferred stock                         (268,133)        (2,352,374)
                                                                          ---------           --------
Net loss applicable to common stockholders                              (5,516,959)        (5,105,846)
                                                                           ========            =======

Net loss per common share                                                    (0.12)             (0.13)
                                                                           ========            =======
Weighted average number of common shares                                 45,657,091         40,490,853
                                                                           ========           ========






THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THESE STATEMENTS.

</TABLE>

                                       3

<PAGE>

           BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENT OF CASH FLOW

<TABLE>
<CAPTION>

                                                                              (Unaudited)
                                                                     Nine Months Ended September 30
                                                                         2001             2000
                                                                           $                $
<S>                                                                     <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                                (5,248,826)      (2,753,472)

Adjustments to reconcile net loss to net cash
used in operating activities
Goodwill amortization                                                       508,632          508,632
Depreciation and amortization                                               310,209          227,889
Loss on disposal of fixed assets                                            139,483          113,042
Share of loss of associate                                                  321,931           26,395
Realized and unrealized loss (profit) on marketable securities              363,840        (286,370)
Accretion of warrants                                                     (138,000)                -

Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable                                  399,759        (827,309)
Increase in amounts receivable from related parties                       (503,558)        (873,990)
Increase in prepaid expenses and other current assets                     (325,394)        (138,874)

(Decrease) increase in deferred revenue                                   (403,005)          518,689
Increase (decrease) in accounts payable                                     422,556        (157,582)
Increase   (decrease)  in  accrued   expenses  and  other  current          206,925         (78,553)
liabilities
                                                                          ---------        ---------

Net cash used in operating activities                                   (3,945,448)      (3,721,503)
                                                                           ========         ========

Cash flows from investing activities:
Purchases of property and equipment                                       (710,074)        (788,393)
Net (purchase) sale of marketable securities                                (4,615)          215,335
Purchase of equity investments                                             (75,000)         (50,000)
Amounts advanced to equity investment                                     (601,400)         (45,000)
Cash acquired from acquisition                                               14,908                -
                                                                          ---------        ---------

Net cash used in investing activities                                   (1,376,181)        (668,058)
                                                                           ========         ========
Cash flows from financing activities:

Proceeds from sale of preferred stock                                     1,462,918        8,899,546
                                                                          ---------        ---------
Net cash provided by financing activities                                 1,462,918        8,899,546
                                                                          ---------        ---------
Effects of exchange rate changes on cash and cash equivalents              (52,444)          140,270
                                                                          ---------        ---------
Net (decrease) increase in cash and cash equivalents                    (3,911,155)        4,650,255

Cash and cash equivalents, at beginning of period                         3,818,717            5,818
                                                                          ---------        ---------
Cash and cash equivalents, at end of period                                (92,438)        4,656,073
                                                                           ========         ========
</TABLE>

                                       4


<PAGE>

BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND
                SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW (CONTINUED)



Supplemental disclosure of cash flow information

Acquisition of ProDesign Technology Limited

<TABLE>
<CAPTION>
                                                                              (Unaudited)
                                                                     Nine Months Ended September 30
                                                                               2001             2000
                                                                                  $                $

<S>                                                                         <C>                    <C>
Fair value of equity issued                                                 166,250                -
Assets acquired                                                           (235,945)                -
Liabilities assumed                                                         237,399
Net non-cash investment                                                     167,706                -
                                                                            -------                -
                                                                                                   -
Cash acquired                                                                14,908                -
                                                                             ------                -
Net cash acquired from acquisition                                           14,908
                                                                             ------
                                                                           ========         ========

THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THESE STATEMENTS.

</TABLE>

                                       5

<PAGE>

           BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES

                    Notes to Financial Statements (Unaudited)

In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of the financial
condition of registrant have been included.

Note 1. A summary of significant accounting policies is currently on file with
the U.S. Securities and Exchange Commission in registrant's Form 10-KSB, which
is incorporated herein by reference. Certain reclassifications have been made to
the 2000 financial statements to conform to the 2001 presentation.

Note 2. The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all information
and footnotes required by generally accepted accounting principles for complete
financial statements.

Note 3. In July 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 141, Business Combinations ("FAS 141") and
No. 142, Goodwill and Other Intangible Assets ("FAS 142"). FAS 141 requires all
business combinations initiated after June 30, 2001 to be accounted for using
the purchase method. Under FAS 142, goodwill and intangible assets with
indefinite lives are no longer amortized but are reviewed annually (or more
frequently if impairment indicators arise) for impairment. Separable intangible
assets that are not deemed to have indefinite lives will continue to be
amortized over their useful lives (but with no maximum life). The amortization
provisions of FAS 142 apply to goodwill and intangible assets acquired after
June 30, 2001. With respect to goodwill and intangible assets acquired prior to
July 1, 2001, the Company is required to adopt FAS 142 effective January 1,
2002. The Company is currently evaluating the effect that adoption of the
provisions of FAS 142 that are effective January 1, 2002 will have on its
results of operations and financial position.

Note 4. On July 6, 2001 the Company completed the acquisition of ProDesign
Technology Limited ("PTL"). Completion of the acquisition, which has been
accounted for under the purchase method in accordance with FAS 141, follows the
execution of a letter of intent announced on March 16, 2001. Initial
consideration payable in respect of the acquisition is 125,000 shares of common
stock in the Company ("Consideration Shares"). Goodwill of $167,706 arose on the
acquisition. Under FAS 142, no amortization is required and this goodwill is
subject to impairment review. Consideration Shares are restricted from sale for
a period of one year from the date of issue. Additional consideration ("Deferred
Consideration") shall be payable by the Company in accordance with the following
and any future payments will be reflected as an increase in the purchase price
as they fall due:

1.       If at any time on or before December 31, 2001, the cumulative sales
         revenues of PTL derived from third parties exceed $500,000, the Company
         shall issue the number of ordinary shares of common stock in the
         Company determined in accordance with the following provisions, price
         being the closing price of the Company's common stock on the relevant
         date:

                                       6

<PAGE>

        (i)       if the price is $2.50 or more - 100,000 shares

        (ii)      if the price is $1.66 or less - 150,000 shares

        (iii)     if the price is between $1.66 and $2.50 - a figure equal to
                  the result of dividing 250,000 by the price

2.       If at any time on or before December 31, 2002, the cumulative sales
         revenues of PTL derived from third parties exceed $1,000,000, the
         Company shall issue the number of ordinary shares of common stock in
         the Company determined in accordance with the following provisions,
         price being the closing price of the Company's common stock on the
         relevant date:

        (i)       if the price is $2.50 or more - 100,000 shares

        (ii)      if the price is $1.66 or less - 150,000 shares

        (iii)     if the price is between $1.66 and $2.50 - a figure equal to
                  the result of dividing 250,000 by the price

As of September 30, 2001, these targets have not been met and no purchase price
adjustments have been made.

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

         The following discussion should be read in conjunction with the
consolidated financial statements and related notes thereto included elsewhere
in this Quarterly Report on Form 10-Q.

FORWARD-LOOKING STATEMENTS

         Certain of the statements contained in this Quarterly Report on Form
10-Q, including certain statements in this section, are forward-looking. In
addition, from time to time, we may publish forward looking statements relating
to such matters as anticipated financial performance, business prospects,
technological developments, new products, research and development activities
and similar matters. These statements involve known and unknown risks,
uncertainties, and other factors that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, those listed under "Risk Factors" in the
Annual Report on Form 10-KSB of the Company for the year ended December 31,
2000, which are: "Our limited operating history makes evaluating our business
difficult"; "Our quarterly operating results may fluctuate significantly and you
should not rely on them to predict our future performance"; "Our business may
suffer if new customers do not accept our product offerings"; "We depend on a
few industries for most of our sales, and we may not be successful in expanding
beyond those limited markets"; "The loss of one of our largest customers could
cause our revenues to drop quickly and unexpectedly"; "We depend upon licenses
with manufacturers for revenues"; "We need to manage our growth effectively or
we may not succeed"; "We need additional cash to operate our business and our

                                       7

<PAGE>

viability as a going concern is uncertain"; "Our stock price or our business
could be adversely affected if we are not able to effectively integrate
acquisitions"; "Competition could reduce our market share and harm our
business"'; "We need to continually develop new products or we risk
technological obsolescence"; "We have a limited ability to protect our
intellectual property rights and others could infringe on or misappropriate our
proprietary rights"; "We depend on key personnel for our success"; "Our
founders, officers and principal stockholders have substantial control over our
voting stock and have the ability to make decisions that could adversely affect
our stock price"; "We may be subject to future product liability claims"; "Our
common stock price is likely to be volatile and could drop unexpectedly"; "If we
fail to maintain our OTC Bulletin Board listing, liquidity of your investment
will be adversely affected"; and "Under certain circumstances, our common stock
may be considered a penny stock which could negatively impact the market for our
common stock." In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "potential" or "continue" or the negative of
such terms or other comparable terminology. Forward-looking statements are only
predictions. Actual events or results may differ materially. In evaluating these
statements, you should specifically consider various factors, including the
risks outlined under "Risk Factors." Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. Moreover,
neither we nor any other person assumes responsibility for the accuracy and
completeness of such statements.

OVERVIEW

         As used in this Item 2, the "Company" means BioProgress Technology
International, Inc. ("BioProgress") and its consolidated subsidiaries. The
Company is a development stage company engaged primarily in the research,
development, manufacturing, marketing, sales and distribution of products that
use water soluble and biodegradable films for the dietary supplement,
pharmaceutical, recreational and cosmetic industries and other applications. The
Company's research and development operations are located in the United Kingdom.
During 2000 and the first three quarters of 2001, the Company's primary focus
remained on the development and commercialization of its unique and proprietary
process, the XGel(TM) film system ("XGel(TM) FS").

         Since inception, the Company has incurred substantial operating losses.
Management expects operating losses to continue in the near term as the Company
continues its product development efforts, conducts trials and undertakes
marketing and sales activities for the XGel(TM) FS. The Company's ability to
achieve profitability is dependent upon its ability to successfully complete
development of the XGel(TM) FS, to procure manufacturing capacity, and to
execute its marketing and sales plan.

         During the quarter, management has conducted an operational and
corporate review in light of current market conditions and in consideration of
the low share price of the Company. As a result of the review, the Company has
postponed any corporate activity that might have arisen as a result of its work
with Close Brothers Corporate Finance ("CBCF") for a period of at least six
months. Any valuations that may have been achieved in the various scenarios
under consideration with CBCF would have resulted in a valuation falling well
short of the expectations of the management and, we believe, the shareholders of

                                       8

<PAGE>

the Company. The work undertaken with CBCF and the related accountancy and legal
fees have cost the Company in excess of $500,000 and these fees have been taken
as a charge in the year-to-date.

         In addition, management has reviewed the operations of the Company, in
particular the projects and products under development currently being
undertaken together with a full review of overheads of the Company with regard
to cash burn, financial resources and the amount of funds required until cash
flow break-even. As a result of this review, projects and product development
have been re-prioritized with a view to bringing those projects to market more
quickly which will have a positive cash flow impact. As an indication of the
depth and quality of the Company's intellectual property rights and products in
various stages of development, management did not feel that any projects should
be shelved completely, as all the projects could earn significant future
revenues for the Company. Management has decided to seek third party investors
or joint venture partners for certain projects of the Company to mitigate
current cash outflows and to bring these projects to commercialization more
quickly.

         In addition, the Company has arranged a bank overdraft with Barclays
Bank PLC for (pound)250,000, secured by the Norwood Road site and a personal
guarantee given by Barry Muncaster, the Company's Chief Executive Officer. Since
the quarter end, Consolidated EcoProgress Technologies, Inc., the Company's
Canadian licensee for the Trutona products, have paid their overdue receivable
amounting to nine months research and development contributions. The Company
also expects to receive clearance from the Internal Revenue Service before the
year-end in respect of U.S. withholding tax on its licenses, which will enable
the receivable due from Peter Black Healthcare Limited ("Peter Black"), one of
its licensees, to be collected and which will be a blanket clearance for all
licenses written of a similar nature.

         The directors of the Company and the directors of all its operating
subsidiaries have taken a 66.6% pay cut for the twelve month period commencing
July 1, 2001, after which period the salaries will be reviewed. The London
office has been closed and the Norwood Road premises leased to The Healthy Forum
Limited ("The Healthy Forum"), a U.K. company in which we hold a 46.6% stake.
Stronger and improved internal financial controls have been implemented to
ensure there are no unnecessary expense commitments and expenditure has been cut
back severely on all but the projects of the highest priority. The consolidated
statements of cash flow shows that, if compared with the previous quarter, the
net loss from operating activities has been reduced considerably and those
non-cash items such as depreciation and amortization make up a much higher
proportion than in previous quarters. Therefore, operating cash outflow is much
reduced and it is anticipated will be reduced further in the next quarter. The
Company believes that it continues to manage its working capital effectively.

         As a result of the foregoing, together with its revised financial
projections, management is seeking to raise an additional maximum of $3 million
by way of the issue of series C preferred shares to enable the Company to reach
operational cash flow break-even, estimated at between 12 to 15 months from now.
The Company believes that this amount may prove conservative and that, barring
any protracted delays in commissioning the first deliverable XGel(TM) FS, such
funds will be sufficient for current plans. Based on interest from prospective
investors, management believes that it will be able to raise all the necessary
funds.

                                       9

<PAGE>

         On July 27, 2001, the Company announced that Dr. Carey Bottom had
accepted an invitation to join its Board of Directors with immediate effect. Dr.
Carey Bottom has been President and Chief Executive Officer of PharmaCore, Inc.
since October 2000. Prior to this appointment, Dr. Bottom was Chief Operating
Officer of LDS Technologies, Inc., a drug delivery company holding a significant
proprietary position in microemulsion technology for enhancing the oral
absorption of water-soluble drugs with low gastrointestinal permeability. The
technology was particularly beneficial for enhancing the oral absorption of
peptide actives such as desmopressin. A major drug delivery company acquired LDS
Technologies in August 2000. From 1994 to 1999, Dr. Bottom was Senior Vice
President of R&D for Banner Pharmacaps, Inc., a company engaged in the
development and manufacture of soft gelatin capsules for the drug and
nutritional industries. His responsibilities at Banner included establishing and
directing a comprehensive research operation for soft gelatin capsules as well
as developing new business for the Company. He has also held executive positions
covering diverse areas of responsibilities including quality control, regulatory
affairs, compliance and analytical chemistry for Schering-Plough, Chase
Pharmaceutical Company, Marion Laboratories and the Drackett Company, a division
of Bristol-Myers.

         Dr. Bottom obtained his Ph.D. in Chemistry from the University of
Missouri-Rolla, having also earned his M.S. and B.S. degrees from the same
institution. He has authored or co-authored numerous scientific papers and book
chapters covering diverse areas such as natural products, carbohydrates,
analytical chemistry, dissolution technology, transdermal delivery and
pharmacokinetics. In addition, he also holds several patents covering
pharmaceutical preparations and household products. In 1998, Dr. Bottom received
the FDA Commissioner's Special Citation for his cooperative research efforts
with the Agency on gelatin capsule dissolution. This work led to the
implementation of a compendial two-tier dissolution testing procedure for
gelatin capsules.

         During the quarter, the Company announced the launch of its new website
at www.bioprogress.com. The website, which replaces an earlier version, better
describes the gains the Company has made and will enable customers, the
investment community and other interested parties to gain access to the very
latest information about the Company.

RESULTS OF OPERATIONS

         SUMMARY

         The results for the quarter ended September 30, 2001 show that the
Company received income from fees for research and development work in respect
of the license sold to Consolidated EcoProgress Technologies ("EcoProgress")
(VSE:CES), together with the release of deferred income in respect of the sale
of the Trutona license to EcoProgress. The increased operating loss of
$1,082,477 in the third quarter of 2001, as compared to $891,030 in the third
quarter of 2000, primarily consists of increased unrealized losses on marketable
securities offset by reductions in costs of revenues, professional fees and
general and administrative expenses. Net revenues are materially lower in the
third quarter of 2001, as no income has been realized or released from deferred
income from the sale of licenses or research and development agreements. The
increased operating loss of $4,926,383 in the nine months to September 30, 2001,
as compared to $2,753,472 in the nine months to September 30, 2000, primarily
consists of a substantial increase in the cost of revenues from machine

                                       10

<PAGE>

development costs, professional fees and general and administrative expenses.
The expenditure incurred by the U.K. operations, the Company's research and
development facility, has increased to $667,825 in the first nine months of
2001, as compared to $652,225 in the first nine months of 2000. These costs have
only increased marginally as the research and development team continues to be
well-established. The results reflect the Company's continuing efforts to
commercialize its XGel(TM) FS, both in North America and Europe.

         The Company's finances remain on budget notwithstanding the reversal
from a cash balance to a net overdraft of $92,438, which is secured by a
personal guarantee given by Barry Muncaster and by way of a charge over the
premises at Norwood Road, March, United Kingdom. The company believes that
during the course of the next twelve months, the plans of management and the
business model, together with the planned issue of up to $3 million of series C
preferred shares with a warrant attached, will ensure that the Company will be
able to continue to commercialize its XGel(TM) FS and that the financial health
of the Company will strengthen. Funds generated are expected to arise from
agreements already signed, the continuing sales of marketable securities, the
signing of further agreements, cash from receivables, receipt of funds from Jade
Partnership International, Inc. ("Jade") and The Healthy Forum, in repayment of
their respective loans from the Company, and the sale of series C preferred
shares with a warrant attached during the forthcoming periods.

CONSOLIDATED STATEMENT OF OPERATIONS

         The Company's operations were expanded during the first three quarters
of 2001 and are not expected to require any further increased resources in terms
of manpower and premises for the time being. This has resulted in overall
increases in all material headline figures in the profit and loss account.

         REVENUES

         The Company generates revenues from licensing the rights to use its
intellectual property in the XGel(TM) FS, the sale of the XGelTM FS, and
research and development services to assist customers in gaining maximum benefit
from the license. Revenues from license arrangements and the sale of XGelTM FS
are recognized when there is persuasive evidence of an agreement with a
customer, collectibility is probable and the fee is fixed or determinable.
Revenues from research and development contracts are recognized ratably over the
period to which the contract relates, unless significant acceptance criteria
exist. If acceptance criteria exist, revenues are recognized upon the earlier of
customer acceptance or the expiration of the acceptance period.

         The Company's total revenues decreased to $71,486 from $395,634 in the
third quarter of 2001, a decrease of 82% over the corresponding period. The
Company's total revenues increased to $724,774 from $631,648 in the nine months
to September 30, 2001, an increase of 15% over the corresponding period. A
number of factors contributed to the decrease in total revenues in the third
quarter of 2001 compared with the corresponding period in 2000, in that the only
revenues generated in the third quarter of 2001 were from the receipt of ongoing
research and development contributions from its Canadian licensee, EcoProgress,
for the Trutona International, Inc. products and deferred income therefrom. The

                                       11

<PAGE>

corresponding period in 2000 also enjoyed income from licenses and research and
development agreements.

         The following is a summary of major contracts signed that have not yet
had a major impact on the revenues of the Company but are expected to lead to
the generation of material revenues later in 2001 and 2002.

         On July 25, 2000, the Company announced that it had licensed its
XGel(TM) FS to Peter Black. Peter Black is a wholly owned subsidiary of Peter
Black Holdings (LSE: BKP). Peter Black is the United Kingdom's leading supplier
and largest manufacturer of private label vitamin, mineral and herbal
supplements. In addition, it owns several leading supplement brands and the
United Kingdom's No. 2 Direct Marketing Brand. The license grants Peter Black
exclusive use of the XGel(TM) FS to produce and sell dietary supplements and
non-prescription medicines within the United Kingdom and Republic of Ireland. In
addition, Peter Black has conditional exclusivity to serve as a contract
manufacturer of dietary supplements and non-prescription medicines within member
states of the European Economic Community and the European Free Trade
Association. The license is in respect of one XGel(TM) FS. Additional XGel(TM)
FS, if and when ordered by Peter Black, will require the purchase of additional
licenses. Consideration paid for the license remains confidential at this time.
In addition, an annual license fee is payable in respect of the license for the
period of ten years or the life of the patent, whichever is the longer term. The
Company has recognized no revenues to date in respect of the Peter Black
agreements, as certain revenue recognition criteria have not yet been met. All
cash received to date is included within the deferred income balance at
September 30, 2001. The XGel(TM) FS which is the subject of the agreement with
Peter Black is on-site at the Company's Hostmoor facility and is undergoing
commissioning at the time of this report. The commission process requires each
sub-assembly to be tested individually against specification prior to its
assembly into the XGel(TM) FS. Testing of the assembled XGel(TM) FS is performed
in several stages to ensure that quality and efficiency is maintained at varying
speeds of operation and in the production of varying types and sizes of
capsules. Commissioning of the Peter Black XGel(TM) FS is progressing
satisfactorily at the time of this report.

         On July 10, 2001 the Company completed four agreements with a Spanish
pharmaceutical company, Farmasierra, S. L., for: the sale of a full scale XGelTM
FS; the sale of a license to use the Company's patents in respect of the XGelTM
technology; the future supply of additional XGelTM FS; and, the future supply of
XGelTM Film for use with the XGelTM FS. The Company believes that the technology
covered by these agreements may revolutionize the pharmaceutical industry. The
pharmaceutical industry currently uses two types of gelatin-based dosage forms:
gelatin soft capsules for liquids and two-piece hard gelatin capsules for
powders. These two processes exist because the soft capsule process is
essentially wet, and therefore not suitable for use with powders. With the
development of a powder fill version of the XGelTM FS, pharmaceutical companies
will be able to employ just the one process to deliver both liquid and powder
products. Further, the Company's Septum technology enables both liquids and
powders to be combined in a single capsule and to be released at different times
and or sites in the digestive system. The Company has recognized no revenues to
date in respect of the Farmasierra agreements.

                                       12

<PAGE>

         On July 9, 2001, the Company and The Boots Company PLC ("Boots ")
extended their product development agreement and negotiated ongoing commercial
terms to enable new product concepts to enter consumer trials. The Product
Development Agreement was executed in October 2000 to develop a range of
innovative new consumer products utilizing BioProgress' unique XGelTMFS
encapsulation technology. For commercial reasons, the specific products and
categories are confidential. The Company is in negotiations with Boots to agree
the terms for commercialization of the products on a global basis which, in line
with the Company's business model, will include a technology licensing
agreement, the design and supply of production machines and the on-going supply
of the proprietary film materials necessary to manufacture the new products.

         The Company is continuing to work with major international corporations
engaged in pharmaceuticals, consumer durables and confectionery products to
determine the suitability of the XGel(TM) FS to replace traditional
encapsulation processes and, in some cases, to facilitate new product
development not possible with competitive technologies.

         During June 2001, the Company commenced user trials of its flushable
and biodegradable ostomy pouch. The Company believes that initial feedback from
users is extremely encouraging. As a result of the feedback received, the
Company is in the process of producing a large batch of ostomy pouches in order
to expand the number of trials with a view to collecting sufficient data to
determine if the current design is suitable for commercial release. In addition,
the Company is actively seeking investment or a joint venture partner for this
product range.

         COST OF REVENUES

         The Company's cost of revenues decreased to $150,807 in the third
quarter of 2001 from $171,422 in 2000 due to much of the development work that
was being done on the ingestible machine now being complete and no ongoing work
on the non-ingestible machine. The Company's cost of revenues in the nine months
to September 30, 2001 increased to $1,170,871 from $184,210 in the nine months
to September 30, 2000. The majority of the increase is a result of the increased
research and development effort in developing new variations of the XGel(TM) FS
but which has now since reduced as certain projects reach a more advanced stage.
During 2001, the Company took several major steps toward commercializing the
XGel(TM) FS. The fabrication of the Company's first ingestible product version
of the XGel(TM) FS, code-named "Swallow 1" continued throughout the period.
Swallow 1 was designed by the Company and is subject to various patent
applications and is being manufactured by specialist sub-contractors who have
now delivered the machine for commissioning to the Hostmoor Avenue premises,
March, United Kingdom. The ability to demonstrate Swallow 1 in operation to
potential customers is expected to continue to generate interest from several
major international corporations interested in purchasing licenses and the
XGel(TM) FS. The machine is now being demonstrated and has generated
considerable interest, which the Company expects to commence converting into
orders for machinery and licenses.

                                       13

<PAGE>

GENERAL AND ADMINISTRATIVE EXPENSES

         General and administrative expenses (including the management fee of
Jade and directors salaries) have decreased to $658,579 in the third quarter of
2001 from $852,809 in the third quarter of 2000, a decrease of 23%. The material
balances classified within general and administrative expenses are discussed
below:

         Directors and senior management costs. Payments in relation to
directors and senior management services have decreased to $142,374 during the
third quarter of 2001 from $477,756 during the third quarter of 2000. For the
first nine months of 2001, directors and senior management costs were $1,031,457
compared with $1,063,819 in the nine months to September 30, 2000. The latter
included the $150,000 management charge referred to in the paragraph below. From
July 1, 2001, the salaries of directors were cut by two thirds and all bonus
provisions reversed for a period of twelve months, at which time the salaries
will be reviewed again.

         Management charges. Management charges payable to Jade ceased on March
31, 2000. During the first quarter of 2000, management charges of $150,000 were
paid but none were paid in the second quarter of 2000 and thereafter.

         Amortization and depreciation. Amortization and depreciation costs have
increased in the third quarter of 2001. The charge during the third quarter of
2001 was $274,706 compared to $239,590 in the third quarter of 2000. The charge
for the first three quarters of 2001 was $805,709 compared to $643,242 in the
first three quarters of 2000. The increase is entirely due to increased
depreciation on fixed asset expenditure. The majority of the charge in both
years relates to the amortization of goodwill generated following the reverse
acquisition of BioProgress Technology Limited in 1998.

         Staff related costs. Staff related costs, which consist primarily of
salary costs (other than directors and senior management), recruitment,
entertaining and traveling have reduced to $226,896 in the third quarter of 2001
from $251,951 in the third quarter of 2000. Staff related costs have increased
to $733,451 from $400,147 in the first nine months of 2001 compared with the
first nine months of 2000. The decrease in the third quarter is due to lower
traveling and entertainment costs, offset by higher staff salaries. The
increases in the first nine months of 2001 as compared with the first nine
months of 2000 are as a direct result of increases in the headcount of the
Company as the Company develops different variations of the XGel(TM) FS and a
significant increase in traveling costs. The year ended December 31, 2000 was
the first year in which the Company has incurred significant traveling
expenditure as a direct result of negotiating with potential customers, and
visiting those customers who had signed agreements during the year.

         Other general and administrative costs. Other costs within the general
and administrative area have increased to $14,603 in the third quarter of 2001
from a credit of $116,488 in the third quarter of 2000. For the nine months to
September 30, 2001, other general and administrative costs were $397,301
compared with $788,573 in the first nine months of 2000. The following are the
major reasons for the changes:

                                       14

<PAGE>

         Foreign exchanges gains during the third quarter of 2001 were $260,370.
In the comparable quarter in 2000, foreign exchange gains were $40,849. Foreign
exchange losses in the first nine months of 2001 were $55,823 compared with
$404,912 for the first nine months of 2000. As cash balances have been reducing,
the Company has not been as adversely affected by adverse foreign currency
fluctuations.

         There has been no charge or credit in the third quarter of 2001, as the
warrants are no longer in-the-money. A $55,000 credit has been taken to profit
and loss in the first nine months of 2001. There was no comparable charge in the
first nine months of 2000. In the third quarter of 2001, there was a loss on
sale of fixed assets of $10,574, with no comparable charge in 2000. There was a
charge for losses on the sale of assets of $130,141 for the first nine months of
2000.

         Other expenses within this category, which include such items as office
overheads (rent, stationery, maintenance and similar categories) increased in
line with expectations due to the Company's increased levels of activity
compared with 2000.

         General administration charges are likely to reduce or remain constant
in the forthcoming year. The Company is not recruiting additional staff for any
functions in the United Kingdom at present. Elsewhere, management continues to
make efforts to minimize day-to-day overheads and periodic reviews of overhead
costs continue to be undertaken internally.

         Realized and unrealized loss (profit) on marketable securities. A loss
of $211,331 was incurred during the third quarter of 2001 as compared to neither
a profit nor loss in the corresponding period. For the first nine months of
2001, the cumulative loss was $444,060 compared with a cumulative gain of
$328,030 in the first nine months of 2000. The Company has now disposed of the
majority of its holdings in marketable securities, with EcoProgress comprising
the majority of the holdings.

         Professional fees. Professional fees decreased by 24% to $133,246 in
the third quarter of 2001 from $175,773 in the third quarter of 2000.
Professional fees for the first nine months of 2001 were $1,068,821 compared
with $441,499 in the first nine months of 2000. The amount during 2001 is caused
largely by increased corporate advice fees and related advice. No further
corporate finance advisory and related fees are expected to be incurred for the
next two quarters

         LOSS FROM OPERATIONS

         The result of the above is that a loss applicable to common
stockholders of $1,362,981 was generated in the third quarter of 2001 as
compared to a loss of $1,162,946 in the third quarter of 2000, which represents
an increase of 17%. However, the loss in the third quarter of 2001 included a
charge for share of loss from equity investment of $112,541 compared with nil in
the third quarter of 2000. The charge for dividends payable and accretion of
preferred stock was $167,963 in the third quarter of 2001 compared with $271,916
in the comparable period. The net loss applicable to common stockholders of
$5,516,959 generated in the first three quarters of 2001 compares to a loss of
$5,105,846 in the first three quarters of 2000. Due to cost cuts, the Company
believes that costs are expected to decrease over the next quarter. Revenues are
expected to increase in 2002 as delivery of the first machine occurs in the
first quarter and further orders for machines and sales of licenses ensue. There

                                       15

<PAGE>

is currently $1,360,300 of deferred income some of which will continue to be
released during 2001 and beyond as revenue recognition criteria are met.

         SHARE OF LOSS OF EQUITY INVESTMENT

         During April 2000, the Company invested an initial $50,000 in The
Healthy Forum. The Company continues to offer financial support by way of loan.
The Healthy Forum has been formed to build a global well-being brand in the
complimentary medical and specialty food sectors. The principal products of The
Healthy Forum are feminine hygiene, beneficial foods and vitamins, minerals and
supplements. During the quarter, the Company has taken a charge to profit and
loss in respect of its share of the losses of The Healthy Forum of $112,541, as
compared to nil in the third quarter of 2000. In April 2001, the Company
invested an additional $70,000 in The Healthy Forum increasing its shareholding
from 29.9% to 46.6%.

         PROVISION FOR INCOME TAXES

         No provision has been made for income taxes in 2000 or 2001 as a result
of the losses made by the Company. The Company has provided a 100% valuation
allowance against the deferred tax asset arising on the net operating losses due
to the uncertainty of their ultimate realization.

         DIVIDENDS PAYABLE AND ACCRETION OF COMMON STOCK

         A charge of $167,963 was taken to profit and loss for dividends payable
and accretion of preferred stock during the third quarter of 2001, as compared
to $271,916 during the second quarter of 2000. This is explained in more detail
below, but was incurred due to the issuance of series B preferred shares during
the third quarter of 2001, but is lower than the more substantial issue in the
comparable quarter of 2000, with the difference that arises between the
subscription price and redemption value being charged to profit and loss.

LIQUIDITY AND CAPITAL RESOURCES

         Since its inception, the Company has financed its operations primarily
through the sale of preferred stock to accredited investors. As at September 30,
2001, the Company has a net overdraft of $92,438 compared with cash and cash
equivalents of $4,656,073 at September 30, 2000.

         During the first three quarters of 2001, the Company received
$1,462,918 from the sale of shares of series B preferred shares at par value as
compared to $8,899,546 in the first three quarters of 2000. All sales in 2001
and 2000 were of series B preferred shares. The funds raised from the sale of
series B preferred shares have been applied to funding the net cash used in
operating activities. The net cash used in operating activities has decreased
from $1,612,131 in the first quarter of 2001 to $1,226,221 in the second quarter
of 2001 and to $1,107,093 in the third quarter of 2001. The Company expects this
figure to continue to fall. The Company has invested $63,280 in property, plant
and equipment in the third quarter of 2001, a decrease of 92% from $788,393 in
the third quarter of 2000.

                                       16

<PAGE>

         Management believes that the aforementioned actions and activities, as
discussed in the Overview, by themselves will generate sufficient cash to fully
meet its working capital requirements for the 12 months following the date of
this report. However, any material delay in completing the production of the
initial range of XGel(TM) FS or securing the additional $3 million of financing
from the sale of preferred shares or other sources of funding could have a
material adverse effect on the Company's cash flow and may require the Company
to seek additional financing.

         The Company is in discussion with several parties regarding joint
ventures, license agreements and distribution agreements for its XGel(TM) FS and
derived products. The Company continues to investigate a number of other funding
scenarios and opportunities.

         No guarantee can be given that any additional financing required by the
Company would be available on terms acceptable to the Company or at all.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The following discussion about the Company's market risk disclosures
involves forward-looking statements. Actual results could differ materially from
those projected in the forward-looking statements. The Company is exposed to
market risk related to changes in interest rates and foreign currency exchange
rates. The Company does not use derivative financial instruments for speculative
or trading purposes.

         FOREIGN CURRENCY EXCHANGE RISK

         With sales and services offices in the United States and the United
Kingdom, the Company faces exposure to adverse movements in foreign currency
exchange rates. These exposures may change over time as business practices
evolve and could have a material adverse impact on the Company's financial
results. Historically, the Company's primary exposure has been
non-dollar-denominated operating expenses and sales by its U.K. subsidiary. The
introduction of the Euro as a common currency for members of the European
Monetary Union, of which the United Kingdom is not a member, occurred in January
1999. To date, the Company has not seen any impact of the Euro on foreign
exchange exposure. The Company is prepared to hedge against fluctuations in the
British Sterling, Euro or other foreign currency if the exposure becomes
material. As of December 31, 2000, the Company's material non-dollar-denominated
assets and liabilities primarily consisted of cash, accounts receivable and
accounts payable denominated in British Sterling.

PART II - OTHER INFORMATION
---------------------------

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

a.     Exhibits

       The following exhibits are included herein:

3.1 (c)       Articles of Incorporation and Amendments. (4)
3.1 (d)       Articles of Incorporation and Amendments. (5)

                                       17

<PAGE>

3.2 (b)       Bylaws. (2)
4.1           Specimen stock certificate. (1)
10.1          Partnership Agreement dated October 20, 1993, among the Company,
              Costner Industries, Inc., a California corporation, Jack Bitterly
              and Steve Bitterly. (1)
10.2          Asset Purchase Agreement dated October 20, 1993, among the
              Company, the Partnership, Jack Bitterly, Steve Bitterly, Bruce
              Swartout, U.S. Flywheel, Inc., a California corporation and
              Sunbird Technologies, Inc. (1)
10.3          U.S. Flywheel Systems Unit Purchase Agreement dated July 16, 1994,
              between the Company and Costner Industries, Inc. (1)
10.4          Straight Note dated October 21, 1993, between the Company and
              Sunbird. (1)
10.5          Consulting Agreement dated October 20, 1993, between the
              Partnership and Bruce Swartout. (1)
10.6          Asset Purchase Agreement dated May 31, 1996, changing name and
              domicile to Nevada and reverse splitting outstanding
              capitalization and increasing authorized capital. (2)
10.7          Reorganization Agreement between the Company and Famous Sam's. (2)
10.8          Liquidating Trust. (2)
10.9          Recision Agreement. (4)
10.10         Reorganization Agreement between the Company and BioProgress
              Technology. (4)
10.11         Acquisition Agreement - DHA Nutrition (5)
10.12(a)      Acquisition Agreement - BioProgress Limited (UK) (5)
10.12(b)      Amendment to Acquisition Agreement - BioProgess Limited (UK) (5)
10.13         Employment Agreement - Barry J. Muncaster (5)
10.14         Employment Agreement - James T. C. Longley (5)
10.15         Employment Agreement - Malcolm D. Brown (5)
10.16         Employment Agreement - Edward I. Nowak (5)
10.17         Employment Agreement - Graham Hind (5)
10.18         Professional Services Agreement - The Jade Partnership
              International, Inc. (5)
10.19         Professional Services Agreement - Company and Ormiston-Gore
              Securities Limited (5)
10.20         Professional Services Agreement - BTL and Ormiston-Gore Securities
              Limited (5)
10.21         Trutona Purchase Agreement (5)
10.22         EcoProgress License (5)
10.23         Employment Agreement - Gregory L. Bowers (6)
10.24         Exclusive Evaluation Agreement, dated February 18, 2000 between
              the Company and the Fortune 500 company (6)
10.25         Technology Collaboration Agreement for the Development of
              Non-Gelatin Paintballs, dated March 7, 2000 between the Company
              and JT USA (6)

10.26         Agreement for Supply of Prototype Machine, dated July 24, 2000
              between the Company and Peter Black (7)
10.27         Machine Supply Agreement, dated July 24, 2000 between the Company
              and Peter Black (7)
10.28         Patent License Agreement, dated July 24, 2000 between the Company
              and Peter Black (7)

                                       18

<PAGE>

10.29         Guarantee by BTL in favor of Peter Black, dated July 24, 2000 (7)
10.30         Option Agreement - Barry J. Muncaster (7)
10.31         Option Agreement - Edward Nowak (7)
10.32         Option Agreement - Gregory L. Bowers (7)
10.33         Option Agreement - Graham R.M. Hind (7)
10.34         Option Agreement - James T.C. Longley (7)
10.35         Option Agreement - Larry C. Shattles (7)
10.36         Option Agreement - Malcolm D. Brown (7)

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

(1)      Filed as an exhibit to the Company's Registration Statement on Form
         10-SB dated August 23,1994, or October 21, 1994 (Registration No.
         0-24736).
(2)      Filed as an exhibit to the Company's Form 10-KSB for the year ended
         December 31, 1995.
(3)      Filed as an exhibit to the Company's Form 10-KSB for the year ended
         December 31, 1996.
(4)      Filed as an exhibit to the Company's Form 10-KSB for the year ended
         December 31, 1997.
(5)      Filed as an exhibit to the Company's Form 10-KSB for the year ended
         December 31, 1998.
(6)      Filed as an exhibit to the Company's Form 10-KSB for the year ended
         December 31, 1999.
(7)      Filed as an exhibit to the Company's Form 10-KSB for the year ended
         December 31, 2000.

b.     Form 8-K

       The Company did not file any current report on Form 8-K during the three
months ended September 30, 2001.

                                       19

<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.



                                      BioProgress Technology International, Inc.
                                                    (Registrant)

Date:      November 14, 2001          By:    /s/ Barry J. Muncaster
                                         ---------------------------------------
                                               Barry J. Muncaster
                                               President
                                      (Signing on behalf of the registrant
                                      and as principal financial officer)

                                      S-1