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

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

                                    FORM 10-Q

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

(Mark One)

     X            Quarterly report pursuant to Section 13 or 15(d) of the
----------        Securities Exchange Act of 1934 for the Quarterly Period Ended
                  March 31, 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 May 22, 2001, there were 45,616,175 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 March 31, 2001 and December 31, 2000..1

         Consolidated Statements of Operations for the three months ended
         March 31, 2001 and 2000...............................................2

         Consolidated Statements of Cash Flows for the three months ended
         March 31, 2001 and the twelve months ended December 31, 2000..........3

         Notes to Financial Statements (Unaudited).............................4

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations.................................................4

Item 3.  Quantitative and Qualitative Disclosures About Market Risk...........11

PART II - OTHER INFORMATION...................................................11

Item 6.  Exhibits and Reports on Form 8-K.....................................11

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

<PAGE>

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

Item 1.    Financial Statements

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

                           CONSOLIDATED BALANCE SHEETS
                           (UNAUDITED) MARCH 31, 2001

<TABLE>
<CAPTION>
                                                                  March 31, 2001 December 31, 2000
                                                                         $              $
<S>                                                                   <C>            <C>
CURRENT ASSETS
Cash and cash equivalents                                             2,062,867      3,818,717
Marketable securities                                                   642,462        362,423
Accounts receivable                                                     226,453        826,251
Amounts due from related parties                                        572,664        167,705
Prepaid expenses and other current assets                               911,716      1,789,172
                                                                    -----------    -----------

Total current assets                                                  4,416,162      6,964,268

FIXED ASSETS
Property, plant and equipment, net                                    1,010,292        881,463

EQUITY INVESTMENTS, net                                                 494,503        218,482

INTANGIBLE ASSETS
Trademarks, licenses, patents, net                                    1,060,430      1,094,506
Goodwill, net                                                         5,255,845      5,425,389
                                                                    -----------    -----------
TOTAL ASSETS                                                         12,237,232     14,584,108
                                                                    ===========    ===========
CURRENT LIABILITIES
Accounts payable                                                        623,301        173,185
Accrued expenses and other current liabilities                          498,448        422,230
Deferred revenue                                                      1,464,100      1,763,305
                                                                    -----------    -----------
Total current liabilities                                             2,585,849      2,358,720
                                                                    -----------    -----------
Redeemable convertible preferred stock, Series A, par value $1.00         3,120          3,120
Redeemable convertible preferred stock, Series B, par value $2.50       338,040        338,040
                                                                    -----------    -----------
                                                                        341,160        341,160
                                                                    -----------    -----------

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

Additional paid-in capital                                           22,746,469     23,195,285
Accumulated deficit                                                 (13,763,336)   (11,421,592)
Accumulated other comprehensive gain                                    281,478         64,923
                                                                    -----------    -----------
TOTAL STOCKHOLDERS' EQUITY                                            9,310,223     11,884,228
                                                                    -----------    -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                           12,237,232     14,584,108
                                                                    ===========    ===========
THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THESE STATEMENTS

</TABLE>

                                       1


<PAGE>

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


                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  Three Months Ended March 31,
                                                                      2001           2000
                                                                        $             $

<S>                                                                  <C>            <C>
Net revenues                                                         405,152        179,228

COSTS AND EXPENSES

Costs of revenues                                                    679,523          6,004

Professional fees                                                    285,200        251,477

Realized and unrealized loss (profit) on marketable securities       253,119       (493,752)

Management fee                                                          --          150,000

General and administrative expenses                                1,422,076        453,321
                                                                 -----------    -----------

Total cost and expenses                                            2,639,918        367,050
                                                                 -----------    -----------

Loss from operations                                              (2,234,766)      (187,822)

Share of loss from equity investment                                (106,979)          --

Net loss                                                          (2,341,745)      (187,822)

Dividend payable and accretion of preferred stock                       --       (1,289,705)
                                                                 -----------    -----------
Net loss applicable to common stockholders                        (2,341,745)    (1,477,527)
                                                                 ===========    ===========

Net loss  per common share                                             (0.05)         (0.04)
                                                                 ===========    ===========
Weighted average number of common shares                          45,611,541     36,101,540
                                                                 ===========    ===========

The accompanying notes form an integral part of these statements.

</TABLE>

                                       2

<PAGE>

            BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                           (UNAUDITED) MARCH 31, 2001

<TABLE>
<CAPTION>
                                                                  Three months   Twelve months
                                                                 ended March 31, ended December 31,
                                                                       2001          2000
<S>                                                                <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                           (2,341,745)   (4,376,479)

Adjustments to reconcile net loss to net cash
Used in operating activities
Depreciation and amortization                                         253,925       950,079
Loss on disposal of fixed assets                                            0       113,042
Share of loss of associate                                            106,979        29,517
Unrealized loss on marketable securities                              173,674        49,928
Compensation charge for stock options                                       0       105,000

Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable                            360,909      (624,448)
Increase in amounts receivable from related parties                  (404,959)     (948,555)
Decrease (increase) in prepaid expenses and other current assets       11,956        17,502

(Decrease) increase in deferred revenue                              (299,205)      541,351
Increase (decrease)  in accounts payable                              450,116      (184,750)
Increase in accrued expenses and other current liabilities             76,219        50,465
                                                                   ----------    ----------

Net cash used in operating activities                              (1,612,131)   (4,277,348)
                                                                   ==========    ==========

Cash flows from investing activities:
Purchases of property and equipment                                  (195,252)     (825,787)
Purchase of investments                                              (214,823)      (95,045)
Amounts advanced to equity investment                                (383,000)     (198,000)
                                                                   ----------    ----------

Net cash used in investing activities                                (793,075)   (1,118,832)
                                                                   ==========    ==========

Cash flows from financing activities:

Proceeds from sale of preferred stock                                 416,684     9,089,546
                                                                   ----------    ----------
Net cash provided by financing activities                             416,684     9,089,546
                                                                   ----------    ----------
Effects of exchange rate changes on cash and cash equivalents         232,672       119,533
                                                                   ----------    ----------
Net (decrease) increase in cash and cash equivalents               (1,755,850)    3,812,899

Cash and cash equivalents, at beginning of period                   3,818,717         5,818
                                                                   ----------    ----------
Cash and cash equivalents, at end of period                         2,062,867     3,818,717
                                                                   ==========    ==========
Supplemental disclosure of cash flow information
Cash paid for interest                                                      0             0
                                                                   ==========    ==========

THE ACCOMPANYING NOTES FORM AN INTEGRAL PART OF THESE STATEMENTS.

</TABLE>

                                       3


<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, and the disclosures are adequate to
make the information presented not misleading.

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 changes 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.


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
viability as a going concern is uncertain"; "Our stock price or our business

                                       4

<PAGE>

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 quarter 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 FS").

         Since inception, the Company has incurred substantial operating losses.
Management expects operating losses to continue and possibly increase 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.

RESULTS OF OPERATIONS

         SUMMARY

         The results for the quarter ended March 31, 2001 show that the Company
received certain license fees and other income derived from agreements signed in
respect of its XGel(TM) FS. Material amounts of income from the same sources are
also included in the provision for deferred income. Other sources of income were

                                       5

<PAGE>

fees for research and development work and accrued royalties in respect of the
license sold to Consolidated EcoProgress Technologies ("EcoProgress") (VSE:CES).
The increased operating loss of $2,234,766 in the first quarter of 2001, as
compared to $187,822 in the first quarter of 2000, primarily consists of
research and development expenditures, administration costs and certain non-cash
items, such as depreciation, foreign exchange losses and a small write-down in
the market value of the Company's investment in EcoProgress. The expenditure
incurred by the Company's research and development facility located in the
United Kingdom has increased to $1,250,061 in the first quarter of 2001, as
compared to $354,967 in the first quarter of 2000, as a direct result of a
substantial increase in engineering manpower and resources required to meet the
obligations of the Company under executed agreements and further resources
applied to general engineering and formulation development. The results reflect
the Company's continuing efforts to commercialize its XGel(TM) FS, both in North
America and Europe.

         The Company believes that notwithstanding the decrease in its cash
balances, during the course of the next twelve months, the plans of the
management and the business model will ensure that the Company continues to
grow. Funds generated are expected to arise from agreements already signed, the
sale of marketable securities held by the Company in other quoted companies, the
signing of further agreements, cash from receivables and the sale of further
Series B Preferred Shares during the forthcoming periods.

CONSOLIDATED STATEMENT OF OPERATIONS

         The Company's operations were expanded during the first quarter of
2001, resulting 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 increased to $405,152 from $179,228 in the
first quarter of 2001, an increase of 126%. A number of factors contributed to
the increase in total revenues in the first quarter of 2001, including the
release of deferred income to profit and loss from the sales of licenses in
respect of the XGel(TM) FS. Revenues generated in relation to an evaluation
agreement and a product development agreement with Procter & Gamble contributed
63% of the total revenues in the first quarter of 2001 and is the main
contributor to the increased revenues this quarter. The remaining revenues were
generated from research and development collaboration agreements and the receipt
of ongoing license fees from its Canadian licensee, EcoProgress, for the Trutona
International, Inc. products. The levels of these other revenues are broadly
consistent with the first quarter of 2000.

                                       6

<PAGE>

         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 in 2001.

         On July 25, 2000, the Company announced that it had licensed its
XGel(TM) FS to Peter Black Healthcare Limited ("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 during the
first quarter of 2001 or 2000 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 March 31, 2001.

         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 the first quarter of 2001, the Company announced orders for two
laboratory scale versions of its XGel(TM) FS received from two manufacturers of
pharmaceutical products.

         COST OF REVENUES

         The Company's cost of revenues increased to $679,523 in the first
quarter of 2001 from $6,004 in 2000. The majority of the increase is a result of
the increased development effort in collaberation with Proctor and Gamble
developing new variations of the XGel(TM) FS. During 2000, 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. The ability to demonstrate Swallow 1 in operation
to potential customers is expected to generate interest from several major
international corporations interested in purchasing licenses and the XGel(TM)
FS.

                                       7

<PAGE>

GENERAL AND ADMINISTRATIVE EXPENSES

         General and administrative expenses (including the management fee of
Jade and directors salaries) have increased to $1,422,076 in the first quarter
of 2001 from $603,321 in the first quarter of 2000, an increase of 136%. 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 increased to $510,228 during the
first quarter of 2001 from $253,531 during the first quarter of 2000. During the
first quarter of 2000, a review of directors and senior management remuneration
was completed and, as a result, salaries were increased to reflect increased
responsibilities and future development. The Company completed a further salary
review during the first quarter of 2001.

         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.

         Amortization and depreciation. Amortization and depreciation costs have
remained consistent in the first quarter of 2001. The charge during the first
quarter of 2001 was $253,925 compared to $233,968 in the first quarter of 2000.
The majority of the charge in both years relates to the amortization of goodwill
generated following the reverse acquisition of BTL 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 increased to $238,770 in the first quarter of
2001 from $48,180 in the first quarter of 2000. This increase is a 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 travelling costs.
The year ended December 31, 2000 has been the first year where the Company has
incurred significant travelling expenditure as a direct result of negotiating
with potential customers, and visiting those customers who have signed
agreements during the year.

         Other general and administrative costs. Other costs within the general
and administrative area have increased to $419,153 in the first quarter of 2001
from $67,462 in the first quarter of 2000. The following are the major reasons
for the changes:

         Foreign exchanges losses during the first quarter of 2001 were $320,631
caused by significant variations in the U.S. dollar against the Pound sterling.
During 2001, the Company had high levels of cash and liquid resources
denominated in both currencies that were subject to exchange rate fluctuations.

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

         General administration charges are likely to continue to increase in
line with increases in the head count during the forthcoming year. The Company
is seeking additional staff for the engineering and laboratory departments in

                                       8

<PAGE>

the United Kingdom together with increases in administrative staff both in the
United States and United Kingdom. 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 $253,119 was made during the first quarter of 2001 as compared to a profit of
$493,752 during the first quarter of 2000. The general fall in stock values
experienced by the world's stock markets during the first quarter of 2001 was
reflected in the Company's holding of marketable securities.

          Professional fees. Professional fees increased by to 13% to $285,200
in the first quarter of 2001 from $251,477 in the first quarter of 2000. The
amount during 2000 is caused by financial public relations activity, legal and
accounting activities, together with corporate advice fees in respect of the
issuance of Series B Preferred Stock during 2000. Due to the increased level of
advice required in various areas in 2001, professional fees are higher during
the first quarter and likely to increase during the year.

         LOSS FROM OPERATIONS

         The result of the above is that a loss applicable to common
stockholders of $2,341,745 was generated in the first quarter of 2001 as
compared to a loss of $1,477,527 in the first quarter of 2000, which represents
an increase of 58%. However, the loss in the first quarter of 2000 included a
charge for dividends payable and accretion of preferred stock of $1,289,705.
There is no similar charge for this quarter. While the Company believes that
costs are expected to continue to increase as the research and development
activities of the Company continue to grow, license and other revenues are
expected to increase in 2001 as delivery of the first machines occurs, currently
expected in the third quarter of 2001, and consequential sales in the final
quarter of 2001. There is currently $1,464,100 of deferred income some of which
is expected to be released during 2001 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 Limited ("The Healthy Forum"). In addition, the Company loaned The
Healthy Forum $198,000 during 2000 to help fund its working capital
requirements. 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. The Company has taken a charge to profit and
loss in respect of its share of the losses of The Healthy Forum of $106,979 in
the first quarter of 2001, as compared to nil in the first 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

                                       9

<PAGE>

to the uncertainty of their ultimate realization.

         DIVIDENDS PAYABLE AND ACCRETION OF COMMON STOCK

         No charge for accretion of preferred stock was taken to profit and loss
for dividends payable and accretion of preferred stock was made during the first
quarter of 2001, as compared to $1,289,705 during the first quarter of 2000.
This is explained in more detail below, but was incurred due to a substantial
issuance of Series B Preferred Stock during 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 March 31,
2001, the Company had cash and cash equivalents of $2,062,867 compared to
$3,876,387 at March 31, 2000.

         During the first quarter of 2001, the Company received $416,684 from
the sale of shares of Series B Preferred Stock at par value as compared to
$5,152,286 in the first quarter of 2000. These proceeds have been used to reduce
trade and short term liabilities to a minimal amount and for general working
capital purposes, including research and development and the building, design
and upgrade of further plant and machinery. Management anticipates making
further offerings of the Company's securities to provide for subsequent working
capital needs as such arise, although such offerings may not be successful.

         The funds raised from the sale of Series B Preferred Stock have been
applied to funding the net cash used in operating activities. The net cash used
in operating activities has increased from $1,261,187 to $1,612,131 in the first
quarter of 2001, an increase of 28%. The Company has invested $195,252 in
property, plant and equipment in the first quarter of 2001, an increase of 283%
from $50,969 in the first quarter of 2000.

         During 2000, the Company executed a number of different agreements, the
principal of which were an agreement with Procter & Gamble for a license and
machine, agreements with Peter Black for a license, machinery and film supply,
and research and development collaboration agreements with Boots and Nestec York
Limited (part of Nestle). Other sales were made, but the material agreements
were the foregoing.

         Management believes that the aforementioned actions and activities 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
could have a material adverse effect on the Company's cash flow and may require
the Company to seek additional financing.

         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.

                                       10

<PAGE>

         The Company is in discussion with several parties regarding joint
ventures, license agreements and distribution agreements for its XGel(TM) FS and
derived products, although none of such discussions may result in formal
arrangements, or even if formal agreements are consummated, no such arrangement
may be successful. The Company also continues to investigate a number of other
long-term funding scenarios and opportunities and to this end has engaged Close
Brothers Corporate Finance Limited as its corporate finance advisors.

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, 2001, 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)
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)

                                       11

<PAGE>

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)
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)

                                       12

<PAGE>

---------------------
(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 March 31, 2001.

                                       13

<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:    June 20, 2001                By:  /s/ James T.C. Longley
                                           ----------------------
                                            James T.C. Longley
                                            Chief Financial Officer
                                      (Signing on behalf of the registrant and
                                      as principal financial officer)