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
                   June 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 August 7, 2001, there were 45,623,798 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 June 30, 2001 and December 31, 2000...1

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

         Consolidated Statement of Operations for the six months ended
         June 30, 2001 and 2000................................................3

         Consolidated Statement of Cash Flows for the three months ended
         June 30, 2001 and twelve months ended December 31, 2000...............4

         Notes to Consolidated Statements......................................5

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations.................................................5

Item 3.  Quantitative and Qualitative Disclosures About Market Risk...........15

PART II - OTHER INFORMATION...................................................16

Item 6.  Exhibits and Reports on Form 8-K.....................................16

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





<PAGE>


Part I - Financial Information
------------------------------

Item 1.    Financial Statements

           BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES
           -----------------------------------------------------------
<TABLE>

                           CONSOLIDATED BALANCE SHEETS
                            (Unaudited) June 30, 2001
<CAPTION>

                                                                  June 30, 2001    December 31, 2000
                                                                  $                $
<S>                                                                       <C>                <C>
CURRENT ASSETS
Cash and cash equivalents                                                 401,078            3,818,717
Marketable securities                                                     635,984              362,423
Accounts receivable                                                       199,049              826,251
Amounts due from related parties                                          599,089              167,705
Prepaid expenses and other current assets                                 648,017            1,789,172
                                                                        ---------            ---------

Total current assets                                                    2,483,217            6,964,268

FIXED ASSETS
Property, plant and equipment, net                                      1,388,192              881,463

EQUITY INVESTMENTS, net                                                   537,092              218,482

INTANGIBLE ASSETS
Trademarks, licenses, patents, net                                      1,026,353            1,094,506
Goodwill, net                                                           5,086,301            5,425,389
                                                                       ----------            ---------
TOTAL ASSETS                                                           10,521,155           14,584,108
                                                                       ==========           ==========
CURRENT LIABILITIES
Accounts payable                                                        1,222,474              173,185
Accrued expenses and other current liabilities                            504,682              422,230
Deferred revenue                                                        1,268,700            1,763,305
                                                                        ---------            ---------
Total current liabilities                                               2,995,856            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               836,210              338,040
$2.50
                                                                        ---------           ----------
                                                                          839,330              341,160
                                                                        ---------           ----------

STOCKHOLDERS' EQUITY Common stock, $0.001 par value:
75,000,000 shares authorized (2000: 50,000,000)
45,623,798 shares issued and outstanding (2000: 45,611,541)                45,624               45,612

Additional paid-in capital                                             21,928,714           23,195,285
Accumulated deficit                                                  (15,575,571)         (11,421,592)
Accumulated other comprehensive gain                                      287,202               64,923
                                                                       ----------            ---------
TOTAL STOCKHOLDERS' EQUITY                                              6,685,969           11,884,228
                                                                       ----------            ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                             10,521,155           14,584,108
                                                                       ==========           ==========
The accompanying notes form an integral part of these statements.



</TABLE>


                                       1
<PAGE>

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

<TABLE>

                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (Unaudited)
<CAPTION>

                                                                       Three Months Ended June 30,
                                                                         2001             2000
                                                                           $                $

<S>                                                                         <C>               <C>
Net revenues                                                                248,136           56,786

Costs and expenses

Costs of revenues                                                           340,542            6,782

Professional fees                                                           650,375          229,466

Realized and unrealized (profit) loss on marketable securities              (6,737)          165,722

General and administrative expenses                                         873,608        1,308,963
                                                                          ---------         --------

Total cost and expenses                                                   1,857,788        1,710,933
                                                                          ---------         --------

Loss from operations                                                    (1,609,652)      (1,654,147)

Share of loss from equity investment                                      (102,411)         (20,470)
                                                                         ----------         --------

Net loss                                                                (1,712,063)      (1,674,617)

Dividend payable and accretion of preferred stock                         (100,170)        (790,753)
                                                                          ---------         --------
Net loss applicable to common stockholders                              (1,812,233)      (2,465,370)
                                                                        ===========      ===========

Net loss per common share                                                    (0.04)           (0.07)
                                                                        ===========      ===========
Weighted average number of common shares                                 45,617,669       37,373,802
                                                                        ===========      ===========







The accompanying notes form an integral part of these statements.

</TABLE>


                                       2
<PAGE>



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

<TABLE>

                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (Unaudited)
<CAPTION>

                                                                       Six Months Ended June 30,
                                                                         2001             2000
                                                                           $                $

<S>                                                                         <C>              <C>
Net revenues                                                                653,288          236,014

Costs and expenses



Costs of revenues                                                         1,020,065           12,786

Professional fees                                                           935,575          480,943

Realized and unrealized (profit) loss on marketable securities              (6,737)        (328,030)

Management fee                                                                    0          150,000

General and administrative expenses                                       2,548,803        1,762,284
                                                                          ---------         --------

Total cost and expenses                                                   4,497,706        2,077,983
                                                                          ---------         --------

Loss from operations                                                    (3,844,418)      (1,841,969)

Share of loss from equity investment                                      (209,390)         (20,470)
                                                                          ---------        ---------

Net loss                                                                (4,053,808)      (1,862,439)

Dividend payable and accretion of preferred stock                         (100,170)      (2,080,458)
                                                                          ---------         --------
Net loss applicable to common stockholders                              (4,153,978)      (3,942,897)
                                                                        ===========      ===========

Net loss per common share                                                    (0.09)           (0.11)
                                                                        ===========      ===========
Weighted average number of common shares                                 45,614,605       36,697,593
                                                                        ===========      ===========






The accompanying notes form an integral part of these statements.

</TABLE>


                                       3
<PAGE>


<TABLE>

           BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOW
<CAPTION>

                                                                  (Unaudited)
                                                               Three months ended    Twelve months
                                                                    June 30,             ended
                                                                                      December 31,
                                                                      2001                2000
                                                               $                   $
<S>                                                                   <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                              (1,712,063)         (4,376,479)

Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization                                             277,080             950,079
Loss on disposal of fixed assets                                                -             113,042
Share of loss of associate                                                 86,056              29,517
Unrealized loss on marketable securities                                  (6,737)              49,928
Compensation charge for stock options                                           -             105,000
Accretion of warrants                                                   (138,000)                   -

Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable                                 27,404           (624,448)
Increase in amounts receivable from related parties                      (82,807)           (948,555)
(Increase)  decrease in prepaid  expenses  and other  current            (99,419)              17,502
assets

(Decrease) increase in deferred revenue                                 (195,400)             541,351
Increase (decrease) in accounts payable                                   599,173           (184,750)
Increase in accrued expenses and other current liabilities                 18,492              50,465
                                                                        ---------           ---------

Net cash used in operating activities                                 (1,226,221)         (4,277,348)
                                                                      ===========         ===========
Cash flows from investing activities:
Purchases of property and equipment                                     (451,542)           (825,787)
Net purchase of investments                                              (45,430)            (95,045)
Amounts advanced to equity investment                                    (70,000)           (198,000)
                                                                        ---------           ---------

Net cash used in investing activities                                   (566,972)         (1,118,832)
                                                                      ===========         ===========

Cash flows from financing activities:

Proceeds from sale of preferred stock                                     119,934           9,089,546
                                                                        ---------           ---------
Net cash provided by financing activities                                 119,934           9,089,546
                                                                        ---------           ---------
Effects of exchange rate changes on cash and cash equivalents              11,470             119,533
                                                                        ---------           ---------
Net (decrease) increase in cash and cash equivalents                  (1,661,789)           3,812,899

Cash and cash equivalents, at beginning of period                       2,062,867               5,818
                                                                        ---------           ---------
Cash and cash equivalents, at end of period                               401,078           3,818,717
                                                                      ===========         ===========
Supplemental disclosure of cash flow information
Cash paid for interest                                                          -                   -
                                                                      ===========         ===========
The accompanying notes form an integral part of these statements.


</TABLE>


                                       4
<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.

Note 3. On July 6, 2001 the Company completed the acquisition of ProDesign
Technology Limited ("PTL"). Completion of the acquisition 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"). 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:

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:

        (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



                                       5
<PAGE>

(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



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
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.



                                       6
<PAGE>

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 two 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 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.

         On June 4, 2001, the Company's new manufacturing facility located at
Hostmoor, March, England was opened. The new facility of approximately 25,000
square feet has been custom built to serve as the final assembly, test and
commission base for its range of XGelTM FS. The main area of the facility houses
five cubicles called `pods', which have been designed to allow the Company's
customers to carry out commission work in a confidential manner. The Company
anticipates being able to commission fifty XGelTM FS annually from existing
resources, and space is available to double that rate if and when required. Two
different versions of the XGelTM FS are already on site and three more are
expected shortly. Thirty-three employees have already relocated to the new
facility, including the entire engineering design and support team. In addition,
the Company's research and development functions have transferred to the new
facility in purpose-built and equipped laboratories.

         On July 10, 2001, the Company completed four agreements with a European
pharmaceutical company, Farmasierra, S. L. ("Farmasierra"). These agreements are
for the sale of a full scale XGelTMFS; the sale of a license to use the
Company's patents in respect of the XGelTM technology; the future supply of
additional XGelTMFS; and, the future supply of XGelTM Film for use with the
XGelTMFS.

         The Company believes that the technology covered by the agreements with
Farmasierra is innovative with respect to the pharmaceutical industry. The
pharmaceutical industry currently uses two types of gelatin-based dosage forms:
gelatin soft capsules for liquids, and two-piece



                                       7
<PAGE>

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 XGelTMFS,
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.

         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 Healthy Forum Limited ("THF"), in which the Company has a 46.6%
investment, has released the first section of its unique "body maps" at its web
site, which can be viewed at www.thehealthyforum.com. THF's first range of
products were launched in March 2001 and are now available in excess of 1,000
retail stores in the United Kingdom, including Sainsbury's, Waitrose, Superdrug
and Robert Sayle.

         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



                                       8
<PAGE>

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.


Results of Operations

         Summary

         The results for the quarter ended June 30, 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
fees for research and development work and accrued royalties in respect of the
license sold to Consolidated EcoProgress Technologies ("EcoProgress") (VSE:CES).
The reduced operating loss of $1,609,652 in the second quarter of 2001, as
compared to $1,654,147 in the second quarter of 2000, primarily consists of
increases in the cost of revenues, development costs and professional fees
offset by a reduction in the unrealized loss on marketable securities, to a
small profit in this quarter, and a reduction in general and administrative
expenses. The increased operating loss of $3,844,418 in the six months to June
30, 2001, as compared to $1,841,969 in the six months to June 30, 2000,
primarily consists of an increase in the cost of revenues from substantially
increased machine 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 $933,979 in the
first six months of 2001, as compared to $527,403 in the first six months 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's finances remain on budget notwithstanding the decrease in
cash balances. The Company believes that during the course of the next twelve
months, the plans of the management and the business model, together with the
planned and progressing issue of up to a further two million Series B Preferred
Shares, will ensure that the Company continues to grow and the financial health
of the Company will strengthen. Funds generated are expected to arise from
agreements already signed, the sale of listed investments, the signing of
further agreements, cash from receivables and the sale of further Series B
Preferred shares during the forthcoming periods. In addition, Close Brothers
Corporate Finance continues to be retained to examine the strategic options
available to the Company.



                                       9
<PAGE>

Consolidated Statement of Operations

         The Company's operations were expanded during the first two quarters 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 $248,136 from $56,786 in the
second quarter of 2001, an increase of 337% over the corresponding period. The
Company's total revenues increased to $653,288 from $236,014 in the six months
to June 30, 2001, an increase of 177% over the corresponding period. A number of
factors contributed to the increase in total revenues in the second quarter of
2001 compared with the corresponding period in 2000, 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 65% of the total
revenues in the second 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.

         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 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



                                       10
<PAGE>

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 June 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.

         As mentioned above, on July 10, 2001, the Company  completed four
agreements with a Spanish  pharmaceutical company, Farmasierra.  See "Overview."

         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. There can be no
assurance that any of these discussions will result in finalized agreements.

         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. It is
anticipated that these additional trials will be completed during 2001.

         Cost of Revenues

         The Company's cost of revenues increased to $340,542 in the second
quarter of 2001 from $6,782 in 2000. The Company's cost of revenues in the six
months ended June 30, 2001 increased to $1,020,065 from $12,786 in the six
months ended June 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. 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.


                                       11
<PAGE>

General and Administrative Expenses

         General and administrative expenses (including the management fee of
Jade and directors salaries) have decreased to $873,608 in the second quarter of
2001 from $1,308,963 in the second quarter of 2000, a decrease of 33%. 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 $378,855 during the
second quarter of 2001 from $332,532 during the second quarter of 2000. For the
first six months of 2001, directors and senior management costs were $889,084
compared with $436,063 in the six months to June 30, 2000. The latter excluded
the $150,000 management charge referred to in the paragraph below. During the
first quarter of 2000 and in 2001, a review of directors and senior management
remuneration was completed and, as a result, salaries were increased to reflect
increased responsibilities and future development.

         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 second quarter of 2001. The charge during the second quarter of
2001 was $277,080 compared to $234,108 in the first quarter of 2000. The charge
for the first two quarters of 2001 was $531,003 compared to $400,527 in the
first two 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 increased to $267,786 in the second quarter of
2001 from $106,789 in the second quarter of 2000. Further, the staff related
costs have increased to $506,555 from $149,196 in the first six months of 2001
compared with the first six months of 2000. These increases 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 where the Company has
incurred significant traveling 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 reduced to a credit of $34,492 in the second
quarter of 2001 from $626,072 in the second quarter of 2000. For the six months
to June 30, 2001, other general and administrative costs were $395,821 compared
with $1,158,135 in the first six months of 2000. The following are the major
reasons for the changes:

         Foreign exchanges losses during the second quarter of 2001 were a
credit of $4,438 caused by a more stable U.S. dollar rate against the Pound
sterling. In the comparable quarter in



                                       12
<PAGE>

2000, foreign exchange losses were $381,337 when the Company had higher levels
of cash and liquid resources denominated in both currencies that were subject to
exchange rate fluctuations. Foreign exchange losses in the first six months of
2001 were $316,193 compared with $445,761 for the first six months of 2000. The
first quarter of 2001 was more adversely effected by adverse foreign currency
fluctuations due to higher cash balances in that quarter.

         A credit in the second quarter of 2001 of $138,000 due to a reversal of
the warrant accounting charge was significant in producing an overall credit for
other general and administrative costs in the quarter. In the second quarter of
2000, there was a loss on sale of fixed assets of $114,159 with no comparable
charge in this quarter.

         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
continues to recruit additional staff for the engineering and laboratory
departments in 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
profit of $6,737 was made during the second quarter of 2001, as compared to a
loss of $165,722 during the second quarter of 2000. For the first six months of
2001 the cumulative loss is $232,729 compared with a cumulative gain of $328,030
in the first six months of 2000. The stock prices of the Company's holding of
marketable securities were more stable during the period.

         Professional fees. Professional fees increased by 183% to $650,375 in
the second quarter of 2001 from $229,466 in the second quarter of 2000.
Professional fees for the first six months of 2001 were $935,575 compared with
$265,726 in the first six months of 2000. The amount during 2001 is caused by
financial public relations activity, legal and accounting activities, together
with corporate advice fees. Due to the increased level of advice required in
various areas in 2001, professional fees are higher during the first and second
quarters of the year, as compared to last year, and are likely to remain high in
the next quarter.

         Loss from Operations

         The result of the above is that a loss applicable to common
stockholders of $1,812,233 was generated in the second quarter of 2001 as
compared to a loss of $2,465,370 in the second quarter of 2000, which represents
a decrease of 26%. However, the loss in the second quarter of 2000 included a
charge for dividends payable and accretion of preferred stock of $790,753
compared with $100,170 in the second quarter of 2001. The net loss applicable to
common stockholders of $4,153,978 generated in the first two quarters of 2001
compares to a loss of $3,942,897 in the first two quarters of 2000. While the
Company believes that costs are expected to continue to increase, but at a
slower rate than the previous five quarters, as the research and development
activities of the Company continue to grow, license and other revenues are


                                       13
<PAGE>

expected to increase in 2001 as delivery of the first machines occurs, currently
expected in the third quarter of 2001, and consequential sales and deferred
income provisions expected to arise in the final quarter of 2001. There is
currently $1,268,700 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 Limited ("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 $102,411, as compared to nil in the second 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 $100,170 for accretion of preferred stock was taken to
profit and loss for dividends payable and accretion of preferred stock during
the second quarter of 2001, as compared to $790,753 during the second quarter of
2000. This is explained in more detail below, but was incurred due to the
issuance of Series B Preferred Stock during the second 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 June 30,
2001, the Company has cash and cash equivalents of $401,078 compared to
$3,818,717 at June 30, 2000.

         During the second quarter of 2001, the Company  received  $119,934 from
the sale of shares of Series B Preferred Stock at par value as compared to
$2,690,759 in the second quarter of 2000. All sales in 2001 and 2000 were of
Series B Preferred Stock. The Company has raised a further $645,950 from the
sale of 258,380 Series B Preferred Stock since the end of the quarter as part of
its current fundraising to sell a maximum of a further 2,000,000 Series B
Preferred Stock to raise up to $5,000,000. These proceeds have and will continue
to be been used to reduce and fund 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



                                       14
<PAGE>

machinery and for expansion of the business during 2001 and thereafter. 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 decrease slightly from $1,261,187 in the first quarter
of 2001 to $1,226,221 in the second quarter of 2001. The Company has invested
$451,542 in property, plant and equipment in the second quarter of 2001, a
decrease of 32% from $660,817 in the second quarter of 2000.

         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.

         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 also continues to investigate a number of other
long-term funding scenarios and opportunities and to this end the Company
engaged, earlier this year, Close Brothers Corporate Finance Limited as its
corporate finance advisors who continue to work closely with the Company on
various strategic scenarios.

         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.


                                       15
<PAGE>

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)
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)

                                       16
<PAGE>

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)

---------------------------
(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 June 30, 2001.



                                       17
<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:     August 7, 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)