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

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



For Quarter Ended          March 31, 2002    Commission File No.  0-24866
                           --------------                         -------


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


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

                                512 LEHMBERG ROAD
                           COLUMBUS, MISSISSIPPI 39702
                    (Address of principal executive offices)

                                 (662) 327-1863
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for at least the past 90 days.

Yes   X     No
    -----      -----

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

           Class                                Outstanding at May 10, 2002
-----------------------------                   ---------------------------
Common Stock, $.001 par value                           43,042,184


<PAGE>

                                     PART I

                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                             ISOLYSER COMPANY, INC.
                      Condensed Consolidated Balance Sheets
                                 (in thousands)
<TABLE>
<CAPTION>
<S>                                                             <C>                         <C>
                                                                      (unaudited)
                            ASSETS                                  MARCH 31, 2002             DECEMBER 31, 2001
                                                                ----------------------------------------------------
Current assets
        Cash and cash equivalents                                $           8,800                  $     10,587
        Accounts receivable, net                                            17,043                        16,141
        Other receivables                                                      600                           587
        Inventory, net                                                      26,600                        27,022
        Prepaid expenses and other assets                                      750                         1,215
                                                                ----------------------------------------------------
                    Total current assets                                    53,793                        55,552
                                                                ----------------------------------------------------

Property and equipment                                                      22,237                        21,994
        Less accumulated depreciation                                      (15,061)                      (14,455)
                                                                ----------------------------------------------------
                    Property and equipment, net                              7,176                         7,539
                                                                ----------------------------------------------------

Intangible assets, net                                                      26,268                        26,351
Deferred income taxes                                                        2,018                         2,018
Other assets, net                                                            2,979                         2,870
                                                                ----------------------------------------------------
                    Total assets                                 $          92,234                  $     94,330
                                                                ====================================================

             LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
        Accounts payable                                         $           5,006                  $      4,934
        Accrued expenses                                                     2,402                         3,091
        Accrued customer rebates                                               490                           490
        Current portion of long-term debt                                      258                           260
        Deferred licensing revenue                                           1,070                         1,427
        Product financing agreement                                              -                           404
                                                                ----------------------------------------------------
                    Total current liabilities                                9,226                        10,606
                                                                ----------------------------------------------------

Long-term debt                                                               9,849                        12,649
Other long-term liabilities                                                  1,660                         1,487
                                                                ----------------------------------------------------
                    Total liabilities                                       20,735                        24,742
                                                                ----------------------------------------------------

Shareholders' equity
        Common stock                                                            43                            43
        Additional paid-in capital                                         210,940                       210,251
        Accumulated deficit                                               (137,308)                     (138,636)
        Cumulative translation adjustment                                     (292)                         (239)
        Unrealized loss on available for sale securities                      (103)                          (96)
        Unearned shares restricted to employee stock ownership
                  Plan                                                         (60)                          (60)
                                                                ----------------------------------------------------
                                                                            73,220                        71,263
Treasury shares, at cost                                                    (1,721)                       (1,675)
                                                                ----------------------------------------------------
        Total shareholders' equity                                          71,499                        69,588
                                                                ----------------------------------------------------
                    Total liabilities and shareholders' equity   $          92,234                  $     94,330
                                                                ====================================================
</TABLE>

See notes to condensed consolidated financial statements.



                                       2
<PAGE>

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

<TABLE>
<CAPTION>
<S>                                                           <C>                        <C>
                                                                THREE MONTHS ENDED        THREE MONTHS ENDED
                                                                  MARCH 31, 2002            MARCH 31, 2001
                                                              -----------------------    ----------------------

Net sales                                                             $       20,824            $       15,877
Licensing revenues                                                               357                       379
                                                              -----------------------    ----------------------
                Net revenues                                                  21,181                    16,256

Cost of goods sold                                                            12,585                     9,593
                                                              -----------------------    ----------------------
                Gross profit                                                   8,596                     6,663

Operating expenses:
       Selling, general and administrative                                     6,744                     5,379
       Research and development                                                  163                       453
       Amortization of intangibles                                               114                       320
                                                              -----------------------    ----------------------
                Total operating expenses                                       7,021                     6,152
                                                              -----------------------    ----------------------

Income from operations                                                         1,575                       511

Interest income                                                                   37                       113
Interest expense                                                                (195)                     (107)
                                                              -----------------------    ----------------------
Income before income tax provision                                             1,417                       517

Income tax provision                                                              89                        90
                                                              -----------------------    ----------------------

Net income                                                             $       1,328              $        427
                                                              =======================    ======================

Other comprehensive loss:
         Foreign currency translation loss                                       (53)                      (85)
         Unrealized loss on available for sale securities                         (7)                      (14)
                                                              -----------------------    ----------------------

Comprehensive income                                                   $       1,268              $        328
                                                              =======================    ======================

Net income per common share  - basic
   and diluted                                                         $        0.03             $        0.01
                                                              =======================    ======================

Basic weighted average number of common
  shares outstanding                                                          42,074                    41,408
                                                              =======================    ======================

Diluted weighted average number of common
  shares outstanding                                                          42,938                    41,578
                                                              =======================    ======================

</TABLE>

See notes to condensed consolidated financial statements.


                                       3
<PAGE>

                             ISOLYSER COMPANY, INC.
                 Condensed Consolidated Statements of Cash Flows
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
<S>                                                                 <C>                      <C>
                                                                       THREE MONTHS ENDED      THREE MONTHS ENDED
                                                                         MARCH 31, 2002          MARCH 31, 2001
                                                                    -------------------------------------------------

Cash flows from operating activities:
      Net income                                                     $         1,328            $          427

Adjustments to reconcile  net income to net cash provided by
     (used in) operating activities:
      Depreciation                                                               623                       558
      Amortization of intangibles                                                114                       320
      Provision for doubtful accounts                                             65                        10
      Licensing revenues                                                        (357)                     (379)
      Provision for obsolete and slow moving inventory                            43                       177
      Stock option compensation expense                                           18                         -
      Changes in assets and liabilities, net of effects of
        acquisitions                                                            (950)                   (1,394)
                                                                    -------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                              884                      (281)
                                                                    -------------------------------------------------

Cash flows from investing activities:
      Purchase of and deposits for property and equipment                       (260)                     (345)
      Acquisitions                                                                 -                   (11,983)
                                                                    -------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                                           (260)                  (12,328)
                                                                    -------------------------------------------------

Cash flows from financing activities:
      Net (repayments) borrowings under credit agreements                     (2,793)                    6,663
      Changes in bank overdraft                                                  223                       875
      Net repayments under notes payable                                        (413)                     (155)
      Proceeds from exercise of stock options                                    452                         -
      Repurchase of treasury stock                                               (46)                       (8)
      Proceeds from issuance of common stock                                     219                       201
                                                                    -------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                           (2,358)                    7,576
                                                                    -------------------------------------------------
Effect of exchange rate changes on cash                                          (53)                      (85)
                                                                    -------------------------------------------------
Net decrease in cash and cash equivalents                                     (1,787)                   (5,118)
Cash and cash equivalents at beginning of period                              10,587                    14,379
                                                                    -------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                           $         8,800            $        9,261
                                                                    =================================================

</TABLE>


See notes to condensed consolidated financial statements.


                                       4
<PAGE>


                             ISOLYSER COMPANY, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1) In  the  opinion  of  management,  the  information  furnished  reflects  all
adjustments  (consisting only of normal recurring  adjustments)  necessary for a
fair  presentation  of the financial  position,  results of operations  and cash
flows for the interim periods presented. Results for the interim periods are not
necessarily  indicative  of  results  to be  expected  for the  full  year.  The
consolidated  financial statements herein should be read in conjunction with the
consolidated  financial  statements and notes thereto contained in the Company's
Annual  Report on Form 10-K for the year ended  December  31, 2001 (the  "Annual
Report").

2)  Inventories  are stated at the lower of cost or market and are summarized as
follows:
<TABLE>
<CAPTION>
<S>                                          <C>                                  <C>
                  (in thousands)                  MARCH 31, 2002                     DECEMBER 31, 2001
                                             -----------------------------        -------------------------

Raw materials and supplies                   $           13,011                   $         13,504
Work in process                                             709                                890
Finished goods                                           14,996                             14,634
                                             -----------------------------        -------------------------
                                                         28,716                             29,028
Reserves for slow moving and
     obsolete inventories                                (2,116)                            (2,006)
                                             -----------------------------        -------------------------
         Inventory, net                      $           26,600                   $         27,022
                                             =============================        =========================
</TABLE>

     At March  31,  2002 and  December  31,  2001,  the net OREX  inventory  was
approximately $2.6 million.

3) Effective February 2, 2001, Microtek Medical, Inc. ("Microtek"), a subsidiary
of the Company, entered into a definitive agreement to acquire substantially all
of the  assets  of Deka  Medical,  Inc.  ("Deka")  for cash.  Microtek  and Deka
manufacture  and  sell  specialty  equipment  drapes  used in  various  surgical
procedures to prevent infection. Concurrently with the signing of the definitive
agreement,   Microtek  acquired  Deka's  post-surgical  clean-up  product  line.
Effective  March 2,  2001,  Microtek  concluded  the  acquisition  by  acquiring
substantially  all of the  assets  of Deka used in Deka's  patient  and  medical
equipment  drape product line.  The  allocation of the total  purchase  price of
approximately  $11.6  million  resulted in an excess of purchase  price over the
fair value of the net assets acquired (goodwill) of approximately $3.3 million.

     On February 16, 2001,  the Company  acquired the assets of  MICROBasix  LLC
("MICROBasix")  for  approximately  $675,000 in cash and the issuance of 250,000
shares of the  Company's  common stock  having a market  value of  approximately
$265,000 on the date of the acquisition. The acquisition follows the development
of a cooperative  alliance  relationship with MICROBasix in 2000 for the purpose
of sharing  technologies,  products and services that provide significant volume
reduction of low level radioactive waste for the nuclear industry.

     Each of the  above  described  acquisitions  were  accounted  for under the
purchase  method,  and  accordingly,  the results of  operations  related to the
acquired assets have been included in the  accompanying  condensed  consolidated
financial  statements from their respective dates of acquisition.  The following
unaudited pro forma  financial  information  reflects the  Company's  results of
operations as if the Deka acquisition had been completed on January 1, 2001:


                                       5
<PAGE>
<TABLE>
<CAPTION>
<S>                                                            <C>                       <C>
                                                                          THREE MONTHS ENDED
          (in thousands, except per share data)                MARCH 30, 2002            MARCH 31, 2001
                                                               --------------            --------------

 Net revenues                                                    $21,181                     $20,006
 Net income                                                        1,328                         436
 Net income per common share -
           Basic and diluted                                     $  0.03                     $  0.01
</TABLE>

     Including  the  MICROBasix  acquisition  in the above  pro forma  financial
information would not have a material effect on the amounts  presented.  The pro
forma  financial  information  is  based  on  estimates  and  assumptions  which
management  believes  are  reasonable.  However,  the pro forma  results are not
necessarily indicative of the operating results that would have occurred had the
Deka  acquisition  been  consummated  as of the  date  indicated,  nor are  they
necessarily indicative of future operating results.

4) The Company  maintains a $17.5 million credit  agreement (as amended to date,
the "Credit  Agreement") with the Chase Manhattan Bank (the "Bank"),  consisting
of a revolving credit facility maturing on June 30, 2004. Borrowing availability
under the revolving  credit  facility is based on the lesser of (i) a percentage
of eligible  accounts  receivable and inventory or (ii) $17.5 million,  less any
outstanding  letters  of credit  issued  under the Credit  Agreement.  Revolving
credit  borrowings bear interest,  at the Company's option, at either a floating
rate approximating the Bank's prime rate plus an interest margin (5.25% at March
31, 2002) or LIBOR plus an interest margin (4.16% at March 31, 2002). There were
outstanding  borrowings  under the revolving  credit facility of $9.6 million at
March 31, 2002 and $12.4  million at December  31,  2001.  Borrowings  under the
Credit  Agreement  are  collateralized  by the  Company's  accounts  receivable,
inventory,  equipment,  Isolyser's  stock of its subsidiaries and certain of the
Company's plants and offices.  The Credit Agreement contains certain restrictive
covenants,  including the maintenance of certain  financial ratios and earnings,
and  limitations  on  acquisitions,   dispositions,   capital  expenditures  and
additional  indebtedness.  In addition,  the Company is not permitted to pay any
dividends.  At March 31, 2002, the Company was in compliance  with its financial
covenants under the Credit Agreement.

5) Basic per share  income is  computed  using the  weighted  average  number of
common shares  outstanding for the period.  Diluted per share income is computed
including  the  dilutive  effect  of  all  contingently   issuable  shares.  The
difference  between basic and diluted weighted average shares is attributable to
864,000 and 170,000  dilutive  stock  options  outstanding  for the three months
ended March 31, 2002 and March 31, 2001, respectively. Dilutive potential common
shares are  calculated  in  accordance  with the treasury  stock  method,  which
assumes that  proceeds  from the exercise of all options are used to  repurchase
common shares at market value. The number of shares remaining after the exercise
proceeds  are  exhausted  represents  the  potentially  dilutive  effect  of the
options.

6) On February  11,  2000,  the Company paid  $249,000  for  approximately  7.5%
interest in Consolidated Ecoprogress Technology, Inc. ("CES"). CES is a Canadian
environmental  technology  company  focused on being a leader in developing  and
selling  biodegradable  and  disposable  absorbent  products  such  as  diapers,
feminine  hygiene,  adult  incontinence  and other products.  This investment is
classified  in  accordance  with  Statement  of Financial  Accounting  Standards
("SFAS")  No.  115,  Accounting  for  Certain  Investments  in Debt  and  Equity
Securities as available for sale  securities and is stated at market value.  Any
change  in  market  value  between   periods  is  included  as  a  component  of
shareholders'  equity.  The value of this  investment  as of March 31,  2002 was
$146,000.

                                       6
<PAGE>

7) At December 31,  2001,  the Company had  restructuring  reserves of $101,000.
Additions  to and  charges  against  the  reserves  totaled  $54,000 and $9,000,
respectively, during the three months ended March 31, 2002, leaving a balance of
$146,000 in the reserves at March 31, 2002. The activity is shown below:
<TABLE>
<CAPTION>
<S>                                            <C>              <C>           <C>             <C>
                                               DECEMBER 31,                                     MARCH 31,
             (in thousands)                        2001                                           2002
DESCRIPTION                                      BALANCE         ADDITIONS     DEDUCTIONS       BALANCE
-----------                                    ------------     -----------   ------------    ------------
Severance and consulting
   arrangements                                      $   26          $  54       $     (9)       $      71
Impaired equipment reserve                               75              -              -               75
                                               ------------     -----------   ------------    ------------
Total                                                $  101          $  54       $     (9)       $     146
                                               ============     ===========   ============    ============
</TABLE>

     Severance  and vacation  benefits for 19  employees  totaling  $54,000 were
accrued during the quarter ending March 31, 2002.

8) Due to the Company's federal net operating loss carryforwards,  the Company's
income tax provision for the three months ended March 31, 2002 and 2001 consists
primarily of state and foreign income taxes.  At March 31, 2002, the Company had
federal and state net operating  loss  carryforwards  of $86.7 million and $72.9
million,  respectively,  of which $2.2 million relates to  compensation  expense
associated  with the exercise of employee  stock  options.  The  operating  loss
carryforwards expire on various dates beginning in 2011 through 2020.

9) In July 2001, the Financial  Accounting  Standards Board ("FASB") issued SFAS
No. 141,  Business  Combinations and SFAS No. 142, Goodwill and Other Intangible
Assets.  SFAS No. 141 requires  business  combinations  initiated after June 30,
2001 to be accounted for using the purchase  method of accounting  and prohibits
the use of the  pooling-of-interest  method. The application of SFAS No. 141 did
not affect any of the Company's previously reported amounts in goodwill or other
intangible assets. SFAS No. 142 requires that the amortization of goodwill cease
prospectively  upon  adoption  and instead,  the  carrying  value of goodwill be
evaluated  using an impairment  approach.  Identifiable  intangible  assets will
continue to be amortized  over their useful lives and reviewed for impairment in
accordance  with SFAS No.  144,  Accounting  for the  Impairment  or Disposal of
Long-Lived  Assets  (see  below).  SFAS No. 142 is  effective  for fiscal  years
beginning after December 15, 2001, and was implemented by the Company on January
1, 2002.  The Company is required to complete the initial step of a transitional
impairment  test  within six months of  adoption of SFAS No. 142 and to complete
the final  step of the  transitional  impairment  test by the end of the  fiscal
year. Any impairment loss resulting from the transitional  impairment test would
be recorded as a cumulative  effect of a change in accounting  principle for the
quarter ended June 30, 2002.  Subsequent  impairment losses will be reflected in
operating income in the consolidated  statements of operations.  Management does
not believe that a material  adjustment will be necessary upon completion of its
initial assessment.  The information  presented below could be adjusted based on
the results of this initial assessment.

     The  Company's  goodwill  and  intangible  assets as of March 31,  2002 and
December 31, 2001 are summarized as follows:

                                       7
<PAGE>
<TABLE>
<CAPTION>
<S>                                    <C>             <C>                 <C>             <C>

                                               MARCH 31, 2002                    DECEMBER 31, 2001
                                       -----------------------------       ----------------------------
                                          GROSS                              GROSS
                                        CARRYING        ACCUMULATED         CARRYING        ACCUMULATED
            (in thousands)               AMOUNT         AMORTIZATION         AMOUNT        AMORTIZATION
            --------------             ----------       ------------       -------------   ------------

Goodwill                                $ 29,953              $7,488        $ 29,953             $7,488
Customer lists                               586                  68             586                 62
Covenants not to compete                     575                 159             575                124
Patent and license agreements              3,877               1,753           3,847              1,701
Other                                        887                 142             887                122
                                         -------              ------         -------             ------
Total                                   $ 35,878              $9,610        $ 35,848             $9,497
                                        ========              ======        ========             ======

</TABLE>

     The  following  financial  information  is presented as if SFAS No. 142 was
adopted at the beginning of the quarter ended March 31, 2001:

                                                           THREE MONTHS ENDED
      (in thousands, except per share data)                  MARCH 31, 2001
                                                             --------------

Net  income, as reported                                          $ 427
Goodwill amortization                                               240
                                                                  -----
Adjusted net income                                               $ 667
                                                                  =====

Net income per common share - basic and diluted:
     As reported                                                 $ 0.01
     Goodwill amortization                                         0.01
                                                                 ------
     As adjusted                                                 $ 0.02
                                                                 ======

     Amortization  expense related to intangible assets was $114,000 and $76,000
for the three months ended March 31, 2002 and 2001,  respectively.  Following is
the estimated annual amortization expense subsequent to December 31, 2001:

                                       AMORTIZATION
                    YEAR                 EXPENSE
                    ----                 -------
                  2002-2004             $ 454,000
                    2005                  431,000
                    2006                  287,500
                  2007-2011               281,000
                    2012                  161,500
                    2013                   75,000
                  2014-2015                70,000
                    2016                   24,000

10) In August 2001, the FASB issued SFAS No. 144,  Accounting for the Impairment
or Disposal of Long-Lived Assets. Although SFAS No. 144 supercedes SFAS No. 121,
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
Be Disposed Of, it retains most of the concepts of that standard, except that it
eliminates  the  requirement  to  allocate  goodwill  to  long-lived  assets for
impairment  testing  purposes  and it  requires  that a  long-lived  asset to be
abandoned or exchanged for a similar asset be considered  held and used until it
is disposed  (i.e.,  the  depreciable  life should be revised until the asset is
actually  abandoned  or  exchanged).  Also,  SFAS No.  144  includes  the  basic
provisions of Accounting  Principles Board ("APB") Opinion No. 30, Reporting the
Results of  Operations  -  Reporting  the Effect of  Disposal  of a Segment of a
Business,  and  Extraordinary,  Unusual and  Infrequently  Occurring  Events and
Transactions,  for a  presentation  of  discontinued  operations  in the  income
statement  but broadens  that  presentation  to include a component of an entity

                                       8
<PAGE>


rather  than a segment  of a  business,  where  that  component  can be  clearly
distinguished  from the  rest of the  entity.  The  provisions  of SFAS No.  144
generally are to be applied prospectively.  SFAS No. 144 is effective for fiscal
years beginning after December 15, 2001,  with earlier  application  encouraged.
The  Company's  adoption  of SFAS  No.  144 on  January  1,  2002 did not have a
material effect on the Company's  consolidated  financial position or results of
operations.

ITEM 2.

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

Net revenues for the three months ended March 31, 2002 (the "2002 Quarter") were
$21.2  million,  an  increase  of $4.9  million or 30.3  percent  over the $16.3
million of net revenues  reported for the three months ended March 31, 2001 (the
"2001 Quarter").  Excluding  licensing revenues associated with the amortization
of the $10.5 million payment by Allegiance allocated to the Company's Supply and
License  Agreement with Allegiance,  net revenues in the 2002 Quarter were $20.8
million as compared to $15.9  million in the 2001  Quarter,  an increase of 31.2
percent. The increase in net revenues is attributable to Microtek's  acquisition
of the drape and CleanOp  product  lines of Deka in the 2001  Quarter,  internal
growth in Microtek's core product  revenues and expansion of Microtek's  product
offerings.

For the 2002 Quarter, Microtek's net revenues totaled $20.5 million, an increase
of $4.9 million or 31.5 percent over net revenues of $15.6  million  reported in
the 2001 Quarter. Microtek's domestic revenues, which were $17.7 million or 86.4
percent of Microtek's total net revenues in the 2002 Quarter,  increased by $3.8
million or 27.6 percent over the 2001 Quarter.  Microtek's domestic revenues are
generated through two primary channels or customer categories,  hospital branded
and  contract  manufacturing  (commonly  referred  to as OEM).  Included  in the
Company's OEM revenues are sales of products to custom  procedure tray companies
and other  "non-branded" or private label  customers.  Hospital branded revenues
were 53.3 percent and OEM revenues were 46.7 percent of total domestic  revenues
in the 2002 Quarter as compared to 63.4 percent and 36.6 percent,  respectively,
in the 2001 Quarter.  Hospital branded revenues in the 2002 Quarter increased by
approximately  $635,000 to $9.4 million  from $8.8 million in the 2001  Quarter.
The most  significant  contributor to the increase in hospital  branded revenues
was the CleanOp product line acquired from Deka.  Additionally,  Microtek's core
hospital  branded  revenues  demonstrated  moderate  internal growth in the 2002
Quarter as compared to the 2001 Quarter. Slightly offsetting these increases was
a  decline  in  safety  product  revenues  in the 2002  Quarter  which  resulted
primarily from increased competitive pressures. OEM revenues in the 2002 Quarter
increased by $3.2 million to $8.3 million from $5.1 million in the 2001 Quarter,
an increase of 62.8 percent. The significant contributors to the increase in OEM
revenues in the 2002 Quarter were sales of the  angiography  drape and equipment
drape products  acquired from Deka along with internal growth of greater than 10
percent.

Microtek's  international  revenues,  which  accounted  for the  remaining  13.6
percent  of its 2002  Quarter  net  revenues,  were  $2.8  million  for the 2002
Quarter, an increase of $1.1 million or 63.5 percent over the 2001 Quarter.  The
improvements  in the 2002 Quarter are  attributable  to  international  revenues
stemming from the Deka acquisition and internal growth in excess of 20 percent.

OTI's net revenues were $599,000 in the 2002 Quarter versus $593,000 in the 2001
Quarter.  Licensing  revenues in the 2002 Quarter  were  $357,000 as compared to
$379,000 in the 2001  Quarter.  The Company will cease to recognize the non-cash
licensing revenues in December 2002. Included in OTI's net revenues for the 2002
Quarter  was  approximately  $89,000  related  to its  nuclear  operations.  The
Company's  commercialization  efforts and relationships within the nuclear power


                                       9
<PAGE>

industry  continue to strengthen with continued  favorable  customer response to
product usage of the OREXTM protective clothing.

Gross margins in the 2002 Quarter were 40.6 percent and are consistent  with the
margins of 41.0 percent recorded in the 2001 Quarter.

Operating expenses as a percentage of net revenues in the 2002 Quarter were 33.1
percent,  down from 37.8  percent  in the 2001  Quarter.  Selling,  general  and
administrative expenses were $6.7 million or 31.8 percent of net revenues in the
2002  Quarter,  versus $5.4  million or 33.1 percent of net revenues in the 2001
Quarter. The overall increase in the absolute dollar amount of selling,  general
and administrative  expenses is due in part to fixed selling expenses related to
product  lines  acquired  from Deka and  increases  in  variable  selling  costs
resulting from increased net revenues in the 2002 Quarter.  The  improvements in
selling,  general and administrative expenses as a percentage of net revenues in
2002 result  from  increased  revenues  and cost  control and expense  reduction
efforts, particularly in corporate overhead expenses.

The  Company  has  begun  the  process  of  transferring  most of the  sales and
marketing  responsibilities  for  its  OREX  nuclear  product  line  to  Eastern
Technologies,  Inc.  ("ETI").  ETI  serves  as the  exclusive  licensee  of OREX
LaunderableTM   products  and  non-exclusive  licensee  of  Certified  SolubleTM
products  in the United  States and  Canada.  ETI also  serves as the  exclusive
operator of processing services to the nuclear power industry for these products
in that territory.  This transition of the management of the sales and marketing
portion of the OREX  nuclear  power  business  to ETI is  intended to reduce the
Company's  operating  expenses and better align expenses with expected  revenues
for this business opportunity. The Company intends to continue to support ETI in
developing this business opportunity.

Research and development  expenses decreased by $290,000 to $163,000 in the 2002
Quarter as compared to the 2001 Quarter due to significant reductions in product
development  costs. The reduction in research and development  expenses reflects
the Company's more narrow focus on new market opportunities in the nuclear power
industry for its OREX Degradable products.

Amortization  of  intangibles  in the 2002 Quarter was  $114,000,  a decrease of
$206,000  from  the 2001  Quarter.  This  decrease  results  primarily  from the
Company's adoption of SFAS No. 142 on January 1, 2002, at which time the Company
ceased to amortize  goodwill and instead will evaluate the carrying value of its
goodwill  using an  impairment  approach.  Identifiable  intangible  assets will
continue to be amortized  over their useful lives and reviewed for impairment on
a periodic basis. Had the provisions of SFAS No. 142 been in effect for the 2001
Quarter, amortization of intangibles in the 2001 Quarter would have decreased by
approximately   $240,000.  The  decrease  attributable  to  non-amortization  of
goodwill  in the  2002  Quarter  was  offset  slightly  by the  amortization  of
identifiable  intangible assets acquired in the Deka and MICROBasix acquisitions
that were completed in the 2001 Quarter.

Income from operations for the 2002 Quarter was $1.6 million, versus $511,000 in
the 2001 Quarter.  For the 2002 Quarter,  Microtek's  operating  profit was $1.8
million,  a 45.0  percent  increase  over the  operating  profit of $1.2 million
recorded in the 2001 Quarter. The operating losses recorded by the Company's OTI
division in the 2002  Quarter  were  $147,000,  which  represents a 76.3 percent
improvement over the $622,000 in operating losses recorded in the 2001 Quarter.

Interest  expense,  net of interest income,  was $158,000 in the 2002 Quarter as
compared to interest  income,  net of  interest  expense,  of $6,000 in the 2001
Quarter.  The increase in net interest  expense is the result of higher interest
expense in 2002 and lower interest income on cash and cash equivalents which are


                                       10
<PAGE>

attributable  to borrowings on the Company's  line of credit  facility and lower
cash balances during the 2002 Quarter.

The Company's provision for income taxes in the 2002 Quarter reflects an expense
of $89,000. Due to the Company's federal net operating loss carryforwards,  this
expense consists primarily of state and foreign income taxes.

The  resulting  net income for the 2002 Quarter was $1.3  million,  or $0.03 per
basic and diluted share. These results reflect significant  improvement over the
$427,000, or $0.01 per basic and diluted share, for the 2001 Quarter.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31,  2002,  the  Company's  cash and cash  equivalents  totaled $8.8
million as compared to $10.6 million at December 31, 2001.

During the 2002 Quarter,  the Company's  operating  activities  provided cash of
$884,000  as compared to cash used in  operating  activities  of $281,000 in the
2001 Quarter.  The increase in cash provided by operating activities in the 2002
Quarter is attributable  to the Company's  increased  profitability  in the 2002
Quarter and working capital management. Cash used in investing activities in the
2002 Quarter was  $260,000,  as compared to $12.3  million in the 2001  Quarter.
Investing  activities in the 2002 Quarter  consisted of the purchase of property
and equipment.  Investing  activities in the 2001 Quarter  included the Deka and
MICROBasix  acquisitions which consumed  approximately $12.0 million in cash and
purchases of property and equipment of $345,000.  During the 2002 Quarter,  cash
used in financing  activities was $2.4 million.  Repayments  under the Company's
Credit Agreement and other long-term debt agreements in the 2002 Quarter totaled
$3.2  million.  Included  in this  amount  was a lump sum  payment to Thantex of
$341,000 under the product financing agreement described in the Company's Annual
Report. This payment satisfied in full the Company's remaining  obligation under
this  agreement.  During the 2002  Quarter,  the  Company  received  $671,000 in
proceeds from the exercise of stock options and issuance of stock. Cash provided
by financing  activities  in the 2001 Quarter was $7.6 million  which  consisted
primarily of borrowings under the Company's Credit Agreement of $6.7 million.

The Company  maintains a $17.5 million credit agreement (as amended to date, the
"Credit Agreement") with the Chase Manhattan Bank (the "Bank"),  consisting of a
revolving  credit  facility  maturing on June 30, 2004.  Borrowing  availability
under the revolving  credit  facility is based on the lesser of (i) a percentage
of eligible  accounts  receivable and inventory or (ii) $17.5 million,  less any
outstanding  letters of credit  issued under the Credit  Agreement.  Outstanding
borrowings  under the  revolving  credit  facility  were $9.6  million and $12.4
million at March 31, 2002 and December 31, 2001,  respectively.  As of March 31,
2002,  the Company had  additional  borrowing  availability  under the revolving
facility  of  $5.6  million.  As  of  May  10,  2002,  the  Company's  borrowing
availability  under  the  revolving  facility  was $15.2  million,  of which the
Company had borrowed $8.9 million. Revolving credit borrowings bear interest, at
the Company's option,  at either a floating rate  approximating the Bank's prime
rate plus an interest  margin  (5.25% at May 10, 2002) or LIBOR plus an interest
margin (4.16% at May 10, 2002). At March 31, 2002, the Company was in compliance
with its financial covenants under the Credit Agreement.

Based on its current  business plan, the Company  expects that cash  equivalents
and short term investments on hand, the Company's  credit facility,  as amended,
and funds budgeted to be generated from  operations will be adequate to meet its
liquidity  and  capital  requirements  for the next year.  Currently  unforeseen



                                       11
<PAGE>

future  developments  and increased  working  capital  requirements  may require
additional  debt  financing or issuance of common  stock in 2002 and  subsequent
years.

CRITICAL ACCOUNTING POLICIES.

While the listing  below is not  inclusive  of all of the  Company's  accounting
policies,  the Company's  management  believes  that the following  policies are
those  which  are most  critical  and  embody  the most  significant  management
judgments and the  uncertainties  affecting their application and the likelihood
that materially  different amounts would be reported under different  conditions
or using different assumptions. These critical policies are:

Revenue  Recognition.  The  Company's  revenues are derived from the sale of its
products and are recognized at the time of shipment (i) when persuasive evidence
of a sale  arrangement  exists,  (ii) delivery has occurred,  (iii) the price is
fixed and determinable,  and (iv) collectibility of the associated receivable is
reasonably assured.  As discussed below,  significant  management  judgments and
estimates must be made and used in connection with the revenue recognized in any
accounting period.  Material  differences may result in the amount and timing of
the Company's revenues for any period if management made different  judgments or
utilized different estimates.

All sales of the Company's products are evidenced by a binding purchase order as
evidence of a sale  arrangement.  Sales through the Company's  distributors  are
evidenced by a master agreement which governs the  relationship  together with a
binding purchase order on a transaction by transaction basis. Delivery generally
occurs when the Company's products are delivered to a common carrier.

At the time of a sale  transaction,  the  Company  assesses  whether the related
sales price is fixed and determinable based on the payment terms associated with
the  transaction.  Sales prices due within the Company's  normal  payment terms,
which are 30 to 60 days from the invoice date for its domestic  customers and 90
to 120 days from the invoice date for  international  customers,  are considered
fixed and  determinable.  The Company does not  generally  extend  payment terms
outside its normal  guidelines.  The Company also assesses whether collection is
reasonably  assured  at the time of the sale  transaction  based on a number  of
factors,   including  past  transaction   history  with  the  customer  and  the
credit-worthiness of the customer.

Sales Returns and Other  Allowances  and Allowance  for Doubtful  Accounts.  The
preparation of financial  statements  requires  management to make estimates and
assumptions  that  affect  the  reported  amount of  assets  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenues  and expenses  during the  reporting  period.
Specifically, management must make estimates of potential future product returns
related to current period product revenues.  The Company's sales arrangements do
not  generally  include  acceptance  provisions  or clauses.  Additionally,  the
Company does not  typically  grant its  distributors  or other  customers  price
protection  rights or rights to return  products  bought,  other than normal and
customary  rights of return for defects in materials or workmanship,  and is not
obligated to accept  product  returns for any other reason.  Actual returns have
not historically  been  significant.  Management  analyzes  historical  returns,
current  economic  trends and changes in customer  demand  when  evaluating  the
adequacy of its sales returns and other allowances.

Similarly,  the Company's management must make estimates of the uncollectibility
of  its  accounts   receivables.   Management   specifically  analyzes  accounts
receivable,   historical   bad   debts,   customer   concentrations,    customer
creditworthiness,  current economic trends and changes in its customers' payment
terms when evaluating the adequacy of its allowance for doubtful  accounts.


                                       12
<PAGE>

The Company's accounts  receivables at March 31, 2002 totaled $17.0 million, net
of the allowance for doubtful accounts of $957,000.

Inventory  Valuation.  The  preparation  of the Company's  financial  statements
requires careful determination of the appropriate dollar amount of the Company's
inventory balances. Such amount is presented as a current asset in the Company's
balance sheet and is a direct determinant of cost of goods sold in the statement
of operations and therefore has a significant impact on the amount of net income
reported in an accounting  period.  The basis of accounting  for  inventories is
cost,  which is the sum of expenditures  and charges,  both direct and indirect,
incurred to bring the  inventory  quantities  to their  existing  condition  and
location.  The Company's  inventories are stated at the lower of cost or market,
with cost  determined  using the  first-in,  first-out  ("FIFO")  method,  which
assumes  that  inventory  quantities  are sold in the  order  in which  they are
manufactured or purchased.  The Company utilizes  standard costs as a management
tool. The Company's  standard cost  valuation of its  inventories is adjusted at
regular  intervals to reflect the approximate  cost of the inventory under FIFO.
The  determination of the indirect charges and their allocation to the Company's
work-in-process   and  finished  goods   inventories  is  complex  and  requires
significant  management judgment and estimates.  Material differences may result
in the  valuation of the Company's  inventories  and in the amount and timing of
the  Company's  cost of goods  sold and  resulting  net income for any period if
management made different judgments or utilized different estimates.

On a periodic  basis,  management  reviews its inventory  quantities on hand for
obsolescence, physical deterioration,  changes in price levels and the existence
of  quantities  on hand which may not  reasonably be expected to be used or sold
within the normal  operating cycles of the Company's  operations.  To the extent
that any of these  conditions  are  believed  to  exist  or the  utility  of the
inventory quantities in the ordinary course of business is no longer as great as
their carrying value, a reserve against the inventory  valuation is established.
To the extent that this reserve is established or increased during an accounting
period,  an  expense is  recorded  in the  Company's  statement  of  operations,
generally in cost of good sold.  Significant  management judgment is required in
determining  the amount and adequacy of this  reserve.  In the event that actual
results differ from management's  estimates or these estimates and judgments are
revised in future periods, the Company may need to establish additional reserves
which could materially  impact the Company's  financial  position and results of
operation.

As of March 31, 2002, the Company's  inventories  totaled $26.6 million,  net of
reserves for slow moving and obsolete  inventories  of $2.1 million.  Management
believes  that the  Company's  inventory  valuation,  together with the recorded
reserves  for slow moving and  obsolete  inventories,  results in  carrying  the
inventory at the lower of cost or market.

Accounting  for Income  Taxes.  In  conjunction  with  preparing  the  Company's
consolidated  financial  statements,  management  is required  to  estimate  the
Company's income tax liability in each of the jurisdictions in which the Company
operates.  This process  involves  estimating  the Company's  actual current tax
exposure together with assessing temporary  differences resulting from differing
treatment  of  items,  such as  goodwill  amortization,  for tax and  accounting
purposes.  These differences  result in deferred tax assets or liabilities which
are reflected in the Company's consolidated balance sheet.  Management must also
assess the likelihood  that the Company's  deferred tax assets will be recovered
from future taxable income. To the extent that management believes that recovery
is not likely,  a valuation  allowance must be established  and reviewed in each
accounting period.  Increases in the valuation allowance in an accounting period
requires  that the Company  record an expense  within its tax  provision  in its
consolidated statement of operations.



                                       13
<PAGE>

Significant  management  judgment  is  required  in  determining  the  Company's
provision  for income  taxes,  its deferred tax assets and  liabilities  and any
valuation  allowance  recorded against the Company's net deferred tax assets. At
March 31, 2002, the Company's net deferred tax assets totaled $2.0 million.  The
Company has  recorded a  valuation  allowance  of $40.4  million as of March 31,
2002, due to uncertainties  related to the Company's  ability to utilize some of
its  deferred  tax  assets,   primarily   consisting  of  net   operating   loss
carryforwards,   before  they  expire.  The  valuation  allowance  is  based  on
management's  estimates of taxable income by  jurisdiction  in which the Company
operates and the period over which the deferred tax assets will be  recoverable.
In the event that actual results differ from these  estimates or these estimates
are adjusted in future  periods,  the Company may need to adjust this  valuation
allowance which could  materially  impact the Company's  financial  position and
results of operation.

Valuation of Long-Lived and Intangible Assets and Goodwill. The Company assesses
the  impairment  of  identifiable  intangibles,  long-lived  assets and  related
goodwill whenever events or changes in circumstances  indicate that the carrying
value may not be  recoverable.  Factors that are  considered  by  management  in
performing this assessment include, but are not limited to, the following:

     -    The Company's  performance  relative to historical or projected future
          operating results;

     -    The  Company's  intended  use of  acquired  assets  or  the  Company's
          strategy for its overall business; and

     -    Industry or economic trends.

In the event  that the  carrying  value of  intangibles,  long-lived  assets and
related goodwill is determined to be impaired, such impairment is measured using
a discount  rate  determined  by  management  to be  commensurate  with the risk
inherent in the Company's  current  business  model.  At March 31, 2002, the net
book value of  goodwill  approximated  $22.5  million  and the net book value of
other intangible assets approximated $3.8 million.

As  discussed  in  the  footnotes  to  the  condensed   consolidated   financial
statements,  on January 1, 2002, the Company implemented  Statement of Financial
Account Standard ("SFAS") No. 142, Goodwill and Other Intangible  Assets, and as
a result,  will cease to amortize  approximately  $22.5  million of goodwill but
will continue to amortize other intangible assets. Goodwill amortization for the
full year of 2001 and the 2001 Quarter amounted to  approximately  $1.1 million,
or $0.026 per share, and $240,000, or $0.006 per share, respectively. In lieu of
amortization,  the Company  will be  required  to perform an initial  impairment
review of its  goodwill in 2002 and an  impairment  review  thereafter  at least
annually.  The Company expects to complete its initial  impairment review in the
second  quarter of 2002 and  currently  does not expect to record an  impairment
charge upon completion of this review. However, there can be no assurance that a
material  impairment charge will not be recorded at the time that this review is
completed.

FORWARD LOOKING STATEMENTS

Statements made in this Quarterly Report include forward-looking statements made
under the  provisions of the Private  Securities  Litigation  Reform Act of 1995
including,  but not limited to, expected  adjustments to the Company's financial
statements upon completion of the  transitional  impairment tests under SFAS No.
142,  expected  amortization  expenses  in 2002 and future  periods,  forecasted
reductions to operating  expenses  associated  with the  transition of sales and
marketing  responsibilities of the OTI nuclear business to Eastern Technologies,
Inc., the ability of the Company to meet its liquidity and capital requirements,
and management  judgments about future events in the application of its critical
accounting policies as described under "Critical Accounting Policies" above. The
Company's  actual  results  could differ  materially  from such  forward-looking



                                       14
<PAGE>

statements and such results will be affected by risks described in the Company's
Annual Report including, without limitation, those described under "Risk Factors
-History of Net Losses",  "-Reliance upon Microtek",  "-Competition",  "-Product
Liability",   "-Stock  Price   Volatility",   "-Dependence  on  Key  Personnel",
"-Anti-takeover Provisions",  "-Low Barriers to Entry for Competitive Products",
"-Potential  Erosion of Profit  Margins",  "-Risks of Completing  Acquisitions",
"-Small Sales and Marketing Force",  "-Reliance upon  Distributors",  "-Microtek
Regulatory Risks",  "-Risks of Obsolescence",  "-Reduced OREX Market Potential",
"-OREX Commercialization Risks", "-OREX Manufacturing and Supply Risks", "-Risks
Affecting Protection of Technology",  "-Risks of Technological Obsolescence" and
"-OTI  Regulatory  Risks".  We do not  undertake  to update our  forward-looking
statements to reflect future events or circumstances.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's greatest  sensitivity with respect to market risk is to changes in
the  general  level of U.S.  interest  rates and its effect  upon the  Company's
interest expense.  At March 31, 2002, the Company had $10.1 million long-term or
short-term  debt bearing  interest at floating  rates.  Because  these rates are
variable,  a 1% increase in interest  rates would result in additional  interest
expense of  approximately  $30,000 per quarter  and a 1%  reduction  in interest
rates would  result in reduced  interest  expense of  approximately  $30,000 per
quarter.

                                     PART II

                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not applicable.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

During the  quarter  for which  this  report is filed,  there  were no  material
modifications in the instruments defining the rights of shareholders. During the
quarter  for which this  report is filed,  none of the rights  evidenced  by the
shares of the Company's common stock were materially limited or qualified by the
issuance or modification of any other class of securities.

On January 18, 2002,  the Company  issued  50,000 shares of its common stock for
consideration  consisting  of $50,000 in cash plus  services  provided and to be
provided  under a consulting  agreement  for investor  relations  services.  The
securities were purchased by two principals of the Company's  investor relations
advisor in a private transaction.  Exemption from the registration provisions of
the  Securities Act for this  transaction  was claimed under Section 4(2) of the
Securities Act and the rules and regulations promulgated thereunder on the basis
that such transaction did not involve any public  offering,  the purchasers were
sophisticated with access to the kind of information  registration would provide
and that such purchasers acquired such securities without a view to distribution
thereof.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

Not applicable.




                                       15
<PAGE>

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

None.

ITEM 5.        OTHER INFORMATION

None.

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K

(a)            Exhibits:


Exhibit No.    Description
-----------    -----------

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

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

3.3(3)         Amended and Restated Bylaws of Isolyser Company, Inc.

4.1(1)         Specimen Certificate of Common Stock





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

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

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

(3)  Incorporated by reference to Exhibit 3.1 to the Company's Current Report on
     Form 8-K filed April 23, 2002.




(b)  The Company filed a Current  Report on Form 8-K on April 23, 2002 reporting
     under Item 5 thereof an  amendment  to the  Company's  Amended and Restated
     Bylaws.



                                       16
<PAGE>



                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has caused  this  quarterly  report on Form 10-Q to be signed on its
behalf by the undersigned thereunto duly authorized on May 13, 2002.


                        ISOLYSER COMPANY, INC.



                                 By:      /s/ Dan R. Lee
                                          ---------------------------------
                                          Dan R. Lee
                                          President & CEO
                                          (principal executive officer)


                                 By:      /s/ R. G. Wilson
                                          --------------------------------
                                          R. G. Wilson
                                          Chief Financial Officer
                                          (principal financial officer)




                                       17


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