<PAGE>

                                  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 quarter ended SEPTEMBER 30, 2001

                                       OR

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

        For the transition period from_____________ to _______________

                        Commission file number: 000-24103

                           COHESION TECHNOLOGIES, INC.
             (Exact Name of Registrant as Specified in Its Charter)

          DELAWARE                                          94-3274368
       (State or Other                                   (I.R.S. Employer
       Jurisdiction of                                 Identification No.)
      Incorporation or
        Organization)

                      2500 FABER PLACE, PALO ALTO, CA 94303
          (Address of Principal Executive Offices, including Zip Code)

       Registrant's telephone number, including area code: (650) 320-5500

        Securities registered pursuant to Section 12(b) of the Act: NONE

           Securities registered pursuant to Section 12(g) of the Act:
                          COMMON STOCK, $.001 PAR VALUE


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 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 October 31, 2001, the Registrant had 9,422,959 shares of common stock
outstanding, exclusive of 515,100 shares held by the Registrant as treasury
stock.


<PAGE>


                           COHESION TECHNOLOGIES, INC.

                                    FORM 10-Q

                                      INDEX

<TABLE>
<CAPTION>
                                                                             Page No.
                                                                             --------
<S>       <C>                                                                <C>
PART I.   Financial Information

Item 1.   Financial Statements:

              Condensed Balance Sheets -
              September 30, 2001 and June 30, 2001                               3

              Condensed Consolidated Statements of Operations -
              Three months ended September 30, 2001 and 2000                     4

              Condensed Consolidated Statements of Cash Flows -
              Three months ended September 30, 2001 and 2000                     5

              Notes to Condensed Consolidated Financial Statements             6-8

Item 2.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations                               9-15

Item 3.   Quantitative and Qualitative Disclosures about Market Risk            16

PART II.  Other Information

Item I.   Legal Proceedings                                                     17

Item 6.   Exhibits and Reports on Form 8-K                                      18

Signatures                                                                      19
</TABLE>



                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                           COHESION TECHNOLOGIES, INC.

                            CONDENSED BALANCE SHEETS
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>
                                                  SEPTEMBER 30,     JUNE 30,
                                                      2001           2001*
                                                  -------------     --------
                                                   (UNAUDITED)
<S>                                               <C>               <C>
ASSETS
Current assets:
  Cash and cash equivalents ....................    $ 18,808        $ 10,101
  Accounts receivable, net .....................         327             462
  Inventories ..................................       2,356           2,706
  Other current assets .........................       4,872           6,084
                                                    --------        --------
         Total current assets ..................      26,363          19,353

Property and equipment, net ....................       4,744           5,028
Investment in equity securities ................          --          17,204
Other assets ...................................       2,342           4,045
                                                    --------        --------
                                                    $ 33,449        $ 45,630
                                                    ========        ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable .............................    $    408        $    613
  Accrued compensation .........................         963             467
  Accrued liabilities ..........................       1,994           2,718
  Deferred revenue .............................         380             380
  Income taxes payable .........................         650             904
  Current portion of capital lease obligation ..         883             867
                                                    --------        --------
         Total current liabilities .............       5,278           5,949

Long-term liabilities:
  Deferred income taxes ........................          --           6,298
  Obligation under capital lease ...............       1,530           1,757
  Deferred revenue .............................         983           1,078

Stockholders' equity:
  Preferred stock ..............................          --              --
  Common stock .................................          10              10
  Additional paid-in capital ...................      21,536          21,334
  Retained earnings ............................       6,086           2,630
  Accumulated other comprehensive income .......          --           8,548
  Treasury stock, at cost ......................      (1,974)         (1,974)
                                                    --------        --------
         Total stockholders' equity ............      25,658          30,548
                                                    --------        --------
                                                    $ 33,449        $ 45,630
                                                    ========        ========
</TABLE>


The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.

* Amounts derived from audited financial statements at the date indicated.


                                       3
<PAGE>


                           COHESION TECHNOLOGIES, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED
                                                                        SEPTEMBER 30,
                                                                     2001         2000
                                                                   --------      -------
<S>                                                                <C>           <C>
Revenue:
  Product sales .................................................  $    684      $   754
  Other revenue .................................................        95           38
                                                                   --------      -------
                                                                        779          792
Costs and expenses:
  Cost of sales, including manufacturing start-up costs .........     1,550        1,195
  Research and development ......................................     2,662        2,981
  Selling, general and administrative ...........................     2,578        1,561
  Compensation expense related to cancelled stock options .......        74          164
                                                                   --------      -------
      Total costs and expenses ..................................     6,864        5,901
                                                                   --------      -------
Loss from operations ............................................    (6,085)      (5,109)

Other income (expense):
  Realized gain on investments, net .............................    16,032          676
  Investment impairment .........................................    (5,293)          --
  Interest income ...............................................       184          387
  Interest expense ..............................................       (52)         (66)
                                                                   --------      -------

Income(loss) before taxes and change in accounting principle ....     4,786       (4,112)
Provision (benefit) for income taxes ............................     1,330       (1,439)
                                                                   --------      -------

Income (loss) before cumulative effect of change in
  accounting principle ..........................................     3,456       (2,673)
Cumulative effect of change in accounting for
  derivatives, net of tax .......................................        --          129
                                                                   --------      -------

Net income (loss) ...............................................  $  3,456      $(2,544)
                                                                   ========      =======

Net income (loss) per common share - basic                         $   0.37      $ (0.27)
                                                                   ========      =======

Net income (loss) per common share - diluted                       $   0.37      $ (0.27)
                                                                   ========      =======

Weighted average shares outstanding                                   9,423        9,276
                                                                   ========      =======

Weighted average shares outstanding assuming
  dilution                                                            9,442        9,276
                                                                   ========      =======
</TABLE>


      The accompanying notes to condensed consolidated financial statements
                    are an integral part of these statements.



                                       4
<PAGE>


                           COHESION TECHNOLOGIES, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                                 (IN THOUSANDS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                                  SEPTEMBER 30,
                                                               2001          2000
                                                             --------      --------
<S>                                                          <C>           <C>
Cash flows from operating activities:
  Net income (loss) .......................................  $  3,456      $ (2,544)

  Adjustments to reconcile net income
    to net cash used in operating activities:
    Depreciation and amortization .........................       402           678
    Cumulative effect of change in accounting principle ...        --          (129)
    Realized gain (loss) on investments, net ..............   (10,739)         (676)
    Decrease (increase) in assets:
      Accounts receivable .................................       135          (188)
      Inventories .........................................       350          (834)
      Other ...............................................     2,537        (1,241)
    Increase (decrease) in liabilities:
      Accounts payable, accrued liabilities and other .....      (765)          525
                                                             --------      --------
    Net cash used in operating activities .................    (4,624)       (4,409)

Cash flows from investing activities:
  Proceeds from sale of equity investments ................    13,697         8,021
  Proceeds (payment) on maturity of equity collars ........        --           789
  Expenditures for property and equipment .................      (118)          (93)
                                                             --------      --------
    Net cash provided by investing activities .............    13,579         8,717

Cash flows from financing activities:
  Proceeds from exercise of stock options .................        11           186
  Payment of capital lease obligation .....................      (259)         (196)
                                                             --------      --------
    Net cash used in financing activities .................      (248)          (10)

Net increase in cash and cash equivalents .................     8,707         4,298
Cash and cash equivalents at beginning of period ..........    10,101        14,154
                                                             --------      --------
Cash and cash equivalents at end of period ................  $ 18,808      $ 18,452
                                                             ========      ========
</TABLE>


     The accompanying notes to condensed consolidated financial statements
                    are an integral part of these statements.



                                       5
<PAGE>


                           COHESION TECHNOLOGIES, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   Basis of Presentation

     The condensed balance sheet as of September 30, 2001, the condensed
consolidated statements of operations for the three months ended September 30,
2001 and 2000, and the condensed consolidated statements of cash flows for the
three months ended September 30, 2001 and 2000, have been prepared by the
Company and are unaudited. In the opinion of management, all necessary
adjustments (which include only normal recurring adjustments) have been made to
present fairly the financial position, results of operations, and cash flows at
September 30, 2001 and for all periods presented. Interim results are not
necessarily indicative of results for a full fiscal year. The condensed balance
sheet as of June 30, 2001 has been derived from the audited consolidated
financial statements at that date.

     Certain amounts in the financial statements for the prior fiscal period
have been reclassified to conform with the current year presentation. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These condensed consolidated financial statements should
be read in conjunction with the audited consolidated financial statements and
notes included in the Company's Annual Report on Form 10-K for the year ended
June 30, 2001.

  Earnings Per Share

     Basic earnings per share ("EPS") is calculated using the weighted average
number of common shares outstanding for the period. The computation of diluted
EPS includes the effects of stock options, warrants and convertible preferred
stock, if any, if such effect is dilutive. Options that had an exercise price
greater than the market price of the Company's common stock during the quarters
ended September 30, 2001 and 2000 were excluded, as their inclusion would have
been anti-dilutive. Below is a reconciliation between the basic and diluted
weighted average shares for the three months ended September 30, 2001 and 2000:

<TABLE>
<CAPTION>
                                                    SEPTEMBER 30,
                                                   2001     2000
                                                   -----    -----
                                                   (IN THOUSANDS)
<S>                                                <C>      <C>
Basic (weighted average common shares
outstanding)..............................          9,423   9,276
Dilutive effect of stock options .........             19      --
                                                    -----   -----
Weighted average common shares outstanding,
assuming dilution                                   9,442   9,276
                                                    =====   =====
</TABLE>




                                       6
<PAGE>

2. INVENTORIES

   Inventories are valued at the lower of cost, determined on a standard cost
basis, which approximates average cost, or market.

   Inventories comprise the following:

<TABLE>
<CAPTION>
                                      SEPTEMBER 30,       JUNE 30,
                                               2001           2001
                                             ------         ------
                                                 (IN THOUSANDS)
<S>                                          <C>            <C>
Raw materials.............................   $1,043         $1,157
Work-in-process...........................      584            842
Finished goods............................      729            707
                                             ------         ------
                                             $2,356         $2,706
                                             ======         ======
</TABLE>

3. EQUITY INVESTMENTS

   The following is a summary of the aggregate estimated fair value, gross
unrealized gains and losses and cost of the Company's investments in equity
securities:

<TABLE>
<CAPTION>
                                      SEPTEMBER 30,        JUNE 30,
                                               2001            2001
                                             ------         -------
                                                 (IN THOUSANDS)
<S>                                          <C>            <C>
Cost......................................   $   --         $ 7,150
Gross unrealized losses...................       --            (714)
Gross unrealized gains ...................       --          10,768
                                             ------         -------
Estimated fair value......................   $   --         $17,204
                                             ======         =======
</TABLE>


   The Company determines the appropriate classification of marketable
securities at the time of purchase and re-evaluates such designation as of each
balance sheet date. All of the Company's investments in equity securities were
classified as available-for-sale at June 30, 2001, and were subsequently sold in
the quarter ended September 30, 2001.



                                       7
<PAGE>

4. COMPREHENSIVE INCOME

   The components of comprehensive income (loss), net of related income tax, for
the three months ended September 30, 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED
                                                    SEPTEMBER 30,
                                                    (IN THOUSANDS)
                                                  2001          2000
                                                 -------      -------
<S>                                              <C>          <C>
Net income (loss).........................       $ 3,456      $(2,544)

Decrease in unrealized gains on
  securities..............................            --       (2,473)

Adjustment of hedged item carrying
  amount for fair value hedge.............            --          789

Adjustment for investment gains (losses)
  recognized during the period............        (8,548)        (513)
                                                 -------      -------

Comprehensive income (loss)...............       $(5,092)     $(4,741)
                                                 =======      =======
</TABLE>





                                       8
<PAGE>

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

OVERVIEW

   The following discussion should be read in conjunction with the condensed
consolidated financial statements and the related notes and the other
information included elsewhere in this quarterly report and our annual report on
Form 10-K for the fiscal year ended June 30, 2001. Some of the statements in
this "Management's Discussion and Analysis of Financial Condition and Results of
Operations" are forward-looking. The words "may," "will," "could," "should,"
"continue," "anticipates," "projects," "believes," "expects," "future," "plans,"
"might," "intends," "seeks," "estimates," and similar expressions identify
forward-looking statements. These forward-looking statements are based on
current expectations and entail various risks and uncertainties that could cause
actual results to differ materially from those described in forward-looking
statements. These risks include product performance, the rate of product
adoption by customers, usage, order and re-order rates, competition from other
products, performance of third-party sales representatives, ability to hire and
the performance of a direct sales force, the timing and effectiveness of product
introductions and launches, the success of scaling up product production,
ability to achieve product revenue targets or market share, commencement and
continuation of product sales in the United States and in additional countries
outside of the United States, the timing and terms of sales arrangements with
other companies, receipt of regulatory and marketing approvals, including
approvals, quality system regulation inspections and panel reviews from the Food
and Drug Administration ("FDA"), clinical efficacy of and market demand for our
products, assessment of market size and opportunity, including the applicable
numbers if procedures, our position in the market, enrollment in and results of
clinical studies and potential unfavorable publicity regarding our company or
our products. In addition, we may not prevail in our patent infringement lawsuit
claiming patent infringement by Fusion Medical Technologies, Inc. The risks
related to this lawsuit that could cause our actual results to differ materially
from those described in forward-looking statements include that the court may
rule against us on the issue of infringement, we may not be awarded damages
and/or permanent injunctive relief, the court could limit our ability to enforce
our patent, we could be served with a counter suit, our patent could be declared
invalid or the substantial cost and length of time and unpredictability
associated with litigation. These differences may be based upon factors within
our control, such as strategic planning decisions by management and reallocation
of internal resources, or on factors outside our control, such as scientific
advances by third parties, court decisions in lawsuits filed by us, introduction
of competitive products and delays by regulatory authorities, including
approvals from the FDA. For a more detailed discussion of these and other
business risks, see " - Additional Factors that Might Affect Future Results,"
and "Business - Government Regulation" and "Business - Competition" in our
annual report on Form 10-K for the fiscal year ended June 30, 2001.

   We are focused on developing and commercializing proprietary surgical
products, including bioresorbable hemostatic devices and biosealants for tissue
repair and regeneration, which increase the effectiveness of, and minimize
complications following open and minimally invasive surgeries. Hemostatic
devices are used to stop bleeding during surgeries. Bleeding must be controlled
to ensure effective closure of surgical wounds and to avoid serious or
life-threatening complications, including blood loss, tissue damage, infection
and excessive scarring. CoStasis Surgical Hemostat, our hemostatic product, is
designed for use in cardiovascular, orthopedic and general surgery indications.
We received a CE Mark for CoStasis in fiscal 1999 and received FDA approval in
June 2000 to market the product in the United States. In November 1999, we
announced an agreement with U.S. Surgical, a business unit of Tyco Healthcare
Group and Tyco International, for the marketing and distribution of CoStasis.
The U.S. Surgical territories include the United States, European Union, Eastern
Europe, Latin America, Middle East, Australia, New Zealand and India. The
CoStasis agreement with U.S. Surgical originally granted U.S. Surgical exclusive
distribution rights in assigned territories requiring minimum aggregate
purchases of CoStasis product each calendar year. To date, U.S. Surgical has
failed to purchase sufficient CoStasis product to maintain exclusive
distribution rights. In addition, U.S. Surgical has thus far elected not to make
a payment that would allow for the


                                       9
<PAGE>

maintenance of exclusivity in the absence of meeting minimum product purchases.
Accordingly, we may seek alternative means of CoStasis distribution, which may
include direct sales by our own sales force.

   CoSeal Surgical Sealant, our surgical biosealant product, is designed for
sealing vascular grafts and other tissues and sites of incision and incision
repair. In February 2000, we received a CE Mark for CoSeal. CoSeal is currently
being sold outside of the U.S. through distributors, including Tyco Healthcare
Group and other specialty distributors. We filed a PMA application with the FDA
for CoSeal in April 2001. We have recently undergone an FDA quality system
regulation inspection, resulting in several observations and comments from the
FDA related to CoSeal. We expect to address and satisfy the FDA's observations
and comments in a timely manner. FDA clearance and satisfaction with our actions
to address these observations and comments is normally required before a pending
PMA will be approved. CoSeal was scheduled to be reviewed by the FDA panel in
September 2001; however, due to national events, the meeting was postponed. The
FDA subsequently determined that a panel meeting would not be necessary. We
expect our response to the FDA's observations and comments from our FDA quality
system regulation inspection will not impact our anticipated timeframe for
approval. However, we cannot assure you that we will receive approval from the
FDA to market CoSeal in the United States within our anticipated timeframe, or
at all.

   Our products and programs are based on a platform of proprietary technologies
centered around collagen and hydrophilic polymers that quickly polymerize
in-vivo and bind to tissue. We also have research and development programs in
recombinant human collagen and thrombin, a potent clotting agent. We are
considering and discussing options to establish a separate entity, with outside
funding, to continue research programs to develop sources of recombinant human
collagen and thrombin. If such an entity is successfully established, it is
likely that we would retain a minority interest in the new entity. If these or
other efforts to raise funds are not successful, it is likely that we will
suspend research and development programs in the area of recombinant human
collagen and thrombin.

    We were organized in June 1997 as a Delaware corporation and wholly-owned
subsidiary of Collagen Aesthetics, Inc. formerly known as Collagen Corporation,
now known as McGhan Medical since Collagen was acquired by Inamed Corporation.
Effective January 1, 1998, Collagen contributed its research and development
programs for hemostatic devices, biosealants, orthopedics products and programs,
adhesion barriers and recombinant human collagen and thrombin and other related
businesses to our company, including various equity investments. On August 18,
1998, Collagen distributed as a dividend to its stockholders, one share of our
common stock for each share of Collagen common stock outstanding. In February
1999, we formed a subsidiary, NeuColl, Inc., to commercialize products in the
orthopedics field, which included Collagraft(R), an orthopedic product, and
NeuVisc(TM), a collagen-based intra-articular implant for the treatment of pain
related to osteoarthritis. During the quarter ended March 31, 2000, our
ownership interest in NeuColl fell below 50% and accordingly, we began to report
our share of NeuColl's operating results under the equity method of accounting.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2001 and 2000

   Revenues were $779,000 and $792,000 for the three months ended September 30,
2001 and 2000, respectively. Revenues for the current and prior year fiscal
quarters included $95,000 and $38,000, respectively, of contract revenue related
to the recognition of upfront license fees and milestone payments pursuant to
our marketing and distribution agreements with U.S. Surgical and Tyco Healthcare
Group. Product sales were $684,000 and $754,000 for the three months ended
September 30, 2001 and 2000, respectively. Sales in the prior year quarter
included initial U.S. sales of CoStasis, related delivery systems and equipment,
and demonstration product to our marketing partner, U.S. Surgical, in
preparation for the U.S. launch of CoStasis. A number of uncertainties exist


                                       10
<PAGE>

surrounding the marketing and distribution of our products where the primary
means of distribution is through a third party firm, such as U.S. Surgical
meeting exclusivity requirements. Our business and financial results could be
adversely affected in the event a third party firm is, or other third party
firms are, unable to market the product effectively, anticipate customer demand
accurately, or effectively manage industry-wide pricing and cost containment
pressures in health care.

   Cost of sales as a percentage of product sales was 227% and 158% for the
three months ended September 30, 2001 and 2000, respectively. Negative gross
margins continue to reflect a high level of fixed manufacturing costs that are
relatively independent of sales volumes.

   Research and development ("R&D") expenses were $2.7 million and $3.0 million
for the three months ended September 30, 2001 and 2000, respectively. R&D
spending decreased 10% primarily due to lower R&D program spending, which was
partially offset by severance expense.

   Selling, general and administrative ("SG&A") expenses were $2.6 million for
the quarter ended September 30, 2001, an increase of 63% from $1.6 million
during the prior year quarter. SG&A expenses increased primarily due to
increases in sales and marketing staffing, legal expenses related to our patent
infringement lawsuit against Fusion Medical and severance expense.

   We are considering various options to reduce spending from our current
levels. It is likely that the headcount will be substantially reduced before the
end of calendar 2001 in selected operational areas, particularly R&D. We are
also planning to increase headcount in sales and marketing in anticipation of
CoSeal approval and launch in the United States in the first half of calendar
year 2002. These changes in headcount may involve charges and expense changes
that result in substantial short- or longer-term changes in our cost structure
in comparison to historical expense patterns.

   During the three months ended September 30, 2001 and 2000, we recorded $0.1
million and $0.2 million, respectively, of compensation expense in connection
with the cancellation of the remaining stock options of Cohesion Corporation. In
September 1998, our board of directors approved a program to cancel options to
purchase shares of the common stock of Cohesion Corporation. In connection with
this cancellation, we offered to pay each holder of canceled options a per share
amount equal to the excess of $16.70 over the exercise price of the canceled
option. We made these option payments ratably over the original vesting period
of the canceled option (through September 2001) so long as the former holder
thereof remained an employee or consultant of the company.

   Net realized gains on sale of investments were $16.0 million and $0.7 million
for the three months ended September 30, 2001 and 2000, respectively. The net
gains were primarily from the sale of common stock of Boston Scientific and
Johnson & Johnson, respectively. All of our remaining shares of Boston
Scientific stock were sold during the quarter ended September 30, 2001. We also
recorded in the fiscal quarter ended September 30, 2001, an impairment charge of
$5.3 million for the write-down of our investment in Pharming Group N.V., which
filed for receivership in August 2001.

   Interest income was $184,000 and $387,000 for the three months ended
September 30, 2001 and 2000, respectively. The decrease is due to lower interest
rates and lower average cash balances in the current fiscal quarter.

   Interest expense of $52,000 and $66,000 for the three months ended September
30, 2001 and 2000, respectively was related to the obligation under a capital
lease.

   We recorded a provision for income taxes of $1.3 million for the three months
ended September 30, 2001 and a benefit of 35% for the three months ended
September 30, 2000. As a result of expected future operating losses, we do not
expect to recover additional tax benefits for the remainder of the fiscal year.


                                       11
<PAGE>

   Effective July 1, 2000, we recorded the cumulative effect of a change in
accounting principle related to the adoption of SFAS 133 which resulted in a
decrease to the net loss of approximately $129,000, net of tax, for the three
months ended September 30, 2000.

LIQUIDITY AND CAPITAL RESOURCES

   At September 30, 2001, cash and cash equivalents were $18.8 million compared
to cash, cash equivalents and investments of $27.3 million at June 30, 2001. Net
cash used in operating activities was $4.6 million for the three months ended
September 30, 2001 compared to $4.4 million used in the same prior-year period.

   For the three months ended September 30, 2001, cash provided by investing
activities of $13.6 million was related to proceeds from the sale of equity
investments. Currently, we anticipate that capital expenditures will not exceed
$1.5 million in fiscal 2002. Net cash used by financing activities for the three
months ended September 30, 2001 was approximately $248,000 primarily due to
payments for capital lease obligations.

   Our principal sources of liquidity include cash and cash equivalents, and
included marketable equity securities through the quarter ended September 30,
2001. We sold all of our remaining shares of Boston Scientific common stock
during the quarter ended September 30, 2001. We also recorded an impairment
charge of $5.3 million for the write-down of our investment in Pharming N.V.,
which filed for receivership in August 2001. It is uncertain at this time what
the recoverable value will be for this investment, if any.

   We believe that our current sources of liquidity should be adequate to fund
our anticipated capital requirements through the end of our fiscal year 2002.
However, during this period and thereafter, we may seek additional financing
which may involve attempting to sell equity securities or to secure debt
financing or other financing arrangements. Our capital requirements will depend
on numerous factors, including the achievement of targeted sales levels,
progress of our clinical research and product development programs, the extent
to which we enter into collaborative relationships with third parties and the
scope of our obligations in such relationships, the receipt of, and the time
required to obtain, regulatory clearances and approvals, the resources required
to protect our intellectual property and other factors. We cannot accurately
predict the timing and amount of such capital requirements. Additional financing
may not be available to us on acceptable terms, if at all.

   In September 1998, our Board of Directors approved a stock repurchase program
to buy back up to 1.0 million shares of common stock at a price of up to $4.25
per share. As of September 30, 2001, we had repurchased 515,100 shares of our
common stock under this program, none of which were repurchased in the quarter
ended September 30, 2001.

   In September 1998, our Board of Directors approved a program to cancel
options to purchase shares of the common stock of Cohesion Corporation. In
connection with such program, we offered to pay each holder of canceled options
a per share amount equal to the excess of $16.70 over the exercise price of the
canceled option. We made these option payments ratably over the original vesting
period of the canceled option (through September 2001) so long as the holder
thereof remained an employee or consultant of the company.

    In February 1999, we formed a subsidiary, NeuColl, Inc., in order to
commercialize products in the orthopedics field. During the quarter ended March
31, 2000, our ownership interest in NeuColl fell below 50% and accordingly, we
began to report our share of NeuColl's operating results under the equity method
of accounting. As of June 30, 2001 and September 30, 2001, the carrying value of
our investment in NeuColl was zero. We hold a warrant to purchase an additional
3.0 million shares of common stock in NeuColl, which expires in February 2006.



                                       12
<PAGE>

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

   For a discussion of other risks and uncertainties involving our business, see
"Business" in our annual report on Form 10-K for the fiscal year ended June 30,
2001.

We have a history of operating losses and anticipate continued operating losses.

   Our operating losses have resulted primarily from expenses incurred in
connection with research and development activities, including preclinical and
clinical trials, development of manufacturing processes and general and
administrative expenses, and we expect that these expenses may continue to
increase in the foreseeable future. Our ability to achieve and sustain operating
profitability is highly dependent upon obtaining regulatory approval in a timely
and efficient fashion, and successfully commercializing and marketing our
products. in Europe, the United States and other markets. We cannot assure you
that we will obtain required regulatory approvals in a timely fashion, if at
all, or successfully develop, manufacture, commercialize and market our products
or that we will ever record significant product revenues or achieve operating
profitability.

We have historically depended on our sales of equity investments to fund
operations and will need to obtain additional financing in the future to fund
operations.

    As of September 30. 2001, cash and cash equivalents were $18.8 million. We
sold all of our remaining shares of Boston Scientific common stock during the
quarter ended September 30, 2001. Our only remaining equity investment is
Pharming Group N.V. common stock. We cannot assure you that we will be able to
sell any of the remaining shares of Pharming common stock at attractive prices
if, when and as needed. In August 2001, Pharming filed for receivership in order
to seek protection from its competitors. It is uncertain at this time what the
recoverable value will be, if any, for our equity investment in Pharming.

    We believe that our current sources of liquidity should be adequate to fund
our anticipated capital requirements through fiscal year 2002. However, during
this period and thereafter, we may seek additional financing which may not be
available on acceptable terms or at all. If we cannot raise necessary additional
capital on acceptable terms, we may have to significantly reduce our expenses
and may not be able to continue our clinical research and product development
programs, achieve targeted sales levels, take advantage of future opportunities
or respond to competitive pressures or unanticipated requirements, which may
adversely effect our business, financial condition and results of operations.

    If additional capital is raised through the issuance of equity securities,
the percentage ownership of our existing stockholders will decline, stockholders
may experience dilution in net book value per share, or these equity securities
may have rights, preferences or privileges senior to those of the holders of our
outstanding common stock. Any debt financing, if available, used to raise
additional capital may involve covenants limiting or restricting our operations
or future opportunities.

We depend on a small number of customers for a substantial portion of our
revenues and the loss of one of more of our significant customers could
substantially reduce our revenues and prevent us from achieving operating
profitability.

   We anticipate that for the foreseeable future we will continue to be
primarily dependent on a small number of customers for our revenues. We are
currently primarily dependent on U.S. Surgical for the distribution of CoStasis
in much of the world and for CoSeal, outside of the United States. Other than
our line of intermediate products, CoStasis is our only product currently being
sold in the United States. U.S. Surgical is our largest customer and accounted
for 74% of our product sales for the quarter ended September 30, 2001 and 63% of
our product sales for the fiscal year ended June 30,


                                       13
<PAGE>

2001. We anticipate that for the foreseeable future we will continue to be
primarily dependent on U.S. Surgical and a small number of other customers for
most of our revenues. The loss of U.S. Surgical or one or more of our other
significant customers, for any reason, or reduced orders from our significant
customers without replacement customers or orders would significantly reduce our
revenues and adversely effect our ability to ever achieve operating
profitability.

We must develop and commercialize our products to generate revenues.

   Except for CoStasis, CoSeal in Europe and our line of intermediate products,
all other products are in research or preclinical or clinical development and
are not currently generating revenue. The development and commercialization of
new products is highly uncertain, as is the timing associated with these
activities. Potential products that may appear to be promising may not reach the
market for a number of reasons, including the possibilities that the potential
products will be found to be ineffective or to cause harmful side effects during
preclinical testing or clinical trials, will fail to receive necessary
regulatory approvals, will be difficult to manufacture on a commercial scale,
will be uneconomical, will fail to achieve market acceptance or will be
precluded from commercialization by the proprietary rights of third parties. We
cannot assure you that we will receive FDA approval to market CoSeal in the
United States, that any of our other development programs will be successfully
completed, that clinical trials will generate anticipated results or will
commence or be completed as planned. Additionally, we cannot assure you that we
will be able to obtain additional CE marks in Europe, on a timely basis, if at
all, or that any PMA application submitted by us will be accepted or ultimately
approved by the FDA on a timely basis, if at all, or that any products for which
approval is obtained will be commercially successful. If any of our development
programs are not successfully completed in a timely fashion, required regulatory
approvals are not obtained in a timely fashion, or products for which approvals
are obtained are not commercially successful, our business, financial condition
and results of operations will be materially and adversely affected.

We operate in an intense competitive environment.

   We compete with many domestic and foreign medical device, pharmaceutical and
biopharmaceutical companies and organizations across each of our product
categories and areas in which we are conducting research and development
activities. In the hemostatic and biosealant areas in the United States, we
believe that we will face strong competition from existing methodologies for
controlling bleeding and sealing wounds resulting from surgery, such as
hemostatic powders and sponges, collagen-based hemostats and traditional sutures
and staples marketed by companies such as Johnson & Johnson and Tyco Healthcare
Group. In addition, Baxter Healthcare Corporation is the largest seller of
fibrin sealant products in the United States and Europe. We face competition
from newer products and technologies, including those developed by Genzyme
Biosurgery, who recently acquired Focal, Inc., and Fusion Medical Technologies,
Inc. In the United States, there are several biosurgery products under
development including those by the American Red Cross, Haemacure Corporation,
and Cryolife. Additionally, several companies and institutions are engaged in
the development of collagen-based materials, techniques, procedures and products
for use in medical applications that may overlap with our current and proposed
products and research programs.

   Most of these companies and organizations have or may have substantially
greater financial, technological, research and development, regulatory and
clinical, marketing and sales and personnel resources than we do. They may also
have greater experience in developing products, conducting clinical trials,
obtaining regulatory approvals, and manufacturing and marketing their products.
They may also develop alternative technologies and products that are more
effective, easier to use or more economical than those which have been or are
being developed by us or that render our technology and products obsolete and
non-competitive. Recently developed technologies or procedures are, or may in
the future be, the basis of competitive products. We cannot assure that our
current competitors or other parties will not succeed in developing alternative
technologies or products that are more effective, easier to use or more
economical than the technologies and products that we have been or


                                       14
<PAGE>

are developing or that would render our technology and products obsolete or
uncompetitive. If our current competitors or other parties succeed in developing
these alternative technologies or products, our business, financial condition
and results of operations would be materially and adversely affected. Our
competitors may also obtain approval or clearance by the FDA or foreign
regulatory approval organizations, achieve product commercialization or obtain
patent protection earlier than we do. Additionally, we cannot assure that any
marketing or other strategic partners that we may engage will not pursue
parallel development of technologies or products relating to, or competitive
with, our planned product portfolio. Also, to the extent we commence
manufacturing activities, we will also face competition with respect to
manufacturing efficiency and marketing capabilities, areas in which we currently
have limited experience. Failure to successfully address these factors and
circumstances could have a material adverse impact on us, our financial
condition and results of operations. See "Business -- Competition;" and
"Business -- Manufacturing" in our annual report on Form 10-K for the fiscal
year ended June 30, 2001.

The market may not accept our products.

   CoStasis Surgical Hemostat is a product designed to control diffuse capillary
and small vein bleeding, and CoSeal Surgical Sealant is a product designed to
seal anastomoses and sites of incision and incision repair, in connection with
surgery. We cannot assure that either of these products will gain widespread
commercial acceptance among physicians, patients and health care payors, even if
necessary international and U.S. marketing approvals are, obtained in the case
of CoSeal and, maintained. We believe that recommendations and endorsements by
physicians will be essential for market acceptance of our surgical products, and
we cannot assure you that these recommendations or endorsements will be
obtained. We believe that surgeons will not use our products unless they
determine, based on clinical data and other factors, that the products are an
effective means of controlling bleeding and sealing anastomoses and sites of
incision and incision repair, and that the clinical benefits to the patient and
cost savings achieved through use of these product outweigh their cost.
Acceptance among physicians may also depend upon our ability to train surgeons
and other potential users of our products in the use of sprayable surgical
products, which they typically have not used, and the willingness of such users
to learn these new techniques. Additional factors in achieving market acceptance
may include our ability to address competition from U.S. and international
medical device, pharmaceutical and biopharmaceutical companies, to develop a
direct marketing and sales force, to form strategic partnerships and to
manufacture cost-effective products. Failure of our products to achieve
significant market acceptance will have a material adverse effect on our
business, financial condition and results of operations.

We have limited marketing and sales capabilities.

   We currently have limited experience in marketing and selling our products,
including those under development, and we do not have an established direct
marketing and sales staff. In order to achieve commercial success for any
product approved by the FDA, we must either develop a marketing and sales force
or enter into arrangements with third parties to market and sell our products.
If we attempt to establish our own marketing and sales capabilities, we will be
competing with companies that currently have experienced and well-funded
marketing and sales operations. To the extent that we enter into co-promotion or
other marketing and sales arrangements with other companies, any revenues we
receive will be dependent on the efforts of others, and we cannot assure that
these efforts will be successful. Failure to establish develop and expand our
direct sales and marketing force or enter into arrangements with other companies
to market and sell our products will reduce our ability to generate revenues.



                                       15
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   We are exposed to financial market risks, including changes to interest rates
and equity security prices. To mitigate these risks, we have utilized derivative
financial instruments. We do not utilize derivative financial instruments for
speculative or trading purposes.

INTEREST RATE RISK

   The primary objective of our debt investment portfolio is to preserve
principal. We invest in debt instruments that meet high credit quality standards
and limit the amount of credit exposure to any one issue, issuer, or type of
instrument. We also limit the maturity of debt investments to 400 days or less.
As of September 30 and June 30, 2001, we held approximately $7.5 million and
$9.5 million of interest rate sensitive investments in debt securities,
respectively. A hypothetical 1% increase in interest rates would result in a
decrease in the fair value of investments in debt securities of less than
$15,000 and $20,000 as of September 30 and June 30, 2001, respectively. This
estimate is based on sensitivity analyses performed on our financial positions
at September 30 and June 30, 2001. Actual results may differ materially.

EQUITY SECURITY PRICE RISK

   During the quarter ended September 30, 2001, we sold all of our remaining
shares of Boston Scientific common stock. As of June 30, 2001, we held an equity
investment in the Pharming Group N.V. with a fair value of approximately $4.9
million and a cost basis of approximately $5.6 million. In August 2001, Pharming
filed for receivership in order to seek protection from its creditors because a
financing facility that was previously announced could not be obtained. Pharming
indicated that receivership was sought following a breakdown of certain
discussions with potential partners for mergers with or acquisition of Pharming.
As a result, the value of our investment was impaired and we may not be able to
sell any of our remaining shares of Pharming stock at attractive prices or at
all. We recorded a $5.3 million loss for the writedown of this investment as of
September 30, 2001.

<TABLE>
<CAPTION>
                                      SEPTEMBER 30,       JUNE 30,
EQUITY INVESTMENTS                             2001           2001
------------------------------------------------------------------
<S>                                           <C>         <C>
Boston Scientific                             $  --       $ 12,337

Pharming Group N.V.                              --          4,867
                                              -----       --------

Total                                         $  --       $ 17,204
                                              =====       ========
</TABLE>



                                       16
<PAGE>


                           PART II. OTHER INFORMATION

                           COHESION TECHNOLOGIES, INC.


Item I. Legal Proceedings

         Between August 2000 and September 2001, four actions were filed in the
U.S. District Court for the Northern District of California and one action was
filed in the Superior Court of California for the City and County of San
Francisco, each by the same attorneys. The four federal actions are Crane v.
Collagen Aesthetics et al.; Kerr et al. v. Inamed Corp. et al.; Vaernes v.
Inamed Corp. et al.; and Campbell v. Inamed Corp. et al. The state court action
is Bell v. Inamed Corp. et al. All five actions allege personal injury claims
arising out of the development and sale of Trilucent breast implants by an
affiliate of Collagen Aesthetics. The implants were principally sold outside the
United States, although clinical trials were conducted in the United States. We
had no role in the development or sale of these products. The Crane, Campbell
and Bell cases are personal injury complaints on behalf of single plaintiffs
seeking monetary damages. The Kerr and Vaernes cases are purported class actions
seeking "medical monitoring" and monetary damages. The Kerr purported class
consists of overseas implant patients, while the Vaernes purported class
consists of U.S. patients from the clinical trials.

         Pursuant to the Separation and Distribution Agreement between Collagen
and our company, we called upon Collagen to indemnify us with respect to these
suits. Collagen has acknowledged its obligation to indemnify us, and has assumed
our defense, with respect to the Bell, Campbell, Crane, Kerr and Vaernes cases.

         In June 2001, the U.S. District Court for the Northern District of
California dismissed the Crane and Kerr cases on the grounds of forum non
conveniens, or lack of a convenient forum. On October 1, 2001, the U.S. District
Court for the Northern District of California also dismissed the Campbell
lawsuit on the grounds of forum non conveniens. As a condition of these
dismissals, Collagen, our company and several of the other defendants agreed to
litigate any claims brought by plaintiffs Crane, Kerr and Campbell in the United
Kingdom. Plaintiffs Crane, Kerr and Campbell have appealed the U.S. District
Court's dismissal of their actions for forum non conveniens.

         On August 28, 2001, the U.S. District Court for the Northern District
of California granted our motion to dismiss the Vaernes action for failing to
state a claim against our company upon which relief could be granted. The Court
entered a similar order with respect to other defendants in the action and
granted the Plaintiff Vaernes leave to file an amended complaint against the
defendants, including our company. On October 9, 2001, Plaintiff Vaernes filed
her amended complaint. The amended complaint does not include any claims against
us. Consequently, the Company is not presently a party to the Vaernes Action.

         With respect to the Bell case, pending in the Superior Court, neither
the company nor the other defendants have been served with the summons and
complaint, therefore no response to that lawsuit is required yet.

         Cohesion commenced an action in December 2000, Cohesion Technologies.
Inc. v. Fusion Technology, Inc., in the U.S. District Court for the Northern
District of California. Cohesion alleges that Fusion unlawfully contributes to
infringement of Cohesion's U.S. Patent No. 6,110,484 by selling its product
lines. In October 2001, Cohesion amended its claim to include an additional
patent, U.S. Patent No. 6,277,394. Cohesion's complaint seeks monetary damages
and a permanent injunction prohibiting the sale of Fusion's product lines. A
trial date of July 8, 2002 has been set regarding this lawsuit.


                                       17
<PAGE>


                           PART II. OTHER INFORMATION

                           COHESION TECHNOLOGIES, INC.


Item 6. Exhibits and Reports on Form 8-K

           A.  Reports on Form 8-K

               None






                                       18
<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.



                                        COHESION TECHNOLOGIES, INC.


Dated: November 12, 2001                /s/  Sharon Kokubun
                                        --------------------------------------
                                        Sharon Kokubun
                                        Vice President, Financial Operations
                                        (Principal Accounting Officer)




                                       19