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

                                   FORM 10-QSB

        [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

               For the Quarterly Period Ended: September 30, 2001

                                       OR
       [ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                         for the transition period from:

                         Commission File Number 0-24913


                          BioShield Technologies, Inc.
                          ----------------------------
           (Name of small business issuer as specified in its charter)


                        Georgia                        58-2181628
           ---------------------------------       -------------------
             (State or other jurisdiction             (IRS Employer
           of incorporation or organization)       Identification No.)


                            4405 International Blvd.
                                   Suite B-109
                             Norcross, Georgia 30093
                          -----------------------------
                    (Address of principal executive offices)

         Issuer's telephone number, including area code: (770) 925-4302



                             ----------------------
     (Former name, former address, and former fiscal year, if changed since
                                  last report)



Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X]  No [ ].


State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 36,465,776 shares, as of November 12,
2001.

<PAGE>

                                TABLE OF CONTENTS
                                -----------------

                                                                           PAGE
                                                                           ----
PART I FINANCIAL INFORMATION

   Item 1.  Financial Statements

     1.  Consolidated Balance Sheet as of September 30, 2001 (unaudited)     3

     2.  Consolidated Statements of Operations for the three month
          period ended September 30, 2001 and 2000 (unaudited)               4

     3.  Consolidated Statements of Cash Flows for the three
         month period ended September 30, 2001 and 2000 (unaudited)          5

     4.  Notes to Consolidated Financial Statements                         6-9

   Item 2.  Management's Discussion and Analysis
              or Plan of Operation                                         10-11

PART II  OTHER INFORMATION

   Item 1. Legal Proceedings                                               12-13

   Item 2. Changes in Securities and Use of Proceeds                        13

   Item 3. Defaults upon Senior Securities                                  13

   Item 4. Submission of Matters to a Vote of Security Holders              13

   Item 5. Other Information                                                13

   Item 6.  Exhibits and Reports on Form 8-K                                13

SIGNATURES                                                                  13

                                        2


<PAGE>

                  BIOSHIELD TECHNOLOGIES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                               September 30, 2001



                                  ASSETS

CURRENT ASSETS:
    Cash ......................................................   $     36,618
    Accounts receivable, net of allowance for
       doubtful accounts of $100,000 ..........................      1,154,467
    Due from related party ....................................         37,500
    Other current assets ......................................          5,499
    Deferred financing costs ..................................        336,571
                                                                  ------------

       TOTAL CURRENT ASSETS ...................................      1,570,655

PROPERTY AND EQUIPMENT, net ...................................        189,389
                                                                  ------------

       TOTAL ASSETS ...........................................   $  1,760,044
                                                                  ============


                     LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
    Accounts)payable ..........................................   $  1,225,123
    Notes payable .............................................      1,443,233
    Accrued expenses ..........................................      2,416,076
                                                                  ------------

       TOTAL CURRENT LIABILITIES ..............................      5,084,432
                                                                  ------------

STOCKHOLDERS' DEFICIT:
    Convertible preferred stock - Series B, no par value;
       500 shares authorized; 493 shares issued and outstanding
       total liquidation of outstanding - $9,860,000 ..........      9,854,500
    Convertible preferred stock - Series C, no par value;
       500 shares authorized; 205 shares issued and outstanding
       total liquidation of outstanding - $4,100,000 ..........      4,100,460
    Common stock, no par value; 50,000,000 shares authorized;
       28,183,325 issued  and outstanding .....................     31,392,125
    Additional paid-in capital ................................      4,762,810
    Accumulated deficit .......................................    (52,897,383)
    Less 35,000 shares of common stock in treasury - at cost ..       (536,900)
                                                                  ------------

       TOTAL STOCKHOLDERS' DEFICIT ............................     (3,324,388)
                                                                  ------------

       TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT ............   $  1,760,044
                                                                  ============

                 See notes to consolidated financial statements.

                                        3

<PAGE>

                  BIOSHIELD TECHNOLOGIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS




                                           Three Months Ended September 30,
                                           --------------------------------
                                                 2001            2000
                                             ------------    ------------

NET SALES ................................   $    934,417    $    445,953
COST OF SALES ............................        300,219         239,538
                                             ------------    ------------

GROSS PROFIT .............................        634,198         206,415
                                             ------------    ------------

OPERATING COSTS AND EXPENSES:
    Marketing and selling ................        117,754         854,751
    General and administrative ...........      1,406,544       2,264,842
    Research and development .............          1,254         244,730
                                             ------------    ------------
                                                1,525,552       3,364,323
                                             ------------    ------------

LOSS FROM OPERATIONS .....................       (891,354)     (3,157,908)
                                             ------------    ------------

OTHER INCOME (EXPENSES):
    Interest  and dividend income ........            -            43,499
    Interest expense .....................       (342,598)            -
                                             ------------    ------------

       TOTAL OTHER EXPENSES ..............       (342,598)         43,499
                                             ------------    ------------

NET LOSS FROM CONTINUING OPERATIONS ......     (1,233,952)     (3,114,409)
                                             ------------    ------------

DISCONTINUED OPERATIONS:
    Loss from discontinued operations ....            -        (4,005,037)
    Loss on disposal .....................            -               -
                                             ------------    ------------
LOSS FROM DISCONTINUED OPERATIONS ........            -        (4,005,037)
                                             ------------    ------------

NET LOSS .................................     (1,233,952)     (7,119,446)

PREFERRED STOCK STOCK DIVIDENDS ..........       (176,250)            -
                                             ------------    ------------

NET LOSS APPLICABLE TO COMMON SHAREHOLDERS   $ (1,410,202)   $ (7,119,446)
                                             ============    ============

BASIC AND DILUTED NET LOSS PER
    COMMON SHARE:
       Continuing operations .............   $      (0.06)   $      (0.43)
       Discontinued operations ...........            -             (0.55)
                                             ------------    ------------
       Net loss to common stockholders ...   $      (0.06)   $      (0.98)
                                             ============    ============

NUMBER OF SHARES USED IN CALCULATING BASIC
    AND DILUTED NET LOSS PER SHARE .......     25,290,081       7,297,942
                                             ============    ============


                 See notes to consolidated financial statements.

                                        4

<PAGE>

                  BIOSHIELD TECHNOLOGIES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                      For the Three Months Ended
                                                            September 30,
                                                      --------------------------
                                                          2001           2000
                                                      -----------   ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss .......................................  $(1,233,952)  $(3,114,409)
    Adjustments to reconcile net loss to
       net cash used in operating activities:
          Loss from discontinued operations ........          -      (4,005,037)
          Minority interest in loss of subsidiary ..         (740)     (138,469)
          Depreciation and amortization ............       25,721        20,160
          Issuance of stock, stock options and
             stock warrants for services rendered ..      628,700        28,000
          Deferred financing costs and interest ....      330,615           -

    Changes in assets and liabilities:
       (Increase) decrease in:
          Accounts receivable ......................     (704,913)     (260,091)
          Inventory ................................          -         (49,807)
          Prepaid expenses and other current assets        (5,499)     (343,446)
          Due from related party ...................      (37,500)          -
          Deposits and other assets ................       11,721           -
       Increase (decrease) in:
          Accounts payable .........................      135,436       513,882
          Accrued expenses .........................      148,145      (260,473)
          Other liability ..........................      (25,000)          -
                                                      -----------   -----------

NET CASH USED IN OPERATING ACTIVITIES ..............     (727,266)   (7,609,690)
                                                      -----------   -----------

CASH FLOWS FROM INVESTING ACTIVITIES
    Capital expenditures ...........................          -         (80,330)
                                                      -----------   -----------

NET CASH USED IN INVESTING ACTIVITIES ..............          -         (80,330)
                                                      -----------   -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Preferred stock dividend
    Proceeds from stock warrants exercised .........          -         125,000
    Proceeds from stock options exercised ..........          -         542,380
    Proceeds from common stock issuances, net ......          -       1,500,000
    Proceeds from debt .............................      379,279     2,000,000
    Repayment of debt ..............................          -        (442,372)
                                                      -----------   -----------

NET CASH PROVIDED BY FINANCING ACTIVITIES ..........      379,279     3,725,008
                                                      -----------   -----------

NET DECREASE IN CASH ...............................     (347,987)   (3,965,012)

CASH - BEGINNING OF PERIOD .........................      384,605     6,172,914
                                                      -----------   -----------

CASH - END OF PERIOD ...............................  $    36,618   $ 2,207,902
                                                      ===========   ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
    INFORMATION:

    Cash paid during the period for interest .......  $       -     $       -
                                                      ===========   ===========


                 See notes to consolidated financial statements.

                                        5

<PAGE>

                  BioShield Technologies, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements


NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). The accompanying consolidated
financial statements for the interim periods are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair presentation of the financial
position and operating results for the periods presented. These financial
statements should be read in conjunction with the consolidated financial
statements for the year ended June 30, 2001 and notes thereto contained in the
Report on Form 10-KSB of BioShield Technologies, Inc. and Subsidiary (the
"Company") as filed with the Securities and Exchange Commission. The results of
operations for the three months ended September 30, 2001 are not necessarily
indicative of the results for the full fiscal year ending June 30, 2002.

The consolidated statements include the accounts of BioShield Technologies, Inc.
and its wholly owned subsidiary and majority owned subsidiary. All significant
inter-company balances and transactions have been eliminated.

NOTE 2 - STOCK OPTIONS

Stock option transactions for BSTI for the three months ended September 30, 2001
are summarized as follows:
                                                Weighted
                                                average
                                                exercise
                                     Shares      price
                                  -----------   --------
Outstanding, beginning of period     753,230     $ 2.50
  Granted                          5,835,922        .05
  Exercised                       (4,385,922)       .05
  Forfeited                                -          -
                                  -----------    -------
Outstanding, end of period         2,203,230     $ 2.50
                                  ===========    =======

Options exercisable at period end             2,203,230

Weighted average fair value of options
 granted during the three months ended
 September 30, 2001                           $    0.05

The Company uses the intrinsic value method in accounting for stock options
issued to employees and directors. In applying this method, compensation cost of
$628,700 has been recognized for the three months ended September 30, 2001 and
the Company reduced accrued expenses by $60,000.

NOTE 3 - NOTES PAYABLE

(a) As of September 30, 2001, the Company had borrowed funds from two
shareholders, one a current officer and the other a former officer, amounting to
$123,500. The loans are non-interest bearing and payable on demand.

(b) On December 15, 2000, the Company conducted a private placement which was
comprised of the sale of units consisting of shares of common stock and a
promissory note equal to the dollar amount of the investment; with the latter
being due 12 months from the date of issuance. The unit holder at his option can
convert such note at a 25% discount based on the average closing cost of the
common stock for the twenty business days prior to conversion. Cash totaling
$487,500 was received under this placement but the stock was not issued until
July 18, 2001. Accordingly this amount which bears interest at 6% per annum is
showed in the financial statements as notes payable. In addition the beneficial
feature on the note amounting to $162,500 has been recorded and is being
amortized over the life of the note. Furthermore the stock that was issued in
July 2001, having a fair market value of $835,960 on the date that the funds
were received, was recorded as common stock to be issued and as deferred
financing costs as of June 30, 2001. The deferred financing costs are being
amortized over the life of the respective note. As of September 30, 2001, the
Company owes $429,733 related to this note (net of deferred interest of $57,767.

                                        6

<PAGE>

                  BioShield Technologies, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements


NOTE 3 - NOTES PAYABLE (Continued)

(c) On June 19, 2001, the Company borrowed $500,000 from Jackson LLC. The loan
bears interest at 8% per annum and is payable on demand.

(d) The Company borrowed funds from a third party under a revolving line of
credit. The line of credit aggregates $1,000,000 and bears interest at a rate
equal to two and one-half (2.5%) per months, on a basis of a 360-day year and
actual number of days elapsed. To the extent that there are amounts due under
the line of credit (including unpaid principal and interest), the Company shall
pay to the lender an amount equal to 100% of the Company's collected
receivables, on a monthly basis. The line of credit is payable on demand and is
collateralized by substantially all of the Company's assets. As of September 30,
2001, the Company borrowed $390,000 under this line of credit.


NOTE 4 - PRIVATE EQUITY CREDIT AGREEMENTS

On June 30, 1999, BSTI entered into an equity agreement with an investor whereby
the Company may issue and sell to the investor, from time to time, up to
$6,250,000 of BSTI's common stock. Subsequently, this agreement was amended to
increase the issuance limit to $10,000,000 of BSTI's common stock.

Pursuant to the agreement, the Company may exercise a put by giving notice to
the investor of the investment amount that the Company intends to require the
investor to purchase. The number of shares, which the investor will receive, is
determined by dividing the investment amount by the purchase price, determined
as the market price of the common stock on the date that the notice of the put
is delivered to the investor less 20% of the market price. Unless the Company
obtains requisite approval of its shareholders in accordance with the corporate
laws of the State of Georgia and the applicable rules of NASDAQ, no more than
19.99% of the outstanding common stock may be issued and sold under this
agreement.

The Company must reserve at all times the maximum number of common shares to
enable the Company to issue a sufficient number of shares having an aggregate
purchase price of the lesser of $10,000,000 or number of shares having an
aggregate purchase price of the lesser of $10,000,000 less the number of shares
actually delivered under the agreement. Additionally, the average market bid
prices for the twenty trading days preceding the Company's notice to put the
shares to the investor must equal or exceed $1.00 per share.

On June 14, 2000, BSTI entered into another equity agreement with the same
investor whereby the Company may issue and sell to the investor, from time to
time, up to $50,000,000 of BSTI's common stock.

This agreement has terms similar to the $10,000,000 agreement with the following
exceptions. The purchase price for the put is determined as the market price of
the common stock on the date that the notice of the put is delivered to the
investor less 10% of the market price. The aggregate average daily trading
volume must equal or exceed $500,000 and the average of the market bid prices
must equal or exceed $7.50 per share for the ten trading days immediately
preceding both the date of the Company's notice to put the shares to the
investor and the date of the closing of the sale of shares to the investor.

NOTE 5 - SUBSEQUENT EVENTS

In October 2001, the Company issued 612,330 share of common stock in connection
with a prior securities purchase agreement which allows the holder of EMD common
stock to exchange their shares for BSTI common stock at a predetermined exchange
rate. Accordingly, the Company reduced accrued expenses by $100,162 in
connection with this conversion.

In October 2001, the Company issued 2,000,000 shares of common stock in
connection with the conversion of its Series B convertible preferred stock.

                                        7

<PAGE>

                  BioShield Technologies, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (Continued)


NOTE 5 - SUBSEQUENT EVENTS (Continued)

In October 2001, the Company issued 1,760,000 shares in connection with the
exercise of stock options.

In October 2001, the Company granted 750,000 options to consultants for services
rendered at exercise prices ranging from $.05 to $.50.

In November 2001, the Company granted 225,000 options to a consultant for
services rendered at exercise prices ranging from $.24 to $.34.

NOTE 6 - Litigation

On September 7, 2000, AHT Corporation ("AHT") filed suit against the Company and
certain of its officers and directors in the Superior Court of Fulton County,
Georgia (the "Georgia Action") alleging breach of a June 30, 2000 acquisition
agreement and related common laws claims and seeking damages in excess of
$70,000,000. On September 21, 2000, the Company filed its Answer and
Counterclaim. On September 22, 2000, AHT filed, in the U.S. Bankruptcy Court for
the Southern District of New York, a petition for relief under Chapter 11 of the
Federal Bankruptcy Code. Following the filing of its Chapter 11 petition, AHT
filed a motion seeking approval of an asset purchase agreement dated as of
September 22, 2000 (the "APA"), which provided, for the sale of substantially
all of AHT's assets to the Company and AHT Acquisition Corp. for approximately
$15,000,000. Such sale is subject to Bankruptcy Court approval.

Pursuant to a Debtor in Possession ('DIP") Financing, Escrow and Settlement
Agreement dated as of September 22, 2000, which was approved by the Bankruptcy
Court, the Company agreed to provide approximately $1.5 million in postpetition
financing to AHT. That agreement also provided for the dismissal of the Georgia
Action with prejudice, subject to certain conditions contained therein.

At September 30, 2000, AHT had requested and received $378,338 from the Company
under the DIP financing arrangement. Subsequent to September 30, 2000, AHT had
requested and received an additional $1,121,662 under the DIP financing
agreement.

The Bankruptcy Court had initially scheduled a hearing to approve the APA for
November 8, 2000. However, due to the decline in the Company's stock price, in
early November, the Company notified AHT that it would need additional time
beyond November 8, 2000 to obtain sufficient capital to acquire AHT's assets.
The Bankruptcy Court did not approve the APA on November 8, 2000. Rather, on
November 21, 2000, the Bankruptcy Court approved the sale of substantially all
of AHT's assets to Cybear, Inc.

On November 28, 2000, AHT Acquisition Corp. commenced a new lawsuit (in its
Bankruptcy case) against the Company, as well as the other defendants in the
Georgia Action. The prepetition claims asserted and relief sought in that action
are essentially the same as the claims and relief sought in the Georgia Action.
The lawsuit in the bankruptcy case also alleges breach of the APA and seeks
damages related to the APA, and to equitably subordinate the Company's $1.5
million claim against AHT relating to the postpetition advances made by the
Company to AHT under the DIP Financing, Escrow and Settlement Agreement. On
February 9, 2001, the Company filed an answer and counterclaim and intends to
vigorously defend the action. Motions to dismiss the action and/or abstain from
hearing the action have been denied and the parties are currently engaged in
discovery proceedings under Bankruptcy Order that same be concluded by October
31, 2001.

In the matter entitled Edward U. Miller v. BioShield Technologies, Inc.,
Superior Court of Gwinnett County, Georgia, Civil Action No. 01-A-0096103, a
former COO of the Company ("plaintiff") has brought action against the Company
alleging breach of the plaintiff's employment agreement by the Company and
claims that he is entitled to severance pay in the amount of approximately
$80,000 following his termination on December 5, 2000. The Company disputes this
claim and has filed a counterclaim against the plaintiff for violation of his
fiduciary duties to the Company. The matter is currently in the discovery phase
of litigation with the expectation that (absent settlement) trial will commence
in early 2002.

In the matter entitled Douglas Calvert v. BioShield Technologies, Inc., Superior
Court of Gwinnett County, Georgia, Civil Action No. 01-A-102272-4, a former
employee of the Company ("plaintiff") has brought action against the Company
alleging breach of employment contract. The plaintiff claims that the Company
wrongfully refused to pay him severance pay of $28,558 following his termination
on December 5, 2000. The Company has admitted that severance pay is due and
owing and continues to seek a realistic payment plan to pay out the sum owed.
This amount has been recorded as an accrued expense.

                                        8

<PAGE>

                  BioShield Technologies, Inc. and Subsidiaries
             Notes to Consolidated Financial Statements (Continued)


NOTE 6 - Litigation (Continued)

In the matter entitled Bioshield, Inc. v. BioShield Technologies, Inc., United
States District Court, Eastern District, Michigan, Civil Action No.
00-CV-10181-BC, a Michigan corporation has brought a trademark violation suit
against the Company, which claims superior right to the use of the "Bioshield"
name and claims damages in an amount not less than $75,000. The Company denies
the claims and has filed a counterclaim for damages for infringement upon the
Company's intellectual property. The Company intends to vigorously defend the
action.

In the matter of Duke Construction Limited Partnership v. Bioshield
Technologies, Inc., American Arbitration Association Arbitration No.
30-110-00023-01, Superior Court of Gwinnett County, Civil Action No.
01-A-7161-5, Duke Construction received its arbitration award in the amount of
$219,000 on June 8, 2001. On July 18, 2001, Duke Construction filed a complaint
in the Superior Court of Gwinnett County seeking confirmation of the award. The
Company is contesting approximately $5,000 of interest, which was included in
the award. Settlement negotiations regarding the payment of this judgment are
ongoing.

In the matters of Jamestown Management Corp. v. Bioshield Technologies, Inc. and
Mountain National Bank (garnishee) and Summit Marketing Group, Inc. v. Bioshield
Technologies, Inc. and Mountain National Bank (garnishee), Jamestown received
condemned funds as a result of the garnishment it filed in DeKalb County, as
well as the garnishment filed by Summit in Gwinnett County with a principal
amount of $78,699 remained outstanding on this judgement as of August 15, 200l.

Summit was involved in two garnishment actions, one filed in DeKalb County by
Jamestown and the other filed in Gwinnett County by Summit. Summit received a
total of $29,201 under the garnishments and has indicated that $36,000 remained
outstanding on Summit's judgment, including interest as of August 15, 2001.





















                                        9

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS



MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

         BioShield Technologies, Inc. ("BSTI") is a Georgia corporation and was
organized in 1995. The Company historically has engaged in research and
development, patent filings, regulatory issues and related activities geared
towards the sale of its retail, industrial and institutional products. BioShield
is currently selling antimicrobial products via licensing and distribution
contracts. Many of these products provide long-term killing action of
microorganisms responsible for cross contamination and viral contamination,
along with inhibiting and controlling the growth of over 100 viral, bacteria,
fungi and yeast organisms. The Company has continued to successfully build
recognition and market penetration of its recently approved E.P.A. antimicrobial
product line.

         As a result of certain management decisions and bankruptcy proceedings
involving Electronic Medical Distribution, Inc. ("eMD"), a Company subsidiary,
referred to herein, BioShield currently operates and produces antimicrobial and
biostatic products for use within certain targeted markets (and no longer
engages in those business activities in which eMD formerly engaged in). BSTI is
currently engaged in sale, distribution, and development of antimicrobial,
biostatic, and medical related products for the retail (recently discontinued),
industrial and institutional, and Specialty Chemical markets.

         Bioshield founded HealthCARE Network solutions, Inc. ("HNS") in April
2001 for the purpose of providing non-medical services to physician practices.
It currently owns approximately 52% of all outstanding HNS common stock and
expects to own approximately 28% post spin-off with the difference of 24% to be
owned by Bioshield shareholders. BSTI intends to spin-off, to its stockholders
on a 1 for 10 basis, a portion of those shares owned by it in HNS.

         HNS filed a Form 10-SB Registration Statement with the Securities and
Exchange Commission ("SEC") which provides certain information about HNS, its
current and proposed business activities and its management team. The Form 10-SB
was filed with the SEC on September 27, 2001 under File No. 001-16703 utilizing
the Edgar system. Accordingly, all information contained in such Form 10-SB
including financial statements and exhibits thereto may be obtained at the SEC's
web site at http:\www.sec.gov.

FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

Three Months Ended September 30, 2001 compared to three months ended September
30, 2000

         The Company's revenue increased to $934,417 for the three months ended
September 30, 2001, from $445,953 for the three months ended September 30, 2000.
The increase was attributable to an increase in the distribution and licensing
of the Company's core antimicrobial product line and the restructuring of the
marketing method in December of 2000. Gross profit of $634,198 for the three
months ended September 30, 2001 represents 67% of net sales as compared to
$206,415, or 46% of net sales, for the three months ended September 30, 2000.
The increase in gross margin is due to a restructuring of the way in which the
Company sells its products, changing to a licensing and distribution model and
selling to large multi-national corporations. During the third and fourth
quarters of fiscal 2001, under the Company's restructuring, certain of the
Company's customers began purchasing high levels of the Company's antimicrobial
products.


         Marketing and selling expenses decreased to $117,754 for the three
months ended September 30, 2001 from $854,751 for the three months ended
September 30, 2000. The decrease was attributable to change in the way in which
the Company sells its products, changing to a licensing and distribution model.

         General and administrative expenses decreased to $1,406,544 the three
months ended September 30, 2001 from $2,264,842 for the three months ended
September 30, 2000. This decrease in costs related primarily to a decrease in
personnel and personnel related cost as part of the Company's restructuring.
Accordingly, salaries and payroll taxes decreased to $233,876 for the three
months ended September 30, 2001 from approximately $621,000 for the three months
ended September 30, 2000. Additionally, the Company experienced decreased
personnel related costs such as employee benefits and 401K expense due to the
decrease in staff. The Company's accounting and legal fees decreased to
approximately $159,000 for the three months ended September 30, 2001 from
approximately $391,000 for the three months ended September 30, 2000. This
decrease was attributable to a decrease in the professional fees associated with
the Company SEC filings and the restructuring of the Company.

                                       10

<PAGE>

         The Company's research and development expenses decreased to $1,254 for
the three months ended September 30, 2001 from $244,730 for the three months
ended September 30, 2000. The decrease in expenses related primarily to (i) the
restructuring of the Company in December 2000, (ii) to lower formulation
development costs of the Company's antimicrobial products and other products
under development, (iii) a reduction in development cost paid to outside
parties, and (iv) the completion of a majority of the Company's initial EPA
approvals.

         Interest expense was $342,598 for the three months ended September 30,
2001 compared to $ -0- for the three months ended September 30, 2000. The
interest expense relates mainly to increased borrowings during fiscal year 2001
and for the three months ended September 30, 2001. Additionally, interest
expense includes amortization of deferred financing costs.

         As a result of the reasons set forth above, the Company's operations
generated a net loss of $1,233,952 for the three-month period ending September
30, 2001 compared to a net loss of $7,119,446 for the three-month period ended
September 30, 2000.

LIQUIDITY

         At September 30, 2001, the Company had cash totaling $36,618 compared
to $2,207,902 at September 30, 2000. The decrease in cash of $2,171,284 is
primarily due to losses from operations and discontinued operations.

         The Company's primary source of cash included, but was not limited to
borrowings on the Company's existing equity line and funds raised from a private
placement. The Company has elected not to put additional common stock to its
existing $10,000,000 equity line as not to create any more undo pressure on its
existing share price. Additionally, the Company entered into a credit agreement
to borrow up to $1,000,000 under a line of credit. We cannot assure you that we
will be able to obtain additional capital from this or other investors. Our
inability to successfully renegotiate these agreements could cause the company
to dramatically curtail or cease operations.

         The Company's ability to fund its operating requirements and maintain
an adequate level of working capital until it achieves positive cash flow will
depend primarily on its ability to borrow money against its accounts receivable.
The Company's failure to generate substantial growth in sales and/or of its
antimicrobial products; progress in research and development programs; the cost
and timing of seeking regulatory approvals of the Company's products under
development; the Company's ability to manufacture products at an economically
feasible cost; cost in filing, prosecuting, defending and enforcing patent
claims and other intellectual property rights and changes in economic,
regulatory, or competitive conditions or the Company's planned business could
cause the Company to require additional capital, and substantially delay or
reduce the scope of business. In the event the Company must raise additional
capital to fund its working capital needs, it may seek to raise such capital
through loans or issuance of debt securities, issuance of equity securities, or
through private placements. Moreover, there can be no assurance that the Company
will be successful in its efforts to obtain additional capital, and that capital
will be available on terms acceptable to the Company or on terms that will not
significantly dilute the interests of existing shareholders.

FORWARD-LOOKING STATEMENTS

         When used in this form 10-KSB, the words or phrases "will likely
result", "are expected to," "will continue," "is anticipated," "estimate,"
"project," or similar expressions are intended to identify "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such statements are subject to certain risks and uncertainties
including changes in economic conditions in the Company's market area, changes
in policies by regulatory agencies, fluctuations in interest rates, demand for
loans in the Company's market area and competition, that could cause actual
results to differ materially from historical earnings and those presently
anticipated or projected. The Company wishes to caution readers not to place
undue reliance on any such Forward- looking statements, which speak only as to
the date made. The Company wishes to advise readers that the factors listed
above could affect the Company's financial performance and could cause the
Company's actual results for future periods to differ materially from any
opinions or statements expressed with respect to future periods in any current
statements. The Company does not undertake, and specifically disclaims any
obligation, to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or unanticipated
events.

                                       11

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                                     PART II

                                OTHER INFORMATION

Items 1. Legal Proceedings
--------------------------

        On September 7, 2000, AHT Corporation ("AHT") filed suit against the
Company and certain of its officers and directors in the Superior Court of
Fulton County, Georgia (the "Georgia Action") alleging breach of a June 30, 2000
acquisition agreement and related common laws claims and seeking damages in
excess of $70,000,000. On September 21, 2000, the Company filed its Answer and
Counterclaim. On September 22, 2000, AHT filed, in the U.S. Bankruptcy Court for
the Southern District of New York, a petition for relief under Chapter 11 of the
Federal Bankruptcy Code. Following the filing of its Chapter 11 petition, AHT
filed a motion seeking approval of an asset purchase agreement dated as of
September 22, 2000 (the "APA"), which provided, for the sale of substantially
all of AHT's assets to the Company and AHT Acquisition Corp. for approximately
$15,000,000. Such sale is subject to Bankruptcy Court approval.

         Pursuant to a Debtor in Possession ('DIP") Financing, Escrow and
Settlement Agreement dated as of September 22, 2000, which was approved by the
Bankruptcy Court, the Company agreed to provide approximately $1.5 million in
postpetition financing to AHT. That agreement also provided for the dismissal of
the Georgia Action with prejudice, subject to certain conditions contained
therein.

         At September 30, 2000, AHT had requested and received $378,338 from the
Company under the DIP financing arrangement. Subsequent to September 30, 2000,
AHT had requested and received an additional $1,121,662 under the DIP financing
agreement.

         The Bankruptcy Court had initially scheduled a hearing to approve the
APA for November 8, 2000. However, due to the decline in the Company's stock
price, in early November, the Company notified AHT that it would need additional
time beyond November 8, 2000 to obtain sufficient capital to acquire AHT's
assets. The Bankruptcy Court did not approve the APA on November 8, 2000.
Rather, on November 21, 2000, the Bankruptcy Court approved the sale of
substantially all of AHT's assets to Cybear, Inc.

         On November 28, 2000, AHT Acquisition Corp. commenced a new lawsuit (in
its Bankruptcy case) against the Company, as well as the other defendants in the
Georgia Action. The prepetition claims asserted and relief sought in that action
are essentially the same as the claims and relief sought in the Georgia Action.
The lawsuit in the bankruptcy case also alleges breach of the APA and seeks
damages related to the APA, and to equitably subordinate the Company's $1.5
million claim against AHT relating to the postpetition advances made by the
Company to AHT under the DIP Financing, Escrow and Settlement Agreement. On
February 9, 2001, the Company filed an answer and counterclaim and intends to
vigorously defend the action. Motions to dismiss the action and/or abstain from
hearing the action have been denied and the parties are currently engaged in
discovery proceedings under Bankruptcy Order that same be concluded by October
31, 2001.

         In the matter entitled Edward U. Miller v. BioShield Technologies,
Inc., Superior Court of Gwinnett County, Georgia, Civil Action No. 01-A-0096103,
a former COO of the Company ("plaintiff") has brought action against the Company
alleging breach of the plaintiff's employment agreement by the Company and
claims that he is entitled to severance pay in the amount of approximately
$80,000 following his termination on December 5, 2000. The Company disputes this
claim and has filed a counterclaim against the plaintiff for violation of his
fiduciary duties to the Company. The matter is currently in the discovery phase
of litigation with the expectation that (absent settlement) trial will commence
in early 2002.

         In the matter entitled Douglas Calvert v. BioShield Technologies, Inc.,
Superior Court of Gwinnett County, Georgia, Civil Action No. 01-A-102272-4, a
former employee of the Company ("plaintiff") has brought action against the
Company alleging breach of employment contract. The plaintiff claims that the
Company wrongfully refused to pay him severance pay of $28,558 following his
termination on December 5, 2000. The Company has admitted that severance pay is
due and owing and continues to seek a realistic payment plan to pay out the sum
owed.

         In the matter entitled Bioshield, Inc. v. BioShield Technologies, Inc.,
United States District Court, Eastern District, Michigan, Civil Action No.
00-CV-10181-BC, a Michigan corporation has brought a trademark violation suit
against the Company, which claims superior right to the use of the "Bioshield"
name and claims damages in an amount not less than $75,000. The Company denies
the claims and has filed a counterclaim for damages for infringement upon the
Company's intellectual property. The Company intends to vigorously defend the
action.

                                       12

<PAGE>

         In the matter of Duke Construction Limited Partnership v. Bioshield
Technologies, Inc., American Arbitration Association Arbitration No.
30-110-00023-01, Superior Court of Gwinnett County, Civil Action No.
01-A-7161-5, Duke Construction received its arbitration award in the amount of
$219,000 on June 8, 2001. On July 18, 2001, Duke Construction filed a complaint
in the Superior Court of Gwinnett County seeking confirmation of the award. The
Company is contesting approximately $5,000 of interest, which was included in
the award. Settlement negotiations regarding the payment of this judgment are
ongoing.

         In the matters of Jamestown Management Corp. v. Bioshield Technologies,
Inc., Mountain National Bank (garnishee) and Summit Marketing Group, Inc. v.
Bioshield Technologies, Inc., Mountain National Bank (garnishee), Jamestown
received condemned funds as a result of the garnishment it filed in DeKalb
County, as well as the garnishment filed by Summit in Gwinnett County with a
principal amount of $78,699 remained outstanding on this judgement as of August
15, 200l.

         Summit was involved in two garnishment actions, one filed in DeKalb
County by Jamestown and the other filed in Gwinnett County by Summit. Summit
received a total of $29,201 under the garnishments and has indicated that
$36,000 remained outstanding on Summit's judgment, including interest as of
August 15, 2001.


Item 2. Changes in securities and Use of Proceeds
-------------------------------------------------
- NONE -

Item 3. Defaults upon Senior Securities
---------------------------------------
- NONE -

Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
- NONE -

Item 5. Other Information
-------------------------
- NONE -

Item 6. Exhibits and Reports on Form 8-K
----------------------------------------
(a)      Exhibits                        - NONE -

(b)      Reports on Form 8-K             - NONE -



                               SIGNATURES

     In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





Date: November 14, 2001          /s/ Timothy C. Moses
                                 -------------------------
                                 Name: Timothy C. Moses
                                 Title: President and Chief Executive Officer



Date: November 14, 2001          /s/ Adam Wasserman
                                 -------------------------
                                 Name: Adam Wasserman
                                 Title: Chief Financial Officer



                                       13

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