<PAGE>
                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

[ ]      Transition report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934

COMMISSION FILE NO. 1-11602


                           SI DIAMOND TECHNOLOGY, INC.
          (Exact name of Small Business Issuer as specified in charter)

                 TEXAS                                      76-0273345
               (State of                                   (IRS Employer
            Incorporation)                            Identification Number)

    3006 Longhorn Blvd., Suite 107
             AUSTIN, TEXAS                                     78758
(Address of principal executive office)                     (Zip Code)

Registrant's telephone number, including area code:  (512) 339-5020


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

                                 Yes [X] No [ ]

     As of November 2, 2001, the registrant had 66,792,175 shares of common
stock, par value $.001 per share, issued and outstanding.

     Transitional Small Business Disclosure Format.

                                 Yes [ ] No [X]


<PAGE>
                           SI DIAMOND TECHNOLOGY, INC.
                                      INDEX

<TABLE>
<CAPTION>
                                                                                    PAGE
                                                                                    ----
<S>                                                                                 <C>
Part I  Financial Information

         Item 1.  Consolidated Financial Statements

              Consolidated Balance Sheets--September 30, 2001 and
                December 31, 2000..................................................   3

              Consolidated Statements of Operations--Three Months and Nine Months
                Ended September 30, 2001 and 2000..................................   4

              Consolidated Statements of Cash Flows--Nine Months Ended
                September 30, 2001 and 2000........................................   5

              Notes to Consolidated Financial Statements...........................   6

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

Part II  Other Information

         Item 1.  Legal proceedings................................................  13

         Item 5.  Other Information................................................  14

         Item 6.  Exhibits and Reports on Form 8-K.................................  14


Signatures      ...................................................................  15
</TABLE>




                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
                  SI DIAMOND TECHNOLOGY, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                   (UNAUDITED)
                                      ASSETS                                      SEPTEMBER 30,     DECEMBER 31,
                                                                                      2001              2000
                                                                                  ------------      ------------
<S>                                                                               <C>               <C>
Current assets:
   Cash and cash equivalents ................................................     $    180,333      $      8,818
   Marketable equity securities .............................................           16,950            70,313
   Accounts receivable, trade - net of allowance for doubtful accounts
      of $35,309 in 2001 and $33,000 in 2000 ................................          602,376           353,154
   Inventories ..............................................................          275,632           153,244
   Prepaid expenses and other current assets ................................           82,028            90,767
                                                                                  ------------      ------------
     Total current assets ...................................................        1,157,319           676,296

   Property and equipment, net ..............................................          745,526           766,581
   Intangible assets, net ...................................................          100,000           190,000
   Other assets .............................................................            8,688             8,688
                                                                                  ------------      ------------
     Total assets ...........................................................     $  2,011,533      $  1,641,565
                                                                                  ============      ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
   Accounts payable .........................................................     $    675,339      $    467,414
   Current portion of long-term debt ........................................           17,232           121,623
   Current portion of obligations under capital lease........................           19,496                --
   Notes payable ............................................................          499,784           375,000
   Accrued liabilities ......................................................          227,177           441,958
   Deferred revenues ........................................................          225,033                --
   Customer deposits ........................................................          252,933           169,795
                                                                                  ------------      ------------
     Total current liabilities ..............................................        1,916,994         1,575,790

Notes payable, long-term ....................................................           52,467                --
Obligations under capital lease .............................................           86,992                --

Commitments and contingencies ...............................................               --                --

Stockholders' equity (deficit):
   Convertible preferred stock, $1.00 par value, 2,000,000 shares authorized;
     Series G convertible, 850 shares issued and outstanding at
       September 30, 2001 and December 31, 2000, respectively ...............              850               850
   Common stock, $.001 par value, 120,000,000 shares authorized,
   66,792,175 and 60,518,0983 shares issued and outstanding at
   September 30, 2001 and December 31, 2000, respectively ...................           66,792            60,519
Additional paid-in capital ..................................................       65,058,409        61,272,028
Less stock subscriptions receivable .........................................          (75,000)          (10,850)
Accumulated deficit .........................................................      (65,095,971)      (61,256,772)
                                                                                  ------------      ------------
     Total stockholders' equity (deficit) ...................................          (44,920)           65,775
                                                                                  ------------      ------------
     Total liabilities and stockholders' equity (deficit) ...................     $  2,011,533      $  1,641,565
                                                                                  ============      ============
</TABLE>

                 See notes to consolidated financial statements.




                                       3
<PAGE>

                  SI DIAMOND TECHNOLOGY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                    For the Three Months Ended      For the Nine Months Ended
                                                            September 30,                 September 30,
                                                   ----------------------------    ----------------------------
                                                       2001            2000            2001            2000
                                                   ------------    ------------    ------------    ------------
<S>                                                     <C>             <C>           <C>             <C>
Revenues
    Sign Construction ..........................        358,724         642,572       1,386,646       1,804,714
    License fees and royalties .................             --              --              --          25,500
    Government contracts .......................        225,816              --         304,417         330,329
    Privately funded research ..................        162,988              --         374,967              --
    Other ......................................         26,021          22,901          26,021          51,394
                                                   ------------    ------------    ------------    ------------
       Total Revenues ..........................        773,549         665,473       2,092,051       2,211,937
                                                   ------------    ------------    ------------    ------------
Cost of sales ..................................        672,782         438,689       1,781,094       1,559,447
Selling, general and administrative expenses ...        733,437         880,458       2,487,069       3,390,797
Research and development .......................        639,464         675,491       1,581,986       1,520,591
Impairment charge ..............................             --              --              --         486,000
                                                   ------------    ------------    ------------    ------------
     Operating costs and expenses ..............      2,045,683       1,994,638       5,850,149       6,956,835

Loss from operations ...........................     (1,272,134)     (1,329,165)     (3,758,098)     (4,744,898)

Other income (expense), net
     Net realized and unrealized gains (losses)
        on marketable securities and investments         (6,767)        (44,404)        (28,542)        (34,455)
         Other .................................        (25,353)         (6,804)        (52,559)        (30,857)
                                                   ------------    ------------    ------------    ------------
Loss before taxes and minority
         interest in subsidiary earnings .......     (1,304,254)     (1,380,373)     (3,839,199)     (4,810,210)
Minority interest in subsidiary earnings .......             --              --              --          22,547
                                                   ------------    ------------    ------------    ------------
Loss before taxes ..............................     (1,304,254)     (1,380,373)     (3,839,199)     (4,787,663)

Provision for taxes ............................             --              --              --              --
                                                   ------------    ------------    ------------    ------------
Net loss .......................................     (1,304,254)     (1,380,373)     (3,839,199)     (4,787,663)

Less accretion on convertible preferred stock ..        (21,250)        (22,500)        (63,750)        (72,500)
                                                   ------------    ------------    ------------    ------------
Net loss applicable to common shareholders .....   $ (1,325,504)   $ (1,402,873)   $ (3,902,949)   $ (4,860,163)
                                                   ============    ============    ============    ============
Loss per share

     Basic .....................................   $      (0.02)   $      (0.02)   $      (0.06)   $      (0.09)
                                                   ============    ============    ============    ============
     Diluted ...................................   $      (0.02)   $      (0.02)   $      (0.06)   $      (0.09)
                                                   ============    ============    ============    ============

Weighted average shares outstanding

     Basic .....................................     66,041,136      58,348,597      63,971,176      56,539,673
                                                   ============    ============    ============    ============
     Diluted ...................................     66,041,136      58,348,597      63,971,176      56,539,673
                                                   ============    ============    ============    ============
</TABLE>



                 See notes to consolidated financial statements.




                                       4
<PAGE>

                  SI DIAMOND TECHNOLOGY, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    FOR THE NINE MONTHS ENDED
                                                                          SEPTEMBER 30,
                                                                   --------------------------
                                                                      2001           2000
                                                                   -----------    -----------
<S>                                                                <C>            <C>
Cash flows from operating activities:
     Net loss ..................................................   $(3,839,199)   $(4,787,663)
       Adjustments to reconcile net loss to net
         cash used in operating activities:
       Minority interest in subsidiary earnings ................            --        (22,547)
       Depreciation and amortization expense ...................       469,548        375,652
       Loss on disposal of fixed assets ........................         9,000             --
       Impairment charge .......................................            --        486,000
       Net realized and unrealized loss on marketable securities        28,542        409,454
       Net realized and unrealized gain on other investments ...            --       (375,000)
       Option repricing expense ................................         5,000             --
       Interest paid in common stock ...........................            --          7,669
       Common shares issued for services .......................            --        675,000
       Changes in assets and liabilities:
         Accounts receivable, trade ............................      (249,222)       (14,416)
         Notes receivable ......................................            --         60,000
         Inventories ...........................................      (122,388)         4,324
         Prepaid expenses and other current assets .............         8,739         13,154
         Accounts payable and accrued liabilities ..............        93,144        114,634
         Customer deposits and deferred revenue ................       308,171       (122,983)
                                                                   -----------    -----------
              Total adjustments ................................       550,534      1,610,941
                                                                   -----------    -----------
         Net cash used in operating activities .................    (3,288,665)    (3,176,722)
                                                                   -----------    -----------
Cash flows from investing activities:
       Capital expenditures ....................................      (261,360)      (910,472)
       Proceeds from the sale of marketable securities .........        62,308      2,371,589
       Purchase of marketable securities .......................       (37,487)    (1,794,952)
       Proceeds from disposal of equipment .....................        15,000             --
     Changes in deposits and other assets ......................            --         (1,058)
                                                                   -----------    -----------
         Net cash used in investing activities .................      (221,539)      (334,893)
                                                                   -----------    -----------

Cash flows from financing activities:
       Repayment of notes payable ..............................      (241,872)      (160,497)
       Proceeds from notes payable and long-term debt ..........       300,000        375,000
       Proceeds of stock issuance, net of costs ................     3,623,591      3,495,146
                                                                   -----------    -----------
         Net cash provided by financing activities .............     3,681,719      3,709,649
                                                                   -----------    -----------
Net increase in cash and cash equivalents ......................       171,515        198,034

Cash and cash equivalents, beginning of period .................         8,818        348,832
                                                                   -----------    -----------
Cash and cash equivalents, end of the period ...................   $   180,333    $   546,866
                                                                   ===========    ===========
</TABLE>

                 See notes to consolidated financial statements.




                                       5
<PAGE>
                  SI DIAMOND TECHNOLOGY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   Basis of Presentation

     The consolidated financial statements of the Company for the three and nine
month periods ended September 30, 2001 and 2000 have been prepared by the
Company without audit pursuant to the rules and regulations of the Securities
and Exchange Commission. In the opinion of the Company's management, all
adjustments necessary to present fairly the financial position, results of
operations, and cash flows of the Company as of September 30, 2001 and 2000 and
for the periods then ended have been made. Those adjustments consist of normal
and recurring adjustments. The consolidated balance sheet of the Company as of
December 31, 2000 has been derived from the audited consolidated balance sheet
of the Company as of that date.

     Certain information and note disclosures normally included in the Company's
annual financial statements prepared in accordance with generally accepted
accounting principals have been condensed or omitted. These consolidated
financial statements should be read in conjunction with a reading of the
financial statements and notes thereto included in the Company's Annual Report
on Form 10KSB/A for 2000 as filed with the U.S. Securities and Exchange
Commission.

     The results of operations for the three and nine month periods ended
September 30, 2001 are not necessarily indicative of the results to be expected
for the full year.

2.   Supplemental Cash Flow Information

     Cash paid for interest for the nine months ended September 30, 2001 and
2000 was approximately $27,472 and $24,484, respectively. In the nine months
ended September 30, 2001, the Company also had non-cash transactions related to
the issuance of a note payable in connection with a lawsuit settlement that is
described in greater detail in Note 6 and a capital lease that is described in
greater detail in Note 5.

3.   Stockholders' Equity

     In the nine months ended September 30, 2001, the Company issued a total of
5,806,412 restricted shares of its common stock and received net proceeds of
$3,366,604 in a series of exempt offerings under Regulation D of the Securities
Act of 1933. The Company also received $222,487 and issued 430,280 shares as the
result of the exercise of options and received $34,500 and issued 36,500 shares
as the result of the exercise of warrants during the period.

4.   Notes Payable and Long Term Debt

     As described in greater detail in Note 6, the Company issued a note payable
during the nine months ended September 30, 2001 in connection with a lawsuit
settlement. The amount of this settlement was included in accrued expenses at
December 31, 2000. In September 2001, the Company also issued two notes payable
totaling $300,000 due in March 2002. These notes bear interest at a rate of 15%,
are secured by all assets, and are convertible into shares of the Company's
stock when due. These notes are convertible into stock at a discount of 25% from
the stock price at the due date. Generally accepted accounting principles
require that this conversion right be valued, that this value be recorded as a
discount to the face value of the note, and that the discount be amortized to
interest expense over the life of the note. The value of the conversion
privilege is $99,913 and is recorded in additional paid in capital. Amortization
of this non cash discount will result in an effective annual interest rate of
approximately 96%, as compared with the stated rate of 15%.



                                       6
<PAGE>

                  SI DIAMOND TECHNOLOGY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

5.   Obligations Under Capital Leases

     During the nine months ended September 30, 2001, the Company entered into
two leases related to copier equipment. The total cost of the equipment, which
is included in property and equipment, was $118,969. The leases cover a 63 month
time period and call for aggregate monthly payments of $3,246.

6.   Contingencies

Lawsuit Settlements

     As described in greater detail in the Company's 2000 Annual Report on Form
10-KSB/A, the Company agreed in January 2000 to participate in a settlement
agreement in a lawsuit brought by a former customer of the Company's Plasmatron
subsidiary against the Company and Universal Bonding Company, the bonding agent
on the contract. As part of this settlement the Company agreed to pay a total of
$450,000, of which $350,000 was paid in 2000. The remaining $100,000 was
advanced on behalf of the Company by Universal Bonding Company in exchange for a
note due in July 2001. Universal Bonding Company sought to recover its portion
of the settlement from other guarantors under the bond. These defendants,
Richland Glass Company, Inc., Robert Williams, Joan Williams, Bawa Singh,
Narinder Singh, Gaylord Evey and Doris Evey, named the Company as a third party
defendant. In January 2001, the Company agreed to participate in a settlement
agreement whereby it would pay a total of $150,000, of which $50,000 was due and
paid by June 1, 2001 and the remaining balance of $100,000 is in the form of an
additional note due to Universal Bonding Company in July 2003.

     In June 2001, the Company agreed to settle a lawsuit related to the
purchase of its subsidiary, Sign Builders of America, Inc. The former owner of
Sign Builders of America, Inc. filed suit against the Company and Sign Builders
of America, Inc. for alleged breech of the purchase agreement related to offsets
the Company took against the final note payment. The amount of the note in
question was $131,250, including accrued interest. The Company agreed to pay
$75,000 to settle the lawsuit. The payment was made in June 2001.

     The Company is a defendant in other lawsuits described in greater detail in
its 2000 annual report on Form 10KSB/A.

7.   Related Party Transactions

     As described in greater detail in Item 12 of the Company's Annual Report on
Form 10-KSB/A for the fiscal year ended December 31, 2000, the Company's
subsidiary, Electronic Billboard Technology, Inc. has entered into a Patent
Assignment and Royalty Agreement with Advanced Technology Incubator, Inc.,
("ATI"). ATI is owned by Dr. Zvi Yaniv, the Company's President and Chief
Operating Officer. The assignment is conditioned on an initial payment of
$200,000 from the Company to ATI. To date, a total of $112,500 has been paid,
$25,000 of which was paid during the nine months ended September 30, 2001. The
Company can complete the assignment at any time by paying the remaining balance
due of $87,500, or by making quarterly payments of $12,500 to keep its option in
effect. Since it is likely that the Company will complete the patent assignment,
the remaining $87,500 has been accrued; however the Company is not legally
obligated to complete this assignment at the present time.

     In July 2001, the Company made a short term non-interest bearing loan to
its President and Chief Operating Officer in the amount of $150,000. No
repayment arrangements have been made for this loan, however any future payments
made related to the patent license agreement discussed in the previous paragraph
will likely be offset against this loan.




                                       7
<PAGE>

                  SI DIAMOND TECHNOLOGY, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

8.   Business Segments

Following is information related to the Company's business segments for the nine
months ended September 30, 2001 and 2000:

<TABLE>
<CAPTION>
                         FEPET          SBOA        EBT        All Other        Total
                      ----------      --------   ----------    ----------    ----------
<S>                  <C>           <C>           <C>           <C>          <C>
     2001
     ----

Revenue              $   700,405   $ 1,386,646   $    5,000     $      --   $ 2,092,051

Profit (Loss)           (955,487)     (112,192)  (1,992,344)     (779,176)   (3,839,199)

Expenditures for
  long-lived assets       12,403        13,483      226,072         9,402       261,360

     2000
     ----

Revenue                  330,329     1,804,714       76,894            --     2,211,937

Profit (Loss)         (1,389,377)     (344,646)  (1,709,151)   (1,344,489)   (4,787,663)

Expenditures for
  long-lived assets        1,192        37,879      865,557         5,844       910,472
</TABLE>

9.   Subsequent Events

     For the period from October 1, 2001 through November 2, 2001, the Company
issued notes payable totaling $250,000. These notes are six month notes similar
in terms to the notes issued in September 2001 described in note 4.

10.  Recently Issued Accounting Standards

     In July 2001 FAS 141, Business Combinations, and FAS 142 Goodwill and Other
Intangible Assets, were issued. These pronouncements provide that all business
combinations initiated after June 30, 2001 be accounted for using the purchase
method and that goodwill be reviewed for impairment rather than amortized,
beginning on January 1, 2002. The Company does not believe that the adoption of
these pronouncements will have a material effect on its financial statements.
Any business combination transactions in the future would be accounted for under
this new guidance.

     In September 2001, the FASB issued Statement 143, Asset Retirement
Obligations. This Statement addresses financial accounting and reporting for
obligation associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The Statement will be effective for the
Company's fiscal year ending December 2003. The Company does not believe that
the adoption of this pronouncement will have a material effect on its financial
statements.

     In August 2001, the FASB issued Statement 144, Accounting for Impairment or
Disposal of Long-Lived Assets. This Statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. The Statement
will be effective for the Company's fiscal year ending December 2002. The
Company does not believe that the adoption of this pronouncement will have a
material effect on its financial statements.




                                       8
<PAGE>

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

     NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

                                    OVERVIEW

         During the nine months ended September 30, 2001, the Company's primary
     revenues were earned as a result of the construction of signs at our Sign
     Builders of America, Inc. ("SBOA") subsidiary and reimbursed research
     expenditures at our Field Emission Picture Element Technologies, Inc.
     ("FEPET") subsidiary. We continued to incur substantial expenses in support
     of the development of our proprietary Carbon Based Field Emission ("CFE")
     Technology and in the development of our electronic display products. As
     more fully discussed in our Annual Report on Form 10-KSB/A for the year
     ended December 31, 2000, we expect to incur additional research and
     development expenses throughout 2001 in developing our CFE technology.

                                     OUTLOOK

         We expect our external cash needs for 2001 to be approximately $4.5
     million, of which approximately $4.0 million has already been raised. We
     expect that we may also have to raise additional funds during the next
     twelve months. We intend to fund our overall cash needs through a
     combination of SBOA sales, reimbursements for research, license agreements,
     and issuance of debt and equity securities. A successful introduction of
     our electronic display products could result in significant customer orders
     thereby causing our cash needs to exceed these levels, however, such
     customer orders would also result in increased availability of funding.

         We anticipate that losses will continue through the remainder of 2001
     and into 2002 as we continue to fund the development of our CFE technology
     and continue installations of our electronic display products. There can be
     no assurance that we will be profitable in the future. Our future
     profitability is dependent on either generating significant revenues
     through EBT, or the signing of significant royalty agreements. Full
     commercial development of our technology and electronic display will
     require additional funds that may not be available at terms acceptable to
     us.

         We anticipate that we will need to raise significantly fewer funds
     through debt and equity offerings for operating purposes in 2002 than in
     2001. This is because we expect EBT to begin generating significant
     revenues related to its electronic display products in 2002 and we expect
     FEPET to have increased revenues related to reimbursed research and
     development expenditures. We also expect FEPET to sign multiple revenue
     generating license agreements related to its technology. We expect positive
     cash flow from operations in 2002. We may have to raise additional funds
     for investing activities to support potential customer roll outs at EBT,
     however the amount of such funds would be dependent on the nature of the
     customer agreement and can not be predicted at the present time. Overall,
     in 2002, we expect to have minimum fixed operating costs of approximately
     $5.0 million, although that number could be reduced if required. We expect
     to cover these expenses with revenue, primarily from license agreements,
     however if revenue is not sufficient, we will be required to raise funds
     through the issuance of either debt or equity.

         We developed a plan to allow ourselves to maintain operations until we
     are able to sustain ourselves on our own revenue, however our current cash
     levels are not sufficient to reach that point. We have the existing
     resources to continue operations for approximately four to six weeks. We
     have been operating in this manner for an extended period of time and we
     believe that we have the ability to continue to raise short term funding,
     if necessary, to enable us to continue operations until our plan can be
     completed. Our plan is primarily dependent on raising funds through the
     licensing of our technology and through additional debt and equity
     offerings. We are also concentrating on raising revenue by seeking
     customers for our electronic display products.

         This plan is based on current development plans, current operating
     plans, the current regulatory environment, historical experience in the
     development of electronic products and general economic conditions. Changes
     could occur which would cause certain assumptions on which this plan is
     based to be no longer valid. Although we do not expect funding our
     operations to be a problem, if adequate funds are not available from
     operations, or additional sources of financing, we may have to eliminate,
     or reduce substantially, expenditures for research and development, testing
     and production of its products, or obtain funds through arrangements with
     other entities that may require us to relinquish rights to certain of our
     technologies or products. Such results would materially and adversely
     affect us.



                                       9
<PAGE>

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

                               RECENT DEVELOPMENTS

         In February 2001, EBT signed an agreement with Eckerd Corporation, a
     subsidiary of J.C. Penney Company to install indoor electronic display
     products at ten Eckerd locations as part of a pilot program. Under this
     arrangement, EBT will sell advertising on these products and share a
     portion of the advertising revenue with Eckerd. Installation of these
     products was completed in June 2001. These products are not currently
     generating revenue and the amount of revenue to be generated, if any, can
     not be predicted until the end of the test period.

         EBT also signed an agreement in February 2001 to install its indoor
     electronic display products at two McDonald's locations on a test basis.
     The units were installed and the test began in March 2001. Based on the
     initial successful results, the test was expanded to four locations in June
     2001 and the scope of the test was increased. This expanded test continues
     to yield very favorable results. The expanded test is scheduled to last
     until November 2001. These products are not currently generating revenue
     and the amount of revenue to be generated, if any, can not be predicted
     until the end of the test period. EBT is also testing, or has entered into
     agreements to test, its products at retailers, convenience store chains,
     and sporting goods stores.

         In May 2001, FEPET announced the successful completion of a four inch
     diagonal monochrome HyFED(TM) utilizing carbon nanotube technology by its
     international development team. As a result, Phase II of the development
     program was kicked-off by the international development team to develop a
     color prototype of the HyFED(TM) display. This project continues to
     progress well, however we do not expect any revenue from the HyFED(TM)
     during 2001.

         FEPET is nearing completion of its research project with a large
     Japanese display manufacturer. FEPET has also solved the majority of the
     problems associated with manufacturing Field Emission Displays using carbon
     nanotube technology. We have developed simplified manufacturing processes
     using methods that display manufacturers are familiar with, and lowered the
     cost by making these processes compatible with the use of lower cost glass.
     We now are in a position to license this technology to display
     manufacturers and to transfer the manufacturing process and know how.

         FEPET has also continued to develop and made substantial progress on
     its proposed outdoor LCD display and is currently building a prototype,
     which it expects to be completed prior to the end of the year.

                              RESULTS OF OPERATIONS

         Our revenues for the third quarter ended September 30, 2001 totaled
     $773,549 compared to $665,473 for the third quarter of 2000. We earned
     $2,092,051 in revenues during the nine month period ended September 30,
     2001, (the "2001 Period") as compared with $2,211,937 during the nine month
     period ended September 30, 2000 (the "2000 Period"). During the 2001
     Period, we had revenues of $1,386,646 from SBOA, $700,405 from FEPET, and
     $5,000 from EBT. In the 2000 Period, we had revenue of $1,804,714 from
     SBOA, $330,329 from FEPET, and $76,894 from EBT. The FEPET revenues in both
     periods were primarily the result of reimbursed research expenditures. In
     the 2001 Period, FEPET had $304,417 of reimbursements from government
     programs, $374,967 from a private research contract with a large Japanese
     display manufacturer, and 21,021 in miscellaneous product sales. In the
     2000 Period, all FEPET revenues were reimbursements from government grants.
     The SBOA revenues in both periods were all from the sale of signs designed,
     manufactured, or installed by SBOA. Revenues declined by approximately 23%
     at SBOA in the 2001 Period as compared with the 2000 Period. During the
     2000 period, EBT received $25,500 in royalties under its now terminated
     agreement with Texas Digital Systems, Inc. ("TDS"), $27,413 in revenue from
     miscellaneous product sales, and $1,080 of advertising revenue. In the 2001
     Period, EBT had products installed at various customer locations on a test
     basis, but generated only $5,000 in revenue as a result of these tests
     during the period ended September 30, 2001.



                                       10
<PAGE>

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

         We had a total revenue backlog of $1,432,980 as of September 30, 2001,
     which represents a substantial increase over the total revenue backlog of
     $335,178 that existed at September 30, 2000. The SBOA backlog at September
     30, 2001 was $781,743 compared with $322,343 at September 30, 2000. The
     FEPET backlog at September 30, 2001 was $651,237 and is composed of
     $426,204 related to government funded research and $225,033 related to
     privately funded research. FEPET had no backlog at September 30, 2000. EBT
     had no backlog at September 30, 2001, however EBT anticipates that it will
     generate revenues in the last three months of 2001 related to both sales of
     electronic display products and advertising on Company owned displays
     installed at customer locations. Our ability to perform continued research,
     or fulfill our backlog, should not require significant additional
     personnel.

         We expect our revenue for the fourth quarter of 2001 to exceed the
     revenues from the comparable period last year and to equal or exceed the
     revenues from the third quarter of this year. FEPET has a strong research
     backlog and is scheduled to make substantial progress on that backlog
     during that period. While revenues at SBOA have declined substantially in
     the 2001 Period from the 2000 Period, its backlog remains strong. Although
     SBOA installs signs nationally, the majority of its sales come from new
     construction in the Central Texas area in the vicinity of Austin. That area
     has been particularly hard hit by the economic slowdown being experienced
     by technology companies. One reason for the substantial increase in the
     SBOA backlog is the delay in new construction projects in the Austin area
     that were previously started. Signage is normally installed at the
     completion of the project. If SBOA had been able to ship enough products
     during the third quarter to reduce its backlog to an amount similar to the
     backlog at September 30, 2000, its sales for the 2001 Period would
     approximate its sales for the 2000 Period.

         For the 2001 Period, our cost of sales were $1,781,094, or a gross
     margin of 15%, as compared with $1,159,447 or a gross margin of 30%, for
     the 2000 Period. This decreased margin resulted primarily from higher costs
     incurred at EBT in the 2001 Period than in the 2000 Period. Margins at
     SBOA, which generates the majority of our revenue, remained similar at
     approximately 34% in the 2000 Period and 35% in the 2001 Period. Higher
     revenues at FEPET in the 2001 Period also contributed to the decrease in
     overall margin. Since FEPET's revenue consists primarily of reimbursed
     expenditures, it operates with nominal margins. We expect our future
     margins to increase substantially from the 15% margin in this quarter as
     EBT begins to generate both advertising revenue and product sales from its
     electronic display products and as FEPET enters into license or royalty
     agreements.

         Our selling, general, and administrative expenses were $2,487,069 for
     the 2001 Period, compared with $3,390,797 for the 2000 Period. The primary
     reason for the decrease was the $675,000 non cash expense incurred in the
     2000 Period related to selling costs associated with the initial agreement
     signed with Eckerd Corporation, as well as overall cost cutting measures.

         We incurred research and development expenses of $1,581,986 in the 2001
     Period. This was slightly higher than the $1,520,591 incurred in the 2000
     Period. Overall, we have a higher level of research activity, however a
     portion of this is offset by increased funding from outside sources for our
     research. We expect to continue to incur expense throughout the remainder
     of 2001 in support of additional research and development activities
     related to the commercial development of our CFE technology and our
     electronic products. We expect the overall research and development in 2001
     to be substantially lower than 2000 as a result of the increased funding
     available to FEPET and the transition of the EBT products from the
     development stage to the installation stage. We also expect internally
     funded research and development expense to decrease in the last quarter of
     the year for the same reasons.

         The impairment charge in the 2000 Period was related to our acquisition
     of the minority interest in our FEPET subsidiary. As described in greater
     detail in our 2000 annual report on form 10KSB/A, we had the opportunity to
     acquire these shares of FEPET stock by issuing SI Diamond stock. The
     transaction was valued based on the market value of the SI Diamond stock
     issued, which exceeded the book value of the stock acquired. FAS 121
     required us to write off the resulting goodwill, since there was no future
     cash flow directly tied to this minority interest. There was no impairment
     charge in the 2001 Period.




                                       11
<PAGE>

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONT.)

         We had net realized and unrealized losses on our marketable securities
     portfolio of $28,542 in the 2001 Period as compared with net realized and
     unrealized losses of $409,455 in the 2000 Period. This loss on marketable
     securities in the 2000 Period was partially offset by the sale of an
     investment in an LLC that generated a net gain of $375,000. We had a
     greatly decreased level of funds committed to our marketable securities
     portfolio in the 2001 Period as compared to the 2000 Period. Our other
     expense in both the 2001 and 2000 Periods consists primarily of interest
     expense.

                        FINANCIAL CONDITION AND LIQUIDITY

         At September 30, 2001, we had cash and cash equivalents in the amount
     of $180,333 as compared with cash and cash equivalents of $8,818 at
     December 31, 2000. This increase in cash is primarily the result of cash
     provided by financing activities, partially offset by cash used in
     operating activities and cash used in investing activities. The cash used
     in operations was primarily the result of our net operating loss for the
     period. The cash used in operating activities during the 2001 Period of
     $3,288,665 was slightly higher than the $3,176,722 used in the 2000 Period.
     The primary reason for the increase was the increased operating loss at
     SBOA resulting from lower revenues.

         As described in greater detail in the notes to the financial
     statements, we received proceeds of $3,623,591 from the issuance of common
     stock related to private placements, options, and warrants during the 2001
     Period, as compared with $3,495,146 from the same sources during the 2000
     Period. The primary reason for this increase relates to a slightly higher
     cash need to fund operations, repay debt, and fewer funds generated in the
     2001 Period as the result of new debt issued. We have issued $250,000 in
     debt during the period from October 1, 2001 through October 18, 2001. We
     intend to raise an additional $500,000 in the form of either debt or equity
     prior to the end of the year.

         Cash used in investing activities during the 2001 Period was $221,539
     as compared with cash used by investing activities of $334,893 for the 2000
     Period. The cash used in the 2000 Period was primarily the result of
     expenditures related to the construction of billboards, partially offset by
     funds generated by our marketable securities portfolio. The cash used in
     the 2001 Period resulted primarily from the purchase of equipment and
     electronic display products.

         The principal source of our liquidity has been funds received from
     exempt offerings of common and preferred stock. If we need additional
     funds, we may seek to sell additional debt or equity securities. While we
     expect to be able to obtain any funds needed for operations, there can be
     no assurance that we can obtain financing on commercially acceptable terms.
     We believe that our success in reaching profitability will be dependent
     upon the viability of our products, their acceptance in the marketplace,
     and our ability to obtain additional financing in the future. Our
     independent auditor's, McGladrey & Pullen, LLP, expressed uncertainty as to
     the ability of the Company to continue as a going concern based on current
     losses and accumulated past losses from operations and our past reliance on
     raising outside capital. See "Independent Auditor's Report." We have
     received similar opinions from our auditors in each year since 1995.

         We expect to continue to incur substantial expenses for research and
     development ("R&D"), product testing, and product marketing. Further, we
     believe that certain products that may be developed by potential licensees
     of our technology may not be available for commercial sale or routine use
     for a period of one to two years. While we would likely receive initial
     license payments, ongoing royalty streams related to those licenses will
     not be available until potential licensees have introduced products using
     our technology. Our electronic display products are available for
     installation and being installed in certain locations at the present time.
     In some cases, our business model calls for us to install electronic
     display products and generate revenues from the sale of advertising. As a
     result we must incur the cost of installing the products and recover that
     cost through the advertising revenues generated by these products.
     Therefore, it is anticipated that the commercialization of our existing and
     proposed products will require additional capital in excess of our current
     funding.

         The combined effect of the foregoing may prevent us from achieving
     sustained profitability for an extended period of time. Because the timing
     and receipt of revenues from the sale of products will be tied to the
     achievement of certain product development, testing and marketing
     objectives which can not be predicted with certainty, there may be
     substantial fluctuations in our results of operations. If revenues do not
     increase as rapidly as anticipated, or if product development, testing, and
     marketing require more funding than anticipated, we may be required to
     curtail our expansion or seek additional financing from other sources.




                                       12
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

          There have been no new legal developments during the quarter.



















                                       13
<PAGE>

ITEM 5.   OTHER INFORMATION

CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

     Certain statements in this report are forward-looking statements concerning
the future operations of the Company. The Company is including the following
cautionary statement in this Quarterly Report on Form 10-QSB to make applicable
and take advantage of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 for any forward-looking statement made by, or on
behalf of, the Company. The factors identified in this cautionary statement are
important factors (but not necessarily all important factors) that could cause
actual results to differ materially from those expressed in any forward-looking
statement made by, or on behalf of, the Company.

     Where any such forward-looking statement includes a statement of the
assumptions or basis underlying such forward-looking statement, the Company
cautions that, while it believes such assumptions or basis to be reasonable and
makes them in good faith, assumed facts or basis almost always vary from actual
results, and the differences between assumed facts or basis and actual results
can be material, depending upon the circumstances. Where in any forward-looking
statement, the Company or its management expresses an expectation or belief as
to future results, such expectation or belief is expressed in good faith and
believed to have a reasonable basis, but there can be no assurance that the
statement or expectation or belief will result or be achieved or accomplished.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits: See Index to Exhibits on page 16 for a descriptive response
         to this item.

     (b) Reports on Form 8-K:

         (1) None








                                       14
<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.


                                     SI DIAMOND TECHNOLOGY, INC.
                                     (Registrant)



Date:    November 2, 2001                          /s/ Marc W. Eller
                                     -------------------------------------------
                                     Marc W. Eller
                                     Chairman and Chief Executive Officer
                                     (Principal Executive Officer)



Date:    November 2, 2001                           /s/ Tracy Vaught
                                     -------------------------------------------
                                     Tracy Vaught
                                     Chief Financial Officer
                                     (Principal Financial Officer and Principal
                                     Accounting Officer)



















                                       15
<PAGE>

                                INDEX TO EXHIBITS

The following documents are filed as part of this Report:

<TABLE>
<CAPTION>
   Exhibit
   -------

<S>               <C>
       11         Computation of (Loss) Per Common Share
</TABLE>
















                                       16