<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 UNDER SECTION 13 OR 15(d) OF THE
         EXCHANGE ACT

         For the transition period from ____________to _____________

                         Commission file number 0-21489

                      International Dispensing Corporation
                      ------------------------------------
        (Exact name of small business issuer as specified in its charter)


                DELAWARE                               13-3856324
     (State of other jurisdiction of        (IRS Employer Identification No.)
     incorporation or organization)

          1111 Benfield Blvd., Suite 230, Millersville, Maryland 21108
          ------------------------------------------------------------
                    (Address of principal executive offices)

                                 (410) 729-0125
                           (Issuer's telephone number)

                                 Not Applicable
                                 --------------
              (Former name, former address and former fiscal year,
                          if changed since last report)

Check whether the issuer (1) filed all reports 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 __
      -

                      APPLICABLE ONLY TO CORPORATE ISSUERS


State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 9,728,396 shares of Common Stock as
of October 10, 2001

Transitional Small Business Disclosure Format (Check One): Yes __    No  X
                                                                         -

<PAGE>

                      International Dispensing Corporation
                          (A Development Stage Company)


                                Table of Contents


Part I - FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                    Page Number
                                                                                    -----------
<S>                                                                                   <C>
Item 1.  Financial Statements

         Balance Sheet at September 30, 2001 (unaudited)                                3
         and December 31, 2000

         Statements of Operations for the Nine Months and Three Months                  4
         Ended September 30, 2001 and 2000 and for the Period from Inception
         (October 10, 1995) through September 30, 2001

         Statements of Cash Flows for the Nine Months Ended                             5
         September 30, 2001 and 2000 and for the Period from Inception
         (October 10, 1995) through September 30, 2001

         Statements of Changes in Stockholders' Equity (Deficiency) for the
         Period from Inception (October 10, 1995) through September 30, 2001
         and December 31, 2000, 1999, 1998, 1997, 1996 and 1995                         6

         Notes to Financial Statements                                                  7

Item 2.  Management's Discussion and Analysis or Plan of Operation                      9


Part II -  OTHER INFORMATION

Item 1.  Legal Proceedings                                                              11

Item 2.  Changes in Securities and Use of Proceeds                                      11

Item 3.  Defaults Upon Senior Securities                                                12

Item 4.  Submission of Matters to a Vote of Security Holders                            12

Item 5.  Other Information.                                                             12

Item 6.  Exhibits and Reports on Form 8-K                                               12
</TABLE>






                                       2.
<PAGE>

               INTERNATIONAL DISPENSING CORPORATION


                  (A Development Stage Company)

                          BALANCE SHEET
<TABLE>
<CAPTION>

                                                                             September 30, 2001               December 31, 2000
                                                                            ---------------------            --------------------
                                                                                 (unaudited)
<S>                                                                             <C>                             <C>
Assets
Current Assets:
  Cash and cash equivalents                                                     $       2,763,813               $       418,758
  Prepaid expenses                                                                              -                        31,342
  Inventory                                                                                17,865                             -
                                                                             ---------------------            -------------------
                                         Total current assets                           2,781,678                      450,100
                                                                             ---------------------            -------------------

Fixed Assets:
  Office equipment                                                                         85,746                       75,000
  Production equipment for future use                                                     679,160                      397,427
  Accumulated depreciation and amortization                                               (26,824)                     (17,447)
                                                                             ---------------------            -------------------
                                             Net fixed assets                             738,082                      454,980
                                                                             ---------------------            -------------------
Other Assets                                                                                3,447                        3,447
                                                                             ---------------------            -------------------
                                                 Total assets                   $       3,523,207               $      908,527
                                                                             =====================            ===================

Liabilities and Stockholders' Equity
  Current Liabilities:
  Accounts payable                                                                       $ 46,533                          $ -
  Accrued expenses                                                                         26,302                      130,527
                                                                             ---------------------            -------------------
  Total current liabilities                                                                72,835                      130,527
                                                                             ---------------------            -------------------
                                            Total liabilities                              72,835                      130,527
                                                                             ---------------------            -------------------

Commitments and contingencies
Stockholders' Equity:
  Preferred stock, $.001 par value;
  2,000,000 shares authorized, 3,175 and 1,350
  shares issued and outstanding, as of September 30, 2001
  and December 31, 2000, respectively                                                   6,974,174                    2,971,601
  Common stock, $.001 par value;
  40,000,000 shares authorized;
  9,728,396 and 9,666,668 issued and outstanding, as of
  September 30, 2001 and December 31, 2000, respectively                                    9,728                        9,667
  Additional paid-in capital                                                            9,736,351                    9,692,585
  Warrants outstanding                                                                    109,949                      109,949
  Deferred compensation                                                                  (247,600)                           -
  Deficit accumulated during the development stage                                    (13,132,230)                 (12,005,802)
                                                                             ---------------------            -------------------
                                                                                        3,450,372                      778,000
                                                                             ---------------------            -------------------
                        Total liabilities and stockholders' equity              $       3,523,207               $      908,527
                                                                             =====================            ===================
</TABLE>

    The accompanying notes are an integral part of these financial statements


                                       3.

<PAGE>

                             STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>



                                                          Nine Months                               Three Months
                                                             ended                                     ended
                                           ----------------------------------------    --------------------------------------
                                           September 30, 2001   September 30, 2000     September 30, 2001  September 30, 2000
                                               (unaudited)         (unaudited)           (unaudited)           (unaudited)


<S>                                        <C>                  <C>                    <C>                 <C>
Revenues                                   $                -   $                -     $                -  $                -
                                           ------------------   ------------------     ------------------- ------------------
Operating expenses
   General and administrative                       1,140,302            1,194,650                557,965             334,333
   Depreciation and amortization                        9,377                    -                  3,126                   -
                                           ------------------   ------------------     ------------------- ------------------
               Total operating expenses             1,149,679            1,194,650                561,091             334,333
                                           ------------------   ------------------     ------------------- ------------------
               Loss from operations                (1,149,679)          (1,194,650)              (561,091)          (334,333)


Other income (expense)
   Interest expense                                         -                    -                      -                  -
   Interest income                                     23,251               16,216                 18,945              3,286
                                           ------------------   ------------------     ------------------- ------------------
      Net loss before extraordinary loss
          and discontinued operations              (1,126,428)          (1,178,434)              (542,146)          (331,047)


Extraordinary loss on retirement of debt                    -                    -                      -                  -

Loss from discontinued operations                           -                    -                      -                  -
                                           ------------------   ------------------     ------------------- ------------------
               Net loss                    $       (1,126,428)  $       (1,178,434)    $         (542,146) $        (331,047)
                                           ==================   ==================     =================== ==================

Basic and diluted loss per share                      ($0.12)               ($0.12)                ($0.06)            ($0.04)

Basic and diluted weighted average
    shares outstanding                             9,718,337             9,623,967              9,728,396          9,666,668


<CAPTION>

                                               Cumulative
                                             from Inception
                                           October 10, 1995
                                                   through
                                           September 30, 2001
                                           ------------------
                                              (unaudited)

<S>                                        <C>
Revenues                                   $                -
                                           ------------------
Operating expenses
   General and administrative                       8,384,933
   Depreciation and amortization                       45,924
                                           ------------------
               Total operating expenses             8,430,857
                                           ------------------
               Loss from operations                (8,430,857)


Other income (expense)
   Interest expense                                   (66,665)
   Interest income                                    459,219
                                           ------------------
      Net loss before extraordinary loss
          and discontinued operations              (8,038,303)


Extraordinary loss on retirement of debt             (250,000)

Loss from discontinued operations                    (843,927)
                                           ------------------
               Net loss                    $       (9,132,230)
                                           ==================

Basic and diluted loss per share

Basic and diluted weighted average
    shares outstanding
</TABLE>



   The accompanying notes are an integral part of these financial statements

                                       4.

<PAGE>

                INTERNATIONAL DISPENSING CORPORATION
                    (A Development Stage Company)

                       STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                                      Cumulative
                                                                                                                    from Inception
                                                                     Nine months             Nine months           October 10, 1995
                                                                       ended                   ended                  through
                                                                  September 30, 2001      September 30, 2000      September 30, 2001
                                                                     (unaudited)             (unaudited)             (unaudited)
                                                                  ------------------      ------------------      ------------------
<S>                                                                    <C>                     <C>                     <C>
Cash flows from operating activities:
Net loss                                                           $     (1,126,428)       $     (1,178,434)       $     (9,132,230)
Adjustment for (income) loss from discontinued operations                         -                       -                 843,927
Net loss from continuing operations                                      (1,126,428)             (1,178,434)             (8,288,303)
Adjustments to reconcile net loss to
 net cash used in operating activities:
  Depreciation and amortization                                               9,377                       -                  45,924
  Compensation from stock grant                                                   -                       -                  25,279
  Non-cash compensation                                                     148,800                       -                 414,948
  Loss on retirement of debt                                                      -                       -                 250,000
  Changes in operating assets and liabilities:
    (Increase) decrease in prepaid expenses                                  31,342                 (11,708)                      -
    Increase in inventory                                                   (17,865)                      -                 (17,865)
    Decrease (Increase) in other assets                                           -                  23,200                  (3,447)
    Increase (decrease) in accrued expenses                                (104,225)                 39,767                  (4,138)
    Increase (decrease) in accounts payable                                  46,533                (175,801)                 46,533
                                                                  ------------------      ------------------      ------------------
Net cash used in continuing operating activities:                        (1,012,466)             (1,302,976)             (7,531,069)
Net cash provided by (used in) discontinued operations:                           -                       -                (843,927)
                                                                  ------------------      ------------------      ------------------
Net cash used by operating activities:                                   (1,012,466)             (1,302,976)             (8,374,996)
                                                                  ------------------      ------------------      ------------------
Cash flows from operating activities:
  Purchase of fixed assets                                                 (292,479)                 38,401                (784,006)
  Purchase of license                                                             -                       -              (4,000,000)
                                                                  ------------------      ------------------      ------------------
Net cash used in investing activities                                      (292,479)                 38,401              (4,784,006)
                                                                  ------------------      ------------------      ------------------
Cash flows from financing activities:
  Proceeds from issuance of preferred stock                               3,650,000               1,280,000               6,350,000
  Proceeds from private placement                                                 -                       -               2,100,000
  Proceeds from issuance of convertible debt                                      -                       -                 150,000
  Repayment of promissory note                                                    -                       -                (300,000)
  Repayment of bridge loans                                                       -                       -              (1,050,000)
  Repayment of convertible debt                                                   -                       -                (100,000)
  Proceeds from initial public offering                                           -                       -               8,772,815
                                                                  ------------------      ------------------      ------------------
Net cash provided from financing activities                               3,650,000               1,280,000              15,922,815
                                                                  ------------------      ------------------      ------------------
Net increase (decrease) in cash and cash equivalents                      2,345,055                  15,425               2,763,813
Cash and cash equivalents, beginning of period                              418,758                 416,322                       -
                                                                  ------------------      ------------------      ------------------
Cash and cash equivalents,end of period                            $      2,763,813        $        431,747        $      2,763,813
                                                                  ==================      ==================      ==================
Supplemental disclosure of cash flow information:
  Cash paid for interest                                                          -                       -
Non-cash investing and financing activities:
  Issuance of common stock                                                        -                       -
  Purchase of license from affiliate                                              -                       -

</TABLE>

    The accompanying notes are an integral part of these financial statements

                                       5.

<PAGE>

<TABLE>
<CAPTION>
                      INTERNATIONAL DISPENSING CORPORATION
                          (a development stage company)

           STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
                FOR THE PERIOD FROM OCTOBER 10, 1995 (INCEPTION)
 THROUGH SEPTEMBER 30, 2001 and DECEMEBER 31, 2000, 1999, 1998, 1997, 1996 AND 1995


                                                                                                                          Additional
                                                               Preferred        Stock        Common         Stock           Paid-in
                                                                Shares          Amount       Shares         Amount          Capital
                                                               ---------------------------------------------------------------------
<S>                                                             <C>      <C>               <C>         <C>            <C>
BALANCE, October 10, 1995 (inception)                              -             $ -            -          $ -               $ -
   Issuance of common stock pursuant to License Agreement          -               -       2,900,000        2,900              -
   Issuance of common stock pursuant to Settlement Agreement       -               -       1,950,000        1,950              -
   Issuance of common stock to management                          -               -         950,000          950            76,238
   Purchase of License from Affiliate                              -               -            -            -                 -
   Issuance of common stock in private placement                   -               -          87,500           88            43,662
   Issuance of common stock rights in private placement            -               -            -            -              131,250
      Net loss                                                     -               -            -            -                 -
                                                               ---------------------------------------------------------------------
BALANCE, December 31, 1995                                         -               -       5,887,500        5,888           251,150
   Issuance of common stock in private placement                   -               -         437,500          437           218,313
   Issuance of common stock rights in private placement            -               -            -            -              656,250
   Issuance of common stock to bridge lenders                      -               -       1,575,000        1,575            (1,575)
   of $1,227,193                                                   -               -       1,666,668        1,667         8,771,148
      Net loss                                                     -               -            -            -                 -
                                                               ---------------------------------------------------------------------
BALANCE, December 31, 1996                                         -               -       9,566,668        9,567         9,895,286
      Net loss                                                     -               -            -            -                 -
                                                               ---------------------------------------------------------------------
BALANCE, December 31, 1997                                         -               -       9,566,668        9,567         9,895,286
      Net loss                                                      -              -            -            -                 -
                                                               ---------------------------------------------------------------------
BALANCE, December 31, 1998                                         -               -       9,566,668        9,567         9,895,286
   Issuance of preferred stock in private placement               560        1,120,000          -            -                 -
      Net loss                                                     -               -            -            -                 -
                                                               ---------------------------------------------------------------------
BALANCE, December 31, 1999                                        560        1,120,000     9,566,668        9,567         9,895,286
   Issuance of preferred stock in private placement               790        1,580,000          -            -                 -
   Accrued and unpaid preferred stock dividends                    -           271,601          -            -             (271,601)
   Issuance of warants to consultants                              -               -            -            -                 -
   Issuance of common stock to consultants                         -               -         100,000          100            68,900
      Net loss                                                     -               -            -            -                 -
                                                               ---------------------------------------------------------------------
BALANCE, December 31, 2000                                      1,350        2,971,601     9,666,668        9,667         9,692,585
   Issuance of preferred stock in private placement             1,825        3,650,000          -            -                 -
   Accrued and unpaid preferred stock dividends                    -           352,573          -            -             (352,573)
   Issuance of options deferred compensation                       -               -            -            -              371,400
   Issuance of common stock to consultants                         -               -          61,728           61            24,939
      Net loss                                                     -               -            -            -                 -
                                                               ---------------------------------------------------------------------
BALANCE, September 30, 2001                                     3,175    $6,974,174.00     9,728,396   $ 9,728.00     $9,736,351.00
                                                               =====================================================================

<CAPTION>
                                                                                                      Deficit
                                                                                                    Accumulated             Total
                                                                                                     During the         Stockholders
                                                                   Warrants        Deferred         Development           Equity
                                                                  Outstanding    Compensation          Stage            (Deficiency
                                                               ---------------------------------------------------------------------
<S>                                                            <C>              <C>              <C>                <C>
BALANCE, October 10, 1995 (inception)                                $ -             $ -                  $ -               $ -
   Issuance of common stock pursuant to License Agreement              -               -                    -                2,900
   Issuance of common stock pursuant to Settlement Agreement           -               -                    -                1,950
   Issuance of common stock to management                              -               -                    -               77,188
   Purchase of License from Affiliate                                  -               -              (4,000,000)       (4,000,000)
   Issuance of common stock in private placement                       -               -                    -               43,750
   Issuance of common stock rights in private placement                -               -                    -              131,250
      Net loss                                                         -               -                (249,795)         (249,795)
                                                               ---------------------------------------------------------------------
BALANCE, December 31, 1995                                             -               -              (4,249,795)       (3,992,757)
   Issuance of common stock in private placement                       -               -                    -              218,750
   Issuance of common stock rights in private placement                -               -                    -              656,250
   Issuance of common stock to bridge lenders                          -               -                    -                 -
   of $1,227,193                                                       -               -                    -            8,772,815
      Net loss                                                         -               -              (1,302,684)       (1,302,684)
                                                               ---------------------------------------------------------------------
BALANCE, December 31, 1996                                             -               -              (5,552,479)        4,352,374
      Net loss                                                         -               -              (1,145,091)       (1,145,091)
                                                               ---------------------------------------------------------------------
BALANCE, December 31, 1997                                             -               -              (6,697,570)        3,207,283
      Net loss                                                         -               -              (1,938,390)       (1,938,390)
                                                               ---------------------------------------------------------------------
BALANCE, December 31, 1998                                             -               -              (8,635,960)        1,268,893
   Issuance of preferred stock in private placement                    -               -                    -            1,120,000
      Net loss                                                         -               -              (1,702,108)       (1,702,108)
                                                               ---------------------------------------------------------------------
BALANCE, December 31, 1999                                             -               -             (10,338,068)          686,785
   Issuance of preferred stock in private placement                    -               -                    -            1,580,000
   Accrued and unpaid preferred stock dividends                        -               -                    -                 -
   Issuance of warants to consultants                              109,949             -                    -              109,949
   Issuance of common stock to consultants                             -               -                    -               69,000
      Net loss                                                         -               -              (1,667,734)       (1,667,734)
                                                               ---------------------------------------------------------------------
BALANCE, December 31, 2000                                         109,949             -             (12,005,802)          778,000
   Issuance of preferred stock in private placement                    -               -                    -            3,650,000
   Accrued and unpaid preferred stock dividends                        -               -                    -                 -
   Issuance of options deferred compensation                           -           (247,600)                -              123,800
   Issuance of common stock to consultants                             -               -                    -               25,000
      Net loss                                                         -               -              (1,126,428)       (1,126,428)
                                                               ---------------------------------------------------------------------
BALANCE, September 30, 2001                                    $ 109,949.00     $ (247,600.00)   $(13,132,229.55)   $ 3,450,372.45
                                                               =====================================================================
</TABLE>

        The accompanying notes are an integral part of these statements.

                                       6.

<PAGE>


                      International Dispensing Corporation
                          (A Development Stage Company)

                        NOTES TO THE FINANCIAL STATEMENTS
  (Information as of and for the period ended September 30, 2001 is unaudited)

1.  THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

The balance sheet as of September 30, 2001, statements of operations for the
three and nine months then ended and statements of cash flows for the nine
months then ended have been prepared by International Dispensing Corporation
(the "Company") without audit. The results should be read in conjunction with
the audited financial statements and notes thereto included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2000. Results of
operations for the nine-month period are not necessarily indicative of the
operating results for the full year. Interim statements are prepared on a basis
consistent with year-end statements.

In the opinion of management, the unaudited interim financial statements
furnished herein include all adjustments necessary for a fair presentation of
the results of operations of the Company. All such adjustments are of a normal
recurring nature.

2.  GOING CONCERN

The Company's financial statements have been presented on the basis that it is a
going concern. The Company's development stage activities have resulted in an
accumulated deficit since inception to September 30, 2001 of approximately $13.1
million and losses are continuing. Efforts to market its products have yet to
result in the Company generating revenue. The Company's primary source of funds
since inception has been from the sale of its common and preferred stock.

The Company completed a private placement of $1.2 million dollars in preferred
stock in the third quarter of 2000. The Company completed another private
placement of approximately $650,000 during the first half of 2001. Further, the
Company completed a preferred stock private placement of approximately $3.0
million dollars in July 2001 (see Note 3). In addition, management has taken
certain steps, made significant management changes and reduced operating
expenses for the first nine months of 2001 as compared to the first nine months
of 2000 by 4%. The Company believes these steps will provide sufficient
liquidity for it to continue as a going concern. Accordingly, the financial
statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of
liabilities or any other adjustments that might result should the Company be
unable to continue as a going concern.

3.  Private Placements

During 2000, the Company designated 700 shares of the authorized Preferred Stock
as Series C Redeemable Convertible Preferred Stock (the "Series C Stock") and
entered into a Subscription Agreement (the "Series C Subscription Agreement")
with certain investors (the "Series C Investors"). Series C Stock accrues
cumulative dividends at the annual rate of 12%. These dividends accrue and
accumulate from the date of issuance and shall be payable quarterly on the last
day of March, June, September and December, commencing on the last day of the
quarter of the date of issuance. Cumulative dividends are payable in cash or
additional shares of Series C Stock, at the discretion of the Company.






                                       7.
<PAGE>

Each share of Series C Stock is convertible at the holder's option into
approximately 6,667 shares of common stock of the Company, plus additional
shares of common stock for accrued but unpaid dividends at the conversion rate
of $0.30 per share. Each share of Series C Stock is redeemable at the option of
the Company for $2,000 per share plus accrued and unpaid dividends, if certain
conditions are met. The Series C Stock carries a liquidation preference of
$2,000 per share plus accrued and unpaid dividends.
Pursuant to the Series C Subscription Agreement, in August and December 2000,
the Series C Investors purchased an aggregate of 350 shares of Series C Stock
and warrants for an additional 350 shares of Series C Stock at a price of $2,000
per share. As of December 31, 2000, 175 of these warrants expired. As of June
30, 2001, 150 of the remaining warrants were exercised for an aggregate purchase
price of $350,000 and the remaining warrants expired on June 30, 2001.

In January 2001, the Company sold to one investor 50 shares of the Series C
Stock and warrants to purchase an additional 50 shares of Series C Stock, for an
aggregate purchase price of $100,000. These warrants expired on June 30, 2001.
In May and June 2001, the Company sold to investors an aggregate of 100 shares
of the Series C Stock and warrants to purchase an additional 100 shares of
Series C Stock, for an aggregate purchase price of $200,000. These warrants
entitle the holder to purchase shares of Series C Stock for a price of $2,000
per share. As of June 30, 2001, 25 of these warrants were exercised for an
aggregate purchase price of $50,000 and the remaining warrants expire on
December 31, 2001.

In July 2001, the Company designated 3,000 shares of the authorized Preferred
Stock as Series D Redeemable Convertible Preferred Stock (the "Series D Stock")
and entered into a Subscription Agreement (the "Series D Subscription
Agreement") with one investor who purchased 1,500 shares of Series D Stock for
an aggregate purchase price of $3.0 million dollars. The Series D Stock accrues
cumulative dividends at the annual rate of 12%. These dividends accrue and
accumulate from the date of issuance and shall be payable quarterly on the last
day of March, June, September and December, commencing on the last day of the
quarter of the date of issuance. Cumulative dividends are payable in cash or
additional shares of Series D Stock, at the discretion of the Company. Each
share of Series D Stock is convertible at the holder's option into approximately
2,000 shares of common stock of the Company, plus additional shares of common
stock for accrued but unpaid dividends at the conversion rate of $1.00 per
share. Each share of Series D Stock is redeemable at the option of the Company
for $2,000 per share plus accrued and unpaid dividends, if certain conditions
are met. The Series D Stock carries a liquidation preference of $2,000 per share
plus accrued and unpaid dividends.

The following is a summary of the Company's preferred stock as of September 30,
2001 and December 31, 2000:

<TABLE>
<CAPTION>
                                                              September 30, 2001      December 31, 2000
                                                              ------------------      -----------------
<S>                                                              <C>                     <C>
Series A, $.001 par value, 12% cumulative dividends,
each share convertible at holder's option to
approximately 9,091 shares of common stock, 2,000 shares
authorized, 560 shares outstanding as of September 30, 2001
and December 31, 2000.                                            $1,120,000              $1,120,000


Series B, $.001 par value, 12% cumulative dividends,
each share convertible at holder's option to
approximately 5,714 shares of common stock, 1,500 shares
authorized, 440 shares outstanding as of September 30, 2001
and December 31, 2000.                                               880,000                 880,000
</TABLE>





                                       8.
<PAGE>

<TABLE>
<CAPTION>
<S>                                                               <C>                       <C>
Series C, $.001 par value, 12% cumulative dividends,
each share convertible at holder's option to
approximately 6,667 shares of common stock, 700 shares
authorized, 675 shares outstanding as of September 30, 2001
and 350 shares outstanding at December 31, 2000.                   1,350,000                 700,000

Series D, $.001 par value, 12% cumulative dividends,
each share convertible at holder's option to
approximately 2,000 shares of common stock, 3,000 shares
authorized, 1,500 shares outstanding as of September 30, 2001      3,000,000                   -


Cumulative Preferred Dividends                                       624,174                 271,601
                                                                 ------------            ------------

Total Preferred Stock                                             $6,974,174              $2,971,601
                                                                 ============            ============
</TABLE>

4.  STOCK OPTION PLAN

Under APB No. 25, the Company recorded deferred compensation expense of $371,400
relating to options to purchase 300,000 shares granted in June of 2001 equal to
the difference between the estimated fair value of the Company's common stock on
the grant date and the exercise price of the options. The expense will be
recognized ratably over the vesting period of the options, which is generally
three years. For the three and nine months ended September 30, 2001, the Company
recorded $123,800 in expense related to this transaction.

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


The following discussion and analysis should be read in conjunction with the
Company's financial statements, beginning on Page 3 and financial information
included elsewhere in this report.

The Company anticipates it will generate sales revenue and profits from the
gravity flow valve and beverage carafe in the fourth quarter of 2001. However as
of this filing the Company has not obtained any purchase commitments for these
products. The events of September 11, 2001 delayed completion of the field
trials for such products, which are currently underway.

The Company completed an extensive review process with NSF International, The
Public Health and Safety Company (TM) in the second quarter. The Company
received NSF International's C-2 certification on its aseptic gravity flow
valve. NSF International is an independent, certification laboratory that has
been recognized worldwide as an authority on food safety for more than a half
century. The Company is now certified and able to produce over 5 million gravity
flow valves from its existing production tools.

In the second quarter of 2001, the Company completed production of a second,
single cavity production tool designed to produce the first disposable, aseptic
gravity flow valve for the dairy, isotonic, coffee and juice industries.

 In the third quarter of 2001, the Company's semi-automated assembly system came
online. The semi-automated system can assemble over 5.0 million gravity flow
valves per year.




                                       9.


<PAGE>

The Company has completed the design and has filed for patent protection on a
new Disposable Beverage Carafe ("Beverage Carafe") that can safely transport up
to 96 ounces of a hot beverage. The beverage carafe allows consumers and food
service providers to safely transport multiple cups of coffee while maintaining
the product's hot temperature. The Company believes it will generate sales
revenue from this product in the last quarter of 2001.


The Company has also completed the design for a new Fresh Flow System dispensing
system that maintains the commercial sterility of a beverage concentrate. The
Fresh Flow System is a beverage dispensing system that mixes viscous
concentrates with water or another dilutent to produce ready-to-drink juice,
dairy, and coffee or tea beverage. The Fresh Flow System has been designed to
eliminate the need for a peristaltic pump to portion out the beverage
concentrate.

The Company has completed the design for a Portion Control Pump dispensing
system that will attach to flexible packaging and dispense flowable foods. The
Company is in discussions with a global packaging company to adapt the Company's
proprietary dispensing technology to their package.

The Company is also subject to the availability of sufficient financing to meet
its future cash requirements and the uncertainty of future product development
and regulatory approval and market acceptance of proposed products.
Additionally, other risk factors such as loss of key personnel, lack of
manufacturing capabilities, difficulty in establishing new intellectual property
rights and preserving and enforcing existing intellectual property rights as
well as product obsolescence due to the development of competing technologies
could impact the future results of the Company.

For further information concerning the business conducted by the Company, see
Item 1. "Description of Business" in the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2000.


                              Results of Operations

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE AND NINE MONTHS
ENDED SEPTEMBER 30, 2000

Revenue - The Company has not generated any revenue since its inception.

Operating Expenses - For the three and nine months ended September 30, 2001, the
Company had operating expenses of $561,091 and $1,149,679, respectively,
representing an increase of $226,758 and a decrease of $44,971 respectively,
versus the same periods last year. The increase represents the recognition of
$123,800 in deferred compensation and an increase in engineering costs relating
to the field trials for the Company's gravity flow valve and Beverage Carafe.
The decreases primarily represent decreased research and development expenses as
a result of the Company having completed the majority of its research and
development on its current product and development initiatives.

Net Loss - For the three and nine months ended September 30, 2001, the Company
had a net loss of $542,146 and $1,126,428 respectively, versus a net loss of
$331,047 and $1,178,434 respectively for the three and nine months ended
September 30, 2000. The increase loss for the three-month period is due
principally as a result of the Company's recognition of the deferred
compensation and engineering cost. The decrease in the nine-month period is due
to the decrease in other operating expenses.




                                       10.
<PAGE>

                               Financial Condition

As reflected in the financial statements, the Company has experienced continuing
net losses and negative cash flows from operations through September 30, 2001.
The Company's continuing existence is dependent on its ability to achieve and
maintain profitable operations. The Company continues to be in the development
stage and does not anticipate generating any operating revenue until the fourth
quarter of fiscal year 2001.

As of September 30, 2001, the Company had working capital of approximately
$2,708,843. In the first and second quarter of fiscal 2001,the Company received
an aggregate of $650,000 from the purchase of Series C Stock by five investors.
In July 2001 the Company received $3.0 million dollars from the purchase of
Series D Stock by one investor. The proceeds from this sale will provide the
Company with sufficient operating funds to continue operations through the third
quarter of 2003 even if the Company were not to generate any revenue.

The Company's spending rate from July to September 2001 was approximately
$181,000 per month. The Company anticipates that for the fourth quarter of 2001
the monthly spending rate will be approximately $145,000 per month. The majority
of the Company's follow-on expenditures will be related to Sales & Marketing as
well as the Company's new product lines and new product development efforts. In
addition, the Company will also incur capital expenditures for multi-cavity
molds, steel dyes, raw materials and the cost to manufacture the products.

PART II

OTHER INFORMATION

Item 1.  Legal Proceedings.
                  None

Item 2.  Changes in Securities and Use of Proceeds.

In July 2001, the Company sold to one investor 1,500 shares of the Company's
Series D Stock for an aggregate purchase price of $3,000,000. The entire
purchase price for the Series D Stock was paid for in cash. There were no
underwriters with respect to this transaction. Each share of Series D Stock is
convertible at the holder's option into 2,000 shares of Common Stock of the
Company, plus additional shares of Common Stock for accrued but unpaid dividends
at the conversion rate of $1.00 per share. The Company believes that the Series
D Stock was issued in a transaction not involving a public offering in reliance
upon an exemption from registration provided by Section 4(2) of the Securities
Act of 1933, as amended.

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) No reports on Forms 8-K have been filed for the quarter for which this
report is being filed.

                                       11.

<PAGE>


                                   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.


                                     INTERNATIONAL DISPENSING
                                     CORPORATION


Date: October 14, 2001               BY: /s/ Gary Allanson
                                     ------------------------------------------

                                     Gary Allanson
                                     Chief Executive Officer & President
                                     (Principal Executive, Accounting and
                                     Financial Officer)










                                       12.