SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   FORM 10KSB

(Mark One)

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended: December 31, 1999

OR

[ ]  TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

Commission file number: 0-24736

                   BioProgress Technology International, Inc.
                   ------------------------------------------
             (Exact name of registrant as specified in its charter)

            Nevada                                              88-0361701
            ------                                              ----------
 (State or other jurisdiction)                               (I.R.S. employer)
of incorporation or organization                           identification number

9055 Huntcliff Trace, Atlanta, Georgia 30350-1735
-------------------------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (770) 641-0264

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

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No ____

Indicate by check mark if disclosure of delinquent filers pursuant to Rule 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10KSB or any amendment to
this Form 10KSB. [ ]

State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing: On
March 22, 2000, the closing inside bid and asked prices for the shares of common
stock of registrant, which is the sole voting stock outstanding of registrant,
were $4.09 and $4.25, respectively. On that date, there were approximately
36,002,800 shares of common stock outstanding, which did not include those
shares which the Company had the obligation to issue. Affiliates held 13,022,425
shares of this stock; thus, the aggregate market value of the voting stock held
by non-affiliates approximated $95,828,163. Indicate the number of shares
outstanding of each of the registrant's classes of common stock as of the latest
practicable date: As of March 22, 2000, there were approximately 36,002,800
shares outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the documents incorporated by reference and the Part of this Form
10KSB into which the document is incorporated: None.

<PAGE>


                                     PART I.

Item 1. Description of Business:

     History:

BioProgress Technology International, Inc. (Company), was incorporated in
California on March 5, 1990. Subsequently, shares of the common stock of the
Company (Common Stock) were distributed to the shareholders of the parent
corporation then owning the Company after registration with the U.S. Securities
and Exchange Commission (Commission). The Company changes its domicile to Nevada
in 1997.

     Subsidiary Acquisitions:

Acquisition of BioProgress Technology, Inc.:

On November 17, 1997, the Company acquired all of the outstanding capital stock
of BioProgress Technology, Inc., a Colorado corporation (BioProgress Technology)
in exchange for 4,000,000 post-split shares of Common Stock.

Distributorship and Acquisition Agreement with BioProgress Technology Limited
(UK):

In conjunction with the acquisition of BioProgress Technology, the Company
entered into an agreement (BTL Option Agreement) with certain of the
shareholders of BioProgress Technology Limited, an entity incorporated in the
United Kingdom (BTL), which gave the Company the option of acquiring all or any
part, on a pro rata basis, of the issued and outstanding proprietary interest of
BTL. The BTL Option Agreement was subsequently modified and completed on
December 31, 1998. The Company assumed, in this acquisition,
approximately $1,000,000 in liabilities, satisfying such through the issuance of
shares of Common Stock valued at the inside bid price on the closing date, and
issued 22,818,446 shares of Common Stock as the sole consideration for the
acquisition.

Acquisition and Current Business of DHA Nutrition Limited (UK):

On August 12, 1998, the Company acquired DHA Nutrition Limited (UK), an entity
organized in the United Kingdom (DNL), as a wholly-owned subsidiary solely in
exchange for 400,000 shares of Common Stock. The number of shares which the
Company issued in the acquisition of DNL was to have been increased in the event
that certain gross revenues were accomplished by DNL. These figures were not
met; therefore, no additional common shares were issued by the Company in this
acquisition.

The sole asset of DNL on the date of acquisition was an agreement with Martek
Biosciences Corporation (Martek), a publicly-held corporation organized in the
United States whose securities trade on the NASDAQ System maintained by the
National Association of Securities Dealers, Inc. DNL is working with Martek to
develop the market in the United Kingdom for the use of Martek's nutritional
oils in infant formula, vegetarian foods, dietary supplements and agro feed
markets. Martek has identified and patented DHA (docosahexaenoic acid) producing
varieties of micro algae (sea plankton), and has developed techniques for the
production of both a powder form and an oil form of DHA. The oil form of DHA,
management feels, is an excellent candidate for delivery using the film system
developed by BTL.

<PAGE>


On closing of the acquisition of DNL by the Company, Messrs. Muncaster,  Longley
and  Brown  were  named to the  board of DNL and  assumed  analogous  officerial
positions  with DNL as they maintain with the Company and BTL.  Correspondingly,
the principal shareholder of DNL, Mr. Graham Hind, was named to the board of the
Company and was appointed  Vice-President  of Sales and Marketing of the Company
and BTL.

Martek has granted DNL exclusive DHA nutrition rights to develop a meat concept,
and on July 23, 1998, DNL entered into a development agreement with ABN Limited,
which is one of Europe's largest feed companies, to develop this opportunity
with the support of several U.K retailers. The Company horizontally expanded its
product line as a result of the DNL acquisition, and gained direct access to
several leading retailers in the U.K., which, management feels, will offer
potential to expand the customer base for a proposed line of vegetarian
soft-capsule dietary supplements by BTL.

Feed trials initiated by DNL in partnership with ABN Limited, which included
Martek's Algal Biomass and Biomeal in the diet of pigs and chickens, were
completed in 1999. The Biomeal waste product was unsuccessful as a feed additive
source of DHA as the residual levels of DHA were found not to be sufficiently
bio-available to the animals. Further feeding trial work on the Biomeal product
has therefore been abandoned. The Biomass product showed excellent results in
the feeding trials, and significant levels of DHA were transferred to the
chicken and pork meat. The UK government is currently funding a large study in
conjunction with The University of Bristol to investigate dietary methods of
manipulating the fatty acid composition of milk as a way of delivering the
important long chain cardio-protective fatty acids like DHA into the nation's
diet. As DNL through its exclusive agreement with Martek is the exclusive source
of algal DHA for animal feed purposes, Bristol University approached DNL, and,
in February, 2000, DNL agreed to supply a quantity of Biomass for this important
study. If successful, one of the largest UK dairy companies has expressed an
interest in marketing the new DHA enriched milk.

At the end of 1999, following the successful feeding trials, DNL commenced
discussions with major UK retailers about the opportunity for a new generation
of DHA enriched meat products. There is a great deal of interest in the concept,
but the timing and the method of communicating the benefits to the consumer are
the main issues. Most retailers in the UK have banned genetically modified
ingredients as a result of media-induced consumer pressure. Although the DHA
algal from Martek is a natural plant, grown and harvested and not in any way
artificially genetically modified, the retailers feel the opportunity of DHA
enriched foods needs to be addressed carefully. To maximise this opportunity it
needs to be launched at the right time and in the right media atmosphere when
other issues like genetically modified ingredients are not clouding the issue.
Major retailers want to be sure the DHA story will be received positively by the
media and consumers, and are, therefore, timing of the introduction will be very
important. The commercialisation of the concept could therefore take longer than
was originally envisaged. In the meantime DNL is continuing with feeding trial
research projects, at negligible cost to the Company, and is maintaining an
active and on-going dialogue with Martek with regard to this and other
opportunities.

<PAGE>


     Product Acquisition and License Agreements:

Product Acquisition from Trutona International:

On February 15, 1999, the Company acquired from Trutona International, Inc., a
privately-held Atlanta-based corporation (Trutona), patents, licenses and
trademarks relating to a broad range of products, including an award winning
range of flushable and biodegradable disposable products designed by Trutona.
The Company paid Trutona $1,500,000 in the acquisition, of which $750,000 was
paid through the delivery of 1,875,000 shares of Common Stock at an agreed price
of $.40 per share, with the remainder payable on or before December 31, 1999,
through either the delivery of cash or of additional shares of Common Stock
valued at $.40 per share, or any combination of the two at the option of the
Company. The remaining purchase price was paid with cash prior to year end.

The products acquired include an ultra thin, flushable and biodegradable line of
feminine sanitary napkins which were recently selected for a "Millennium
Product" award under a program initiated by the British Government to promote
innovative technological achievements. Trutona is an affiliate of the Company
since Messrs. Muncaster, Longley and Brown are directors, officers and
significant shareholders of each entity.


License to Consolidated EcoProgress Technologies:

On April 5, 1999, the Company completed the sale of a license to Consolidated
EcoProgress Technologies (EcoProgress), a Canadian company with securities
traded on the Vancouver Stock Exchange. The license and certain patents was sold
for the sum of U.S. $1,336,000 and $164,000 respectively and gives EcoProgress
the exclusive right to manufacture, sell and distribute in the U.S. a line of
flushable and biodegradable disposable products employing the intellectual
property that the Company acquired from Trutona. EcoProgress paid $380,000 cash
at closing and the remaining $1,120,000 was paid through the issuance of
1,066,667 shares of free trading common stock in EcoProgress at an agreed price
of $1.05 per share. The sale allowed the Company to recoup the entire price paid
by the Company to Trutona for the technology. In addition to the consideration
paid at closing, the Company is entitled to receive up to a maximum of
$3,500,000 by way of royalty on gross revenues achieved by EcoProgress. Nominal
accruals of royalties have been made to date. Contemporaneous to the completion
of the sale to EcoProgress, the Company and EcoProgress executed a research and
development agreement that provides for the Company to exclusively develop
products subject to the license for a minimum of two years. During the year, the
Company conducted a review of the products under license to EcoProgress and
implemented design changes to the flushable and biodegradable sanitary napkin.
During the first quarter of 2000, trials of the new version of sanitary napkin
were initiated both in the UK and North America. The Company has confidentially
submitted a proposal to EcoProgress in respect of two new product developments.

<PAGE>


     Business Conducted by the Company and its Subsidiaries:

The Company is a development stage company engaged in the research, development,
manufacturing, marketing, sales and distribution of products that use water
soluble and biodegradable films. During 1999, the Company's primary focus
remained on the development and commercialization of its unique and proprietary
process, the XGel(TM) Film System ("XGel(TM) FS").

The XGel(TM) FS is used to produce soft capsules that are free- from animal
by-products; gelatin in particular. Soft capsules are commonly recognized as
products that contain a wide variety of non-aqueous fillings either in
ingestible form, such as vitamin, herbal and mineral supplements and as oral
delivery systems for drugs; or in non-ingestible form, such as paintballs and
toiletries (bath and aromatherapy oils).

Gelatin is a protein, which is predominantly derived from animal renderings. For
many years gelatin has proven to be an acceptable and cost-effective
encapsulation medium for soft capsules; however, the Company is of the opinion
that this position is changing. Following the outbreak in Europe of Bovine
Spongiform Encephalopathy (BSE), or mad cow disease, all animal derived food and
by-products have come under the scrutiny of the scientific community and
legislators for fear that BSE may have entered the human food chain. The reason
for concern is that BSE may be linked to Creutzfeldt Jakob Disease (CJD), which
is fatal to humans. Recorded deaths in the UK from CJD totalled 56 at the end of
1999. A further 6 cases in living persons have been recently identified. The
Company believes that its XGel(TM) FS is the only viable alternative for
consumers who are anxious to switch to animal-free products in the global market
for soft capsules. In addition, the XGel(TM) FS opens up a substantial untapped
market for animal-free soft capsules that exists among vegetarian and religious
groups. These groups, because of belief or culture, refuse to consume gelatin
derived from cows or pigs, or in some cases, from any source. In addition,
market research carried out in the United States and in Europe has indicated
that in excess of 30% of all families are making efforts, on a regular basis, to
remove animal products from their diet.

The XGel(TM) FS not only provides consumers with the choice of an animal-free
soft capsule, but its unique and revolutionary design delivers significant
advantages in the manufacturing process when compared to traditional
encapsulation processes. One such advantage is the elimination of capital
intensive equipment employed to mix and heat gelatin prior to its delivery to
the encapsulating machine. A further example of the XGel(TM) FS's efficiency
lies in its ability to produce soft capsules that do not require drying before
being packed. Using traditional methods of manufacture, soft capsules may take
up to 48 hours to dry, thereby requiring a substantial investment in inventory
financing and resources. The Company believes its XGel(TM) FS to be the first
revolutionary development within the encapsulation industry since it was first
established in 1935. The Company has identified several new and substantial
market opportunities that can benefit from the XGel(TM) FS and which are not
available to traditional soft capsule manufacturers because of the limitations
imposed by the use of gelatin. The Company's strength lies in innovation and the
ability to commercialize innovative products.

<PAGE>


The Company is committed to a research and development program targeted to
introduce enhancements to the XGel(TM) FS on a regular basis, which will expand
the opportunities for both horizontal and vertical penetration of the Company's
target markets.

     Evolving Business Plan

During the year the Company had the opportunity to meet with, and present its
Xgel (TM) Film System to, many of the world's leading corporations engaged in
pharmaceuticals, dietary supplements, household products, cosmetics,
confectionery and paintballs. Following these experiences the Company conducted
a strategic review of its business model for commercialization of the Xgel (TM)
Film System with the conclusion that, in order to achieve maximum global
penetration at the fastest possible rate for maximum benefit of the Company's
stockholders, the Company would implement the following strategy:

     1.   Sell licenses to use the Company's intellectual property vested in the
          Xgel (TM) Film System;

     2.   Sell Xgel (TM) Film Systems for use by licensees of the intellectual
          property; and,

     3.   Offer research and development services to assist licensees gain
          maximum benefit from the license.

The resultant business model will benefit the Company in the following ways:

     1.   It eliminates the requirement for large capital investment to
          establish Company owned Good Manufacturing Practices (GMP) facilities;

     2.   It eliminates the need for the Company to recruit skilled personnel to
          staff GMP facilities;

     3.   It facilitates the rapid introduction of the Xgel (TM) Film System on
          a global basis by a large group of companies who already have in place
          the infrastructure and resources to produce and deliver products to
          consumers;

     4.   It reduces the risk of and need for a competitive response by industry
          peers;

     5.   It employs the Company's innovative technological and engineering
          skills to maximum advantage;

     6.   It enables the Company to maintain a low cost base.

<PAGE>


This year the Company took several major steps toward commercializing the Xgel
(TM) Film System. Most significantly, during November, 1999, it took delivery of
the first ingestible product version of the Xgel (TM) Film System, code-named
Swallow 1. Swallow 1 was designed by the Company and is subject of various
patent applications, as yet unpublished, and was manufactured by specialist
sub-contractors. Delivery of Swallow 1 enabled the Company's technical staff to
successfully conduct batch trials of a wide range of Xgel (TM) films and active
ingredients. Having the ability to demonstrate Swallow 1 in operation to
potential customers generated serious interest from seven major international
corporations interested in purchasing licenses and Xgel (TM) Films Systems.

     Developments Subsequent to Year End:

Subsequent to the year-end the Company executed an Exclusive Evaluation
Agreement with a Fortune 500 company in respect of a specific product
application. This work is progressing satisfactorily at the time of this report.

Further since year-end, the Company is at an advanced stage of discussions with
six major international corporations regarding the sale of Xgel (TM) Film System
licenses.

On March 7, 2000, the Company announced an agreement with J T Racing, LLP, based
in San Diego whereby the Company will develop a unique range of paintballs using
Xgel (TM) film technology for exclusive distribution by J T Racing.

     Description of Products:

The Company's primary focus is to commercialize its XGel(TM) FS. Products
currently in development that are not related to the XGel(TM) FS include
flushable and biodegradable pouches for colostomists. During the year the
Company had granted within the United Kingdom two patents in respect of
flushable and biodegradable ostomy pouches. International patent applications in
respect of these inventions are being prosecuted in other territories. These and
other products, which are the subject of the Company's research and development
programs, are not expected to contribute to the Company's planned revenues
during the current year.

XGel(TM) FS:

The Company's soft capsule technology can be considered as two separate
technologies: the XGel(TM) FS for non-ingestible soft capsules, which is fully
developed and in use, and the XGel(TM) FS for ingestible soft capsules, which is
in the final stages of its development program. The Company believes that its
XGel(TM) FS has significant advantages over traditional gelatin based soft
capsule production machinery. These advantages are:

     Lower Raw Material Costs: The cost of XGel(TM) Film per tonne is currently
marginally less than that of gelatin in powder forms. There are no additional
costs incurred to deliver XGel(TM) Film to the encapsulating head; whereas,
gelatin has to be mixed with glycerine to form a liquid film.

<PAGE>


     Reduced Capital Investment and Manpower: The availability of XGel(TM) Film
in a film format eliminates the need for mixing containers and vats currently
used to prepare gelatin for the encapsulation machine. In addition, expensive
machinery is needed to maintain the viscosity of gelatin during its
transportation to the encapsulation machine. The resultant savings to the
Company in terms of capital investment and human resources compared to those of
its competitors are significant.

     Multi-Task Encapsulating Head: A modular design of the filling, sealing,
and cutting head makes it possible to produce capsules having a range of shapes
and sizes with differing fills during the same encapsulation cycle. Traditional
machinery cannot deliver this flexibility.

     Improved Speed of Processing: To achieve the correct viscosity for
processing, gelatin requires wide changes in temperature prior to it being fed
to the encapsulation machine. The time taken to achieve this change in
temperature is one of the controlling factors that determine the speed at which
the encapsulation machine can operate. XGel(TM) Film requires no such
temperature variation, and its use significantly increases potential processing
speeds to a level controlled by the rate of injection of the material to be
encapsulated.

     Reduced Drying Time: Gelatin soft capsules require up to 48 hours in which
to dry after being made. This lengthy process requires a substantial resource in
terms of material handling equipment and storage facilities. XGel(TM) soft
capsules require less than 1 hour to dry.

     XGel(TM) FS - Non-Ingestible Products:

This unique process is the subject of an international patent application. The
raw material used in the process is supplied in a film format (XGel(TM) Film)
and is made from a water soluble and biodegradable polymer, which is naturally
resistant to oils. This version of XGel(TM) Film exhibits good elasticity and
forms a very strong bond when sealed during the encapsulation process. The first
products to be produced using the XGel(TM) FS comprise a range of moisturizing
bath oils. There are four different soft capsules in the range; each containing
a different fragrance designed to deliver a sensual, relaxing, refreshing or
invigorating ambience to the bathroom. The Company is working with a Fortune 500
company, with a view to developing a novel delivery system for a range of its
products. This work is subject to a Confidential Disclosure Agreement.

     XGel(TM) Film System - Ingestible Products:

The Company's second technology, which is the subject of three patent
applications, relates to materials that utilize all of the benefits of XGel(TM)
FS, but which can be made from FDA approved natural and sustainable resource
materials, and are, therefore ingestible. These materials are code named ProTex.
ProTex is produced in a film format that enables it to be processed using
similar machinery as used for non-ingestible soft capsules. Using proprietary
techniques, ProTex films may be formulated and/or coated to produce an
encapsulation medium with broad ranging characteristics that facilitate the oral
delivery of oils, pastes and powders by time or at site within the human body.
ProTex film is processed using the XGel(TM) FS. The Company has under
development a comprehensive range of vitamin, herbal and mineral supplements.

<PAGE>


     Markets:

The gelatin capsule market is divided into two sectors: hard or soft, according
to the nature of the capsule shell. Hard capsules are manufactured in two pieces
and then filled with either, a powdered dose or a liquid dose washed with
nitrogen. These processes are expensive, and the resultant capsules are used
predominantly to carry orally administered medications and drugs. Soft capsules
are formed and filled simultaneously and predominantly carry liquid fills which
enables their use in a far wider variety of products, including pharmaceutical,
vitamin, herbal and mineral, toiletries and paintballs.

The gelatin soft capsule market is currently dominated by two companies, namely
R. P. Scherer Inc., (a subsidiary of Cardinal Health, Inc.), and Banner
Pharmacaps Inc. (a subsidiary of Sobel NV). During 1999, R. P. Scherer Inc.
(RPS), was acquired by Cardinal Healthcare, Inc, for $2.4 billion. RPS has
headquarters in Troy, Michigan, and 24 operating subsidiaries. Sobel NV is a
Dutch organization with a number of subsidiaries, including Banner Pharmacaps,
Limited., Banner Pharmacaps Inc., and Sobel Pharma BV.

The Company believes that its XGel(TM) FS gelatin-free soft capsule will be
extremely attractive to vegetarians and certain ethnic and religious groups,
such as Hindus and Muslims. These groups represent large potential markets. The
Muslim population now stands globally at 935 million. There are an estimated 2
million vegetarians in the United States, and 250,000 in the United Kingdom. In
addition, market research has indicated that in excess of 29 million households
in the United States qualify as "meat reducers" by making a regular effort to
remove animal products from their diet.

The value of a soft capsule rests in its contents. The shell is simply a means
of transporting the contents from the manufacturer to the consumer. Some soft
capsule manufacturers produce the contents as well as the shell and sell the
finished product under their own brand or for use in private label brands. Other
manufacturers simply act as sub-contract suppliers to the proprietors of main
brands.

Soft capsules reach consumers via a multitude of distribution channels. In the
United States dietary supplements and pharmaceuticals are sold through
traditional Over The Counter outlets, as well as in-store locations at large
food retailers. The Natural Food and Healthcare market, which in the United
States grew by 9% to $14.3 billion during 1998, is serviced by around 8,000
small and medium sized stores that tend to purchase from national distributors,
such as Tree of Life, Cornucopia and Lotus Light. Direct mail suppliers account
for a small but important part of the market.

<PAGE>


In general terms, the sales and distribution channels to be used by the Company
are mature and are easily identified. The market for dietary supplements in the
United Kingdom was approximately $560 million in 1999. The leading producer in
the United Kingdom is Peter Black Healthcare Limited, which accounts for
approximately 34% of the entire market. The market for soft capsules in the
pharmaceutical market is vast and global.

Marketing and Sales:

     Marketing:

The Company's initial marketing and sales strategy is to create market expansion
by facilitating animal free soft capsules for consumers within the vegetarian
and religious groups referred to earlier. The second phase to the Company's plan
is to offer animal free soft capsules to existing consumers of gelatin based
soft capsules. In addition, the Company anticipates that new markets for its
products will be developed as future versions of its XGel(TM) FS are proven.

     Sales:

The Non-Ingestible Range: During February 2000, the Company executed an
Exclusive Evaluation Agreement with a Fortune 500 company in respect of a
specific application of the Xgel (TM) Film System. The Exclusive Evaluation
Agreement provides for the Company and its customer to work together to develop
a novel delivery system for an entirely new mass market consumer product having
potential for sale on a global basis. The Company received a six-figure sum in
consideration of the grant of the evaluation period and all other matters
relating to the agreement remain strictly confidential. The Company commenced
work on the project during March 2000 and progress is satisfactory. On March 7,
2000, the Company announced an agreement with J T Racing, of San Diego, whereby,
the Company will develop a unique range of paintballs using Xgel (TM) film
technology. The Company continues to explore new market opportunities for
non-ingestible applications for the Xgel (TM) Film System. Terms of the
agreement remain strictly confidential.

The Ingestible Range: During 1998 Company executed a Technology Collaboration
Agreement with UBFCF, a part of the United Biscuits plc group, which enjoys
annual revenues of $3.6 billion. UBFCF is the owner of the leading brand of
vegetarian prepared foods for the U.K. market, where it is the brand leader by a
large margin.

<PAGE>


The Company approached UBFCF with the idea that, because of its dominant market
position, the brand would be the perfect vehicle through which to launch the
first full line of dietary supplements designed specifically for vegetarians.
The Company, because of its unique technology, is the only company capable of
making such a proposition. Under the terms of the Technology Collaboration
Agreement the Company had with UBFCF, the Company was asked to compile a range
of dietary supplements that deliver the perfect cocktail to address the
shortfall of nutrition evident in a vegetarian diet. That task was successfully
carried out by the Company's subsidiary, DNL. During the last quarter of the
year, UBFCF's parent company sold the business to Heinz Corporation. This
corporate activity caused delay to the project and its outcome remains uncertain
at the date of this report.

Certain formulations of XGel(TM) Film will enable its use as a drug delivery
system. The Company is in discussions with several leading pharmaceutical
companies with a view to licensing its Xgel (TM) Film System. It is too early in
the Company's development to comment in more detail on the possibilities within
this market sector.

     Manufacturing:

During the year, the Company relocated both its manufacturing facility and its
research and development facility to March, Cambridgeshire, England.
Commissioning of the Company's non- ingestible Xgel (TM) Film System is complete
and it is producing products for assessment by the Fortune 500 Company referred
to herein. Commissioning of the Swallow 1 Xgel (TM) Film System is underway and
will be a continuing process during the year 2000. The Company's prime costs in
producing soft capsules are comparable to those of gelatin capsule
manufacturers; however, the capital investment required per line of XGel(TM) FS
is significantly less than gelatin systems . In addition, operational costs are
dramatically reduced using the XGel(TM) FS by reason of the elimination of the
need to dry capsules post-production.

     Research and Development:

The XGel(TM) FS has potential for exploitation in many new markets. The Company
is committed to a research and development program intended to produce new
products for licensees and new variations of, and improvements to the Xgel (TM)
Film System. The research and development program seeks to explore the use of
alternative materials and formulations and to test their suitability to form
capsules suitable for ingestion and drug delivery by time and at site. In
parallel with the formulation work, the Company aims to expand the processing
abilities of the XGel(TM) FS. Throughout the research and development program
specialist centers of excellence are deployed and their expertise used to
optimize materials and processes.

<PAGE>


Y2K Disclosure: The Company and its suppliers suffered no recognisable impact
from the Y2K problem. No problems were identified, no costs were incurred and
the company does not expect any repercussions or related costs to be incurred in
the future in respect of Y2K.

Item 2. Description of Property: The Company, as of the date of this report,
owned no real or personal property, tangible or intangible, other than the
shares of its wholly-owned subsidiaries. The executive offices of the Company
are being provided by The Jade Partnership, a significant shareholder of the
Company owned by several of the executive officers and directors of the Company,
free of charge on a month-to-month basis. These offices are located at 9055
Huntcliff Trace, Atlanta, Georgia, 30350-1735. The telephone number at this
address is (770) 641-0264. BioProgress Technology, BTL and DNL are leasing at
market rates from a third party approximately 15,000 square feet of laboratory,
executive office, manufacturing and storage facilities at Unit 1, Norwood Road,
March, Cambridgeshire, United Kingdom PE15 8QD. The telephone number at this
address is 011-44-1354-655-674

Item 3. Legal Proceedings:

No material legal proceedings to which the Company(or any officer or director of
the Company, or any affiliate or owner of record or beneficially of more than
five percent of the Common Stock, to management's knowledge) is a party or to
which the property of the Company is subject is pending, and no such material
proceeding is known by management of the Company to be contemplated.

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

There were no meetings of security holders during the period covered by this
report.

Item 5. Market for Common Equity and Related Shareholder Matters:

As of March 22, 2000, there were approximately 36,002,800 shares of Common Stock
issued and outstanding, which were held of record by approximately 2,334
shareholders. The Common Stock is currently quoted on the Bulletin Board
maintained by the National Association of Securities Dealers, Inc., under the
symbol BPRG. There was no trading in the Common Stock prior to August, 1996. The
following table sets forth the range of high, low and closing bid and asked
prices per share of the Common Stock as reported by National Quotation Bureau,
Inc., for the quarterly period indicated.

<PAGE>


                               Bid                      Ask
Calendar Quarter     High      Low   Close    High      Low     Close
----------------     ----      ---   -----    ----      ---     -----

March 31, 1998      1.875    0.8125  0.9375  1.3125   0.90625  1.03125
June 30, 1998       0.96875  0.25    0.5     1.125    0.40625  0.53125
September 30, 1998  0.65625  0.375   0.375   0.6875   0.46875  0.46875
December 31, 1998   0.40625  0.22    0.27    0.4688   0.25     0.31

March 31, 1999      0.8438   0.26    0.78    0.92     0.30     0.83
June 30, 1999       2.375    0.7     1.375   2.4375   0.75     1.46875
September 30, 1999  1.71875  0.625   0.625   1.875    0.75     0.875
December 30, 1999   1.25     0.375   0.875   1.46875  0.59375  1.00

The above prices represent inter-dealer quotations without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.

On March 22, 2000, the closing inside bid and asked prices for the Common Stock
were $4.09 and $4.25 , respectively. On that date there were ten market makers
publishing quotes.

The Company has paid no dividends on the Common Stock since inception and does
not expect to pay dividends in the foreseeable future. There are, however, no
restrictions on the payment of dividends.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations:

The following management's discussion and analysis of financial condition and
results of operations should be read in conjunction with the financial
statements, related notes and other financial information included elsewhere in
this document. Our financial statements have been prepared in accordance with
U.S. GAAP. This discussion contains forward-looking statements based upon
current expectations that involve risks and uncertainties. Actual results and
timing of certain events could differ materially from those anticipated in those
forward-looking statements.

     Results of Operations:

There were two significant transactions affecting the Company's operations
during 1999. These were (1) the purchase of the Trutona assets primarily in
exchange for Common Stock and the incurrence of debt which was paid prior to
year end, and (2) the license of these assets to EcoProgress. As a result, the
assets of the Company increased significantly, with a smaller but corresponding
increase in equity, due to the purchase of these assets in significant part
through the issuance of Common Stock. The Company anticipates that significant
royalties will accrue over the life of the EcoProgress license which will far
exceed the cost of the assets licensed, and that the common shares of
EcoProgress received by the Company in partial exchange for this license will
increase in value.

BioProgress Technology was reorganized in late 1997 and was in the development
stage during 1997 and 1998. A full description of the business of the Company
and its subsidiaries is set forth under Item 1. The Company incurred
significantly higher losses in 1999. This was primarily due to the following:

     1.   Expansion of day-to-day operations

     2.   An increase in general and administrative expenses which includes
          goodwill amortization of $678,174, an increase in other depreciation
          and amortization charges, higher expenses from US operations, moving
          costs to new premises, and amortization of the Trutona investment.

<PAGE>


     3.   An unrealized loss in the Ecoprogress securities of $752,694.

     4.   Increased management charges

Administration charges are likely to be stabilize during 2000 although
additional staff is being sought for the laboratories and is expected to be
recruited in 2000. In addition, at the beginning of the second quarter,
management charges are expected to be decreased substantially. Other efforts
will be made by management to minimize overhead, and periodic reviews of
overhead costs are being undertaken internally. Efficiency will be further
improved when the new extension to the factory and laboratories is completed in
the second quarter of 2000.

Liquidity and Capital Resources:

During the last six months of 1999 and the first three months of 2000,
Management implemented a string of measures to improve the Company's liquidity
and capital resources. The improvement resulted primarily from the sale of
Series B Preferred Stock. The sale of these shares has given the Company
sufficient funds for its operations for the foreseeable future given its current
cash consumption rate. It is envisaged that, during 2000, further capital
raising and other measures will be put into place to secure the long-term
financial future of the Company. These measures will be subsequently announced
in the normal course of business.

Sale of license: The sale of the license to Ecoprogress produced $380,000 in
cash during 1999, together with additional consideration of 1,066,666 shares of
Ecoprogress, which are traded on the Vancouver Venture Board. From March 10,
2000, the Company is permitted to sell these shares and will commence doing so
during 2000, if market conditions permit. In addition, during the latter part of
2000, the Company anticipates that Ecoprogress will be selling more products in
North America and, accordingly, will accrue and make more roaylty payments under
the license.

EcoProgress is developing its marketing strategy, and new and upgraded products
should come on line during 2000. In addition, EcoProgess' recent fund raising
efforts for inventory and other related operating expenses should significantly
enhance their efforts in North America.

Sale of Series A and Series B Preferred Stock: The Company has made significant
improvements to its liquidity and capital resources by the sale of preference
shares to accredited investors. During 1999, the Company received $1,115,235
from the sale of shares of Series A Preferred Stock and $60,000 from the sale of
24,000 shares of Series B Preferred Stock. In the first three months of 2000,
the Company received applications for 2,900,924 Series B preferred shares at
$2.50 each and proceeds of $4,088,408 have been received to date from the sale

<PAGE>


of these shares. These proceeds have been used (1) to reduce trade and short
term liabilities, (2) for research & development, (3) for the building, design
and upgrade of further plant and machinery, (4) for the expansion of the
business during the year and (5) for general working capital purposes.
Management anticipates making further offerings of the Company's securities to
provide for subsequent working capital needs as such arise.

The Company is in discussion with several parties regarding joint ventures and
license and distribution agreements for its XGel(TM) Film System and derived
products. In addition, the Company is engaged in discussions with institutional
investors and with industry peers regarding an investment in the Company.

Management believes that the aforementioned actions and activities will generate
sufficient cash to fully meet the working capital requirements of the Company
for the twelve months following the date of this report.

Compliance with Beneficial Ownership Reporting Rules: Section 16(a) of the
Securities Act of 1934, as amended (Exchange Act), requires the executive
officers and directors of the Company, and persons who beneficially own more
than 10% of the Common Stock, to file initial reports of ownership and reports
of changes in ownership with the Commission. These officers, directors and
shareholders are also required to furnish the Company with copies of certain of
these reports. Based solely on a review of copies of reports furnished to the
Company during its fiscal year ended December 31, 1999, and thereafter, or
written representations, if any, received by the Company from these persons that
no other reports were required, the Company believes that, during 1999, not all
applicable Section 16(a) filing requirements were satisfied; however, it has
been assured that the reporting persons are endeavoring to immediately file
these reports.

Item 7. Financial Statements:

<PAGE>

BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
TOGETHER WITH AUDITORS' REPORT



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
BioProgress Technology International, Inc:

We have audited the accompanying consolidated balance sheets of BioProgress
Technology International, Inc. (a Nevada corporation) and subsidiaries as of
December 31, 1999 and 1998 (as restated-see note 2), and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BioProgress Technology
International, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.



/s/ ARTHUR ANDERSEN LLP
-----------------------
ARTHUR ANDERSEN LLP


New York, New York
March 29, 2000

<PAGE>
<TABLE>
<CAPTION>


BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998

                                     ASSETS                                            1999            1998
                                     ------                                         -----------    -----------

CURRENT ASSETS:
<S>                                                                                 <C>            <C>
    Cash and cash equivalents                                                       $     5,818    $    82,119
    Marketable securities (Note 5)                                                      367,306           --
    Accounts receivable                                                                 201,803         12,675
    Prepaid expenses and other current assets                                            61,174         52,357
              Total current assets                                                      636,101        147,151
                                                                                    -----------    -----------

PROPERTY, PLANT AND EQUIPMENT, net (Notes 2 and 4)                                      326,629        156,792


GOODWILL, net                                                                         6,103,565      6,781,739

INTANGIBLE ASSETS, net (Note 6)                                                       1,232,289         32,569
                                                                                    -----------    -----------
              Total assets                                                          $ 8,298,584    $ 7,118,251
                                                                                    ===========    ===========

                        LIABILITIES AND STOCKHOLDERS' EQUITY
                        ------------------------------------

CURRENT LIABILITIES:
    Deferred revenue                                                                $ 1,221,954    $   114,456
    Accounts payable                                                                    387,912        287,315
    Amounts owed to related parties (Note 10)                                           780,850        758,365
    Accrued expenses and other current liabilities                                      362,855         53,716
                                                                                    -----------    -----------
              Total current liabilities                                               2,753,571      1,213,852

LONG-TERM DEBT (Note 8)                                                                    --            1,914
                                                                                    -----------    -----------
              Total liabilities                                                       2,753,571      1,215,766
                                                                                    -----------    -----------

Redeemable convertible preferred stock, Series A, par value $1.00 (Note 11)              51,475        100,000
Redeemable convertible preferred stock, Series B, par value $2.50 (Note 11)              75,120           --
                                                                                    -----------    -----------
                                                                                        126,595        100,000
                                                                                    -----------    -----------
STOCKHOLDERS' EQUITY:
    Common stock, $0.001 par value-
    50,000,000 shares authorized; 36,002,800 (1998: 28,484,214) shares issued and
    outstanding (Note 3)                                                            $    36,002    $    28,484
    Additional paid-in capital (Note 3)                                               9,861,562      7,186,660
    Accumulated deficit                                                              (4,481,241)    (1,404,297)
    Accumulated other comprehensive gain (loss)                                           2,095         (8,362)
                                                                                    -----------    -----------
              Total stockholders' equity                                              5,418,418      5,802,485
                                                                                    -----------    -----------
              Total liabilities and stockholders' equity                            $ 8,298,584    $ 7,118,251
                                                                                    ===========    ===========


The accompanying notes to the consolidated financial statements are an integral
part of these consolidated balance sheets.


</TABLE>
<PAGE>
<TABLE>
<CAPTION>


BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
DECEMBER 31, 1999 AND 1998

                                                                       1999            1998
                                                                   ------------    ------------

<S>                                                                <C>             <C>
NET REVENUE                                                        $    293,582    $     28,118

COST AND EXPENSES:
    Cost of revenues                                                     21,458          42,287
    General and administrative expenses                               1,602,322         318,545
    Unrealized loss on marketable securities                            752,694            --
    Professional fees                                                   334,637         258,195
    Management fee                                                      600,000         314,377
                                                                   ------------    ------------
              Total cost and expenses                                 3,311,111         933,404
                                                                   ------------    ------------
              Loss from operations                                   (3,017,529)       (905,286)
              Dividends payable and accretion of preferred stock        (59,415)           --
                                                                   ------------    ------------
              Loss applicable to common shareholders                 (3,076,944)       (905,286)
                                                                   ============    ============


NET LOSS PER COMMON SHARE - BASIC AND DILUTED                      $      (0.10)   $      (0.06)
                                                                   ============    ============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES                             30,159,566      14,317,657
                                                                   ============    ============


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


</TABLE>
<PAGE>
<TABLE>
<CAPTION>


BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
DECEMBER 31, 1999 AND 1998


                                                                                                          Accumulated     Total
                                                         Common             Additional                       Other     Stockholders'
                                               --------------------------     Paid-in     Accumulated    Comprehensive    Equity
                                                  Shares         Amount       Capital       Deficit          Loss        (Deficit)
                                               -----------    -----------   -----------   -----------    -----------    -----------

<S>                                             <C>           <C>           <C>           <C>            <C>            <C>
BALANCE at December 31, 1997                    15,750,000    $    15,750   $   312,421   $  (499,011)   $    (2,226)   $  (173,066)
                                                                                                                        ===========

    Net loss                                          --             --            --        (905,286)          --         (905,286)
    Currency translation adjustment                   --             --            --            --           (6,136)        (6,136)
                                                                                                                        -----------
       Comprehensive loss                                                                                                  (911,422)
                                                                                                                        -----------

    Issuance of common shares                    7,343,936          7,344       647,911          --             --          655,255

    Issuance of 5,390,278 common shares
       par value $0.001 for purchase of
       BTII in reverse acquisition               5,390,278          5,390     6,226,328          --             --        6,231,718
                                               -----------    -----------   -----------   -----------    -----------    -----------

BALANCE at December 31, 1998                    28,484,214         28,484     7,186,660    (1,404,297)        (8,362)     5,802,485

    Net loss                                          --             --            --      (3,017,529)          --       (3,017,529)
    Currency translation adjustment                   --             --            --            --           10,457         10,457
                                                                                                                        -----------
       Comprehensive loss                                                                                                (3,007,072)
                                                                                                                        -----------

    Dividends payable                                 --             --            --         (34,000)          --          (34,000)
    Conversion of Series A preferred stock
       to common stock                           2,935,138          2,935     1,171,120          --             --        1,174,055
    Accretion of preferred stock to
    redemption rate at
    December 31, 1999                                 --             --            --         (25,415)          --          (25,415)
    Debt to equity conversion                    2,708,448          2,708       755,657                                     758,365
    Issuance of common shares                    1,875,000          1,875       748,125          --             --          750,000
                                               -----------    -----------   -----------   -----------    -----------    -----------

BALANCE at December 31, 1999                    36,002,800    $    36,002   $ 9,861,562   $(4,481,241)   $     2,095    $ 5,418,418
                                               ===========    ===========   ===========   ===========    ===========    ===========


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

</TABLE>
<PAGE>
<TABLE>
<CAPTION>


BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31, 1999 AND 1998

                                                                                      1999           1998
                                                                                  -----------    -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                               <C>            <C>
    Net loss                                                                      $(3,017,529)   $  (905,286)
    Adjustments to reconcile net loss to net cash used in operating activities-
       Changes in operating assets and liabilities-
       Depreciation and amortization                                                  888,998         40,742
       Unrealized loss on marketable securities                                       752,694           --
       Increase in accounts receivable                                               (189,128)       (12,675)
       Decrease (increase) in prepaid expenses and other current assets                (8,816)       (51,704)
       Increase in deferred revenue                                                   (12,502)        79,343
       Increase in accounts payable                                                     1,476        261,864
       Increase in accrued expenses and other current liabilities                   1,054,075        568,349
                                                                                  -----------    -----------
       Net cash used in operating activities                                         (530,732)       (19,367)
                                                                                  -----------    -----------

CASH FROM INVESTING ACTIVITIES
       Purchases of property, plant and equipment                                    (244,381)          --
       Purchase of intangibles                                                       (650,880)          --
                                                                                  -----------    -----------
       Net cash used in investing activities                                         (895,261)          --
                                                                                  -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
       Proceeds from sale of preferred stock                                        1,175,235        100,000
       Proceeds from sale of intangibles                                              164,000           --
                                                                                  -----------    -----------
       Net cash provided by financing activities                                    1,339,235        100,000
                                                                                  -----------    -----------
       Effects of exchange rate changes on cash and cash equivalents                   10,457           --
                                                                                  -----------    -----------
       Net (decrease) increase in cash and cash equivalents                           (76,301)        80,633

CASH AND CASH EQUIVALENTS, beginning of year                                           82,119          1,486
                                                                                  -----------    -----------

CASH AND CASH EQUIVALENTS, end of year                                            $     5,818    $    82,119
                                                                                  ===========    ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
    Cash paid during the year for interest                                        $      --      $     1,995
                                                                                  ===========    ===========


NON CASH TRANSACTIONS
During the year the Company purchased patents, licenses and trademarks from
Trutona International Inc. (see note 10). Non cash consideration provided was
$750,000 in shares of the Company's common stock.

During the year, the Company sold a license to Consolidated EcoProgress
Technologies, Inc., and received consideration of $1,120,000 in shares of common
stock in Consolidated EcoProgress (see note 10).

The Company issued equity for debt of $758,365 (see note 10). The total number
of common shares allocated was 2,708,448.

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

</TABLE>
<PAGE>

BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998


1. BACKGROUND AND ORGANIZATION
------------------------------

History
-------

BioProgress Technology International, Inc. (the "Company"), was incorporated in
California on March 5, 1990, under the name of U.S. Flywheel, Inc., as a
subsidiary of Sunbird Technologies, Inc., a Utah corporation ("Sunbird
Technologies"). In June, 1991, the Company acquired three patents and a license
relating to flywheel technology from Sunbird Technologies and its affiliates in
exchange for common shares of the Company "Common Stock". These shares of Common
Stock were subsequently distributed to the shareholders of Sunbird Technologies
after registration with the U.S. Securities and Exchange Commission
("Commission"). The Company subsequently transferred its flywheel technology to
a partnership (the "Partnership") in exchange for a minority interest in the
Partnership. The Partnership interest of the Company was subsequently sold,
after which the Company began its search for a business in which to engage.

The Company changed its name to Famous Sam's Group Inc and briefly traded as a
restaurateur under the name of Famous Sam's. The business subsequently ceased to
trade and in 1997 the Company acquired its interest in BioProgress Technology
Inc, as described in note 3.

Operations
----------

The Group's primary operations are in the United Kingdom. The principal
activities of the Group are the development, manufacture, and sale of
non-gelatin encapsulation materials for the dietary supplement, pharmaceutical
and recreational industries, cosmetics and other related applications.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------

Principles of Consolidation
---------------------------

The accompanying consolidated financial statements include the financial
statements of the Company and its wholly owned subsidiaries: BioProgress
Technology, Inc., BioProgress Technology Limited, and DHA Nutrition Limited. All
significant intercompany transactions and balances have been eliminated.

The 1998 financial statements have been restated to reflect an adjustment to the
purchase price as a result of the reverse acquisition and to reflect the
appropriate number of shares outstanding and earnings per share.

Use of Estimates
----------------

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

<PAGE>

BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998


Reclassifications
-----------------

Certain reclassifications have been made to the prior year's financial
statements in order to ensure consistent presentation with the current year.

Property, Plant and Equipment
-----------------------------

Property, plant and equipment are stated at cost. Depreciation of property,
plant and equipment is provided for using the straight-line method over the
estimated useful lives of the respective assets, ranging from 4 to 7 years.
Amortization of leasehold improvements is provided for over the related lease
term.

Cash and Cash Equivalents
-------------------------

Cash and cash equivalents represent all highly liquid investments with
maturities of three months or less when purchased.

Revenue Recognition
-------------------

Revenue is recognized as products are shipped or services are performed. Cash
received from the sale of licenses is recognized as deferred income and
recognized over the term of the license agreement.

Marketable Securities
---------------------

Marketable securities represent the Company's investment in the common stock of
Consolidated EcoProgress Technology Inc, as described in note 5. Management
considers these securities as trading securities. The value of the investment is
marked to market value at each period end with any unrealized gain or loss
included in the statement of operations in the period to which it relates.

Intangibles
-----------

Licenses are included at cost and depreciated in equal annual installments over
a period of 10 years which is their estimated useful economic life. Provisions
are made for any known impairments.

Goodwill
--------

Goodwill is being amortized on a straight-line basis over a period of 10 years.
The amortization charge for 1999 and 1998 was $678,174 and $0 respectively.

Long-Lived Assets
-----------------

The provisions of Statement of Financial Accounting Standards (SFAS) No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" requires, among other things, that an entity review its long
lived assets and certain related intangibles for impairment whenever changes in
circumstances indicate that the carrying amount of an asset may not be fully
recoverable. Management does not believe that any such change in circumstances
has occurred.

<PAGE>

BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998


Earnings Per Share
------------------

Effective for the year ended December 31, 1998 the Company adopted SFAS No. 128
"Earnings per share". The adoption of SFAS No. 128 requires the presentation of
basic earnings per share and diluted earnings per share. Basic and diluted loss
per common share was calculated based upon the net loss available to common
stockholders divided by the weighted average number of shares of common stock
outstanding during the period. There are 3,000,000 stock options outstanding at
December 31, 1999 which are not included in the earnings per share calculation.

Foreign Currency Translation
----------------------------

The financial statements of the foreign subsidiaries are translated into U.S.
dollars using the exchange rate in effect at year end for balance sheet accounts
and the average exchange rate in effect during the year for revenue and expense
accounts with currency translation adjustments reflected in other comprehensive
loss in stockholders' equity. Gains and losses from foreign currency
transactions, such as those resulting from the settlement of foreign receivables
or payables, are included in the consolidated statement of operations. The
functional currency of foreign operations is the local currency.

Income Taxes
------------

The Company applies the deferred method of accounting for income taxes whereby
deferred taxes are recognized for tax consequences of temporary differences by
applying enacted statutory tax rates to differences between financial statements
carrying amounts and the tax bases of existing assets and liabilities.

New Accounting Pronouncements
-----------------------------

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for derivative instruments and hedging activities". SFAS No. 133
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded on the balance sheet as either an asset or liability
measured at its fair value. The statement requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
allows a derivative's gains and losses to offset related results on the hedged
item in the income statement or other comprehensive income (depending on the
type of hedge). To adopt hedge accounting a company must formally document,
designate and assess the effectiveness of transactions that receive hedge
accounting.

SFAS No. 137 delayed the effective date of SFAS No. 133 to fiscal years
beginning after June 15, 2000. A company may implement the statement as of the
beginning of any fiscal quarter after issuance, however, SFAS No. 133 can not be
applied retroactively. The Company has not yet determined the timing of the
adoption of SFAS No. 133.


<PAGE>

BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998


3. ACQUISITIONS
---------------

On October 30, 1997, the Company entered into a letter of intent with
BioProgress Technology, Inc., a Colorado corporation ("BioProgress Technology"),
which was followed on November 17, 1997, by a formal agreement (the
"Reorganization Agreement"). Pursuant to the Reorganization Agreement, the
Company agreed to acquire all of the outstanding capital stock of BioProgress
Technology in exchange for 4,000,000 post split shares of Common Stock.
Immediately prior to closing, the Company effected a one for five (1:5) reverse
stock split.

In conjunction with the execution and delivery of the Reorganization Agreement,
the Company entered into an agreement (the "BTL Option Agreement") with certain
of the shareholders of BioProgress Technology Limited, an entity incorporated in
the United Kingdom ("BTL"), which gave the Company the option of acquiring all
or any part, on a pro-rata basis, of the issued and outstanding common shares of
BTL on or before June 30, 1998. The Company was required under the BTL Option
Agreement to issue 1 1/2 shares of Common Stock for each outstanding share of
BTL, which then had 10,100,000 shares outstanding; thus, if the option had been
exercised in full and in accordance with the original terms of this agreement,
the Company would have issued 15,150,000 shares of Common Stock. BTL was
required to have no more than 10,100,000 shares outstanding, and the Company was
required to have no more than 5,000,000 shares of Common Stock issued and
outstanding and to have completed or be in a position to complete the sale of
such number of shares of Common Stock at a price of no less than $5.00 per share
so as to generate no less than $4,000,000 net of all costs. The terms and
conditions of the BTL Option Agreement were not met; however, the Company and
original signatories elected to amend the agreement and go forward with the
acquisition of BTL.

On June 30, 1998, the Company and BTL amended the BTL Option Agreement. First,
the maximum number of shares BTL was allowed to have outstanding at the closing
date was raised from 10,100,000 to 16,000,000. Second, the requirement that the
Company have no more than 5,000,000 shares of Common Stock issued and
outstanding and to have completed or be in a position to complete the sale of
such number of shares of Common Stock at a price of no less than $5.00 per share
so as to generate no less than $4,000,000 net of all costs was waived. Third,
the Company undertook to assume debt up to a maximum of $1,000,000, satisfying
such through the issuance of shares of Common Stock valued at the average market
price on the closing date. The Company acquired approximately 62% of BTL on
November 11, 1998, and acquired the remaining 38% of BTL on December 31, 1998,
issuing a total of 23,093,936 shares of Common Stock as sole consideration for
the acquisition.

The acquisition of BTL was treated as a reverse acquisition of the Company by
BTL. The shareholders of BTL received approximately 81% of the post acquisition
shares of the Company and therefore, BTL is the accounting acquirer. Common
stock and additional paid-in capital were restated in 1997 such that the total
dollar value of common stock and additional paid-in capital for 1997 was split
to reflect the same ratio as the Company's common stock and additional paid-in
capital at that time. The Company's financial results are included in the
consolidated financial statements for a period of two weeks during 1998.
Goodwill generated in the acquisition of $6,781,739 will be amortized on a
straight-line basis over a period of 10 years.

<PAGE>

BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998


On July 31, 1998, the Company agreed to acquire DHA Nutrition Limited (UK), an
entity organized in the United Kingdom ("DNL"), in exchange for consideration of
400,000 shares of Common Stock. These shares are restricted from sale,
assignment or disposal for 18 months beginning July 31, 1998. The acquisition
closed on August 12, 1998. The number of shares, which the Company issued in the
acquisition of DNL, may be increased in the event that DNL's cumulative gross
revenues in respect of its Feed Supply sales exceed $8,319,000 in the period
from October 1, 1999 to September 30, 2000. In this event, the Company will
issue to the former DNL shareholders an additional 400,000 shares of Common
Stock. Further, and in addition to the foregoing shares, if DNL's cumulative
gross revenues in respect of its Food Supply sales exceed $831,900 in the period
October 1, 1999 to September 30, 2000, the Company will issue an additional
200,000 shares of Common Stock.

The acquisition of DNL was accounted for as a purchase. DNL's financial results
of operations are included in the consolidated financial statements for a period
of five months in 1998.

4. PROPERTY, PLANT AND EQUIPMENT
--------------------------------

Property, plant and equipment are stated at cost and consist of the following:

                                                                     Estimated
                                              1999         1998     Useful Lives
                                              ----         ----     ------------

        Leasehold improvements             $ 129,117    $    --        7 years
        Plant and machinery                  234,638      155,188         4
        Equipment under capital leases         4,021        4,021         4
        Office equipment                      36,807       18,189         4
        Laboratory equipment                  41,065       26,353         6
                                           ---------    ---------
                                             445,648      203,751
                                           ---------    ---------
        Less- Accumulated depreciation      (119,019)     (46,959)
                                           ---------    ---------
                  Total                    $ 326,629    $ 156,792
                                           =========    =========


The depreciation expense was $74,544 and $40,741 for 1999 and 1998 respectively.

5. MARKETABLE SECURITIES
------------------------

Marketable securities in the balance sheet represent shares in Consolidated
EcoProgress Technologies Inc., which are classified as trading securities. The
investment is marked to market value at each period end, and an unrealized loss
of $752,694 has been reflected in the statement of operations during 1999.


<PAGE>

BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998


6. INTANGIBLE ASSETS
--------------------


                                               1999           1998
                                               ----           ----

           Trademarks, licenses, patents   $ 1,368,569    $    32,569
           Less accumulated amortization      (136,280)          --
                                           -----------    -----------
           Net intangible assets           $ 1,232,289    $    32,569
                                           ===========    ===========


The licenses were purchased from Trutona International, Inc., a related party as
disclosed in note 10 and are being depreciated in equal annual installments over
a period of 10 years which is their estimated useful economic life. The
amortization expense for the year was $136,280 and $0 for 1999 and 1998,
respectively.

7. OPERATING LEASE OBLIGATIONS
------------------------------

The Company leases its facilities under a non-cancelable operating lease that
expires in 2014. Minimum future lease payments under non-cancelable operating
leases as of December 31, 1999 are summarized as follows:


                                                   1999
                                                   ----

        2000                                     $ 67,200
        2001                                     $ 67,200
        2002                                     $ 67,200
        2003                                     $ 67,200
        2004                                     $ 67,200
                                                 --------
        Thereafter                               $616,000
                                                 --------
                                                 $952,000
                                                 ========


Rental expenses under operating leases totaled $56,000 and $0 for the years
ended December 31, 1999 and 1998, respectively

8. LONG-TERM DEBT
-----------------

Long-term debt consists of capital lease obligations. The equipment lease
obligations are payable in monthly installments of $210, through May 2000. The
debt is collateralized by the related equipment. The Company's lease obligations
are due as follows-

                                             1999        1998
                                             ----        ----

       1999                               $     --    $    2,520
       2000                                    1,050       1,914
                                           ----------  ----------


<PAGE>

BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998


9. INCOME TAXES
---------------

The Company does not have any income taxes payable in 1999 or 1998. The Company
has no net operating loss carry forwards available in the U.S. but has tax
losses of approximately $1,862,000 and $1,335,000 for 1999 and 1998
respectively, available to carry forward against taxable profits in the U.K.,
subject to agreement with the U.K. tax authorities. The Company had deferred tax
assets (DTA's) at December 31, 1999 and 1998 respectively, of approximately
$559,000 and $400,000 representing the tax effect of the U.K. tax losses
available to carry forward. Due to uncertainty regarding the ultimate amount of
income tax benefits to be derived from the tax losses, the Company has recorded
valuation allowances against the entire DTAs.

10. RELATED PARTIES
-------------------

The Jade Partnership International, Inc.
----------------------------------------

On April 1, 1998, the Company entered into a consulting and option agreement
with The Jade Partnership International, Inc. ("Jade"), a Delaware Corporation.

Certain directors of the Company are controlling shareholders in Jade. The
Company has a contract with Jade, under which Jade assists the Company in
obtaining equity and debt financing, and provides general business management,
administration services, international licensing and sales and marketing
strategies. In the opinion of management, all transactions are at arms length.
This agreement provides that the Company is to pay $50,000 per month as a fee to
Jade which, at the option of Jade, is convertible into Common Stock of the
Company at a price of $0.28 per share. On December 16, 1999, Jade elected to
convert $356,595 of fees outstanding into 1,273,556 shares of the Common Stock
of the Company. The Company incurred management charges of $600,000 during the
year and paid $122,675 to Jade in respect of the balance outstanding; the
balance due to Jade by the Group at December 31, 1999 was $780,850.

The executive offices of the Company located at 9055 Huntcliff Trace, Atlanta,
Georgia are provided free by Jade on a month-to-month basis.

Ormiston-Gore Securities Limited
--------------------------------

Ormiston-Gore Securities Limited ("OGSL"), is a related party by virtue of its
shareholding in the Company.

On April 1, 1998, the Company entered into a financial consulting agreement with
OGSL, a Bahamian investment and financial services company.

OGSL, under this contract, provided services for BTL in obtaining equity and
debt financing and also loaned $230,746 to the Company. All services had been
rendered as of November 12, 1998. The Company agreed to pay OGSL a fee of
$10,000 per month which, at the option of OGSL, was convertible into common
stock of the Company at a price of $0.28 per share. The Company agreed to pay
OGSL the sum of $171,023 for fees. OGSL elected to convert this amount into
610,798 shares of the Common Stock of the Company on December 16, 1999.

OGSL elected to convert the outstanding loan of $230,746 into shares of the
Common Stock of the Company at a price of $0.28 per share, receiving 824,094
shares on December 16, 1999.

<PAGE>

BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998


In addition, OGSL has entered into a lease agreement dated March 1, 1999 with
the Company for the rental of the premises in March, Cambridgeshire, U.K. The
term of the lease is 15 years and the rental per month is $5,600 with a security
deposit of $16,800. Details of the operating lease obligations are disclosed in
note 7.

Trutona International, Inc.
---------------------------

Certain directors of the Company are also directors of Trutona International,
Inc. ("Trutona"), a privately held Atlanta based corporation.

On February 15, 1999, the Company acquired from Trutona patents, licenses and
trademarks relating to a broad range of products, including a range of flushable
and biodegradable disposable products designed by Trutona. The consideration
payable to Trutona by the Company was $1,500,000 in the acquisition, of which
$750,000 was paid through the delivery of 1,875,000 shares of Common Stock at an
agreed price of $0.40, with the remainder was paid in cash.

In connection with the acquisition of the above patents, licenses and
trademarks, the Company has recognized license fee revenues of $88,862 in the
year relating to a previous license agreement between Trutona and Consolidated
EcoProgress Technology Inc. that has been assigned to the Company.


Consolidated EcoProgress Technologies, Inc
------------------------------------------

Consolidated EcoProgress Technologies, Inc, ("EcoProgress"), is a related party
by virtue of its shareholding in the Company.

On April 5, 1999, the Company completed the sale of a license to EcoProgress, a
Canadian company with securities traded on the Vancouver Stock Exchange. The
license was sold for the sum of $1,500,000 and granted EcoProgress the exclusive
right to manufacture, sell and distribute in the US a line of flushable and
biodegradable disposable products utilizing the intellectual property that the
Company recently acquired from Trutona International Inc (see note 10).
EcoProgress paid $380,000 in cash and the remaining $1,120,000 was paid through
the issuance of 1,066,666 shares of free trading common stock in EcoProgress at
an agreed price of $1.05 per share.


<PAGE>

BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998


11. REDEEMABLE CONVERTIBLE PREFERRED STOCK
------------------------------------------

The Series A and B redeemable convertible preferred stock are recorded in the
accompanying balance sheet outside the stockholders' equity section due to their
mandatory redemption feature.

<TABLE>
<CAPTION>

                                                           Series A                 Series B
                                                         redeemable               redeemable
                                                        convertible              convertible
                                                          preferred                preferred
                                                              stock                    stock
                                                        -----------              -----------
<S>                                                       <C>                     <C>
Number of shares authorized                               1,250,000                3,750,000

Number of shares issued                                   1,215,235                   24,000

Number of shares converted                                1,174,055                     --

Subscription price per share                             $     1.00               $     2.50

Value based on redemption rate at December 31, 1999      $   51,475               $   75,120

Proceeds from issuance                                   $1,215,235               $   60,000

Conversion date and rate to common shares
By December 31, 1999                                          1:2.5                    1:2.5
From January 1, 2000 on or before December 31, 2000           1:1.0                    1:2.5
From January 1, 2001 on or before December 31, 2001           1:0.5                    1:1.0
From January 1, 2002 on or before December 31, 2002            --                      1:0.5
Expiry of conversion rights                        After 12/31/2001         After 12/31/2002
Conversion at discretion of                                  Holder                   Holder

Redemption date and amount per share
On or before December 31, 1999                            $    1.25               $     3.13
From January 1, 2000 on or before December 31, 2000       $    1.56               $     3.13
From January 1, 2001 on or before December 31, 2001       $    1.95               $     3.91
From January 1, 2002 on or before December 31, 2002       $     --                $     4.88
Redemption at discretion of                                 Company                  Company

Mandatory redemption date                      After March 31, 2002     After March 31, 2003
Mandatory redemption price                                $    2.07               $     5.19

Dividend rate                                       4% per annum of          4% per annum of
                                                subscription amount      subscription amount
                                              computed quarterly in    computed quarterly in
                                               arrears March, June,     arrears March, June,
                                             September and December  September  and December

Voting rights                                                  None                     None

Preferential liquidation rights                                None                     None

A charge has been accreted to accumulated deficit to reflect the $0.25 premium
on Series A redeemable convertible preferred shares and the $0.63 premium on
Series B redeemable convertible preferred shares.

</TABLE>
<PAGE>

BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998


At December 31, 1999 management had approved dividends of $34,000 on the Series
A redeemable convertible preferred stock. The payment of the dividend is
entirely at the discretion of management.

12. STOCK OPTION PLAN
---------------------

The Company granted 3,000,000 stock options to executives on January 25, 1999.

The following table summarizes information about stock options outstanding at
December 31, 1999.
<TABLE>
<CAPTION>

                                   Weighted                                         Weighted
                       Number       Average                           Number         Average
               Outstanding as     Remaining        Weighted   Exercisable as  Exercise Price
    Exercise  of December 31,   Contractual         Average  of December 31,  of Exercisable
     Price $             1999          Life  Exercise Price             1999         Options
    ----------------------------------------------------------------------------------------
        <S>           <C>            <C>              <C>            <C>               <C>
        0.35          600,000        1 year           $0.35          600,000           $0.35

        0.75          600,000        1 year           $0.75          600,000           $0.75

        1.25          600,000        1 year           $1.25          600,000           $1.25

        1.75          600,000        1 year           $1.75          600,000           $1.75

        2.25          600,000        1 year           $2.25          600,000           $2.25
                    ---------     ---------                        ---------

                    3,000,000     5.0 years                        3,000,000
                    =========     ========                         =========

</TABLE>

As permitted under SFAS No. 123 "Accounting for Stock Based Compensation", the
Company has elected to follow Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" ("APB No. 25") in accounting for
share-based awards to employees, for options granted. There is no compensation
charge arising as no stock options have been granted during the year at less
than fair market value.

Pro-forma information regarding net loss and net loss per share is required by
SFAS No. 123 and has been determined as if the Company had accounted for its
employee share options and the options granted by shareholders under the fair
value method consistent with the method prescribed by that Statement. The fair
value of these options was estimated at the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions for 1999:

         - risk-free interest rate of 7%;
         - dividend yield of 0%;
         - volatility factor of 100%; and
         - an expected life of the option of three years.

<PAGE>

BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998


Had the Company's option plan and the options granted by shareholders been
accounted for under SFAS No. 123, the Company's charge to income for 1999 would
have been $561,244. Net loss and loss per share would have been increased to the
following pro-forma amounts.

                                               Year ended December 31,
                                                        1999
                                               -----------------------

         Pro-forma net loss                        ($  3,638,188)
         Pro-forma net loss per share applicable
            to common stockholders - basic and
            diluted                                ($       0.12)
                                                   =============

13. SUBSEQUENT EVENTS
---------------------

In the first quarter of 2000, the Company has received subscriptions for
2,900,924 redeemable convertible preferred Series B stock, par value $2.50 and
to date has received cash of $4,088,406.

On February 18, 2000, an agreement was signed with a Fortune 500 company in
respect of a specific product application.

On March 7, 2000, the Company signed an agreement with JT USA LP and Dye
Precision Inc to develop a commercially viable non-gelatin paintball for
exclusive distribution by JT Racing.

<PAGE>


Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure: On March 8, 1999, the Company informed Halliburton, Hunter
& Associates that it would not retain them as the independent accountant to
audit the financial statements of the Company as of and for the year ended
December 31, 1998, because it had retained Arthur Andersen & Company. The
Company had no disagreement with its former accountant on any matter of
accounting principal or practice, financial statement disclosure or auditing
scope or procedure which would have caused the accountant to make reference in
its report upon the subject matter of the disagreement. Further, the former
principal accountant's report on the financial statements did not contain an
adverse opinion or a disclaimer of opinion or qualification as to audit scope or
accounting principle. The decision to change accountants was approved by the
full Board of Directors, which has no audit or similar committee.

                                    PART III

Item 9. Directors and Executive Officers of the Company: The following table
sets forth all current directors, executive officers and significant employees
of the Company, BioProgress Technology, BTL and/or DNL, as well as their ages:

      Name           Age      Position with Company
      ----           ---      ---------------------

Barry J. Muncaster    54      Chairman of the Board of Directors
                              and Chief Executive Officer of
                              the Company, BioProgress
                              Technology, Inc., BTL and DNL;

Malcolm D. Brown      41      Director and Chief technical Officer
of the Company,               BioProgress
                              Technology, Inc., BTL and DNL

James T.C. Longley    40      Director, Chief Financial and
                              Accounting Officer, and
                              Treasurer and Secretary of
                              the Company, BioProgress Technology,
                              Inc., BTL and DNL

Robert G.M. Hind      50      Director and Vice-President of Sales
                              and Marketing of the Company
                              BioProgress Technology, Inc.,
                              BTL and DNL

Edward Z. Nowak       46      Director of Research and Development
                              for BTL

Greg Bowers           48      Director of the Company and President
                              of Bioprogress Technology, Inc.

Larry Shattles        57      Director of the Company

<PAGE>


No current director has any arrangement or understanding whereby he is or will
be selected as a director or nominee, other than those gentlemen under
employment agreements, as discussed below. Directors and executive officers will
hold office until the next annual meeting of shareholders and until their
respective successors have been duly elected and qualified or until they earlier
resign. Officers are generally elected by the Board of Directors at its annual
meeting immediately following the shareholders' annual meeting and hold office
until their death or until they earlier resign or are removed from office. The
Company does not have any standing audit, nominating or compensation committees,
or any committees performing similar functions.

Profiles of Directors and Executive Officers of the Company and BioProgress
Technology:

Profiles of Directors and Executive Officers of the Company and BioProgress
Technology, Inc.:

Barry J. Muncaster: Chairman, Chief Executive Officer and President. Mr.
Muncaster is Chairman of the Board of Directors and Chief Executive Officer of
the Company, BioProgress Technology, Inc. and BTL, having served in these
capacities since November 17, 1997, for the Company and inception for
BioProgress Technology, Inc. and BTL. He has also served the Company and BTL as
President since November 17, 1997, and inception, respectively. Mr. Muncaster
also served BioProgress Technology as President from inception until the
engagement of Mr. Bowers. He has served in similar positions with DNL since the
acquisition of that entity as a wholly-owned subsidiary. Mr. Muncaster trained
as a telecommunications engineer with British Telecom, and obtained a diploma in
Telecommunications Engineering in 1970 from the Cambridge College of Arts and
Technology. Since 1970 Mr. Muncaster has been involved at the executive and
senior executive level with companies engaged in the development and
commercialization of high technology products, which include: laser-based
systems employed in high energy physics experiments, electronic taxi meters,
personal computer systems and home banking systems. He was a co-founder, and
served as Chief Executive Officer, of Oric Products International, Limited
which, within three years of start-up, manufactured and sold in excess of
300,000 personal computers, achieving annual sales revenues in excess of
$45,000,000 prior to its sale in 1983 to an investment company quoted on the
London Stock Exchange. Since 1987 Mr. Muncaster has been a partner in the Jade
Partnership, a firm of management consultants which specializes in assisting
developmental companies engaged in high technology activities. The Jade
Partnership was the sole shareholder of BioProgress Technology and now owns a
substantial portion of the outstanding shares of Common Stock. Mr. Muncaster
entered into an employment agreement with the Company on January 25, 1999, as
discussed further below.

Malcolm D. Brown: Director and Chief Technical Officer. Mr. Brown has served the
Company as a director and as the Executive Vice- President of Research and
Development since November 17, 1997, and for BioProgress Technology, Inc. and
BTL from inception. He has served in similar positions with DNL since the
acquisition of that entity as a wholly-owned subsidiary. He is responsible for
the direction and implementation of the research and development program of
BioProgress Technology Limited, the production engineering of its products, and
for the environmental, safety and performance compliance of all raw materials
used. Mr. Brown received a Bachelor of Science Degree (Honors) in Applied
Biology from Northeast London University in 1984 and a Masters of Science Degree
in Microbiology from London University in 1986. Prior to his affiliation with
BioProgress Technology, Inc. and BTL, Mr. Brown held senior research positions
with Gestetner Corporation and with Ferrisgate Limited, where he worked on the
formulation of specialist inks and coatings used in industrial processes. Mr.
Brown entered into an employment agreement with the Company on January 25, 1999,
as discussed further below. Mr. Brown is also a director, officer and
shareholder of The Jade Partnership.

James T.C. Longley: Director and Chief Financial and Accounting Officer and
Treasurer. Mr. Longley has been a director and the Chief Financial and
Accounting Officer, Treasurer and Secretary the Company since November 17, 1997,
and of BioProgress Technology, Inc. and BTL since inception. He has served in
similar positions with DNL since the acquisition of that entity as a
wholly-owned subsidiary. He received a Bachelor of Arts degree in accounting
with honors from Leeds University in 1980, and was admitted to the Institute of
Chartered Accountants in England in July, 1983, and was admitted as a fellow to
the Institute of Chartered Accountants in England and Wales in 1993. Mr. Longley
in 1983 joined Arthur Andersen, where he worked for two years, attaining the
position of Senior Accountant, Auditing Division. He then served for three years
as a manager in the Merchant Banking Division of Creditanstalt-Bankverein before
leaving to join Touche Ross and Co., another accounting firm, as a senior
manager in its corporate finance division. In 1991, Mr. Longley founded Chapman
Longley Chartered Accountants and Registered Auditors in the United Kingdom
where, in addition to providing services to a range of clients, he participated
as part of a management team which successfully completed a (pound)10.5 million
(Sterling) management buy-in within the manufacturing industry, and served as
the finance director of The Fleet Management Group Limited which had annual
revenues of (pound)18 million (Sterling) during this time. Mr. Longley entered
into an employment agreement with the Company on January 25, 1999, as discussed
further below. Mr. Longley is also a director and officer of The Jade
Partnership.

<PAGE>


Robert Graham Mason Hind: Director and Vice-President of Sales and Marketing.
Mr. Hind has been an executive officer and director of the Company and BTL since
the acquisition by the Company of DNL, prior to which he served as a consultant
to BioProgress Technology, Inc. and BTL from June 30, 1998. Mr. Hind has served
DNL as a director and executive officer since inception. Mr. Hind entered into
an employment agreement with the Company after its acquisition of DNL, as
discussed further below.

Edward Z. Nowak: Vice-President of Research. Mr. Nowak has been with BTL since
March, 1997. He received a Bachelor of Science Degree in Applied Chemistry from
Stockport University in the United Kingdom in 1978. Mr. Nowak then joined Ciba
Geigy agrochemical and industrial chemical divisions, where he worked for 12
years. He headed up formulations groups and pioneered technology in
micro-emulsions, granulation and polymer seed coatings. In 1989 Mr Nowak joined
Jeyes Group, where he was research and development manager. In 1992 Mr. Nowak
joined Bush Boake Allen's fragrance division as European technical manager. He
developed a number of new products for launch within the personal care and
household sectors for both Jeyes and Bush Boake Allen. Mr. Nowak has been
responsible for much of the product and process development of encapsulation
technology at BTL. Mr. Nowak entered into an employment agreement with the
Company on January 25, 1999, as discussed further below.

Gregory L. Bowers: Mr. Bowers was engaged as a director of the Company and as
President of BioProgress Technology, Inc. earlier this year. Prior to the
Company, he was employed as the Senior Vice-President of Sales and Marketing in
Health and Nutrition with the Banner Pharmacap Division of Sobel International
from April, 1996. In this capacity, Mr. Bowers was responsible for all sales and
marketing activities of a $120 million domestic and international nutrition and
generic drug business. From April, 1994, until April, 1996, Mr. Bowers was
employed by Chase Pharmaceutical as Executive Vice President and General
Manager. (Chase Pharmaceutical was purchased by Sobel International in March
1994.) In this capacity, he was responsible for all business operations of a $55
million, 350 employee pharmaceutical and nutritional products manufacturer. Mr.
Bowers reported directly to the CEO of the parent company and directing the
Senior VP Technical Affairs, VP Finance, VP Operations and VP Sales and
Marketing. From April, 1990, to April, 1994, Mr. Bowers served as Executive Vice
President of Sales and Marketing for Chase Pharmaceutical. In this capacity, he
reported directly to the CEO and was responsible for sales and marketing for
Chase Laboratories (generic drug division), Chase Pharmaceuticals (prescription
and OTC contract manufacturing) and Encapsulations, Inc. (nutritional products).
Mr. Bowers developed and directed long and short-term sales and marketing
strategies, including establishing operating budgets, negotiating licenses and
royalty agreements domestically and internationally. Prior to Chase
Pharamaceutical, Mr. Bowers worked in various sales and marketing positions in
the pharmaceutical and other industries. Mr. Bowers is a member of the (1)
American Association of Pharmaceutical Scientists, (2) National Association of
Chain Drugstores, (3) National Wholesale Drug Association, (4) National
Association of Pharmaceutical Manufacturers, and (4) Council for Responsible
Nutrition. He attended the University of Texas in Austin, Texas, receiving a
Bachelors of Arts in Biology and also attended Columbia University,
participating in their executive marketing program.

<PAGE>


Larry C. Shattles was appointed a Director of the Company and Executive Vice
President of BioProgress Technology, Inc in July this year. Prior to that date
he was President of Trutona International, Inc, which sold its "Trutona" assets
to the company during this period for $1,500,000. Previously, he was President
of Shattles and Associates, a publisher's representative firm contracting with
leading publishers such as Time, Inc., American Express, Meredith, and Hearst.
He was also employed for 12 years with Time, Inc. (now AOL/Time Warner). He also
has a Bachelor of Arts Degree from Oglethorpe University. . Consultants to
BioProgress Technology: Dawn M. Franklin. Ms. Franklin served for 21 years as
Marketing Property Manager for Mars, Inc., where she was responsible for the
management, registration and prosecution of intellectual property and
trademarks. She has a very high standing in the international trademark
community and holds the following positions: (i) Member of Board of Directors of
International Trademark Association; (ii) Chairman of Membership Committee of
International Trademark Association; (iii) Vice-Chairman of Public Relations
Committee of International Trademark Association; (iv) Vice-Chairman of British
Brands Group; (v) Member of Trademark Committee of AIM (European Association of
Branded Goods Manufacturers); (vi) Delegate representing AIM at World
Intellectual Property Organization ("WIPO"); (vii) Member of Committee of
Experts on Subject of Famous Marks at WIPO; (viii) Consultant to WIPO and Member
of Committee of Experts at WIPO on Subject of International Trademark Licensing;
and (ix) Member of MARQUES (Association of European Trademark Proprietors).

Item 10. Executive Compensation: No compensation was paid during 1999 directly
to the Board of Directors or executive officers of the Company in their
capacities as such.

Employment Agreements:

Barry J. Muncaster. On January 25, 1999, Mr. Muncaster and the Company entered
into an agreement for a term of five years pursuant to which Mr. Muncaster is to
serve the Company as a Director and Chief Executive Officer. He serves in a
similar capacity with BioProgress Technology, Inc., BTL and DNL. Mr. Muncaster
is entitled to receive cash compensation of $2,000 per month from the Company,
subject to upward revision per board review every six months. Mr. Muncaster also
received an option from the Company under this agreement which is exercisable on
or before December 31, 2003. This option grants Mr. Muncaster the right to
purchase up to 500,000 shares Common Stock in 100,000 share increments at prices
per share of $.35, $.75, $1.25, $1.75 and $2.25 per share. These shares are to
be registered under applicable securities laws before issuance.

<PAGE>


James T.C. Longley. On January 25, 1999, Mr. Longley and the Company entered
into an agreement for a term of five years pursuant to which Mr. Longley is to
serve the Company as a director and as Chief Financial Officer, Treasurer and
Secretary. He serves in a similar capacity with BioProgress Technology, BTL and
DNL. Mr. Longley is entitled to receive cash compensation of $2,000 per month
from the Company, subject to upward revision per board review every six months.
Mr. Longley also received from the Company an option under this agreement which
is exercisable on or before December 31, 2003. This option grants Mr. Longley
the right to purchase up to 500,000 shares Common Stock in 100,000 share
increments at prices per share of $.35, $.75, $1.25, $1.75 and $2.25 per share.
These shares are to be registered under applicable securities laws before
issuance.

Malcolm D. Brown: On January 25, 1999, Mr. Brown and the Company entered into an
agreement for a term of five years pursuant to which Mr. Brown is to serve the
Company as a director and as Executive Vice President Research and Development.
He serves in a similar capacity with BioProgress Technology, BTL and DNL. He is
entitled to receive cash compensation of $2,000 per month from the Company,
subject to upward revision per board review every six months. Mr. Brown also
received from the Company an option under this agreement which is exercisable on
or before December 31, 2003. This option grants Mr. Brown the right to purchase
up to 500,000 shares of Common Stock in 100,000 share increments at prices per
share of $.35, $.75, $1.25, $1.75 and $2.25 per share. These shares are to be
registered under applicable securities laws before issuance.

Edward Z. Nowak. On January 25, 1999, Mr. Nowak and the Company entered into an
agreement for a term of five years pursuant to which Mr. Nowak is to serve the
Company in connection with the business of the Company's wholly owned
subsidiary, BTL. Mr. Nowak serves BTL as Director of Research and Development.
In this capacity he receives $8,000 per month from BTL. Mr. Nowak has received
from the Company an option under this agreement which is exercisable on or
before December 31, 2003. This option grants Mr. Nowak the right to purchase up
to 500,000 shares of Common Stock in 100,000 share increments at prices per
share of $0.35,$0.75,$1.25, $1.75 and $2.25. These shares are to be registered
under applicable securities laws before issuance.

<PAGE>


Graham R M Hind. On January 25, 1999, Mr. Hind and the Company entered into an
agreement for a term of five years pursuant to which Mr. Hind is to serve the
Company as a director. He is entitled to receive cash compensation of $2,000 per
month from the Company, subject to upward revision per board review every six
months. Mr. Hind has received from the Company an option under this agreement
which is exercisable on or before December 31, 2003. This option grants Mr. Hind
the right to purchase up to 500,000 shares of Common Stock in 100,000 share
increments at prices per share of $0.35,$0.75,$1.25, $1.75 and $2.25. These
shares are to be registered under applicable securities laws before issuance.

Greg Bowers. On January 25, 1999, Mr. Bowers and the Company entered into an
agreement for a term of five years pursuant to which Mr. Bowers is to serve the
Company as a director. Mr Bowers serves BioProgress Technology, Inc. as a
director and President for which he is entitled to receive cash compensation of
$125,000 per annum from the Company, subject to upward revision per board review
annually. Mr. Bowers has received from the Company an option under this
agreement which is exercisable on or before December 31, 2003. This option
grants Mr. Bowers the right to purchase up to 500,000 shares of Common Stock in
100,000 share increments at prices per share of $0.35, $0.75, $1.25, $1.75 and
$2.25. These shares are to be registered under applicable securities laws before
issuance.

Item 11. Security Ownership of Management and Certain Others:

Based on information which has been made available to the Company by its stock
transfer agent and the individual officers and directors of the Company, the
following table sets forth, as of March 22, 2000, the shares of Common Stock and
options owned by each current director, by directors and executive officers as a
group and by each person known by the Company to own more than 5% of the
outstanding Common Stock:

Title of Class  Name of Beneficial Owner  Number of Shares  Percent of Class (1)
--------------  ------------------------  ----------------  --------------------

Common Stock    The Jade Partnership (2)      3,125,000             8.68%

Common Stock    Barry J. Muncaster (2,3,4)    8,298,109            12.96%

Common Stock    Malcolm D. Brown (4)          4,464,277            11   %

Common Stock    James T.C. Longley (4)          500,000                0%

Common Stock    Robert G. M. Hind (4)           837,773              .94%

Common Stock    Edward Nowak(4)                 847,773              .97%

Common Stock    Greg Bowers (4)                 520,000              .06%

Common Stock    Larry C Shattles                554,493             1.54%

Directors and Executive
      Officers as a Group:                   13,022,045            36.17%

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

<PAGE>


(1) Based on approximately 36,002,800 shares of common stock issued and
outstanding on March 22, 2000. The share figures include all of the 3,000,000
shares under those options described in footnote five below, an aggregate of
39,002,800 shares. The percentage figures do not include these options, nor does
the total figure. Mr. Muncaster's figure includes the Jade shares, but his
percentage figure does not.

(2) The Jade Partnership is a Delaware corporation, the equity ownership of
which is as follows: (i) 42.49% - Barry J. Muncaster; (ii) 21.22% - Joe
Muncaster, the son of Barry J. Muncaster; (iii) 7.067% - Linda Zangus, the wife
of Barry J. Muncaster; and (iv) 29.23% - Malcolm D. Brown. All 4,000,000 shares
of Common Stock owned by Jade are attributed to Mr. Muncaster for purposes of
this table.

(3). (4) These shares include 3,808,634 shares owned directly by Mr. Muncaster
and 864,475 shares held by his wife, as well as the 3,498,123 shares held by The
Jade Partnership since Mr. Muncaster controls these entities.

(4) These shares include an option to acquire up to 500,000 shares of Common
Stock. This option is currently exercisable in whole or in part at any time and
from time to time. The option was granted on January 25, 1999, and allows the
holder to purchase 500,000 shares Common Stock on or before December 31, 2003.
The option is exercisable in 100,000 share increments at prices per share of
$.35, $.75, $1.25, $1.75 and $2.25 per share. The number of shares included in
this figure is 500,000 since the market price for the Common Stock exceeded the
option price for the all shares acquirable under these options.

Messrs. Muncaster, Brown, Longley, Nowak, Hind and Bowers each had an option to
acquire 500,000 shares at the date of this report under similar terms and
conditions, for an aggregate of 3,000,000 shares; thus, shares aggregating
3,000,000 in number under these options were included in the outstanding figure
since the strike price for these shares was more than the market price at March
22, 2000.

Item 12. Certain Transactions:

     Product Acquisition from Trutona International:

Jade:

On April 1, 1998, the Company entered into a consulting and option agreement
with The Jade Partnership International, Inc. (Jade), a Delaware Corporation.
Certain directors of the Company are controlling shareholders in Jade. The
Company has a contract with Jade, under which Jade assists the Company in
obtaining equity and debt financing, and provides general business management,
administration services, international licensing and sales and marketing
strategies. In the opinion of management, all transactions are at arms length.
This agreement provides that the Company is to pay $50,000 per month as a fee to
Jade which, at the option of Jade, is convertible into Common Stock of the
Company at a price of $0.28 per share. During 1999, Jade elected to convert
$356,595 of fees outstanding into 1,273,556 shares of the Common Stock of the
Company. The Company incurred management charges of $600,000 during the year and
paid $122,675 to Jade in respect of the balance outstanding; the balance due to
Jade by the Company at December 31, 1999 was $780,850.

<PAGE>


Ormiston-Gore Securities Limited:

Ormiston-Gore Securities Limited (OGSL) is a related party by virtue of its
shareholding in the Company. On April 1, 1998, the Company entered into a
financial consulting agreement with OGSL, a Bahamian investment and financial
services company.

OGSL, under this contract, provided services for BTL in obtaining equity and
debt financing and also loaned $230,746 to the Company. All services had been
rendered as of November 12, 1998. The Company agreed to pay OGSL a fee of
$10,000 per month which, at the option of OGSL, was convertible into common
stock of the Company at a price of $0.28 per share. The Company agreed to pay
OGSL the sum of $171,023 for fees. OGSL elected to convert this amount into
610,798 shares of the Common Stock of the Company.

OGSL elected to convert the outstanding loan of $230,746 into shares of the
Common Stock of the Company at a price of $0.28 per share, receiving 824,094
shares. Both equity for debt transactions were completed during 1999.

In addition, OGSL has entered into a lease agreement dated March 1, 1999 with
the Company for the rental of the premises in March, Cambridgeshire, U.K. The
term of the lease is 15 years and the rental per month is $5,600 with a security
deposit of $16,800. Details of the operating lease commitment are disclosed in
note 7.

Trutona International, Inc.:

Certain directors of the Company are also directors of Trutona. On February 15,
1999, the Company acquired from Trutona patents, licenses and trademarks
relating to a broad range of products, including a range of flushable and
biodegradable disposable products designed by Trutona. The consideration payable
to Trutona by the Company was $1,500,000 in the acquisition, of which $750,000
was paid through the delivery of 1,875,000 shares of Common Stock at an agreed
price of $0.40, with the remainder was paid in cash.

In connection with the acquisition of the above patents, licenses and
trademarks, the Company has recognized license fee revenues of $88,862 in the
year relating to a previous license agreement between Trutona and EcoProgress
that has been assigned to the Company.

<PAGE>


Consolidated EcoProgress Technologies, Inc

EcoProgress is a related party by virtue of its shareholding in the Company. On
April 5, 1999, the Company completed the sale of a license to EcoProgress, a
Canadian company with securities traded on the Vancouver Stock Exchange. The
license was sold for the sum of $1,500,000 and gives EcoProgress the exclusive
right to manufacture, sell and distribute in the US a line of flushable and
biodegradable disposable products utilizing the intellectual property that the
Company recently acquired from Trutona International Inc (see note 10).
EcoProgress paid $380,000 in cash and the remaining $1,120,000 was paid through
the issuance of 1,066,666 shares of free trading common stock in EcoProgress at
an agreed price of $1.05 per share.

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

(a) Exhibits:

3.1 (a)        Articles of Incorporation and Amendments (California). (1)
3.1 (b)        Articles of Incorporation and Amendments (Nevada). (2)
3.1 (c)        Articles of Incorporation and Amendments (Nevada). (4)
3.1 (d)        Articles of Incorporation and Amendments (Nevada). (5)
3.1 (e)        Series A Preferred Stock Resolutions. (6)
3.1 (f)        Series B Preferred Stock Resolutions. (6)
3.2 (a)        Bylaws (California). (1)
3.2 (b)        Bylaws (Nevada). (2)
4.1            Specimen stock certificate. (1)
10.1           Partnership Agreement dated October 20, 1993, among the Company,
               Costner Industries, Inc., a California corporation, Jack Bitterly
               and Steve Bitterly. (1)
10.2           Asset Purchase Agreement dated October 20, 1993, among the
               Company, the Partnership, Jack Bitterly, Steve Bitterly, Bruce
               Swartout, U.S. Flywheel, Inc., a California corporation and
               Sunbird Technologies, Inc. (1)
10.3           U.S. Flywheel Systems Unit Purchase Agreement dated July 16,
               1994, between the Company and Costner Industries, Inc. (1)
10.4           Straight Note dated October 21, 1993, between the Company and
               Sunbird. (1)
10.5           Consulting Agreement dated October 20, 1993, between the
               Partnership and Bruce Swartout. (1)
10.6           Asset Purchase Agreement dated May 31, 1996, changing name and
               domicile to Nevada and reverse splitting outstanding
               capitalization and increasing authorized capital. (2)
10.7           Reorganization Agreement between the Company and Famous Sam's.
               (2)
10.8           Liquidating Trust. (2)
10.9           Recision Agreement. (4)
10.10          Reorganization Agreement between the Company and BioProgress
               Technology. (4)

<PAGE>


10.11          Acquisition Agreement - DHA Nutrition (5)
10.12(a)       Acquisition Agreement - BioProgress Limited (UK) (5)
10.12(b)       Amendment to Acquisition Agreement - BioProgess Limited (UK) (5)
10.13          Employment Agreement - Barry J. Muncaster (5)
10.14          Employment Agreement - James T. C. Longley (5)
10.15          Employment Agreement - Malcolm D. Brown (5)
10.16          Employment Agreement - Edward I. Nowak (5)
10.17          Employment Agreement - Graham Hind (5)
10.18          Professional Services Agreement - The Jade Partnership
               International, Inc. (5)
10.19          Professional Services Agreement - Company and Ormiston-Gore
               Securities Limited (5)
10.20          Professional Services Agreement - BTL and Ormiston-Gore
               Securities Limited (5)
10.21          Trutona Purchase Agreement (5)
10.22          EcoProgress License (5)
10.23          Employment Agreement - Gregory L. Bowers (6)
10.24          Confidential Contract (6)
10.25          JT Racing Contract (6)

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

(1)  Filed as an exhibit to the Company's Registration Statement on Form 10-SB
     dated August 23,1994, or October 21, 1994 (Registration No. 0-24736).
(2)  Filed as an exhibit to the Company's Form 10-KSB for the year ended
     December 31, 1995.
(3)  Filed as an exhibit to the Company's Form 10-KSB for the year ended
     December 31, 1996.
(4)  Filed as an exhibit to the Company's Form 10-KSB for the year ended
     December 31, 1997.
(5)  Filed as an exhibit to the Company's Form 10-KSB for the year ended
     December 31, 1998.
(6)  Filed herewith.

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

(b) Forms 8-KSB: None.

<PAGE>


                                   SIGNATURES

In accordance with the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cambridge,
United Kingdom on the 29th day of March , 2000.

BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
(Registrant)

/s/ Barry J. Muncaster
----------------------
Barry J. Muncaster, Chief Executive Officer
and President

/s/ James T.C. Longley
----------------------
James T.C. Longley, Chief Financial
and Accounting Officer, Treasurer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant in the
capacity on this 29th day of March, 2000.

/s/ Barry J. Muncaster
----------------------
Barry J. Muncaster, Director

/s/ James T.C. Longley
---------------------
James T.C. Longley, Director

/s/ Malcolm Brown
----------------
Malcolm Brown, Director

/s/ Robert GM Hind
------------------
Robert G.M. Hind, Director

/s/ Gregory L. Bowers
---------------------
Gregory L. Bowers, Director

<PAGE>

                                    EXHIBITS

                                TABLE OF CONTENTS

3.1 (e)    Series A Preferred Stock Resolutions

3.1 (f)    Series B Preferred Stock Resolutions

10.23      Employment Agreement - Gregory Bowers

10.24      Confidentiality Contract

10.25      JT Racing Agreement