U.S. SECURITIES AND EXCHANGE COMMISSION
                     WASHINGTON, D.C. 20549


                          FORM 10-QSB


          QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
               THE SECURITIES EXCHANGE ACT OF 1934


          FOR THE QUARTERLY PERIOD ENDED March 31, 2001

                   COMMISSION FILE NO. 0-28413


                        HYPERBARIC SYSTEMS
 (Exact name of small business issuer as specified in its charter)


            CALIFORNIA                           77-0481056
  (State or other jurisdiction of             (I.R.S. Employer
   incorporation or organization)            Identification  No.)


                        1127 HARKER AVENUE
                    PALO ALTO, CALIFORNIA 94301
              (Address of principal executive offices)

                            650-323-0943
                    (Issuer's telephone number)

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

 At May 15, 2001 , the registrant had outstanding 11,535,024 shares of
common stock, no par value.

        Transitional Small Business disclosure format: Yes     No   X



HYPERBARIC SYSTEMS

TABLE OF CONTENTS

                                                                         PAGE
PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

   BALANCE SHEET - as of March 31, 2001 (unaudited)                         3

   STATEMENTS OF OPERATIONS (unaudited)
   -- For the Three Month Periods Ended March 31, 2001 and 2000             4

   STATEMENT OF STOCKHOLDERS' DEFICIT (unaudited)
   -- For the Three Month Periods Ended March 31, 2001                      4

   STATEMENTS OF CASH FLOWS (unaudited)
   -- For the Three Month Periods Ended March 31, 2001 and 2000             5

   NOTES TO UNAUDITED FINANCIAL STATEMENTS                                  6

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION          6

PART II - OTHER INFORMATION                                                13

ITEM 1.  LEGAL PROCEEDINGS                                                 13
ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS                         13
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                   13
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS               13
ITEM 5.  OTHER INFORMATION                                                 13
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                  13
SIGNATURES                                                                 14
                                                                           15

PART I -- FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                               HYPERBARIC SYSTEMS
                                 BALANCE SHEETS
                                 MARCH 31, 2001
                                  (UNAUDITED)

ASSETS

   Current assets
         Cash                                                    $     2,100
         Prepaid expenses and other current assets                    14,500
                 Total Current Assets                                 16,600
   Fixed assets, net                                                   7,000
   Total assets                                                  $    23,600

LIABILITIES AND STOCKHOLDERS' DEFICIT

   Current liabilities
         Accounts payable                                            127,500
         Accrued liabilities                                         159,700
         Stockholder payables                                        383,600
         Note payable - related party                                 67,400
         Convertible note payable - related party                    166,000
         Stock subject to rescission                                  88,600
                 Total current liabilities                           992,800
Total liabilities                                                    992,800
Commitments and contingencies                                              0
Stockholders' deficit
  Common stock; no par or stated value; 50,000,000 shares
  authorized, 9,630,800 shares issued and outstanding              4,688,200
  Unamortized loan fees related to options to purchase
  common stock - related party net                                  (609,300)
  Prepaid consulting services paid in common stock                   (86,800)
  Accumulated deficit during development stage                    (4,961,300)
         Total stockholders' deficit                                (969,200)

         Total liabilities and stockholders' deficit             $    23,600

See accompanying notes to unaudited financial statements.

                               HYPERBARIC SYSTEMS
                            STATEMENTS OF OPERATIONS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
<S>                                                                     <C>             <C>                 <C>
                                                                                                          February 26, 1998
                                                                          Three Months Ended                 (Inception)
                                                                              March 31                         Through
                                                                         2001            2000               March 31, 2001

Revenue                                                              $        0       $         0         $              0
Operating expenses
        General and administrative
                Stock based compensation                                664,700           233,800                2,453,400
                Other general and administrative expenses               133,400           261,200                1,491,300
        Total general and administrative                                798,100           495,000                3,944,700
        Research and development                                         74,000            66,300                  640,000
        Sales and marketing                                              12,700            19,100                  142,700
        Total operating expenses                                        884,800           580,400                4,727,400
Loss from operations                                                   (884,800)         (580,400)              (4,727,400)
Other income (expense)
        Interest income                                                       0               400                    2,500
        Interest expense                                                (70,600)             (600)                (234,000)
Loss before provision for income taxes                                 (955,400)         (580,600)              (4,958,900)
Provision for income taxes                                                    0                 0                    2,400
Net loss                                                             $ (955,400)      $  (580,600)        $     (4,961,300)
Basic and diluted loss per share                                     $    (0.10)      $     (0.09)        $          (0.80)
Basic and diluted weighted average common shares outstanding          9,241,000         6,459,200                6,219,000

See accompanying notes to unaudited financial statements.

</TABLE>


                               HYPERBARIC SYSTEMS
                       STATEMENTS OF STOCKHOLDER'S DEFICIT
                                  (UNAUDITED)
<TABLE>
<CAPTION>
<S>                                   <C>         <C>         <C>                 <C>                 <C>            <C>

                                                                 Loan Fees
                                                              Related to Options  Prepaid Consulting                   Total
                                         Common Stock            to purchase       Services Paid in    Accumulated   Stockholder's
                                     Shares        Amount       Common Stock        Common Stock         Deficit       Deficit
                                     --------------------     ------------------  ------------------  -------------  -------------

Balance, December 31, 2000         $ 8,136,200  $ 3,818,600   $     (656,200)     $      (195,200)    $ (4,005,900)  $ (1,038,700)

Issuance Of Common Stock For Cash      259,400       94,800                0                    0                0         94,800

Stock Options And Warrants
Excercised                             102,000       21,700                0                    0                0         21,700

Issuance Of Common Stock In
Satisfaction Of Promissory Note
Issued As A Result Of Recission
Offering                               416,600      178,200                0                    0                0        178,200

Amortization Of Prepaid
Consulting Services                          0            0                0              108,400                0        108,400

Issuance Of Common Stock For
Services                               716,600      556,300                0                    0                0        556,300

Deemed Interest Expense Related
To Conversion Feature Of Note
Payable                                      0       18,600                0                    0                0         18,600

Current Period Amortiztion Of
Loan Fees Related To Options
To Purchase Common Stock                     0            0           46,900                    0                0         46,900

Net Loss                                     0            0                0                    0         (955,400)      (955,400)
                                     ---------    ---------      -----------         ------------       ----------     ----------
Balance, March 31,2001               9,630,800  $ 4,688,200   $    (609,300)      $       (86,800)    $ (4,961,300)  $   (969,200)
                                     =========    =========      ===========         ============       ==========     ==========

See accompanying notes to unaudited financial statements.

</TABLE>

                               HYPERBARIC SYSTEMS
                            STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
<TABLE>
<CAPTION>
<S>                                                                          <C>             <C>                 <C>

                                                                              Three Months Ended
                                                                                   March 31
                                                                                2001      2000
Cash Flows From Operating Activities:
Net loss                                                                 $   (955,400)   $  (580,600)      $  (4,961,300)
        Adjustments to reconcile net loss to net
        cash used in operating activities:
        Stock based compensation                                              664,700        233,800           2,453,400
        Depreciation                                                              400            200               2,800
        Deemed interest expense                                                18,600              0              55,700
        Amortization of discount and loan fees on notes payable                46,900              0             165,500
        Changes in operating assets liabilities:
                Change in prepaid expenses and other assets                    (5,400)         1,500             (14,500)
                Change in bank overdraft                                         (500)             0                   0
                Change in accounts payable                                     15,600          5,100             127,400
                Change in accrued liabilities                                  20,500        (37,400)            159,700
                Change in stockholder payables                                 81,700         (2,700)            352,900
Net Cash Used In Operating Activities                                        (112,900)      (380,100)         (1,658,400)
Cash flows from investing activities:
Purchase of fixed assets                                                            0         (6,100)             (9,800)
                Net cash provided from investing activities                         0         (6,100)             (9,800)
Cash flows from financing activities:
        Proceeds from issuance of common stock                                116,500        386,500           1,401,200
        Proceeds from borrowing on notes payable                                    0              0             299,100
        Principal payments on notes payable                                    (1,500)       (11,500)            (30,000)
                Net cash provided by financing activities                     115,000        375,000           1,670,300
Net increase in cash and cash equivalents                                       2,100        (11,200)              2,100
cash and cash equivalents, beginning of period                                      0         52,100                   0
Cash and Cash Equivalents, end of period                                 $      2,100    $    40,900       $       2,100
Supplemental Disclosure of Cash Flow Information:
        Cash paid for income taxes                                       $          0    $         0       $       1,600
        Cash paid for interest                                           $          0    $       600       $         200
Schedule of non-cash financing activities:
        Principal payments on notes payable through the issuance of
        common stock                                                     $          0    $         0       $       5,000
Rescission of common stock related to Reg. D offering dated
September 1, 1999 and February 2, 2000                                   $          0    $         0       $     334,000
Issuance of common stock in satisfaction of promissory note issued
as a result of rescission offering                                       $    178,200    $         0       $     245,700
Issuance of common stock for prepaid consulting services                 $          0    $         0       $     335,100
Loan fees related to options to purchase common stock                    $          0    $         0       $     750,000

See accompanying notes to unaudited financial statements.

</TABLE>

                    NOTES TO FINANCIAL STATEMENTS
                             (unaudited)

1.      BASIS OF PRESENTATION

The accompanying financial statements have been prepared in accordance with
Securities and Exchange Commission requirements for interim financial
statements.  Therefore, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements.  The financial statements should be
read in conjunction with the Form 10-KSB for the year ended December 31, 2000
of HyperBaric Systems ("the Company").

The results of operations for the interim periods shown in this report are not
necessarily indicative of results to be expected for the full year.  In the
opinion of management, the information contained herein reflects all
adjustments necessary to make the results of operations for the interim
periods a fair statement of such operations.  All such adjustments are of a
normal recurring nature.

2.      GOING CONCERN

The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business.  The Company is in the
development stage, has no operating revenue and incurred a net loss of
approximately $955,400 for the three months ended March 31, 2001.  The Company
is in the fourth year of research and development, with an accumulated loss
during the development stage of approximately $4,961,300, a stockholders'
deficit of approximately $969,200 and a working capital deficiency of
approximately $976,200 as of March 31, 2001.  As of March 31, 2001, management
is uncertain as to the completion date of the research and development or if
the product will be completed at all.

Management's plan, in this regard, is to raise financing of approximately
$2,500,000 through a combination of equity and debt financing.  Management
believes this amount will be sufficient to finance the continuing research for
the next twelve months.  However, there is no assurance that the Company will
be successful in raising such financing.

These conditions give rise to substantial doubt about the Company's ability to
continue as a going concern.  These financial statements do not include
adjustments relating to the recoverability and classification of reported
asset amounts or the amount and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.  The
Company's continuation as a going concern is dependent upon its ability to
obtain additional financing or sale of its common stock as may be required and
ultimately to attain profitability.

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

        ITEM 2. MANAGEMENT'S PLAN OF OPERATION.

THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE
ACT OF 1934, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING OUR
EXPECTATIONS, BELIEFS, INTENTIONS OR FUTURE STRATEGIES THAT ARE SIGNIFIED BY
THE WORDS "EXPECTS", "ANTICIPATES", "INTENDS", "BELIEVES", OR SIMILAR
LANGUAGE.  THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS, UNCERTAINTIES AND
OTHER FACTORS.  ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS DOCUMENT ARE
BASED ON INFORMATION AVAILABLE TO US ON THE DATE HEREOF AND SPEAK ONLY AS OF
THE DATE HEREOF.  THE FACTORS DISCUSSED BELOW UNDER "RISK FACTORS" AND
ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-QSB ARE AMONG THOSE FACTORS THAT
IN SOME CASES HAVE AFFECTED OUR RESULTS AND COULD CAUSE THE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING STATEMENTS.

The following discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto.

OVERVIEW

        We have a very limited operating history and have no revenue to date.
Our prospects must be considered in light of the risks and uncertainties
encountered by companies in an early stage of development involving new
technologies and overcoming regulatory approval process requirements before
any revenue is possible.

        We have experienced operating losses since our inception.  These
losses have resulted from the significant costs incurred in the development of
the technology and the establishment of our research and development facility.
Expenditures will increase in all areas in order to execute our business plan,
particularly in research and development and in gaining regulatory approval to
market our products in the U.S. and abroad.

        During the next twelve months we will continue efforts on prototype
development and the generation of pre-clinical data.  It is anticipated that
we will submit our first IND/IDE and begin clinical testing of our first
product for blood platelet storage. Research will commence on kidney
preservation and developing solutions that will operate under refrigerated and
sub-zero temperature conditions.

        We anticipate filing additional patents relating to platelet
preservation during the next twelve months of operation which should
strengthen our competitive position in the platelet preservation marketplace.
We will also seek strategic alliances with companies that have the capability
to provide technical and clinical expertise as well as financial and marketing
expertise to leverage our current expertise in these areas.

        We also plan to relocate our current Branch facility in Russia to a
more suitable location to accommodate more equipment and personnel, as well as
to locate a central administrative facility in the U.S.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2001 Compared With Three Months Ended March 31,
2000

Revenues.  We have not had any revenue since our inception in February 26,
1998.

    General and Administrative Expenses:   Our total general and administrative
expenses in the three months ended March 31, 2001 equaled $798,100 an increase
over $495,000for the comparable period in 2000.  We utilize stock-based
compensation to expand our business and employees while conserving our
operating cash. The remainder of the increase was due to expenses related
to our reporting and other obligations as a public company.

    Research and Development:  We incurred research and development expenses
equal to $74,000 for the three months ended March 31, 2001 as compared to
$66,300 for the three months ended March 31, 2000.

    Sales and Marketing Expenses: Our sales and marketing expenses for the
three months ended March 31, 2001 equaled $12,700 a decrease from
$19,100 for the three months ended March 31, 2000.  This decrease is
due to our decision to decrease our sales and marketing expenses until
our products are ready for introduction into the market.

   Interest Income: We did not have any Interest income for the three
months ended March 31, 2001 compared to $400 for the three months e
ended March 31, 2000, reflecting our minimal cash reserve.

   Interest Expense:  We incurred interest expense of $70,600 in the first
quarter of 2001 as compared to $600 in the first quarter of 2000.  The
increase is primarily due to interest recorded on a promissory note
that we issued in June 2000, and on a promissory  notes that we issued
pursuant to a rescission offer conducted in the third quarter of 2000.


   Net Loss:  As a result of the foregoing factors our net loss increased to
$955,400 for the three months ended March 31, 2001, from a net loss of
$580,600 for the three months ended March 31, 2000.

LIQUIDITY AND CAPITAL RESOURCES

        Since our inception, we have financed our operations through financing
from the founders and private investors, a public offering under Regulation D
Rule 504, and private placements under Regulation D Rule 505.

        We anticipate continued growth in our operations and a corresponding
growth in our operating expenses and capital expenditures.  We do not
anticipate any revenue from operations for the next two or three years.
Therefore, our success is dependent on funding from private placements.
At present time, however, we have no agreements for any such private
placements.

       Our operating plan for calendar year 2001 is focused on development of
our products. It is our estimate that a cash requirement of $3,000,000 is
required to support this plan. The expense estimates total $2,650,000 for
operating expenses and $350,000 for capital expenditures.

GOING CONCERN

        We are in the third year of research and development, with an
accumulated loss during the development stage of $4,961,300.  As of March 31,
2001 we are uncertain as to the completion date of this research and
development, or if a product will ever be completed as a result of this
research and development activity.    We anticipate that the funds spent on
research and development activities will need to increase prior to completion
of a product.  Additionally, we may not be able to secure funding in the
future necessary to complete our intended research and development activities.

        If we lose key personnel or are unable to attract and retain
additional qualified personnel, we may not be able to successfully manage the
business and achieve our objectives.

        These conditions give rise to substantial doubt about our ability to
continue as a going concern. Our financial statements do not include
adjustments relating to the recoverability and classification of reported
asset amounts or the amount and classification of liabilities that might be
necessary should we be unable to continue as a going concern.  Our
continuation as a going concern is dependent upon our ability to obtain
additional financing from the sale of our common stock, as may be required,
and ultimately to obtain profitability.

        The report of our independent certified public accountants, included
our most recent Annual Report on Form 10-KSB, contains a paragraph regarding
our Company's ability to continue as a going concern.

PRODUCT DEVELOPMENT

       We have engaged Quintiles, Inc., an international regulatory
consulting firm,to assist with planning and managing the regulatory
approval process.  This firm specializes in the design and implementation
of regulatory strategies, including experiment design and monitoring.
Thus far we have used it only on a limited basis, as we have not yet
started clinical trials.  We anticipate that Quintiles participation
will increase as we met with the FDA to proceed with clinical trials.

     As an overall strategy, we intend to limit the system claims for our
Plexlife system and to progressively expand them as FDA and/or EU approval is
granted for each succeeding claim.  We believe that this should provide a
shorter time to market.

RESEARCH AND DEVELOPMENT PLAN

        We have developed a research and development strategy that considers
the FDA and international approval processes and their impact on bringing a
product to market.  Based on these constraints, we have developed a research
and development plan that requires multiple developments being conducted at
the same time.

        We have developed a 3-phase marketing strategy, with estimated time
requirements for the research and development, and market introduction of
products.  The plan starts with phase one, a platelet preservation product
using our PlexLife solution by itself.  The second phase is the market
introduction of the Plexlife System utilizing our hyperbaric container.
Our third phase of marketing is to find a viable alternative to the
current organ preservation methods with both solution under
refrigeration and a complete system at sub-zero temperatures.

      Government approval for human testing will be required for each of
these three phases of development.  Our plan is to obtain the
necessary approvals for each phase.

PLATELET PRESERVATION - REFRIGERATION

        The plan starts with a platelet preservation product using the
PlexLife solution by itself.  We have been able to successfully store
platelets for 7 days at refrigerated temperatures which is considered
to be a major milestone in the cold storage of platelets.  Currently
the industry stores platelets at ambient temperature for a maximum
of 5 days, a FDA-imposed limit due to historic bacterial infection
of the platelets.

PLATELET PRESERVATION - SUB-ZERO STORAGE

        This development is intended to result in longer storage times for
platelets,  combining the use of solutions, sub-zero temperature and high
pressure.  It is our goal to develop a storage method that will preserve the
viability of platelets with little or no bacterial growth for a period greater
than 13 days.  This will provide the medical community with a new and
economical method for long-term platelet storage, thereby reducing the current
loss of product. The successful implementation of refrigerated platelets
at 9 days or beyond may eliminate the need for sub-zero stored platelets
for most blood center needs.

ORGANS PRESERVATION

        This effort will incorporate storage of organs involving experiments
with animal organs to demonstrate our ability tonharvest, store and
transplant organs. The goal is to achieve a level of physical condition
and viability of these organs that is equal to or superior to present
storage methods and storage times.  The development process includes the
development of solutions, cooling methods and possibly the use of chambers
to protect organs from freezing at subzero storage temperatures.

INTELLECTUAL PROPERTY

        We consider our intellectual property to be a key cornerstone and
asset of our business.  As such, the intellectual property, which consists of
applied-for patents, trade secrets, copyrights and know-how will be both
developed and protected.  We plan to gain wide protection for our intellectual
property worldwide by patent and trademark filings in major foreign markets as
well as the careful protection of trade secrets through contract and
procedure. Information regarding our patents is contained in our most recent
Annual Report on Form 10-KSB.

CHANGES IN THE NUMBER OF EMPLOYEES

       We presently have sixteen employees, five in the U.S. and eleven
 in Russia.  Twelve of our employees are in research and development,
 one employee is in marketing and sales and three are in administration.
 Our Employees are currently not represented by a collective bargaining,
 we believe that our relations with our employees are good.

RISK FACTORS

        Our business, financial condition or results of operations could be
materially and adversely affected by any of the following risks:

WE REQUIRE IMMEDIATE ADDITIONAL CAPITAL.

        We currently anticipate that based on our short-term forecast of
raising additional funds of $1.2 million, our available funds will be
sufficient to meet our anticipated needs for working capital, capital
expenditures and business operations until April 2002. To date, however, we
have not entered into any arrangements for equity or debt financing, and had
no funds available at December 31, 2000. Thereafter, we will need to raise
additional capital.  If additional funds are raised through the issuance of
equity or convertible debt securities, the percentage ownership of our
stockholders will be reduced, stockholders may experience additional dilution
and such securities may have rights, preferences and privileges senior to
those of our common stock.  There can be no assurance that additional
financing will be available on terms favorable to us or at all.  If adequate
funds are not available or are not available on acceptable terms when
required, we may be required to significantly curtail our operations or may
not be able to fund expansion, take advantage of unanticipated acquisition
opportunities, develop or enhance services or products or respond to
competitive pressures. Such inability could have a material adverse effect on
our business, results of operations and financial condition.

WE ARE A DEVELOPMENT STAGE COMPANY, AND HAVE A LIMITED OPERATING HISTORY ON
WHICH TO EVALUATE OUR POTENTIAL FOR FUTURE SUCCESS.

We are a development stage company, and have yet to produce or sell any
products or services.  We have only a limited operating history upon which you
can evaluate our business and prospects, and have yet to develop sufficient
experience regarding actual revenues to be received from our products and
services.  You must consider the risks and uncertainties frequently
encountered by early stage companies in new and rapidly evolving markets.  If
we are unsuccessful in addressing these risks and uncertainties, our business,
results of operations and financial condition will be materially and adversely
affected.

WE EXPECT LOSSES FOR THE FORESEEABLE FUTURE, AND OUR OPERATING RESULTS MAY
FLUCTUATE FROM QUARTER TO QUARTER.

        Since our inception in 1998, we have incurred losses from operations,
resulting primarily from costs related to research and development and
building our infrastructure.  Because of our status as a development stage
company and the need to conduct additional research and development prior to
introducing products and services to the market, we expect to incur net losses
for the foreseeable future.  If our growth is slower than we anticipate or our
operating expenses exceed our expectations, our losses will be significantly
greater.  We may never achieve profitability.  Primarily as a result of these
recurring losses, our independent certified public accountants modified their
report on our December 31, 2000 and December 31, 1999 financial statements to
include an uncertainty paragraph wherein they expressed substantial doubt
about our ability to continue as a going concern.

OUR FUTURE REVENUES ARE UNPREDICTABLE AND OUR QUARTERLY OPERATING RESULTS MAY
FLUCTUATE SIGNIFICANTLY.

        We have a very limited operating history, and have no revenue to date.
We cannot forecast with any degree of certainty whether any of our products or
services will ever generate revenue the amount of revenue to be generated by
any of our products or services. In addition, we cannot predict the
consistency of our quarterly operating results.  Factors which may cause our
operating results to fluctuate significantly from quarter to quarter include:

-       our ability to attract new and repeat customers;

-       our ability to keep current  with  the evolving requirements of our
        target market;

-       our ability to protect our proprietary technology;

-       the ability of our  competitors to offer new or enhanced products or
        services; and

-       unanticipated  delays or cost  increases  with  respect to research
        and development.

        Because of these and other factors, we believe that quarter-to-quarter
comparisons of our results of operations are not good indicators of our future
performance.  If our operating results fall below the expectations of
securities analysts and investors in some future periods, then our stock price
may decline.

WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY.

        The markets in which we are engaged are new, rapidly evolving and
intensely competitive, and we expect competition to intensify further in the
future.  We currently or potentially compete with a number of other companies.
Competitive pressures created by any one of these companies, or by our
competitors collectively, could have a material adverse effect on our
business, results of operations and financial condition.  A potential
competitor could develop a technology that is competitive or superior to ours.

WE MAY FAIL TO ESTABLISH AND MAINTAIN STRATEGIC RELATIONSHIPS.

        We intend to establish various strategic alliances.  We may not be
able to enter into these relationships on commercially reasonable terms or at
all.  Even if we enter into strategic alliances, our partners may not attract
significant numbers of customers.   Our inability to enter into new
distribution relationships or strategic alliances could have a material and
adverse effect on our business.

SHARES ELIGIBLE FOR FUTURE SALE BY OUR CURRENT STOCKHOLDERS MAY ADVERSELY
AFFECT OUR STOCK PRICE.

        To date, we have had a very limited trading volume in our common
stock.  As long as this condition continues, the sale of a significant number
of shares of common stock at any particular time could be difficult to achieve
at the market prices prevailing immediately before such shares are offered.
In addition, sales of substantial amounts of common stock, including shares
issued upon the exercise of outstanding options and warrants, under Securities
and Exchange Commission Rule 144 or otherwise could adversely affect the
prevailing market price of our common stock and could impair our ability to
raise capital at that time through the sale of our securities.

OUR COMMON STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE; OUR COMMON STOCK IS
"PENNY STOCK".

        The market price of our common stock is likely to be highly volatile
as the stock market in general, and the market for technology companies in
particular, has been highly volatile.  The trading prices of many technology
companies' stocks have reached historical highs within the last 52 weeks and
have reflected valuations substantially above historical levels.  During the
same period, these companies' stocks have also been highly volatile and have
recorded lows well below historical highs.

        Factors that could cause such volatility in our common stock may
include, among other things:

-  actual  or  anticipated fluctuations in our quarterly operating results;
-  announcements of  technological  innovations;
-  changes  in  financial  estimates  by  securities  analysts;
-  conditions  or  trends  in our industry;  and
-  changes  in  the  market  valuations  of  other comparable companies.

        In addition, our stock is currently traded on the NASD O-T-C Bulletin
Board and it is uncertain that we will be able to successfully apply for
listing on the AMEX, the NASDAQ National Market, or the Nasdaq SmallCap Market
in the foreseeable future due to the trading price for our common stock, our
working capital and revenue history.  Failure to list our shares on the AMEX,
the Nasdaq National Market, or the Nasdaq SmallCap Market, will impair the
liquidity for our common stock.

        The Securities and Exchange Commission has adopted regulations which
generally define a "penny stock" to be any security that 1) is priced under
five dollars, 2) is not traded on a national stock exchange or on NASDAQ, 3)
may be listed in the "pink sheets" or the NASD OTC Bulletin Board, 4) is
issued by a company that has less than $5 million in net tangible assets and
has been in business less than three years, or by a company that has under $2
million in net tangible assets and has been in business for at least three
years, or by a company that has revenues of $6 million for 3 years.

        Penny stocks can be very risky: penny stocks are low-priced shares of
small companies not traded on an exchange or quoted on NASDAQ.  Prices often
are not available.  Investors in penny stocks are often unable to sell stock
back to the dealer that sold them the stock.  Thus an investor may lose
his/her investment.  Our common stock is a "penny stock" and thus is subject
to rules that impose additional sales practice requirements on broker/dealers
who sell such securities to persons other than established customers and
accredited investors, unless the common stock is listed on The Nasdaq SmallCap
Market. Consequently, the "penny stock" rules may restrict the ability of
broker/dealers to sell our securities, and may adversely affect the ability of
holders of our common stock to resell their shares in the secondary market.

SOME OF THE INFORMATION IN THIS ANNUAL REPORT CONTAINS FORWARD-LOOKING
STATEMENTS.

        Some of the information in this Quarterly Report on Form 10-QSB
contains forward-looking statements that involve substantial risks and
uncertainties. You can identify these statements by forward-looking words such
as "may", "will", "expect", "intend", "anticipate", "believe", "estimate" and
"continue" or similar words.  You should read statements that contain these
words carefully because they:

-     discuss  our  expectations  about  our  future  performance;

-     contain  projections of our future operating results or of our future
      financial condition; or

-     state  other  "forward-looking"  information.

        We believe it is important to communicate our expectations to our
stockholders.  There may be events in the future, however, that we are not
able to predict accurately or over which we have no control.  The risk factors
listed in this section, as well as any cautionary language in this prospectus,
provide examples of risks, uncertainties and events that may cause our actual
results to differ materially from the expectations we describe in our forward-
looking statements.  Before you invest in our common stock, you should be
aware that the occurrence of any of the events described in these risk factors
and elsewhere in this prospectus could have a material and adverse effect on
our business, results of operations and financial condition and that upon the
occurrence of any of these events, the trading price of our common stock could
decline and you could lose all or part of your investment.

DILUTION OF COMMON SHAREHOLDERS.

        The sale of a substantial number of shares of our common stock in the
public market, or the prospect of such sales, could materially and adversely
affect the market price of our common stock.  We are authorized to issue up to
50,000,000 shares of common stock.  To the extent of such authorization, our
Board of Directors will have the ability, without seeking stockholder
approval, to issue additional shares of common stock in the future for such
consideration as our Board of Directors may consider sufficient.  The issuance
of additional common stock in the future will reduce the proportionate
ownership and voting power of our common stock held by existing stockholders.

        Sales in the public market of substantial amounts of our common stock,
including sales of common stock issuably upon exercise of options and
warrants, could depress prevailing market prices for our common stock.  Even
the perception that such sales could occur might impact market prices for the
common stock.  The existence of outstanding options and warrants may prove to
hinder our future equity financing. In addition, the holders of such options
and warrants might exercise them at a time when we would otherwise be able to
obtain additional equity capital on terms more favorable to us.  Such factors
could materially and adversely affect our ability to meet our capital needs.
We depend on our key personnel to operate our business, and we may not be able
to hire enough additional management and other personnel as our business
grows.

        Our performance is substantially dependent on the continued services
and on the performance of our executive officers and other key employees.  The
loss of the services of any of these executive officers or key employees could
materially and adversely affect our business.  We currently do not have any
"key person" insurance on any of our executive officers or key employees.
Additionally, we believe we will need to attract, retain and motivate talented
management and other highly skilled employees to be successful.  Competition
for employees that possess knowledge of our target market is intense.  We may
be unable to retain our key employees or attract, assimilate and retain other
highly qualified employees in the future.


PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         Not applicable.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

         Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         Not applicable.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         Not applicable.

ITEM 5.  OTHER INFORMATION.

         Not applicable.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      Exhibits.

         (b)      Reports on Form 8-K

                  None



SIGNATURES


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


                                  HYPERBARIC SYSTEMS


Date:  May 18, 2001           /s/ Harry Masuda
                                  ------------
                                  Harry Masuda
                                  Chief Executive Officer