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, 2002

                        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 Identification No.)
 incorporation or organization)


                            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 March 31, 2002, the registrant had outstanding 15,748,212 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 (unaudited) - as of March 31, 2002                             F-1

STATEMENTS OF OPERATIONS (unaudited) - For the Three Month Periods Ended
March 31, 2002 and 2001 and the period from February 26, 1998 (Inception)
through March 31, 2002                                                       F-2

STATEMENT OF STOCKHOLDERS' DEFICIT (unaudited) -
For the Three Months Ended March 31, 2002                                    F-3

STATEMENTS OF CASH FLOWS (unaudited) -
For the Three Month Periods Ended March 31, 2002 and 2001                    F-4

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)                              F-5 - F-7

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

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

PART I -- FINANCIAL INFORMATION

<PAGE>F-1

                              HYPERBARIC SYSTEMS
                                BALANCE SHEET
                                March 31, 2002
                                 (Unaudited)

                                    ASSETS

Current assets
        Cash                                                         $  139,200
        Prepaid expenses and other current assets                        49,800
                                                                       --------
                Total current assets                                    189,000

Fixed assets, net                                                         5,000
                                                                       --------
Total assets                                                         $  194,000
                                                                       ========
                     LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities
        Accounts payable                                             $   67,800
        Accrued liabilities                                             107,100
        Stockholder payables                                             87,300
        Stock subject to recission                                       21,000
                                                                       --------
                Total current liabilities                               283,200
                                                                       --------
Total liabilities                                                       283,200

Commitments and contingencies                                                 -

Stockholders' deficit
        Common stock; no par or stated value; 50,000,000 shares
           authorized, 15,748,200 shares issued and outstanding       8,010,100
        Other receivables, net                                         (398,300)
        Accumulated deficit during development stage                 (7,701,000)
                                                                      ---------
                Total stockholders' deficit                             (89,200)
                                                                      ---------
Total liabilities and stockholders' deficit                          $  194,000
                                                                      =========

<PAGE>F-2

                            HYPERBARIC SYSTEMS
                         STATEMENTS OF OPERATIONS
                                (unaudited)

<table>
<caption>


                                                                     <c>                <c>              <c>
                                                                                                         February 26, 1998
                                                                     Three Months Ended March 31,       (Inception) Through
                                                                       2002                2001            March 31, 2002
                                                                    ---------           ---------            ----------
Revenue                                                           $         -          $        -          $          -

Operating expenses
        General and administrative
                Stock based compensation                              256,700             664,700             2,932,700
               Other general and administrative expenses              297,100             133,400             2,348,400
                                                                     --------            --------            ----------
        Total general and administrative                              553,800             798,100             5,281,100

        Research and development                                      105,100              74,000               990,700
        Sales and marketing                                            64,700              12,700               275,700
                                                                     --------            --------            ----------
                Total operating expenses                              723,600             884,800             6,547,500
                                                                     --------            --------            ----------
Loss from operations                                                 (723,600)           (884,800)           (6,547,500)

Other income (expense)
        Loan fees                                                           -                   -              (750,000)
        Bad debt related to other receivable                                -                   -              (104,000)
        Interest income                                                     -                   -                 2,500
        Interest expense                                                    -             (70,600)             (298,800)
                                                                     --------            --------            ----------
Loss before provision for income taxes                               (723,600)           (955,400)           (7,697,800)

Provision for income taxes                                                  -                   -                 3,200
                                                                     --------            --------            ----------
Net loss                                                          $  (723,600)         $ (955,400)         $ (7,701,000)
                                                                   ==========          ==========            ==========

Basic and diluted loss per common share                           $     (0.05)         $    (0.10)         $      (1.10)
                                                                   ==========          ==========            ==========
Basic and diluted weighted average
        common shares outstanding                                  14,968,100           9,241,000             6,994,400
                                                                   ==========          ==========            ==========
</table>

<PAGE>F-3

                      STATEMENT OF STOCKHOLDERS' DEFICIT
                                 (unaudited)
                  For the Three Months Ended March 31, 2002
<table>
<caption>

                                              <c>              <c>             <c>             <c>                <c>

                                                                                                   Accumulated
                                                                                                  Deficit During         Total
                                                Common Stock                         Other         Development       Stockholders'
                                                   Shares           Amount        Receivables         Stage             Deficit
                                                 ----------       ----------       ---------       -----------         --------
Balance December 31, 2001                        14,561,800      $ 7,322,500      $ (398,300)     $ (6,977,400)       $ (53,200)

Issuance of common stock for cash
  (net of offering costs of $33,900),
  $0.55                                             677,600          373,000               -                 -          373,000

Stock options and warrants exercised,
  weighted average                                  264,000            3,600               -                 -            3,600
exercise price of $0.01

Issuance of common stock in satisfaction
  of promissory note issued as a result of
  rescission offering (including accrued
  interest of $7,200), $0.75                         72,100           54,300               -                 -           54,300

Issuance of common stock for services, $0.92        172,700          159,100               -                 -          159,100

Stock based compensation related to granting
  of warrants and options                                 -           97,600               -                 -           97,600

Net loss                                                  -                -               -          (723,600)        (723,600)
                                                 ----------       ----------       ---------       -----------         --------
Balance March 31, 2002                           15,748,200      $ 8,010,100      $ (398,300)     $ (7,701,000)       $ (89,200)
                                                 ==========       ==========       =========       ===========         ========
</table>

<PAGE>F-4

                           STATEMENTS OF CASH FLOWS
                                 (unaudited)

<table>
<caption>

                                                                       <c>                <c>               <c>
                                                                                                              February 26, 1998
                                                                          Three Months Ended March 31,       (Inception) Through
                                                                             2002               2001            March 31, 2002
                                                                          ---------          ---------             ----------
Cash flows from operating activities:
        Net loss                                                         $ (723,600)        $ (955,400)          $ (7,701,000)
        Adjustments to reconcile net loss to net
         cash used by operating activities:
                Stock based compensation                                    256,700            664,700              2,932,700
                Depreciation                                                    500                400                  4,800
                Deemed interest expense                                           -             18,600                 92,800
                Interest expense paid in common stock                             -                  -                117,300
                Amortization of discount and loan fees
                        on notes payable                                          -             46,900                774,800
                Bad debt related to other receivables                             -                  -                104,000
        Changes in operating assets and liabilities:
                Change in prepaid expenses and other assets                 (10,600)            (5,400)               (49,800)
                Change in bank overdraft                                          -               (500)                     -
                Change in accounts payable                                    8,300             15,600                 92,500
                Change in accrued liabilities                                67,600             20,500                142,100
                Change in stockholder payables                             (168,000)            81,700                320,900
                                                                          ---------          ----------            ----------
                        Net cash used by operating activities              (569,100)          (112,900)            (3,168,900)
                                                                          ---------          ----------            ----------

Cash flows from investing activities:
        Purchase of fixed assets                                                  -                  -                 (9,800)
                                                                         ----------          ----------             ----------
              Net cash used by investing activities                               -                  -                 (9,800)
                                                                         ----------          ----------             ----------

Cash flows from financing activities:
        Proceeds from issuance of common stock                              376,600            116,500              3,112,700
        Proceeds from borrowing on notes payable                                  -                  -                323,100
        Principal payments on notes payable                                       -             (1,500)               (97,400)
        Principal payments on stock subject to rescission                         -                  -                (20,500)
                                                                          ---------          ---------             ----------
                        Net cash provided by financing activities           376,600            115,000              3,317,900
                                                                          ---------          ---------             ----------
Net increase (decrease) in cash                                            (192,500)             2,100                139,200

Cash, beginning of period                                                   331,700                  -                      -
                                                                          ---------          ---------             ----------
Cash, end of period                                                      $  139,200         $    2,100           $    139,200
                                                                          =========          =========             ==========
Supplemental disclosure of cash flow information:
        Cash paid for income taxes                                       $        -         $        -           $      1,600
                                                                          =========          =========             ==========
        Cash paid for interest                                           $        -         $        -           $        200
                                                                          =========          =========             ==========
Schedule of non-cash financing activities:
        Issuance of common stock in satisfaction of
                promissory note issued as a result of recission
                 offering                                                $        -         $  178,200           $    178,200
                                                                          =========          =========             ==========
        Issuance of common stock in satisfaction of
                promissory note issued as a result of recission
                offering (including accrued interest of $7,200)          $   54,300         $        -           $     54,300
                                                                          =========          =========             ==========
</table>


<PAGE>F-5

                              HYPERBARIC SYSTEMS
                        (A Development Stage Company)
                        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, 2001
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.      STOCKHOLDER PAYABLES

        During the three months ended March 31, 2002, the Company paid accrued
wages to stockholders totaling $134,200.  Additionally, the Company paid
$50,000 in principal on a promissory note to a stockholder.  As of March 31,
2001 the balance in stockholder payables, totaling $87,300, consists of
accrued wages.

3.      STOCK BASED COMPENSATION RELATED TO GRANTING OF WARRANTS AND OPTIONS

OPTIONS

        STATUTORY INCENTIVE STOCK OPTIONS - In January 2002, the Company
granted statutory incentive stock options to various employees in relation to
the stock option plan adopted in August 2001, to purchase 395,000 shares of
the Company's common stock at $0.54 per share.  The Company estimated the
value of the options under APB 25 "Accounting for Stock issued to Employees"
which calculates the cost using the difference between the estimated fair
value of the stock on the date of grant and the exercise price. Compensation
under the statutory incentive stock options totaled $35,500 for the three
months ended March 31, 2002.

<PAGE>F-6

        NON-STATUTORY INCENTIVE STOCK OPTIONS - In January 2002, the Company
granted non-statutory incentive stock options to various consultants in
relation to the stock option plan adopted in August 2001, to purchase 45,000
shares at $0.54 per share.  The Company estimated the fair value of non-
statutory incentive stock options by using the Black-Scholes option pricing-
model with the following assumptions: no dividend yield; expected volatility
of 232%; risk-free interest rates of 2.23%; and expected lives of 1 year for
all plan options.  Compensation under the non- statutory incentive stock
options totaled $22,000 for the three months ended March 31, 2002.

        Employees and consultants may exercise their options to purchase their
shares according to the following schedule:

                            At inception    30%
                            After 1st year  30%
                            After 2nd year  40%

WARRANTS

        In January 2002, the Company entered into a Consulting Agreement
("Agreement") with an entity whereby the entity would provide investor and
financial public relations in return for a monthly retainer of $5,000 and a
warrant to purchase 80,000 shares of the Company's common stock at $0.72 per
share.  The Company has estimated the fair value of the warrant using the
Black-Scholes pricing-model with the following assumptions: no dividend yield;
expected volatility of 232%; risk free interest rates of 2.29%; and an
expected life of 1 year.  Compensation under the grant totaled $40,100 for the
three months ended March 31, 2002.

<PAGE>F-7

4.      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
$723,600 for the three months ended March 31, 2002.  The Company is in the
fifth year of research and development, with an accumulated loss during the
development stage of $7,701,000, a stockholders' deficit of $89,200, and a
working capital deficiency of $94,200 as of March 31, 2002. As of March 31,
2002, management is uncertain as to the completion date 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.

<PAGE>2

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 financial
statements and notes thereto.

OVERVIEW

        We are a development stage company, and have a very limited operating
history and 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
our 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.

        Our principal business objective is to develop and provide economical,
non-toxic methods of extending the shelf life and improving the quality of
blood platelets and other biological material.  We have been successful in
preserving blood platelets for ten days under refrigeration while maintaining
cell structure and morphology, which has never been done before to our
knowledge. We hope to validate our findings at an independent blood center in
California and submit them for government approval in the next quarter.

        We will continue efforts on prototype development and the generation
of pre-clinical and clinical data in the months ahead.  It is anticipated that
we will commence human studies by summer of 2002 and submit our first
application for FDA approval and begin clinical testing of our first product
for blood platelet storage within the next six months.  We have begun research
on kidney preservation and developing solutions that will operate under
refrigerated conditions in April 2002.

        In addition to our previously-filed patent applications, we filed a
provisional patent application in June 2001 to cover recent discoveries in our
platelet preservation process.   We anticipate filing additional patent
applications 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 research and development facility
from its current location in Russia to a more suitable location to accommodate
more equipment and personnel.  In April 2002, we set up a separate research
facility in Vicksburg, Michigan.  We also intend to establish a central
administrative facility in the U.S. in 2002.

<PAGE>3

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
Quintiles only on a limited basis, as we have not yet started clinical trials.
We anticipate that Quintiles participation will increase as we meet with the
FDA to proceed with clinical trials.

        As an overall strategy, we intend to limit the system claims for our
Platelet Preservation System and to progressively expand them as FDA and/or EU
approval is granted for each succeeding claim.  We also plan to market our
first products in countries that have relaxed regulatory requirements for
product sales.  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 three-phase strategy, with estimated time
requirements for the research and development and market introduction of
products.  The first phase starts with a platelet preservation product which
stores platelets under refrigeration for seven to nine days using our
proprietary solution by itself.   The second phase is the market introduction
of our Platelet Preservation System utilizing our hyperbaric container. Our
third phase 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.   We are currently in the first phase of our strategy, and
are anticipating advancing through this phase for the foreseeable future.

        Governmental 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.

<PAGE>4

PLATELET PRESERVATION - REFRIGERATION

        Our platelet preservation plan starts with a platelet preservation
product using our solution by itself.  We have been able to successfully store
platelets for ten days at refrigerated temperatures, which is considered to be
a major milestone in the cold storage of platelets.  Our technology has been
validated by an independent test facility in the U.S., and we are commencing
human studies.  Currently the industry stores platelets at ambient temperature
for a maximum of five days, an 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
nine days or beyond may eliminate the need for sub-zero stored platelets for
most blood center needs.

ORGAN PRESERVATION

        This effort will incorporate storage of organs involving experiments
with animal organs to demonstrate our ability to harvest, 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.  In addition, we plan to develop a process that will reduce the
need for anti-rejection drugs after transplantation. The development process
will include the development of solutions, cooling methods and possibly the
use of chambers to protect organs from freezing at sub-zero storage
temperatures.

TEST RESULTS

        Non-clinical experiments and tests of platelet preservation and other
research and development activities are being conducted in Russia and
Vicksburg, Michigan.   We are continuing to conduct experiments to find the
optimal conditions of storage at refrigerated temperatures.  We have been able
to achieve up to 24 hours of refrigerated storage of platelets with up to 68%
retaining their original disc shape.  Up to 13% of the platelets remain discs
after five days of storage.  Subsequent tests indicated very little disc loss
after the first 24 hours of storage, where disc percentage remained
essentially constant for 72 hours, which was the limit of these particular
tests.  We subsequently demonstrated that platelets stored using our
technology under refrigeration for ten days still remain functional, with a
platelet survival rate of up to 78% and 20% maintaining full functionality.

<PAGE>5

        Our most recent test efforts have been directed toward the refinement
of our platelet preservation technology before we commence human studies and
an application for approval from the FDA.  Human studies are currently
projected to start sometime in 2002.

RESULTS OF OPERATIONS

        Three Months Ended March 31, 2002 Compared With Three Months Ended
March 31, 2001

REVENUES.  We did not generate any revenue in the three months ended March 31,
2002 and 2001, and have not generated revenues since our inception in February
1998, as our focus to date has been on the research and development of
products.  We are a development stage company in the fifth year of research
and development activities, and do not anticipate receiving revenue until we
complete product development and clinical testing.

GENERAL AND ADMINISTRATIVE EXPENSES.   Our total general and administrative
expenses in the three months ended March 31, 2002 equaled $553,800, a decrease
from $798,100 for the comparable period in 2001.  This decrease was primarily
due to a substantial decline in our use of stock based compensation, which
equaled $256,700 during the three months ended March 31, 2002 compared to
$664,700 in the comparable period in 2001.  This decrease was offset in part
by an increase in  other general and administrative expenses including the
employment of an office assistant and the purchase of expendable computer
equipment.

RESEARCH AND DEVELOPMENT.  Our research and development expenses increased
from $74,000 for the three months ended March 31, 2001 to $105,100 for the
three months ended March 31, 2002, due to costs incurred in connection with
our planned establishment of a research and development facility in Vicksburg,
Michigan, the employment of a Chief Operating Officer, and research and
development work conducted by a third party.

<PAGE>6

SALES AND MARKETING EXPENSES.  Our sales and marketing expenses for the three
months ended March 31, 2002 equaled $64,700, an increase from $12,700 for the
three months ended March 31, 2001.  This increase was due to our hiring of a
new Vice President of Marketing and the expansion of our company promotion
efforts, including entering into contracts for new investor relations programs
in the United States and Europe.  Although we are developing our sales and
marketing efforts, we intend to expand at a measured pace until our products
are ready for introduction into the market.

INTEREST EXPENSE.  We incurred no interest expense during the three months
ended March 31, 2002 as compared to interest expense of $70,600 in the same
period in 2001.  The decrease is primarily due to interest on promissory notes
issued in 2000, many of which were converted to common stock in 2001. We had
no interest income in the three-month periods ended March 31, 2002 and 2001.

NET LOSS.  As a result of the foregoing factors, our net loss decreased from
$955,400 for the three months ended March 31, 2001 to $723,600 for the three
months ended March 31, 2002.  Our net loss per share also decreased from $.10
for the three months ended March 31, 2001 to $.05 for the three months ended
March 31, 2002.

LIQUIDITY AND CAPITAL RESOURCES

        Our operating plan for calendar year 2002 is focused on development of
our products. It is our estimate that a cash requirement of $2,500,000 is
required to support this plan for the next twelve months.  We have received an
aggregate of only $376,600 through March 31, 2002 and we are actively seeking
additional funding.  There can be no assurance that such financing will be
available at terms favorable to us or at all.

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

<PAGE>7

        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 will be dependent on funding from private placements of
equity securities.  At the present time however, we have no agreements or
other arrangements for any such private placements.

        We are in the fifth year of research and development, with an
accumulated loss during the development stage of $7,701,000.  As of March 31,
2002, 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.

        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 attain profitability.

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

RISK FACTORS

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

WE HAVE A HISTORY OF LOSSES, AND OUR ACCOUNTANTS HAVE RAISED DOUBTS ABOUR OUR
ABILITY TO CONTINUE AS A GOING CONCERN

        Since our inception in 1998, we have incurred substantial 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, 2001 financial statements to include an uncertainty
paragraph wherein they expressed substantial doubt about our ability to
continue as a going concern.

<PAGE>8

        We are in the fourth year of research and development, with an
accumulated loss during the development stage of $7,701,000.  We currently do
not know when our research and development will be completed, or if a product
will ever result from this research and development activity.   We anticipate
that the funds spent on research and development activities will need to
increase significantly prior to completion of research and development and
commercialization of a product.  Additionally, we may not be able to secure
funding in the future necessary to complete our intended research and
development activities.

        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 attain profitability.

WE REQUIRE IMMEDIATE ADDITIONAL CAPITAL.

        We currently anticipate that based on our short-term forecast of
raising additional funds of $2.5 million, our available funds will be
sufficient to meet our anticipated needs for working capital, capital
expenditures and business operations through December 31, 2002. However, we
have raised only $376,600 through March 31, 2002.  We therefore need to raise
additional capital.  Obtaining capital will be challenging in a difficult
environment, due to the economic downturn in the United States economy.
We currently have no commitments for any future funding, and there can be no
assurance that we will be able to obtain additional funding in the future from
either debt or equity financings, bank loans, collaborative arrangements or
other sources on terms acceptable 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.  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.

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.

<PAGE>9

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 or 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.

ESTABLISHING OUR REVENUES AND ACHIEVING PROFITABILITY WILL DEPEND ON OUR
ABILITY TO DEVELOP AND COMMERCIALIZE OUR PRODUCTS.

        Much of our ability to establish revenues and to achieve profitability
and positive cash flows from operations will depend on the successful
introduction of our products in development.  Products based on our
technologies will represent new methods of treatment and preservation. Our
prospective customers, including blood banks, hospitals and clinics, will not
use our products unless they determine that the benefits provided by these
products are greater than those available from competing products. Even if the
advantage from our planned products is clinically established, prospective
customers may not elect to use such products for a variety of reasons.

        We may be required to undertake time-consuming and costly development
activities and seek regulatory clearance or approval for new products.  The
completion of the development and commercialization of any of our products
under development remains subject to all of the risks associated with the
commercialization of new products based on innovative technologies, including
unanticipated technical or other problems, manufacturing difficulties and the
possible insufficiency of the funds allocated for the completion of such
development.

<PAGE>10

WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY.

        As a development stage company, we are entering a biological material
preservation market that is presently addressed by large companies with
extensive financial resources.  Those companies include DuPont and Baxter,
among others.  Additionally, smaller companies with which we may compete
include LifeCell Corporation for platelet preservation, Cerus for viral
inactivation of platelets and other blood products and Cryo Life for
preserving heart valves by cryo-preservation. We have limited funds with which
to develop products and services, and many of our competitors have
significantly more resources than we do.  These companies are active in
research and development of biological material preservation, and we do not
know the current status of their development efforts. Most of the above
competitors have significantly greater financial resources, technical
expertise and managerial capabilities than we currently possess.

WE MAY FAIL TO OBTAIN GOVERNMENT APPROVAL OF OUR PROCESSES.

        The United States Food & Drug Administration ("FDA") regulates the
commercial distribution and marketability of medical solutions and equipment.
In the event that we determine that these regulations apply to our proposed
products, we will need to obtain FDA approval for such distribution.  The
process of obtaining FDA approval may be expensive, lengthy and unpredictable.
We have not developed our products to the level where these approval processes
can be started.  We do not know if such approval could be obtained in a timely
fashion, if at all.  In the event that we do not receive any required FDA
approval for certain products, we would not be able to sell such products in
the United States.

        The regulation of our processes and products outside the United States
will vary by country.  Noncompliance with foreign country requirements may
include some or all of the risks associated with noncompliance with FDA
regulation as well as other risks.

WE MAY FAIL TO ESTABLISH AND MAINTAIN STRATEGIC RELATIONSHIPS.

        We believe that the establishment of strategic partnerships will
greatly benefit the growth of our business, and we intend to seek out and
enter into strategic alliances.  We may not be able to enter into these
strategic partnerships on commercially reasonable terms or at all.  Even if we
enter into strategic alliances, our partners may not attract significant
numbers of customers or otherwise prove advantageous to our business. Our
inability to enter into new distribution relationships or strategic alliances
could have a material and adverse effect on our business.

<PAGE>11

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 recently 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 of 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.

<PAGE>12

        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 QUARTERLY 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.

<PAGE>13

PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         Not applicable.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

      On January 30, 2002, we granted options to purchase an aggregate of
440,000 shares of common stock under our  Stock Option Plan to employees and
certain other individuals, with an exercise price of  $0.54 per share.

     In January of 2002, we also granted a warrant to purchase 80,000 shares
of common stock for $0.72 per share to an investor relations firm in exchange
for services rendered.

        The issuances of options and warrants were made in reliance on Section
4(2) of the Act and were made without general solicitation or advertising.
The recipients were sophisticated investors with access to all relevant
information necessary to evaluate the investments, and  who represented to us
that the shares were being acquired for investment purposes.

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

<PAGE>14

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


/s/ Harry Masuda
    -----------------------
    Harry Masuda                          Date:  May 15, 2002
    Chief Executive Officer