================================================================================

                    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 June 30, 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 June 30, 2002, the registrant had outstanding 18,993,053 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 June 30, 2002                    F-2

      STATEMENTS OF OPERATIONS (unaudited) -- For the
       Three and Six Month Periods Ended June 30, 2002
       and 2001 and the period from February 26, 1998
       (Inception) through June 30, 2002                                  F-3

      STATEMENT OF STOCKHOLDERS' DEFICIT (unaudited) -
       For the Six Months Ended June 30, 2002                             F-4

      STATEMENTS OF CASH FLOWS (unaudited) -- For the
       Six Months Ended June 30, 2002 and 2001
       and the period from February 26, 1998 (Inception)
       through June 30,2002                                               F-5

      NOTES TO FINANCIAL STATEMENTS (unaudited)                     F-6 - F-7

    ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION   3-14

PART II - OTHER INFORMATION                                                15

    ITEM 1.  LEGAL PROCEEDINGS                                             15
    ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS                     15
    ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                               15
    ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS           15
    ITEM 5.  OTHER INFORMATION                                             15
    ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                              16

      SIGNATURES                                                           16


PART I -- FINANCIAL INFORMATION





                            HYPERBARIC SYSTEMS, INC.
                                 BALANCE SHEET
                                  (unaudited)
                                 June 30, 2002

<table>
<caption>

                                                                     <c>
                                     ASSETS

Current assets
        Cash                                                            $    194,900
        Prepaid expenses and other current assets                             48,500
                Total current assets                                         243,400

Fixed assets, net                                                              4,500

Total assets                                                            $    247,900

 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
        Accounts payable                                                $     50,000
        Accrued liabilities                                                   59,500
        Stockholder payables                                                  83,900
        Note payable - related party                                              --
        Convertible note payable - related party                                  --
        Stock subject to recission                                            21,000
                Total current liabilities                                    214,400

Total liabilities                                                            214,400

Commitments and contingencies                                                     --

Stockholders' equity
        Common stock; no par or stated value; 50,000,000 shares
           authorized, 18,236,000 shares issued and outstanding            8,759,500
        Other receivables, net                                              (448,300)
        Accumulated deficit during development stage                      (8,277,700)
                Total stockholders' equity                                    33,500

Total liabilities and stockholders' equity                              $    247,900

</table>

<PAGE>F-2

                            HYPERBARIC SYSTEMS, INC.
                            STATEMENT OF OPERATIONS
                                  (unaudited)
            For the Three and Six Month Periods Ended June 30, 2002
                 and 2001 and the period from February 26, 1998
                       (Inception) through June 30, 2002

<table>
<caption>

                                            <c>            <c>             <c>            <c>           <c>
                                                                                                            February 26, 1998
                                               Three Months Ended June 30,     Six Months Ended June 30,   (Inception) Through
                                                    2002         2001            2002            2001          June 30, 2002
                                                ---------     ----------      ----------       ----------        ----------

                                               $       --   $         --    $         --     $         --      $         --

Revenue

Operating expenses
        General and administrative
          Stock based compensation                104,900         59,800         361,600          724,500         3,037,600
          Other general and adminstrative
           expenses                               324,000        160,400         621,100          293,800         2,672,400
        Total general and administrative          428,900        220,200         982,700        1,018,300         5,710,000
        Research and development                   95,600         67,100         200,700          141,100         1,086,300
        Sales and marketing                        50,800         12,700         115,500           25,400           326,500

          Total operating expenses                575,300        300,000       1,298,900        1,184,800         7,122,800

Loss from operations                             (575,300)      (300,000)     (1,298,900)      (1,184,800)       (7,122,800)

Other income (expense)
        Loan fees                                      --             --              --               --          (750,000)
        Bad debt related to other receivable           --             --              --               --          (104,000)
        Interest income                                --             --              --               --             2,500
        Interest expense                             (600)       (68,000)           (600)        (138,600)         (299,400)

Loss before provision for income taxes           (575,900)      (368,000)     (1,299,500)      (1,323,400)       (8,273,700)

Provision for income taxes                            800             --             800               --             3,200

Net loss                                       $ (576,700)  $   (368,000)   $ (1,300,300)    $ (1,323,400)     $ (8,276,900)

Basic and diluted loss per common share        $    (0.04)  $      (0.03)   $      (0.08)    $      (0.13)     $      (1.16)

Basic and diluted weighted average
        common shares outstanding              15,962,700     10,606,300      16,064,600        9,927,400         7,138,700


</table>

<PAGE>F-3

                            HYPERBARIC SYSTEMS, INC.
                              STOCKHOLDER'S EQUITY
                                  (unaudited)
                     For the Six Months Ended June 30, 2002

<table>
<caption>

                                              <c>                 <c>          <c>           <c>               <c>
                                                                                             Accumulated
                                                                                            Deficit During       Total
                                                        Common Stock           Other         Development     Stockholders'
                                                     Shares        Amount   Receivables         Stage            Equity
                                                 ------------------------   -----------    --------------    -------------
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 $96,900), $0.34       3,020,600     1,017,500            --                --        1,017,500

Stock options and warrants exercised,
  weighted average exercise                         264,000         3,600            --                --            3,600
  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), $0.83                         72,100        54,300            --                --           54,300

Issuance of common stock for services, $0.83        317,500       264,000            --                --          264,000

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

Common shares due from stockholder                       --            --       (50,000)               --          (50,000)

Net loss                                                 --            --            --        (1,300,300)      (1,300,300)

Balance June 30, 2002                            18,236,000    $8,759,500    $ (448,300)     $ (8,277,700)    $     33,500

</table>

<PAGE>F-4

                            Hyperbaric Systems, Inc.
                                   Cash Flows
                                  (unaudited)
             For the Six Month Periods Ended June 30, 2002 and 2001

<table>
<caption>

                                                                      <c>                <c>             <c>

                                                                                                            February 26, 1998
                                                                             Six Months Ended June 30,     (Inception) Through
                                                                               2002              2001         June 30, 2002
                                                                          -------------------------------   ------------------




Cash flows from operating activities:
        Net loss                                                           $ (1,300,300)    $ (1,323,400)       (8,277,700)
        Adjustments to reconcile net loss to net
         cash used in operating activities:
                Stock based compensation                                        361,600          724,500         3,037,600
                Depreciation                                                      1,000              600             5,300
                Deemed interest expense                                              --           37,100            92,800
                Interest expense paid in common stock                                --               --           117,300
                Amortization of discount and loan fees
                        on notes payable                                             --           93,800           774,800
                 Bad debt related to other receivables                               --               --           104,000
        Changes in operating assets and liabilities:
                Change in prepaid expenses and other assets                      (9,300)           4,100           (48,500)
                Change in bank overdraft                                             --             (500)               --
                Change in accounts payable                                       (9,500)         (40,000)           74,700
                Change in accrued liabilities                                    20,000           (9,000)           94,500
                Change in stockholder payables                                 (171,400)         139,300           317,500
                        Net cash used by operating activities                (1,107,900)        (373,500)       (3,707,700)

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

Cash flows from financing activities:
        Proceeds from issuance of common stock                                1,021,100          458,500         3,757,200
        Proceeds from borrowing on notes payable                                     --               --           323,100
        Principal payments on notes payable                                          --           (7,000)          (97,400)
        Principal payments on stock subject to rescission                            --               --           (20,500)
        Change in other receivables, net                                        (50,000)              --           (50,000)
                        Net cash provided by financing activities               971,100          451,500         3,912,400

Net increase (decrease) in cash and cash equivalents                           (136,800)          78,000           194,900

Cash, beginning of period                                                       331,700               --                --

Cash, end of period                                                        $    194,900     $     78,000      $    194,900

Supplemental disclosure of cash flow information:
        Cash paid for income taxes                                         $         --     $         --      $    331,700
        Cash paid for interest                                             $         --     $         --      $         --

Schedule of non-cash financing activities:
        Issuance of common stock in satisfaction of
                promissory note issued as a result of recission offering   $         --     $    178,200      $         --

        Issuance of common stock in satisfaction of
                promissory note issued as a result of recission offering
                (including accrued interest of $7,200)                     $    104,000     $    104,000      $    104,000

</table>

<PAGE>F-5
                               HYPERBARIC SYSTEMS
                         (A Development Stage Company)
                         NOTES TO FINANCIAL STATEMENTS
                                  (UNAUDITED)

1.    BASIS OF PRESENTATION

The accompanying  unaudited 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 six months ended June 30, 2002, the Company paid accrued wages to
stockholders who are employees of the Company totaling $147,400.  Additionally,
the Company paid $50,000 in principal on a promissory note to a stockholder.
The Company accrued an additional $35,700 in wages during the six months ended
June 30, 2002.  As of June 30, 2002 the balance in stockholder payables,
totaling $83,900 consists of accrued wages.

3.      COMMON STOCK DUE FROM STOCKHOLDER

In April 2002, a check received from a stockholder for stock issued in 2001 was
returned by the bank due to insufficient funds.  The stockholder agreed to
return to the Company all 106,000 shares related to this transaction. However,
as of June 30, 2002 the Company has not received these shares and recorded a
stock receivable totaling $50,000 as other receivables.

4.      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 six months ended June 30, 2002.

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 six
months ended June 30, 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%

<PAGE>F-6

                               HYPERBARIC SYSTEMS
                         (A Development Stage Company)
                         NOTES TO FINANCIAL STATEMENTS
                                  (UNAUDITED)

4.      STOCK BASED COMPENSATION RELATED TO GRANTING OF WARRANTS AND OPTIONS
        (continued)

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 six months ended June 30, 2002.

5.     COMMITMENTS AND CONTINGENCIES

In May 2002, the Company entered into a Consulting Agreement with an entity
whereby the entity would develop and provide an investor relations program for
the term of twelve months.  Compensation for the services included 260,000
shares of the Company's common stock, of which 65,000 shares were issued in May
valued at $39,700.  The remaining shares are to be issued in three separate
issuances of 65,000 every 90 days.  Further, the Company will grant a warrant to
the entity to purchase 100,000 shares of the Company's common shares at $0.75
per share which will be exercisable for 3 years from the date of grant.  The
warrant will be automatically exercised if the underlying stock closes at or
above 150% of $0.75 per share for 30 consecutive trading days.  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 179%;
risk free interest rates of 2.531%; and an expected life of 1 year.
Compensation under the grant totaled $37,800 and will be expensed over the life
of the Consulting Agreement.

6.    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 $1,300,300 for the
six months ended June 30, 2002.  The Company is in the fifth year of research
and development, with an accumulated loss during the development stage of
$8,277,700.  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.

7. SUBSEQUENT EVENT

On August 7, 2002  the United States Attorney for the Eastern District of New
York and the Securities and Exchange Commission announced they were bringing
securities fraud charges against the Company and Harry Masuda, the Company's
Chief Executive Officer, for allegedly paying an unregistered broker an
undisclosed commission in a 1999 and 2000 private placement.  The allegations
generally charge the Company and Mr. Masuda with the failure to adequately
disclose to investors in these private placements a commission agreement with
Larry Bryant, an  unlicensed broker-dealer. Remedies sought in these proceedings
included criminal penalties and a bar from service as an officer or director of
a publicly-traded company. The Company believes the charges are unwarranted, and
that the issues involved in this matter were resolved during 2000 to the full
satisfaction of all investors.  There can be no assurance that Mr. Masuda will
be able to continue to serve as our Chief Executive Officer in the event that
the Securities and Exchange Commission receives the remedies that it seeks.


<PAGE>F-7

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 the end of summer of 2002 and submit our first
application for FDA approval and begin clinical testing of our first product for
blood platelet storage within six months thereafter. In April 2002, we began
research on kidney preservation and developing solutions that will operate under
refrigerated conditions.

In July 2002, we received our first patent on the technology and methodology for
preserving blood platelets.  This patent, U.S. 6,413,713, B1, is titled "Method
for Preserving Blood Platelets".   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.

<PAGE>3

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.

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 if longer preservation times are required.
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.

<PAGE>4

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.

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.   In July 2002, we entered into a development and supply
contract with MMR Technologies of Mountain View, California, to build a
computerized blood platelet cooling instrument.  We anticipate that a prototype
of this device, which is designed to help extend the shelf life of platelets for
blood banks and hospitals, will be ready for preliminary testing in
approximately two months.

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.

<PAGE>5

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.

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.  We are currently negotiating with two
blood research centers to conduct human infusion studies.  Human studies are
currently projected to start sometime in 2002.

Results of Operations

Three and Six Months Ended June 30, 2002 Compared With Three and Six Months
Ended June 30, 2001

Revenues.  We did not generate any revenue in the six months ended June 30, 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.   General and administrative expenses in
the three months ended June 30, 2002 were $428,900, an increase from $220,200
for the three months ended June 30, 2001.  Our total general and administrative
expenses in the six months ended June 30, 2002 equaled $982,700, a decrease from
$1,018,300 for the comparable period in 2001.  The decrease for the six-month
period was primarily due to a substantial decline in our use of stock-based
compensation during the first three months of 2002 as compared to the first
three months of 2001.  Stock-based compensation increased for the three months
ended June 30, 2002, however, equaling $104,900 as compared to $59,800 for the
three months ended June 30, 2001.  This increase was due to consulting
agreements entered into during the second quarter of 2002, which involved the
use of stock and warrants as consideration for services rendered, as well as
expenses incurred for the employment of an office assistant and the purchase of
expendable computer equipment.

<PAGE>6

Research and Development.  Our research and development expenses were $95,600
for the three months ended June 30, 2002, an increase from $67,100 for the
comparable period in 2001.  Research and development expenses also increased to
$200,700 for the six months ended June 30, 2002 from $141,100 for the six months
ended June 30, 2001.   These increases were primarily 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.

Sales and Marketing Expenses.  Our sales and marketing expenses for the three
months ended June 30, 2002 equaled $50,800, an increase from $12,700 for the
three months ended June 30, 2001.  Sales and marketing expenses for the six
months ended June 30, 2002 reflected a similar increase to $115,500 compared to
$25,400 for the comparable period in 2001.  The increase in both the three- and
six-month periods 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 continue to develop our sales and marketing efforts, we intend to
expand at a measured pace until our products are ready for introduction into the
market.

Interest Income and Expense.  We incurred interest expense of $600 during the
three months ended June 30, 2002, as compared to interest expense of $68,000 in
the same period in 2001.  Interest expense equaled $600 for the six months ended
June 30, 2002, as compared to interest expense of $138,600 for the six months
ended June 30, 2001.  The decrease in both periods was due primarily 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- or six-month periods ended
June 30, 2002 and 2001.

Net Loss.  As a result of the foregoing factors, our net loss increased to
$576,700 for the three months ended June 30, 2002, from a net loss of $368,000
for the three months ended June 30, 2001.  However, our net loss decreased to
$1,300,300 for the six months ended June 30, 2002 from $1,323,400 for the six
months ended June 30, 2001.  Our net loss per share increased to $0.04 for the
three months ended June 30, 2002, from $0.03 for the comparable period in 2001,
but decreased to $0.08 for the six months ended June 30, 2002 from $0.13 for the
six months ended June 30, 2001.

<PAGE>7

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 $1,021,100 through June 30, 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.

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 $8,277,700.  As of June 30, 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.

<PAGE>8

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 ABOUT 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.

We are in the fourth year of research and development, with an accumulated loss
during the development stage of $8,277,700.  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.

<PAGE>9

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 $1,021,100
through June 30, 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.

OUR CHIEF EXECUTIVE OFFICER IS THE SUBJECT OF SEC AND JUSTICE DEPARTMENT
PROCEEDINGS FOR SECURITIES FRAUD.

On August 7, 2002, the United States Attorney for the Eastern District of New
York and the Securities and Exchange Commission announced that they were
bringing securities fraud charges against us as well as Harry Masuda, our Chief
Executive Officer, for allegedly paying an unregistered broker an undisclosed
commission in a 1999 and 2000 private placement.  The allegations generally
charge Mr. Masuda and us with the failure to adequately disclose to investors in
this private placement a commission agreement with Larry Bryant, an unlicensed
broker-dealer. Remedies sought in these proceedings include criminal penalties
and a bar from service as an officer or director of a publicly-traded company.
Although we believe that the charges are unwarranted, and that the issues
involved in this matter were resolved over two years ago to the full
satisfaction of all investors, there can be no assurance that Mr. Masuda will be
able to continue to serve as our Chief Executive Officer in the event that the
Securities and Exchange Commission receives the remedies that it seeks. The loss
of Mr. Masuda could have a material adverse impact on our business 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.

<PAGE>10

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>11

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.

<PAGE>12

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.

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.

<PAGE>13

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 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>14

PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         Not applicable.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

         In May 2002, we issued 65,000 shares of our common stock and a warrant
to purchase 100,000 shares of our common stock to a consultant as partial
consideration for investor relations services.  The warrant is exercisable for
three years from the date of grant, with an exercise price of $.75 per share.
The issuance and grant were made in reliance on Section 4(2) of the Act and were
made without general solicitation or advertising.  The recipient was a
sophisticated investor with access to all relevant information necessary to
evaluate the investments, and who represented to us that the shares and warrant
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.

<PAGE>15

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)     Exhibits.

Exhibit No.       Title of Exhibit
----------        ---------------

99.1              Certification of Chief Executive Officer and Chief Financial
                  Officer

         (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: August 14, 2002           /s/ Harry Masuda
                                    ----------------------------
                                    Harry Masuda
                                    Chief Executive Officer