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 September 30, 2001

                       COMMISSION FILE NO. 0-28413


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


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


         1127 HARKER AVENUE
     PALO ALTO, CALIFORNIA 94301                    650-323-0943
(Address of principal executive offices)    (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 November 12, 2001, the registrant had outstanding 13,424,100 shares of
common stock, no par value.

        Transitional Small Business disclosure format: Yes     No   X



HYPERBARIC SYSTEMS

TABLE OF CONTENTS

<table>
<caption>

                                                                            <c>

                                                                               PAGE
PART I - FINANCIAL INFORMATION


        ITEM 1.  FINANCIAL STATEMENTS

BALANCE SHEET (unaudited)  - as of September 30, 2001                            3

STATEMENTS OF OPERATIONS (unaudited) -- For the Three Month and Nine Month
Periods Ended September 30, 2001 and 2000 and the period from February 26,
1998 (Inception) through September 30, 2001                                      4

STATEMENT OF STOCKHOLDERS' DEFICIT (unaudited)- For the Nine Months ended
September 30, 2001                                                               5

STATEMENTS OF CASH FLOWS (unaudited) -- For the Nine Month Periods Ended
September 30, 2001 and 2000 and the Period From February 26, 1998 (Inception)
through September 30, 2001                                                       6

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)                                        8

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION              10

PART II - OTHER INFORMATION                                                     16

ITEM 1.  LEGAL PROCEEDINGS                                                      16

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS                              16

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES                                        17

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                    17

ITEM 5.  OTHER INFORMATION                                                      18

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                       18


SIGNATURES                                                                      19

</table>


PART I -- FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                              HYPERBARIC SYSTEMS
                        (A Development Stage Company)

                               BALANCE SHEET
                             SEPTEMBER 30, 2001
                                (UNAUDITED)


ASSETS


Current assets
                Cash                                         $      201,200
                Prepaid expenses and other current assets            30,400
                                                                  ---------
                        Total current assets                        231,600
Fixed assets, net                                                     6,200
                                                                  ---------
  Total assets                                               $      237,800
                                                                  =========
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities
                Accounts payable                             $       63,200
                Accrued liabilities                                 105,000
                Stockholder payables                                178,400
Stock subject to rescission                                          88,600
                                                                  ---------
                        Total current liabilities                   435,200
                                                                  ---------
Total liabilities                                                   435,200
        Commitments and contingencies                                     -
        Stockholders' deficit
    Common stock; no par or stated value; 50,000,000
     shares authorized, 13,424,100 shares issued and
     outstanding                                                  6,617,900
            Other receivables                                      (502,300)
        Accumulated deficit during development stage             (6,313,000)
                                                                  ---------
                      Total stockholders' deficit                  (197,400)
                                                                  ---------
               Total liabilities and stockholders' deficit    $     237,800
                                                                  =========
See accompanying Notes to Financial Statements.

                              HYPERBARIC SYSTEMS
                        (A Development State Company)
                          STATEMENTS OF OPERATIONS
                                 (UNAUDITED)
<table>
<caption>

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

                                                                                                                      February 26,
                                                                                                                         1998
                                                                                                                      (Inception)
                                                         Three Months Ended                 Nine Months Ended          Through
                                                           September 30,                        June 30,             Septebmer 30,
                                                         2001          2000                2001          2000            2001
Revenue                                            $        --      $      --       $        --      $       --      $        --
Operating expenses
        General and administrative
                Stock based compensation               656,300         63,600           826,300         904,400        2,615,000
                Other general and administrative       209,800        119,500           503,600         518,800        1,861,500
                        expenses
        Total general and administrative               866,100        183,100         1,329,900       1,423,200        4,476,500
        Research and development                        66,800         89,600           207,900         251,500          773,900
        Sales and marketing                             12,700          9,600            38,100          50,000          168,100
        Total operating expenses                       945,600        282,300         1,575,900       1,724,700        5,418,500
Loss from operations                                  (945,600)      (282,300)       (1,575,900)     (1,724,700)      (5,418,500)
Other income (expense)
        Loan fees                                     (562,500)            --          (656,200)             --         (656,200)
        Interest income                                     --             --                --             400            2,500
        Interest expense                               (30,100)       (29,100)          (75,000)        (87,400)        (238,400)
Loss before provision for income taxes              (1,538,200)      (311,400)       (2,307,100)     (1,811,700)      (6,310,600)
Provision for income taxes                                  --             --                --             800            2,400
Net loss                                           $(1,538,200)    $ (311,400)      $(2,307,100)    $(1,812,500)     $(6,313,000)
Basic and diluted loss per share                   $     (0.12)    $    (0.04)      $     (0.19)    $     (0.26)     $     (0.94)
Basic and diluted weighted average common
 shares outstanding                                 12,627,700      7,081,600        12,206,600       6,879,400        6,734,700

</table>


                              HYPERBARIC SYSTEMS
                        (A Development State Company)
                      STATEMENT OF STOCKHOLDERS' DEFICIT
                                 (UNAUDITED)
<table>
<caption>

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

                                                                       Loan Fees              Prepaid
                                                                    Related to Option        Consulting
                                                    Common Stock       to Purchase        Services Paid in
                                                   Shares  Amount     Common Stock         Common Stock
Balance, December 31, 2000                    $ 8,136,200  $3,818,600    $(656,200)       $  (195,200)

Issuance of common stock for cash (net
offering costs of $95,300)                      2,167,700     772,100           --                 --

Stock options and warrants exercised              734,200     153,000           --                 --

Issuance of common stock in
satisfaction of accounts payable                   67,600      24,800           --                 --

Satisfaction of accrued liabilities related
to granting warrants                                   --      18,100           --                 --

Satisfaction of stockholder payables
related to granting warrants                           --     274,000           --                 --

Issuance of common in satisfaction of
promissory note issued as a result of
rescission offering                               416,600     178,200           --                 --

Issuance of common stock in
satisfaction of convertible note payable
related party (including interest of
$82,700)                                          257,300     272,700           --                 --

Amoritzation of prepaid consulting
services                                               --          --           --            195,200

Issuance of common stock for services             184,500      91,200           --                 --

Stock based compensation related to
granting warrants and options                          --     280,200           --                 --

Deemed interest expense related to
conversion feature of note payable                     --      55,700           --                 --

Current period amortization of loan fees
related to options to purchase common
stock                                                  --          --      656,200                 --

Issuance of common stock for other
receivables                                       800,000     104,000           --                 --

Common shares due related to
termination of consulting agreement               510,000     398,300           --                 --

Issuance of common stock in exchange
for consulting agreement                          150,000     177,000           --                 --

Net loss                                               --          --           --                 --

Balance, September 30, 2001                   $13,424,100  $6,617,900    $      --        $        --

</table>


                              HYPERBARIC SYSTEMS
                        (A Development State Company)
                      STATEMENT OF STOCKHOLDERS' DEFICIT
                                 (UNAUDITED)
<table>
<caption>

                                              <c>         <c>             <c>


                                                                                 Total
                                                    Other     Accumulated     Stockholders
                                                 Receivables     Deficit          Deficit
Balance, December 31, 2000                     $       --   $ (4,005,900)   $ (1,038,700)

Issuance of common stock for cash (net
offering costs of $95,300)                             --             --        772,1000

Stock options and warrants exercised                   --             --         153,000

Issuance of common stock in
satisfaction of accounts payable                       --             --          24,800

Satisfaction of accrued liabilities related
to granting warrants                                   --             --          18,100

Satisfaction of stockholder payables
related to granting warrants                           --             --         274,000

Issuance of common in satisfaction of
promissory note issued as a result of
rescission offering                                    --             --         178,200

Issuance of common stock in
satisfaction of convertible note payable
related party (including interest of
$82,700)                                               --             --         272,700

Amoritzation of prepaid consulting
services                                               --             --         195,200

Issuance of common stock for services                  --             --          91,200

Stock based compensation related to
granting warrants and options                          --             --         280,200

Deemed interest expense related to
conversion feature of note payable                     --             --          55,700

Current period amortization of loan fees
related to options to purchase common
stock                                                  --             --         656,200

Issuance of common stock for other
receivables                                      (104,000)            --              --

Common shares due related to
termination of consulting agreement              (398,300)            --              --

Issuance of common stock in exchange
for consulting agreement                               --             --         177,000

Net loss                                               --      (2,307,100)    (2,307,100)

Balance, September 30, 2001                   $  (502,300)   $ (6,313,000)  $   (197,400)

</table>


                              HYPERBARIC SYSTEMS
                        (A Development State Company)
                          STATEMENTS OF CASH FLOWS
                                 (UNAUDITED)
<table>
<caption>

                                                                             <c>                   <c>      <c>

                                                                                                              February 26, 1998
                                                                                   Nine Months Ended             (Inception)
                                                                                     September 30,                 Through
                                                                                    2001      2000            September 30, 2001
Cash Flows From Operating Activities:
Net loss                                                                    $  (2,307,100)  $  (1,812,500)   $  (6,313,000)
        Adjustments to reconcile net loss to net
        cash used in operating activities:
        Stock based compensation                                                  826,300         904,400        2,615,000
        Depreciation                                                                1,200           1,200            3,600
        Deemed interest expense                                                    55,700              --           92,800
        Amortization of discount and loan fees on notes payable                   656,200          84,500          774,800
        Changes in operating assets liabilities:                                                       --               --
                Change in prepaid expenses and other assets                       (21,300)         (5,500)         (30,400)
                Change in bank overdraft                                             (500)             --               --
                Change in accounts payable                                        (23,900)         60,000           87,900
                Change in accrued liabilities                                     (16,100)        (82,400)         123,100
                Change in related party wages and accrued expenses                     --         133,100               --
                Change in stockholder payables                                    150,500              --          421,700
                Net cash used by operating activities                             679,000         (717,200)      (2,224,500)
Cash flows from investing activities:
Purchase of fixed assets                                                               --          (6,100)          (9,800)
                Net cash used by investing activities                                  --          (6,100)          (9,800)
Cash flows from financing activities:
        Proceeds from issuance of common stock                                    925,100         515,900        2,209,800
        Proceeds from borrowing on notes payable                                   24,000         161,700          323,100
        Principal payments on notes payable                                       (68,900)         (5,000)         (97,400)
                Net cash provided by financing activities                         880,200         672,600        2,435,500
Net increase (decrease) in cash and cash equivalents                              201,200         (50,700)         201,200
Cash and cash equivalents, beginning of period                                         --          52,100               --
Cash and Cash Equivalents, end of period                                          201,200   $       1,400    $     201,200
Supplemental Disclosure of Cash Flow Information:
        Cash paid for income taxes                                                     --   $          --    $       1,600
        Cash paid for interest                                                         --   $         600    $         200
Schedule of non-cash financing activities:
        Principal payments on notes payable through the issuance of
                common stock                                                           --   $          --    $       5,000
        Rescission of common stock related to Reg. D offering dated
                September 1, 1999 and February 2, 2000                                 --   $          --    $     334,400
        Loan fees related to options to purchase common stock                          --   $          --    $     750,000
        Issuance of common stock for prepaid consulting services                       --   $          --    $     335,100
        Issuance of common stock  in exchange for other receivable                104,000   $          --    $     104,000
        Issuance of common stock in satisfaction of accounts payable               24,800   $          --    $      24,800
        Satisfaction of accrued liabilities relating to granting warrants          18,100   $          --    $      18,100
        Satisfaction of stockholder payables related to granting of
                warrants and options                                              274,000   $          --    $     274,000
        Issuance of common stock for finder's fees                                 16,900   $          --    $      16,900
        Issuance of common stock in satisfaction of convertible note payable
                  related party                                                   190,000   $          --    $     190,000
        Issuance of common stock in satisfaction of promissory note issued
                as a result of rescission offering                          $     178,200   $          --    $     245,700

See accompanying Notes to Financial Statements

</table>

                              HYPERBARIC SYSTEMS
                        (A Development State 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, 2000
of HyperBaric Systems ("the Company").

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

2.      OTHER RECEIVABLE

During April 2001, the Company issued 800,000 shares of the Company's common
stock for $104,000.  As of September 30, 2001, the Company has not received
these funds and is currently taking necessary actions to collect or have the
shares returned and cancelled.

3.      CONVERTIBLE NOTE PAYABLE - RELATED PARTY

During June 2000, the Company entered into an unsecured loan agreement with a
stockholder to borrow a principal amount up to $500,000, with interest at 10%,
and maturing in June 2004.  The loan agreement also contained a conversion
feature for converting the loan balance into restricted common stock, based on
the unpaid principal and interest balances of the loan.  In September 2001,
the stockholder converted the balance of $272,700 (including interest of
$87,700) into 257,300 shares of the Company's common stock.

Additionally, a warrant was granted to purchase 500,000 shares of the
Company's common stock at $0.30 per share.  The fair value of the warrants as
computed using the Black-Scholes option pricing model was $750,000 and was
recorded as unamortized loan fees related to options to purchase common stock
- related party, of which $93,800 was recorded as loan fees during the year
ended December 31, 2000.  As of September 30, 2001, the remaining unamortized
loan fees were completely amortized upon conversion of the related loan.

4.      TERMINATION OF CONSULTING AGREEMENT

In January 2001, the Company entered into a Financial Consulting Services
Agreement with an entity whereby the entity agreed to provide financial
consulting services for one year in exchange for 200,000 restricted shares of
the Company's common stock.  In conjunction with that agreement, the Company
also entered into a second Financial Consulting Services Agreement with three
individuals whereby the individuals agreed to provide financial consulting
services for one year in exchange for 510,000 free trading shares of the
Company's common stock.  These two agreements will hereafter be collectively
referred to as the "Consulting Agreements" while both the entity and
individuals will hereafter be collectively referred to as the "Consultants".
In January 2001, the Company issued 710,000 shares of the Company's common
stock as pertaining to the Consulting Agreements.

In August 2001, the Company entered into a Termination Agreement (the
"Termination") with the Consultants, whereby both parties agreed to terminate
the Consulting Agreements.  As a material inducement to the Company and
Consultants to enter into the Termination, the Consultants agreed to return
all 710,000 shares of the Company's common stock in exchange for 150,000
shares of the Company's common stock.

As of September 30, 2001, the Company received and cancelled 200,000 shares
from the Consultant, while the remaining 510,000 shares remain outstanding.
The 710,000 shares were originally expensed in the amount of $554,500 as stock
based compensation in January 2001.  As no services were performed by the
Consultants, the Company reversed the entire expense of $554,500 while
recording an other receivable of $398,300 for the 510,000 outstanding shares.
The following proforma statements of operations shows the effects of the
Termination and related reduction of expenses for the three months ended March
30, 2001, the period in which the transactions were previously reported:

<table>
<caption>

                                          <c>                        <c>                 <c>
                                            For the Three Months Ended March 31, 2001
                                            Previously Reported              Restated       Difference
                                            -------------------            ----------       ----------
Revenue                                              $       --            $       --       $       --
Operating expenses                                      884,800               330,300          554,500
Loss from operations                                    884,800               330,300          554,500
Other expense                                            70,600                70,600                0
Loss before provision for income taxes                  955,400               400,900          554,500
Provision for income taxes                                   --                    --               --
                                                      ---------             ---------        ---------
Net Loss                                             $  955,400            $  400,900       $  554,500
                                                      =========             =========        =========
Basic and diluted loss per common share              $    (0.10)           $    (0.05)      $    (0.05)
                                                      =========             =========        =========
Basic and diluted weighted average
   Common shares outstanding                          9,241,000             8,712,400          528,600
                                                      =========             =========        =========
</table>

5.      STOCK OPTION PLAN

The Company adopted the following stock option plan during August 2001:

2001 Stock Option Plan

The purpose of this plan is to strengthen the Company by providing both
incentive stock options ("ISO's") and nonqualified options ("NQO's") as a
means to:  (i) encourage selected officers and key employees to accept or
continue employment with the Company, and (ii) increase the interest of
selected officers, directors, key employees and consultants in the Company's
welfare through participation in the growth in value of the common stock of
the Company.  Eligible persons may be granted ISO's with an exercise price of
no less then the fair value of the stock on the date of grant or NQO's with an
exercise price of no less then 85% of the fair value of the stock on the date
of grant. Both types of options may be granted to any ten percent stockholder
at no less then 110% of the fair market value of the stock covered by the
option at the time the option is granted.  The Company has set aside 1,585,500
shares of common stock for this plan with no options granted as of September
30, 2001.

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
$2,307,100 for the nine months ended September 30, 2001.  The Company is in
the fourth year of research and development, with an accumulated loss during
the development stage of $6,313,000, a stockholders' deficit of $197,400 and a
working capital deficiency of  $203,600 as of September 30, 2001.  As of
September 30, 2001, management is uncertain as to the completion date of
its proposed products or whether the products will be completed at all.

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

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




        Item 2. Management's Plan of Operation.

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

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

Overview

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

        We have experienced operating losses since our inception.  These
losses have resulted from the significant costs incurred in the development of
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 submit our first application for FDA approval and begin clinical
testing of our first product for blood platelet storage within the next six to
nine months.  We plan to begin research on kidney preservation and developing
solutions that will operate under refrigerated and sub-zero temperature
conditions within the next six months.

        We filed a provisional patent application in June 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 operations 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 Russia to a more suitable location to accommodate more
equipment and personnel, and intend to establish a central administrative
facility in the U.S. within the next six to nine months

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,
Inc. 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 Plexlife
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 marketing strategy, with estimated
time requirements for the research and development, and market introduction of
products.  The plan starts with phase one, a platelet preservation product
which stores platelets under refrigeration for 7 to 9 days using only our
PlexLife solution by itself.  Subject to market requirements, the second phase
will be the market introduction of the PlexLife System with our hyperbaric
container. Our third phase of marketing will be to find a viable alternative
to the current organ preservation methods with both solution under
refrigeration and a complete system at sub-zero temperatures.

Platelet Preservation - Refrigeration

        The plan starts with a platelet preservation product using only the
PlexLife solution by itself.  We have been able to successfully store
platelets for 10 days at refrigerated temperatures, which is considered to be
a major milestone in the cold storage of platelets.  We are now in process of
having our technology validated by an independent test facility in the U.S.
Currently the industry stores platelets at ambient temperature for a maximum
of 5 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 9
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.  The development will include the development of
solutions, cooling methods and possibly the use of chambers to protect organs
from freezing at sub-zero storage temperatures.

     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.

Results of Operations

Three Months Ended September 30, 2001 Compared With Three Months Ended
September 30, 2000

Revenues.  We have not had any revenue since our inception in February 1998,
as our focus to date has been on the research and development of products.

General and Administrative Expenses.   Our total general and administrative
expenses in the three months ended September 30, 2001 equaled $866,100, an
increase from $183,100 for the comparable period in 2000.  This increase was
primarily due to an increase in stock based compensation. We usually
compensate our executives, cetain consultants and pay certain professional
fees with stock, options and warrants to conserve cash.

Research and Development.  Our research and development expenses decreased
from $89,600 for the three months ended September 30, 2000 to $66,800 for the
three months ended September 30, 2001, due to a shut down of our Russian
branch during the month of August, 2001.

Sales and Marketing Expenses.  Our sales and marketing expenses for the three
months ended September 30, 2001 equaled $12,700, an increase from $9,600 for
the three months ended September 30, 2000.  This increase is due to our
decision to increase our sales and marketing expenses.

Interest Expense.  We incurred interest expense of $30,100 for the three
months ended September 30, 2001 as compared to $29,100 in the same period in
2000.  The increase is primarily due to interest on related party notes
payable.

Net Loss.  As a result of the foregoing factors, our net loss increased from
$311,400 for the three months ended September30, 2000 to $1,538,200 for the
three months ended September 30, 2001.

Nine Months Ended September 30, 2001 Compared with Nine Months Ended September
30, 2000

General and Administrative Expenses.   Our total general and administrative
expenses in the nine months ended September 30, 2001 equaled $1,329,900, a
decrease from $1,423,200 for the comparable period in 2000.  This decrease was
primarily due to a decrease in stock based and cash based compensation and
payment of cetain professional fees.

Research and Development.  Our research and development expenses decreased
from $251,500 for the nine months ended September 30, 2000 to $207,900 for the
nine months ended September 30, 2001, due to a shut down of our Russian branch
in August, 2001.

Sales and Marketing Expenses.  Our sales and marketing expenses for the nine
months ended September 30, 2001 equaled $38,100, a decrease from $50,000 for
the nine months ended September 30, 2000. This decrease is due to our decision
to decrease our sales and marketing expenses until our products are ready for
introduction into the market.

Interest Income. We did not have any interest income for the nine months
period ended September 30, 2001, compared to interest income of $400 for the
comparable period in 2000.

Interest Expense.  We incurred interest expense of $75,000 for the nine months
ended September 30,  2001, as compared to $87,400 in the same period in  2000.
The decrease is primarily due to interest on related party notes payable.

Net Loss.  As a result of the foregoing factors our net loss increased from
$1,812,500 for the nine months ended September 30, 2000, to $2,307,100 for the
nine months ended September 30, 2001.

Liquidity and Capital Resources

    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.

  Our operating plan for calendar year 2001has been focused on development of
our products. It is our estimate that a cash requirement of $1,200,000 is
required to support this plan, comprised of $1,000,000 for operating expenses
and $200,000 for capital expenditures. We have recieved an aggregate of
$925,000, and are actually seeking additional funding. There can be no
assurance that such financing will be available at terms favorable to us or at
all.

   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.

Intellectual property

        We consider our intellectual property to be a key cornerstone and
asset of our business.  As such, the intellectual property, which consists of
applied-for patents, trade secrets, copyrights and know-how will, be both
developed and protected.  We plan to gain  protection for our intellectual
property worldwide by patent and trademark filings in major foreign markets as
well as the careful protection of trade secrets through contract and
procedure. In addition to the previous patent filings, we recently filed a
provisional patent application in June 2001. Information regarding our patents
is contained in our most recent Annual Report on Form 10-KSB.

Risk Factors

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

GOING CONCERN

        We are in the fourth year of research and development, with an
accumulated loss during the development stage of $6,313,000.  As of September
30, 2001 we are uncertain as to the completion date of this research and
development, or if a product will ever be completed as a result of this
research and development activity.    We anticipate that the funds spent on
research and development activities will need to increase prior to completion
of a product.  Additionally, we may not be able to secure funding in the
future necessary to complete our intended research and development activities.

        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.

WE REQUIRE IMMEDIATE ADDITIONAL CAPITAL.

        We currently anticipate that based on our short-term forecast of
raising additional funds of $1.2 million, our available funds will be
sufficient to meet our anticipated needs for working capital, capital
expenditures and business operations until April 2002. To date, however, we
have raised $925,000 through September 30, 2001.  We therefore  need to raise
additional capital.  There can be no assurance that additional financing will
be available on terms favorable to us or at all.  If adequate funds are not
available or are not available on acceptable terms when required, we may be
required to significantly curtail our operations or may not be able to fund
expansion, take advantage of unanticipated acquisition opportunities, develop
or enhance services or products or respond to competitive pressures. Such
inability could have a material adverse effect on our business, results of
operations and financial condition.  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.

CHANGES IN THE NUMBER OF EMPLOYEES

        We presently have seventeen employees, six in the U.S. and eleven in
Russia.  Twelve of our employees are in research and development, two
employees are in marketing and sales and three are in administration.  Our
employees are currently not represented by a collective bargaining agreement,
and we believe that our relations with our employees are good. If we lose our
key personnel or are unable to attract and retain additional qualified
personnel, we may not be able to successfully manage the business and achieve
our objectives.

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

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

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

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

-       our ability to attract new and repeat customers;

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

-       our ability to protect our proprietary technology;

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

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

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

WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY.

        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

        FDA and the European Union ("EU") have regulations for the
marketability of medical solutions and equipment. We have not developed our
products to the level where these approval processes can be started.

WE MAY FAIL TO ESTABLISH AND MAINTAIN STRATEGIC RELATIONSHIPS.

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

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

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

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

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

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

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

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

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

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

SOME OF THE INFORMATION IN THIS 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.

DILUTION OF COMMON SHAREHOLDERS.

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

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

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

PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         Not applicable.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.


(1)     During the three months ended September 30, 2001, we issued
approximately 497,487 shares of common stock for an aggregate amount of
approximately $413, 047.  These issuances were made in reliance on Section
4(2) of the Securities Act of 1933 as amended (the "Act") and/or Regulation D
promulgated under the "Act" and were made without general solicitation or
advertising.  The purchasers 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.

(2)     During the three months ended September 30, 2001, we issued warrants
to purchase an aggregate 165,000 shares of common stock with prices ranging
from $0.55 to $1.25 per share in consideration as cancellation of debts owed
to certain service providers. These issuances were made in reliance on Section
4(2) of "Act". The service providers were sophisticated investors with access
to all relevant information necessary to evaluate the investments, andwho
represented to us that the shares were being acquired forinvestment purposes.

(3)     During the three months ended September 30, 2001, we issued
approximately 135,000 shares of common stock for an aggregate amount of
approximately $79,150 in consideration for the cancellation of debts owed to
certain service providers.  These issuances were made in reliance on Section
4(2) of the "Act" as amended. The service providers 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.

(4)     During the three months ended September 30, 2001 we issued 10,813
shares of common stock for an aggregate amount of approximately $5,100 in
consideration  for cancellation of debts owed to certain individuals. These
issuances were made in reliance on Section 4(2) of the "Act". The individuals
were sophisticated investors with access to all relevant information necessary
to evaluate the investments, and who represented to the Company that the
shares were being acquired for investment purposes.

(5)     During the three months ended September 30, 2001, we issued options to
purchase 430,000 shares of common stock under our Non-Statutory Stock Option
Plan to three  individuals, with exercise prices ranging from $0.025 to $0.10
per share.  The issuances  made in reliance of Section 4(2) of the "Act" as
amended and were made without general solicitation or advertising. The
individuals were sophisticated investors with access to all relevant
information necessary to evaluate the investments, and who represented to the
Company that the shares were being acquired for investment purposes.

(6)     In July 2001, we issued approximately 9,092 shares of common stock for
an aggregate amount of approximately $ 9,091 in consderation for a finder's
fee to certain individuals.  These issuances were made in reliance on Section
4(2) of the "Act"as amended.  The service providers 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.

(7)     In July 2001, we issued warrants to purchase 1,028,888 shares of
common stock with prices ranging from  $0.01 to $0.3 per share as cancellation
of debts owed to certain officers and shareholders of the Company.  These
issuances were made in reliance of Section 4(2) on the "Act".The officers of
the Company are sophisticated investors with access to all relevance
information necessary to evaluate the investments, and who represented to the
Company that the shares were being acquired for investment purposes.

(8)    In September 2001, we issued 150,000 shares of common
stock with an aggregate  of approximately $156,200  on the date of
issuance in consideration of the settlement of a dispute with former
consultants. These issuances were made in reliance on Section 4(2) of
the "Act". Theindividuals were sophisticated investors with access
to all relevantinformation necessary to evaluate the investments,
and who represented to theCompany 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

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:  November 14,2001

/s/ Harry Masuda
----------------------------
Harry Masuda
Chief Executive Officer