UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549 FORM 10-Q (Mark
One) xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001 OR  ̈TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934For the  transition period from
_______________ to _________________. COMMISSION FILE NUMBER  0-22743  VISTA
MEDICAL TECHNOLOGIES, INC.(Exact
name of registrant as specified in its charter)  DELAWARE
  94-3184035(State or other jurisdiction of
  (I.R.S. Employerincorporation or organization)
  Identification No.)
  5451 AVENIDA ENCINAS, SUITE ACARLSBAD, CA  92008(Address of principal executive offices)(760) 603-9120(Registrant's phone number, including area
  code)  Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the past
90 days: (1)
  YesxNo ̈(2)
  YesxNo ̈  As of May 10, 2001 there were 19,623,257
shares of $.01 par value common stock outstanding.


VISTA MEDICAL TECHNOLOGIES,
INC.
FORM 10-Q
TABLE OF CONTENTS  PART
  1.   FINANCIAL INFORMATIONItem
  1.   Financial StatementsConsolidated Balance SheetsConsolidated
  Statements of OperationsConsolidated
  Statements of Cash FlowsNotes to Consolidated
  Financial StatementsItem
  2.   Management's Discussion and
  Analysis of Financial Condition and Results of OperationsItem
  3.   Quantitative and Qualitative
  Disclosures About Market RiskRisks
  and UncertaintiesPART
  II.  OTHER INFORMATIONItem 6.   Exhibits and Reports on Form 8-KSIGNATURES


Item
1. Financial Statements Vista Medical
Technologies, IncConsolidated Balance Sheets March
  31, 2001
  December
  31, 2000(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
  $2,040,900
  $2,589,006Marketable securities
  286,777
  345,224Accounts receivable, net
  1,263,375
  1,363,915Inventories, net
  1,822,941
  1,701,668Other current assets
  82,117
  116,868Total current assets
  5,496,110
  6,116,681Property and
  equipment, net
  759,576
  900,083Patents and other
  assets, net
  99,139
  137,747TOTAL ASSETS
  $6,354,825
  $7,154,511LIABILITIES AND
  STOCKHOLDERS' EQUITYCurrent liabilities:
  $472,866
  $460,168Accounts payableAccrued compensation
  250,770
  192,660Accrued liabilities
  344,502
  350,521Total current
  liabilities
  1,068,138
  1,003,349Commitments and
  ContingenciesStockholders' equity:Preferred stock, $.01 par value:Authorized shares - 5,000,000Issued and outstanding shares -
  noneCommon stock, $.01 par value:Authorized shares - 35,000,000Issued and outstanding shares -
  19,589,386 on          December 31, 2000 and 19,620,468 on March 31, 2001
  196,205
  195,894Additional paid-in capital
  67,872,518
  67,856,614Notes receivable from stockholders
  (78,375)
  (78,375)Deferred compensation
  (208,427)
  (267,951)Accumulated deficit
  (62,495,234)
  (61,555,020)Total stockholders'
  equity
  5,286,687
  6,151,162TOTAL LIABILITIES AND
  STOCKHOLDERS' EQUITY
  $6,354,825
  $7,154,511 Note: The balance sheet at December 31,
2000 has been derived from the audited finanial statements at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. Vista
Medical Technologies, Inc.Consolidated Statements of
Operations
(Unaudited)




Three Months Ended March 31,2001
  2000Sales
  $1,932,533
  $1,796,886Cost
  and expenses:Cost of sales
  1,531,906
  1,539,846Research and development
  389,899
  431,538Sales and marketing
  487,697
  413,335General and aministrative
  495,983
  427,800Total
  cost and expenses
  2,905,485
  2,812,519Loss
  from operations
  (972,952)
  (1,015,633)Interest
  income
  32,738
  18,667Net
  loss
  $(940,214)
  $(996,966)Basic
  and diluted loss per share
  $(0.05)
  $(0.07)Shares
  used in computing basic and diluted loss per share
  19,589,386
  13,763,095



See
accompanying notes


Vista Medical
Technologies, Inc.Consolidated Statements of Cash
Flows
(Unaudited)

Three Months Ended March 31,2001
  2000OPERATING
  ACTIVITIESNet
  loss
  $(940,214)
  $(996,966)Adjustments
  to reconcile net loss to net cash used for operating activities:Depreciation and amortization
  187,045
  157,186Amortization of deferred compensation
  59,524
  87,201Changes in operating assets and
  liabilities:Accounts receivable
  100,540
  141,851Inventories
  (121,273)
  926,428Other current assets
  34,752
  53,375Accounts payable
  12,698
  (640,823)Accrued compensation
  58,111
  (8,716)Accrued liabilities
  (6,020)
  (44,152)Net
  cash flows used for operating activities
  (614,837)
  (608,318)INVESTING
  ACTIVITIESPurchases
  of short-term investments
  58,447
  121,957Purchases
  of property and equipment
  (7,931)
  (15,399)Net
  cash flows provided by investing activities
  50,516
  106,558FINANCING
  ACTIVITIESIssuance
  of common stock
  16,215
  25,400Net
  cash flows provided by financing activities
  16,215
  25,400Net
  decrease in cash and cash equivalents
  (548,106)
  (476,360)Cash
  and cash equivalents at beginning of period
  2,589,006
  1,368,910Cash
  and cash equivalents at end of period
  $2,040,900
  $892,550See
accompanying notes



VISTA MEDICAL TECHNOLOGIES, INC.NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2001
(UNAUDITED)



1.  
Basis of Presentation

The
audited financial statements of Vista Medical Technologies, Inc. (the
"Company") and the notes thereto for the year ended December 31, 2000
included in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission, contain additional information about the Company, its
operations, and its financial statements and accounting  practices, and should be read in conjunction
with this quarterly report on Form 10-Q. 
These unaudited consolidated financial statements have been prepared in
accordance with generally accepted accounting principles and with the
instructions on Form 10-Q except that certain information and footnote
disclosures normally contained in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted.

The
accompanying unaudited consolidated financial statements of the Company reflect
all adjustments of a normal recurring nature which are, in the opinion of
management, necessary for a fair presentation of the financial position,
results of operations and cash flows for all periods presented.  The interim financial information contained
herein is not necessarily indicative of results for any future interim periods
or for the full fiscal year ending December 31, 2001.

2.  
Inventories



March
  31, 2001
  December
  31, 2000(Unaudited)Parts and materials
  $2,422,272
  $2,261,441Work in process
  499,235
  461,269Finished goods
  1,108,167
  1,224,7064,029,674
  3,947,416Less: reserves
  (2,206,733)
  (2,245,748)Inventories, net
  $1,822,941
  $1,701,668

VISTA
MEDICAL TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements (continued)

3.  
Loss Per Share



Three Months
  Ended March 31,2001
  2000Net income (loss)
  $(940,214)
  $(996,966)Weighted average common shares outstanding
  19,589,386
  13,763,095Shares used in basic and diluted loss per
  share
  19,589,386
  13,763,095Basic and diluted loss per share
  ($0.05)
  ($0.07)

4. 
New Accounting Standards



In June 1998, the FASB issued SFAS 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, as amended in
June 2000 by SFAS 138,  ACCOUNTING FOR
CERTAIN DERIVATIVE INSTRUMENTS AND CERTAIN HEDGING ACTIVITIES, which requires
companies to recognize all derivatives as either assets or liabilities in the
balance sheet and measure such instruments at fair value.  As amended by SFAS 137, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - DEFERRAL OF THE EFFECTIVE DATE
OF FASB STATEMANT NO. 133, the provisions of SFAS 133  required adoption no later than the
beginning of the Companys fiscal year ending December 31, 2001.  Adoption of SFAS 133, as amended by SFAS
138, did not have a material impact on the Companys financial statements.


Item
2.   Managements Discussion and
Analysis of Financial Condition and Results of Operations THIS
QUARTERLY REPORT MAY CONTAIN PREDICTIONS, ESTIMATES AND OTHER FORWARD-LOOKING
STATEMENTS THAT INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES, INCLUDING THOSE
DISCUSSED BELOW AT "RISKS AND UNCERTAINTIES."  WHILE THIS OUTLOOK REPRESENTS OUR CURRENT
JUDGMENT ON THE FUTURE DIRECTION OF OUR BUSINESS, SUCH RISKS AND UNCERTAINTIES
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM ANY FUTURE PERFORMANCE
SUGGESTED BELOW.  WE UNDERTAKE NO
OBLIGATION TO RELEASE PUBLICLY THE RESULTS OF ANY REVISIONS TO THESE
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES ARISING AFTER THE
DATE OF THIS QUARTERLY REPORT.  THE
FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR CONSOLIDATED
FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED IN ITEM 1 OF THIS QUARTERLY
REPORT ON FORM 10-Q AND OUR 2000 ANNUAL REPORT ON FORM 10-K, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. Overview of our
business We
develop, manufacture and market products that provide information to doctors
performing minimally invasive general surgical, cardiac surgical and other
selected microsurgical procedures.  We
also develop and sponsor training and support programs for medical personnel
which enhance the adoption of procedures incorporating use of our visualization
technology.  Our products combine a head
mounted display with video cameras to provide surgeons with critical visual
information during these microsurgical procedures, combined with the ability to
view new additional information in a voice-controlled, picture-in-picture
format, to facilitate real-time decision making during surgery.  Our product lines include the ORPC Advanced
Visualization and Information System for general surgery and other complex
endoscopic procedures and the Series 8000 Advanced Visualization and
Information System, for use in cardiac surgery.  In general terms, endoscopic surgery involves a telescopic
viewing device which is inserted into a small incision in the body and which
allows the surgeon an adequate view of the internal part of the body being
repaired. Our results of operations for 3 three-months ended March 31,
2001 versus three-months ended March 31, 2000 Sales.  We had revenue from product sales of
$1,932,000 for the three-months ended March 31, 2001, compared to revenues from
product sales of $1,797,000 for the same period in 2000.  The increase in revenue during the first
quarter of 2001 compared to the corresponding period in 2000 was due to
increased unit sales from our Laparoscopic Bariatric Surgery Program partially
offset by reduced unit sales of our original equipment manufacturer, or OEM
products. Cost
of Sales.  Our cost of sales were
$1,532,000 and $1,540,000 for the three- months ended March 31, 2001 and 2000,
respectively, with gross margins of 20% and 14%, respectively. The increase in
gross margin percentage was primarily due to reduced manufacturing expenses
during the 2001 period as compared to 2000. Research
and Development Expenses.  Our research
and development expenses were $390,000 and $432,000 for the three-months ended
March 31, 2001 and 2000, respectively. 
The decrease in research and development expenses during the 2001 period
was primarily attributable to decreases in staffing and related supply and
occupancy costs and a decrease in contract services related to development
efforts.  We expect our research and
development expenses to remain at or near current levels in the next several
quarters as we finalize our next generation of products for the general surgery
market. Sales
and Marketing Expenses.  Our sales and
marketing expenses were $488,000 and $413,000 for the three-months ended March
31, 2001 and 2000, respectively. The increase in sales and marketing expense
during the 2001 period reflects an increase in staffing and related expenses in
order to support our Laparoscopic Bariatric Surgery Program.  We expect our sales and marketing expenses
to increase marginally during the next several quarters as we continue to seek
support for our Laparoscopic Bariatric Surgery Program. General
and Administrative Expenses.  Our
general and administrative expenses were $496,000 and $428,000 for the
three-months ended March 31, 2001 and 2000, respectively.  The increase in general and administrative
expenses during the 2001 period reflects higher professional and legal
fees.  We expect our general and
administrative expenses to remain at or near current levels for the next
several quarters. Interest
Income.  Our net interest income was
$33,000 and $19,000 for the three-months ended March 31, 2001 and 2000,
respectively.  The increase in net
interest income during the 2001 period was due primarily to increasing average
investment balances due to receipt of proceeds from our April 2000 financing. Liquidity and capital resources Net
cash used for operating activities for the three-months ended March 31, 2001
was $615,000 compared to net cash used of $608,000 for the corresponding
three-month period in 2000.  The slight
increase in net cash used in operating activities during the 2001 period was
primarily attributable to higher inventory purchases during the 2001 period. Net
cash provided by investing activities was $51,000 for the three-months ended
March 31, 2001 compared to $107,000 of net cash provided in the same period in
2000.  The decrease in net cash provided
by investing activities in 2001 was primarily attributable to declining
balances of short term investments reaching maturity partially offset by
decreasing purchases of property and equipment. Net
cash provided by financing activities was $16,000 for the three-months ended
March 31, 2001 compared to $25,000 for the same period in 2000.  The decrease in net cash provided by
financing activities during the 2001 period was primarily attributable to a
reduction in purchases of stock by employees through our employee stock
purchase plan and a lower level of stock option exercises. We
recently announced that we are working on a strategic initiative to extend our
business to become more involved in the medical treatment of severe
obesity.  If we decide to pursue this
initiative, we will be required to raise additional funds to support our
operations.  In addition, even if we do
not pursue this initiative, if we are unable to sustain our cash flow under our
current business plan, we will be required to raise additional funds.  If we are unable to raise additional funds
from an offering of securities or otherwise, we may be unable to continue
operations at their current level and may be unable to pursue this new
objective.  Even if we are successful in
raising additional funds, circumstances, including slow rate of market
acceptance of our products or our inability to scale up manufacturing, would
accelerate our use of proceeds from any offering we might do and require us to
seek additional funds to support our operating requirements.  We expect to continue to incur substantial
losses for at least the next 9 - 12 months. 
As of March 31, 2001, our accumulated deficit was approximately
$62,495,000. Item
3.Quantitative and Qualitative
Disclosures About Market Risk At
March 31, 2001, our investment portfolio included fixed-income securities of
$1.6 million.  These securities are
subject to interest rate risk and will decline in value if interest rates
increase.  Due to the short duration of
our investment portfolio, an immediate 10 percent increase in interest rates
would have no material impact on our financial condition or results of operations. We
generally conduct business, including sales to foreign customers, in U.S.
dollars and as a result have limited foreign currency exchange rate risk.  The effect of an immediate 10 percent change
in foreign exchange rates would not have a material impact on our financial
condition or results of operations. RISKS
AND UNCERTAINTIES

You
should consider the following factors carefully in evaluating an investment in
Vista Medical in addition to the other information in this report.  You are cautioned that the statements in
this quarterly report that are not descriptions of historical facts may be
forward-looking statements that are subject to risks and uncertainties.  Our actual results could differ materially
from those currently anticipated due to a number of factors, including those
identified in this section and elsewhere in this quarterly report.  We undertake no obligation to release
publicly the results of any revisions to these forward-looking statements to
reflect events or circumstances arising after the date of this quarterly report.  The following discussion should be read in
conjunction with our consolidated financial statements and notes thereto.

We may not be able
to maintain the listing of our common stock on the Nasdaq SmallCap market.

On February 10, 2000, our common
stock ceased to be quoted on the Nasdaq National Market and began to be quoted
on the Nasdaq SmallCap Market as a result of Nasdaqs concern about our ability
to maintain continued compliance with some of the Nasdaq National Market
requirements for continued quotation. 
In addition, since that time, Nasdaq has placed us on probation twice
for failing to maintain a minimum bid price of $1.00 per share of our common
stock.  Although we have successfully
complied with the terms of these probations, our common stock has recently
failed to maintain a consistent bid price above $1.00 per share and we cannot
assure you that we will be able to remain compliant with the continued listing
requirements of Nasdaq.  If we are
unable to remain compliant, Nasdaq may not continue to allow our common stock
to be quoted on the Nasdaq SmallCap Market. 
If we are unable to maintain our status on the Nasdaq SmallCap Market,
there may not continue to be an active trading market for our common stock.  If this occurs, you may not be able to sell
your shares quickly or at the market price.

We may need
additional funds to support our currently proposed operations.  If we are unable to obtain them, we may have
to significantly scale back our operations or forego opportunities in new
market segments.

We recently announced that we are
working on a strategic initiative extending our business to become more
involved in the medical treatment of severe obesity.  If we decide to pursue this initiative, we will be required to
raise additional funds to support our operations.  In addition, if we are unable to sustain our cash flow under our
current business plan, we will be required to raise additional funds.  If we are unable to raise sufficient funds
from an offering of securities or otherwise, we may be unable to continue
operations at their current level and may be unable to pursue this new
objective.  Moreover, our liquidity and
capital requirements will depend upon other numerous factors, including the following:


  The
  extent to which our products gain market acceptance;
  The
  progress and scope of product evaluations;
  The
  timing and costs of filing future regulatory submissions;
  The
  timing and costs required to receive both domestic and international
  governmental approvals;
  The
  timing and costs of product introductions;
  The
  extent of our ongoing research and development programs;
  The
  costs of sponsorship training of the physicians to become proficient in the
  use of our products and procedures;
  The costs
  of developing marketing and distribution capabilities.

Even if we are successful in
raising additional funds, circumstances, including slow rate of market
acceptance of our products or our inability to scale up manufacturing, would
accelerate our use of proceeds from any offering we might do and require us to
seek additional funds to support our operating requirements.

We have a history of
losses and may not become profitable.

Since our formation in July 1993,
and as of March 31, 2001, we had incurred cumulative net losses of $62.5
million.  We expect to incur substantial
losses for at least the next 9-12 months. We may never achieve or sustain
profitability in the future.  Even if we
achieve profitability, we may not be able to sustain it on an ongoing basis.

We are, to a
significant extent, dependent on distribution partners to sell our products.

We only have a small direct sales
force and, in the past, we were primarily dependent on  agreements with third parties for sales of
the majority of products derived from our core three-dimensional
technology.  Two of our primary
distribution agreements were terminated in 2000 and we just recently entered
into an arrangement with Jomed N.V. to transition distribution in cardiac
surgery and to continue supporting our cardiac customer base. However, this
transition may not be achieved without operational disruption and unplanned
cost, or at all.  If we are unable to
make this transition, we may be unsuccessful in distributing our cardiac
surgery products and may lose revenues.

In addition, during the last year,
we changed our strategic emphasis for our core three-dimensional technology for
applications in general surgery, gynecology and urology.  We cannot assure you that we will be successful
in these areas of sales.  Even if we are
successful, we cannot assure you that the revenue achieved in these areas of
emphasis will be sufficient to compensate for any loss of sales revenue from
the termination of our previous distribution agreements for cardiac
products.  Either of these results could
have an adverse affect on our financial condition and results of operations.

Our profitability is
dependent upon the successful development and commercialization of our products
based on our core three-dimensional technology.

Products derived from our core
technology  the ORPC for general surgery, the Series 8000 for minimally
invasive cardiac surgery are expected to account for the majority of our
revenues over the next several years. 
The demand for these products may not be sufficient to allow us to
achieve profitable operations.

Our development efforts for
improvements to these products may not be successful.  In addition, other products under development may not be shown to
be safe or effective, capable of being manufactured in commercial quantities at
acceptable costs, acquire appropriate regulatory clearances or be successfully
marketed.

Our success is
dependent upon acceptance of a minimally invasive approach to complex
procedures as a reliable, safe and cost effective alternative to existing
treatments.

Complex minimally invasive
procedures are only performed on a very limited basis by a relatively small
number of highly skilled surgeons.  We
are unable to predict how quickly, if at all, minimally invasive procedures
will be adopted by the medical community or, if they are adopted, the number of
procedures that will be performed.

Even if the clinical safety and
effectiveness of complex minimally invasive procedures is established in
general surgery, cardiac and other specialties, surgeons, specialists and other
physicians may choose not to recommend the procedures for any number of other
reasons.  Adoption of these procedures
by doctors will depend, for example, upon our ability to facilitate and sponsor
training of surgeons to perform complex minimally invasive procedures and the
willingness of such surgeons to perform such procedures.  Doctors may also elect not to recommend the
minimally invasive procedures based on possible unavailability of acceptable
reimbursement from health care payors. 
Health care payor acceptance may require evidence of the cost
effectiveness of minimally invasive procedures as compared to other currently
available treatments.  We believe that
physician endorsements will be essential for clinical adoption of minimally
invasive procedures and these endorsements may not be obtained.  Patient acceptance of new procedures will
depend upon doctor recommendations, as well as other factors, including the
effectiveness of, and the rate and severity of complications associated with,
the procedure as compared to other treatments.

Widespread use of
our products will require sponsoring the training of a large number of
surgeons, and the time required to institute a training program and to train
such surgeons could adversely affect near term market acceptance.

Evaluations of visualization
technology such as ours conducted to date have shown that there is a learning
process involved for surgeons and other members of the surgery team to become
proficient with the use of the systems. 
Based on the clinical and laboratory procedures performed to date, we
cannot assure you that visualization and information system enhancements
incorporated, or to be incorporated, in our products will prove suitable for
use by a substantial number of surgeons. 
If they prove unsuitable for a large number of surgeons to use, the
potential markets and applications for our products would be significantly
limited.

There are
significant risks associated with any scale-up of manufacturing which may be
required to meet market demand and become profitable.

We have never established
high-volume manufacturing operations and if we are required to do so to meet
market demand or to become profitable, we may not be able to establish or
maintain reliable operations at commercially reasonable costs.  We may also require additional manufacturing
facilities if production volumes increase. 
Acquisition of new manufacturing facilities would also likely involve
relocation.  Difficulties in scaling up
manufacturing of products could result from problems involving:


  Quality control and assurance,
  component and service availability,
  adequacy of control policies and
  procedures,
  lack of qualified personnel,
  compliance with FDA regulations and
  the need for further FDA approval of new manufacturing processes and
  facilities and
  other production constraints.We have considered and will
continue to consider as appropriate, the internal manufacture of sub-assemblies
currently provided by third-party subcontractors, as well as the implementation
of new production processes.  Our
manufacturing yields or costs may increase as a result of the transition to
in-house production or to new production processes when such efforts are
undertaken.  In addition, costs in
complying with FDA good manufacturing practices or changes in such practices
may exceed our expectations.

We may face
component shortages and are dependent in some instances on single sources of
supply.

Any significant supply
interruption, or inventory shortage or overage, would negatively impact our
ability to manufacture our products.  We
use and rely on specific components and services used in our systems for which
we have only a single source of supply. 
The manufacture of our products in larger commercial quantities will
require a substantial increase in component supplies and will likely
necessitate the replacement of current suppliers or the addition of new
suppliers.  The qualification of
additional or replacement vendors for specified components or services is a
lengthy process.  In addition, the
substitution of replacement vendors may entail re-engineering time and cost and
could delay the supply of our products.

We expect to manufacture our
products based on forecasted product orders and intend to purchase
subassemblies and components prior to receipt of purchase orders from
customers.  Lead times for ordered
materials and components vary significantly and depend on factors such as the
business practices of the specific supplier, contract terms and general demand
for a component at a given time.  Some
components used in our products have long lead times.  As a result, there is a risk of excess or inadequate inventory if
orders do not match forecasts.

We are subject to
significant domestic and international regulation and may not be able to obtain
necessary regulatory clearances to sell our products.

The manufacture and sale of medical
devices intended for commercial distribution are subject to extensive
governmental regulation.  Our failure to
comply with regulatory requirements would jeopardize our ability to market our
products.  Noncompliance with applicable
requirements can result in failure of the regulatory agency to grant pre-market
clearance or approval for devices, withdrawal or suspension of approval, total
or partial suspension of production, fines, injunctions, civil penalties,
refunds, recall or seizure of products and criminal prosecution.

Medical devices are regulated in
the United States primarily by the FDA and, to a lesser extent, by state
agencies.  Sales of medical device
products outside the United States are subject to foreign regulatory
requirements that vary from country to country.  Generally, medical devices require pre-market clearance or
pre-market approval prior to commercial distribution.  A determination that information available on the medical device
is not sufficient to grant the needed clearance or approval will delay market
introduction of the product.  In
addition, material changes or modifications to, and changes in intended use of,
medical devices also are subject to FDA review and clearance or approval.  The FDA regulates the research, testing,
manufacture, safety, effectiveness, labeling, storage, record keeping, promotion
and distribution of medical devices in the United States and the export of
unapproved medical devices from the United States to other countries.  The time required to obtain approvals
required by foreign countries may be longer or shorter than that required for
FDA clearance, and requirements for licensing may differ from FDA
requirements.  The current regulatory
environment in Europe for medical devices differs significantly from that in
the United States.

We expect to
encounter rapid technological change and significant competition.

The medical device market in which
we compete is characterized by intensive development efforts and rapidly
advancing technology.  Our future
success will depend, in large part, upon our ability to anticipate and keep pace
with advancing technology and competing innovations.  We may not be successful in identifying, developing and marketing
new products or enhancing our existing products.

We believe that a number of large
companies, with significantly greater financial, manufacturing, marketing,
distribution and technical resources and experience than ours, are focusing on
the development of visualization products for minimally invasive
microsurgery.  Several companies are
currently developing and marketing visualization products for minimally
invasive microsurgery which could be applied to heart surgery, to general
surgery or to head, neck and spine microsurgery.

Technological advances with other
therapies such as drugs, interventional procedures or future innovations in
surgical techniques could make such other therapies more effective or lower in
cost than minimally invasive microsurgery procedures and could render minimally
invasive microsurgery obsolete.

We expect
fluctuations in our operating results.

Our results of operations may vary
significantly from quarter to quarter depending upon numerous factors,
including the following:


  timing and results of product
  evaluations,
  delays associated with the FDA and
  other regulatory approval processes,
  demand for and utilization of our
  products,
  changes in our pricing policies or
  those of our competitors,
  changes in third-party payment
  guidelines,
  the number, timing and significance
  of product enhancements and new product announcements by us or our
  competitors,
  our ability to develop, introduce and
  market new and enhanced versions of our products on a timely basis,
  customer order deferrals in
  anticipation of enhancements or of new product introductions by us or our
  competitors,
  product quality problems,
  personnel changes and
  the level of international sales.Our profitability is
directly related to the level of reimbursements for surgical procedures using
our products.

Our profitability is directly
related to the level of payments for the surgical procedures in which our
products are involved, either by Medicare or private insurance companies.  We could be adversely affected by changes in
payment policies of government or private health care payors, particularly to
the extent any such changes affect payment for the procedure in which our
products are intended to be used.  It is
a continuing trend in U.S. health care for such payments to be under continual
scrutiny and downward pressure.  We
believe that reimbursement in the future will be subject to increased
restrictions, both in the United States and in foreign markets and that the
overall escalating cost of medical products and services has led to and will
continue to lead to increased pressures on the health care industry, both
foreign and domestic, to reduce the cost of products and services, including
products which we offer.

We expect that our products
typically will be used by hospitals and surgical centers, which bill various
third-party payors, such as governmental programs and private insurance plans,
for the health care services provided to their patients.  Third-party payors carefully review and
increasingly challenge the prices charged for medical products and services or
negotiate a flat rate fee in advance. 
Payment rates from private companies also vary depending on the procedure
performed, the third-party payor, the insurance plan and other factors.  Medicare compensates hospitals at a pre
determined fixed amount for the costs associated with an in-patient
hospitalization based on the patients discharge diagnosis and compensates
physicians at a pre determined fixed amount based on the procedure performed,
regardless of the actual costs incurred by the hospital or physician in
furnishing the care and unrelated to the specific devices or systems used in
that procedure.  Medicare and other
third-party payors are increasingly scrutinizing whether to cover new products
and the level of payment for new procedures. 
The flat fee reimbursement trend is causing hospitals to control costs
strictly in the context of a managed care system in which health care providers
contract to provide comprehensive health care for a fixed cost per person.  We are unable to predict what changes will
be made in the reimbursement methods utilized by such third-party payors.

If we obtain the necessary foreign
regulatory registrations or approvals, market acceptance of our products in
international markets would be dependent, in part, upon the acceptance by the
prevailing health care financing system in each country.  Health care financing systems in international
markets vary significantly by country and include both government sponsored
health care programs and private insurance. 
There can be no assurance that these financing systems will endorse the
use of our products.

We have limited
experience directly marketing our products overseas and may not be successful
in expanding into international markets without experienced partners.

We have limited experience in
marketing our products overseas. 
Changes in overseas economic conditions, currency exchange rates,
foreign tax laws or tariffs or other trade regulations could negatively impact
our business.  The anticipated
international nature of our business is also expected to subject our
representatives, agents and distributors to laws and regulations of the foreign
jurisdictions in which they operate or in which our products  are sold, including laws regulating
manufacture and sale of medical devices. 
In addition, the laws of some foreign countries do not protect our
intellectual property rights to the same extent as do the laws of the United
States.

We may be subject to
product liability claims and have limited insurance coverage.

We face an inherent and significant
business risk of exposure to product liability claims in the event that the use
of our products results in personal injury or death.  Also, in the event that any of our products proves to be
defective, we may be required to recall or redesign such products.  Our current product liability insurance
coverage limit is $10.0 million per occurrence and in the aggregate.  Our coverage limits may not be adequate to
protect us from any liabilities we might incur in connection with the
development, manufacture and sale of our products.  In addition,  increased
product liability coverage may be required if additional products are used in
clinical evaluations or successfully commercialized.  Product liability insurance is expensive and in the future may
not be available to us on acceptable terms, if at all.  A successful product liability claim or
series of claims brought against us in excess of our insurance coverage or a
product recall would negatively impact our business.

If we are unable to
protect our intellectual property, we may be unable to prevent other companies
from using our technology in competitive products.

Our future success will depend, in
part, on our ability to continue to develop patentable products, enforce our
patents and obtain patent protection for our products both in the United States
and in other countries.  The patent
positions of medical device companies, however, are generally uncertain and
involve complex legal and factual questions. 
Patents may never issue from any patent applications owned by or
licensed to us.  Even  if patents do issue, the claims allowed may
not be sufficiently broad to protect our technology.  In addition, issued patents owned by or licensed to us may be
challenged, invalidated or circumvented, or the rights granted thereunder may
not provide us with competitive advantages.

The medical device industry has
been characterized by extensive litigation regarding patents and other
intellectual property rights. 
Litigation, which would result in substantial expense, may be necessary
to enforce any patents issued or licensed to us and/or to determine the scope and
validity of proprietary rights of third parties or whether our products,
processes or procedures infringe any such third-party proprietary rights.  We may also have to participate in
interference proceedings declared by the United States Patent and Trademark
Office, which could result in substantial expense, to determine the priority of
inventions covered by our issued United States patents or pending patent
applications.  Furthermore, we may have
to participate at substantial cost in International Trade Commission
proceedings to enjoin importation of products which would compete unfairly with
our products.  Any adverse outcome of
any patent litigation, including interference proceedings, could subject us to
significant liabilities to third parties, require disputed rights to be
licensed from or to third parties or require us to cease using the technology
in dispute.  Any such licenses may not
be available on acceptable terms, if at all. 
Furthermore, parties making such claims may be able to obtain injunctive
or other equitable relief that could effectively block our ability to make,
use, sell or otherwise practice our intellectual property, whether or not
patented or described in pending patent applications, or to further develop or
commercialize our products in the United States and abroad and could result in
the award of substantial damages. 
Defense of any lawsuit or failure to obtain any such license could
damage our business.

We rely on unpatented trade secrets
to protect our proprietary technology. 
Others may independently develop or otherwise acquire the same or
substantially equivalent technologies or otherwise gain access to our
proprietary technology or disclose such technology.  It is difficult to protect rights to such unpatented proprietary technology.  Third parties may obtain patent rights to
such unpatented trade secrets, which patent rights could be used to assert
infringement claims against us.  We also
rely on confidentiality agreements with our collaborators, employees, advisors,
vendors and consultants to protect our proprietary technology.  These agreements may be breached, we may not
have adequate remedies for any breach and our trade secrets may otherwise
become known or be independently developed by competitors.  In addition, our agreements with employees
and consultants require disclosure of ideas, developments, discoveries or
inventions conceived during employment or consulting, as the case may be, and
assignment to us of proprietary rights to such matters related to our business and
technology.  The extent to which efforts
by others will result in patents and the effect on us of the issuance of such
patents is unknown.

We have licensed
some aspects of our products from third parties and may lose the rights to
these essential aspects under the agreements which govern those relationships.

We have licensed some aspects of
our technology from third parties.  The
rights under the governing agreements may be terminated if we breach our
obligations or in other circumstances. Our failure to retain rights to these
licensed rights could negatively impact our business.

If we are not able
to attract and retain key technical and senior management personnel and doctors
to participate in our advisory boards, it may adversely affect our ability to
obtain financing or develop our products.

Our future business and operating
results depend in significant part upon the continued contributions of our key
technical and senior management personnel, many of whom would be difficult to
replace and some of whom perform important functions beyond those suggested by
their job titles or descriptions.  Our
business and future operating results also depend in significant part upon our
ability to attract and retain qualified management, manufacturing, technical,
marketing and sales and support personnel for our operations.  Competition for such personnel is intense,
and we may not be successful in attracting or retaining such personnel.

Members of our clinical advisory
boards consult with us exclusively in the field of visualization, but are free
to consult with other non-competing instrumentation companies and are employed
elsewhere on a full-time basis.  As a
result, they only spend a limited amount of time on our business.  Although we have entered into consulting
agreements,  including confidentiality
provisions with each of the members of our clinical advisory boards, the
consulting and confidentiality agreements between us and each of the members of
our clinical advisory boards may be terminated or breached

Our stock price
could continue to be volatile and your investment in our common stock could
suffer a decline in value, adversely affecting our ability to raise additional
capital.

The market prices and trading
volumes for securities of emerging companies, like ours, have historically been
highly volatile and have experienced significant fluctuations unrelated to the
operating performance.  The market price
of our common stock has historically been highly volatile and may be
significantly affected by factors such as:


  actual or anticipated fluctuations
  in our operating results,
  changes in financial estimates by
  securities analysts,
  announcements of technological
  innovations,
  new products or new contracts by us
  or our competitors,
  regulatory announcements,
  developments with respect to
  patents or proprietary rights,
  conditions and trends in the
  medical device and other technology industries,
  adoption of new accounting
  standards affecting the medical device industry, and
  general market conditions.In addition, the stock market has
from time to time experienced significant price and volume fluctuations that
have particularly affected the market prices for shares of early stage
companies.  These broad market fluctuations
may adversely affect the market price of our common stock.  In the past, following periods of volatility
in the market price of a particular companys securities, securities class
action litigation has often been brought against that company.  Such litigation, if brought against us,
could result in substantial costs and a diversion of managements attention and
resources.

Our use of hazardous
materials may result in unexpected and substantial claims against us for which
we do not have sufficient financial resources.

Our research and development
activities may involve the controlled use of hazardous materials and
chemicals.  The risk of accidental
contamination or injury from these materials cannot be completely eliminated.  In the event of such an accident, we could
be held liable for any resultant damages, and any such liability could exceed
our resources.  We may incur substantial
cost to comply with environmental regulations.

We do not anticipate
paying any dividends and any gains from your investment in our stock will have
to come from increases in the price of such stock.

We currently intend to retain any
future earnings for use in our business and do not anticipate paying any cash
dividends in the foreseeable future.

Our charter
documents may prevent us from participating in transactions that could be
beneficial to you.

Our charter documents contain
provisions that may make it more difficult or discourage a change in
control.  This may adversely affect the
market price of our common stock.


PART II. 
OTHER INFORMATION Item 1.  
Not Applicable Item 2.  
Not Applicable Item 3.  
Not Applicable Item 4.  
Not Applicable Item 5.  
Not Applicable Item
6.   Exhibits and Reports on Form 8-K A)     
Exhibits Not Applicable B)     
Reports on Form 8-K No reports on Form 8-K were filed by the Company during the three months
ended
          March 31, 2001.


SIGNATURES  Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.  VISTA
  MEDICAL TECHNOLOGIES,INC.Date:
  May
  11, 2001
  /s/ John R. LyonJohn
  R. LyonPresident,
  Chief Executive Officer andDirectorDate:
  May
  11, 2001
  /s/ Stephen A. GorgolStephen
  A. GorgolVice
  President of Finance, Chief FinancialOfficer
  and Secretary(Principal
  financial and accounting officer)