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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-QSB

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

FOR THE QUARTERLY PERIOD ENDED March 31, 2001

Securities and Exchange Commission File Number 000-26369

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Dicom Imaging Systems, Inc.(Exact name of registrant as specified in its charter)

|Nevada(State or other jurisdiction of
incorporation or organization) |  | 88-0422026(I.R.S. Employer
Identification Number)
|-------------------------------------------------------------------- |  | -------------------------------------------------

#201  15047 Marine Drive
White Rock, British Columbia
Canada V6B 1C5(Address of principal executive offices, including zip code)

(604) 531-2521(Registrant's Telephone 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 requirements for the past 90 days.

YES
X    NO

The
number of issued and outstanding shares of the Registrants Common Stock,
$0.001 par value, as of March 31, 2001, was 21,600,000.

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DICOM IMAGING SYSTEMS, INC.

|                             |  |                                                                                                    |  | Page
|---------------------------- |  | -------------------------------------------------------------------------------------------------- |  | ----
|PART IFINANCIAL INFORMATION |  |                                                                                                   
|Item 1.                      |  | Financial Statements.                                                                              |  | 4   
|                             |  | Consolidated Balance Sheets as at March 31, 2001 and December 31, 2000                             |  | 4   
|                             |  | Consolidated Statements of Operations for the three months ended March 31, 2001 and March 31, 2000 |  | 5   
|                             |  | Consolidated Statement of Stockholders' Equity for the three months ended March 31, 2001           |  | 6   
|                             |  | Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and March 31, 2000 |  | 7   
|Item 2.                      |  | Management's Discussion and Analysis of Financial Condition and Results of Operations.             |  | 9   
|PART IIOTHER INFORMATION    |  |                                                                                                   
|Item 1.                      |  | Legal Proceedings.                                                                                 |  | 10  
|Item 2.                      |  | Changes in Securities.                                                                             |  | 10  
|Item 3.                      |  | Defaults Upon Senior Securities.                                                                   |  | 11  
|Item 4.                      |  | Submission of Matters to a Vote of Security Holders.                                               |  | 11  
|Item 5.                      |  | Other Information.                                                                                 |  | 11  
|Item 6.                      |  | Exhibits and Reports on Form 8-K.                                                                  |  | 12  
|Signatures                   |  | 13                                                                                                
|Exhibits                     |  | 12                                                                                                

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Forward-looking Statements

Certain statements in this Quarterly Report on Form 10-QSB, as well as statements made by Dicom Imaging Systems, Inc. ("Dicom" or "the Company") in periodic
press releases, oral statements made by the company's officials to analysts and shareholders in the course of presentations about the company, constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results,
performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. Such factors include,
among other things, (1) general economic and business conditions; (2) interest rate changes; (3) the relative stability of the debt and equity markets; (4) competition; (5) demographic changes; (6)
government regulations; (7) required accounting changes; (8) disputes or claims regarding the Dicom's proprietary rights to its software and intellectual property; and (9) other factors over which
Dicom has little or no control.

3

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PART IFINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets  (Expressed in U.S. dollars)  As At March 31, 2001 and December 31, 2000

|                                            |  | March 31,
2001
(Unaudited) |            | December 31,
2000
(Audited) |  
|------------------------------------------- |  | -------------------------- | ---------- | --------------------------- | -
|Assets                                      |  |                            |            |                             |  
|Current assets:                             |  |                            |            |                             |  
|Cash and cash equivalents                   |  | $                          | 155,353    |                             | $
|Cash held in trust (note 3)                 |  |                            | 66,654     |                             |  
|Accounts receivable                         |  |                            | 42,578     |                             |  
|Inventory                                   |  |                            | 81,663     |                             |  
|Prepaid expenses                            |  |                            | 22,980     |                             |  
|                                            |  |                            |            |                             |  
|                                            |  |                            | 369,228    |                             |  
|Intangible assets                           |  |                            | 245,190    |                             |  
|Equipment                                   |  |                            | 101,059    |                             |  
|                                            |  |                            |            |                             |  
|                                            |  | $                          | 715,477    |                             | $
|                                            |  |                            |            |                             |  
|Liabilities and Stockholders' Deficit       |  |                            |            |                             |  
|Current liabilities:                        |  |                            |            |                             |  
|Accounts payable                            |  | $                          | 469,422    |                             | $
|Accrued liabilities                         |  |                            | 337,484    |                             |  
|Payables to related parties                 |  |                            | 127,582    |                             |  
|Loans from related parties (note 4)         |  |                            | 756,685    |                             |  
|Deferred revenue                            |  |                            | 161,684    |                             |  
|                                            |  |                            |            |                             |  
|                                            |  |                            | 1,852,857  |                             |  
|Stockholders' deficit:                      |  |                            |            |                             |  
|Authorized:                                 |  |                            |            |                             |  
|10,000,000 preferred stock, $.001 par value |  |                            |            |                             |  
|50,000,000 common stock, $.001 par value    |  |                            |            |                             |  
|Issued:                                     |  |                            |            |                             |  
|21,600,000 common stock                     |  |                            | 21,600     |                             |  
|Additional paid in capital                  |  |                            | 1,203,574  |                             |  
|Deficit                                     |  |                            | (2,362,554 | )                           |  
|                                            |  |                            |            |                             |  
|                                            |  |                            | (1,137,380 | )                           |  
|                                            |  |                            |            |                             |  
|                                            |  | $                          | 715,477    |                             | $
|                                            |  |                            |            |                             |  

Continuing
Operations (note 1)

4

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Consolidated Statements of Operations  (Expressed in U.S. dollars)  (Unaudited)

|                                                      |           | Three Months Ended
March 31, 2001 |          | Three Months Ended
March 31, 2000
|----------------------------------------------------- | --------- | --------------------------------- | -------- | ---------------------------------
|Revenue                                               |           | $                                 | 576,387  |                                  
|Cost of sales                                         |           |                                   | 312,151  |                                  
|                                                      |           |                                   |          |                                  
|Gross profit                                          |           |                                   | 264,236  |                                  
|                                                      |           |                                   |          |                                  
|Operating expenses:                                   |           |                                   |          |                                  
|Depreciation                                          |           |                                   | 28,647   |                                  
|General and administrative                            |           |                                   | 499,360  |                                  
|Research and development                              |           |                                   | 48,672   |                                  
|Selling and marketing                                 |           |                                   | 154,186  |                                  
|                                                      |           |                                   |          |                                  
|                                                      |           |                                   | 730,865  |                                  
|                                                      |           |                                   |          |                                  
|Net income (loss)                                     |           | $                                 | (466,629 | )                                
|                                                      |           |                                   |          |                                  
|Net Income (loss) per common share, basic and diluted |           | $                                 | (0.02    | )                                
|Weighted average common shares outstanding,           |           |                                   |          |                                  
|                                                      |  basic   |                                   |          | 21,600,000                       
|                                                      |  diluted |                                   |          | 21,600,000                       

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Consolidated Statement of Stockholders' Equity  (Expressed in U.S. dollars)  Three months ended March 31, 2001  (Unaudited)

|                                                            |  | Common stock |  |   |        |  |   |           |  
|----------------------------------------------------------- |  | ------------ |  | - | ------ |  | - | --------- | -
|
|
|Balance at December 31, 2000                                |  | 21,600,000   |  | $ | 21,600 |  | $ | 1,189,042 |  
|Compensatory value of stock options issued to non-employees |  |              |  |   |        |  |   | (7,690    | )
|Issuance of convertible loans (note 4)                      |  |              |  |   |        |  |   | 22,222    |  
|Net (loss)                                                  |  |              |  |   |        |  |   |           |  
|                                                            |  |              |  |   |        |  |   |           |  
|Balance at March 31, 2001                                   |  | 21,600,000   |  | $ | 21,600 |  | $ | 1,203,574 |  
|                                                            |  |              |  |   |        |  |   |           |  

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Consolidated Statements of Cash Flows  (Expressed in U.S. dollars)  (Unaudited)

|                                             |                               | Three Months Ended
March 31, 2001 |          | Three Months Ended
March 31, 2000 |  
|-------------------------------------------- | ----------------------------- | --------------------------------- | -------- | --------------------------------- | -
|Operations:                                  |                               |                                   |          |                                   |  
|Loss for the period                          |                               | $                                 | (466,629 | )                                 | $
|Items not involving cash:                    |                               |                                   |          |                                   |  
|Stock based compensation                     |                               |                                   | (7,690   | )                                 |  
|Depreciation and amortization                |                               |                                   | 28,647   |                                   |  
|Non-cash interest expense                    |                               |                                   | 22,222   |                                   |  
|Changes in operating assets and liabilities: |                               |                                   |          |                                   |  
|Accounts receivable                          |                               |                                   | 35,990   |                                   |  
|Inventory                                    |                               |                                   | 25,677   |                                   |  
|Prepaid expenses                             |                               |                                   | 20,201   |                                   |  
|Accounts payable                             |                               |                                   | 214,915  |                                   |  
|Accrued liabilities                          |                               |                                   | 70,106   |                                   |  
|Payable to related parties                   |                               |                                   | 6,840    |                                   |  
|Deferred revenue                             |                               |                                   | 5,213    |                                   |  
|                                             |                               |                                   |          |                                   |  
|Net cash used in operating activities        |                               |                                   | (44,508  | )                                 |  
|Investments:                                 |                               |                                   |          |                                   |  
|Purchase of equipment                        |                               |                                   | (6,635   | )                                 |  
|Cash held in trust                           |                               |                                   | (66,654  | )                                 |  
|Purchase of trademarks                       |                               |                                   |         |                                   |  
|                                             |                               |                                   |          |                                   |  
|Net cash used in investing activities        |                               |                                   | (73,289  | )                                 |  
|                                             |                               |                                   |          |                                   |  
|Financing:                                   |                               |                                   |          |                                   |  
|Loan from related party                      |                               |                                   | 200,000  |                                   |  
|                                             |                               |                                   |          |                                   |  
|Net cash provided by financing activities    |                               |                                   | 200,000  |                                   |  
|                                             |                               |                                   |          |                                   |  
|Increase in cash and cash equivalents        |                               |                                   | 82,203   |                                   |  
|Cash and cash equivalents, beginning of year |                               |                                   | 73,150   |                                   |  
|                                             |                               |                                   |          |                                   |  
|Cash and cash equivalents, end of year       |                               | $                                 | 155,353  |                                   | $
|Supplementary information:                   |                               |                                   |          |                                   |  
|                                             | Interest paid                 |                                   | $        | 215                               |  
|                                             | Income taxes paid             |                                   |          |                                  |  
|Non-cash transactions:                       |                               |                                   |          |                                   |  
|                                             | Issuance of stock options     |                                   |          | (7,690                            | )
|                                             | Issuance of convertible loans |                                   |          | 22,222                            |  

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1. Continuing operations

These
consolidated financial statements have been prepared on a going concern basis in accordance with United States generally accepted accounting principles. The going concern basis
of presentation assumes the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of
business. Certain conditions, described below, currently exist which raise substantial doubt upon the validity of this assumption. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

The
Company's future operations are dependent upon the market's acceptance of its product and the Company's ability to license their product around the world. There can be no
assurance that the Company's product will be able to secure market acceptance or that they will be able to license their product. As of March 31, 2001, the Company has not generated sufficient
revenues to fund expenses and has experienced negative cash flow from operations. Operations have primarily been financed through the issuance of common stock and working capital loans provided by a
controlling shareholder. The intention of management is to generate revenue from the sale of software licenses. Additional debt or equity financing may be required and may not be available on
reasonable terms. If the Company is unable to generate sufficient cash flow to support its existing level of operations, it may be obligated to reduce its activities. The Company estimates that it
currently has available cash flow to sustain itself until June 30, 2001. Failure to obtain additional financing at this time may result in liquidation, leading to values which may be much lower than
their carrying value.

2. Significant accounting policies

These
unaudited interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States and the rules and
regulations of the Securities and Exchange Commission. The unaudited interim financial statements include all
adjustments, consisting solely of normal recurring adjustments, which in management's opinion are necessary for a fair presentation of the financial results for the interim period. The interim
financial statements have been prepared on a basis consistent with the annual financial statements of the Company and should be read in conjunction therewith. The Company's results of operations for
any interim period are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

The
preparation of the unaudited consolidated financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and recognized revenues and expenses for the
reporting periods. In these unaudited consolidated financial statements, the significant areas requiring the use of estimates include the valuation of long-lived assets, including intangible assets,
the fair value of stock options and the recognition of revenue. Actual results may significantly differ from these estimates.

3. Cash held in trust

Cash held in trust as at March 31, 2001, included an amount that was garnished by the Supreme Court of British Columbia and held in trust, pursuant to a legal
proceedings as detailed in Part II, Item 1. This legal proceeding was subsequently dismissed on April 23, 2001 and $37,631 in cash was returned to the Company, being net of the settlement amount and
legal fees.

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4. Loans from related parties

On February 14, 2001, the Company entered into an additional convertible loan agreement with Torchmark Holdings Ltd., a related party, for $200,000 at a rate
of 10%, due May 6, 2001. Under the terms of the agreement, the lender may convert the loan in whole or in part into common shares at a conversion rate equal to 90% of the market price of the shares on
the date of the agreement. As the conversion price was less than the market value of the Company's common shares at the issuance date, a beneficial conversion option equal to the difference of $22,222
has been recognized. The resulting deemed discount on the convertible loan has been fully recognized in interest expense in the quarter ended March 31, 2001.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the accompanying consolidated financial statements for the three month period ended March 31, 2001
and March 31, 2000, and the Form 10-KSB for the fiscal year ended December 31, 2000.

Revenue

Revenue for the three month period ended March 31, 2001 ("1Q01") was $576,387, compared to $748,228 in the three month period ended March 31, 2000 ("1Q00").
The revenue in 1Q01 was derived from the sale of hardware and software licenses primarily to dentists in the United States. The revenue in 1Q00 included $500,000 of revenue that was originally
recorded as deferred revenue at December 31, 1999 and subsequently recognized in 1Q00 as a result of the termination of the agreement with Mr. Doug Campbell, and $248,228 in sales of hardware and
software licenses directly to dentists in the United States.

Cost of Sales

The cost of sales of hardware and software licenses was 54.2% in 1Q01 compared to 54.5% in 1Q00, after adjusting 1Q00 revenue for the $500,000 distribution
license revenue.

Gross Profit

Gross profit was $264,236 in 1Q01 compared to $612,837 in 1Q00. The gross profit for 1Q00 included the recognition of $500,000 of distribution license revenue
relating to the cancellation of the agreement with Mr. Doug Campbell.

Operating Expenses

Depreciation expense was $28,647 for 1Q01 compared to $7,735 for 1Q00. There were no material purchases of capital assets during 1Q01. The increase in
depreciation expense related mainly to additional amortization expense on intangible assets acquired during 2000.

General
and administrative expense was $499,360 in 1Q01 compared to $130,801 in 1Q00. The increase in general and administrative expense in 1Q01 was due to the following: financial
consulting fees of $140,000; increased legal fees of $76,241; additional salary expense of $47,516; severance of $35,484; interest expense on the Torchmark financing agreements of $36,831; and
increased insurance expense of $25,106.

Research
and development expense was $48,672 in 1Q01 compared to $74,082 in 1Q00. The reduced expense reflects the Company's lower staffing levels in software development.

Selling
and marketing expense was $154,186 in 1Q01 compared to $81,104 in 1Q00, reflecting higher levels of trade show activity and travel expense.

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The net loss for 1Q01 was $466,629 compared to a net income of $319,115 in 1Q00.

Operations
in the three month period ending March 31, 2001 were funded by a convertible loan agreement from Torchmark Holdings, Ltd. in the amount of $200,000, issued on February 14,
2001.

Dicom
has a history of losses and accumulated deficit and this trend of losses may continue in the future. The Company's ability to obtain and sustain profitability will depend, in
part, upon the successful marketing of its existing products and the successful and timely introduction of new products. There can be no assurance that Dicom will ever be profitable.

The
auditors' report on Dicom's December 31, 2000 consolidated financial statements, as filed in Form 10-KSB on May 17, 2001, includes an explanatory paragraph that states that the
Company has suffered recurring losses and negative cash flows from operations and has a capital deficiency, conditions that raise substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustment as a result of this uncertainty.

Dicom
does not believe it can continue to satisfy its cash requirements from funds generated from operations at existing levels of revenues, and implemented a downsizing of management
staff in the first quarter of 2001. In order to continue to fund operations, the Company requires additional sources of funds that may not be readily available.

PART IIOTHER INFORMATION

Item 1. Legal Proceedings.

In March 2001, Dicom was named as a Defendant in now settled legal proceedings, instituted by Don Williams, Dicom's former President and Chief Operating
Officer. On March 2, 2001, the Company terminated Mr. Williams' employment with Dicom. On March 26, 2001, Mr. Williams instituted legal proceedings against the Company in the Supreme Court of British
Columbia (No. S011718), alleging that the Company owed Mr. Williams approximately $56,482 in outstanding bonuses and severance pay. On April 23, 2001, the Company settled Mr. Williams' claim for
approximately $17,742. On April 23, 2001, the Company and Mr. Williams consented to and filed, and the Registrar of the Supreme Court of British Columbia entered, a Consent Dismissal Order with the
Court, dismissing the legal proceedings.

In
March 2001, Dicom was named as a Defendant in now settled legal proceedings, instituted by Richard Bergin, Dicom's former Vice President Marketing. On March 2, 2001, the Company
terminated Mr. Bergin's employment with Dicom. On March 26, 2001, Mr. Bergin instituted legal proceedings against the Company in the Supreme Court of British Columbia (No. S011719), alleging that the
Company owed Mr. Bergin approximately $50,563 in outstanding bonuses and severance pay. On April 23, 2001, the Company settled Mr. Bergin's claim for approximately $17,742. On April 23, 2001, the
Company and Mr. Bergin consented to and filed, and the Registrar of the Supreme Court of British Columbia entered, a Consent Dismissal Order with the Court, dismissing the legal proceedings.

On
November 22, 2000, a former employee, Mr. Ross Paterson, filed a Writ and Statement of Claim against the Company for wrongful dismissal, in the New Westminster Registry of the
Supreme Court of British Columbia. Mr. Paterson is claiming unspecified damages for breach of contract. At a court hearing held on May 14, 2001, the Company requested, and was granted, an adjournment
of the proceeding until July 2001.

Item 2. Changes in Securities.

None.

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Item 3. Defaults Upon Senior Securities.

Dicom has defaulted on certain principal and interest payments due as of May 6, 2001 with respect to the Senior Securities described below. Nonetheless, Dicom
has reached an agreement in principle with Torchmark Holdings, Ltd., the lender, to restructure the terms and conditions of the payment of all principal and interest owing on such Senior Securities.
The documentation regarding the terms and conditions of such restructuring is expected to be completed on or before June 30, 2001.

On
November 7, 2000, the Company entered into a convertible loan agreement with Torchmark for $255,685, bearing interest at 10% per annum and repayable on or before May 6, 2001.

On
November 7, 2000, the Company entered into a convertible loan agreement with Torchmark for $250,000, bearing interest at 10% per annum and repayable on or before May 6, 2001.

On
December 21, 2000, the Company entered into a convertible loan agreement with Torchmark for $51,000, bearing interest at 10% per annum and repayable on or before May 6, 2001.

On
February 14, 2001, the Company entered into a convertible loan agreement with Torchmark for $200,000, bearing interest at 10% per annum and repayable on or before May 6, 2001.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

On April 24, 2001, the Over-the-Counter Bulletin Board (the "OTC BB"), the market on which Dicom's common stock is traded, appended Dicom's trading symbol,
"DCIM", with an "E" because it had not timely filed its Annual Report on Form 10-KSB for the fiscal year ended 2000 with the Securities and Exchange Commission. On May 17, 2001, Dicom filed its Form
10-KSB.

On
May 17, 2001, the OTC BB informed Dicom that an "E" would continue to be appended to Dicom's trading symbol until Dicom files its Quarterly Report on Form 10-QSB for the quarterly
period ended March 31, 2001.

Upon
filing this Form 10-QSB with the Securities and Exchange Commission, Dicom will be, and intends to supply the OTC BB with information indicating that it is, current in its public
reporting obligations. The time required to remove the "E" from Dicom's trading symbol may vary, but will be no earlier than the next trading day after Dicom files this Form 10-QSB with the SEC.

The
"E" appended to Dicom's trading symbol means that, upon the expiration of a 30-day grace period ending June 18, 2001, its common stock could be suspended from trading on, and
subject to removal from, the OTC BB unless Dicom supplies the NASD, the parent company to the OTC BB, with (i) information indicating that Dicom is current in its public reporting obligations pursuant
to NASD Rule 6530 and (ii) the NASD is satisfied that Dicom has met such obligations.

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Item 6. Exhibits and Reports on Form 8-K.

|REGULATION
SB NUMBER |   | EXHIBIT                                                                                                     
|-------------------- | - | ------------------------------------------------------------------------------------------------------------
|10.4(1               | ) | Software Bundling and Co-Marketing Agreement dated February 13, 2001, between Dicom and Olympus America Inc.
|10.5(1               | ) | Authorized Dealer Agreement dated April 6, 2001, between Dicom and Dental X Change, Inc.                    
|10.10(1              | ) | Convertible Loan Agreement dated February 14, 2001 between Dicom and Torchmark Holdings Ltd.                

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On
March 2, 2001, Dicom filed a Current Report on Form 8-K (File No. 000-26369) stating, under "Item 5. Other Events", generally that its ImagExplorer and ImagEditor image management
software would cease to be distributed for free and that they would be sold with a list price of $999.

On
March 2, 2001, Dicom filed a Current Report on Form 8-K (File No. 000-26369) stating, under "Item 5. Other Events", that Reza Bazargan, Dicom's former Chief Technology Officer, was
no longer employed at Dicom and that a replacement for Mr. Bazargan would be hired in due course.

12

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SIGNATURES

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

|                   |  | DICOM IMAGING SYSTEMS, INC.
|------------------ |  | ---------------------------
|Date: June 1, 2001 |  | By:                        

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