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SYNTHETIC BLOOD INTERNATIONAL, INC.
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended July 31, 1998
Commission File Number 2-31909
SYNTHETIC BLOOD INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-3067701
- ------------------------ ------------------------
(State of Incorporation) (IRS Employer ID Number)
2685 Culver Avenue, Kettering, Ohio 45429
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937-298-6070
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(Registrant's telephone number, including area code)
Indicate by the 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) YES [X] NO [ ]
(2) YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of July 31, 1998.
50,729,302 shares of common stock par value $0.01
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SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
July 31, April 30,
1998 1998
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash $ 455,785 $ 740,215
Prepaid Expense 21,126 19,525
----------- -----------
Total Current Assets $ 476,911 $ 759,740
Property & Equipment, net 76,154 84,653
Other Assets:
Patents and Technology 151,955 141,521
----------- -----------
Total Assets $ 705,020 $ 985,914
=========== ===========
LIABILITIES AND STOCKHOLDERS'S EQUITY
Current Liabilities:
Accrued Expenses $ 332,112 $ 339,540
Stockholders loans 14,900 15,000
Accrued Payroll & Other 131,096 176,800
----------- -----------
Total Current Liabilities $ 478,108 $ 531,340
Notes Payable, less current $ 103,021 $ 103,021
Total Liabilities $ 581,129 $ 634,361
Stockholder's Equity:
Common Stock $0.01 par
Value: Authorized
100,000,000 shares
Issued & outstanding
50,729,302 & 50,729,302 $ 507,293 $ 507,293
Additional Paid in capital 9,412,424 9,412,424
Deficit Accumulated since
Development Stage (9,795,826) (9,568,164)
----------- -----------
Total Stockholder's Equity
(Deficit) $ 123,891 $ 351,553
----------- -----------
Total Liabilities &
Stockholder's Equity $ 705,020 $ 985,914
=========== ===========
</TABLE>
See accompanying notes to financial statements
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SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Accumulated
during the Three Months Ended
development July 31,
stage 1998 1997
------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Expenses:
Research and
development $ 2,929,181 $ 24,982 $ 46,365
General and
administrative 6,789,526 203,388 167,064
Interest 135,117 5,920 792
------------ ------------ ------------
Total Expense 9,853,824 234,290 214,221
OTHER INCOME (57,998) (6,628) (114)
------------ ------------ ------------
NET LOSS $ (9,795,826) $ (227,662) $ (214,107)
============ ============
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.005) $ (0.004)
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING, BASIC AND DILUTED 50,729,302 50,279,302
============ ============
</TABLE>
See accompanying notes to financial statements
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SYNTHETIC BLOOD INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Accumulated
during the Three months Three months
CASH FLOWS FROM OPERATING development ended July 31, ended July 31
ACTIVITIES: stage 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net loss $(9,795,826) $ (227,662) $ (214,107)
Adjustments to reconcile net
cash used in operating activities:
Depreciation and amortization 322,447 12,890 23,294
Write down other assets 126,800
Issuance of compensatory stk options 248,906
Contribution of capital through
services rendered 30,000
Issuance of stock for services rendered 989,516
Issuance of stock below FMV 695,248
Contribution of capital by stockholders 216,851
Changes in operating assets and
liabilities:
Prepaid expenses & other assets (21,126) (1,601) (4,000)
Accounts payable and accrued
expense 536,129 (12,875) 85,114
----------- ----------- -----------
Net cash used in operating
activities (6,651,055) (229,248) (109,699)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of other assets (377,817) (14,825) (7,281)
Proceeds from the sale of equipment 15,457
Purchase of property and equipment (262,658)
----------- ----------- -----------
Net cash used in investing
activities (625,081) (14,825) (7,281)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from sale of common stock 6,138,221
Payments on capital lease obligations (52,338)
Proceeds from issuance of notes
payable to stockholder 915,792 79,000
Contribution of capital stockholder 40,700
Proceeds from convertible debentures 811,000
Repayments of notes payable (121,517) (40,357)
----------- ----------- -----------
Net cash provided by (used in)
financing activities 7,731,858 (40,357) 79,000
</TABLE>
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<TABLE>
<S> <C> <C> <C>
NET CHANGE IN CASH AND CASH
EQUIVALENTS: 455,785 (284,430) (37,980)
CASH AND CASH EQUIVALENTS,
beginning of period 740,215 53,857
CASH AND CASH EQUIVALENTS,
end of period $ 455,785 $ 455,785 $ 15,877
=========== =========== ===========
Cash paid for Interest $ 93,091 $ 5,920 $ 792
Taxes 6,400 800 800
</TABLE>
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SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
July 31, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements contain all adjustments
(consisting only of normal recurring adjustments) which in the opinion
of management, are necessary to present fairly the financial position of
the Company at July 31, 1998, and the results of its operations and its
cash flows for the three month periods ended July 31, 1998 and 1997.
Certain information and footnote disclosures normally included in
financial statements have been condensed or omitted pursuant to rules
and regulations of the Securities and Exchange Commission although the
Company believes that the disclosures in the financial statements are
adequate to make the information presented not misleading.
The financial statements included herein should be read in conjunction
with the financial statements of the Company, included in the Company's
Annual Report on Form 10-K for the year ended April 30, 1998 filed with
the Securities and Exchange Commission on August 28, 1998.
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. As
shown in the financial statements, the Company is in the development
stage and, at July 31, 1998 has accumulated losses from operations
amounting to $9,795,826, a working capital deficit of $1,197. The
Company is in the pre-clinical trial stage of its products. These
products must undergo further development and testing prior to
submission to the FDA for approval to market the products. The Company's
continuation as a going concern is dependent on its ability to generate
sufficient cash flow, to meet its obligations on a
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timely basis, to obtain additional financing as may be required, and
ultimately to attain successful operations. However, no assurance can be
given at this time as to whether the Company will achieve any of these
conditions or that the FDA approval will be granted, once applied for.
These factors, among others, raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not
include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company
be unable to continue as a going concern for a reasonable period of
time. Additional funding will be necessary which will require future
private placements and/or joint ventures to enable the Company to
continue the required testing through Phase I, II and III human testing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development Stage - Because the Company has not commenced principal
operations, it is considered a "Development Stage Enterprise" as defined
by Statement of Financial Accounting Standards No. 7, Accounting and
Reporting by Development Stage Enterprises.
Pricing of Common Stock and Options to Purchase Common Stock - The
Company's Board of Directors determines the issuance price of its common
stock and options to purchase common stock to be fair market value,
based on a good faith estimate which is derived from recent issuance of
common stock to unrelated parties and/or from common stock market
quotations, after giving effect to the restricted nature of the stock
issued.
Property and Equipment - Property is recorded at cost. Depreciation and
amortization are computed using the straight-line method over the
shorter of the estimated useful lives of the related assets, ranging
from three to ten years, or lease term, if applicable.
Patents - Patent costs are being amortized over the lesser of the
remaining life of the patent or the estimated useful life of the
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related product, ranging from eight to ten years. The Company evaluates
recoverability of patents on at least an annual basis by comparing the
estimated resale value of the patents to the remaining carrying values.
An adjustment to the carrying value of the patent rights would be made
if the estimated resale value of the patents is determined to be
insufficient to recover such value.
3. COMMITMENTS AND CONTINGENCIES
Employment Contracts - The Company has employment agreements with a
certain officer with aggregate future commitments of $274,000 through
February 2000.
Litigation - The Company is subject to litigation in the normal course
of the business, none of which management believes will have a material
adverse effect on the Company's financial statements as of July 31,
1998.
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SYNTHETIC BLOOD INTERNATIONAL, INC
(A Development Stage Company)
Part I- Financial Information
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS- First Quarter of 1998 and 1997.
The Research and Development expenses for the three months period ended July 31,
1998 was $ 24,982, compared to $ 46,365 for the same period in the prior year.
This decrease was due to a significant reduction in research personnel, the
purchase of animals and supplies.
General and Administrative expenses for the three months period ended July 31,
1998 were $203,388, compared to $167,064 for the same period in the prior year.
This increase was due to a increase in additional personnel and legal fees.
The net loss for the three months ended July 31, 1998 was $227,662, compared to
$214,107 for the same period in the prior year. This increase represented the
difference between an increase in administrative expense offset by a reduction
in research expense.
LIQUIDITY AND CAPITAL SOURCES
The Company has financed its operations since September 1990, when the current
management became involved, through the issuance of debt and equity securities
and loans from stockholders. As of July 31, 1998 the Company had $476,911 in
total current assets and a working capital deficit of $1,197.
The Company is in the pre-clinical trial stage in the development of its
products. These products must undergo further development and testing prior to
submission to the FDA for approval to market its products. This additional
development and testing and if approved, the FDA required clinical testing will
require significant additional financing. Management is actively pursuing
strategic alliance and joint venture
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agreements to enable the Company to develop its products. There can be no
assurance that FDA approval will be granted, once applied for, or that necessary
funding will be obtained.
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SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Company)
Part II-Other Information
Item 1. Legal Proceedings.
Described in Financial Statement notes.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matter to a Vote of Security Holders.
None
Item 5. Other Information
Leland C. Clark, Jr., Ph.D. resigned as an officer and director.
He was replaced on the board on May 18, 1998 by Howard Jones,
Ph.D., president of the biopharmaceutical business unit of
Curative Health Services since 1993 and co-founder of Cypros
Pharmaceutical Corporation in 1992.
Item 6. Exhibits and Reports on Form 8-K.
None
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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.
SYNTHETIC BLOOD INTERNATIONAL, INC.
(Registrant)
9/12/98 /S/ ROBERT J. LARSEN
- -------------- --------------------------------
(Date) Robert J. Larsen, Secretary
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIRST
QUARTER ENDED JULY 31, 1998 SYNTHETIC BLOOD INTERNATIONAL, INC.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> JUL-31-1998
<CASH> 455,785
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 476,911
<PP&E> 294,219
<DEPRECIATION> 218,065
<TOTAL-ASSETS> 705,020
<CURRENT-LIABILITIES> 478,108
<BONDS> 0
0
0
<COMMON> 507,293
<OTHER-SE> (383,402)
<TOTAL-LIABILITY-AND-EQUITY> 705,020
<SALES> 0
<TOTAL-REVENUES> 6,628
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 234,290
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,920
<INCOME-PRETAX> (227,622)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (227,622)
<EPS-PRIMARY> (0.005)
<EPS-DILUTED> (0.005)
</TABLE>
