<PAGE> 1
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, 1999
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
----------------------------------------
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).
YES (X) NO ( )
and (2) has been subject to such filing requirements for the past 90 days.
YES (X) NO ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of July 31, 1999.
57,059,078 shares of common stock par value $0.01
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SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
July 31, April 30,
1999 1999
------------ ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 90,788 $ 193,013
Prepaid Expense 30,385 60,874
------------ ------------
Total Current Assets $ 121,173 $ 253,887
Property & Equipment, net 50,738 61,602
Other Assets:
Patents and Technology 216,433 215,417
------------ ------------
$ 388,344 $ 530,906
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Current portion of notes payable $ 62,793 $ 101,170
Accounts payable 284,208 305,686
Stockholders loans 76,900 76,900
Accrued liabilities 118,032 118,470
------------ ------------
Total Current Liabilities $ 541,933 $ 602,226
Notes Payable, less current $ 44,097 $ 47,327
Total Liabilities $ 586,030 $ 649,554
Stockholders' Deficiency:
Common Stock ,authorized 100,000,000 shares,
Issued and outstanding 57,059,078 and 55,314,324 570,591 553,143
Additional Paid in Capital 9,854,080 9,730,209
Deficit Accumulated Since Development Stage (10,622,357) (10,401,999)
------------ ------------
Total Stockholders' Deficiency $ (197,686) $ (118,647)
------------ ------------
$ 388,344 $ 530,906
============ ============
</TABLE>
See accompanying notes to financial statements
2
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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 1999 1998
------------ ------------------------------
(Unaudited) Unaudited
<S> <C> <C> <C>
Expenses:
Research and development $ 3,207,623 $ 43,698 $ 35,107
General and administrative 7,336,355 172,508 193,263
Interest 154,484 4,892 5,920
------------ ------------ ---------
Total Expense 10,698,462 221,098 234,290
Other Income (76,105) (741) (6,628)
------------ ------------ ---------
NET LOSS $(10,622,357) $ (220,357) $(227,662)
============ ============ =========
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.004) $ (0.005)
------------ ---------
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING, BASIC
AND DILUTED 55,860,937 50,729,302
------------ ---------
</TABLE>
See accompanying notes to financial statements
3
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SYNTHETIC BLOOD INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Accumulated During Three Months Ended
Development July 31,
Stage 1999 1998
---------------------------
CASH FLOWS FROM OPERATING (Unaudited) (Unaudited)
ACTIVITIES:
<S> <C> <C> <C>
Net loss $(10,622,357) $(220,357) $(227,662)
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation and amortization 378,951 17,391 12,890
Write down other assets 129,210
Issuance of compensatory stock options 250,466
Issuance of stock for services 1,046,441
Issuance of stock below FMV 695,248
Contribution of capital by stockholders 216,851
Changes in operating assets and liabilities:
Prepaid expenses and other assets (30,385) 30,489 (1,601)
Accounts payable and accrued expense 565,233 (21,916) (12,875)
------------ --------- ---------
Net cash used in operating activities (7,370,342) (194,393) (229,248)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of other assets (452,582) (6,872) (14,825)
Proceeds from the sale of equipment 15,457
Purchase of property and equipment (285,868) (671)
------------ --------- ---------
Net cash used in investing activities (722,993) (7,543) (14,825)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from sale of common stock 6,584,690 141,319
Repayments of amounts due stockholders (121,517)
Proceeds from stockholder notes payable 977,692
Contribution of capital by stockholder 40,700
Proceeds from notes and debentures 951,248
Payments on notes and lease obligations (248,690) (41,608) (40,357)
------------ --------- ---------
Net cash provided by (used in) financing
activities 8,184,123 99,711 (40,357)
Net change in cash and cash equivalents 90,788 (102,225) (284,430)
Cash and cash equivalents, beginning -- 193,013 740,215
------------ --------- ---------
Cash and cash equivalents, ending 90,788 90,788 455,785
============ ========= =========
Cash paid for Interest $ 114,970 $ 4,892 $ 5,920
Taxes 7,966 1,276 800
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES-
Common stock issued for accounts payable $ 25,000
Common stock issued to retire notes $ 36,000
Common stock issued to retire accrued wages $ 94,000
</TABLE>
See accompanying notes to financial statements
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SYNTHETIC BLOOD INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
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, 1999, and the results of its operations for the three
month periods ended July 31, 1999 and 1998 and its cash flows for the
three month periods ended July 31, 1999 and 1998. 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, 1999 filed with
the Securities and Exchange Commission on September 1, 1999.
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, 1999 has accumulated losses from operations
amounting to $10,622,357 and a working capital deficit of $420,760. 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 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.
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2. STOCKHOLDERS' EQUITY
During the period ended July 31, 1999, the Company issued 124,545
shares of the Company's common stock to third party investors for $.11
per share, the fair market value at the date of purchase, plus options
to purchase 124,545 shares of the common stock at $.11 per share.
Also during the period ended July 31, 1999, the Company issued
1,332,619 shares of the Company's common stock to third party investors
for $.14 per share, the fair market value at the date of purchase, plus
options to purchase 1,812,190 shares of the common stock at $.14 per
share.
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SYNTHETIC BLOOD INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Except for the historical information contained herein, the following discussion
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those projected in the
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in this section and
those discussed in the Company's Annual Report on Form 10K.
RESULTS OF OPERATIONS-
Three months ended July 31, 1999 and 1998:
The Research and Development expenses for the three month period ended July 31,
1999 were $43,698, compared to $ 35,107 for the same period in the prior year.
This increase was primarily due to an increase in contract wages of $9,400.
General and Administrative expenses for the three month period ended July 31,
1999 were $172,508, compared to $193,263 for the same period in the prior year.
During the current period professional fees were down $14,600 along with wages
and contract labor down $23,300 and travel expenses down $8,800. These decreases
were partially offset by an increases in rent expense of $13,000 related to the
addition of a California research laboratory in 1999 and a one-time moving
expense of $14,000 associated with the set-up of a laboratory in California.
The net loss for the three months ended July 31, 1999 was $220,357, compared to
$227,662 for the same period in the prior year. Although total expenses were
down $14,000 for the current period, this decrease was offset by interest income
of $6,000 earned on excess funds available for investment in the prior period.
LIQUIDITY AND CAPITAL RESOURCES
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, 1999 the Company had $121,173 in
total current assets and a working capital deficit of $420,760.
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 agreements to enable the Company to develop
its products.
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There can be no assurance that FDA approval will be granted, once applied for,
or that necessary funding will be obtained. The Company does not have any firm
commitments for additional capital as of July 31, 1999.
YEAR 2000 COMPLIANCE
The "Year 2000 Issue" arises because most computer systems and programs were
designed to handle only a two-digit, not a four-digit year. When the year 2000
begins, these computers may interpret "00" as the year 1900 and could either
stop processing date-related computations or could process them incorrectly.
The Company is in the process of developing a program to address Year 2000
issues and such program is substantially complete as of July 31, 1999. The
Company does not believe the costs required to address Year 2000 issues will be
material, and that the program should be completely implemented by the end of
the third quarter of 1999.
Year 2000 issues faced by prospective supplies, vendors and financial service
organizations with which the Company interacts could adversely impact the
Company. The Company is in the process of developing a plan to determine the
impact that third parties that are not Year 2000 compliant may have on the
operations of the Company. However, there can be no guarantee that the systems
of these companies will achieve Year 2000 compliance in a timely manner.
Recent SEC guidance for Year 2000 disclosure also calls on companies to describe
their most likely worst case Year 2000 scenario. The Company believes that the
most likely worst case scenario is that the Company could experience clinical
trial and research and development delays because of infrastructure failures or
delays from suppliers.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company has no derivative financial instruments and no exposure to foreign
currency exchange rates or interest rate risk.
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SYNTHETIC BLOOD INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
In May, 1999 the Company issued 124,545 shares of common stock
at $.11 per share and granted options to acquire a total of
124,545 shares of common stock with an exercise price of $.11
per share to two individuals.
In June, 1999 the Company issued 230,419 shares of common
stock at $.14 per share and granted options to acquire a total
of 368,670 shares of common stock with an exercise price of
$.14 per share to six individuals.
In July, 1999 the Company issued 1,102,200 shares of common
stock at $.14 per share and granted options to acquire a total
of 1,443,520 shares of common stock with an exercise price of
$.14 per share to fifteen individuals.
The common stock was issued and the options were granted
pursuant to the exemption provided by Section 4(2) of the
Securities Act of 1933.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matter to a Vote of Security Holders.
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The Company filed Form 8-K on July 9, 1999 informing the
Commission of a change in corporate auditors.
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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)
9/14/99 /S/ DAVID H. JOHNSON
- ---------------------------------- -----------------------------------------
(Date) David H. Johnson, Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIRST
QUARTER ENDED JULY 31, 1999 SYNTHETIC BLOOD INTERNATIONAL, INC.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JUL-31-1999
<CASH> 90,788
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 121,173
<PP&E> 307,483
<DEPRECIATION> 256,745
<TOTAL-ASSETS> 388,344
<CURRENT-LIABILITIES> 541,933
<BONDS> 0
0
0
<COMMON> 570,591
<OTHER-SE> (768,277)
<TOTAL-LIABILITY-AND-EQUITY> 388,344
<SALES> 0
<TOTAL-REVENUES> 741
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 216,206
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,892
<INCOME-PRETAX> (220,357)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (220,357)
<EPS-BASIC> ($0.004)
<EPS-DILUTED> ($0.004)
</TABLE>
