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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, 2000
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Commission File Number 2-31909
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SYNTHETIC BLOOD INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
New Jersey 22-3067701
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(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).
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, 2000.
85,735,042 shares of common stock par value $0.01
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SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
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<TABLE>
<CAPTION>
July 31, April 30,
2000 2000
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(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $5,569,914 $5,466,391
Common stock subscription receivable - 400,000
Prepaid expenses 46,233 71,065
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Total Current Assets 5,616,147 5,937,456
Property and Equipment, net 128,994 31,731
Other Assets, Patents 246,021 230,464
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$5,991,162 $6,199,651
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities:
Current portion of notes payable $ 22,301 $ 44,534
Accounts payable 219,627 211,460
Accrued liabilities 96,370 89,446
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Total Current Liabilities 338,298 345,440
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Stockholders' Equity:
Common Stock, par value $.01 per share;
authorized 100,000,000 shares; issued and
outstanding 85,735,042 and 80,907,298 857,350 809,073
Stock subscriptions receivable (600,000) (600,000)
Deposits on common stock 981,457 2,535,471
Additional paid in capital 15,981,078 14,423,005
Deficit accumulated during development stage (11,567,021) (11,313,338)
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Total Stockholders' Equity 5,652,864 5,854,211
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$ 5,991,162 $ 6,199,651
================== ====================
</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 2000 1999
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(Unaudited) (Unaudited)
<S> <C> <C> <C>
Expenses:
Research and development $ 3,497,788 $ 109,841 $ 43,698
General and administrative 8,085,391 233,969 172,508
Interest 166,282 808 4,892
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Total Expense 11,749,461 344,618 221,098
Other Income (182,440) (90,935) (741)
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Net Loss $11,567,021 $ (253,683) $ (220,357)
================= ================== =================
NET LOSS PER SHARE, BASIC AND
DILUTED $ (0.003) $ (0.004)
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WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING, BASIC
AND DILUTED 81,917,908 55,860,937
================== =================
</TABLE>
See accompanying notes to financial statements
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SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Accumulated
During
Development Three Months Ended, July 31
Stage 2000 1999
---------------- --------------- ---------------
<S> <C> <C> <C>
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(11,567,021) $ (253,683) $ (220,357)
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation and amortization 422,363 6,812 17,391
Loss on disposal of equipment 15,284 - -
Disposal and write-down other assets 126,800 - -
Compensatory stock options/warrants issued 279,079 - -
Issuance of stock for services rendered 1,068,841 - -
Issuance of stock below market value 695,248 - -
Contribution of capital by stockholders through
services rendered 216,851 - -
Changes in operating assets and liabilities:
Prepaid expenses and other assets (46,233) 24,832 30,489
Accounts payable and accrued expense 492,590 15,091 (21,916)
---------------- --------------- ---------------
Net cash used in operating activities (8,296,198) (206,948) (194,393)
---------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (402,103) (99,242) (671)
Proceeds from the sale of equipment 15,456 - -
Purchase of other assets (500,476) (20,389) (6,872)
---------------- --------------- ---------------
Net cash used in investing activities (887,123) (119,631) (7,543)
---------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock and exercise of
common stock warrants 10,339,820 52,336 141,319
Proceeds from stock subscription receivable 400,000 400,000 -
Repayments of amounts due stockholders (121,517) - -
Proceeds from stockholder notes payable 977,692 - -
Contribution of capital by stockholder 40,700 - -
Proceeds from common stock not yet issued 2,535,471 - -
Proceeds from notes and debentures 951,248 - -
Payments on notes and lease obligations (370,179) (22,234) (41,608)
---------------- --------------- ---------------
Net cash provided by financing activities 14,753,235 430,102 99,711
---------------- --------------- ---------------
Net change in cash and cash equivalents 5,569,914 103,523 (102,225)
Cash and cash equivalents, beginning of period - 5,466,391 193,013
---------------- --------------- ---------------
Cash and cash equivalents, ending of period $ 5,569,914 $ 5,569,914 $ 90,788
================ =============== ===============
Cash paid for: Interest $ 126,768 $ 808 $ 4,892
================ =============== ===============
Taxes $ 9,190 $ 1,250 $ 1,276
================ =============== ===============
</TABLE>
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See accompanying notes to financial statements
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, 2000, and the results of its operations for the three
month periods ended July 31, 2000 and 1999 and its cash flows for the three
month periods ended July 31, 2000 and 1999. 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, 2000 filed with the
Securities and Exchange Commission on August 3, 2000.
2. STOCKHOLDERS' EQUITY
During the three months ended July 31, 2000 the Company issued 849,555
shares of common stock resulting from the exercise of previously issued
stock warrants. The shares were issued at a weighted average price of
$0.103 per share. The proceeds received in connection with the exercise of
the warrants were $87,508, of which $35,172 was received during the fiscal
year ended April 30, 2000. These proceeds were presented as deposits on
common stock in the accompanying balance sheet as of April 30, 2000.
During the three months ended July 31, 2000, 29,819 shares of common stock
were issued to a consultant for services rendered. The fair value of the
stock at the date of issuance of approximately $19,000 has been charged
against additional paid-in capital.
During the three months ended July 31, 2000, the Company issued 3,948,370
shares of common stock for $0.385 per share. The net proceeds received in
connection with these shares, $1,518,543, were received during fiscal year
2000. These proceeds were presented as deposits on common stock in the
accompanying balance sheet as of April 30, 2000.
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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 for the year ended
April 30, 2000 and the filings made with the Securities and Exchange Commission.
Although the Company believes that the expectations reflected in the forward-
looking statements are reasonable, the Company can not guarantee future results,
levels of performance or achievements. Moreover, neither the Company nor any
other person assumes responsibility for the accuracy and completeness of the
forward-looking statements. The Company is under no obligation to update any of
the forward-looking statements after the filing of the Form 10-Q to conform such
statements or actual results or to changes in expectations.
Potential risks and uncertainties include, but are not limited to: an inability
to achieve results from the pre-clinical studies which are determined to merit
requesting FDA approval to begin clinical trials for one or more of the
Company's products; an inability to receive FDA approval to begin clinical
trials for one or more of its products; an inability to enter into or maintain
the future strategic collaborative relationships the Company believes are
essential to further develop and commercialize the Company's products;
uncertainties associated with the lengthy and complicated testing and regulatory
approval process, in particular the risk that the Company's products, assuming
pre-clinical tests are successful, may be found ineffective during clinical
trials, if any, or the Company is unable to obtain the necessary regulatory
approvals to commercialize these products; uncertainties associated with
obtaining and enforcing patents for the Company's products and technology; the
risks of infringing patents held by other parties; uncertainties associated with
changing or new technology; difficulties in scaling up manufacturing operations
to commercial scale and in obtaining raw materials in a quantity and at prices
necessary to produce profitable products; an inability to have the Company's
products manufactured by future strategic partners or contract manufacturing
companies; and failure to obtain market acceptance, significant market share, or
third party reimbursement at profitable price levels.
Significant risks and uncertainties are associated with the Company's ability to
obtain the required financing to develop its products. The Company's projected
capital requirements are based on the expectation that strategic partners will
assume further development and regulatory costs for each product during Phase II
clinical trials. If that does not happen, the amount of financing the Company
will be required to raise could increase substantially. If the Company is unable
to raise adequate financing, it may be required to delay, scale-back, or
eliminate one or more product development programs, or sell the rights to
certain technologies or products.
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RESULTS OF OPERATIONS
Three months ended July 31, 2000 and 1999:
The Research and Development expenses for the three month period ended July 31,
2000 were $109,841, compared to $43,698 for the same period in the prior year.
This increase is attributed to increases in salaries and contract wages of
$20,800, laboratory rent of $23,700 and laboratory supplies of $23,000. The
increased expenses over the same period in the prior year are due to increased
research activity and the addition of a California laboratory.
General and Administrative expenses for the three month period ended July 31,
2000 were $233,969, compared to $172,508 for the same period in the prior year.
The increase was the result of increases in advertising expenses of $34,000,
legal expenses of $14,000, travel expenses of $11,000 and salaries, consulting
and director fees of $28,000. This increase is partially offset by decreases in
moving expenses of $14,000, insurance expenses of $7,000 and depreciation of
$4,000.
The net loss for the three months ended July 31, 2000 was $253,683, compared to
$220,357 for the same period in the prior year. This increased net loss resulted
from the increases in operating expenses noted above, offset by $83,000 of
interest income from investment earnings.
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, 2000 the Company had $5,616,147 in
total current assets and working capital of $5,277,849. The Company has invested
excess working capital in short-term money market investment instruments. The
Company believes its cash and cash equivalents at July 31, 2000 will be
sufficient to meet its liquidity needs for the next 36 months.
Cash used in operating activities during the three months ended July 31, 2000
was $206,948 compared to $194,393 for the comparable period of the prior year.
Operating activities consisted primarily of product research and development.
Cash used in investing activities during the three months ended July 31, 2000
was $119,631 compared to $7,543 for the comparable period of the prior year.
Investing activities consisted primarily of the purchase of equipment and
expenditures related to the patent rights.
Cash provided by financing activities during the three months ended July 31,
2000 was $430,102 compared to $99,711 for the comparable period of the prior
year. Financing activities consisted primarily of the sale of common stock.
The Company is in the pre-clinical trial stage in the development of its
products. These products
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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 assist the Company in acquiring the necessary additional
financing, although there are no commitments for any such alliances or joint
ventures as of July 31, 2000. If the Company raises additional funds through the
issuance of equity securities, the percentage ownership of existing stockholders
will be reduced, stockholders may experience additional dilution or such equity
securities may provide for rights, preferences and privileges senior to those of
the common stock.
There can be no assurance that FDA approval will be granted, if and when it is
applied for one or more of the Company's products, or that necessary funding
will be obtained. The Company does not have any firm commitments for additional
capital as of July 31, 2000.
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.
Part II-Other Information
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
1. During May 2000 warrants were exercised for the
purchase of 317,909 shares of common stock at an exercise
price of $.0.11 per share by seven individuals, 44,200
shares of common stock at an exercise price of $0.14 per
share by one individual and 248,252 shares of common stock
at an exercise price of $0.07 by one individual.
2. During June 2000 warrants were exercised for the
purchase of 130,000 shares of common stock at an exercise
price $.0.10 per share by four individuals and 100,000
shares of common stock at an exercise price of $0.14 per
share by one individual.
3. In July 2000 the Company issued 3,948,370 shares of
common stock at $.385 per share to seven individuals whom
the Company reasonably believes were accredited investors,
and 29,819 shares of common stock were issued in
consideration for services rendered and options were
exercised for the purchase of 9,194 shares of common stock
at $.14 per share by one individual.
The registrant relied upon the exemption provided by Section 4
(2) for the
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transactions described in paragraphs 1 and 2 and for the
transaction described in paragraph 3, relied upon Section (4) 2
and/or Regulation D and Regulation S of the Securities Act of
1933 to issue the common stock. Restrictive legends were placed
on the common stock certificates.
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:
The following Exhibits are filed with this report as
indicated below:
27.1 Financial Data schedule
(b) Reports on Form 8K:
None
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.
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(Registrant)
9/14/00 /s/ David H. Johnson
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(Date) David H. Johnson, Chief Financial Officer
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