<PAGE>
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 January 31, 2000
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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(Address of principal executive offices)
937-298-6070
------------
(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 ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of January 31, 2000.
70,441,038 shares of common stock par value $0.01
-------------------------------------------------
1
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SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
January 31, April 30,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
------
Current Assets:
Cash and cash equivalents ................................ $ 39,060 $ 193,013
Prepaid expenses ......................................... 76,380 60,874
------------ ------------
Total Current Assets .......................... $ 115,440 $ 253,887
Property & Equipment, net ................................ 39,240 61,602
Other Assets, Patents and Technology ..................... 224,619 215,417
------------ ------------
$ 379,299 $ 530,906
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
Current Liabilities:
Notes payable & current portion of long-term debt ........ $ 79,714 $ 101,170
Accounts payable ......................................... 287,254 305,686
Stockholders loans ....................................... 88,968 76,900
Accrued liabilities ...................................... 91,919 118,470
------------ ------------
Total Current Liabilities ..................................... $ 547,855 $ 602,226
Notes Payable, less current portion ........................... 37,159 47,327
------------ ------------
Total Liabilities ............................................. $ 585,014 $ 649,553
------------ ------------
Stockholders' Deficiency:
Preferred Stock, authorized 10,000,000 shares;
issued and outstanding, none ........................... $ -- $ --
Common Stock, par value $.01 per share;
authorized 100,000,000 shares; issued and
outstanding, 70,441,038 and 55,314,324 .................. 704,411 553,143
Additional paid in capital .................................. 11,272,118 9,730,209
Stock subscription receivable................................ (1,200,000) --
Deficit accumulated during development stage ................ (10,982,244) (10,401,999)
------------ ------------
Total Stockholders' Deficiency ................................ $ (205,715) $ (118,647)
------------ ------------
$ 379,299 $ 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 Nine Months Ended
Development January 31, January 31,
Stage 2000 1999 2000 1999
------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Expenses:
Research and development ....... $ 3,303,931 $ 69,764 $ 42,173 $ 140,007 $ 99,795
General and administrative ..... 7,619,937 109,330 117,507 456,090 525,221
Interest ....................... 160,079 2,816 4,516 10,487 14,106
------------ ------------ ------------ ------------ ------------
Total Expense ....................... $ 11,083,947 $ 181,910 $ 164,196 $ 606,584 $ 639,122
Other Income ........................ (101,703) (238) (12,248) (26,339) (22,109)
------------ ------------ ------------ ------------ ------------
NET LOSS ............................ $(10,982,244) $ (181,672) $ (151,948) $ (580,245) $ (617,013)
============ ============ ============ ============ ============
NET LOSS PER SHARE, BASIC AND DILUTED
$ (0.003) $ (0.003) $ (0.009) $ (0.012)
============ ============ ============ ============
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING, BASIC
AND DILUTED ..................... 65,194,496 51,132,128 62,064,627 50,971,548
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements
3
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SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Accumulated
During Nine Months Ended
Development January 31,
Stage 2000 1999
------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ....................................... $(10,982,244) $ (580,245) $ (617,013)
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation and amortization ............ 400,730 39,170 41,410
Write-down other assets .................. 129,210
Compensatory stock options/warrants issued 250,466
Issuance of stock for services ........... 1,046,441 32,705
Issuance of stock below market value ..... 695,248
Contribution of capital by stockholders through
services rendered .......................... 216,850
Changes in operating assets and liabilities:
Prepaid expenses and other assets ........... (76,380) (15,506) (76,429)
Accounts payable and accrued expense ........ 554,234 (32,915) 39,581
------------ ------------ ------------
Net cash used in operating activities .... $ (7,765,445) $ (589,496) $ (579,746)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of other assets ....................... $ (468,087) $ (22,377) $ (29,167)
Proceeds from the sale of equipment ............ 15,457
Purchase of property and equipment ............. (288,830) (3,632) (8,575)
------------ ------------ ------------
Net cash used in investing activities ..... $ (741,460) $ (26,009) $ (37,742)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock ............. $ 6,936,547 $ 493,176 $ 22,051
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 99,096
Payments on notes and lease obligations ........ (238,706) (31,624) (72,914)
------------ ------------ ------------
Net cash provided by financing activities . $ 8,545,964 $ 461,552 $ 48,233
Net change in cash and cash equivalents ........ 39,059 (153,953) (569,255)
Cash and cash equivalents, beginning of period . -- 193,013 740,215
------------ ------------ ------------
Cash and cash equivalents, ending of period .... $ 39,059 $ 39,060 $ 170,960
============ ============ ============
Cash paid for: Interest ....................... $ 160,079 $ 10,487 $ 14,106
Taxes .......................... 9,216 -- 800
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
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 January 31, 2000, and the results of its operations for the
three month and nine month periods ended January 31, 2000 and 1999 and
its cash flows for the nine month periods ended January 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, 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 January 31, 2000 has accumulated losses from operations
amounting to $10,982,244 and working capital deficit of $432,415. 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, if and when applied for one or more of the
Company's products. 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.
5
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2. STOCKHOLDERS' DEFICIENCY
During the three month period ended July 31, 1999, the Company issued
412,135 shares of the Company's common stock to third party investors
for $.11 per share, plus options to purchase 412,135 shares of the
common stock at $.11 per share.
Also during the three month period ended July 31, 1999, the Company
issued 1,132,619 shares of the Company's common stock to third party
investors for $.08 per share and 200,000 shares for $.06, plus options
to purchase 1,812,190 shares of the common stock at $.14 per share.
During the three month period ended October 31, 1999, the Company
issued 950,710 shares of the Company's common stock to third party
investors for $.08 per share.
Also during the three month period ended October 31, 1999, the Company
issued 2,500,000 shares of the Company's common stock to a third party
investor for $.08 per share. In addition, the Company sold an
additional 9,000,000 shares of common stock to this investor at $.13 a
share in exchange for a promissory note of $1,200,000 payable in 12
equal monthly installments of $100,000, commencing in April 2000. The
note has been recorded as a stock subscription receivable and has been
presented as a reduction of Stockholders' Deficiency in the
accompanying Balance Sheet.
During the three month period ended January 31, 2000, the Company
issued 931,250 shares of the Company's common stock to third party
investors for $.08 per share.
Subsequent to January 31, 2000, the Company issued 3,600,000 shares of
the Company's common stock to third party investors for $.28 per share,
which resulted in net cash proceeds of $1,000,000.
6
<PAGE>
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.
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 of 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
may be found ineffective or unsafe 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 levels and in
obtaining raw materials in 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 one or more of the Company's products
progress to that level. 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.
RESULTS OF OPERATIONS
Three months ended January 31, 2000 and 1999:
- --------------------------------------------
The Research and Development expenses for the three month period ended January
31, 2000 were $69,764, compared to $42,173 for the same period in the prior
year. This increase is attributed due to an increase in salaries and contract
wages of $27,400 due to increased research activity during the period.
7
<PAGE>
General and Administrative expenses for the three month period ended January 31,
2000 were $109,330, compared to $117,507 for the same period in the prior year.
This was the result of current period administrative salaries decreasing
$18,000. This decrease is partially offset by increases in various other general
operating expenses of $10,000.
The net loss for the three months ended January 31, 2000 was $181,672, compared
to $151,948 for the same period in the prior year. This increase is the result
of increased research and development expenses discussed above.
Nine months ended January 31, 2000 and 1999:
- -------------------------------------------
The Research and Development expenses for the nine month period ended January
31, 2000 were $140,007 compared to $99,795 for the same period in the prior
year. This increase is due primarily to an increase in research activity causing
an increase in salaries and contract wages of $48,300.
General and Administrative expenses for the nine month period ended January 31,
2000 were $456,090, compared to $525,221for the same period in the prior year.
During the current period wages, consulting and contract labor decreased by
$91,200 over the same period in the prior year. This decrease was offset by an
increase in office expenses of $21,400 relating to the set up of a California
location during the current year.
The net loss for the nine months ended January 31, 2000 was $580,245, compared
to $617,013 for the same period in the prior year. Total expenses were down
$32,500 for the current period and during the current period the Company
realized an increase in other income of $15,000 due to a vendor settlement.
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 January 31, 2000 the Company had $115,440 in
total current assets and a working capital deficit of $432,415.
The Company is in the pre-clinical trial stage in the development of its
products. These products must undergo further development and testing and
achieve certain desired results prior to submission to the FDA for approval to
begin clinical trials, and thereafter 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.
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. Except for the stock subscription and 3,600,000 shares of
common stock sold subsequent to January 31, 2000 as described in Note 2, the
Company does not have any firm commitments for additional capital as of January
31, 2000.
8
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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.
9
<PAGE>
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Company)
PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
In November 1999, December 1999 and January 2000 the Company
issued 468,750, 317,500 and 145,000 shares of common stock,
respectively, at $.08 per share to ten individuals were.
Subsequent to January 31, 2000 the Company issued 3,600,000
shares of the Company's common stock to non-U.S. persons for
$.28 per share.
The registrant relied upon the exemptions provided by Section
4 (2) and Regulation S of the Securities Act of 1933 to issue
the common stock and grant the options.
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.
The Company filed Form 8-K on July 9, 1999 informing the
Commission of a change in corporate auditors.
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)
3/16/00 /s/ DAVID H. JOHNSON
- --------------- -----------------------------------------
(Date) David H. Johnson, Chief Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIRD
QUARTER ENDED JANUARY 31, 2000 SYNTHETIC BLOOD INTERNATIONAL, INC.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 39,060
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 115,440
<PP&E> 310,445
<DEPRECIATION> 271,205
<TOTAL-ASSETS> 379,299
<CURRENT-LIABILITIES> 547,855
<BONDS> 0
0
0
<COMMON> 704,411
<OTHER-SE> (910,126)
<TOTAL-LIABILITY-AND-EQUITY> 379,299
<SALES> 0
<TOTAL-REVENUES> 26,339
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 596,097
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,487
<INCOME-PRETAX> (580,245)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (580,245)
<EPS-BASIC> ($0.009)
<EPS-DILUTED> ($0.009)
</TABLE>
