10-Q 1 0001.txt FORM 10-Q FOR PERIOD ENDED JULY 31, 2000 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 ----------------- 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 ---------------------------------- (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 ------------------------------------------------- 1 SYNTHETIC BLOOD INTERNATIONAL, INC. (A Development Stage Company) BALANCE SHEETS ASSETS ------
July 31, April 30, 2000 2000 ----------------- ------------------ (Unaudited) Current Assets: Cash and cash equivalents $5,569,914 $5,466,391 Common stock subscription receivable - 400,000 Prepaid expenses 46,233 71,065 ----------------- ------------------ Total Current Assets 5,616,147 5,937,456 Property and Equipment, net 128,994 31,731 Other Assets, Patents 246,021 230,464 ----------------- ------------------ $5,991,162 $6,199,651 ================= ================== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities: Current portion of notes payable $ 22,301 $ 44,534 Accounts payable 219,627 211,460 Accrued liabilities 96,370 89,446 ------------------ -------------------- Total Current Liabilities 338,298 345,440 ------------------ -------------------- 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) ------------------ -------------------- Total Stockholders' Equity 5,652,864 5,854,211 ------------------ -------------------- $ 5,991,162 $ 6,199,651 ================== ====================
See accompanying notes to financial statements 2 SYNTHETIC BLOOD INTERNATIONAL, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS
Accumulated During the Three Months Ended Development July 31, Stage 2000 1999 ----------------- ---------------------------------------- (Unaudited) (Unaudited) 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 ----------------- ------------------ ----------------- Total Expense 11,749,461 344,618 221,098 Other Income (182,440) (90,935) (741) ----------------- ------------------ ----------------- Net Loss $11,567,021 $ (253,683) $ (220,357) ================= ================== ================= NET LOSS PER SHARE, BASIC AND DILUTED $ (0.003) $ (0.004) ================== ================= WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED 81,917,908 55,860,937 ================== =================
See accompanying notes to financial statements 3 SYNTHETIC BLOOD INTERNATIONAL, INC. (A Development Stage Company) STATEMENT OF CASH FLOWS
Accumulated During Development Three Months Ended, July 31 Stage 2000 1999 ---------------- --------------- --------------- (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 ================ =============== ===============
4 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. 5 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. 6 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 7 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 8 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. ----------------------------------- (Registrant) 9/14/00 /s/ David H. Johnson ----------- ----------------------------------------- (Date) David H. Johnson, Chief Financial Officer 9