<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, 2001
                                              ------------------

                     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)

         3189 Airway Avenue, Building C, Costa Mesa, California 92626
       ----------------------------------------------------------------
                    (Office of Principal Executive Office)

                                 714-427-6363
                                 ------------
             (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 January 31, 2001.

               88,244,436 shares of common stock par value $0.01
               -------------------------------------------------
<PAGE>

                      SYNTHETIC BLOOD INTERNATIONAL, INC.
                         (A Development Stage Company)
                                BALANCE SHEETS

                                    ASSETS
                                    ------

<TABLE>
<CAPTION>
                                                           January 31,         April 30,
                                                               2001              2000
                                                           -----------         ---------
                                                           (Unaudited)
<S>                                                        <C>                 <C>
Current Assets:
    Cash and cash equivalents                               $  4,693,913        $  5,466,391
    Common stock subscription receivable                               -             400,000
    Prepaid expenses                                             100,415              71,065
                                                            ------------        ------------

                     Total Current Assets                      4,794,328           5,937,456

Property and Equipment, net                                      187,758              31,731
Patents, net                                                     229,738             230,464
                                                            ------------        ------------

                                                            $  5,211,824        $  6,199,651
                                                            ============        ============

                     LIABILITIES AND STOCKHOLDERS' EQUITY
                     ------------------------------------
Current Liabilities:
    Current portion of notes payable                        $     72,836        $     44,534
    Accounts payable                                             141,041             211,460
    Accrued liabilities                                           81,364              89,446
                                                            ------------        ------------

                     Total Current Liabilities                   295,241             345,440
                                                            ------------      --------------

Stockholders' Equity:
    Common Stock, par value $.01 per share;
        authorized 100,000,000 shares; issued and
        outstanding 88,244,436 and 80,907,298                    882,444             809,073
    Stock subscriptions receivable                              (600,000)           (600,000)
    Deposits on common stock                                     243,857           2,535,471
    Additional paid in capital                                16,872,704          14,423,005
    Deficit accumulated during development stage             (12,482,422)        (11,313,338)
                                                            ------------      --------------

                     Total Stockholders' Equity                4,916,583           5,854,211
                                                            ------------      --------------

                                                            $  5,211,824        $  6,199,651
                                                            ============        ============
</TABLE>

                See accompanying notes to financial statements

                                       2
<PAGE>

                      SYNTHETIC BLOOD INTERNATIONAL, INC.
                         (A Development Stage Company)

                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                   Accumulated            Three Months Ended                     Nine Months Ended
                                    During the                January 31,                           January 31,
                                   Development         --------------------------         -------------------------------
                                      Stage               2001           2000                  2001               2000
                                  -------------        --------------------------         -------------------------------
                                   (Unaudited)                (Unaudited)                          (Unaudited)
<S>                               <C>                 <C>            <C>                 <C>                 <C>
Expenses:
     Research and development      $  3,907,745        $   234,760    $    69,764         $   519,799         $   140,007

     General and administrative       8,766,909            257,194        109,330             915,486             456,090

     Interest                           166,544                  -          2,816               1,070              10,487
                                   ------------        -----------    -----------         -----------         -----------

Total Expense                        12,841,198            491,954        181,910           1,436,355             606,584

Other Income                           (358,776)           (85,004)          (238)           (267,271)            (26,339)
                                   ------------        -----------    -----------         -----------         -----------

NET LOSS                           $(12,482,422)       $  (406,950)   $  (181,672)        $(1,169,084)        $  (580,245)
                                   ============        ===========    ===========         ===========         ===========

NET LOSS PER SHARE, BASIC
    AND DILUTED                                        $    (0.004)   $    (0.003)        $    (0.014)        $    (0.009)
                                                       ===========    ===========         ===========         ===========

WEIGHTED AVERAGE
    NUMBER OF SHARES
    OUTSTANDING, BASIC
    AND DILUTED                                         87,642,240     65,194,496          85,422,355          62,064,627
                                                       ===========    ===========         ===========         ===========
</TABLE>

                See accompanying notes to financial statements

                                       3
<PAGE>

                      SYNTHETIC BLOOD INTERNATIONAL, INC.
                         (A Development Stage Company)
                            STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                       Accumulated
                                                         During                     Nine Months Ended January 31,
                                                       Development             ------------------------------------
                                                          Stage                     2001                   2000
                                                       -----------             ------------------------------------
                                                       (Unaudited)                         (Unaudited)
<S>                                                   <C>                      <C>                      <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                               $(12,482,422)            $(1,169,084)             $(580,245)
Adjustments to reconcile net loss to cash used
     in operating activities:
      Depreciation and amortization                         471,630                  56,079                 39,170
      Loss on disposal of equipment                          15,284                       -                      -
      Disposal and write-down of other assets               126,800                       -                      -
      Compensatory stock options/warrants issued            279,079                       -                      -
      Issuance of stock and options for services          1,193,539                 124,698                      -
        rendered
      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              (100,415)                (29,350)               (15,506)
            Accounts payable and accrued expense            398,998                 (78,501)               (32,915)
                                                       ------------             -----------              ---------
     Net cash used in operating activities               (9,185,408)             (1,096,158)              (589,496)
                                                       ------------             -----------              ---------

CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment                         (485,202)               (182,341)                (3,632)
Proceeds from the sale of equipment                          15,456                       -                      -
Purchase of other assets                                   (509,126)                (29,039)               (22,377)
                                                       ------------             -----------              ---------
     Net cash used in investing activities                 (978,872)               (211,380)               (26,009)
                                                       ------------             -----------              ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock and exercise of
   common stock options and warrants                     10,360,093                  72,608                493,176
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                 2,569,621                  34,150                      -
Proceeds from notes and debentures                        1,054,884                 103,636                      -
Payments on notes and lease obligations                    (423,280)                (75,334)               (31,624)
                                                       ------------             -----------              ---------
     Net cash provided by financing activities           14,858,193                 535,060                461,552
                                                       ------------             -----------              ---------

Net change in cash and cash equivalents                   4,693,913                (772,478)              (153,953)

Cash and cash equivalents, beginning of period                    -               5,466,391                193,013
                                                       ------------             -----------              ---------
Cash and cash equivalents, ending of period            $  4,693,913             $ 4,693,913              $  39,060
                                                       ============             ===========              =========

 Cash paid for: Interest                               $    127,030             $     1,070              $  10,487
                                                       ============             ===========              =========
                Taxes                                  $     24,132             $    16,192              $       -
                                                       ============             ===========              =========
</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, 2001, and the results of its operations for the
     three month and nine month periods ended January 31, 2001 and 2000 and its
     cash flows for the nine month periods ended January 31, 2001 and 2000.
     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.

     The Company has changed its corporate offices from Kettering, Ohio to its
     existing facility at 3189 Airway Avenue, Building C, Costa Mesa,
     California.

2.   STOCKHOLDERS' EQUITY


     During the three months ended January 31, 2001, the Company issued 600,000
     shares of common stock for $0.385 per share.  The net proceeds received in
     connection with these shares, $230,760, 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.

     During the three months ended January 31, 2001 the Company issued 291,000
     shares of common stock resulting from the exercise of previously issued
     stock warrants. The shares were issued at a weighted-average price of $0.07
     per share. The proceeds received in connection with the exercise of the
     warrants were $20,570.

                                       5
<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 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 and thereafter.  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
<PAGE>

RESULTS OF OPERATIONS

Three months ended January 31, 2001 and 2000:

The Research and Development expenses for the three-month period ended January
31, 2001 were $234,760, compared to $69,764 for the same period in the prior
year.  This increase is attributed to the addition of laboratory and contract
employees that increased overall compensation by $114,000 over the comparable
period in 2000.  The addition of a California laboratory and an overall increase
in research activity during the three-month period ending January 31, 2001
caused laboratory rent to increase $25,000 and laboratory expenses to increase
$17,000 over the comparable period in 2000.

General and Administrative expenses for the three-month period ended January 31,
2001 were $257,194, compared to $109,330 for the same period in the prior year.
Payroll expenses increased $29,000 during the three-months ended January 31,
2001 along with increases in outside consulting expenses of $25,000, general
office expenses of $32,000 and insurance expenses of $8,000.   In addition,
during the three-month period ended January 31, 2001 the Company incurred
$33,000 in investor expenses for a proxy statement issued in connection with a
stockholders vote during the period.

The net loss for the three months ended January 31, 2001 was $406,950, compared
to a net loss of $181,672 for the same period in the prior year.  Although total
expense increased $310,044 during the three-month period ended January 31, 2001
over the comparable period in 2000, the Company's net loss increased only
$225,278 due to an increase in other income of $84,766 attributed to additional
interest income earned on the Company's increased cash balances over the prior
year.

Nine months ended January 31, 2001 and 2000:

The Research and Development expenses for the nine-month period ended January
31, 2001 were $519,799, compared to $140,007 for the same period in the prior
year.  The addition of a California Laboratory and increased research activity
during the nine month period January 31, 2001 caused wages and contract salaries
to increase $217,000, laboratory supplies to increase $69,000 and laboratory
rent to increase $73,000 over the comparable period in 2000.

General and Administrative expenses for the nine-month period ended January 31,
2001 were $915,486, compared to $456,090 for the same period in the prior year.
The increase was the result of higher general office expenses in 2001 of $87,000
during the nine-month period ended January 31, 2001 along with increases in
consulting services of $150,000, market research expenses of $60,000 and
investor expenses of $83,000.  In addition, travel related expenses increased
during 2001 by $26,000 over the comparable nine-month period in 2000.

The net loss for the nine-month period ended January 31, 2001 was $1,169,084
compared to $580,245 for the same period in the prior year.  Increased expenses
discussed above were offset during the nine-month period ended January 31, 2001
by an increase in other income of $240,932 attributed to additional interest
income earned on the Company's increased cash

                                       7
<PAGE>

balances over the prior year.



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, 2001, the Company had $4,794,328
in total current assets and working capital of $4,499,087.  The Company has
invested excess working capital in short-term money market investment
instruments.  The Company believes its cash and cash equivalents at January 31,
2001 will be sufficient to meet its liquidity needs for the next 18 months.

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 initiate clinical trials. This additional
development and testing and, if approved, the FDA required clinical testing will
require significant additional financing. Management is actively pursuing
private and institutional financing as well as strategic alliances and/or joint
venture agreements to assist the Company in acquiring the necessary additional
financing, although there are no commitments as of January 31, 2001.  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 January 31, 2001.

Financial Condition

January 31, 2001 compared to April 30, 2000:

Cash used in operating activities during the nine-month period ended January 31,
2001 was $1,096,158 compared to $589,496 for the comparable period of the prior
year.  Operating activities consisted primarily of product research and
development and the general operation of corporate office.

Cash used in investing activities during the nine-month period ended January 31,
2001 was $211,380 compared to $26,009 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 nine-month period ended January
31, 2001 was $535,060 compared to $461,552 for the comparable period of the
prior year.  Financing activities consisted primarily of the sale of common
stock.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

                                       8
<PAGE>

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 January 2001, the Company issued 600,000 shares of
                    common stock at $.385 per share to three individuals, who
                    are not United Stated persons as defined in Regulation S,
                    whom the Company reasonably believes were accredited
                    investors.

               2.   During December 2000, warrants were exercised for the
                    purchase of 271,000 shares of common stock at an exercise
                    price $0.07 per share by one individual. During January
                    2001, warrants were exercised for the purchase of 20,000
                    shares of common stock at an exercise price $0.08 per share
                    by one individual.

               The registrant relied upon the exemption provided by Section 4
               (2) and/or Regulation D of the Securities Act of 1933, as amended
               ("1933 Act") for the transactions described in paragraph 2
               and for the transaction described in paragraph 1, relied upon
               Section (4) 2 and/or Regulation D and Regulation S of the 1933
               Act 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:

                         None

               (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)

  03/15/01                             //SS//SS//
------------                      -----------------------------------------
 (Date)                           David H. Johnson, Chief Financial Officer

                                       9