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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, 1997

                         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)

            402 West Broadway Street, Suite 400, San Diego, CA 92101

                                  619-595-4829
              (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, 1997.

                42,829,500 shares of common stock par value $0.01



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



<TABLE>
<CAPTION>
                                       July 31,         April 30,
                                         1997             1997
                                      (Unaudited)       (Audited)
                                      -----------      -----------
<S>                                   <C>              <C>        
                             ASSETS
Current Assets:
  Cash                                $    15,877      $    53,857
  Prepaid Expense                          21,425           17,425
                                      -----------      -----------
    Total Current Assets              $    37,302      $    71,282

Property & Equipment, net                 124,227          137,433

Other Assets:
  Patents and Technology                  106,641          109,448
                                      -----------      -----------
Total Assets                          $   268,170      $   318,163
                                      ===========      ===========

              LIABILITIES AND STOCKHOLDERS'S EQUITY

Current Liabilities:
  Accrued Expenses                    $   493,269      $   473,974
  Stockholders loans                      154,979           75,979
  Accrued Payroll & Other                 116,541           50,722
                                      -----------      -----------

Total Current Liabilities             $   764,789      $   600,675

Total Liabilities                     $   764,789      $   600,675

Stockholder's Equity:
  Common Stock $0.01 par
   Value: Authorized
   100,000,000 shares
  Issued & outstanding
   42,829,500 & 42,829,500            $   428,295      $   428,295
  Additional Paid in capital            7,576,325        7,576,325
  Deficit Accumulated since
   Development Stage                   (8,501,239)      (8,287,132)
                                      -----------      -----------
Total Stockholder's Equity
  (Deficit)                           $ ( 496,619)     $ ( 282,512)
                                      -----------      -----------
Total Liabilities &
  Stockholder's Equity                $   268,170      $   318,163
                                      ===========      ===========
</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 July 31,
                         development       ------------------------------
                            stage              1997              1996
                         ------------      ------------      ------------
                         (Unaudited)                 (Unaudited)
<S>                      <C>               <C>               <C>         
Expenses:

 Research and
  development            $  2,838,798      $     46,365      $    106,215

 General and
  administrative            5,608,392           167,064           126,575

 Interest                     102,464               792             1,272
                         ------------      ------------      ------------

  Total Expense             8,549,654           214,221           234,062

  OTHER INCOME                (48,415)             (114)              (54)
                         ------------      ------------      ------------

  NET LOSS               $ (8,501,239)     $   (214,107)     $   (234,008)
                         ============      ============      ============

  NET LOSS PER SHARE                       $      (0.01)     $      (0.01)

  WEIGHTED AVERAGE
   NUMBER OF SHARES
    OUTSTANDING                              42,829,500        42,829,500
                                           ============      ============
</TABLE>

                 See accompanying notes to financial statements



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                       SYNTHETIC BLOOD INTERNATIONAL, INC.
                             STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                             Accumulated
                                             during the          Three months        Three months
                                             development        ended July 31,      ended July 31
                                                stage                1997                1996
                                            --------------      --------------      --------------
<S>                                         <C>                 <C>                 <C>            
 CASH FLOWS FROM OPERATING
  ACTIVITIES:
Net loss                                    $   (8,501,239)     $     (214,107)     $     (278,428)
Adjustments to reconcile net
  cash used in operating activities:
  Depreciation and amortization                    261,744              23,294              12,500
  Write down other assets                          126,800
  Issuance of compensatory stk options             118,500
  Contribution of capital through
   services rendered                                30,000
Issuance of stock for services rendered            936,924
Issuance of stock below FMV                        540,000
Changes in operating assets and
    liabilities:
    Prepaid expenses & other assets                (21,425)             (4,000)             12,517
    Accounts payable and accrued
      expense                                      593,237              85,114            (280,412)
                                            --------------      --------------      --------------
      Net cash used in operating
       activities                               (5,915,459)           (109,699)           (533,823)
CASH FLOWS FROM INVESTING
  ACTIVITIES:
Purchase of other assets                                              (311,891)             (7,281)
Proceeds from the sale of equipment                 15,457
Purchase of property and equipment                (270,640)                                 (1,500)
                                            --------------      --------------      --------------
      Net cash used in investing
       activities                                 (567,074)             (7,281)             (1,500)
CASH FLOWS FROM FINANCING
  ACTIVITIES:
Proceeds from sale of common stock               4,958,221             826,183
Payments on capital lease obligations                                  (35,765)             (1,454)
Proceeds from issuance of notes
 payable to stockholder                            835,254              79,000            (212,100)
Contribution of capital stockholder                 35,700
Proceeds from convertible debentures               780,000
Repayments of notes payable                        (75,000)
                                            --------------      --------------      --------------
      Net cash provided by financing
       activities                                6,498,410              79,000             612,629
NET DECREASE IN CASH AND CASH
  EQUIVALENTS:                                      15,877             (37,980)             77,306
CASH AND CASH EQUIVALENTS,
  beginning of period                                                   53,857              76,312
CASH AND CASH EQUIVALENTS,
  end of period                             $       15,877      $       15,877      $      153,618
                                            ==============      ==============      ==============
Cash paid for Interest                      $       87,171      $          792      $        1,272
              Taxes                                  5,600                 800                 800
</TABLE>

See accompanying notes to financial statements



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                       SYNTHETIC BLOOD INTERNATIONAL, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS

                                  July 31, 1997

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, 1997, and the results of its operations and
         its cash flows for the three month periods ended July 31, 1997 and
         1996. 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, 1997 filed with
         the Securities and Exchange Commission on August 29, 1997.

         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, 1997 has accumulated losses from
         operations amounting to $8,501,239, a working capital deficit of
         $727,487. 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



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         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.


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Development Stage - Because the Company has not commenced principal
         operations, it is considered a "Development Stage Enterprise" as
         defined by Statement of Financial Accounting Standards No. 7,
         Accounting and Reporting by Development Stage Enterprises.

         Pricing of Common Stock and Options to Purchase Common Stock The
         Company's Board of Directors determines the issuance price of its
         common stock and options to purchase common stock to be fair market
         value, based on a good faith estimate which is derived from recent
         issuance of common stock to unrelated parties and/or from common stock
         market quotations, after giving effect to the restricted nature of the
         stock issued.

         Property and Equipment - Property is recorded at cost.
         Depreciation and amortization are computed using the straight-



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         line method over the shorter of the estimated useful lives of the
         related assets, ranging from three to ten years, or lease term, if
         applicable.

         Patents - Patent costs are being amortized over the lesser of the
         remaining life of the patent or the estimated useful life of the
         related product, ranging from eight to ten years. The Company evaluated
         recoverability of patents on at least an annual basis by comparing the
         estimated resale value of the patents to the remaining carrying values.
         An adjustment to the carrying value of the patent rights would be made
         if the estimated resale value of the patents is determined to be
         insufficient to recover such value.




3.       COMMITMENTS AND CONTINGENCIES

         Employment Contracts - The Company has employment agreements with
         certain officers and an employee with aggregate future commitments of
         $240,000 in 1998.

         During fiscal 1995, the Company entered into a consulting agreement
         with an unrelated party which required monthly payment of $5,000. This
         agreement expired in December 1995. In conjunction with this agreement,
         the Company issued warrants to purchase 100,000 shares of the Company's
         common stock at $1.00 per share, which exceeded the fair market value
         at the date of the agreement. The warrants expire in April 1999.

         Litigation - The Company is subject to litigation in the normal course
         of the business, none of which management believes will have a material
         adverse effect on the Company's financial statements as of July 31,
         1997, except as follows:

The Company has two legal matters pending at July 31, 1997. These legal actions
were filed by former employees alleging unfair treatment during a temporary
layoff in December 1995. These cases are presently in discovery. Company
managements communications with legal counsel have indicated that the Company's
exposure related to these legal actions could amount to $124,000. Thus, while
the outcome of such litigation is uncertain, the Company has provided an accrual
for such loss contingency using the best available estimate of $124,000.



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                       SYNTHETIC BLOOD INTERNATIONAL, INC
                          (A Development Stage Company)

                          Part I- Financial Information

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS

First Quarter of 1997 and 1996.

The Research and Development expenses for the three months period ended July 31,
1997 was $ 46,365, compared to $106,215 for the same period in the prior year.
This decrease was due to a significant reduction in research personnel, the
purchase of animals and supplies.

General and Administrative expenses for the three months period ended July 31,
1997 were $167,064, compared to $126,575 for the same period in the prior year.
This increase was due to a increase in legal fees, filing fees, and the
application fees associated with foreign patent applications.

The net loss for the three months ended July 31, 1997 was $214,107, compared to
$234,008 for the same period in the prior year. This represented the reduction
of research staffing and animal supplies.

LIQUIDITY AND CAPITAL SOURCES

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, 1997 the Company had $37,302 in
total current assets and a working capital deficit of $727,487.

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. There can be no assurance that FDA approval will be granted, once
applied for, or that necessary funding will be obtained.



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

                            Part II-Other Information

Item 1.           Legal Proceedings.

                           Described in Financial Statement notes.

Item 2.           Changes in Securities.

                           None

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.

                           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)



 9/12/97                               /S/ ROBERT J. LARSEN
-----------------------------          ----------------------------------------
(Date)                                 Robert J. Larsen, Secretary/Treasurer



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