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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, 1999

                         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, 1999.

               57,059,078 shares of common stock par value $0.01


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



<TABLE>
<CAPTION>
                                          ASSETS


                                                            July 31,            April 30,
                                                              1999                 1999
                                                          ------------         ------------
                                                           (Unaudited)
<S>                                                       <C>                  <C>
Current Assets:
     Cash and cash equivalents                            $     90,788         $    193,013
     Prepaid Expense                                            30,385               60,874
                                                          ------------         ------------

                Total Current Assets                      $    121,173         $    253,887

     Property & Equipment, net                                  50,738               61,602

Other Assets:
     Patents and Technology                                    216,433              215,417
                                                          ------------         ------------

                                                          $    388,344         $    530,906
                                                          ============         ============

                        LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
     Current portion of notes payable                     $     62,793         $    101,170
     Accounts payable                                          284,208              305,686
     Stockholders loans                                         76,900               76,900
     Accrued liabilities                                       118,032              118,470
                                                          ------------         ------------

Total Current Liabilities                                 $    541,933         $    602,226

Notes Payable, less current                               $     44,097         $     47,327

Total Liabilities                                         $    586,030         $    649,554


Stockholders' Deficiency:
  Common Stock ,authorized 100,000,000 shares,
  Issued and outstanding 57,059,078 and 55,314,324             570,591              553,143
  Additional Paid in Capital                                 9,854,080            9,730,209
  Deficit Accumulated Since Development Stage              (10,622,357)         (10,401,999)
                                                          ------------         ------------
  Total Stockholders' Deficiency                          $   (197,686)        $   (118,647)
                                                          ------------         ------------

                                                          $    388,344         $    530,906
                                                          ============         ============
</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                 1999                1998
                                             ------------         ------------------------------
                                             (Unaudited)                     Unaudited
<S>                                         <C>                   <C>                  <C>
Expenses:
     Research and development                $  3,207,623         $     43,698         $  35,107

     General and administrative                 7,336,355              172,508           193,263

     Interest                                     154,484                4,892             5,920
                                             ------------         ------------         ---------

Total Expense                                  10,698,462              221,098           234,290

Other Income                                      (76,105)                (741)           (6,628)
                                             ------------         ------------         ---------

NET LOSS                                     $(10,622,357)        $   (220,357)        $(227,662)
                                             ============         ============         =========

NET LOSS PER SHARE, BASIC AND DILUTED                             $     (0.004)        $  (0.005)
                                                                  ------------         ---------

WEIGHTED AVERAGE
    NUMBER OF SHARES
    OUTSTANDING, BASIC
    AND DILUTED                                                     55,860,937         50,729,302
                                                                  ------------         ---------
</TABLE>



                 See accompanying notes to financial statements



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                       SYNTHETIC BLOOD INTERNATIONAL, INC.
                             STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                     Accumulated During         Three Months Ended
                                                        Development                 July 31,
                                                           Stage              1999              1998
                                                                           ---------------------------
CASH FLOWS FROM OPERATING                               (Unaudited)               (Unaudited)
       ACTIVITIES:
<S>                                                   <C>                  <C>               <C>
Net loss                                              $(10,622,357)        $(220,357)        $(227,662)
Adjustments to reconcile net loss to cash used
in operating activities:
      Depreciation and amortization                        378,951            17,391            12,890
      Write down other assets                              129,210
      Issuance of compensatory stock options               250,466
      Issuance of stock for services                     1,046,441
        Issuance of stock below FMV                        695,248
Contribution of capital by stockholders                    216,851
Changes in operating assets and liabilities:
   Prepaid expenses and other assets                       (30,385)           30,489            (1,601)
   Accounts payable and accrued expense                    565,233           (21,916)          (12,875)
                                                      ------------         ---------         ---------
      Net cash used in operating activities             (7,370,342)         (194,393)         (229,248)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of other assets                                  (452,582)           (6,872)          (14,825)
Proceeds from the sale of equipment                         15,457
Purchase of property and equipment                        (285,868)             (671)
                                                      ------------         ---------         ---------
     Net cash used in investing activities                (722,993)           (7,543)          (14,825)

CASH FLOWS FROM FINANCING
       ACTIVITIES:
Proceeds from sale of common stock                       6,584,690           141,319
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
Payments on notes and lease obligations                   (248,690)          (41,608)          (40,357)
                                                      ------------         ---------         ---------
     Net cash provided by (used in) financing
          activities                                     8,184,123            99,711           (40,357)
Net change in cash and cash equivalents                     90,788          (102,225)         (284,430)

Cash and cash equivalents, beginning                            --           193,013           740,215
                                                      ------------         ---------         ---------
Cash and cash equivalents, ending                           90,788            90,788           455,785
                                                      ============         =========         =========
 Cash paid for Interest                               $    114,970         $   4,892         $   5,920
                   Taxes                                     7,966             1,276               800

SUPPLEMENTAL DISCLOSURE OF NONCASH
    INVESTING AND FINANCING ACTIVITIES-
   Common stock issued for accounts payable           $     25,000
   Common stock issued to retire notes                $     36,000
   Common stock issued to retire accrued wages        $     94,000
</TABLE>


See accompanying notes to financial statements



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                       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, 1999, and the results of its operations for the three
       month periods ended July 31, 1999 and 1998 and its cash flows for the
       three month periods ended July 31, 1999 and 1998. 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 July 31, 1999 has accumulated losses from operations
       amounting to $10,622,357 and a working capital deficit of $420,760. 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, 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.



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<PAGE>   6
2.       STOCKHOLDERS' EQUITY

         During the period ended July 31, 1999, the Company issued 124,545
         shares of the Company's common stock to third party investors for $.11
         per share, the fair market value at the date of purchase, plus options
         to purchase 124,545 shares of the common stock at $.11 per share.

         Also during the period ended July 31, 1999, the Company issued
         1,332,619 shares of the Company's common stock to third party investors
         for $.14 per share, the fair market value at the date of purchase, plus
         options to purchase 1,812,190 shares of the common stock at $.14 per
         share.



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<PAGE>   7
                       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.

RESULTS OF OPERATIONS-

Three months ended July 31, 1999 and 1998:

The Research and Development expenses for the three month period ended July 31,
1999 were $43,698, compared to $ 35,107 for the same period in the prior year.
This increase was primarily due to an increase in contract wages of $9,400.

General and Administrative expenses for the three month period ended July 31,
1999 were $172,508, compared to $193,263 for the same period in the prior year.
During the current period professional fees were down $14,600 along with wages
and contract labor down $23,300 and travel expenses down $8,800. These decreases
were partially offset by an increases in rent expense of $13,000 related to the
addition of a California research laboratory in 1999 and a one-time moving
expense of $14,000 associated with the set-up of a laboratory in California.

The net loss for the three months ended July 31, 1999 was $220,357, compared to
$227,662 for the same period in the prior year. Although total expenses were
down $14,000 for the current period, this decrease was offset by interest income
of $6,000 earned on excess funds available for investment in the prior period.

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, 1999 the Company had $121,173 in
total current assets and a working capital deficit of $420,760.

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.



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<PAGE>   8
There can be no assurance that FDA approval will be granted, once applied for,
or that necessary funding will be obtained. The Company does not have any firm
commitments for additional capital as of July 31, 1999.

YEAR 2000 COMPLIANCE

The "Year 2000 Issue" arises because most computer systems and programs were
designed to handle only a two-digit, not a four-digit year. When the year 2000
begins, these computers may interpret "00" as the year 1900 and could either
stop processing date-related computations or could process them incorrectly.

 The Company is in the process of developing a program to address Year 2000
issues and such program is substantially complete as of July 31, 1999. The
Company does not believe the costs required to address Year 2000 issues will be
material, and that the program should be completely implemented by the end of
the third quarter of 1999.

Year 2000 issues faced by prospective supplies, vendors and financial service
organizations with which the Company interacts could adversely impact the
Company. The Company is in the process of developing a plan to determine the
impact that third parties that are not Year 2000 compliant may have on the
operations of the Company. However, there can be no guarantee that the systems
of these companies will achieve Year 2000 compliance in a timely manner.

Recent SEC guidance for Year 2000 disclosure also calls on companies to describe
their most likely worst case Year 2000 scenario. The Company believes that the
most likely worst case scenario is that the Company could experience clinical
trial and research and development delays because of infrastructure failures or
delays from suppliers.


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.



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                       SYNTHETIC BLOOD INTERNATIONAL, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                            PART II-OTHER INFORMATION

Item 1.  Legal Proceedings.

                  None

Item 2.  Changes in Securities.

                  In May, 1999 the Company issued 124,545 shares of common stock
                  at $.11 per share and granted options to acquire a total of
                  124,545 shares of common stock with an exercise price of $.11
                  per share to two individuals.

                  In June, 1999 the Company issued 230,419 shares of common
                  stock at $.14 per share and granted options to acquire a total
                  of 368,670 shares of common stock with an exercise price of
                  $.14 per share to six individuals.

                  In July, 1999 the Company issued 1,102,200 shares of common
                  stock at $.14 per share and granted options to acquire a total
                  of 1,443,520 shares of common stock with an exercise price of
                  $.14 per share to fifteen individuals.

                  The common stock was issued and the options were granted
                  pursuant to the exemption provided by Section 4(2) of the
                  Securities Act of 1933.


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

                  Exhibit 27 - Financial Data Schedule

                  (b) Reports on Form 8-K

                  The Company filed Form 8-K on July 9, 1999 informing the
                  Commission of a change in corporate auditors.



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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)

9/14/99                                /S/ DAVID H. JOHNSON
----------------------------------     -----------------------------------------
(Date)                                 David H. Johnson, Chief Financial Officer



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