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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       October 31, 1996
                               -------------------------------------------------
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
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                                  619-595-4829
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              (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 October 31, 1996.

         38,485,094 shares of common stock par value $0.01
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                       SYNTHETIC BLOOD INTERNATIONAL, INC.
                          (A Development Stage Company)

                                 BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                               October 31,   April 30,
                                                                  1996        1996
                                                               (Unaudited)  (Audited)
                                                            -----------     -----------
<S>                                                         <C>             <C>
Current Assets:
  Cash                                                      $   138,760     $    76,312
  Receivables                                                   200,000
  Prepaid Expense                                                 9,126          29,812
                                                            -----------     -----------    
    Total Current Assets                                    $   347,886     $   106,124

Property & Equipment, net                                       191,619         202,167

Other Assets:
  Patents and Technology                                         88,585          85,648
                                                            -----------     -----------
Total Assets                                                $   628,090     $   393,939
                                                            ===========     ===========

                      LIABILITIES AND STOCKHOLDERS'S EQUITY

Current Liabilities:
  Accrued Expenses                                          $   308,086     $   277,340     
  Stockholders loans                                              4,027         246,701
  Accrued Payroll & Other                                        65,115         450,928
                                                            -----------     -----------
                                                                                     
Total Current Liabilities                                   $   377,228     $   974,969
                                                                                     
Capital lease obligations                                   $    12,211     $    16,573
                                                            -----------     -----------
                                                                                     
Total Liabilities                                           $   389,439     $   991,542
                                                                
Stockholder's Equity:
  Common Stock $0.01 par
   Value: Authorized
   100,000,000 shares
  Issued & outstanding
   38,485,094 & 31,030,382                                  $   384,851     $   310,304   
  Additional Paid in capital                                  7,043,609       5,468,849
  Stock Subscribed                                              200,000                 
  Deficit Accumulated since                                                         
   Development Stage                                         (7,389,809)     (6,376,756)
                                                            -----------     -----------
Total Stockholder's Equity                                                          
  (Deficit)                                                 $   238,651     $ ( 597,603)
                                                            -----------     -----------
Total Liabilities &                                                                 
  Stockholder's Equity                                      $   628,090     $   393,939
                                                            ===========     ===========
</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               Six Months Ended
                               development                 October 31,

                                  stage                1996         1995
                               -----------        -------------------------
                                                          (Unaudited)
<S>                            <C>                <C>           <C>  
Expenses:                

 Research and
  development                  $ 2,682,349        $   284,047   $   625,289


 General and
  administrative                 4,662,074            724,946       805,692


 Interest                           93,036              4,323         5,318
                               -----------        -----------   -----------


  Total Expense                  7,437,459          1,013,316     1,436,299


  OTHER INCOME                      47,650                263         5,650
                               -----------        -----------   -----------


  NET LOSS                     $(7,389,809)       $(1,013,053)  $(1,430,649)
                                                  ===========   ===========


  NET LOSS PER SHARE                                   $(0.03)       $(0.05)

  WEIGHTED AVERAGE
   NUMBER OF SHARES
    OUTSTANDING                                    32,274,295    28,910,459

                                                  ===========   ===========
</TABLE>

                 See accompanying notes to financial statements

                                        
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                       SYNTHETIC BLOOD INTERNATIONAL, INC.
                             STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                              ACCUMULATED           SIX  MONTHS           SIX  MONTHS
                                              during the          ended October 31,     ended October 31,
 CASH FLOWS FROM OPERATING                    development               1996                 1995
  ACTIVITIES:                                   stage

<S>                                          <C>                     <C>                  <C>         
Net loss                                     $(7,388,863)            $(1,013,053)         $(1,378,528)
Adjustments to reconcile net
  cash used in operating activities:
  Depreciation and amortization                  165,925                  10,548               18,142
  Write down other assets                        126,800
  Issuance of compensatory stk options           118,500
  Contribution of capital through
   services rendered                              30,000
Changes in operating assets and
    liabilities:
    Accounts receivable
 Prepaid expenses & other assets                   9,126                  20,686               42,546
    Accounts payable and accrued
      expense                                    355,067                (355,067)            (228,748)
                                              ----------              ----------           ----------
      Net cash used in operating
       activities                             (6,583,445)             (1,336,886)          (1,089,092)
CASH FLOWS FROM INVESTING
  ACTIVITIES:
Purchase of other assets                        (264,599)
Purchase of property and equipment              (255,992)                ( 2,937)             (33,926)
                                              ----------              ----------           ----------
      Net cash used in investing
       activities                               (520,591)                ( 2,937)             (33,926)
CASH FLOWS FROM FINANCING
  ACTIVITIES:
Proceeds from sale of common stock             5,177,721                 819,500              371,699
Payments on capital lease obligations            (22,405)                 (4,362)             ( 8,724)
Proceeds from issuance of notes
 payable to stockholder                          446,701                                      ( 6,930)
Contribution of capital stockholder               35,700
Stock subscription                              (200,000)               (200,000)
Proceeds from convertible debentures             780,000
Issuance of stock for services                 1,360,593               1,028,861
Repayments of notes payable                     (335,514)               (242,674)
                                              ----------              ----------           ----------
      Net cash provided by financing
       activities                              7,242,796               1,402,269              356,045

NET DECREASE IN CASH AND CASH
  EQUIVALENTS:                                   138,760                  62,448             (766,973)

CASH AND CASH EQUIVALENTS,
  beginning of period                                                     76,312              767,825
CASH AND CASH EQUIVALENTS,
  end of period                               $  138,760              $  138,760           $      852
                                              ==========              ==========           ========== 
Cash paid for Interest                        $   89,429              $    4,322           $      904
              Taxes                                4,800                     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
                                October 31, 1996

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 October 31, 1996, and the results of its operations
         and its cash flows for the six month period ended October 31, 1996 and
         1995. 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, 1996 filed with
         the Securities and Exchange Commission on August 29, 1996.

         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 has accumulated losses from operations amounting
         to $7,389,809. 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
         additional development and testing will require significant additional
         financing. The Company's continuation as a going concern is dependent
         on its ability to generate sufficient cash flow, to meet its


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         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-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.


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         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.

         Reclassification - Certain amounts as previously reported have been
         reclassified to conform to the 1996 presentation.

3.       COMMITMENTS AND CONTINGENCIES

         Employment Contracts - The Company has employment agreements with
         certain officers and an employee with aggregate future commitments of
         $411,000 in 1997 and $272,000 in 1998.

         Consulting Agreements - The Company has an equity finance agreement
         with an individual which provides for commissions of 6% to be paid in
         cash or common stock, in exchange for raising at least $5,000,000 in
         equity financing after May 7, 1996. As of October 31, 1996, no amounts
         were due under this agreement. The agreement expires on May 7, 1997.

         During fiscal 1995, the Company entered into a consulting agreement
         with an unrelated party which requires monthly payment of $5,000 and
         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


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         believes will have a material adverse effect on the Company's financial
         statements as of October 31, 1996.

4.       LICENSE AGREEMENTS

         The Company has various exclusive and non-exclusive license agreements
         with an unaffiliated entity providing for the rights to manufacture,
         use and sell certain licensed products. In exchange for these rights
         the Company is required to pay royalties of the greater of 3 1/2% of
         net sales or $30,000, $140,000 and $150,000 for the years ended April
         30, 1997, 1998 and 1999 and $200,000 per year, thereafter. These
         agreements expire at various dates through the expiration of the
         patents.

5.       STOCKHOLDERS' EQUITY

         In connection with a funding in 1995, the Company issued a warrant
         providing for the purchase of up to 500,000 shares of its common stock
         at $0.60 per share, which approximated the fair market value of the
         warrant. The warrants expire in April 1998.

         On July 28, 1996 the Company issued 1,000,000 shares of its common
         stock under a Regulation S subscription agreement to an offshore
         company, Caymus Capital, Ltd., for a $200,000 investment.

         On July 5, 1996 the Company issued 2,869,191 shares of common stock to
         officers and directors for the cancellation of $ 581,763 of loans made
         to the corporation and for salaries and expenses remaining unpaid as at
         July 5, 1996.

         On July 5, 1996 the Company issued an employee bonus of 222,100 shares
         of common stock to all employees other than officers and directors. An
         expense of $44,420 was made at $0.20 per share for said bonus.

         On August 29, 1996 the Company issued 1,000,000 shares of common stock
         to Robert Nicora, an outside consultant as a bonus for services
         rendered to the company. An expense of $10,000 was made at $0.20 per
         share for said bonus.


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         On August 2, 1996 the company issued 133,500 shares of common stock to
         Jan Glines for the payment of $19,500 or $0.15 per share.

         On August 6, 1996, the company issued 100,000 shares of common stock to
         Mary Harvey for services rendered to the company. An expense of $20,000
         or $0.20 per shares was made for the payment.

         On October 2, 1996, the company issued 40,000 shares of common stock to
         CeCe Wilkens for cancelling $6,000 owed to her company Wilkens
         Communications. An expense of $2,000 was made for this issuance.

         On October 2, 1996, the company issued 40,000 shares of common stock to
         Jeremy Andrus as payment for services rendered to the company. An
         expense of $8,000 was made for this issuance.

         On August 29, 1996 the Company issued 1,000,000 shares of its common
         stock under a Regulation S subscription agreement to an offshore
         company, Caymus Capital, Ltd., for a $200,000 investment.

         On October 16, 1996 the Company issued 2,000,000 shares of its common
         stock under a Regulation S subscription agreement to Argos Invest
         Consult AG, a Zurich Switzerland asset manager, for a $200,000
         investment.

                       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

Second Quarter of 1996 and 1995.

The Research and Development expenses for the six months period ended October
31, 1996 were $284,047, compared to $625,289 for the


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same period in the prior year. This decrease was due to a significant reduction
in research personnel, research support personnel, and outside independent
laboratory confirmation of test results. The development activities were
primarily concerned with the patenting activity.

General and Administrative expenses for the six month period ended October 31,
1996 were $724,946, compared to $805,692 for the same period in the prior year.
The decrease for the six months period reflected lower travel and office
expenses for the period.

The net loss for the six month period ended October 31, 1996 was $1,013,053,
compared to $1,430,649 for the same period in the prior year. This decrease for
the six month period represents the reduction of research staff and outside
laboratory testing.

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 October 31, 1996 the Company had $347,886 in
total current assets and a working capital deficit of $29,342.

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.

                           None

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)


12/13/96____________                _____//SS//SS//______________________
   (Date)                                Robert J. Larsen, Secretary/Treasurer

                                     
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