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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 JANUARY 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 January 31, 1999.

                51,259,302 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>
                                                                                    January 31,             April 30,
                                                                                       1999                   1998
                                                                                   ------------           ------------
                                                                                    (Unaudited)             (Audited)
<S>                                                                                <C>                    <C>
Current Assets:
    Cash                                                                           $    170,960           $    740,215
    Prepaid Expense                                                                      95,954                 19,525
                                                                                   ------------           ------------

            Total Current Assets                                                   $    266,914           $    759,740

    Property & Equipment, net                                                            64,992                 84,653

Other Assets:
    Patents and Technology                                                              157,514                141,521
                                                                                   ------------           ------------

Total Assets                                                                       $    489,420           $    985,914
                                                                                   ============           ============

                     LIABILITIES AND STOCKHOLDERS'S EQUITY

Current Liabilities:
    Current portion of notes payable                                               $    138,576           $     59,972
    Accounts payable                                                                    311,126                339,540
    Stockholders loans                                                                   14,900                 15,000
    Accrued expenses                                                                    104,823                116,828
                                                                                   ------------           ------------

Total Current Liabilities                                                          $    569,425           $    531,340

Notes Payable, less current                                                        $     50,699           $    103,021

Total Liabilities                                                                  $    620,124           $    634,361

Stockholder's Equity:
Common Stock Subscribed                                                            $     55,000           $         --
100,000,000 shares Issued & outstanding
51,259,302 and 50,729,302                                                               512,594                507,293
Additional Paid in capital                                                            9,486,879              9,412,424
Deficit Accumulated since Development Stage                                         (10,185,177)            (9,568,164)
                                                                                   ------------           ------------
Total Stockholder's Equity (Deficit)                                               $   (130,704)          $    351,553
                                                                                   ------------           ------------

Total Liabilities & Stockholders' Equity                                           $    489,420           $    985,914
                                                                                   ============           ============
</TABLE>



                 See accompanying notes to financial statements
                                        
                                        
                                        
                                       2
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                      SYNTHETIC BLOOD INTERNATIONAL, INC.
                         (A Development Stage Company)
                            STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                  Accumulated
                                   during the            Three Months Ended              Nine Months Ended
                                  development               January 31,                     January 31,
                                     stage             1999             1998            1999            1998
                                  ------------     -----------------------------     -----------------------------
                                  (Unaudited)                Unaudited                         Unaudited
<S>                               <C>              <C>              <C>              <C>              <C>         
Expenses:
    Research and development      $  3,019,227     $     42,173     $     26,733     $     99,795     $    109,011

    General and administrative       7,096,368          117,507          122,949          525,221          630,711

    Interest                           143,619            4,516              442           14,106            3,731
                                  ------------     ------------     ------------     ------------     ------------

Total Expense                       10,259,214          164,196          150,124          639,122          743,453

Other Income                           (73,479)         (12,248)            (282)         (22,109)          (1,176)
                                  ------------     ------------     ------------     ------------     ------------

NET LOSS                          $(10,185,735)    $   (151,948)    $   (149,842)    $   (617,013)    $   (742,277)
                                  ============     ============     ============     ============     ============

NET LOSS PER SHARE, BASIC                          $     (0.003)    $     (0.003)    $     (0.012)    $     (0.017)
AND DILUTED

WEIGHTED AVERAGE
    NUMBER OF SHARES
    OUTSTANDING, BASIC
    AND DILUTED                                      51,132,128       46,276,391       50,971,548       44,404,874
</TABLE>



                 See accompanying notes to financial statements
                                        
                                        
                                        
                                       3
<PAGE>   4

                      SYNTHETIC BLOOD INTERNATIONAL, INC.
                            STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>
                                                          Accumulated during       Nine Months Ended
                                                             development              January 31,
                                                                stage                  1999 1998
                                                                              ------------     ------------
CASH FLOWS FROM OPERATING:                                   (Unaudited)                 (Unaudited)
<S>                                                          <C>              <C>              <C>          
Net loss                                                     $(10,185,735)    $   (617,013)    $   (742,277)
Adjustments to reconcile net loss to cash used
in operating activities:
    Depreciation and amortization                                 350,967           41,410           62,117
    Write down other assets                                       126,800
    Issuance of compensatory stock options                        248,906
    Issuance of stock for services                              1,022,221           32,705
    Issuance of stock below FMV                                   695,248                           180,000
Contribution of capital by stockholders                           216,851

Changes in operating assets and liabilities:

    Prepaid expenses and other assets                             (95,954)         (76,429)          (6,424)
    Accounts payable and accrued expense                          604,401          (15,419)         158,815
                                                             ------------     ------------     ------------
Net cash used in operating activities                          (7,016,295)        (634,746)        (347,769)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of other assets                                         (383,415)         (29,167)         (38,304)
Proceeds from the sale of equipment                                15,457
Purchase of property and equipment                               (279,977)          (8,575)
                                                             ------------     ------------     ------------
    Net cash used in investing activities                        (647,935)         (37,742)         (38,304)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock                              6,160,271           22,051          266,270
Proceeds from common stock subscribed                              55,000           55,000
Proceeds from stockholder notes payable                           915,792                            31,000
Contribution of capital by stockholder                             40,700
Proceeds from notes and debentures                                910,096           99,096
Payments on notes and lease obligations                          (246,669)         (72,914)          37,808
                                                             ------------     ------------     ------------
Net cash provided by financing activities                       7,835,190          103,233          335,078

Net change in cash and cash equivalents                           170,960         (569,255)         (50,995)

Cash and cash equivalents, beginning                                   --          740,215           53,857
                                                             ------------     ------------     ------------
Cash and cash equivalents, ending                                 170,960          170,960            2,862
                                                             ============     ============     ============
Cash paid for Interest                                       $    102,387     $     14,106     $      3,731
           Taxes                                                    6,400              800              800

SUPPLEMENTAL DISCLOSURE OF NONCASH
    INVESTING AND FINANCING ACTIVITIES-

   Common stock issued for accounts payable                  $     25,000     $     25,000
   Common stock issued to retire notes                       $     36,000                      $     36,000
   Common stock issued to retire accrued wages               $     94,000                      $     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

                                JANUARY 31, 1999

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, 1999, and the results of its operations for the three
    and nine months periods ended January 31, 1999 and 1998 and its cash flows
    for the nine month periods ended January 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, 1998 filed with the
    Securities and Exchange Commission on August 28, 1998.

    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
    January 31, 1999 has accumulated losses from operations amounting to
    $10,185,735 and a working capital deficit of $302,511. 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.

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, derived from
    recent issuance of common stock to unrelated parties and/or from common
    stock market quotations.



                                        5
<PAGE>   6

    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.

    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 evaluates 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 a certain
    officer with aggregate future commitments of $271,000 through March 2001.

    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 January 31, 1999.

4.  STOCKHOLDERS' EQUITY

    During the period ending January 31, 1999, the Company issued 210,000 shares
    of the Company's common stock to third party investors for $.125 per share,
    the fair market value at the date of purchase, plus options, which expire in
    November 1999, to purchase 210,000 shares of the common stock at $.20 per
    share.

    During the period ending January 31, 1999, the Company issued 25,000 shares
    of the Company's common stock to an outside consultant in exchange for
    services rendered. As a result of this transaction the Company recognized an
    expense of $2,625, representing the fair market value of the common stock
    issued.



                                        6
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                       SYNTHETIC BLOOD INTERNATIONAL, INC.
                          (A Development Stage Company)

                          PART I- FINANCIAL INFORMATION

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 January 31, 1999 and 1998:

The Research and Development expense for the three months period ended January
31, 1999 was $42,173, compared to $ 26,733 for the same period in the prior
year. This increase was due to an increase in research supplies and the addition
of a research laboratory in California.

General and Administrative expenses for the three months period ended January
31, 1999 were $117,507, compared to $122,949 for the same period in the prior
year. During the period salaries and contract labor and professional fees down
due to a reduction in services provided. Depreciation decreased as certain fixed
assets became fully depreciated. These decreases were offset by an increase in
liability insurance due to increased premiums and an increase in offices
expenses.

The net loss for the three months ended January 31, 1999 was $151,948, compared
to $149,842 for the same period in the prior year. Although total expenses were
up $14,000 for the period, this increase was offset by $10,000 of other income
related the forfeiture of a stock subscription fee.

Nine months ended January 31, 1999 and 1998:

The Research and Development expenses for the nine months period ended January
31, 1999 was $99,795, compared to $109,011 for the same period in the prior
year. This decrease was due to a reduction in research personnel and supplies.

General and Administrative expenses for the nine months period ended January 31,
1999 were $525,221, compared to $630,711 for the same period in the prior year.
This decrease was due primarily to an expense related to stock issued below fair
market value of $180,000. This decrease was offset by an increases in insurance
expense and an increase in payroll and contract services.

The net loss for the nine months ended January 31, 1999 was $617,013, compared
to $742,277 for the same period in the prior year. This decrease represented the
combined effect of a decrease in administrative expense of $105,000 and an
increase in other income of $10,000 relating to a forfeiture of a stock
subscription fee.

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.



                                        7
<PAGE>   8

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, 1999 the Company had $266,914 in
total current assets and a working capital deficit of $302,511.

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.

The Company does not have any firm commitments for additional financing as of
January 31, 1999.



                                        8
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                       SYNTHETIC BLOOD INTERNATIONAL, INC.
                          (A Development Stage Company)

                            PART II-OTHER INFORMATION

Item 1.    Legal Proceedings.

           Described in Financial Statement Note 3.

Item 2.    Changes in Securities.

           In December 1998, the Company issued 210,000 shares of common stock
           plus stock options expiring in November 1999 for the purchase of
           210,000 additional shares of common stock. The common stock was
           issued pursuant to the exemptions provided by Section 4(2) of the
           Securities Act of 1933 and/or Regulation D.

           In January 1999, the Company issued 25,000 shares of common stock to
           an outside consultant in exchange for services rendered, and recorded
           a expense of $2,625 which represents the fair market value of the
           common stock. The common stock was issued pursuant to the exemptions
           provided by Section 4(2) of the Securities Act of 1933 and/or
           Regulation D.

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)

   3/15/99                     /s/ DAVID H. JOHNSON
------------                   ------------------------------------------
   (Date)                      David H. Johnson, Chief Financial Officer



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