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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-QSB



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|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | -----------------------------------------------------------------------------------------

For the quarterly period ended October 31, 2007



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission File Number: 002-31909



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SYNTHETIC BLOOD INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|New Jersey                                                     |  | 33-0112644                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

3189 Airway Avenue, Building C, Costa Mesa, California 92626

(Address of Principal Executive Office)

714-427-6363

(Registrants telephone number, including area code)



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Indicate by 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 (the Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES  x    NO ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ̈NO  x

Indicate the number of shares outstanding of each of the issuers classes of common stock as of December 10, 2007: 140,859,926 shares of common stock, par
value $0.01.



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FORM 10-QSB

SYNTHETIC BLOOD INTERNATIONAL, INC.

INDEX



|         |  |                                                                                                                                                                         |  |     
|-------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                                                                                                         |  | Page
|PART I.  |  | FINANCIAL INFORMATION                                                                                                                                                   |  |     
|         |  | Item 1. Financial Statements                                                                                                                                            |  |     
|         |  | Balance Sheets as of October 31, 2007 (unaudited) and April 30, 2007                                                                                                    |  | 3   
|         |  | Statements of Operations for the Three and Six Months Ended October 31, 2007 and 2006, and for the Period From May 26, 1967 (inception) to October 31, 2007 (unaudited) |  | 4   
|         |  | Statements of Cash Flows for the Six Months Ended October 31, 2007 and 2006, and for the Period From May 26, 1967 (inception) to October 31, 2007 (unaudited)           |  | 5   
|         |  | Condensed Notes to Financial Statements                                                                                                                                 |  | 7   
|         |  | Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                           |  | 9   
|         |  | Item 3.
Controls and Procedures                                                                                                                                         |  | 12  
|         |  |                                                                                                                                                                        
|PART II. |  | OTHER INFORMATION                                                                                                                                                       |  |     
|         |  | Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                     |  | 13  
|         |  | Item 3.
Defaults Upon Senior Securities                                                                                                                                 |  | 13  
|         |  | Item 5.
Other Information                                                                                                                                               |  | 13  
|         |  | Item 6.
Exhibits                                                                                                                                                        |  | 13  
|         |  | Signatures                                                                                                                                                              |  | 14  



2



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Part I-Financial Information



|ITEM 1. | FINANCIAL STATEMENTS.
|------- | ---------------------

SYNTHETIC BLOOD INTERNATIONAL, INC.

(A Development Stage Company)

BALANCE SHEETS



|                                                                                                                                               |  |                  |             |   |                |   |             |  
|---------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ----------- | - | -------------- | - | ----------- | -
|                                                                                                                                               |  | October 31, 2007 |             |   | April 30, 2007 |  
|                                                                                                                                               |  | (Unaudited)      |             |   |                |  
|ASSETS                                                                                                                                         |  |                  |             |   |                |   |             |  
|Current Assets:                                                                                                                                |  |                  |             |   |                |   |             |  
|Cash and cash equivalents                                                                                                                      |  | $                | 731         |   |                | $ | 16,234      |  
|Debt issuance costs, net of accumulated amortization of $1,884,789 and $921,678, respectively                                                  |  |                  | 437,807     |   |                |   | 1,403,806   |  
|Prepaid expenses                                                                                                                               |  |                  | 7,298       |   |                |   | 63,308      |  
|                                                                                                                                               |  |                  |             |   |                |   |             |  
|Total Current Assets                                                                                                                           |  |                  | 445,836     |   |                |   | 1,483,348   |  
|Property and equipment, net of accumulated depreciation of $547,600 and $531,003, respectively                                                 |  |                  | 177,619     |   |                |   | 194,216     |  
|Debt issuance costs, net of accumulated amortization of $13,984 and none, respectively                                                         |  |                  | 140,085     |   |                |   |            |  
|Patents, net                                                                                                                                   |  |                  | 136,534     |   |                |   | 144,958     |  
|                                                                                                                                               |  |                  |             |   |                |   |             |  
|                                                                                                                                               |  | $                | 900,074     |   |                | $ | 1,822,522   |  
|                                                                                                                                               |  |                  |             |   |                |   |             |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                          |  |                  |             |   |                |   |             |  
|Current Liabilities:                                                                                                                           |  |                  |             |   |                |   |             |  
|Accounts payable                                                                                                                               |  | $                | 465,781     |   |                | $ | 391,627     |  
|Amounts due officer                                                                                                                            |  |                  | 39,500      |   |                |   |            |  
|Accrued liabilities                                                                                                                            |  |                  | 462,389     |   |                |   | 183,866     |  
|Notes payable, net of unamortized discount of $85,912 and $370,423, respectively                                                               |  |                  | 1,388,423   |   |                |   | 1,145,025   |  
|Convertible Debentures, net of unamortized discount of $19,402 and $4,884, respectively                                                        |  |                  | 38,598      |   |                |   | 125,116     |  
|                                                                                                                                               |  |                  |             |   |                |   |             |  
|Total Current Liabilities                                                                                                                      |  |                  | 2,394,691   |   |                |   | 1,845,634   |  
|                                                                                                                                               |  |                  |             |   |                |   |             |  
|LONG TERM PORTION of notes payable, net of unamortized discount of $78,683                                                                     |  |                  | 203,372     |   |                |   |            |  
|                                                                                                                                               |  |                  |             |   |                |   |             |  
|Total Liabilities                                                                                                                              |  |                  | 2,598,063   |   |                |   | 1,845,634   |  
|                                                                                                                                               |  |                  |             |   |                |   |             |  
|                                                                                                                                               |  |                 
|COMMITMENTS AND CONTINGENCIES                                                                                                                  |  |                  |             |   |                |   |             |  
|                                                                                                                                               |  |                 
|Stockholders Deficit:                                                                                                                         |  |                  |             |   |                |   |             |  
|Preferred Stock, undesignated, authorized 10,000,000 shares, none issued or outstanding                                                        |  |                  |            |   |                |   |            |  
|Common Stock, par value $.01 per share; authorized 200,000,000 shares; issued and outstanding 140,744,195 and 139,854,859 shares, respectively |  |                  | 1,407,442   |   |                |   | 1,398,549   |  
|Additional paid-in capital                                                                                                                     |  |                  | 29,873,918  |   |                |   | 29,598,533  |  
|Deficit accumulated during the development stage                                                                                               |  |                  | (32,979,349 | ) |                |   | (31,020,194 | )
|                                                                                                                                               |  |                  |             |   |                |   |             |  
|Total Stockholders Deficit                                                                                                                    |  |                  | (1,697,989  | ) |                |   | (23,112     | )
|                                                                                                                                               |  |                  |             |   |                |   |             |  
|                                                                                                                                               |  | $                | 900,074     |   |                | $ | 1,822,522   |  
|                                                                                                                                               |  |                  |             |   |                |   |             |  

See accompanying condensed notes to financial statements.



3



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SYNTHETIC BLOOD INTERNATIONAL, INC.

(A Development Stage Company)

STATEMENTS OF OPERATIONS



|                                                                 |  |                                       |             |   |                               |   |             |                             |  |   |             |   |  |             |             |   |  |   |             |  
|---------------------------------------------------------------- |  | ------------------------------------- | ----------- | - | ----------------------------- | - | ----------- | --------------------------- |  | - | ----------- | - |  | ----------- | ----------- | - |  | - | ----------- | -
|                                                                 |  | Period FromMay 26, 1967(inception) to |             |   | Three Months EndedOctober 31, |   |             | Six Months EndedOctober 31, | 
|                                                                 |  | October 31, 2007                      |             |   | 2007                          |   |             | 2006                        |  |   | 2007        |   |  | 2006        |            
|                                                                 |  | (Unaudited)                           |             |   | (Unaudited)                   |   |             | (Unaudited)                 |  |   | (Unaudited) |   |  | (Unaudited) |            
|Expenses:                                                        |  |                                       |             |   |                               |   |             |                             |  |   |             |   |  |             |             |   |  |   |             |  
|Research and development                                         |  | $                                     | 11,687,810  |   |                               | $ | 118,871     |                             |  | $ | 180,049     |   |  | $           | 270,363     |   |  | $ | 410,228     |  
|General and administrative                                       |  |                                       | 17,296,932  |   |                               |   | 178,628     |                             |  |   | 214,446     |   |  |             | 392,114     |   |  |   | 498,957     |  
|Interest                                                         |  |                                       | 4,847,346   |   |                               |   | 653,376     |                             |  |   | 313,027     |   |  |             | 1,330,341   |   |  |   | 533,030     |  
|                                                                 |  |                                       |             |   |                               |   |             |                             |  |   |             |   |  |             |             |   |  |   |             |  
|Total Expenses                                                   |  |                                       | 33,832,088  |   |                               |   | 950,875     |                             |  |   | 707,522     |   |  |             | 1,992,818   |   |  |   | 1,442,215   |  
|Other Income                                                     |  |                                       | (852,739    | ) |                               |   | (18,936     | )                           |  |   | (12,207     | ) |  |             | (33,652     | ) |  |   | (35,830     | )
|                                                                 |  |                                       |             |   |                               |   |             |                             |  |   |             |   |  |             |             |   |  |   |             |  
|NET LOSS                                                         |  | $                                     | (32,979,349 | ) |                               | $ | (931,939    | )                           |  | $ | (695,315    | ) |  | $           | (1,959,166  | ) |  | $ | (1,406,385  | )
|                                                                 |  |                                       |             |   |                               |   |             |                             |  |   |             |   |  |             |             |   |  |   |             |  
|NET LOSS PER SHARE, BASIC AND DILUTED                            |  |                                       |             |   |                               | $ | (0.007      | )                           |  | $ | (0.005      | ) |  | $           | (0.005      | ) |  | $ | (0.010      | )
|                                                                 |  |                                       |             |   |                               |   |             |                             |  |   |             |   |  |             |             |   |  |   |             |  
|WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED |  |                                       |             |   |                               |   | 140,518,275 |                             |  |   | 137,813,964 |   |  |             | 140,319,577 |   |  |   | 137,375,281 |  
|                                                                 |  |                                       |             |   |                               |   |             |                             |  |   |             |   |  |             |             |   |  |   |             |  

See accompanying condensed notes to financial statements.



4



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SYNTHETIC BLOOD INTERNATIONAL, INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS



|                                                                                                       |  |                                       |             |   |                             |   |            |      |  |   |            |  
|------------------------------------------------------------------------------------------------------ |  | ------------------------------------- | ----------- | - | --------------------------- | - | ---------- | ---- |  | - | ---------- | -
|                                                                                                       |  | Period FromMay 26, 1967(inception) to |             |   | Six Months EndedOctober 31, |  
|                                                                                                       |  | October 31, 2007                      |             |   | 2007                        |   |            | 2006 | 
|                                                                                                       |  | (Unaudited)                           |             |   | (Unaudited)                 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                                  |  |                                       |             |   |                             |   |            |      |  |   |            |  
|Net loss                                                                                               |  | $                                     | (32,979,349 | ) |                             | $ | (1,959,166 | )    |  | $ | (1,406,385 | )
|Adjustments to reconcile net loss to net cash used in operating activities:                            |  |                                       |             |   |                             |   |            |      |  |   |            |  
|Depreciation and amortization                                                                          |  |                                       | 1,352,900   |   |                             |   | 33,356     |      |  |   | 67,956     |  
|Amortization of deferred compensation                                                                  |  |                                       | 336,750     |   |                             |   |           |      |  |   | 15,831     |  
|Interest on debt instruments                                                                           |  |                                       | 4,226,255   |   |                             |   | 989,837    |      |  |   | 499,876    |  
|Gain on debt settlement                                                                                |  |                                       | (87,000     | ) |                             |   |           |      |  |   |           |  
|Loss on disposal and write down of property and equipment and other assets                             |  |                                       | 219,305     |   |                             |   |           |      |  |   |           |  
|Issuance of compensatory stock options and warrants                                                    |  |                                       | 2,291,463   |   |                             |   | 24,093     |      |  |   | 34,000     |  
|Issuance of stock below market value                                                                   |  |                                       | 695,248     |   |                             |   |           |      |  |   |           |  
|Issuance of stock for services rendered                                                                |  |                                       | 1,265,279   |   |                             |   |           |      |  |   |           |  
|Issuance of note payable for services rendered                                                         |  |                                       | 120,000     |   |                             |   |           |      |  |   |           |  
|Contributions of capital through services rendered by stockholders                                     |  |                                       | 216,851     |   |                             |   |           |      |  |   |           |  
|Changes in operating assets and liabilities                                                            |  |                                       |             |   |                             |   |            |      |  |   |            |  
|Prepaid expenses and other assets                                                                      |  |                                       | (119,318    | ) |                             |   | 56,010     |      |  |   | 62,638     |  
|Accounts payable and accrued expenses                                                                  |  |                                       | 1,298,996   |   |                             |   | 391,177    |      |  |   | 242,070    |  
|                                                                                                       |  |                                       |             |   |                             |   |            |      |  |   |            |  
|Net cash used in operating activities                                                                  |  |                                       | (21,162,620 | ) |                             |   | (464,693   | )    |  |   | (484,014   | )
|                                                                                                       |  |                                       |             |   |                             |   |            |      |  |   |            |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                                  |  |                                       |             |   |                             |   |            |      |  |   |            |  
|Purchase of property and equipment                                                                     |  |                                       | (1,083,902  | ) |                             |   |           |      |  |   |           |  
|Purchase of other assets                                                                               |  |                                       | (707,774    | ) |                             |   | (8,335     | )    |  |   | (11,729    | )
|                                                                                                       |  |                                       |             |   |                             |   |            |      |  |   |            |  
|Net cash used in investing activities                                                                  |  |                                       | (1,791,676  | ) |                             |   | (8,335     | )    |  |   | (11,729    | )
|                                                                                                       |  |                                       |             |   |                             |   |            |      |  |   |            |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                                  |  |                                       |             |   |                             |   |            |      |  |   |            |  
|Proceeds from sale of common stock and exercise of stock options and warrants, net of related expenses |  |                                       | 18,615,519  |   |                             |   |           |      |  |   |           |  
|Repayments of amounts due stockholders                                                                 |  |                                       | (121,517    | ) |                             |   |           |      |  |   |           |  
|Proceeds from stockholder notes payable                                                                |  |                                       | 977,692     |   |                             |   |           |      |  |   |           |  
|Proceeds from officer loans                                                                            |  |                                       | 39,500      |   |                             |   | 39,500     |      |  |   |           |  
|Proceeds from issuance of notes payable                                                                |  |                                       | 1,395,717   |   |                             |   | 418,025    |      |  |   |           |  
|Proceeds from debentures and other obligations, net of issue costs                                     |  |                                       | 1,941,500   |   |                             |   |           |      |  |   | 597,211    |  
|Proceeds from convertible debentures, net of issue costs                                               |  |                                       | 894,895     |   |                             |   |           |      |  |   |           |  
|Payments on notescurrent                                                                              |  |                                       | (496,970    | ) |                             |   |           |      |  |   |           |  
|Payments on noteslong term                                                                            |  |                                       | (291,309    | ) |                             |   |           |      |  |   |           |  
|                                                                                                       |  |                                       |             |   |                             |   |            |      |  |   |            |  
|Net cash provided by financing activities                                                              |  |                                       | 22,955,027  |   |                             |   | 457,525    |      |  |   | 597,211    |  
|                                                                                                       |  |                                       |             |   |                             |   |            |      |  |   |            |  
|Net change in cash and cash equivalents                                                                |  |                                       | 731         |   |                             |   | (15,503    | )    |  |   | 101,468    |  
|Cash and cash equivalents, beginning of period                                                         |  |                                       |            |   |                             |   | 16,234     |      |  |   | 382        |  
|                                                                                                       |  |                                       |             |   |                             |   |            |      |  |   |            |  
|Cash and cash equivalents, end of period                                                               |  | $                                     | 731         |   |                             | $ | 731        |      |  | $ | 101,850    |  
|                                                                                                       |  |                                       |             |   |                             |   |            |      |  |   |            |  
|Cash paid for: Interest                                                                                |  | $                                     | 151,720     |   |                             | $ |           |      |  | $ | 2,524      |  
|                                                                                                       |  |                                       |             |   |                             |   |            |      |  |   |            |  
|Taxes                                                                                                  |  | $                                     | 23,692      |   |                             | $ | 3,719      |      |  | $ |           |  
|                                                                                                       |  |                                       |             |   |                             |   |            |      |  |   |            |  

See accompanying condensed notes to financial statements.



5



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Non-cash financing activities during the six months ended October 31, 2007:

In connection with the issuance of $282,055 of two-year notes payable, the Company recorded discounts on notes payable related to the original issue
discount of $16,417, and additional discounts of $70,282 related to the relative fair value of 2,820,550 warrants issued in the transaction.

The Company made principal payments on its convertible notes payable of $72,000 through the issuance of 889,336 shares of common stock.

The Company recorded debt issue costs of $154,070 of which $63,542 was non-cash through the issuance of 2,820,550 warrants for capital raising services.

Non-cash financing activities during the six months ended October 31, 2006:

In connection with the issuance of $665,890 of
one-year notes payable, the Company recorded discounts on notes payable of $418,070 through the issuance of 16,656,703 warrants issued in the transaction.

The Company made principal payments on its convertible notes payable of $178,717 through the issuance of 1,788,446 shares of common stock.

The Company recorded debt issue costs of $378,244 through the issuance of 4,183,593 warrants for capital raising services.

See accompanying condensed notes to financial statements.



6



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SYNTHETIC BLOOD INTERNATIONAL, INC.

(A Development Stage Company)

CONDENSED NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

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 as of
October 31, 2007, and the results of its operations for the three months and six months ended October 31, 2007 and 2006, and for the period from May 26, 1967 (inception) to October 31, 2007, and its cash flows for the six months
ended October 31, 2007 and 2006, and for the period from May 26, 1967 (inception) to October 31, 2007. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to
rules and regulations of the U.S. Securities and Exchange Commission (the Commission). The Company believes that the disclosures in the financial statements are adequate to make the information presented not misleading. However, the
financial statements included herein should be read in conjunction with the financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended April 30, 2007 filed with the Commission on
August 14, 2007.

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 accompanying financial statements, the Company is in the development stage and, at October 31, 2007, has an accumulated deficit of $32,979,349 has negative
working capital, minimal liquid assets, continues to sustain operating losses on a monthly basis, and expects to incur operating losses for the foreseeable future. Since the Company is in the pre-clinical and clinical trial stages of its products,
these products must undergo considerable 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 obtain additional financing
sufficient to fund the required additional development and testing and to meet its obligations on a timely basis (Note 6). 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.

2. STOCK-BASED COMPENSATION

The fair value of the Companys stock options is determined using a Black-Scholes option pricing model, consistent with the provisions of SFAS No. 123R (Share-Based Payment) and Securities and
Exchange Commission Staff Accounting Bulletin No. 107 (SAB 107). The fair value of stock options granted is recognized to expense over the requisite service period. Compensation expense for all share-based payment awards is
recognized using the straight-line single-option method. Effective May 1, 2006, the Company adopted SFAS No 123R, using a modified prospective application. Prior to May 1, 2006, the Company measured employee and board member compensation
cost under the intrinsic method provided by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25) whereby compensation expense is recognized for the excess, if any, of the
fair value of the Companys common stock over the option price on the date the option is granted.

The Company uses the historical stock price
volatility to value stock options under SFAS 123R. The expected term of stock options represents the period of time options are expected to be outstanding and is based on observed historical exercise patterns for the Company, which management
believes are indicative of future exercise behavior. For the risk free interest rate, the Company uses the observed interest rates appropriate for the term of time options are expected to be outstanding.

The Companys net loss for the three months ended October 31, 2007 and 2006 includes approximately $12,800 and $20,000 and $24,100 and $34,000 for the six
months ended October 31, 2007 and 2006 of non-cash stock-based compensation costs. As of October 31, 2007, there was approximately $44,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements.



7



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SYNTHETIC BLOOD INTERNATIONAL, INC.

(A Development Stage Company)

CONDENSED NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

3. STOCKHOLDERS
EQUITY

During the three months ended October 31, 2007:



| | (1) | the Company received a net amount of $140,638 from the issuance of two-year notes payable. The notes are unsecured and were issued with a 6% original issue discount totaling $8,438
and pay interest at 12% per year. In addition, the Company issued 5-year warrants to purchase 1,490,763 shares of common stock at $0.245 per share to investors. An additional discount of $32,298 was recorded for the relative fair value of the
warrants.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | the Company made principal payments on its debentures of $36,000 through the issuance of 419,090 shares of common stock.
| | --- | ------------------------------------------------------------------------------------------------------------------------



| | (3) | the Company issued 1,490,763 warrants for capital raising services and recorded debt issue cost of $63,542 which represents the fair value of these warrants estimated using the
Black-Scholes valuation model. In addition, the Company paid $17,889 in cash for capital raising services.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table summaries the
Companys stock warrant information during the quarter ended October 31, 2007:



|                                   |  |                                   |   |  |                              |      
|---------------------------------- |  | --------------------------------- | - |  | ---------------------------- | -----
|                                   |  | The Quarter EndedOctober 31, 2007
|                                   |  | Warrants                          |   |  | WeightedAverageExercisePrice
|Outstanding as of July 31, 2007    |  | 80,504,129                        |   |  | $                            | 0.250
|Granted                            |  | 2,981,526                         |   |  |                              | 0.245
|Forfeited                          |  | (6,437,500                        | ) |  |                              | 0.207
|                                   |  |                                   |   |  |                              |      
|Outstanding as of October 31, 2007 |  | 77,048,155                        |   |  | $                            | 0.255
|                                   |  |                                   |   |  |                              |      

4. RELATED PARTY TRANSACTIONS

During the six months ended October 31, 2007 and 2006, the Company paid $-0- and $17,334, respectively, to a specialty contract manufacturer of pharmaceutical products to manufacture Oxycyte, the Companys
perfluorocarbon-based blood substitute and therapeutic oxygen carrier, for upcoming clinical trials. No payments were made during the three months ended October 31, 2007 and 2006. An officer of the Company is a minority shareholder and director
of this specialty manufacturer. At October 31, 2007, the Company had no outstanding purchase orders with this specialty manufacturer.

During the six
months ended October 31, 2007, the Company borrowed $39,500 from its former President and Chief Executive Officer (Note 6). The loan is not collateralized, has no stated maturity date, does not have a stated interest rate and no repayments have
been made.

5. INCOME TAXES

In June 2006, the FASB
issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109. Interpretation No. 48 prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The evaluation of a tax position in accordance with interpretation No. 48 involves determining whether it is more likely than not that a tax
position will be sustained upon examination, based upon the technical merits of the position. A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial
statements. If a tax position does not meet the more-likely-than-not recognition threshold, the financial statements do not recognize a benefit for that position.

As required, the Company adopted Interpretation No. 48 during the quarter ended July 31, 2007. The adoption did not result in a material impact to the Companys results of operations or its financial condition.

The Company is subject to taxation in the U.S. and a small number of state jurisdictions. The material jurisdictions subject to potential examination by taxing
authorities include the U.S. and California.

From time to time, the Company may be assessed interest or penalties by its tax jurisdictions, although any
such assessments historically have been minimal and immaterial to the Companys financial results. In the event the Company has received an assessment for interest and/or penalties, it has been classified in the financial statements as general
and administrative expense.



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SYNTHETIC BLOOD INTERNATIONAL, INC.

(A Development Stage Company)

CONDENSED NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

The utilization of net
operating loss carryforwards will likely be limited based on past and future issuances of common and preferred stock due to the ownership change provisions of Internal Revenue Code Section 382.

6. SUBSEQUENT EVENTS

In November 2007, option grants for 150,000
shares with an exercise price of $0.13 were granted. The assumptions used to value the option grants were a risk-free interest rate of 4.64%, no dividends, volatility of 83.7% and an expected life of 10 years.

In November 2007, the Company issued $95,400 of two-year notes payable. The Company recorded discounts on notes payable of $32,717 related to the original issue discount
and 954,000 warrants in the transaction. The Company recorded debt issue costs of $52,111, of which $40,663 was non-cash through the issuance of 954,000 warrants for capital raising services.

In November and December, 2007, the Company received advances totaling $1,000,000 (November 20, 2007 Advance) to fund operations and other working capital
needs. The advances do not have a stated interest or maturity date and were made to provide interim financing until the Company finalizes the terms of a proposed placement of convertible notes, at which point the Company expects that the advance
will be either repaid or exchanged for the offered convertible notes.

Effective November 20, 2007, Robert W. Nicora, the Companys President,
Chief Executive Officer and Chief Financial Officer resigned from all officer positions and from his directorship. Mr. Nicora will receive a total amount of $378,233 which includes accrued salaries, repayment of advances and severance payments
which is payable $125,000 upon receipt by the Company of the November 20, 2007 Advance, and three equal installments of $84,411 on 2/15/08, 5/15/08 and 8/15/08.

Effective November 20, 2007, the Company elected two individuals to its Board of Directors, one of which was also elected as interim President and Chief Executive Officer. The Director and interim President and
Chief Executive Officer is to be paid an annual salary of $120,000, $550 per month car allowance, reimbursement for housing costs while in California during his term as an officer and options to purchase 30,000 shares of common stock for each month
of service. The stock option will be exercisable for three years following the issuance at a price equal to the market price on the date of each monthly issuance. The second Director will be paid a monthly consulting fee of $15,000 and options to
purchase 1,000,000 common shares as of November 20, 2007 at an exercise price of $0.245 per share expiring three years from the date of grant. Additionally, if the Company enters into a license agreement or is sold, it will issue to the second
Director an option to purchase 4,000,000 common shares at an exercise price of $0.245 per share expiring three years from the date of grant.



|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|------- | --------------------------------------------------------------------------------------

Synthetic Blood International, Inc. is a New Jersey corporation that, since 1990, has pursued the development of medical products based on perfluorocarbon technology. Since 1993, Synthetic Blood has also pursued
development of a glucose biosensor implant on a limited basis.

Perfluorocarbons are biologically inert compounds containing carbon and fluorine. The
chemical composition of perfluorocarbons allows them to readily absorb and give up oxygen and carbon dioxide. This property creates opportunities for developing blood substitutes that act as oxygen carriers for human tissue and fluids that carry
oxygen to the lungs for remedial uses.

Synthetic Blood developed Oxycyte as a synthetic blood substitute and therapeutic oxygen carrier. We received
approval of our Investigational New Drug application filed with the U.S. Food and Drug Administration (FDA) in 2003 and completed a Phase I safety study in normal volunteers in December 2003. The results of the Phase I study were in line with our
expectations for the performance of Oxycyte.



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Enrollment started in 2005 in a Phase II orthopedic surgery trial, and five study sites have been qualified and approved
to participate in this study. In this first Phase II trial we are evaluating both efficacy and safety in the prevention of tissue hypoxia (the effects of reduced oxygen levels) in hip surgery patients who experience mild to moderate blood loss
during surgery. While blood transfusions are typically not given during such procedures, blood loss may result in postoperative complications caused by tissue hypoxia. Three study sites have enrolled 12 patients in this study. This is less than
expected, so enrollment has been temporarily put on hold so resources can be refocused on shorter term Phase II trials. Additional financing will be required to restart enrollment, and a completion date cannot be projected at this time.

An eight patient proof of concept Phase II Oxycyte study in patients with brain ischemia due to severe head injury has been completed and the results were considered
within expectations and favorable. A 20 patient proof of concept Phase II Oxycyte trial in patients with sickle cell anemia was put on clinical hold by the FDA for requested protocol changes before enrollment could begin. It is not known at this
time if or when enrollment in this study might begin. In addition to these studies, our future clinical development plans include testing Oxycyte in acute myocardial ischemia, high blood loss surgery, coronary bypass surgery, stroke, myocardial
infarction, malignant tumors and decompression sickness.

We expect to commit a substantial portion of our financial and business resources over the next 3
years to testing Oxycyte and advancing this product to licensing and commercial distribution.

Fluorovent is an oxygen exchange fluid and surfactant for
facilitating the treatment of lung conditions, which the Company has been developing. We have not filed any applications on this product with the FDA and do not expect we will do so while we are focusing on Oxcyte clinical trials or until we obtain
additional financing.

Our biosensor product uses an enzyme process for measuring the glucose level in the blood stream of a diabetic patient. It is a
subcutaneous implant programmed to measure the glucose level and transmit the results to a wearable receiver. We do not expect we will file any applications with the FDA for at least the next 2 years.

RESULTS OF OPERATIONS

Three
months ended October 31, 2007 and 2006

Research and Development expenses for the three months ended October 31, 2007 were $118,871, compared
to $180,049 for the same period in the prior year. Due to the constraints of cash flow, we reduced our expenditure levels which resulted in a decrease in outside consulting services of approximately $23,000 and reduced our lab personnel during the
three months ended October 31, 2007. Phase II expenses totaled zero for the quarter ended October 31, 2007, compared to $50,018 for the quarter ended October 31, 2006. Because of the nature of our ongoing research and development
activities and depending on our cash flow levels, accounting periods may reflect significant changes in expenses resulting from the timing of research related to our developmental products.

General and Administrative expenses for the three months ended October 31, 2007 were $178,628, compared to $214,446 for the same period in the prior year. While
general office and operating expenses have remained relatively constant for the quarters ended October 31, 2007 and 2006, we experienced a general expenditure decrease due to our cash flow constraints. The principal reduction during the three
months ended October 31, 2007 over the same period in 2006 was outside consulting.

The net loss for the three months ended October 31, 2007 was
$931,939 compared to a net loss of $695,315 for the same period in the prior year. Total expenses, excluding interest expense, decreased $96,996 during the three months ended October 31, 2007 over the comparable period in 2006. In addition to
the items noted above, interest expense increased $340,349 due to the interest costs associated with the notes and debentures payable and the related amortization of associated debt discounts. During the three months ended October 31, 2007,
there were additional 18%, 6% and 12% notes payable of approximately $910,000 which were not outstanding during the three months ended October 31, 2006.

Six months ended October 31, 2007 and 2006

Research and Development expenses for the six months ended
October 31, 2007 were $270,363, compared to $410,228 for the same period in the prior year. During the six months ended October 31, 2006 we concentrated our research activities on our Oxycyte product that included Phase II clinical trials
while during the six months ended October 31, 2007 we curtailed our research activities, especially with Phase II clinical trials due to constraints of cash flow.

General and Administrative expenses for the six months ended October 31, 2007 were $392,114, compared to $498,957 for the same period in the prior year. In October 2006, the Company decided to temporarily cease
operations and lay-off exiting employees. The reduced levels of operations, due to limited working capital sources, continued during the six months ended October 31, 2007. The principal reductions during the six months ended October 31,
2007 were outside consultants ($40,000) and contract management ($21,000).



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The net loss for the six months ended October 31, 2007 was $1,959,166 compared to a net loss of $1,406,385 for the
same period in the prior year. Total expenses, excluding interest expense, decreased $246,708 during the six months ended October 31, 2007 over the comparable period in 2006. Interest expense increased $797,311 due to the interest costs
associated with the notes and debentures payable and related amortization of associated debt discounts.

LIQUIDITY AND CAPITAL RESOURCES

Synthetic Blood has financed its operations since September 1990 through the issuance of debt and equity securities and loans from stockholders. As of
October 31, 2007, we had $445,836 of total current assets and a working capital deficit of $1,948,855. Our practice is to invest excess cash, where available, in short-term money market investment instruments.

We do not have the working capital necessary to fund our current operations in fiscal year 2008. We need financing immediately to cover administrative expenses and
on-going expenses of testing Oxycyte. Management is actively seeking additional sources of equity and/or debt financing; however there is no assurance that any additional funding will be available. Should we be unable to obtain additional financing
to meet our short-term needs, we may be forced to cease operations. These factors raise substantial doubt about our ability to continue as a going concern.

In November 2007, the Company issued $95,400 of two-year notes payable. In November and December 2007, the Company received advances of $1,000,000 (November 20, 2007 Advance) to fund operations and other working capital needs.
The advances were made to provide interim financing until the Company finalizes the terms of a proposed placement of convertible notes, at which point the Company expects that the advances will be either repaid or exchanged for the offered
convertible notes. There is no assurance that we will be able to finalize the terms of the proposed placement of convertible notes or that the terms will be suitable to us which could result in our having to pay back the November 20, 2007
Advance.

As a result of the foregoing circumstances our independent registered public accounting firm has, and will possibly in the future, include an
explanatory paragraph in their audit opinions expressing substantial doubt regarding our ability to continue as a going concern.

We are in the
pre-clinical and clinical trial stages in the development of our products. Under an Investigational New Drug application filed with the FDA, we completed a Phase I clinical study on Oxycyte in December 2003. The results of the Phase I study were in
line with our expectations for the performance of Oxycyte. Phase II clinical testing started in 2005. We estimate the additional cost of pursuing our Phase II clinical trials in 2007 and 2008 to be as much as $8,000,000. Even if we are successful
with our Phase II studies, we must then conduct Phase III clinical studies and, if they are successful, file with the FDA and obtain approval of a Biologics License Application to begin commercial distribution, all of which will take more time and
funding to complete. Our other products, Fluorovent and the glucose biosensor, must undergo further development and testing prior to submission to the FDA for approval to initiate clinical trials, which also requires additional funding. Management
is actively pursuing private and institutional financing, as well as strategic alliances and/or joint venture agreements to obtain the necessary additional financing and reduce the cost burden related to the development and commercialization of our
products. We expect our primary focus will be on funding the continued testing of Oxycyte, since this product is the furthest along in the regulatory review process. Our ability to continue to pursue testing and development of our products depends
on obtaining outside financial resources, and there is no assurance we will succeed in obtaining the necessary resources.

Cash used in operating
activities during the six months ended October 31, 2007 was $464,693, compared to $484,014 used for the comparable period of the prior year. Operating activities consisted primarily of product research and development and the general operation
of our corporate office. Cash used in operating activities is primarily dependent on the timing and extent of our research and development activities and our available liquidity.

Cash used in investing activities during the six months ended October 31, 2007 was $8,335 compared to $11,729 for the comparable period of the prior year. Investing activities consisted primarily of expenditures
related to our patent rights and capital assets. Synthetic Blood does not anticipate significant future capital expenditures in the near term.

Cash
provided by financing activities during the six months ended October 31, 2007 was $457,525, compared to cash provided by financing activities of $597,211 for the comparable period of the prior year. Cash provided by financing activities
consists primarily of the proceeds from the sale of debentures, one-year and two-year notes payable and advances from officers. As discussed earlier in this quarterly report, Synthetic Blood is attempting to raise additional funds that may take the
form of equity or debt securities.

RISK FACTORS

Under Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended April 30, 2007, we describe a number of risks associated with our business and our financial condition. Those
factors continue to be meaningful for your evaluation of Synthetic Blood and we urge you to review and consider the risk factors presented in the Annual Report.



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One risk we identified was the lack of working capital. This risk continues to be significant. We do not have the working
capital necessary to fund our operations in fiscal year 2008. We need financing immediately to cover administrative expenses and on-going expenses of testing Oxycyte. Management is actively seeking additional sources of equity and/or debt financing;
however there is no assurance that any additional funding will be available. As noted in Note 6 to the Condensed Notes to Financial Statements above, we obtained a $1 million advance against a proposed placement of convertible notes. Should we be
unable to finalize the terms to the convertible notes or obtain additional financing to meet our short-term needs, we may be forced to cease operations. These factors raise substantial doubt about our ability to continue as a going concern.

CRITICAL ACCOUNTING POLICIES

We
believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements:

SFAS No. 123(R) requires compensation costs related to share-based payment transactions to be recognized in the financial statements over the period that an employee provides service in exchange for the award. The standard requires the
expensing of all share-based compensation, including options and warrants, using the fair value-based method. We adopted the new standard effective May 1, 2006.

Long-Lived AssetsOur intangible assets consist of patents related to our various technologies. These assets are amortized on a straight-line method over their estimated useful life, which ranges from eight to
ten years. We review these intangible assets for impairment on a quarterly basis in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144).

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109.
Interpretation No. 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The calculation of a tax position in
accordance with Interpretation No. 48 involves determining whether it is more likely than not that a tax position will be sustained upon examination, based upon the technical merits of the position. A tax position that meets the
more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. If a tax position does not meet the more-likely-than-not recognition threshold, the financial statements do not
recognize a benefit for that position.

As required, the Company adopted Interpretation No. 48 during the quarter ended July 31, 2007. The
adoption did not result in a material impact to the Companys results of operations or its financial condition.

FORWARD LOOKING
STATEMENTS

Except for the historical information contained herein, the discussion and information presented in this report contain forward-looking
statements that involve risks and uncertainties. Synthetic Bloods actual results could differ materially from those presented 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 Synthetic Bloods Annual Report on Form 10-K for the year ended April 30, 2007 and subsequent filings made with the Securities and Exchange Commission.

Although Synthetic Blood believes that the expectations reflected in the forward-looking statements are reasonable, Synthetic Blood cannot guarantee future results,
levels of performance or achievements. Moreover, neither Synthetic Blood nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. Synthetic Blood is under no obligation to update any of the
forward-looking statements after the filing of this report to conform such statements to actual results or changes in expectations.



|ITEM 3. | CONTROLS AND PROCEDURES.
|------- | ------------------------

We maintain disclosure controls and
procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and
Exchange Commissions rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer who also serves as our Principal Financial Officer, as appropriate, to allow timely
decisions regarding required disclosures. Our management, including our Principal Executive Officer and our Principal Financial Officer, does not expect that our disclosure controls or procedures will prevent all errors and all fraud. A control
system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the control system are met. Further, the benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation or controls can provide absolute assurance that all control issues and instances of fraud, if any, within Synthetic Blood have been detected.



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We carried out an evaluation, under the supervision and with the participation of our management, including our Principal
Executive Officer and our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarterly period covered by this report. Based on the foregoing, our Principal
Executive Officer and our Principal Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect our internal controls over financial reporting.
However, on November 20, 2007 our President, Chief Executive Officer and Chief Financial Officer terminated his services. We have appointed an interim President, Chief Executive Officer and Chief Financial Officer and we are currently
performing a search to replace the Chief Financial Officer.

Part II-Other Information



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

The
Company received a net amount of $140,638 from the issuance of two-year notes payable. The notes are unsecured and were issued with a 6% original issue discount totaling $8,438 and pay interest at 12% per year. In addition, the Company issued
5-year warrants to purchase 1,490,763 shares of common stock at $0.245 per share. Additional discount of $32,298 was recorded for the relative fair value of the warrants. The Company issued five-year warrants to purchase 1,490,763 shares of common
stock at $0.245 per share in connection with placing the 12% notes payable. The securities were issued to fund the current working capital requirements of the Company and were sold in reliance on the exemptions or exclusions from registration set
forth in Section 4(2) of the Securities Act of 1933 and Regulation S adopted thereunder.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

As of October 31, 2007, the
Company was past due on certain notes payable which had a due date of one year from date of issuance in the approximate amount of $846,000 plus accrued and unpaid interest. The Company anticipates that it will become current after the closing, of a
proposed financing. There can be no assurance that the Company will be able to negotiate an agreement for additional funding or if such agreement will be suitable with the Company.



|ITEM 5. | OTHER INFORMATION
|------- | -----------------

On November 20, 2007, the former president,
chief executive officer and chief financial officer of the Company resigned his position. Robert J. Larsen is acting as the interim president and chief executive officer and chief financial officer for the Company until a new chief executive officer
and president is appointed.



|ITEM 6. | EXHIBITS.
|------- | ---------



| | (a) | Exhibits:
| | --- | ---------



|     |  |                                                                                                                                
|---- |  | -------------------------------------------------------------------------------------------------------------------------------
|4.1  |  | Form of Convertible Note                                                                                                       
|     | 
|4.2  |  | Form of Warrant                                                                                                                
|     | 
|31.1 |  | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.        



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SIGNATURE

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.                           
|                  |  | 
|December 17, 2007 |  |  |  | /s/ Robert J. Larsen                                          
|                  |  |  |  | Robert J. Larsen                                              
|                  |  |  |  | President, Chief Executive Officer and Chief Financial Officer



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