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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, 1997


Commission File Number        2-31909

                       SYNTHETIC BLOOD INTERNATIONAL, INC.
             (Exact name of registrant as specified in its charter)

       New Jersey                                 22-3067701
(State of Incorporation)                    (IRS Employer ID Number)

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

                                  619-595-4829
              (Registrant's telephone number, including area code)


Indicate by the check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports).

                          YES   (X)     NO   ( )

and (2) has been subject to such filing requirements for the past 90 days.

                          YES   (X)     NO   ( )

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of January 31, 1997.

                38,485,094 shares of common stock par value $0.01

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

                                 BALANCE SHEETS


                                     ASSETS

<TABLE>
<CAPTION>
                                       January 31,         April 30,
                                          1997               1996
                                       (Unaudited)        (Audited)
<S>                                   <C>                <C>        
Current Assets:
  Cash                                $     7,560        $    76,312
  Prepaid Expense                          25,021             29,812
                                      -----------        -----------
    Total Current Assets              $    32,581        $   106,124

Property & Equipment, net                 167,901            202,167

Other Assets:
  Patents and Technology                  104,708             85,648
                                      -----------        -----------
Total Assets                          $   305,190        $   393,939
                                      ===========        ===========


                      LIABILITIES AND STOCKHOLDERS'S EQUITY

Current Liabilities:
  Accrued Expenses                    $   390,093        $   277,340
  Stockholders loans                       41,046            246,701
  Accrued Payroll & Other                 158,960            450,928
                                      -----------        -----------

Total Current Liabilities             $   590,099        $   974,969

Capital lease obligations             $     4,942        $    16,573
                                      -----------        -----------

Total Liabilities                     $   595,041        $   991,542

Stockholder's Equity:
  Common Stock $0.01 par
   Value: Authorized
   100,000,000 shares
  Issued & outstanding
   38,485,094 & 31,030,382            $   384,851        $   310,304
  Additional Paid in capital            7,043,609          5,468,849
  Stock Subscribed                        200,000
  Stock subscription receivable          (190,000)
  Deficit Accumulated since
   Development Stage                   (7,728,310)        (6,376,756)
                                      -----------        -----------
Total Stockholder's Equity
  (Deficit)                           $  (289,851)       $ ( 597,603)
                                      -----------        -----------
Total Liabilities &
  Stockholder's Equity                $   305,190        $   393,939
                                      ===========        ===========
</TABLE>

See accompanying notes to financial statements

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

                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                            Accumulated
                            during the              Three Months Ended                      Nine Months Ended
                            development                  January 31,                            January 31,
                              stage               1997                  1996              1997               1996
                              -----               ----                  ----              ----               ----

                                                          (Unaudited)                            (Unaudited)
Expenses:
<S>                       <C>                 <C>                 <C>                 <C>                 <C>         
Research and
 development              $  2,805,729        $    156,628        $    194,322        $    408,264        $    882,356

General and
 administrative              4,874,862             165,790             275,221             936,895             990,336

Interest                        95,437               2,401               1,238               6,724               8,364
                          ------------        ------------        ------------        ------------        ------------

 Total Expense               7,776,028             324,819             470,781           1,351,883           1,881,056


 OTHER INCOME                   47,718                  68                  87                 330               5,824
                          ------------        ------------        ------------        ------------        ------------


 NET LOSS                 $ (7,728,310)       $   (324,751)       $   (470,694)       $ (1,351,554)       $ (1,875,319)
                                              ============        ============        ============        ============

 NET LOSS PER SHARE                           $      (0.01)       $      (0.02)       $      (0.04)       $      (0.06)

 WEIGHTED AVERAGE
  NUMBER OF SHARES
   OUTSTANDING                                  38,485,094          29,121,399          38,485,094          28,866,702
                                              ============        ============
</TABLE>

See accompanying notes to the financial statements

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                       SYNTHETIC BLOOD INTERNATIONAL, INC.
                             STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>
                                              ACCUMULATED       NINE  MONTHS       NINE  MONTHS
                                               during the     ended January 31,  ended January 31,
 CASH FLOWS FROM OPERATING                     development          1997               1996
  ACTIVITIES:                                    stage
<S>                                          <C>                <C>                <C>         
Net loss                                     $(7,728,310)       $(1,351,554)       $(1,875,319)
Adjustments to reconcile net
  cash used in operating activities:
  Depreciation and amortization                  190,095             34,718             26,881
  Write down other assets                        126,800
  Issuance of compensatory stk options           118,500
  Contribution of capital through
   services rendered                              30,000
Changes in operating assets and
    liabilities:
    Accounts receivable
Prepaid expenses & other assets                   25,021              4,791             40,252
    Accounts payable and accrued
      expense                                    928,030            217,484            495,277
                                             -----------        -----------        -----------
      Net cash used in operating
       activities                             (6,359,906)        (1,094,561)        (1,312,909)
CASH FLOWS FROM INVESTING
  ACTIVITIES:
Purchase of other assets                        (283,659)           (19,060)           (16,833)
Purchase of property and equipment              (253,055)                              (25,953)
                                             -----------        -----------        -----------
      Net cash used in investing
       activities                               (536,714)           (19,060)           (42,786)
CASH FLOWS FROM FINANCING
  ACTIVITIES:
Proceeds from sale of common stock             4,987,721            629,500            547,144
Payments on capital lease obligations            (29,674)           (11,631)            (8,723)
Proceeds from issuance of notes
 payable to stockholder                          513,526             66,825             74,658
Contribution of capital stockholder               35,700
Proceeds from convertible debentures             780,000
Issuance of stock for services                   734,407            402,675
Repayments of notes payable                     (117,500)           (42,500)
                                                                -----------        -----------
      Net cash provided by financing
       activities                              6,904,180          1,044,869            614,079
NET DECREASE IN CASH AND CASH
  EQUIVALENTS:                                     7,560            (68,752)          (741,616)
CASH AND CASH EQUIVALENTS,
  beginning of period                                                76,312            767,825
CASH AND CASH EQUIVALENTS,
  end of period                              $     7,560        $     7,560        $    26,209
                                             ===========        ===========        ===========
Cash paid for Interest                       $    95,153        $     5,724        $       904
              Taxes                                4,800                800                800
</TABLE>

Non-cash Transactions: Stock subscription on October 16, 1996 for $200,000 by
QueQui, Ltd. The Company issued stock to retire note payable to stockholders in
the amount of $229,980. The Company issued stock to pay salaries and consulting
fees totaling $343,853. See accompanying notes to financial statements

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                       SYNTHETIC BLOOD INTERNATIONAL, INC.
                          (A Development Stage Company)
                          NOTES TO FINANCIAL STATEMENTS
                                January 31, 1997

1.       BASIS OF PRESENTATION

         The accompanying unaudited financial statements contain all adjustments
         (consisting only of normal recurring adjustments) which in the opinion
         of management, are necessary to present fairly the financial position
         of the Company at January 31, 1997, and the results of its operations
         and its cash flows for the three month and nine month periods ended
         January 31, 1997 and 1996. Certain information and footnote disclosures
         normally included in financial statements have been condensed or
         omitted pursuant to rules and regulations of the Securities and
         Exchange Commission although the Company believes that the disclosures
         in the financial statements are adequate to make the information
         presented not misleading.

         The financial statements included herein should be read in conjunction
         with the financial statements of the Company, included in the Company's
         Annual Report on Form 10-K for the year ended April 30, 1996 filed with
         the Securities and Exchange Commission on August 29, 1996.

         Going Concern - The accompanying financial statements have been
         prepared on a going concern basis, which contemplates the realization
         of assets and the satisfaction of liabilities in the normal course of
         business. As shown in the financial statements, the Company is in the
         development stage and has accumulated losses from operations amounting
         to $7,727,471. The Company is in the pre-clinical trial stage of its
         products. These products must undergo further development and testing
         prior to submission to the FDA for approval to market the products. The
         additional development and testing will require significant additional
         financing. The Company's continuation as a going concern is dependent
         on its ability to generate sufficient cash flow, to meet its

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         obligations on a timely basis, to obtain additional financing as may be
         required, and ultimately to attain successful operations. However, no
         assurance can be given at this time as to whether the Company will
         achieve any of these conditions or that the FDA approval will be
         granted, once applied for. These factors, among others, raise
         substantial doubt about the Company's ability to continue as a going
         concern. The financial statements do not include any adjustments
         relating to the recoverability and classification of recorded asset
         amounts or the amounts and classification of liabilities that might be
         necessary should the Company be unable to continue as a going concern
         for a reasonable period of time. Additional funding will be necessary
         which will require future private placements and/or joint ventures to
         enable the Company to continue the required testing through Phase I, II
         and III human testing.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

         Property and Equipment - Property is recorded at cost. Depreciation and
         amortization are computed using the straight-line method over the
         shorter of the estimated useful lives of the related assets, ranging
         from three to ten years, or lease term, if applicable.

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

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

3.       COMMITMENTS AND CONTINGENCIES

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

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

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

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

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4.       LICENSE AGREEMENTS

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

5.       STOCKHOLDERS' EQUITY

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

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

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

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

         On August 2, 1996 the Company issued 50,000 shares of common stock to
         Robert Nicora, an outside consultant as a bonus for services rendered
         to the company. An expense of $10,000 was recognized at $0.20 per share
         for said bonus.

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

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

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

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

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

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

                       SYNTHETIC BLOOD INTERNATIONAL, INC
                          (A Development Stage Company)

                          Part I- Financial Information

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

RESULTS OF OPERATIONS

Third Quarter of 1997 and 1996.

The Research and Development expenses for the three and nine month

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periods ended January 31, 1997 were $156,628 and $408,264 respectively, compared
to $194,322 and $882,356 for the same periods in the prior year. This decrease
was due to a significant reduction in research personnel, research support
personnel, and outside independent laboratory confirmation of test results. The
development activities were primarily concerned with the patenting activity.

General and Administrative expenses for the three and nine month periods ended
January 31, 1997 were $165,790 and $936,895 respectively, compared to $275,221
and $990,336 for the same periods in the prior year. The decrease for the three
month and for the nine months period reflected lower payroll, travel and office
expenses for the periods.

The net loss for the three and nine month periods ended January 31, 1997 was
$324,751 and $1,351,554 respectively, compared to $470,694 and $1,875,319 for
the same periods in the prior year. This decrease for the three and nine month
period represents the reduction of research staff and outside laboratory testing
as well as concentrating on testing for patent purposes only.

LIQUIDITY AND CAPITAL SOURCES

The Company has financed its operations since September 1990, when the current
management became involved, through the issuance of debt and equity securities
and loans from stockholders. As of January 31, 1997 the Company had $ 32,581 in
total current assets and a working capital deficit of $557,518.

The Company is in the pre-clinical trial stage in the development of its
products. These products must undergo further development and testing prior to
submission to the FDA for approval to market its products. This additional
development and testing and if approved, the FDA required clinical testing will
require significant additional financing. Management is actively pursuing
strategic alliance and joint venture agreements to enable the Company to develop
its products. There can be no assurance that FDA approval will be granted, once
applied for, or that necessary funding will be obtained.

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

                            Part II-Other Information

Item 1.           Legal Proceedings.

                           None

Item 2.           Changes in Securities.

                           None

Item 3.           Defaults Upon Senior Securities.

                           None

Item 4.           Submission of Matter to a Vote of Security Holders.

                           None

Item 5.           Other Information

                           None

Item 6.           Exhibits and Reports on Form 8-K.

                  None

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                       SYNTHETIC BLOOD INTERNATIONAL, INC.
                       ----------------------------------
                                  (Registrant)


 3/14/97                                _____//SS//SS//______________________
--------------------
   (Date)                           Robert J. Larsen, Secretary/Treasurer

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