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, 2003
Commission File Number 2-31909
| SYNTHETIC BLOOD INTERNATIONAL, INC. | ||
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| (Exact name of registrant as specified in its charter) | ||
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| New Jersey |
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22-3067701 |
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| (State of Incorporation) |
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(IRS Employer ID Number) |
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| 3189 Airway Avenue, Building C, Costa Mesa, California 92626 | ||
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| (Office of Principal Executive Office) | ||
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| 714-427-6363 | ||
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| (Registrant’s telephone number, including area code) | ||
Indicate by the check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports).
| Yes x |
No o |
and (2) has been subject to such filing requirements for the past 90 days.
| Yes x |
No o |
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of January 31, 2003.
88,783,874 shares of common stock par value $0.01
Part I-Financial Information
ITEM 1. FINANCIAL STATEMENTS
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Company)
BALANCE SHEETS
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January 31, |
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April 30, |
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(Unaudited) |
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| ASSETS |
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| Current Assets: |
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Cash and cash equivalents |
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$ |
524,429 |
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$ |
2,442,015 |
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Prepaid expenses |
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102,825 |
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89,537 |
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Total Current Assets |
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627,254 |
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2,531,552 |
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| Property and Equipment, net |
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444,851 |
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485,614 |
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| Patents, net |
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245,282 |
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258,654 |
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$ |
1,317,387 |
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$ |
3,275,820 |
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Current Liabilities: |
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Notes Payable |
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$ |
— |
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$ |
105,569 |
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Accounts payable |
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74,192 |
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41,174 |
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Accrued liabilities |
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7,354 |
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32,335 |
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Total Current Liabilities |
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81,546 |
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179,078 |
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| Stockholders’ Equity: |
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Preferred Stock, undesignated, authorized 10,000,000 shares, none issued or outstanding |
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— |
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— |
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Common Stock, par value $.01 per share; authorized 200,000,000 shares; issued and outstanding 88,783,874 and 88,577,245 shares |
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887,839 |
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885,772 |
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Additional paid-in capital |
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18,713,263 |
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18,684,363 |
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Deficit accumulated during the development stage |
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(18,365,261 |
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(16,473,393 |
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Total Stockholders’ Equity |
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1,235,841 |
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3,096,742 |
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$ |
1,317,387 |
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$ |
3,275,820 |
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See accompanying condensed notes to financial statements.
2
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
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Deficit |
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Three Months Ended |
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Nine Months Ended |
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| 2003 |
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2002 |
2003 |
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2002 | ||||||||||||
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(Unaudited) |
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(Unaudited) |
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(Unaudited) |
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| Expenses: |
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Research and development |
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$ |
6,740,429 |
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$ |
243,214 |
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$ |
328,719 |
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$ |
1,256,761 |
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$ |
996,044 |
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General and administrative |
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12,035,831 |
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230,419 |
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172,398 |
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673,433 |
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623,499 |
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Interest |
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182,642 |
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156 |
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4,060 |
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2,503 |
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11,307 |
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| Total Expense |
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18,958,902 |
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473,789 |
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505,177 |
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1,932,697 |
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1,630,850 |
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| Other Income |
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(593,641 |
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(9,291 |
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(23,710 |
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(40,829 |
) |
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(110,235 |
) | |
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| NET LOSS |
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$ |
(18,365,261 |
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$ |
(464,498 |
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$ |
(481,467 |
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$ |
(1,891,868 |
) |
$ |
(1,520,615 |
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| NET LOSS PER SHARE, BASIC AND DILUTED |
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$ |
(0.005 |
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$ |
(0.005 |
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$ |
(0.021 |
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$ |
(0.018 |
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| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND DILUTED |
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88,652,678 |
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87,767,245 |
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88,608,362 |
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86,833,992 |
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See accompanying condensed notes to financial statements.
3
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
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Accumulated During Development Stage |
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Nine Months Ended January 31, |
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2003 |
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2002 |
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(Unaudited) |
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(Unaudited) |
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| CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Net loss |
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$ |
(18,365,261 |
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$ |
(1,891,868 |
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$ |
(1,520,615 |
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| Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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700,269 |
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102,829 |
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80,750 |
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Loss on disposal and write-down of property and equipment and other assets |
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150,409 |
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8,325 |
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— |
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Compensatory stock options/warrants issued |
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1,916,263 |
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— |
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— |
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Issuance of stock below market value |
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695,248 |
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— |
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— |
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Contribution of capital through services rendered by stockholders |
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216,851 |
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— |
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— |
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Issuance of stock for services rendered |
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1,190,209 |
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30,600 |
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— |
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Changes in operating assets and liabilities: |
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Decrease in notes receivable |
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30,000 |
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— |
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— |
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Prepaid expenses and other assets |
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(102,825 |
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(13,288 |
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(111,060 |
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Accounts payable and accrued liabilities |
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258,137 |
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8,037 |
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53,399 |
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Net cash used in operating activities |
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(13,310,700 |
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(1,755,365 |
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(1,497,526 |
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| CASH FLOWS FROM INVESTING ACTIVITIES: |
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| Purchase of property and equipment |
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(938,857 |
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(34,704 |
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(229,145 |
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| Purchase of other assets |
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(579,614 |
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(22,315 |
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(33,680 |
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Net cash used in investing activities |
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(1,518,471 |
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(57,019 |
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(262,825 |
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| CASH FLOWS FROM FINANCING ACTIVITIES: |
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| Proceeds from sale of common stock and exercise of common stock options and warrants |
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13,938,656 |
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367 |
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416,878 |
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| Repayments of amounts due stockholders |
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(121,517 |
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— |
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— |
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| Proceeds from stockholder notes payable |
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977,692 |
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— |
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— |
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| Proceeds from notes, debentures and lease obligations |
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1,276,065 |
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— |
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195,286 |
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| Payments on notes and capital lease obligations |
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(717,296 |
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(105,569 |
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(194,665 |
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Net cash provided by (used in) financing activities |
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15,353,600 |
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(105,202 |
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417,499 |
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| Net change in cash and cash equivalents |
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524,429 |
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(1,917,586 |
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(1,342,852 |
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| Cash and cash equivalents, beginning of period |
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— |
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2,442,015 |
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4,250,898 |
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| Cash and cash equivalents, end of period |
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$ |
524,429 |
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$ |
524,429 |
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$ |
2,908,046 |
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| Cash paid for: Interest |
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$ |
143,129 |
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$ |
2,503 |
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$ |
11,306 |
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Taxes |
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$ |
13,890 |
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$ |
4,350 |
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$ |
7,190 |
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See accompanying condensed notes to financial statements.
4
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Company)
CONDENSED NOTES TO FINANCIAL STATEMENTS
| 1. |
BASIS OF PRESENTATION |
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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, 2003, and the results of its operations for the three month and nine month periods ended January 31, 2003 and 2002 and its cash flows for the nine month periods ended January 31, 2003 and 2002. 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. |
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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, 2002 filed with the Securities and Exchange Commission on July 26, 2002. |
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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 accompanying financial statements, the Company is in the development stage and, at January 31, 2003 has an accumulated deficit of $18,365,261 and continues to sustain operating losses on a monthly basis. Since the Company is in the pre-clinical trial stage 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. 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. |
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| 2. |
STOCKHOLDERS’ EQUITY |
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During the three months ended January 31, 2003, the Company issued 170,000 shares of common stock for legal services rendered. The Company recorded an expense of $30,600, which represents the fair value of the common stock on the date the liability was settled. |
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During the three months ended October 31, 2002 the Company issued 36,629 shares of common stock for cash proceeds of $367 resulting from the exercise of previously issued |
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stock options. The Company recorded an expense in a previous period for the fair value of the options at the date they were issued. |
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During the nine months ended January 31, 2003, the Company granted employee incentive stock options under its 1999 Stock Option Plan totaling 400,000 shares with exercise prices ranging from $0.16 to $0.23 per share. The stock options granted have an exercise price equal to the fair market value of the Company’s common stock on the date of grant. |
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| 3. |
RECENT ACCOUNTING PRONOUNCEMENTS |
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In June 2001, the FASB issued SFAS No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” Under these new standards, all acquisitions subsequent to June 30, 2001 must be accounted for using the purchase method of accounting. The cost of intangible assets with indefinite lives and goodwill are no longer amortized, but are subject to an annual impairment test based upon its fair value. |
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In August 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”). SFAS 143 establishes accounting standards for recognition and measurement of a liability for the costs of asset retirement obligations. Under SFAS 143, the costs of retiring an asset w |