As filed with the Securities and Exchange Commission on August
31, 2001
Registration No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
______
SYNTHETIC BLOOD INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
New Jersey 8731 22-3067701
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or Industrial Classification Identification No.)
organization) Code No.)
3189 Airway Avenue, Bldg. C
Costa Mesa, CA 92626
714-427-6363
(Address, including zip code, and telephone number, including
area code,
of Registrant's principal executive officers)
Robert Nicora
President and Chief Executive Officer
Synthetic Blood International, Inc.
3189 Airway Avenue, Bldg. C
Costa Mesa, CA 92626
714-427-6363
(Name, address, including zip code, and telephone number,
including area code,
of agent for service)
Copies to:
Cletha A. Walstrand, Esq.
Lehman, Walstrand & Associates, LLC
620 Judge Building
8 East Broadway
Salt Lake City, UT 84111
Approximate date of commencement of proposed sale of
securities to the public: As soon as practicable after this
Registration Statement becomes effective.
i
If any of the securities being registered on this form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, check the following box.
[X]
If this form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration number of the earlier effective registration
statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier
effective registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. [ ]
Title of Each Class of Amount to be Proposed Proposed Amount of
Securities to be Registered Registered Maximum Maximum Registration
Offering Aggregate Fee
Price Per Offering
Share Price
Common Stock, $.01 par value 12,806,630 $0.2575 $3,297,707 $824.42
The proposed maximum aggregate offering price is estimated
solely for purposes of determining the registration fee pursuant
to Rule 457 under the Securities Act of 1933. The registration
fee has been calculated based upon the average of the high and
low bid prices of Synthetic Blood's common stock as reported on
the Over the Counter Bulletin Board on August 3, 2001.
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effect on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
ii
The information in this prospectus is not complete and may
be changed. We may not sell these securities until the
Securities and Exchange Commission declares our registration
statement effective. This prospectus is not an offer to sell
these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to completion, dated August 31, 2001
12,806,630 Shares
SYNTHETIC BLOOD INTERNATIONAL, INC.
Common Stock
This prospectus relates to the offer and sale by the selling
stockholders identified in this prospectus of up to 12,806,630
shares of our common stock. We are not selling any shares of our
common stock in this offering and we will not receive any
proceeds from the sale. The aggregate proceeds to the selling
stockholders from the sale of any shares of common stock will be
the purchase price of the shares sold less the applicable
discounts and commissions, if any. The selling stockholders may
offer and sell their shares of common stock covered by this
prospectus from time to time, at prevailing prices or at
privately negotiated prices, in one or more transactions,
including the following:
- transactions on the Over the Counter Bulletin Board, or
any other securities exchange or quotation system on which
the common stock is then traded,
- privately negotiated transactions other than the over-the-
counter market, or
- in combination of any of the foregoing transactions.
The selling stockholders also may sell the shares from time
to time directly, or indirectly through agents, dealers or
underwriters designated from time to time, on terms to be
determined at the time of sale. To the extent required, the
respective purchase prices, public offering prices, names of such
agents, dealers or underwriters, and any applicable commissions
or discounts with respect to a particular offer will be set forth
in an accompanying prospectus supplement. In addition, any shares
that qualify for sale pursuant to Rule 144 under the Securities
Act of 1933 may be sold under Rule 144 rather than pursuant to
this prospectus.
The selling stockholders acquired the shares of common stock
covered by this prospectus in private transactions exempt from
registration. The registration statement of which this
prospectus is a part may remain effective for up to two years
after the date of this prospectus and, for so long as the
registration statement remains effective, the selling
stockholders may sell their shares of common stock covered by
this prospectus from time to time in transactions as described
above. However, the registration of this common stock does not
necessarily mean that the selling stockholders will actually sell
any or all of their shares of common stock.
On August 3, 2001, the last reported sale price of our
common stock was $0.255 per share. Our trading symbol is SYBD
and we are listed on the Over the Counter Bulletin Board.
See "Risk Factors" beginning on page 5 for certain
information you should consider before you purchase the shares.
1
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the
securities or passed upon the accuracy or adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is August 31, 2001
2
TABLE OF CONTENTS
Page Number
Summary 4
Risk Factors 5
Special Note Regarding Forward-Looking Statements 13
Market Price of and Dividends on our Stock and Related
Stockholder Matters 13
Selected Consolidated Financial Data 13
Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Business 17
Management 24
Certain Relationships and Related Transactions 30
Principal Shareholders 31
Selling Shareholders 32
Plan of Distribution 34
Description of Common Stock 35
Legal Matters 36
Experts 37
Where you Can Find More Information 37
Index to Consolidated Financial Statements 38
-------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS
DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH ANY INFORMATION THAT IS DIFFERENT.
THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL TO SELL THESE
SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
-------------------------
This prospectus contains forward-looking statements that
involve risks and uncertainties. These statements may be
identified by the use of words such as expects, anticipates,
intends, plans, and similar expressions. Our actual results
could differ materially from those discussed in these statements.
Factors that could contribute to these differences include those
discussed in the section entitled Risk Factors and elsewhere in
this prospectus.
3
SUMMARY
The items in the following summary are described in more
detail in this prospectus. This summary provides an overview of
selected information and does not contain all the information you
should consider. You should also read the more detailed
information set out in this prospectus, including the financial
statements.
Business
We are a development-stage company that is developing
Oxycyte, a proprietary blood substitute and therapeutic oxygen
carrier, Flourovent, a liquid for assisting oxygen exchange in
damaged or diseased lungs based upon perfluorocarbon technology.
In addition, we are developing an implantable continuous reading
glucose biosensor for diabetics. We are in the preclinical stage
of testing our products and are completing the activities
necessary for the prepartion of applications with the United
States Food and Drug Administration to begin clinical testing.
We believe our products will compete in four multibillion
dollar markets:
- Blood substitutes
- Oxygen therapeutics
- Acute respiratory distress
- Diabetes
Our objective is to partner with global and national
pharmaceutical and medical companies to attain additional
funding, commercial scale manufacturing capabilities and maximum
global market penetration for our products. We have not yet
entered into any partnership arrangements although we have begun
to identify and meet with interested and appropriate candidate
companies.
Facilities
We were incorporated on May 26, 1967 as a New Jersey
corporation. Our principal executive offices are located at 3189
Airway Avenue, Building C, Costa Mesa, California 92626 and our
telephone number is 714-427-6363. In addition to our executive
offices, we also have a laboratory at our Costa Mesa facility.
We also have a laboratory facility located at 2685 Culver
Avenue, Kettering, Ohio 45429, telephone number 937-298-6070.
Research and development of our implantable biosensor is
performed at our Kettering facility.
The Offering
All of the shares of common stock offered will be offered by
the selling stockholders as described in the section Selling
Stockholders. Because all of the shares of common stock are
being offered by the selling stockholders, we will not receive
any of the proceeds from the sale of these shares.
Over the Counter Bulletin Board symbol SYBD
4
Common stock outstanding as of August 4, 2001 85,015,376 shares
Common stock offered by selling shareholders 12,806,630 shares
Common stock outstanding after the offering 12,806,630 shares
The number of shares to be outstanding after the offering
excludes:
5,219,836 shares available under options, etc.
1,455,000 shares of common stock reserved for issuance
under our employee stock plan
Summary financial data
April 30, April 30, April 30, April 30, April 30,
2001 2000 1999 1998 1997
Interest Income $ 331,019 $ 16,141 $ 23,994 $ 3,069 $ 914
Total expenses $ 2,003,261 $ 927,480 $ 857,829 $ 1,284,101 $ 1,911,290
Net loss $ 1,672,242 $ 911,339 $ 833,835 $ 1,281,032 $ 1,910,376
=========== ========== ========== ========== ==========
Weighted average number
of shares outstanding,
basic and diluted 86,401,830 65,365,438 51,388,471 46,000,749 36,053,557
Net loss per share,
basic and diluted $ (0.02) $ (0.01) $ (0.02) $ (0.03) $ (0.05)
=========== =========== ========== ========== ===========
Cash $ 4,250,898 $ 5,466,391 $ 193,013 $ 740,215 $ 53,857
Working capital $ 4,020,203 $ 5,592,016 $ (324,369) $ (228,400) $ (529,393)
Total assets $ 4,842,296 $ 6,199,651 $ 530,906 $ 985,914 $ 318,163
Total liabilities $ 344,068 $ 345,440 $ 625,583 $ 634,361 $ 600,675
Long-term debt $ -- $ -- $ 47,327 $ 103,021 $ --
Stockholders' equity $ 4,498,228 $ 5,854,211 $ (94,677) $ 351,553 $ (282,512)
5
RISK FACTORS
We expect to continue incurring losses for the foreseeable
future and may never achieve profitability. For the year ended
April 30, 2001, we had a net loss of $1,672,242. We had losses
since 1990 when we revised our business to develop a line of
blood substitutes. Our accumulated deficit is $12,985,580 as of
April 30, 2001. We will continue to incur substantial and
increasing losses for the foreseeable future as a result of
increased research and development costs. Our chances for
achieving profitability will depend on many factors, including:
- developing and testing new product candidates;
- receiving regulatory approvals;
- manufacturing products;
- marketing products; and
- competing with products from other companies.
Many of these factors are out of our control. We expect to
rely heavily on third parties with respect to many areas of our
business including research and development, clinical testing,
manufacturing and marketing. We cannot assure you we will ever
be profitable.
We will need substantial additional financing to complete
development of our products and to introduce our products in the
market. Costs to complete preclinical tests and to begin and
complete proposed clinical trials are very high. We expect our
existing capital resources will satisfy our requirements through
approximately December 2002. When we begin clinical trials on
our products, we will need substantially more money and we do not
have any commitments for any additional financing. Any
additional equity financing may dilute our current shareholders
and debt financing, if available, may include restrictions. We
cannot assure that any financing will be available to us at all
or on terms that would be acceptable. Our future capital
requirements will depend on many factors, including:
- results of preclinical tests;
- results of any clinical trials;
- continued scientific progress in research and development
programs;
- the time and cost involved in obtaining regulatory
approvals;
- future collaborative relationships;
- competing technological and market developments;
- patient costs; and
- the cost of manufacturing.
If we do not obtain adequate funds, we may have to curtail
our operations or cease operations all together. Although we
cannot estimate the amount of additional financing we will
require, we believe it will be substantial.
We must overcome significant obstacles to successfully
develop or market our products. There are significant risks in
developing new pharmaceutical products and products based on new
technologies. These risks include:
6
- delays in preclinical testing, product development,
clinical testing or manufacturing;
- unplanned expenditures for product development, clinical
testing or manufacturing;
- failure of the product candidates to have the desired
effect or an acceptable safety profile;
- failure to receive regulatory approvals;
- emergence of superior or equivalent products;
- inability to manufacture on our own, or through others, on
a commercial scale;
- inability to market products due to third-party
proprietary rights;
- inability to find collaborative partners to pursue product
development; and
- failure by future collaborative partners to successfully
develop products.
Our research and development efforts may not results in any
commercially viable products if these risks materialize.
Our success depends on meeting strict governmental
regulation. The FDA will regulate our products as drugs or
medical devices. Our products that are intended to be introduced
into the body, such as blood substitutes, will be regulated as
drugs and reviewed by the FDA staff responsible for evaluating
drugs. Our products will be subject to rigorous FDA review and
approval procedures. After testing in animals, an
Investigational New Drug application must be filed with the FDA
to obtain authorization for human testing. Extensive clinical
testing, which is generally in three phases, must be undertaken
at many hospitals or medical centers to demonstrate optimal use,
safety and efficacy of each product in humans. Each clinical
study is conducted under the auspices of an independent
Institution Review Board. The IRB will consider, among other
things, ethical factors, the safety of human subjects and the
possible liability of the institution. The time and expense
required to perform this clinical testing can far exceed the time
and expense of the research and development initially required to
create the product.
No action can be taken to market any of our products in the
United States until an appropriate New Drug Application has been
approved to the FDA. Even after initial FDA approval is
obtained, further studies may be required to provide additional
data on safety or to gain approval for the use of our products as
a treatment for clinical indications other than those initially
targeted. In addition, use of our products during testing and
after marketing could reveal side effects that could delay,
impede or prevent FDA marketing approval, resulting in a FDA
ordered product recall, or in FDA imposed limitation on
permissible uses.
The FDA also regulates the manufacturing process of
pharmaceutical products and requires that a portion of the
clinical trials for new products be conducted using products
produced in compliance with good manufacturing practices.
We cannot assure that, even after substantial expenditures
of time and money, regulatory approval will be obtained for any
of our products. Even if regulatory approval is granted, such
approval may entail limitations on the indicated uses for which
the product may be marketed. After regulatory approval is
obtained, the product, the manufacturer and the manufacturing
facilities are subject to continual review and periodic
inspections, and a later discovery of previously unknown problems
with a
7
product, manufacturer or facility may result in
restrictions on such product or manufacturer including the
withdrawal of the product from the market. Failure to comply
with the applicable regulatory requirements can, among other
things, result in fines, suspensions of regulatory approvals,
product recalls, operating restrictions and criminal prosecution.
Additional government regulation may be established which could
prevent or delay regulatory approval of our products.
If we are unable to establish partner relationships, we may
be unable to develop our products. Our strategy for the
research, development and commercialization of our products is to
enter into contractual arrangements with corporate collaborators,
licensors, licensees and others. We do not have the funds to
fully develop our products and we intend to rely on collaborators
to help develop our products. Even if partners are found, it may
not be possible to completely control the amount and timing of
resources future collaborative partners will devote to our
products. There is no assurance we will be successful in finding
collaborative partners. If collaborative partners or other
sources of financing cannot be found, we may not be able to
continue developing our products and may be forced to sell
assets, including technology, to raise capital.
Our dependence on collaborative arrangements with third
parties has a number of risks. The future arrangements may not
be on favorable terms. Typically, collaborative agreements allow
partners significant discretion in deciding whether to pursue any
of the planned activities. We cannot control the amount and
timing of resources partners may devote to our products and
partners may choose to pursue alternative products. Partners may
not perform their obligations as expected and changes in the
partner's business strategy may affect their willingness to
participate in our product development. We could become involved
in disputes with partners that could lead to delays or
termination of development programs. If any collaborative
partner were to terminate or breach an agreement, chances of
successfully developing our products could be materially and
adversely affected.
If clinical trials of our products are unsuccessful or
delayed, our stock price may decline. We must first demonstrate
through preclinical testing and then through clinical trials that
our products are safe and effective for use in humans before we
can obtain regulatory approval for commercial sales of our
products. We have not yet completed preclinical testing on any
of our products. Conducting clinical trials is a lengthy, time-
consuming and expensive process. If results from our preclinical
tests are sufficient, we can begin clinical trials which may take
several years or more. The start of and rate of clinical trials
may be delayed by many factors, including:
- unsuccessful preclinical testing results;
- lack of efficacy during the clinical trials;
- unforeseen safety issues;
- slower than expected rate of patient recruitment;
- government or regulatory delays;
- inability to adequately follow patients after treatment;
or
- inability to manufacture sufficient quantities of
materials for use in clinical trials.
Often, results from preclinical testing and early clinical
trials are not predictive of results obtained in later clinical
trials. New drugs that have shown promising results in clinical
trials have subsequently
8
failed to establish sufficient safety
and efficacy data to obtain regulatory approval. Data obtained
from preclinical and clinical activities are susceptible to
varying interpretations that may delay, limit or prevent
regulatory approval. In addition, regulatory delays or
rejections may be encountered as a result of many factors,
including perceived defects in the design of clinical trials and
changes in regulatory policy during the period of product
development.
Our products are in the preclinical development stage and we
have not submitted investigational new drug applications to start
clinical trials. We may not successfully complete our
preclinical development efforts and may not file any
investigational new drug applications. Any of these factors
could cause the price of our stock to decline and would also
seriously impede our ability to obtain additional financing.
Although some of our officers have experience with clinical
trials, we will largely depend on third party clinical trial
managers to conduct clinical trials. Our reliance on third
parties, including future collaborative partners, clinical
research organizations and outside consultants, to assist in
managing and monitoring future clinical trials may result in
delays in completing or failure to complete the clinical trials
if the third parties fail to perform.
Our products must be accepted in the market in order for us
to generate any revenue or become profitable. Even if we
eventually obtain regulatory approval to market a product, our
products may not gain market acceptance among physicians,
patients, healthcare payors and the medical community. The
degree of acceptance of any pharmaceutical product that is
developed will depend on a number of factors, including:
- demonstration of clinical efficacy and safety;
- cost-effectiveness;
- potential advantages over alternative therapies;
- reimbursement policies of government and third party
payors; and
- effectiveness of our or a corporate partner's marketing
and distribution capabilities.
Physicians will not recommend therapies using products until
clinical data or other factors demonstrate their safety and
efficacy as compared to other drugs or treatments. Even if the
clinical safety and efficacy of therapies using our products is
established, physicians may elect not to recommend the therapies
for any number of other reasons, including whether the mode of
administration of our products is effective for certain
indications. Physicians, patients, third party payors and the
medical community may not accept and utilize our products. If
our products do not achieve significant market acceptance, it is
not likely we will be able to generate any revenues or ever
become profitable.
We are highly dependent on the principal members of our
scientific and management staff. We do not have employment
contracts with most of our scientific and management staff or
outside consultants. If we lose any of these people and are
unable to attract and retain qualified personnel, the business,
financial condition and results of our operations may be
materially and adversely affected.
If we fail to enter into successful marketing arrangements
with third parties, we will not be able to commercialize our
products. We do not have any sales and marketing expertise and
have no experience in marketing, sales or distribution. Our
future profitability will depend on our ability to enter
9
into
successful marketing arrangements with third parties who have
experience in these areas. To the extent we enter into marketing
and sales agreements, revenues will depend on the efforts of
others and such efforts may not be successful.
We must keep pace with rapid technological changes to
successfully compete in the development and commercialization of
our products. The biotechnology and pharmaceutical industries
are highly competitive and are subject to significant and rapid
technological changes. We are aware of several pharmaceutical
and biotechnology companies that are actively engaged in research
and development in areas related to ours. Some of these
companies have commenced clinical trials. Many of these
companies, either alone or together with their collaborative
partners, have substantially greater financial resources and
larger research and development staffs than we do. Many of these
competitors have significant experience in:
- developing products;
- undertaking preclinical testing and human clinical trials;
- obtaining FDA and other regulatory approvals of products;
and
- manufacturing and marketing products.
Developments by others may render our products or
technologies obsolete or noncompetitive. We face and will
continue to face intense competition from other companies for
collaborative arrangements with pharmaceutical and biotechnology
companies for establishing relationships with academic and
research institutions and for licenses of proprietary technology.
Our competitors may succeed in developing technologies or
products that are more effective than ours.
Our patents may not protect us from competition. We have
obtained patents in the United States and certain other countries
and have additional patent applications pending. We cannot
assure that any additional patents will be issued or that our
patents will provide meaningful protection against the
development of competing products. The patent position of
biopharmaceutical companies involves complex legal and factual
questions and enforceability cannot be predicted with certainty.
Patents, if issued, may be challenged, invalidated or
circumvented. We cannot assure that competitors will not
successfully challenge the validity or enforceability of any
patent issued to us. The costs required to uphold the validity
and prevent infringement of any patent issued to us could be
substantial and we may not have the resources available to defend
our patents.
We also rely on trade secrets and proprietary know-how. We
protect our information through confidentiality and proprietary
information agreements. These agreements may not provide
meaningful protection or adequate remedies for technology in the
event of unauthorized use or disclosure of confidential and
proprietary information. Our failure to protect proprietary
rights could seriously impair our competitive position.
We must operate without infringing upon the proprietary
rights of others. The areas in which we are focusing our
research has many competitors. Our success depends on our
ability to operate without infringing the patents and other
proprietary rights of third parties. In the event we do
infringe, we may be prevented from pursing our product
development or commercialization. The biotechnology and
pharmaceutical industries have been characterized by extensive
litigation regarding patents and other intellectual property
rights. The defense and prosecution of intellectual property
suits, U.S. Patent and Trademark Office interference proceedings
and related legal and administrative proceedings in the United
10
States and internationally involve complex legal and factual
questions. As a result, such proceedings are costly and time-
consuming to pursue and their outcome is uncertain. Litigation
may be necessary to:
- enforce patents that we own or license;
- protect trade secrets or know-how that we own or license;
or
- determine the enforceability, scope and validity of the
proprietary rights of others.
If we become involved in any litigation, interference or
other administrative proceeding, we will incur substantial
expense and the efforts of our technical and management personnel
will be significantly diverted. Any adverse determination may
subject us to loss of our proprietary position or to significant
liabilities, or require licenses that may not be available from
third parties. We may be restricted or prevented from
manufacturing and selling our products in the event of an adverse
determination in a judicial or administrative proceeding or if we
fail to obtain necessary licenses. Costs associated with these
proceedings would be substantial.
Price and sales of our products may be limited by health
insurance coverage and government regulation. Our success in
selling our products may depend in part on the extent to which
health insurance companies, HMOs and government health
administration authorities such as Medicare and Medicaid will pay
for the cost of our products and related treatment. These payors
are increasingly challenging the price and examining the cost
effectiveness of medical products and services. Significant
uncertainty exists as to the reimbursement status of newly
approved healthcare products. We may need to conduct post-
marketing studies in order to demonstrate the cost-effectiveness
of our products. Such studies may require the commitment of a
significant amount of management time and financial and other
resources. Our products may not be considered cost-effective.
Adequate third-party reimbursement may not be available to
maintain price levels sufficient to realize an appropriate return
on investment in product development. Domestic and foreign
governments continue to propose and pass legislation designed to
reduce the cost of healthcare. Legislation and regulations
affecting the pricing of pharmaceuticals may change before our
products are approved for marketing. Adoption of such
legislation could further limit reimbursement for
pharmaceuticals.
A product liability claim or series of claims for uninsured
liabilities or in excess of insured liabilities could force us to
pay substantial damage awards. The use of our products in
clinical trials, and the sale of any approved products, may
expose us to liability claims and financial losses resulting from
the use or sale of our products. We do not currently carry
product liability insurance although we intend to obtain
insurance coverage before we begin any clinical trials. We
intend to obtain insurance coverage to include the sale of
commercial products if marketing approval is obtained for our
products currently in development. Insurance coverage may not be
able to be maintained at a reasonable cost or in sufficient
amounts or scope to protect against losses.
Our stock is subject to the Penny Stock rules which impose
significant restrictions on the Broker-Dealers and may affect the
resale of our stock. A penny stock is generally a stock that
- is not listed on a national securities exchange or Nasdaq,
- is listed in "pink sheets" or on the NASD OTC Bulletin Board,
- has a price per share of less than $5.00 and
11
- is issued by a company with net tangible assets less than
$5 million.
The penny stock trading rules impose additional duties and
responsibilities upon broker-dealers and salespersons effecting
purchase and sale transactions in common stock and other equity
securities, including
- determination of the purchaser's investment suitability,
- delivery of certain information and disclosures to the
purchaser, and
- receipt of a specific purchase agreement from the
purchaser prior to effecting the purchase transaction.
Many broker-dealers will not effect transactions in penny
stocks, except on an unsolicited basis, in order to avoid
compliance with the penny stock trading rules. Because our
common stock is subject to the penny stock trading rules,
- such rules may materially limit or restrict the ability to
resell our common stock, and
- the liquidity typically associated with other publicly
traded equity securities may not exist.
Our stock price could continue to be highly volatile and
investors may not be able to resell shares at or above the price
paid for them. The market price of our stock, like that of many
other life sciences companies, has been highly volatile and is
like to continue to be highly volatile. The following factors,
among others, could have a significant impact on the market price
of our common stock:
- the results of preclinical tests and future clinical
trials or those of future collaborators or competitors;
- evidence of the safety or efficacy of products or the
products of competitors;
- the announcement by us or our competitors of technological
innovations or new products;
- developments concerning patents or other proprietary
rights or those of future competitors, including litigation
or patent office proceedings;
- loss of key personnel;
- governmental regulatory actions;
- changes or announcements in reimbursement policies;
- agreements with future collaborators;
- period-to-period fluctuations in operating results;
- market conditions for life science stocks in general; and
- changes in estimates of performance by securities
analysts.
12
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
You should carefully consider the risk factors set forth
above, as well as the other information contained in this
prospectus. This prospectus contains forward-looking statements
regarding events, conditions, and financial trends that may
affect our plan of operation, business strategy, operating
results, and financial position. You are cautioned that any
forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties. Actual
results may differ materially from those included within the
forward-looking statements as a result of various factors.
Cautionary statements in the risk factors section and elsewhere
in this prospectus identify important risks and uncertainties
affecting our future, which could cause actual results to differ
materially from the forward-looking statements made in this
prospectus.
MARKET PRICE OF AND DIVIDENDS ON OUR STOCK
AND RELATED STOCKHOLDER MATTERS
Our stock is traded on the OTC Bulletin Board under the
symbol SYBD. The over-the-counter quotations set forth below
reflect inter-dealer prices, without retail mark-up, mark-down or
commissions and may not necessarily represent actual
transactions. For the past two fiscal years, the minimum bid and
highest ask prices as determined by Company records were as
follows:
1999 2000 2001
----------- -------------- --------------
Quarter Low High Low High Low High
1st $0.190 $0.255 $0.128 $0.210 $0.46 $1.01
2nd 0.125 0.200 0.125 0.190 $0.28 $0.68
3rd 0.093 0.180 0.105 0.180 $0.20 $0.53
4th 0.093 0.235 0.120 2.250 $0.21 $0.45
As of August 4, 2001, we had approximately 1,141
shareholders. We have never paid dividends since our inception
and we do not anticipate declaring or paying any dividends in the
foreseeable future.
SELECTED CONSOLIDATED FINANCIAL DATA
<CAPTION
April 30, April 30, April 30, April 30, April 30,
2001 2000 1999 1998 1997
--------- -------- --------- --------- ---------
Interest Income $ 331,019 $ 16,141 $ 23,994 $ 3,069 $ 914
Total expenses $ 2,003,261 $ 927,480 $ 857,829 $ 1,284,101 $ 1,911,290
Net loss ($1,672,242) ($911,339) ($833,835) ($1,281,032) ($1,910,376)
=========== ========== ========== ========== ==========
Weighted average number
of shares outstanding,
basic and diluted 86,401,830 65,365,438 51,388,471 46,000,749 36,053,557
Net loss per share,
basic and diluted $ (0.02) $ (0.01) $ (0.02) $ (0.03) $ (0.05)
========== ========== ========== =========== ==========
Cash $ 4,250,898 $ 5,466,391 $ 193,013 $ 740,215 $ 53,857
13
Working capital $ 4,020,203 $ 5,592,016 $ (324,369) $ (228,400) $ (529,393)
Total assets $ 4,842,296 $ 6,199,651 $ 530,906 $ 985,914 $ 318,163
Total liabilities $ 344,068 $ 345,440 $ 625,583 $ 634,361 $ 600,675
Long-term debt - - $ 47,327 $ 103,021 -
Stockholders' equity $ 4,498,228 $ 5,854,211 $ (94,677) $ 351,553 $ (282,512)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 2001 COMPARED TO FISCAL 2000
The Company is a development-stage company that is
developing products in the medical field and therefore has no
revenue from operations. For the fiscal year ended April 30, 2001
Other Income increased to $331,019 from $16,141 in the fiscal
year ended April 30, 2000. This increase was due to increased
interest income on cash balances available for investment.
The General and Administrative expenses of $1,219,852 for
fiscal year 2001 increased $532,277 or 77% over fiscal year 2000.
The increase was the result of higher general office expenses in
2001 of $97,000, along with increases in consulting services of
$119,000, market research expenses of $63,000 and investor
expenses of $83,000 over the prior fiscal year. In addition,
travel related expenses increased during 2001 by $25,000 over
fiscal year 2000.
The Research and Development expenses increased 249% from
$224,023 for the fiscal year ended April 30, 2000, to $782,339
for the fiscal year ended April 30, 2001. During fiscal year
2001, laboratory wages and salaries increased $387,000,
laboratory rent increased $87,000 and laboratory supplies
increased $83,000 from fiscal year 2000. The Company was able to
substantially increase its research and development activities
because of cash that was made available from capital investment.
The interest expense decreased from $15,882 for the fiscal
year ended April 30, 2000, to $1,070 for the fiscal year ended
April 30, 2001. This decrease was due to a reduction of
outstanding notes payable during fiscal year 2001.
FISCAL 2000 COMPARED TO FISCAL 1999
The Company is a development-stage company that is
developing products in the medical field and therefore has no
revenue from operations. For the fiscal year ended April 30,
2000, other income decreased to $16,141 from $23,994 for the
fiscal year ended April 30, 2000. This decrease was mainly due to
a forfeiture of a stock subscription fee of $10,000 received in
during fiscal year 1999.
14
The General and Administrative expenses of $687,575 for
fiscal year 2000 remained substantially the same from fiscal year
1999. During the year ended April 30, 2000 legal fees and moving
expenses increased $22,000 and $18,000, respectively. These
increases were offset by a decrease in fiscal 2000 wages and
contract labor of $60,000 over the amounts recorded in fiscal
year 1999. Also, in the year ended April 30, 2000 the Company
realized a loss of $13,000 due to the write-off of old and
obsolete furniture and equipment.
The Research and Development expenses increased 32% from
$170,058 for the fiscal year ended April 30, 1999, to $224,023
for the fiscal year ended April 30, 2000. This increase was due
substantially to the addition of a laboratory in California with
corresponding increases in lab supplies of $18,000, lab rent of
$15,000 and wages and contract labor of $55,000.
The interest expense decreased 28% from $20,395 for the
fiscal year ended April 30, 1999, to $15,882 for the fiscal year
ended April 30, 2000. This decrease was due to a reduction of
outstanding notes payable during fiscal year 2000.
FISCAL 1999 COMPARED TO FISCAL 1998
The Company is a development-stage company that is
developing products in the medical field and therefore has no
revenue from operations. For the fiscal year ended April 30,
1999, other income increased to $23,994 from $3,069 for the
fiscal year ended April 30, 1998. This increase was due to more
funds available to earn interest, in addition to the forfeiture
of a stock subscription fee of $10,000 that was recorded as
income during 1999.
The General and Administrative expenses decreased 37% from
$1,055,143 for the fiscal year ended April 30, 1998 to $667,376
for the fiscal year ended April 30, 1999. This decrease was
primarily due to a one-time expense of $180,000 related to stock
issued below fair market value that was incurred in 1998 and
reductions in wages and contract salaries during 1999.
The Research and Development expenses decreased 16% from
$201,433 for the fiscal year ended April 30, 1998, to $170,058
for the fiscal year ended April 30, 1999. This decrease was due
to a reduction in laboratory rent of $14,000 and equipment rental
of $26,000.
The interest expense decreased 26% from $27,525 for the
fiscal year ended April 30, 1998, to $20,395 for the fiscal year
ended April 30, 1999. This decrease was due to a reduction is
notes payable.
QUARTERLY RESULTS OF OPERATIONS
The following table presents the Company's operating results for
each of the eight fiscal quarters in the period ended April 30,
2001. The information for each of these quarters is unaudited
and has been prepared on the same basis as the audited financial
statements included in this Form 10K. In the opinion of
management, all necessary adjustments, which consist only of
normal and recurring accruals, have been included to fairly
present the unaudited quarterly results. This data should be
read together with the financial statements and the notes thereto
included in this Form S-1.
15
Three Months Ended
July 30, October 31, January 31, April 30, July 30,
1999 1999 2000 2000 2000
Statement of Operations Data
Research and development expenses $ 43,698 $ 26,545 $ 69,764 $ 84,016 $ 109,841
General and administrative expenses 172,508 174,252 109,330 $ 231,485 233,969
Interest expense 4,892 2,779 2,816 $ 5,395 808
-------- ------- ------- -------- --------
Total Expenses 221,098 203,576 181,910 320,896 344,618
Other (Income) Expense (741) (25,360) (238) $ 10,198 (90,935)
-------- ------- ------- -------- --------
NET LOSS ($220,357) ($178,216) ($181,672) ($331,094) ($253,683)
======== ======== ======== ======== ========
NET LOSS PER SHARE, BASIC
AND DILUTED ($0.004) ($0.003) ($0.003) ($0.003) ($0.003)
======== ========= ======== ======== ========
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING, BASIC
AND DILUTED 55,860,937 60,167,165 65,194,496 74,163,812 81,917,908
========== ========== ========== ========== ==========
Three Months Ended
October 31, January 31, April 30,
2000 2001 2001
Statement of Operations Data
Research and development expenses $ 175,197 $ 234,760 $ 262,541
General and administrative expenses 424,324 257,194 304,365
Interest expense 262 - -
------- ------- -------
Total Expenses 599,783 491,954 566,906
Other (Income) Expense (91,333) (85,004) (63,747)
-------- -------- --------
NET LOSS ($508,450) ($406,950) ($503,159)
======== ======== ========
NET LOSS PER SHARE, BASIC
AND DILUTED ($0.006) ($0.004) ($0.003)
======== ======== ========
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING, BASIC
AND DILUTED 86,706,915 87,642,240 88,900,661
========== ========== ==========
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations since September
1990, when current management became involved, through the
issuance of debt and equity securities and loans from
stockholders. As of April 30, 2001 the Company had $4,364,271 in
total current assets and working capital of $4,020,203 compared
to $5,937,456 in total current assets and working capital of
$5,592,016 as of April 30, 2000.
During the year ended April 30, 2001, the Company had a net
decrease in cash and cash equivalents of $1,215,493, of which
$1,537,617 was used in operations and $317,458 was used for
investing activities, primarily for the purchase of equipment and
patent expenditures. These cash outflows were offset by cash
provided from financing activities of $639,582, primarily through
the sale of common stock in fiscal 2001. In addition the Company
borrowed $135,000 for the purchase of laboratory equipment under
a Promissory note bearing interest at 8% per annum, payable in
monthly principal and interest installments of $11,745 through
April 19, 2002. The Company does not have any lines of credit or
other arrangements with lenders. The Company believes its
existing cash should fund current operations for approximately
two years.
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 will require significant additional financing. There can
be no assurance these proposed funding arrangements will be
successful, or that if they are not the Company will be able to
secure additional capital.
16
BUSINESS
Overview
We were originally incorporated on May 26, 1967 as
Rudominer, David & Associates, Inc. In December 1968 the name
was changed to Federated Franchises, Inc. In August 1976 the
name was changed to Sinequanon Corporation. Rudominer was formed
to do consulting to business on merchandising, Federated
Franchises to operate business franchises, and Sinequanon to
explore for minerals. None of the operations were successful and
no activity was undertaken from 1976 to 1990. Shortly after
initiating our current business plan in late 1990, we changed our
name to Synthetic Blood International, Inc.
We are a development-stage company in the business of
biomedical product development. We are developing products in
the areas of blood substitutes, oxygen therapeutics, acute
respiratory distress and diabetes. Currently, we have three
products under development:
* Oxycyte(tm) a synthetic blood substitute and therapeutic
oxygen carrier;
* Flourovent(tm); a perfluorocarbon compound to facilitate
oxygen exchange for people with respiratory distress
syndrome; and
* Implanted continuous reading glucose biosensor to be used
by people with diabetes.
Our technology is based on research originally performed by
Dr. Leland Clark, Jr., a widely recognized, pioneering inventor
and scientist. Dr. Clark, who is credited with developing the
first blood oxygenator for open heart surgery as well as
biomedical applications for perfluorocarbons and biosensors, was
our Vice President of Research and Development until 1998. Dr.
Clark currently serves us as a consultant.
We are now in the preclinical stage of development on our
products and are completing activities necessary for the
preparation of applications with the Food and Drug Administration
to begin clinical testing.
Our business strategy
Our strategy is to operate and develop our products adding
staff only as necessary to meet our goals. We intend to minimize
our fixed expenses and utilize contract services where possible
to be able to move quickly.
Although we have not entered into any partnership
arrangements, we will attempt to partner as early as possible
with global or national pharmaceutical and medical device
companies so we can attain additional funding, commercial-scale
manufacturing capabilities, and maximum global market penetration
for our products. While major partnerships are often not
consummated until clinical trials are underway, we have begun to
systematically identify and initiate dialogue with all interested
and appropriate candidate companies.
An important element of our strategy is the timing of market
entry. Our current products are new and will require
considerable money and effort to fully develop. If we are not
the first company to market these or similar products, we can
benefit from the investment made by our competition and enter
17
established markets, with the intent to capture market share with
superior products that have competitive advantages. We intend to
select the most appropriate corporate marketing partner for each
product.
Our technology
Our principal technologies - biomedical uses for
perfluorocarbons and substrate analysis with biosensors were
conceptualized and advanced by Dr. Leland C. Clark, Jr. While
his pioneering discoveries in these two areas spawned decades of
research worldwide, Dr. Clark has been one of the most prolific
contributors and has remained at the forefront of scientific
advances in these areas, leading to our patented perfluorocarbon
and biosensor technology platforms.
Perfluorocarbons in Biomedicine
Following an experiment showing that a mouse could live and
breathe submerged in oxygen-saturated silicone oil, Dr. Clark
showed in 1965 that animals could be kept alive submerged for
several hours in oxygen-saturated perfluorocarbon liquids. These
experiments suggested that perfluorocarbons might be useful in
medicine, principally in liquid breathing and in blood
substitutes, and in 1975, Dr. Clark was issued the first patent
for an oxygen-carrying, perfluorocarbon-based blood substitute.
Although the technology described in this patent was used by the
Green Cross Corporation in Japan to develop and obtain FDA
approval for Fluosol DA, Dr. Clark recognized that further
research would be necessary before safe, effective
perfluorocarbons could be identified. Since that time, a
principal focus of his research has been the identification of
optimal properties for biomedical perfluorocarbons, and the
screening of numerous compounds.
Biosensor Substrate Analysis
In the mid-1950's, Dr. Clark developed the first oxygen
electrode. Ten years later, he applied for a patent describing
enzyme-based biosensors that could accurately measure glucose,
lactate, and other substrates. By 1974, Yellow Springs Instrument
Company had developed and marketed the Clark glucose analyzer
based on this technology. In the early 1980's, Dr. Clark
published studies with implanted glucose biosensors, and in the
late 1980's and early 1990's, was issued several seminal patents
on implanted glucose biosensors. Since then, research and
development efforts at SBI have focused on optimizing performance
and design characteristics of the implanted glucose biosensor.
Our products
Flourovent
Flourovent is a unique oxygen-carrying perfluorocarbon and,
after screening numerous available perfluorocarbons for optimal
properties, has been selected for the treatment of acute
respiratory distress syndrome, ARDS. When given as a liquid
directly into the lungs, it acts as a surfactant and a highly
effective medium for gas exchange, thus increasing pulmonary
function and the diffusion of oxygen and carbon dioxide in
respiratory distress.
Based on laboratory and animal studies thus far, we believe
that Fluorovent has significant competitive advantages as a
liquid ventilation treatment. Its boiling point and vapor
pressure result in longer pulmonary retention without the need
for continuous replacement of evaporated fluid, offering the
potential for less costly, less time-intensive procedures. It
does not contain bromine or chlorine and thus presents no
environmental hazard. In animals, it does not produce a
hyperinflated, noncollapsible lung condition seen with other
perfluorocarbon liquids being tested. We cannot assure these
perceived
18
advantages will be demonstrated if Fluorovent enters
clinical trials, or that we will ever market and sell or generate
revenue from Fluorovent.
Oxycyte
Oxycyte is an oxygen-carrying intravenous emulsion made from
the same base perfluorocarbon in Fluorovent. Blood gases such as
oxygen and carbon dioxide are highly soluble in Oxycyte and the
perfluorocarbon in Oxycyte can carry five times more oxygen than
hemoglobin, making it an effective means of transporting oxygen
to tissures and carbon dioxide to the lungs for disposal. As
with our other products, we cannot assure these perceived
advantages will be demonstrated if Oxycyte enters clinical
trials, or that we will ever market and sell or generate revenue
from Oxycyte.
Implanted Glucose Biosensor
We have developed an implanted glucose biosensor to monitor
blood glucose of diabetics. Our sensor eliminates the need for
finger sticks. Once implanted subcutaneously, the biosensor
transmits, on demand, glucose levels as a radio frequency signal
to an external receiver the size of a pager for display and
storage. The sensor has high and low glucose alarms and the
stored data can be downloaded at the physician's office. The
receiver can be programmed to monitor blood glucose according to
a preset schedule to ensure optimal monitoring compliance.
Ultimately, we intend the biosensor to be linked to an
implanted insulin pump, creating a closed-loop mechanical
pancreas. We anticipate the implant life of the biosensor will
exceed one year. Because this product is still in the
development stage, we cannot assure its perceived advantages will
be demonstrated if the biosensor enters clinical trials, or that
we will ever market and sell or generate revenue from the
biosensor.
Other Products
We are currently evaluating the use of perfluorocarbons for
drug delivery, especially pulmonary drug delivery. We believe
this may represent a substantial new market opportunity for use
of our proprietary perfluorocarbons.
We have also identified potential new applications for our
biosensor technology in the following areas:
* clinical analysis of other biochemical substrates
* in-process analysis in bulk biotechnology and chemical
synthetic processes
* veterinary medicine
Our markets
Our lead products - Oxycyte, Fluorovent, and an implantable
glucose biosensor - will compete in what we believe are four
multibillion-dollar markets: blood substitutes, oxygen
therapeutics, acute respiratory distress, and diabetes.
19
Blood Substitutes
The search for blood replacement fluids began centuries ago.
In modern times, this search has been given a new impetus by the
threat of disease transmission, most notably HIV and hepatitis C.
An increasingly short supply of blood is also driving this
research. In the US, the number of blood donors continues to fall
while the number of elderly, the group that needs blood the most,
is growing. By 2030, experts project an annual shortfall of 4
million units in the US. In other countries where cultural and
logistical issues constrain blood collection even more, the
shortfall is believed to be much greater.
The third major force behind this search is the military's
desire for a blood substitute that can be stockpiled and used
immediately when needed in battlefield conditions without special
storage and matching of human donor blood. Current techniques for
blood transfusions do not meet these requirements.
Approximately 100 million units of human donor blood are
collected annually worldwide. About 15 million units are
collected in the US each year. The global market for blood
substitutes has been estimated at $2 to 5 billion.
Oxygen Therapeutics
The availability of parenteral oxygen-carrying products for
animal and clinical research has lead to the identification of
potential new uses for products traditionally defined as blood
substitutes. These uses, for example in ischemic conditions,
specifically depend on the ability to deliver oxygen, not on a
patient's need for blood or blood components. These new uses
include stroke, myocardial infarction, angioplasty, and malignant
disease. In ischemic conditions, cell damage is caused by a lack
of oxygen. In cancer, enhanced oxygen delivery is thought to make
solid tumors, and possibly diffuse cancer cells, more susceptible
to radiation and chemotherapy. Combined, these conditions affect
3-4 million people in the U.S. We estimate these new uses for
oxygen-carrying blood substitutes to constitute a multibillion-
dollar market.
Acute Respiratory Distress
Thousands of premature infants are born each year with
underdeveloped lungs and a condition of impaired pulmonary
function known as acute respiratory distress syndrome, ARDS. This
syndrome has multiple causes and also occurs in children and
adults. Although many of these patients are treated with
mechanical ventilation, this treatment can add further injury to
the lungs and the mortality rate is still high. This has prompted
research for a safer, more effective treatment. While more
research is needed, current studies with partial liquid
ventilation in animals and patients, both infants and adults,
suggest that liquid ventilation may be a safe and effective
treatment of ARDS.
The incident of ARDS in the US is about 250,000 cases
annually. While ARDS is the primary disease target for liquid
ventilation at this time, we believe that it may also be
beneficial in chronic obstructive pulmonary disease, COPD, a
condition that occurs in 10 million people in the US. We believe
that the ultimate market for liquid ventilation is in the
multibillion-dollar range.
Diabetes
Diabetes and its associated complications are among the most
prevalent, costly diseases in the world. Its incidence is
increasing at a significant rate. Diabetes affects men and women
equally but occurs most frequently in the elderly. Direct costs
are estimated at about $50 billion, almost 6% of the
20
total
personal healthcare expenditures in the US. A ten year study,
the Diabetes Control and Complications Trial (DCCT) sponsored by
the National Institutes of Diabetes and Digestive and Kidney
Diseases, showed that "tight diabetes control," keeping blood
sugar levels close to normal by recent blood sugar testing,
several daily insulin shots, and lifestyle changes, was
associated with a major reduction in diabetic complications.
These findings led the American Diabetes Association to recommend
tight control as an important way to delay the onset and
dramatically slow the progression of complications from diabetes.
People with diabetes measure their blood glucose levels by
sticking a finger with a needle to obtain a blood drop that is
placed on a test strip and analyzed by a portable instrument.
Repeating this procedure several times a day becomes painful,
leading many patients, especially the elderly, to perform the
procedure infrequently. Furthermore, the accuracy of some blood
glucose analyzers is poor. A less invasive system for accurately
measuring blood glucose on demand would increase glucose
monitoring compliance and provide a better basis for tight
diabetes control.
More than 16 million people, approximately half undiagnosed,
are estimated to suffer from diabetes in the US. Between 600,000
and 700,000 new cases are diagnosed each year. About 800,000
diabetics are insulin-dependent. Mortality from diabetes and its
associated complications is high; it is the seventh leading cause
of death in the US.
Globally, the incidence of diabetes is estimated at 120
million people. While insulin-dependant diabetics are thought to
have the greatest need for tight diabetic control, evidence is
increasing that better control of blood glucose in type 2
diabetics also leads to a reduction in diabetic complications. We
estimate the global market for a less invasive glucose monitoring
system to be a multibillion-dollar market.
Competition
Fluorovent
SBI is aware of only one other company developing a liquid
ventilation product. Alliance Pharmaceutical Corporation's
product, LiquiVent, is in Phase III clinical trials in adults
with acute respiratory distress.
Oxycyte
Thirteen other companies in addition to us are believed to
be developing oxygen-carrying blood substitutes. Ten - Apex
Bioscience, Baxter International, Biopure, Enzon, Hemosol,
Northfield Laboratories, Somatogen, SynZume, Alteon, Inc., and
Sangard -are developing hemoglobin-based products and three -
Alliance Pharmaceutical, Sonus and Sanguine - are developing
perfluorocarbon based products. Five of these products are in pre-
clinical tewsting and eight of these products are in Phase I, II
or III clinical trials. Baxter recently terminated clinical
trials with HemAssist, their bovine hemoglobin product.
Implanted Glucose Sensor
Historically, the critical issues that have confronted the
development and commercialization of effective, less-invasive
glucose monitoring systems include stable sensor life, accuracy
through a wide glucose range, inappropriate biological ratios of
oxygen and glucose to optimally drive enzyme biosensors, and
biocompatibility. Many research groups have attempted to resolve
these problems with
21
varying success. We do not consider glucose
sensor systems proposed by academic groups as viable competition
because it believes they lack commercial input, and promising
systems are usually acquired by industry.
We are aware of nine other companies that are developing
less-invasive glucose monitoring systems - MiniMed, Cygnus
Therapeutic, Biocontrol Technology, Animas, Sensor Solutions,
Integ, Bioject Medical, Sensors for Medicine and Technology, and
Technical Chemicals and Products. Only two - Sensors for Medicine
and Animas - are pursuing sensors that are fully implantable.
However, they are in the design stage and no performance test
data are available. Systems under development by the other
companies are skin surface or percutaneous systems that are at
least minimally invasive and/or require replacement every few
hours to days. For example, MiniMed's system requires
subcutaneous insertion of a catheter-like device every three
days, while the Cygnus GlucoWatch requires replacement of its
autosensor pad every 12 hours. Six systems are in clinical
trials, Biocontrol Technology has made 510(k) submissions, and
Cygnus and MiniMed recently received approval to market their
system.
We believe the ability to begin and then to complete
clinical trials on a timely basis with the desired results, and
the ability to obtain timely regulatory approvals to market our
product candidates are likely to be significant competitive
factors.
Manufacturing and sources of supply
We believe we have suitable sources of supply for key
ingredients and components, e.g. perfluorocarbons and biosensor
materials, for all three products under development. We also
believe we have or will be able to reach suitable agreements with
appropriate contract manufacturers to implement our strategy for
not manufacturing these products internally at commercial scale.
We are using our best efforts to secure these relationships on a
long tern basis. However, there cannot be complete assurance that
these relationships can be secured or maintained to our benefit.
Properties
We do not own any real property and currently lease our
principal administrative and laboratory facilities at 3189 Airway
Avenue, Building C, Costa Mesa, California 92626. In addition we
lease office and laboratory space at Kettering Research Center in
Kettering, Ohio. The current monthly rent is approximately $7,000
per month.
Our patents and intellectual property
Perfluorocarbon products:
We have four issued U.S. (5,674,913; 5,824,703; 5,840,767;
6,167,887) and two Australian (690277; 722417) perfluorocarbon
patents that protect the use of perfluorocarbons of interest to
us as gas transport agents in blood substitutes and liquid
ventilation. Additionally, through an exclusive supply agreement
with out perfluorocarbon supplier, we have exclusive rights to
eight perfluorocarbon manufacturing process patents that further
protect the perfluorocarbons with which we are working.
Biosensor:
We have two issued U.S. biosensor patents (5,914,026;
5,964,993) and one Australian (720712) that protect what we
believe are important design features of our implanted glucose
biosensor and other biosensor applications, both medical and
industrial. Another U.S. biosensor patent application has been
22
submitted and the claims have been allowed. We have also
licensed three fundamental biosensor patents issued to Dr. Clark
that had previously been assigned to Children's Hospital in
Cincinnati.
For all U.S. patents and applications, we also submit
applications and pursue patents in Europe, Canada, Japan and
Australia. There can be no assurance that any issued patents
would survive a challenge and be valid and enforceable. Also,
there can be no assurance any pending applications will result in
issued U.S. or foreign patents. SBI therefore has a number of
foreign perfluorocarbon and biosensor patent applications
submitted and pending
Employees
On April 30, 2001, the Company employed 9 individuals, six
of whom were scientific personnel, two are executives, and one
office manager/bookkeeper. None of its employees are currently
represented by a union or any other form of collective bargaining
unit.
Government regulations
Regulation by governmental authorities in the United States
and other countries is a significant factor in the manufacture
and marketing of pharmaceuticals and in our ongoing research and
development activities. All of our products will require
regulatory approval by governmental agencies prior to
commercialization. In particular, human therapeutic products are
subject to rigorous preclinical testing and clinical trials and
other pre-marketing approval requirements by the FDA and
regulatory authorities in other countries. In the United States,
various federal, and in some cases state statutes and regulations
also govern the manufacturing, safety, labeling, storage, record-
keeping and marketing of such products. The lengthy process of
seeking required approvals and the continuing need for compliance
with applicable statutes and regulations, requires the
expenditure of substantial resources. Regulatory approval, when
and if obtained, may be limited in scope, which may significantly
limit the indicated uses for which a product may be marketed.
Further, approved drugs, as well as their manufacturers, are
subject to ongoing review, and discovery of previously unknown
problems with such products may result in restrictions on their
manufacture, sale or use or in their withdrawal from the market.
To obtain FDA approval, the FDA requires clinical trials to
demonstrate the safety, efficacy, and potency of the product
candidates. Clinical trials are the means by which experimental
drugs or treatments are tested in humans. New therapies typically
advance from laboratory, research, testing through animal,
preclinical testing and finally through several phases of
clinical, human testing. Upon successful completion of clinical
trials, approval to market the therapy for a particular patient
population may be requested from the FDA in the United States
and/or its counterparts in other countries.
Obtaining FDA approval is a costly and time-consuming
process. Generally, in order to gain FDA pre-market approval,
preclinical studies must be conducted in the laboratory and in
animal model systems to gain preliminary information on an
agent's efficacy and to identify any major safety concerns. The
results of these studies are submitted as a part of an
application for an Investigational New Drug, IND, which the FDA
must review and allow before human clinical trials can start. The
IND includes a detailed description of the clinical
investigations. A company must sponsor and file an IND for each
proposed product and must conduct clinical studies to demonstrate
the safety, efficacy and potency that are necessary to obtain FDA
approval. The FDA receives reports on the progress of each phase
of clinical testing, and it may require the modification,
suspension, or termination of clinical trials if an unwarranted
risk is presented to patients.
23
Clinical trials are normally done in three phases. In Phase
I, trials are conducted with a small number of patients or
healthy volunteers to determine the safety profile, the pattern
of drug distribution and metabolism and early evidence on
effectiveness. In Phase II, trials are conducted with a larger
group of patients afflicted with a target disease in order to
determine preliminary efficacy, optimal dosages and expanded
evidence of safety, efficacy, and potency required by the FDA and
other regulatory authorities. In Phase III, two or more large,
pivotal trials are done to statistically demonstrate safety and
efficacy per FDA requirements.
After completion of clinical trials of a new product, FDA
marketing approval must be obtained. If the product is classified
as a new drug, a New Drug Application (NDA), is required. The NDA
must include results of product development activities,
preclinical studies and clinical trials in addition to detailed
manufacturing information.
Applications submitted to the FDA are subject to an
unpredictable and potentially prolonged approval process. The FDA
may ultimately decide that the application does not satisfy its
criteria for approval or require additional preclinical or
clinical studies. Before marketing clearance is secured, the
manufacturing facility will be inspected for current Good
Manufacturing Practices (GMP) compliance by FDA inspectors. The
manufacturing facility must satisfy current GMP requirements
prior to marketing clearance. In addition, after marketing
clearance is secured, the manufacturing facility will be
inspected periodically for GMP compliance by FDA inspectors, and,
if the facility is located in California, by inspectors from the
Food and Drug Branch of the California Department of Health
Services. We are also subject to various federal, state and
local laws, regulations and recommendations relating to safe
working conditions, laboratory and manufacturing practices, the
experimental use of animals and the use and disposal of hazardous
or potentially hazardous substances used in connection with our
research. The extent of government regulation which might result
from any future legislation or administrative action cannot be
accurately predicted.
Legal proceedings
None.
MANAGEMENT
Executive Officers, Directors and Key Employees
The directors, officers and key employees of the Company are as
follows:
Name Age Position
Roger A. Ekbom 73 Chairman of the Board
Robert W. Nicora 60 President and Chief Executive
Officer and Director
Robert J. Larsen 71 Corporate Secretary and Director
Gerald D. Schlatter 66 Director
David Johnson 53 Chief Financial Officer
Howard Jones 63 Director
24
Richard Kiral, Ph.D 59 Vice President, Research and Development
Douglas Kornbrust, Ph.D. 49 Consultant Director,
PreClinical Toxicology &
Pharmacology
Elmo Blubaugh, Jr., Ph.D. 47 Manager, Biosensor Research and
Development
James Reavis 65 Consultant Director of Marketing
Biographies of our executive officers and directors
Roger A. Ekbom has been Chairman of the Board of Directors
since 1990. Mr. Ekbom was Chief Executive Officer from 1991 to
March 1998 and has extensive experience with medical device
companies including managing companies from startup through full
development and subsequent sales. He is the founder and former
President of Cardio Vista Systems, Inc., and founder and Chairman
of Tronomed, Inc. From 1976 until 1993, Mr. Ekbom was the Vice
President of and a major stockholder in Respiratory Support
Products, Inc. and Tronomed International, Inc. Mr. Ekbom was
formerly the general manager of a division of Becton Dickinson,
an international medical device company, and of Marion
Scientific, a subsidiary of Marion Laboratories. Mr. Ekbom
graduated from the University of Minnesota.
Robert W. Nicora became the President, Chief Executive
Officer and Director on March 1, 1998. Mr. Nicora has BS in
chemistry, five years of graduate study in biochemistry and
medical sciences, and over 30 years of experience in various
laboratory, management and regulatory positions with
pharmaceutical and medical device companies. While at McGaw
Laboratories, he was responsible for the development and FDA
approval of hetastarch, a synthetic blood expander, now marketed
by DuPont Pharma. He led the team that evaluated a joint
partnership with Green Cross to develop their perfluorocarbon
blood substitute, Fluosol. From 1994 through March 1998, he was
director of scientific and regulatory services with Quintiles,
the world's largest global contact pharmaceutical company. He has
provided preclinical and clinical drug and device consulting
services to a number of startup biomedical companies, including
SBI.
Robert J. Larsen, Corporate Secretary and Director since
1990, is a former President and Chief Executive Officer of Bay
Hospital Medical Center, Chula Vista, California. Mr. Larsen has
25 years of experience in the development and management of
hospitals and other related enterprises in California and Oregon.
Mr. Larsen is a former trustee of the California Hospital
Association and the past president of the San Diego Healthcare
Financial Management Association. Mr. Larsen received his
graduate degree in Hospital Administration from the University of
California, Santa Barbara, and his BA from the University of
Washington.
Gerald D. Schlatter, Director and former President from 1990
to 1998 and has over 25 years experience in sales and marketing
of medical supplies and devices. He has served as sales manager
with both American Hospital Supply and Xerox in their medical
products divisions. He is the founder and former president of
Delamesa Medical Equipment Leasing Co. in Irvine California,
specializing in equipping and financing new start up medical,
dental, and optical health care clinics. Mr. Schlatter obtained
his BS degree in business finance and labor law from California
State University of Fresno.
David H. Johnson, CPA, is Chief Financial Officer. Mr.
Johnson has over 30 years of financial and administrative
management experience in a diverse range of industries including
high technology. His
25
most recent position was chief financial
officer of FirstPlus Bank, a California chartered financial
institution. As a certified public accountant, Mr. Johnson spend
20 years in public accounting and is a former regional partner
with McGladrey & Pullen, a major public accounting firm. Mr.
Johnson has a BA in accounting and is a certified public
accountant.
Howard Jones, Ph.D., is a member of the board of directors.
Dr. Jones' most recent position was president of the
biopharmaceutical business unit of Curative Health Services where
he was responsible for R&D, licensing, and manufacturing of wound
healing technology that incorporates growth factors from patient
blood. He has more than 30 years of experience in directing
research and development of drugs at Revlon, Bristol-Myers
Squibb, Amylin Pharmaceuticals, and Cypros Pharmaceuticals, a
company he co-founded. He started his career at Merck where he
discovered Clinoril, a drug for the treatment of rheumatoid
arthritis that has annual sales of $400,000,000. He has had more
than 84 patents issued for his biopharmaceutical developments.
Biographies of our key employees and consultants
Richard Kiral, Ph.D., Vice President of Research and
Development holds a Ph.D. in analytical chemistry and has over of
20 years of experience in the pharmaceutical and medical device
industries. He has held vice president positions in R&D at
Anthony Products, Ioptex Research, Allergan, and McGaw
Laboratories, where he was responsible for development of a
nutritional fat emulsion.
Douglas Kornbrust, Ph.D., Consultant Director, Preclinical
Toxicology and Pharmacology holds a Ph.D. in toxicology and
currently is vice president and scientific director at Sierra
Biomedical, a leading contract primate testing facility for the
pharmaceutical and biotechnology industries. He previously held
senior technical and management positions at ISIS
Pharmaceuticals, Rhone-Poulenc-Rorer, Merck, and Alliance
Pharmaceuticals, where he was responsible for the development and
implementation of preclinical toxicology programs for their
perfluorocarbon liquid ventilation and blood substitute products.
Elmo A. Blubaugh, Jr., Ph.D., Manager of Biosensor Research
and Development is an electrochemist specializing in the chemical
modification of electrode surfaces with thin polymer films. Dr.
Blubaugh previously was laboratory research manager at the
University of Cincinnati. He taught both graduate and
undergraduate courses at the university and holds a patent in the
field of polymer-film electrodes. He received his graduate degree
in analytical chemistry from the University of Cincinnati.
James H. Reavis, Consultant director of marketing received a
BS in chemistry and has a career of over 35 years in sales and
marketing of pharmaceutical products and biomedical devices. He
has owned and operated full-service advertising agencies and, for
the last ten years, has consulted with high technology healthcare
clients. His client roster includes Abbott, Baxter Edwards,
Allergan, Genentech, Invacare, Kyocera, Advanced Cardiovascular
Systems, IVAC, and IMED. Mr. Reavis provides qualitative and
quantitative market research services to help guide product
development, product positioning, and partnering strategies.
Director compensation
During the fiscal year ended April 30, 2000 each director
received $3,000 for their services as directors.
During the fiscal year ended April 30, 2001, three of the
four outside directors received compensation of $6,000 in cash
compensation and one outside director received $12,000 in cash
26
compensation. In addition, each of the four outside directors
received options to purchase 10,000 shares of common stock at
$0.80 per share, 80% of the market value at the date these
options were issued.
Employment contracts
On March 1, 1998 the Board of Directors approved a three-
year employment contract that automatically renews on an annual
basis after the initial term with Robert W. Nicora, as President
and Chief Executive Officer. The employment contract provides a
base annual salary of $145,000, an automobile allowance, medical
and dental coverage, participation in the Executive Bonus Plan,
$200,000 life insurance payable by the corporation and payable to
a beneficiary named by the insured, and participation in our
stock option plan with the grant of an option for 300,000 shares
at signing and 150,000 shares to be granted annually. As of May
18, 1998 Mr. Nicora assumed the title of Chief Executive Officer.
Mr. Nicora's employment agreement provides that Mr. Nicora may,
at his election receive a severance payment equal to 299% of his
average annual salary and bonuses received during the prior two-
year period in the event of a change in control as defined.
On February 1, 2000 the Board of Directors approved a two-
year employment contract with Richard Kiral, as Vice President of
Product Development. Mr. Kiral's base annual salary is $140,000
per year and includes an automobile allowance, medical and dental
coverage, participation in the Executive Bonus Plan, $200,000
life insurance payable by the corporation and payable to a
beneficiary named by the insured, and participation in the
Company's stock option plan with the grant of an option for
100,000 shares annually. Mr. Kiral's employment agreement
provides that he is to a minimum severance payment equal to 9
months of his annual salary period in the event of a change in
control as defined.
Compensation committee interlocks and insider participation in
compensation decisions
We do not presently have a Compensation Committee of the
Board of Directors, or other Board Committees performing
equivalent functions, and did not at any time during the last
four years. The Executive Committee of the Board of Directors
presently performs these functions. Roger Ekbom and Gerald
Schlatter, directors and former officers, and Robert Larsen, a
director and current officer, participated in deliberations of
the Board of Directors concerning executive officer compensation
during the last fiscal year. None of our executive officers
serves as a member of the board of directors or compensation
committee of any entity that has one or more of its executive
officers serving as a member of our Board of Directors or
Compensation Committee.
EXECUTIVE COMPENSATION
The following table provides certain summary information
concerning compensation earned for services rendered in all
capacities to the Company for the fiscal years ended April 30,
2001, 2000 and 1999, by the other most highly compensated
executive officers of the Company ("Named Executive Officers").
Mr. Nicora became President and Chief Executive Officer on the
resignation of Mr. Schlatter on March 1, 1998. This information
includes the dollar amount of base salaries, bonus awards, stock
options and all other compensation, if any, whether paid or
deferred.
27
SUMMARY COMPENSATION TABLE
Long-term
Compensation
Annual Compensation Awards All
Other Securities, Other
Awards Underlying Compensation $
Name and Position Year Salary$ Bonus $ Compensation Options/SARs (1)
Robert Nicora 2001 137,000 - - 450,000 21,250
President 2000 126,000 - - 150,000 12,600
1999 125,000 - - 300,000 12,600
Richard Kiral 2001 132,000 - - 250,000 12,100
Vice President of 2000 118,243 - - 75,000 -
Product Development 1999 97,830 - - 100,000 -
Mr. Nicora and Mr. Kiral received a $6,600 car allowance
plus medical premiums paid for by the Company.
OPTION GRANTS
In April 1995, the Company's Board of Directors approved a
stock option plan providing for the granting of options to
officers, directors, consultants and key employees to purchase up
to 2,500,000 shares of the Company's common stock at prices not
less than the fair market value of the stock at the date of
grant. No shares were exercised or issued under this plan. The
Company adopted a new plan in October 1999, which was ratified by
a vote of the shareholders during fiscal year ended April 30,
2001.
The 1999 plan provides for the granting of incentive and non-
qualified options to officers, directors, consultants and key
employees to purchase up to 4,000,000 shares of the Company's
common stock at prices not less than the fair market value of the
stock at the date of grant for incentive options. The total
number of options issued at April 30, 2001 were 4,201,472 with a
weighted average exercise price of $0.21. This total includes
1,020,000 options granted prior to the 1999 Plan. The Company
must record an expense equal to the intrinsic value (if any) of
the options multiplied by the percent vested at the date the plan
is ratified by the shareholders. The option expiration dates are
determined at the date of grant, but may not exceed ten years.
The following table summarizes certain information as of
April 30, 2001 concerning the stock option grants to the
Company's Chief Executive Officer and the other Named Executive
Officers made for the fiscal year ended April 30, 2001. No stock
appreciation rights, restricted stock awards or long-term
performance awards have been granted as of the date hereof and no
options have been exercised.
28
Option Grants in Last Fiscal Year
Number % of Total Potential Realizable
of Options Value at Assumed
Securities Granted to Exercise Annual Rates of Stock
Underlying Employees or Base Price Appreciation of
Options in Fiscal Price Expiration Option Terms(1)
Granted Year Per Date 5% 10%
Share
Robert W. Nicora 300,000 35.0% $0.62 May 2010 $116,974 $296,436
150,000 18.5% $0.205 April 2011 19,339 49,008
Total 450,000 55.5% $136,313 $345,444
Richard Kiral 250,000 30.9% $0.205 April 2011 $ 32,231 $ 81,679
(1) Each option listed in the table above was fully vested as of
the date of grant and exercisable over a three-year period. The
potential realizable value is calculated based on the ten-year
tern of the option at the time of grant. It is calculated based
on assumed annualized rates of stock price appreciation from the
exercise price at the date of grant of 5% and 10% (compounded
annually) over the full term of the grant with appreciation
determined as of the expiration date. The 5% and 10% assumed
rates of appreciation are mandated by the Securities and Exchange
Commission and do not represent the Company's estimate or
projection of future common stock prices. Actual gains on, if
any, on stock options exercised are dependent on the future
performance of the common stock and overall stock market
conditions. The amounts reflected in the table may not be
achieved.
Aggregate Options Exercised in Last Fiscal Year and Year End Option Values
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options At Options at Fiscal
Shares Fiscal Year Year End
Acquired Value End Exercisable/
On Realized Exercisable/ Unexercisable
Exercise Unexercisable
Robert Nicora None None 200,000/ $ 50,000/
750,000 $ 187,500
Richard Kiral None None 91,666/ $ 22,917/
400,000 $ 100,000
(1) Based on the closing sale price on the OTC Bulletin
Board on the last day of the 2001 fiscal year, less the option
exercise price payable per share.
29
DEFINED BENEFIT AND ACTUARIAL PLANS
The Company has not supplied Defined Benefits, or similar
Pension, Benefit or Actuarial Plan Benefits to its Executive
Officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year 2001 the Company recorded expenses of
$12,400 for services rendered by Peso, Inc., a company controlled
by Robert Larsen, a Director and Officer of the Company.
During the fiscal year 2001 the Company issued options to
purchase common stock to the following Officers of the Company
under the 1999 Plan:
Robert Nicora, President and CEO 300,000 options at $0.62
per share expiring May 15, 2010
150,000 options at $0.205 per
share expiring April 20, 2011
Richard Kiral, Vice President 250,000 options at
$0.205 per share expiring April 20, 2011
During fiscal year 2001, the Company issued each of the four
outside directors received options to purchase 10,000 shares of
common stock at $0.80 per share, 80% of fair market value at the
date the options were issued
During fiscal year 2001 the Company loaned $30,000 to Roger
Ekbom, a Director of the Company under the terms of a Promissory
Note. The Note is interest free and is due September 1, 2001.
During the fiscal year 2000 and 2001 the Company recorded
expenses of $5,825 and $12,400 respectively for services rendered
by a company controlled by Robert Larsen, a Director and Officer
of the Company.
During the fiscal year 2000 the Company issued options to
purchase common stock to the following Officers of the Company
under the 1999 Plan that had not yet been ratified by the
shareholders:
Robert Nicora, President and CEO
150,000 options at $.12 per share expiring February 1, 2010
Richard Kiral, Vice President
75,000 options at $.12 per share expiring February 1, 2010
During fiscal year 2000, the Company issued warrants to
purchase 590,000 shares of common stock to certain directors with
an exercise price of 80% of fair market value. These warrants
were issued pursuant to an agreement whereby such directors
cancelled certain of their shares to assist the Company obtain
additional financing. Part of the agreement included a provision
that if the stock dropped below the market price at the time the
shares were cancelled, new unregistered stock would be issued to
make up the dollar deficit in each director's holdings at the
time of the return, not to exceed the total value of the stock
returned. Pursuant to the agreement, the Company issued these
directors 590,000 shares in November 1999. The directors and the
Company cancelled the shares in return for the grant of a warrant
to purchase 590,000 shares of common stock that were issued in
February 2000 as follows:
Roger Ekbom, Director
200,000 warrants at $.12 per share expiring February 1, 2010
30
Robert Larsen, Director & Secretary
215,000 warrants at $.12 per share expiring February 1, 2010
Gerald Schlatter, Director
175,000 warrants at $.12 per share expiring February 1, 2010
During the fiscal year 2000 Directors Ekbom, Larsen,
Schlatter and Jones were each issued 5,000 options to purchase
the Company's common stock at $.125 per share. The options were
issued at an exercise price that approximated the fair value of
the Company's common stock at the date of grant and expire
February 1, 2010.
During fiscal year 2000 the Company issued 10,000 shares of
common stock to Director Roger Ekbom at $.10 per share in
satisfaction of a $10,000 note payable.
During fiscal year 2000 the Company issued 10,000 shares of
common stock to Director Gerald Schlatter at $.10 per share in
satisfaction of a $10,000 note payable.
During fiscal year 2000 the Company issued 20,000 shares of
common stock to Director/Officer Robert Larsen at $.10 per share
in satisfaction of a $20,000.
PRINCIPAL SHAREHOLDERS
The following table sets forth the beneficial ownership of
our common stock as of the date of this prospectus. The table
includes:
* each person known to us to be the beneficial owner of more
than five percent of the outstanding shares
* each director of Synthetic Blood
* each named executive officer of Synthetic Blood
SHARES OF
COMMON STOCK PERCENT OF
NAME OF OWNER OWNED CLASS
Roger A. Ekbom (1)(3) 2,101,778 2.36%
7 Bridgeview
Irvine, CA 92714
Robert W. Nicora (1)(2) (4) 592,858 0.67%
3189 Airway Avenue, Bldg. C
Costa Mesa, CA 92626
Robert J. Larsen (1)(2)(6) 1,652,553 1.86%
2565 25th Avenue West
Seattle, WA 98199
Gerald D. Schlatter (1)(5) 1,272,929 1.43%
1825 Calle Laguna
Arroyo Grande, CA 93420
31
David Johnson (2)(8) 66,666 0.01%
20470 via Marwah
Yorba Linda, CA 92886
Howard Jones (1)(7) 115,000 0.03%
3189 Airway Avenue, Bldg. C
Costa Mesa, CA 92626
Richard Kiral, Ph.D (2)(9) 91,666 0.01%
3189 Airway Avenue, Bldg. C
Costa Mesa, CA 92626
All Directors and Officers 5,893,450 6.63%
As a Group (7 people)
(1) Director
(2) Officer
(3) Includes options to purchase 515,000 shares of common stock
currently exercisable or exercisable within 60 days of July 31,
2001.
(4) Includes options to purchase 200,000 shares of common stock
currently exercisable or exercisable within 60 days of July 31,
2001.
(5) Includes options to purchase 490,000 shares of common stock
currently exercisable or exercisable within 60 days of July 31,
2001.
(6) Includes options to purchase 530,000 shares of common stock
currently exercisable or exercisable within 60 days of July 31,
2001 and also includes shares beneficially owned by virtue of Mr.
Larsen's control of Peso, Inc. and Jada, Inc.
(7) Includes options to purchase 115,000 shares of common stock
currently exercisable or exercisable within 60 days of July 31,
2001.
(8) Includes options to purchase 66,666 shares of common stock
currently exercisable or exercisable within 60 days of July 31,
2001.
(9) Includes options to purchase 91,666 shares of common stock
currently exercisable or exercisable within 60 days of July 31,
2001.
SELLING SHAREHOLDERS
This prospectus relates to offers and sales of our common
stock by the selling stockholders. The following table sets
forth, as of August 4, 2001, the name of each selling
stockholder, all positions, offices or other material
relationships that each selling stockholder has had during the
past three years with us, the number of shares of common stock
owned by each such selling stockholder, and the percentage of
outstanding common stock held by each selling stockholder. The
shares of common stock subject to the offering and sale by the
selling stockholders pursuant to this prospectus constitute all
of the shares of our common stock owned directly by the selling
stockholders. See also "Security Ownership of Principal
Stockholders and Management." Each selling stockholder may offer
and sell pursuant to this prospectus all of the shares of common
stock held by that selling stockholder as identified below and,
assuming that a selling stockholder sells all of its shares of
our common stock as listed below, such selling stockholder will
no longer own any shares of our common stock. Inclusion in the
table below does not imply that any selling stockholder will
actually offer and sell any of the shares registered on behalf of
the selling stockholders.
32
SHARES OF
COMMON STOCK PERCENT OF SHARES OF
OWNED BEFORE CLASS OWNED COMMON STOCK
NAME OF OWNER THE OFFERING BEFORE OFFERING
TO BE OFFERED
Bank Sal. Oppenheim-Luxemburg 3,500,000 4.11% 3,500,000
Zurich Financial Dynamic Fund 850,000 0.99% 850,000
Bank Sal. Oppenheim Jr. & CIE. SA 600,000 0.70% 600,000
Bank Sal. Oppenheim - SA (Schweiz) 100,000 0.11% 100,000
Bucher, Bruno 150,000 0.17% 150,000
Camenzind, Andreas 920,000 1.08% 920,000
Camenzind, Andreas 2,200,000 2.58% 2,200,000
Camenzind, Aquila 56,630 0.06% 56,630
Camenzind, Patricia 100,000 0.11% 100,000
Dario, Victor 400,000 0.47% 400,000
Dario, Victor 550,000 0.64% 550,000
Gnepf, Daniel 30,000 0.03% 30,000
Hurbin, Dominik 150,000 0.17% 150,000
Kayova, Andrea 100,000 0.11% 100,000
Reiff, Dieter 100,000 0.11% 100,000
Thole, Daniela 100,000 0.11% 100,000
Start up Factory 1,000,000 1.17% 1,000,000
Coniglione Consulting 500,000 0.58% 500,000
Coniglione Consulting 500,000 0.58% 500,000
C&D Finanz AG 1,000,000 1.17% 1,000,000
TOTAL 12,806,630
33
PLAN OF DISTRIBUTION
The selling stockholders may offer and sell their shares of
common stock covered by this prospectus from time to time, at
prevailing prices or at privately negotiated prices, in one or
more transactions including the following:
- over-the-counter market transactions,
- privately negotiated transactions other than the over-the-
counter market, and
- in combination of any of the foregoing transactions.
These transactions may be at market price, at prices related
to the market price, at negotiated prices, at fixed prices or at
varying prices. If the selling stockholders use the services of
an underwriter, broker, dealer or agent to assist with the sale
of the common stock, the party providing services may receive
compensation for their services. The compensation may be paid by
the buyer or the seller of the common stock and may be in the
form of a commission, concession or discount. The amount and form
of compensation for such services will be determined by the buyer
and the seller. The persons providing such services could be
considered underwriters under the Securities Act, and any profits
received or compensation paid could be considered an underwriting
discount or commission under the Securities Act. At the time a
particular offer of shares of common stock is made, to the extent
required, a supplement to this prospectus will be distributed
that will set forth the aggregate number of shares of common
stock being offered and the terms of the offering, including the
name or names of any underwriter, dealers or agents, any
discounts, commission and other items constituting compensation
from the selling stockholders and any discounts, commissions or
concessions allowed or reallowed or paid to dealers.
As used herein, "selling stockholders" includes pledgees,
donees, transferees or other successors-in-interest who receive
shares of our common stock covered by this prospectus as a
pledge, gift, partnership distribution or other non-sale related
transfer from a selling stockholder. If a selling stockholder
notifies us that a pledgee, donee, transferee or other successor-
in-interest intends to sell more than 500 shares of our common
stock pursuant to this prospectus, a supplement to this
prospectus will be provided to name the pledgee, donee transferee
or successor, as applicable.
Under the Exchange Act and applicable rules and regulations
promulgated thereunder, any person engaged in a distribution of
any of the shares of common stock may not simultaneously engage
in market making activities involving the common stock for a
period of five days prior to the commencement of the
distribution, subject to certain exemptions. In addition, the
selling stockholders will be subject to applicable provisions of
the Exchange Act and the rules and regulations promulgated
thereunder, including without limitation Regulation M. These
regulations may limit the timing of purchases and sales of the
common stock by the selling stockholders.
Under certain state securities or blue sky laws, registered
or licensed brokers or dealers must be used to effect sales of
capital stock. In addition, certain states require that sales of
capital stock must be registered or qualified for sale in such
state, or an exemption from registration or qualification must be
available and complied with in such state, prior to effecting
such sales.
Pursuant to the Registration Rights Agreement, we will pay
substantially all of the expenses incident to the registration,
offering and sale of the common stock to the public other than
commissions, fees and discounts of underwriters, dealers or
agents. Under the Registration Rights Agreement, the
34
selling
stockholders and any underwriter they may utilize will be
indemnified by us against certain civil liabilities, including
liabilities under the Securities Act."
DESCRIPTION OF CAPITAL STOCK
Common Stock
We are authorized to issue up to 100,000,000 shares of
common stock with a par value of $0.01. As of the date of this
prospectus, there are 85,015,376 shares of common stock issued
and outstanding. We have approximately 1,141 shareholders.
The holders of common stock are entitled to one vote per
share on each matter submitted to a vote of stockholders. In the
event of liquidation, holders of common stock are entitled to
share ratably in the distribution of assets remaining after
payment of liabilities, if any. Holders of common stock have no
cumulative voting rights, and, accordingly, the holders of a
majority of the outstanding shares have the ability to elect all
of the directors. Holders of common stock have no preemptive or
other rights to subscribe for shares. Holders of common stock
are entitled to such dividends as may be declared by the board of
directors out of funds legally available therefor. The
outstanding common stock is, and the common stock to be
outstanding upon completion of this offering will be, validly
issued, fully paid and non-assessable.
We anticipate that we will retain all of our future
earnings, if any, for use in the operation and expansion of our
business. We do not anticipate paying any cash dividends on our
common stock in the foreseeable future.
Preferred Stock
Our Board of Directors is authorized, without further action
by our stockholders, to issue preferred stock from time to time
in one or more series and to fix, as to any such series, the
voting rights applicable to such series and such other
designations, preferences and special rights as the Board of
Directors may determine, including dividend, conversion,
redemption and liquidation rights and preferences. Upon
completion of this offering, there will be no shares of preferred
stock outstanding. The issuance of shares of preferred stock
under certain circumstances could have the effect of delaying or
preventing a change in control or other corporate actions. Any
such issuances of preferred stock, as well as the availability of
authorized and unissued preferred stock, also could adversely
affect the market price of our common stock.
Stock Options and Warrants
We have reserved 4,000,000 shares of common stock to be
issued pursuant to the terms of out stock plan. As of August 4,
2001, we have granted options for 4,101,472 shares, of which
3,275,000 options had been issued under the plan.
In addition as of August 4, 2001, we have issued warrants
for the purchase of 1,176,936 shares of common stock with an
exercise price of $0.14 per share.
Transfer Agent and Registrar
Interwest Transfer Company, Inc., 1981 East 4800 South, Salt
Lake City, Utah 84124, is our transfer agent.
35
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the NJBCA, a corporation may indemnify any person
who is or was a director, officer, trustee, employee or agent of
the corporation, or is or was serving at the request of the
corporation as a director, officer, trustee, employee or agent of
another corporation, partnership, joint venture, sole
proprietorship, trust or other enterprise, against his or her
reasonable expenses, including counsel fees, in connection with
any pending, threatened or completed proceeding by or in the
right of the corporation to procure a judgment in its favor which
involves the person by reason of his or her corporate agent
status, if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best
interests of the corporation. However, a corporation may not
indemnify a person who has been adjudged to be liable to the
corporation, unless, and only to the extent that the Superior
Court of New Jersey or the court in which the proceeding was
brought determines that, despite the adjudication of liability
but in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for those expenses
that the court shall deem proper. In connection with any other
proceeding, a corporation may indemnify the person against his or
her reasonable expenses and liabilities in connection with any
such proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
proceeding, he or she had no reasonable cause to believe his or
her conduct was unlawful. The NJBCA requires that a corporation
indemnify these persons against expenses to the extent the person
has been successful on the merits or otherwise in any of the
foregoing proceedings or in the defense of any claim, issue or
matter and provides that a court may order such indemnification.
Our By-Laws provide that corporate agents, which term includes
directors, officers and employees, of us shall be indemnified and
held harmless by us to the fullest extent authorized by the laws
of the State of New Jersey against expenses and liabilities
arising in connection with actions performed by the corporate
agent on behalf of us. Our By-Laws permit it to maintain
insurance for corporate agents against liabilities and expenses.
The NJBCA further provides that the certificate or incorporation
may contain provisions which limit the personal liability of
directors and officers, in whole or in part, to the corporation
or its shareholders for damages for breach of any duty owed to
the corporation or its shareholders, except for acts or
omissions:
- in breach of the director's or officer's duty of loyalty
to the corporation or its shareholders,
- not in good faith or involving a knowing violation of law, or
- resulting in receipt by the person of an improper personal
benefit.
Our Restated Certificate of Incorporation contains a
provision of this nature. With respect to the foregoing
provisions, the NJBCA provides that the duty of loyalty is
breached by an act or omission known or believed by a director or
officer to be contrary to the best interests of the corporation
or its shareholders in connection with matters in which the
director or officer has a material conflict of interest.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy and is, therefore,
unenforceable.
LEGAL MATTERS
Our company is not a party in to any bankruptcy,
receivership or other legal proceeding, and to the best of our
knowledge, no such proceedings by or against us have been
threatened.
36
EXPERTS
Our financial statements as of April 30, 2001 and 2000
(audited) appearing in this Prospectus and Registration Statement
have been audited by Grant Thornton, LLP as set forth in their
report appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of said firm as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a Registration Statement on Form S-1 under the
Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares offered hereby. This Prospectus does not
contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further
information with respect to Synthetic Blood and the shares
offered hereby, reference is made to the Registration Statement
and the exhibits and schedules filed therewith. Statements
contained in this Prospectus as to the contents of any contract
or any other document referred to are not necessarily complete,
and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in
all respects by such reference. A copy of the Registration
Statement, and the exhibits and schedules thereto, may be
inspected without charge at the public reference facilities
maintained by the Securities and Exchange Commission in Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at Seven World Trade
Center, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and copies
of all or any part of the Registration Statement may be obtained
from the Commission upon payment of a prescribed fee. This
information is also available from the Commission's Internet web
site, http://www.sec.gov.
37
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants 39
Balance Sheets as of April 30, 2001 and 2000 40
Statements of Operations for each of the three years 42
ended April 30, 2001 and for the period May 26, 1967
(date of incorporation) to April 30, 2001
Statements of Stockholders' Equity (Deficit) for each of the 43
three years ended April 30, 2001 and for the period May 26,
1967 (date of incorporation) to April 30, 2001
Statements of Cash Flows for the three years 45
ended April 30, 2001 and for the period May 26, 1967
(date of incorporation) to April 30, 2001
Notes to Financial Statements 48
38
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Synthetic Blood International, Inc.
We have audited the accompanying balance sheets of Synthetic
Blood International, Inc. (a Company in the development stage) as
of April 30, 2001 and 2000, and the related statements of
operations, stockholders' equity (deficit) and cash flows for
each of the three years ended April 30, 2001 and for the period
from inception (May 26, 1967) to April 30, 2001. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Synthetic Blood International, Inc. as of April 30, 2001 and
2000, and the results of its operations and its cash flows for
each of the three years in the period ended April 30, 2001 and
for the period from inception (May 26, 1967) to April 30, 2001,
in conformity with accounting principles generally accepted in
the United States of America.
GRANT THORNTON LLP
Irvine, California
June 1, 2001
39
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Enterprise)
BALANCE SHEETS
April 30, 2001 and 2000
ASSETS
2001 2000
CURRENT ASSETS: ---------- ----------
Cash and cash equivalents $4,250,898 $5,466,391
Common stock subscription receivable - 400,000
Note receivable from director 30,000 -
Prepaid expenses and other current assets 83,373 71,065
--------- ---------
Total current assets 4,364,271 5,937,456
--------- ---------
PROPERTY AND EQUIPMENT
Laboratory equipment 263,123 47,290
Furniture and fixtures 49,022 28,435
Leasehold improvements 3,825 -
--------- ---------
315,970 75,725
Less accumulated depreciation (72,066) (43,994)
--------- ---------
Property and equipment, net 243,904 31,731
--------- ---------
PATENTS, net 234,121 230,464
--------- ---------
$4,842,296 $6,199,651
========= =========
The accompanying notes are an integral pare of these
financial statements
40
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Enterprise)
BALANCE SHEETS- CONTINUED
April 30, 2001 and 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
2001 2000
--------- ---------
CURRENT LIABILITIES
Notes payable $ 177,358 $ 44,534
Accounts payable 87,256 211,460
Accrued payroll 79,454 89,446
--------- ---------
Total current liabilities 344,068 345,440
--------- ---------
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Common stock, par value $0.01 per share; authorized
100,000,000 shares; 84,474,547 and 80,907,298 shares
issued and outstanding at April 30, 2001 and 2000,
respectively 844,745 809,073
Stock subscription receivable - (600,000)
Deposits on common stock 94,231 2,535,471
Additional paid-in capital 16,544,832 14,423,005
Deficit accumulated during the development stage (12,985,580) (11,313,338)
---------- ----------
Total stockholders' equity 4,498,228 5,854,211
---------- ----------
$ 4,842,296 $ 6,199,651
========== ==========
The accompanying notes are an integral part of these financial statements
41
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Enterprise)
STATEMENTS OF OPERATIONS
For Each of the Three Years ended April 30, 2001 and For the Period
May 26, 1967 (Date of Incorporation) to April 30, 2001
Period from
May 26, 1967
(incorporation) to
April 30, 2001 2001 2000 1999
----------------- ---------- ----------- -----------
EXPENSES
Research and development $ 4,170,286 $ 782,339 $ 224,023 $ 170,058
General and administrative 9,071,274 1,219,852 687,575 667,376
Interest 166,544 1,070 15,882 20,395
---------- ---------- ---------- ---------
Total expenses 13,408,104 2,003,261 927,480 857,829
OTHER INCOME (primarily interest) (422,524) (331,019) (16,141) (23,994)
---------- ---------- ---------- ---------
NET LOSS $(12,985,580) $ (1,672,242) $ (911,339) $ (833,835)
=========== ========== ========== =========
NET LOSS PER SHARE -
Basic and diluted ($0.02) ($0.01) ($0.02)
======= ====== ======
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING-Basic and diluted 86,401,830 65,365,438 51,388,471
=========== ========== ==========
The accompanying notes are an integral part of these financial statements
42
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Enterprise)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For Each of the Three Years ended April 30, 2001 and For the Period
May 26, 1967 (Date of Incorporation) to April 30, 2001
Common Stock
------------ Additional
Number of paid-in
Shares Amount capital
---------- ---------- ----------
Balance at May 26, 1967 - $ - $ -
Issuance of common stock 36,292,293 362,923 5,809,831
Issuance of common stock upon
conversion of debentures 1,401,399 14,014 818,234
Issuance of common stock to employees
and compensatory options 218,800 2,188 81,312
Issuance of common stock for
services rendered 324,175 3,242 49,350
Issuance of common stock to officers
to retire shareholder loans 1,044,450 10,444 177,556
Common stock issued in conjunction with
funding agreements and services rendered 5,376,365 53,764 883,160
Common stock issued upon conversion
of notes payable 4,766,820 47,668 637,607
Issuance of warrants - - 190,406
Exercise of warrants 1,305,000 13,050 117,450
Contributions of capital for cash and
services rendered - - 65,700
Contribution of capital by shareholders - - 581,818
Net loss - - -
---------- -------- ---------
Balances at April 30, 1998 50,729,302 507,293 9,412,424
Issuance of common stock 4,265,022 42,650 262,500
Issuance of common stock for services-
rendered 320,000 3,200 53,725
Stock options granted - - 1,560
Net loss - - -
---------- -------- ---------
Balances at April 30, 1999 55,314,324 553,143 9,730,209
========== ======== =========
Deficit
accumulated Total
Total Stock Deposits during the stockholders'
subscription on common development equity
receivable stock stage (deficit)
Balances at May 26, 1967 $ - $ - $ - $ -
Issuance of common stock - - - 6,172,754
Issuance of common stock upon
conversion of debentures - - - 832,248
Issuance of common stock to employees
and compensatory options - - - 83,500
Issuance of common stock for
services rendered - - - 52,592
Issuance of common stock to officers
to retire shareholder loans - - - 188,000
Common stock issued in conjunction with
funding agreements and services rendered - - - 936,924
Common stock issued upon conversion
of notes payable - - - 685,275
Issuance of warrants - - - 190,406
Exercise of warrants - - - 130,500
Contributions of capital for cash and
services rendered - - - 65,700
Contribution of capital by shareholders - - - 581,818
Net loss - - (9,568,164) (9,568,164)
--------- ------ --------- ---------
Balances at April 30, 1998 - - (9,568,164) 351,553
Issuance of common stock - - - 305,150
Issuance of common stock for services-
rendered - - - 56,925
Stock options granted - - - 1,560
Net loss - - (833,835) (833,835)
--------- ------ ----------- --------
Balances at April 30, 1999 - - (10,401,999) (118,647)
========= ====== =========== ========
The accompanying notes are an integral part of these financial statements
43
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Enterprise)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)- CONTINUED
For Each of the Three Years ended April 30, 2001 and For the Period
May 26, 1967 (Date of Incorporation) to April 30, 2001
Common Stock
Additional Stock
Number of paid-in subscription
shares Amount capital receivable
Balances at April 30, 1999 55,314,324 $ 553,143 $ 9,730,209 $ -
Issuance of common stock 17,882,974 178,830 3,705,283 -
Issuance of common stock for services
rendered 200,000 2,000 20,400 -
Issuance of common stock for payable
settlement 10,000 100 13,500 -
Issuance of common stock for
promissory note 7,500,000 75,000 925,000 (600,000)
Options issued for services - - 28,613 -
Deposits received for common stock
not issued - - - -
Net loss - - - -
---------- -------- ---------- --------
Balances at April 30, 2000 80,907,298 809,073 14,423,005 (600,000)
Issuance of common stock for services
rendered 244,819 2,448 118,920 -
Exercise of stock warrants 1,172,978 11,730 95,027 -
Options issued for services - - 12,401 -
Issuance of common stock for deposit
received 6,649,452 66,494 2,374,746 -
Cancellation of note for common stock
previously issued (4,500,000) (45,000) (555,000) 600,000
Compensation on options and
warrants issued - - 75,733 -
Net loss - - - -
---------- --------- ----------- ---------
Balances at April 30, 2001 84,474,547 $ 844,745 $ 16,544,832 $ -
========== ========= =========== =========
Deficit
accumulated Total
Deposits during the stockholders'
on common development equity
stock stage (deficit)
Balances at April 30, 1999 $ - $ (10,401,999) $ (118,647)
Issuance of common stock - - 3,884,113
Issuance of common stock for services
rendered - - 22,400
Issuance of common stock for payable
settlement - - 13,600
Issuance of common stock for
promissory note - - 400,000
Options issued for services - - 28,613
Deposits received for common stock
not issued 2,535,471 - 2,535,471
Net loss - (911,339) (911,339)
---------- ----------- ----------
Balances at April 30, 2000 2,535,471 (11,313,338) 5,854,211
Issuance of common stock for services
rendered - - 121,368
Exercise of stock warrants - - 106,757
Options issued for services - - 12,401
Issuance of common stock for deposit
received (2,441,240) - -
Cancellation of note for common stock
previously issued - - -
Compensation on options and
warrants issued - - 75,733
Net loss - (1,672,242) (1,672,242)
------------ ------------ -----------
Balances at April 30, 2001 $ 94,231 $ (12,985,580) $ 4,498,228
============ ============ ===========
The accompanying notes are an integral part of these financial statements
44
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS
For Each of the Three Years ended April 30, 2001 and For the Period
May 26, 1967 (Date of Incorporation) to April 30, 2001
Period from
May 26, 1967
(incorporation) to
April 30, 2001 2001 2000 1999
--------------- ---------- ---------- ----------
Cash flows from operating activities:
Net loss $(12,985,580) $ (1,672,242) $ (911,339) $ (833,835)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 487,178 71,627 53,992 54,412
Loss on disposal of property and equipment 15,284 - 12,874 -
Disposal and write-down of other assets 126,800 - - -
Issuance of compensatory stock
options/warrants 367,213 88,134 28,613 1,560
Issuance of stock below fair market value 695,248 - - -
Issuance of stock for services rendered 1,190,209 121,368 22,400 56,925
Contribution of capital through services
rendered by stockholders 216,851 - - -
Changes in operating assets and liabilities:
Prepaid expenses and other current assets (83,373) (12,308) (10,191) (41,349)
Accounts payable and accrued expenses 343,303 (134,196) (109,650) (32,212)
---------- ---------- -------- -------
Net cash used in operating activities (9,626,867) (1,537,617) (913,301) (794,499)
---------- ---------- -------- -------
Cash flows from investing activities:
Purchase of property and equipment (543,107) (240,246) (17,664) (13,795)
Proceeds from sale of property and equipment 15,457 - - -
Purchase of other assets (557,299) (77,212) (34,377) (91,462)
---------- ---------- -------- -------
Net cash used in investing activities (1,084,949) (317,458) (52,041) (105,257)
---------- ---------- -------- -------
The accompanying notes are an integral part of these financial statements
45
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS- CONTINUED
For Each of the Three Years ended April 30, 2001 and For the Period
May 26, 1967 (Date of Incorporation) to April 30, 2001
Period from
May 26, 1967
(incorporation) to
April 30, 2001 2001 2000 1999
---------------- --------- ---------- ---------
Cash flows from financing activities:
Proceeds from stockholder debt $ 977,692 $ - $ - $ 61,900
Repayments of amounts due to stockholders (121,517) - - -
Proceeds from issuance of notes payable 275,248 135,000 - 140,248
Proceeds from issuance of convertible
debentures 811,000 - - -
Payments on short-term notes payable (58,812) (2,175) (56,637) -
Payments on long-term debt (238,971) - (84,227) (154,744)
Payments on capital lease obligation (52,338) - - -
Proceeds from exercise of stock options 106,757 106,757 - -
Proceeds from common stock not
issued at year-end 94,231 - 2,535,471 -
Contribution of capital from stockholders 40,700 - - -
Proceeds from issuance of common stock 13,128,724 400,000 3,844,113 305,150
---------- -------- --------- -------
Net cash provided by financing activities 14,962,714 639,582 6,238,720 352,554
---------- -------- --------- -------
Net increase (decrease) in cash and
cash equivalents 4,250,898 (1,215,493) 5,273,378 (547,202)
Cash and cash equivalents, beginning of period - 5,466,391 193,013 740,215
--------- --------- ---------- -------
Cash and cash equivalents, end of period $ 4,250,898 $4,250,898 $ 5,466,391 $ 193,013
========= ========= ========== =======
Cash paid for:
Interest $ 127,030 $ 1,070 $ 15,882 $ 20,395
========= ========= ========== =======
Taxes $ 8,740 $ 800 $ 1,250 $ 800
========= ========= ========== =======
The accompanying notes are an integral part of these financial statements
46
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Enterprise)
STATEMENTS OF CASH FLOWS - CONTINUED
For Each of the Three Years ended April 30, 2001 and For the
Period
May 26, 1967 (Date of Incorporation) to April 30, 2001
Supplemental information:
During fiscal 2000:
Exchange of $1,200,000 stock subscription receivable for
common stock subscription of 9,000,000 shares, of which
4,500,000 shares ($600,000) were not issued and paid as of
April 30, 2000.
The Company issued 10,000 shares of common stock in
satisfaction of a interest expense liability in which the
Company recognized an expense of $13,600.
The Company permitted the exercise of 400,000 options of
unregistered common stock at a $0.10 exercise price in
satisfaction of $40,000 in related party notes payable. The
company paid an unrelated third party for services with
200,000 shares of common stock, recognizing an expense of
$22,400.
During fiscal 2001:
The Company cancelled the balance of the stock subscription
receivable of $600,000 and the related 4,500,000 shares of
common stock due to nonpayment.
The Company issued 6,649,452 shares of its common stock for
deposits received in fiscal 2000.
The accompanying notes are an integral part of these financial
statements.
47
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS
April 30, 2001 and 2000
NOTE A - GENERAL
The Company was incorporated on May 26, 1967 and was inactive
through September 1990, when it began conducting operations
for the purpose of developing a synthetic blood emulsion to
act as a human blood substitute, and a method of using a
perfluorocarbon compound to facilitate oxygen exchange for
individuals with respiratory distress syndrome. Shortly after
commencing these operations, the Company changed its name to
Synthetic Blood International, Inc. The Company is also
developing an implantable, continuous reading glucose
biosensor to be used primarily by individuals with diabetes.
All of the Company's products are currently in the preclinical
trial stage. This stage requires a sufficient level of animal
testing to be performed in order to file certain applications
with the United States Food and Drug Administration (FDA),
which is necessary to obtain FDA approval to proceed with
human testing and, ultimately, approval to market the
products. No assurances can be given that such approvals,
once applied for, will be granted. The Company has not
generated any revenues since inception.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development Stage - The Company has not commenced its planned
principal operations, and there have been no significant
revenues, therefore it is considered a "Development Stage
Enterprise".
Cash and Cash Equivalents - The Company considers highly-
liquid investments with original maturities of three months or
less to be cash equivalents.
Property and Equipment - Property and equipment are 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 the lease term, if applicable.
Patents - Patent costs are being amortized over the lesser of
the remaining life of the patent or the estimated useful life
of the related product, ranging from eight to ten years.
Patent costs totaled $234,121 and $230,464, net of accumulated
amortization of $138,370 and $94,815, at April 30, 2001 and
2000, respectively. The Company evaluates recoverability of
patents on at least an annual basis by comparing the estimated
resale value of the patents to the remaining carrying values.
An adjustment to the carrying value of the patent rights would
be made if the estimated resale value of the patents is
determined to be insufficient to recover such value.
48
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
April 30, 2001 and 2000
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
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 the exercise price of options to
purchase common stock, based on a good faith estimate of fair
value, which is derived from recent issuances of common stock
to unrelated parties and/or from common stock market
quotations, after giving effect to the restricted nature of
the stock issued. In the event that stock is issued at a
price below fair market value for services rendered, an
expense is recorded for the difference between fair market
value and the issuance price and is included in general and
administrative expenses.
Loss Per Share - Basic loss per share, which includes no
dilutive securities, is computed by dividing loss available to
common shareholders by the weighted-average number of common
shares outstanding for that particular period. In contrast,
diluted loss per share considers the potential dilution that
could occur from other financial instruments that would
increase the total number of outstanding shares of common
stock. Potentially dilutive securities, however, have not
been included in the diluted loss per share computation
because their effect is antidilutive.
Income Taxes - Deferred tax assets and liabilities are
recorded for differences between the financial statement and
tax basis of the assets and liabilities that will result in
taxable or deductible amounts in the future based on enacted
tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized. Income tax
expense is recorded for the amount of income tax payable or
refundable for the period increased or decreased by the change
in deferred tax assets and liabilities during the period.
Reclassifications - Certain amounts as previously reported
have been reclassified to conform with the 2001 presentation.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of
other income and expenses during the reporting periods.
Actual results could differ from those estimates.
49
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
April 30, 2001 and 2000
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Fair Value of Financial Instruments - The Company's balance
sheet includes the following financial instruments: cash and
cash equivalents, accounts payable, accrued expenses, amounts
due to stockholders, and notes payable. The Company considers
the carrying amount in the financial statements to approximate
fair value for these financial instruments because of the
relatively short period of time between origination of the
instruments and their expected realization. The Company
considers the carrying value of its notes payable to
approximate fair market value based on the borrowing rates
currently available to the Company for bank loans with similar
terms and maturities.
Stock-Based Compensation - The Company accounts for stock-
based employee compensation as prescribed by APB Opinion No.
25, "Accounting for Stock Issued to Employees," and has
adopted the disclosure provisions of Statement of Financial
Accounting Standards 123, "Accounting for Stock-based
Compensation" ("SFAS 123"). SFAS 123 requires proforma
disclosures of net loss and net loss per share as if the fair
value based method of accounting for stock-based awards had
been applied. Under the fair value based method, compensation
cost is recorded based on the value of the award at the grant
date and is recognized over the service period.
NOTE C - COMMITMENTS AND CONTINGENCIES
Litigation - The Company is subject to litigation in the
normal course of business, none of which management believes
will have a material adverse effect on the Company's financial
statements.
NOTE D - NOTES PAYABLE
Notes payable consist of the following at April 30:
2001 2000
--------- --------
Installment contract payable, secured by unearned
insurance premiums, payable in monthly installments
of $10,700 through September 2001 $ 42,358 $ 44,534
Promissory note bearing interest at 8% per annum,
payable in monthly principal and interest installments
of $11,745 through April 19, 2001 135,000 -
--------- --------
$177,358 $ 44,534
========= ========
50
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
April 30, 2001 and 2000
NOTE E - STOCKHOLDERS' EQUITY
During fiscal 1999, the Company issued 125,000 shares in
satisfaction of a $26,250 liability for rent on a Company
research facility. An additional 25,000 shares were issued to
a consultant for services rendered. The Company recognized an
expense of $2,625 representing the fair value of the stock at
the date of issuance.
During fiscal 1999, the Company issued 170,000 shares to a
director/officer in exchange for services rendered. The
Company recognized an expense of $28,050 representing the fair
value of the stock at the date of issuance.
During fiscal 1999, the Company issued 4,265,022 shares of
unregistered common stock for $305,150; these shares were
issued at a share price ranging from $0.07 to $0.11.
During fiscal 2000, the Company issued 200,000 shares of
unregistered, restricted common stock to an unrelated party
for services rendered. The Company recognized an expense of
$22,400 representing the fair value of the stock at the date
of issuance.During fiscal 2000, the Company issued 10,000
shares of unregistered, restricted common stock in
satisfaction of an interest expense liability. The Company
recognized an expense of $13,600 representing the fair value
of the stock at the date of issuance.During fiscal 2000, the
Company issued 12,676,714 shares of unregistered common stock
to third party investors for $3,045,837 at share prices
ranging from $0.06 to $0.75 and 75,000 shares of unregistered
common stock to related parties for $6,000; these shares were
issued at a share price of $0.08. The Company issued
5,457,871 options with the sale of the above stock with
exercise prices ranging from $0.11 to $1.00.During fiscal
2000, the Company issued 2,831,260 shares of unregistered
common stock to third party investors in connection with the
exercise of options for $551,970 with a range of exercise
prices from $0.07 to $0.14. The Company also issued 400,000
shares of unregistered common stock to related parties in
connection with the exercise of options for $40,000, at an
exercise price of $0.10.
51
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
April 30, 2001 and 2000
NOTE E- STOCKHOLDERS' EQUITY - Continued
During fiscal 2000, 400,000 options were exercised into
unregistered common stock in satisfaction of $40,000 in related
party notes payable. The options had an exercise price of
$0.10.During fiscal 2000, the Company sold 9,000,000 shares of
common stock at $0.13 per share in exchange for a promissory note
of $1,200,000 payable in 12 equal monthly installments of
$100,000, commencing in April 2000. The note has been recorded as
a stock subscription receivable and has been presented in the
stockholders' equity section of the accompanying Balance Sheet
for amounts not received prior to the filing of this
report.During fiscal 2000, the Company received $2,500,000 in
deposits for 6,500,000 shares of unregistered common stock that
were committed to be issued at April 30, 2000, of which 1,900,000
shares were issued subsequent to year-end at a share price of
$.385. The Company received an additional $35,471 in deposits
for the exercise of 394,452 shares of unregistered common stock
that were committed to be issued at April 30, 2000 and were
issued subsequent to year-end at share prices ranging from $0.07
to $0.14.During fiscal 2001, the Company issued 244,819 shares of
unregistered common stock to unrelated parties for services
rendered. The Company recognized an expense of $121,368
representing the fair value of the stock at the date of
issuance.During fiscal 2001, the Company issued 6,649,452 shares
of unregistered common stock in satisfaction of deposits received
prior to April 30, 2000. The shares were issued at prices ranging
from $0.07 to $0.3846.During fiscal 2001, the Company issued
1,172,978 shares of unregistered common stock to third party
investors in connection with the exercise of stock options for
$106,757 with a range of exercise prices from $0.07 to
$0.14.During fiscal 2001, the Company cancelled its stock
subscription receivable of $600,000 and the related 4.5 million
common shares of stock.
52
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
April 30, 2001 and 2000
NOTE F - STOCK OPTIONS AND WARRANTS
In September 1999, the Company's Board of Directors approved
the 1999 Stock Plan ("the 1999 Plan") which provides for the
granting of incentive and nonstatutory stock options to
employees, directors and consultants to purchase up to
4,000,000 shares of the Company's common stock. The 1999 Plan
was approved by shareholders on October 10, 2000. Options
granted under the 1999 Plan are exercisable at various dates
up to four years and have expiration periods of generally ten
years. At April 30, 2001 there were 4,131,472 stock options
outstanding, of which 2,445,000 stock options had been issued
under the 1999 Plan.
The following table summarizes certain information related to the
Company's stock options as of April 30:
Exercise Exercise
Options Price Options Price
--------- ----- --------- -------
Outstanding,
beginning of year 3,165,000 $0.13 900,000 $0.13
Granted 1,105,666 0.32 2,265,000 0.13
Exercised (139,194) 0.08 - -
--------- ----- --------- -------
Outstanding,
end of year 4,131,472 $0.18 3,165,000 $0.13
========= ===== ========= =======
The following table summarizes information about stock options
outstanding at April 30, 2001.
Options Outstanding
-----------------------
Weighted Weighted
Range of Average Average
Exercise Number Remaining Exercise
Prices Outstanding Life Price
------------- ----------- --------- --------
$0.01-$0.80 4,131,472 8.57 $ 0.18
============= =========== ========= ========
53
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
April 30, 2001 and 2000
NOTE F - STOCK OPTIONS AND WARRANTS - Continued
At April 30, 2001, approximately 2,129,167 stock options were
exercisable. As permitted under SFAS No. 123, Accounting for
Stock-Based Compensation, the Company accounts for its stock
option plan in accordance with the provisions of APB Opinion
No. 25, Accounting for Stock Issued to Employees. During the
year ended April 30, 2001, the Company issued options to non-
employees at exercise prices below the fair market value of
the Company's common stock. The Company has recorded
compensation expense based on the intrinsic value of such
options at the date of grant. Had compensation cost for the
stock option plan been determined based on the fair value at
the grant date consistent with the method of SFAS No. 123, the
Company's net loss and net loss per share would have been the
pro forma amounts indicated below:
Years ended April 30,
-----------------------
2001 2000 1999
-------- ------- --------
Actual net loss $(1,672,242) $(911,339) $ (833,835)
Pro forma net loss $(2,120,000) $(937,906) $ (882,635)
Actual net loss per share $ (0.02) $ (0.01) $ (0.02)
Pro forma net loss per share $ (0.02) $ (0.01) $ (0.02)
The fair value of each option grant was estimated at the grant
date using the Black-Scholes option-pricing model using the
following assumptions: a risk-free interest rate of 5.39% for
2001, 6.12% for 2000, and 6.00% for 1999; volatility of 162%
for 2001, 152% for 2000, and 90% for 1999; zero dividend yield
for all years; and expected lives of 1 to 10 years. The
Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options and warrants which
have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options and
warrants have characteristics significantly different from
those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair
value of its employee stock options.
54
SYNTHETIC BLOOD INTERNATIONAL, INC.
(A Development Stage Enterprise)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
April 30, 2001 and 2000
NOTE F - STOCK OPTIONS AND WARRANTS - Continued During fiscal
2000, the Company issued approximately 5,450,000 warrants in
connection with the sale of stock, with a weighted average
exercise price of $0.45. Also during fiscal 2000, the Company
issued 1,240,000 warrants to certain directors with an
exercise price of 80% of fair market value.
The following table summarizes certain information related to
the Company's stock warrants:
Weighted Average
Exercise Price
Shares Per Share
---------- ----------
Warrants outstanding at April 30, 1999 2,619,827 $ 0.28
Granted 7,004,343 $ 0.39
Exercise (3,631,260) $ 0.17
Terminated (60,000) $ 0.20
---------- ---------
Warrants Outstanding at April 30, 2000 5,932,910 $ 0.41
Exercised (1,033,784) $ 0.09
Terminated (2,150,000) $ 0.90
---------- ---------
Warrants outstanding at April 30, 2001 2,749,126 $ 0.14
========== =========
NOTE G - INCOME TAXES
No provision for federal and state income taxes has been
recorded as the Company has incurred net operating losses
through April 30, 2001. At April 30, 2001, the Company has
net operating loss carryforwards available to offset future
taxable income for federal tax purposes of approximately $12
million; such carryforwards expire in various years through
2021. Deferred tax assets of approximately $4.5 million at
April 30, 2001 include the effects of these net operating loss
carryforwards, and research and development credit
carryforwards. The Company has provided a valuation allowance
to offset all deferred tax assets due to the uncertainty of
realization.
NOTE H - RELATED PARTIES
During fiscal 2001, 2000 and 1999, the Company recorded
expenses of approximately $12,400, $5,800 and $70,500,
respectively, for services provided by a company in which an
officer of the Company has a controlling interest.
55
=============================== ============================
Until _______________, all
dealers that effect
transactions in these
securities, whether or not
participating in this offering,
may be required to deliver a
prospectus. This is in SYNTHETIC BLOOD
addition to the dealers' INTERNATIONAL, INC.
obligation to deliver a
prospectus when acting as
underwriters and with respect
to their unsold allotments or
subscriptions. 12,806,620 Shares
Common Stock
- ------------------------------- $0.01 Par Value
TABLE OF CONTENTS
Summary 4
Risk Factors 5
Special Note Regarding Forward-Looking Statements 13
Market Price of and Dividends on our Stock and related 13
Stockholder Matters
Selected Consolidated Financial Data 13 ---------------
Management's Discussion and Analysis of Financial 14 PROSPECTUS
Condition and Results of Operations --------------
Business 17
Management 24
Certain Relationships and Related Transactions 30
Principal Shareholders 31
Selling Shareholders 32
Plan of Distribution 34
Description of Common Stock 35
Legal Matters 36
Experts 37
Where you Can Find More Information 37
Index to Consolidated Financial Statements 38
- ----------------------------------------------------------
No dealer, salesperson or other
person has been authorized to
give any information or to make
any representations other than
those contained in this
Prospectus and, if given or
made, such information or
representations must not be
relied upon as having been
authorized by the Company. This
Prospectus does not constitute
an offer to sell or a
solicitation of an offer to buy
any of the securities offered
hereby to whom it is unlawful
to make such offer in any
jurisdiction. Neither the
delivery of this Prospectus nor
any sale made hereunder shall,
under any circumstances, create
any implication that
information contained herein is
correct as of any time
subsequent to the date hereof
or that there has been no August 31, 2001
change in the affairs of the
Company since such date.
=============================== ==============================
56
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Other Expenses of Issuance and Distribution
The following table sets forth the expenses in connection
with this Registration Statement. We will pay all expenses of the
offering. All of such expenses are estimates, other than the
filing fees payable to the Securities and Exchange Commission.
Securities and Exchange Commission Filing Fee $ 824.42
Printing Fees and Expenses 1,500.00
Legal Fees and Expenses 33,500.00
Accounting Fees and Expenses 20,000.00
Blue Sky Fees and Expenses 500.00
Trustee's and Registrar's Fees 2,500.00
Miscellaneous 1,175.58
TOTAL $60,000.00
Indemnification of Directors and Officers
Under the NJBCA, a corporation may indemnify any person who
is or was a director, officer, trustee, employee or agent of the
corporation, or is or was serving at the request of the
corporation as a director, officer, trustee, employee or agent of
another corporation, partnership, joint venture, sole
proprietorship, trust or other enterprise, against his or her
reasonable expenses, including counsel fees, in connection with
any pending, threatened or completed proceeding by or in the
right of the corporation to procure a judgment in its favor which
involves the person by reason of his or her corporate agent
status, if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best
interests of the corporation. However, a corporation may not
indemnify a person who has been adjudged to be liable to the
corporation, unless, and only to the extent that the Superior
Court of New Jersey or the court in which the proceeding was
brought determines that, despite the adjudication of liability
but in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for those expenses
that the court shall deem proper. In connection with any other
proceeding, a corporation may indemnify the person against his or
her reasonable expenses and liabilities in connection with any
such proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
proceeding, he or she had no reasonable cause to believe his or
her conduct was unlawful. The NJBCA requires that a corporation
indemnify these persons against expenses to the extent the person
has been successful on the merits or otherwise in any of the
foregoing proceedings or in the defense of any claim, issue or
matter and provides that a court may order such indemnification.
Synthetic Blood's By-Laws provide that corporate agents, which
term includes directors, officers and employees, of Synthetic
Blood shall be indemnified and held harmless by Synthetic Blood
to the fullest extent authorized by the laws of the State of New
Jersey against expenses and liabilities arising in connection
with actions performed by the corporate agent on behalf of
Synthetic Blood. Synthetic Blood's By-Laws permit it to maintain
insurance for corporate agents against liabilities and expenses.
The NJBCA further provides that the certificate or incorporation
may contain provisions which limit the personal liability of
directors and officers, in whole or in part, to the corporation
or its shareholders for damages for breach of any duty owed to
the corporation or its shareholders, except for acts or
omissions:
- in breach of the director's or officer's duty of loyalty
to the corporation or its shareholders,
- not in good faith or involving a knowing violation of law, or
57
- resulting in receipt by the person of an improper personal
benefit.
Synthetic Blood's Restated Certificate of Incorporation
contains a provision of this nature. With respect to the
foregoing provisions, the NJBCA provides that the duty of loyalty
is breached by an act or omission known or believed by a director
or officer to be contrary to the best interests of the
corporation or its shareholders in connection with matters in
which the director or officer has a material conflict of
interest.
Recent Sales of Unregistered Securities
During fiscal 1999, the Company issued 125,000 shares in
satisfaction of a $26,250 liability for rent on a Company
research facility. The shares were issued in a private
transaction that did not involve any public solicitation or sales
and without registration in reliance on the exemption provided by
4(2) of the Securities Act.
An additional 25,000 shares were issued to a consultant for
services rendered during fiscal 1999. The Company recognized an
expense of $2,625 representing the fair value of the stock at the
date of issuance. The shares were issued in a private
transaction that did not involve any public solicitation or sales
and without registration in reliance on the exemption provided by
4(2) of the Securities Act.
During fiscal 1999, the Company issued 170,000 shares to a
director/officer in exchange for services rendered. The Company
recognized an expense of $28,050 representing the fair value of
the stock at the date of issuance. The shares were issued in a
private transaction that did not involve any public solicitation
or sales and without registration in reliance on the exemption
provided by 4(2) of the Securities Act.
During fiscal 1999, the Company issued 2,000,000 shares of
unregistered common stock for $140,000; these shares were issued
at a share price of $0.07. The shares were issued pursuant to
Regulation S.
During fiscal 1999, the Company issued 2,265,022 shares of
unregistered common stock for $165,150; these shares were issued
at a share price ranging from $0.07 to $0.11. The shares were
issued in a private transaction that did not involve any public
solicitation or sales and without registration in reliance on the
exemption provided by 4(2) of the Securities Act.
During fiscal 2000, the Company issued 200,000 shares of
unregistered, restricted common stock to an unrelated party for
services rendered. The Company recognized an expense of $22,400
representing the fair value of the stock at the date of issuance.
The shares were issued in a private transaction that did not
involve any public solicitation or sales and without registration
in reliance on the exemption provided by 4(2) of the Securities
Act.
During fiscal 2000, the Company issued 10,000 shares of
unregistered, restricted common stock in satisfaction of an
interest expense liability. The Company recognized an expense of
$13,600 representing the fair value of the stock at the date of
issuance. The shares were issued in a private transaction that
did not involve any public solicitation or sales and without
registration in reliance on the exemption provided by 4(2) of the
Securities Act.
During fiscal 2000, the Company issued 12,676,714 shares of
unregistered common stock to third party investors for $3,045,837
at share prices ranging from $0.06 to $0.75 and 75,000 shares of
unregistered common stock to related parties for $6,000; these
shares were issued at a share price of $0.08. The Company issued
5,457,871 options with the sale of the above stock with exercise
prices
58
ranging from $0.11 to $1.00. The shares were issued in a
private transaction that did not involve any public solicitation
or sales and without registration in reliance on the exemption
provided by 4(2) of the Securities Act. 6,500,000 of the above
shares were issued pursuant to Regulation S.
During fiscal 2000, the Company issued 2,831,260 shares of
unregistered common stock to third party investors in connection
with the exercise of options for $551,970 with a range of
exercise prices from $0.07 to $0.14. The Company also issued
400,000 shares of unregistered common stock to related parties in
connection with the exercise of options for $40,000, at an
exercise price of $0.10. The shares were issued in a private
transaction that did not involve any public solicitation or sales
and without registration in reliance on the exemption provided by
4(2) of the Securities Act.
During fiscal 2000, 400,000 options were exercised into
unregistered common stock in satisfaction of $40,000 in related
party notes payable. The options had an exercise price of $0.10.
The shares were issued in a private transaction that did not
involve any public solicitation or sales and without registration
in reliance on the exemption provided by 4(2) of the Securities
Act.
During fiscal 2000, the Company sold 9,000,000 shares of
common stock at $0.13 per share in exchange for a promissory note
of $1,200,000 payable in 12 equal monthly installments of
$100,000, commencing in April 2000. The note has been recorded as
a stock subscription receivable and has been presented in the
stockholders' equity section of the accompanying Balance Sheet
for amounts not received prior to the filing of this report. The
shares were issued pursuant to Regulation S.
During fiscal 2000, the Company received $2,500,000 in
deposits for 6,500,000 shares of unregistered common stock that
were committed to be issued at April 30, 2000, of which 1,900,000
shares were issued subsequent to year-end at a share price of
$0.385. The shares were issued pursuant to Regulation S.
The Company received an additional $35,471 in deposits for
the exercise of 394,452 shares of unregistered common stock that
were committed to be issued at April 30, 2000 and were issued
subsequent to year-end at share prices ranging from $0.07 to
$0.14. The shares were issued in a private transaction that did
not involve any public solicitation or sales and without
registration in reliance on the exemption provided by 4(2) of the
Securities Act.
During fiscal 2001, the Company issued 244,819 shares of
unregistered common stock to unrelated parties for services
rendered. The Company recognized an expense of $121,368
representing the fair value of the stock at the date of issuance.
The shares were issued in a private transaction that did not
involve any public solicitation or sales and without registration
in reliance on the exemption provided by 4(2) of the Securities
Act.
During fiscal 2001, the Company issued 6,649,452 shares of
unregistered common stock in satisfaction of deposits received
prior to April 30, 2000. The shares were issued at prices ranging
from $0.07 to $0.3846. The shares were issued pursuant to
Regulation S.
During fiscal 2001, the Company issued 1,172,978 shares of
unregistered common stock to third party investors in connection
with the exercise of stock options for $106,757 with a range of
exercise prices from $0.07 to $0.14. The shares were issued in a
private transaction that did not involve any public solicitation
or sales and without registration in reliance on the exemption
provided by 4(2) of the Securities Act.
During fiscal 2001, the Company cancelled its stock
subscription receivable of $600,000 and the related 4.5 million
common shares of stock.
59
From May 2001 to July 2001, the Company issued 1,660,762
shares of unregistered common stock to third party investors in
connection with the exercise of stock options or warrants for
$232,506 with an exercise price of $0.14. The shares were issued
in a private transaction that did not involve any public
solicitation or sales and without registration in reliance on the
exemption provided by 4(2) of the Securities Act.
Exhibits and Financial Statement Schedules
Exhibit Title of Exhibit Location
No.
3 (a) Registrants Amended Articles of Incorporation Incorporated by
reference to the
Form 10-K for
the period ending
April 30, 2001
3 (b) Specimen Form of Common Stock Certificate Incorporated by
reference of
previous filings
5 Opinion re: legality from Lehman Attached
Walstrand & Associates, LLC
10(a) Agreement between the Registrant and Incorporated by
Children's Hospital Medical Center reference to the
dated, February 27, 2001 Form 10-K for
the period
ending April 30,
2001
10(b) Agreement between the Registrant and Incorporated by
Roger R. Ekbom dated, September 1, reference to the
2001 Form 10-K for
the period
ending April 30,
2001
10(c) Employee Stock Plan dated, 1999 Incorporated by
reference to the
Form 10-K for
the period
ending April 30,
2001
10(d) Selling Shareholders Registration Attached
Rights Agreement
23(a) Consent of Lehman Walstrand and Attached
Associates, LLC
23(b) Consent of Grant Thornton LLP Attached
Undertakings
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of Synthetic Blood pursuant to
the provisions in Item 14 above, or otherwise, Synthetic Blood
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy
as expressed in such act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by Synthetic Blood of expenses incurred
or paid by a director or officer or controlling person of
Synthetic Blood in the successful defense of any action, suit or
proceeding) is asserted by such
60
director, officer or controlling
person in connection with the securities being registered,
Synthetic Blood will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
such act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding
the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end
of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration
Statement; and
(iii) To include any material information with respect
to the Plan of Distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement;
(2) That, for the purpose of determining any liability under
the Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
61
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized in the City of Costa Mesa, State of California, on
August 29, 2001.
SYNTHETIC BLOOD INTERNATIONAL, INC.
By: /s/ Robert Nicora
Robert Nicora, President
By: /s/ David H. Johnson
David H. Johnson, Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933,
this registration statement has been signed by the following
persons in the capacities and on the dates indicated.
Date: August 29, 2001 By: /s/ Robert Nicora
Robert Nicora, President and Director
Date: August 29, 2001 By: /s/ David H. Johnson
David H. Johnson, Chief Financial Officer
Date: August 29, 2001 By: /s/ Robert J. Larsen
Robert J. Larsen, Secretary and Director
Date: August 29, 2001 By: /s/ Richard Kiral
Richard Kiral, Vice President
Date: August 29, 2001 By: /s/ Roger Ekborn
Roger Ekborn, Chairman of the Board
Date: August 29, 2001 By: /s/ Gerald Schlatter
Gerald Schlatter, Director
Date: August 29, 2001 By: /s/ Howard Jones
Howard Jones, Director
62