UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2005
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period to
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Commission file number: 0-21271
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SANGUI BIOTECH INTERNATIONAL, INC.
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(Exact Name of Registrant as Specified in its Charter)
Colorado 84-1330732
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Alfred-Herrhausen-Str. 44, 58455 Witten, Germany
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(Address of Principal Executive Offices) (Zip Code)
011-49-2302-915-204
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(Registrant's Telephone Number, Including Area Code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
The number of shares outstanding of the registrant's common stock, $0.001
par value, as of May 20, 2005, was 48,355,363.
Transitional Small Business Disclosure Format (Check one); Yes [ ] No [X]
SANGUI BIOTECH INTERNATIONAL, INC.
Report on Form 10-QSB
For the Quarter Ended March 31, 2005
INDEX
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Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements ...................................................... 2
Consolidated Balance Sheet at March 31, 2005 (Unaudited) .................. 3
Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
Three and nine Months Ended March 31, 2005 and 2004 .................... 4
Consolidated Statements of Cash Flows(Unaudited)
Three and nine Months Ended March 31, 2005 and 2004 .................... 5
Notes to Consolidated Financial Statements (Unaudited) .................... 6
Item 2. Management's Discussion and Analysis or Plan of Operation ................. 9
Item 3. Controls and Procedures ................................................... 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ......................................................... 13
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds ............... 13
Item 3. Defaults Upon Senior Securities ........................................... 13
Item 4. Submission of Matters to a Vote of Securities Holders ..................... 14
Item 5. Other Information ......................................................... 14
Item 6. Exhibits .................................................................. 14
Page 1
PART I - FINANCIAL INFORMATION
------------------------------
Item 1 - Financial Statements
-----------------------------
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB pursuant to the rules and
regulations of the Securities and Exchange Commission and, therefore, do not
include all information and footnotes necessary for a complete presentation of
our financial position, results of operations, cash flows, and stockholders'
deficit in conformity with generally accepted accounting principles in the
United States of America. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results of operations and
financial position have been included and all such adjustments are of a normal
recurring nature. Our unaudited balance sheet as of March 31, 2005 and our
unaudited statements of operations for the three and nine month periods ended
March 31, 2005 and 2004, and the unaudited statement of cash flows for the
nine month periods ended March 31, 2005 and 2004, are attached hereto and
incorporated herein by this reference.
Page 2
SANGUI BIOTECH INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
------
March 31,
2005
------------
Current assets
Cash and cash equivalents $ 32,076
Accounts receivable 27,117
Other receivables 13,000
Taxes receivable 14,729
Inventory -
Prepaid expenses and other assets 34,905
------------
Total current assets 121,827
Property and equipment-net 64,406
Patents and licenses-net 4,946
Deposits 17,816
------------
Total assets $ 208,995
============
LIABILITIES & STOCKHOLDERS' EQUITY
----------------------------------
Current liabilities
Accounts payable and accrued expenses $ 88,562
------------
Total current liabilities 88,562
Commitments and contingencies -
Stockholders' equity
Preferred stock, no par value, 5,000,000 shares
authorized, no shares issued and outstanding -
Common stock, no par value, 50,000,000 shares
authorized, 48,355,363 shares issued and outstanding 18,737,991
Additional paid-in capital 2,104,256
Treasury stock (103,945)
Stock subscription receivable (87,500)
Accumulated other comprehensive income 532,669
Accumulated deficit (21,063,038)
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Total stockholders' equity 120,433
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Total liabilities and stockholders' equity $ 208,995
============
See accompanying notes to these consolidated financial statements
Page 3
SANGUI BIOTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the three months ended For the nine months ended
March 31, March 31,
(Unaudited) (Unaudited)
2005 2004 2005 2004
------------ ------------ ------------ ------------
Revenues $ 23,163 $ - $ 33,912 $ -
Cost of goods sold 37,301 - 44,929 -
------------ ------------ ------------ ------------
Gross profit (14,138) - (11,017) -
Operating expenses
Research and development 47,165 254,413 371,122 670,852
General and administrative 163,940 134,624 446,934 503,681
Depreciation and amortization 15,086 15,989 48,291 72,983
------------ ------------ ------------ ------------
Total operating expenses 226,191 405,026 866,347 1,247,516
------------ ------------ ------------ ------------
Operating loss (240,329) (405,026) (877,364) (1,247,576)
Other income (expense)
Interest income 427 4,989 1,972 19,649
Other income (expense) 86,737 5,452 141,128 27,092
------------ ------------ ------------ ------------
Total other income (expense) 87,164 10,441 143,100 46,741
Net Loss (153,165) (394,585) (734,264) (1,200,775)
Other comprehensive income
Foreign currency translation adjustments (102,965) 16,510 4,000 68,082
Unrealized gain on marketable securities
- (62,874) - 16,682
------------ ------------ ------------ ------------
Comprehensive loss $ (256,130) $ (440,949) $ (730,264) $ (1,116,011)
============ ============= ============ ============
Net loss available to common
shareholder per common share: $ (0.00) $ (0.01) $ (0.02) $ (0.03)
============ ============= ============ ============
Basic and diluted weighted average
number of common shares outstanding 46,475,363 40,555,363 43,417,918 40,555,363
============ ============= ============ ============
See accompanying notes to these consolidated financial statements
Page 4
SANGUI BIOTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended
March 31,
(Unaudited)
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2005 2004
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (734,264) $ (1,200,775)
Adjustments to reconcile net loss to cash used in operating
activities
Depreciation and amortization 48,291 72,983
Stock compensation 104,256 -
Gain on sale of assets (3,101) 290
Changes in operating asset and liabilities:
Accounts receivable (12,771) -
Taxes receivable 90,511 99,990
Prepaid expenses and other assets 8,032 19,150
Deposits (2,816) -
Accounts payable and accrued expenses 2,839 (60,872)
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Net cash used in operating activities (499,023) (1,069,234)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of marketable securities - 580,400
Payment of patent costs (9,151)
-
Sale of property and equipment 2,516
-
Collection of notes receivable - 20,000
Purchase of property and equipment (6,378) (9,730)
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Net cash provided by (used in) investing activities (13,013) 590,670
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 305,000
-
Sales of treasury stock 51,069
Purchase of treasury stock (126,916) (26,997)
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Net cash provided by (used in) financing activities 229,153 (26,997)
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Effect of exchange rate changes 4,000 52,949
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Net decrease in cash and cash equivalents (278,883) (452,612)
Cash and cash equivalents, beginning of period 310,959 956,531
------------ ------------
Cash and cash equivalents, ending of period $ 32,076 $ 503,919
============ ============
Supplemental disclosures:
Cash paid during the period for:
Interest $ - $ -
============ ============
Income taxes $ - $ -
============ ============
See accompanying notes to these consolidated financial statements
Page 5
SANGUI BIOTECH INTERNATIONAL, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 - BASIS OF PRESENTATION
------------------------------
The accompanying consolidated financial statements have been prepared
without audit in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB and Item 301 of Regulation S-B. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and regulations.
The unaudited consolidated financial statements and notes should, therefore, be
read in conjunction with the consolidated financial statements and notes thereto
in the Company's Form 10-KSB for the year ended June 30, 2004. In the opinion of
management, all adjustments (consisting of normal and recurring adjustments)
considered necessary for a fair presentation, have been included. The results of
operations for the three and nine month periods ended March 31, 2005 are not
indicative of the results that may be expected for the full fiscal year ending
June 30, 2005.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Nature of Business
------------------
Sangui BioTech International, Inc., incorporated in Colorado in 1995, and
its subsidiary (collectively, the "Company") have been engaged in the research,
development, manufacture, and sales of medical products.
Prior to June 30, 2003, the company had two German subsidiaries,
SanguiBioTech AG and GlukoMediTech AG. On June 30, 2003, GlukoMediTech AG was
merged into Sangui BioTech AG. Effective November 4, 2003, Sangui AG was
converted into SanguiBioTech GmbH (Sangui GmbH). After completion of the
restructuring, Sangui GmbH, which is headquartered in Witten, Germany, is
engaged in the development of artificial oxygen carriers (external applications
of haemoglobin, blood substitutes and blood additives), the development of wound
care products as well as in the development of glucose implant sensors. Sangui
GmbH is a wholly-owned subsidiary of Sangui BioTech International, Inc..
The operations of Sangui BioTech, Inc. and Sangui BioTech PTE Ltd
Singapore, two former wholly-owned subsidiaries, were discontinued and dissolved
during 2002.
Consolidation
-------------
The consolidated financial statements include the accounts of Sangui
BioTech International, Inc. and its wholly owned subsidiary. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Certain amounts in the three and nine months ended March 31, 2004 have been
reclassified to conform to the three and nine months ended March 31, 2005
presentation. These reclassifications have no effect on previously reported net
loss.
Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the respective reporting period. Actual results could differ
from those estimates. Significant estimates made by management are, among
others, the realization of taxes receivable, long-lived assets, and valuation
allowance on deferred tax assets.
Page 6
Risk and Uncertainties
----------------------
The Company's line of future pharmaceutical products (artificial oxygen
carriers or blood substitute and additives) and in vivo biosensors (glucose
implant sensor) being developed by Sangui GmbH, are deemed as medical devices or
biologics, and as such are governed by the Federal Food and Drug and Cosmetics
Act and by the regulations of state agencies and various foreign government
agencies. The pharmaceutical and biosensor products, under development in
Germany, will be subject to more stringent regulatory requirements, because they
are in vivo products for humans. The Company and its subsidiaries have only
limited experience in obtaining regulatory clearance on these types of products.
Therefore, the Company will be subject to the risks of delays in obtaining or
failing to obtain regulatory clearance.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern, which contemplates, among
other things, the realization of assets and satisfaction of liabilities in the
normal course of business. The Company has accumulated deficit of $21,063,038 as
of March 31, 2005 and has been significantly reducing its working capital since
June 30, 2004. The Company incurred a net loss applicable to common stockholders
of $730,264 and used cash in operating activities of $499,023 for the nine
months ended March 31, 2005. These conditions raise substantial doubt about the
Company's ability to continue as a going concern. The Company expects to
continue to incur significant capital expenses in pursuing its business plan to
market its products and expand its product line, while obtaining additional
financing through stock offerings or other feasible financing alternatives. In
order for the Company to continue its operations at its existing levels, the
Company will require significant additional funds over the next twelve months.
Therefore, the Company is dependent on funds raised through equity or debt
offerings. Additional financing may not be available on terms favorable to the
Company, or at all. If these funds are not available the Company may not be able
to execute its business plan or take advantage of business opportunities. The
ability of the Company to obtain such additional financing and to achieve its
operating goals is uncertain. In the event that the Company does not obtain
additional capital or is not able to increase cash flow through the increase of
sales, there is a substantial doubt of its being able to continue as a going
concern. The accompanying condensed consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Foreign Currency Translation
----------------------------
Assets and liabilities of the Company's foreign operations are translated
into U.S. dollars at period-end exchange rates. Net exchange gains or losses
resulting from such translation are excluded from net loss but are included in
comprehensive income (loss) and accumulated in a separate component of
stockholders' equity. Income and expenses are translated at weighted average
exchange rates for the period.
Cash and Cash Equivalents
-------------------------
The Company maintains its cash in bank accounts in Germany. The Company has
not experienced any losses in its uninsured bank accounts.
Marketable Securities
---------------------
Marketable securities are classified as available-for-sale. Unrealized
gains and losses are excluded from net loss and are reported as a separate
component of other comprehensive loss in stockholders' equity. Realized gains
and losses are included in other income and are determined based on the specific
identification of the securities bought and sold.
Page 7
Revenue Recognition
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Revenues from product sales are recognized at the time of shipment.
Research and Development
------------------------
Research and development costs are charged to operations as they are
incurred. Legal fees and other direct costs incurred in obtaining and protecting
patents are expensed as incurred.
Basic and Diluted Earnings (Loss) Per Common Share
--------------------------------------------------
Basic earnings (loss) per common share is computed by dividing income
(loss) available to common stockholders by the weighted average number of common
shares outstanding during the period of computation. Diluted earnings (loss) per
share give effect to all potential dilutive common shares outstanding during the
period of compensation. The computation of diluted earnings (loss) per share
does not assume conversion, exercise or contingent exercise of securities that
would have an antidilutive effect on earnings. As of March 31, 2005 and 2004,
the Company had no potentially dilutive securities that would affect the loss
per share if they were to be dilutive.
Comprehensive Income (Loss)
---------------------------
Total comprehensive income (loss) represents the net change in
stockholders' equity during a period from sources other than transactions with
stockholders and as such, includes net earnings (loss). For the Company, the
components of other comprehensive income (loss) are the changes in the
cumulative foreign currency translation adjustments and unrealized gains
(losses) on marketable securities and are recorded as components of
stockholders' equity.
NOTE 3 - STOCKHOLDERS' EQUITY
-----------------------------
As of March 31, 2005, the Company held shares of its common stock valued at
historical cost of approximately $103,945, which is reflected in the
stockholders' equity as treasury stock in the accompanying consolidated balance
sheet. The Company's management intends to sell the remaining shares in the near
future.
In July 2004, the Company issued 217,500 shares of common stock under the
2004 Employee Stock Incentive Plan (the Plan) to Sangui GmbH employees. In
connection with this transaction, the Company recorded $43,500 as compensation
expense and additional paid-in capital in the stockholders' equity (deficiency)
section of accompanying financial statements
In October 2004, the Company issued 782,500 shares of common stock under
the 2004 Employee Stock Incentive Plan (the Plan) to a Sangui GmbH employee. In
connection with this transaction, the Company recorded $39,125 as compensation
expense and additional paid-in capital in the stockholders' equity (deficiency)
section of accompanying financial statements
In November and December 2004, the company issued 2,000,000 shares of
common stock to two German investors for $100,000.
In January and February 2005, the company issued 4,500,000 shares of common
stock to German and Swiss investors for $275,000.
In February 2005, the Company issued 200,000 shares of common stock for
prepaid consulting services valued at $17,500.
Page 8
NOTE 4 - COMMITMENTS AND CONTINGENCIES
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Litigation
----------
The Company may, from time to time, be involved in various litigation
resulting from the ordinary course of operating its business. Management is
currently not able to predict the outcome of any such cases. However, management
believes that the amount of ultimate liability, if any, with respect to such
actions will not have a material effect on the Company's financial position or
results of operations.
Indemnities and Guarantees
--------------------------
During the normal course of business, the Company has made certain
indemnities and guarantees under which it may be required to make payments in
relation to certain transactions. These indemnities include certain agreements
with the Company's officers, under which the Company may be required to
indemnify such person for liabilities arising out of their employment
relationship. The duration of these indemnities and guarantees varies and, in
certain cases, is indefinite. The majority of these indemnities and guarantees
do not provide for any limitation of the maximum potential future payments the
Company could be obligated to make. Historically, the Company has not been
obligated to make significant payments for these obligations and no liabilities
have been recorded for these indemnities and guarantees in the accompanying
consolidated balance sheet.
NOTE 5 - SEGMENT REPORTING
--------------------------
The Company has not has any operating activities outside of Germany for
eight consectutive quarters, accordingly segment reporting is not presented in
these financial statements.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
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Forward-looking Statements
--------------------------
The following discussion of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and the related notes thereto included elsewhere in this quarterly
report. Some of the information in this quarterly report contains
forward-looking statements, including statements related to anticipated
operating results, margins, growth, financial resources, capital requirements,
adequacy of the Company's financial resources, trends in spending on research
and development, the development of new markets, the development, regulatory
approval, manufacture, distribution, and commercial acceptance of new products,
and future product development efforts. Investors are cautioned that
forward-looking statements involve risks and uncertainties, which may affect our
business and prospects, including but not limited to, the Company's expected
need for additional funding and the uncertainty of receiving the additional
funding, changes in economic and market conditions, acceptance of our products
by the health care and reimbursement communities, new development of competitive
products and treatments, administrative and regulatory approval and related
considerations, health care legislation and regulation, and other factors
discussed in our filings with the Securities and Exchange Commission.
GENERAL
-------
We are primarily involved in the development of artificial oxygen carriers
for internal and external applications, wound management products and glucose
sensors.
Page 9
Our clinical development projects are primarily in the preliminary stages.
We are diligently developing several applications for clinical development
projects, but do not anticipate beginning any government protocols or clinical
trials in the near term. In the course of the ongoing cost containment efforts,
these projects were halted during the last fiscal year, after having achieved
the planned milestones. We decided to reduce further expenditures in the blood
substitute, blood additive and glucose sensor projects to the amount necessary
to find financing, industrial or distribution partners for further development
and marketing of the resulting products.
On March 8, 2005, we announced that a meeting was held with executives of
Green Cross Medical Corp., of Seoul, South Korea. As a result of the meeting,
the parties agreed to jointly evaluate several possible ways to cooperate
including the joint development of a blood additive based on our patents.
Initially, we have furnished Green Cross with additional information about the
authorization requirements of some its products under German and Korean
regulation. In addition, we provided Green Cross with price quotations for our
marketable products.
In July, 2004, we signed a marketing and distribution contract with
cosmetics vendor Mercatura Biocosmetics AG, Achim, Germany ("Mercatura"). Under
the terms of the contract, Mercatura has obtained from us the exclusive right to
manufacture, market und distribute the Sangui formulation for skin regeneration
and anti-aging. We have sold to Mercatura a quantity of 60 kg of the preparation
to be used in test sales, which started in September 2004. Mercatura will pay us
per unit licensing fees for each product package sold. The licensing fees refer
to the ex-works price for the product and will be between 5.5 % and 8 %,
depending on the total revenue amount.
Initially, the contract covers the German speaking areas only. Mercatura is
obliged to submit on completion of its quarterly accounting its sales reports
for the preceding quarter confirmed by an independent auditor. These reports
will be the basis for the calculation of the royalties due to us. The parties
have agreed to extend the reach of this agreement to target markets world wide,
if our formulation will be included in the proposed cooperation between
Mercatura and Wolfgang Joop GmbH. As of March 15, Mercatura has informed us,
that the Anti-Aging formulation is planned to be a part of its "Wunderkind"
program.
In March 2005, we sold an initial quantity of our anti-cellulite gel to a
German cosmetics distributor. The distributor intends to offer the preparation
in German TV shop programs under its own brand name.
On March 9, 2005, we were granted the CE certification for our "Chitoskin"
wound pads authorizing the distribution of these medical products in the
European markets. The "CHITOSKIN" trademark was granted to us for the European
countries effective November 1, 2004. In the German market the wound pads will
be distributed by Karl Beese GmbH, Norderstedt, Germany, a leading medical
products distributor.
On April 15, 2005, a contract was signed to this effect. Under the terms of
the contract, we will provide unsterilized pads to Beese. Beese will take care
of sterilization, confectioning and packaging of the products which are to be
sold to hospitals and other institutions with particular demand for wound care
products. Marketing preparations are scheduled to start in May 2005.
Negotiations with distributors in other regions including Spain, Turkey, the
Arab countries and China are under way. For the Benelux countries cooperation
has been offered to Biologiq, Appeldorn, The Netherlands.
Page 10
Cost Savings
------------
As of August 31, 2004, contracts with most employees were cancelled. As of
May 1, 2005, we employ 2 fulltime employees and have consulting arrangements
with 5 persons.
In total, management has been able to reduce our operating expenses by 31%
to approximately $866,000 in the first nine months of fiscal 2005, compared to
approximately $1,248,000 in the respective period of the last fiscal year.
General and administrative expenses have been reduced by 11% in the first nine
months of fiscal 2005 as compared to the respective period of last fiscal year.
This effort is also reflected in the net cash used in operating activities which
decreased 53% to approximately $499,000compared to approximately $1,069,000 net
cash used in operating activities in the respective period of last fiscal year.
FINANCIAL POSITION
------------------
We have resolved to use the existing authorized capital to offer shares to
certain investors. Inthe first nine months of the current fiscal year, the
company sold 4,500,000 shares of common stock to a number of German and Swiss
investors yielding cash proceeds of $275,000.
Our current assets decreased approximately $365,000, or 75%, from June 30,
2004 to approximately $122,000 at March 31, 2005. The decrease is primarily
attributable to a decrease in cash and cash equivalents of approximately
$279,000 and a decrease in taxes receivable of approximately $91,000. The
decrease in cash and cash equivalents results primarily from funding the current
year's operations of the Company with minimal revenues in the three- and
nine-month periods ended March 31, 2004.
We funded our operations primarily through our existing cash reserves and
the issuance of shares to certain investors. Our stockholders' equity decreased
approximately $398,000. The decrease is primarily caused by the Company's
current period net loss of approximately $734,000, an increase in accumulated
other comprehensive income of approximately $4,000 due to foreign currency
translation adjustments, and an increase in common stock of $305,000 from the
proceeds of stock issue in the current year.
RESULTS OF OPERATIONS
---------------------
Three months ended March 31, 2005 and 2004:
RESEARCH AND DEVELOPMENT. Research and development expenses decreased 81%
to approximately $47,000 in 2005 from approximately $254,000 in 2004. The
decrease is mainly attributed to the ongoing refocusing program.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
22% to approximately $164,000 in 2005 from approximately $134,000 in 2004. This
increase is mainly attributed to expanded marketing and restructuring program.
DEPRECIATION. Depreciation decreased 6% to approximately $15,000 in 2005
from approximately $16,000 in 2004. This decrease is mainly attributed to the
restructuring of Sangui GmbH.
NET LOSS. As a result of the above factors, the Company's consolidated net
loss was approximately $256,000, or $0.00 per common share, in 2005, compared to
approximately $441,000, or $0.01 per common share, in 2004.
Nine months ended March 31, 2005 and 2004:
RESEARCH AND DEVELOPMENT. Research and development expenses decreased 45%
to approximately $371,000 in 2005 from approximately $671,000 in 2004. The
decrease is mainly attributed to the ongoing refocusing program.
Page 11
GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased
11% to approximately $447,000 in 2005 from approximately $504,000 in 2004. This
decrease is mainly attributed to the ongoing refocusing program.
DEPRECIATION. Depreciation decreased 34% to approximately $48,000 in 2005
from approximately $73,000 in 2004. This decrease is mainly attributed to the
restructuring of Sangui GmbH.
NET LOSS. As a result of the above factors, the Company's consolidated net
loss was approximately $730,000, or $0.02 per common share, in 2005, compared to
approximately $1,116,000, or $0.03 per common share, in 2005.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
For the nine months ended March 31, 2005, net cash used in operating
activities decreased to approximately $499,000 from approximately $1,069,000 in
the corresponding period in 2004, primarily related to a decrease in the
Company's consolidated net loss as a result of the ongoing refocusing program.
For the nine months ended December 31, 2004, net cash used by investing
activities increased to approximately $13,000 from approximately $591,000 net
cash provided by investing activities in the corresponding period in 2004. The
increase is due to the decrease in collections on notes receivable and decrease
in maturities of marketable securities during the nine months ended March31,
2005, compared to the corresponding period in 2004.
For the nine months ended March 31, 2005, net cash provided by financing
activities increased to approximately $229,000 compared to $27,000 used in the
corresponding period in 2004. The increase is due to the sale of treasury stock
of approximately $51,000 combined with proceeds received from the issuance of
common stock of $305,000 compared to the purchase of treasury stock of
approximately $27,000 in 2004.
Working capital surplus was approximately $33,000, at March 31, 2005, a
decrease of approximately $400,000 from June 30, 2004 due primarily to the
Company's net loss for the nine-month period.
At March 31, 2005, the Company had cash of approximately $32,000. The
Company will need substantial additional funding to fulfil its business plan and
the Company intends to explore financing sources for its future development
activities. No assurance can be given that these efforts will be successful.
ITEM 3 - CONTROLS AND PROCEDURES
--------------------------------
(a) Evaluation of disclosure controls and procedures. Our principal executive
officer and principal financial officer have evaluated the effectiveness of
our disclosure controls and procedures (as defined in rules 13a-14 (c) and
15d-14 (c) under the Exchange Act), as of a date within 90 days of the
filing of this Quarterly Report on Form 10-QSB. Based on such evaluation,
they have concluded that as of such date, our disclosure controls and
procedures are effective and designed to ensure that information required
to be disclosed by us in reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time period
specified in applicable SEC rules and forms.
(b) Changes in internal controls. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of evaluation by our principal executive
officer and principal financial officer.
Page 12
PART II - OTHER INFORMATION
---------------------------
ITEM 1 - LEGAL PROCEEDINGS
--------------------------
On August 4, 2003, SanguiBioTech AG filed a lawsuit against a former
director of SGBI, claiming that some payments incurred by the defendant were
unjustified under German law (Landgericht Munich I Court, Case No. 34 O
14027/03). The defendant denied that the claim is justified and brought forward
the opinion that he could claim additional fees. On February 10, 2005, the
lawsuit was settled by order of the Court. All claims and counterclaims between
the parties were irrevocably dismissed.
The Company is not aware of pending claims or assessments which may have a
material adverse impact on the Company's financial position or results of
operations.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
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In February, 2005, the company sold 4,500,000 shares of common stock to
five German and Swiss investors yielding a cash contribution of $275,000. No
underwriters were used. The offer and sale of the shares occurred outside of the
United States and the shares were sold and issued to individuals who reside
outside of the United States, pursuant to an exemption from registration under
Rule 901, Regulation S of the Securities Act of 1933, as amended.
In February 2005, the company issued 200,000 restricted shares of common
stock in consideration of consulting services valued at $17,500 to Joachim
Fleing, a director of the Company. No underwriters were used. The offer of the
shares occurred outside the United States and the shares were issued to an
individual who resides outside the United States, pursuant to an exemption from
registration under section 4(2)of the Securities Act of 1933, as amended.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
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None.
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ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
--------------------------------------------------------------
None.
ITEM 5 - OTHER INFORMATION
--------------------------
Sangui Directors Christpoh Ludz and Markus Volpers resigned effective
February 7, 2005. The Board appointed Thomas Striepe, the Vice President of
Accounting and Controlling of Dr. Ludz, GmbH, Hamburg, as a director. The Board
of Directors now consists of Wolfgang Barnikol, Joachim Lutz, Thomas Striepe and
Joachim Fleing.
ITEM 6 - EXHIBITS
-----------------
31** Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section
1350
32** 906 Certification
_______________
** Filed Herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SANGUI BIOTECH INTERNATIONAL, INC.
Date: May 23, 2005 By: /s/ Wolfgang Barnikol
_______________________________
Wolfgang Barnikol
President, Chief Executive Officer
and Chief Financial Officer
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