form10q.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________________

FORM 10-Q
 
    (Mark One)
 
    [  X  ]   QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
        For Quarterly period Ended: September 30, 2008; or

 
    [       ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
        For the transition period __________ to __________

 
Commission File Number: 0-21271
_________________________

SANGUI BIOTECH INTERNATIONAL, INC.
________________________________________________
(Exact name of Small Business Issuer as specified in its charter)
 
Colorado 84-1330732
(State or other Jurisdiction of Incorporation or Organization)   (I.R.S. Employer Identification No.)
              
Alfred-Herrhausen-Str. 44, 58455 Witten, Germany
_____________________________
(Address of principal executive offices)

 
011-49-2302-915-204
___________________________________
(Issuer's telephone number, including area code)
 
    Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that a registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x   No  o
 
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.   See definitions of  “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large Accelerated Filer   o
 Accelerated Filer   o
   
 Non-Accelerated Filer   o
 Smaller Reporting Company   x
                                           
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes  £          No  T
 
     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.   As of November 15, 2008, there were 50,000,000 shares of the issuer's Common Stock, no par value, issued and outstanding.
   
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  o   No  x
  
 
SANGUI BIOTECH INTERNATIONAL, INC.
 
Report on Form 10-Q
 
For the Quarter Ended September 30, 2008
 
 
INDEX
----------
 

 
  
 
 
  
 
 
 
 
ii
 
PART I - FINANCIAL INFORMATION
 
ITEM 1 – CONSOLIDATED FINANCIAL STATEMENTS
 
    The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q 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 consolidated results of operations and financial position have been included and all such adjustments are of a normal recurring nature.
 
    Our unaudited consolidated balance sheet as of September 30, 2008 and our unaudited consolidated statements of operations for the three month periods ended September 30, 2008 and 2007, and the unaudited consolidated statements of cash flows for the three month periods ended September 30, 2008 and 2007, are attached hereto and incorporated herein by this reference.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1

 
Condensed Consolidated Balance Sheets
  
             
             
             
             
             
ASSETS
  
             
   
September 30,
    
June 30,
  
   
2008
    
2008
  
CURRENT ASSETS
  
(Unaudited)
        
             
   Cash
   $ 65,457     $ 229,717  
    Accounts receivable
     4,200       5,021  
    Inventory
     149,450       127,109  
    Shareholder loans receivable
     422,505       533,059  
    Prepaid expenses and other assets
     16,602       28,627  
                 
        Total Current Assets
     658,214       923,533  
                 
FIXED ASSETS, Net
                
                 
    Property and equipment
     5,395       7,021  
                 
        Total Fixed Assets
     5,395       7,021  
                 
OTHER ASSETS
                
                 
    Tax refunds receivable
     27,680       40,166  
    Other miscellaneous assets
     214,486       221,208  
                 
        Total Other Assets
     242,166       261,374  
                 
        TOTAL ASSETS
   $ 905,775     $ 1,191,928  
 
 
 

The accompanying condensed notes are an integral part of these interim consolidated financial statements.
 
2

 
Condensed Consolidated Balance Sheets (Continued)
  
             
             
             
             
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  
             
             
   
September 30,
    
June 30,
  
   
2008
    
2008
  
   
(Unaudited)
        
CURRENT LIABILITIES
            
             
Accounts payable and accrued expenses
   $ 297,285     $ 317,378  
Notes payable
     1,952,841       1,952,841  
Notes payable - related
     -       0  
                 
Total Current Liabilities
     2,250,126       2,270,219  
                 
TOTAL LIABILITIES
     2,250,126       2,270,219  
                 
STOCKHOLDERS' EQUITY (DEFICIT)
                
                 
Preferred stock, no par value; 5,000,000 shares
                
  authorized, -0- shares issued and outstanding
     -       -  
Common stock, no par value; 50,000,000 shares
                
  authorized, 50,000,000 shares
                
  issued and outstanding
     18,969,358       18,969,358  
Additional paid-in capital
     3,138,674       3,138,674  
Accumulated other comprehensive income
     89,864       154,272  
Accumulated deficit
     (23,542,247 )     (23,340,595 )
                 
Total Stockholders' Equity (Deficit)
     (1,344,351 )     (1,078,291 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS'
                
  EQUITY (DEFICIT)
   $ 905,775     $ 1,191,928  

 
 

The accompanying condensed notes are an integral part of these interim consolidated financial statements. 

  3 

 
Condensed Consolidated Statements of Operations
  
(Unaudited)
  
             
             
   
For the Three
  
   
Months Ended
  
   
September 30,
  
   
2008
    
2007
  
             
             
REVENUES
   $ 2,259     $ -  
                 
COST OF SALES
     -       -  
                 
GROSS PROFIT
     2,259       -  
                 
OPERATING EXPENSES
                
                 
Research and development
     30,694       89,502  
Depreciation and amortization
     1,405       1,214  
General and administrative
     157,344       139,391  
                 
Total Operating Expenses
     189,443       230,107  
                 
OPERATING LOSS
     (187,184 )     (230,107 )
                 
OTHER INCOME (EXPENSE)
                
                 
Interest income
     7,564       -  
Interest expense
     (22,032 )     (12,827 )
Other income (loss)
     -       -  
                 
Total Other Income (Expense)
     (14,468 )     (12,827 )
                 
NET LOSS
     (201,652 )     (242,934 )
                 
OTHER COMPREHENSIVE INCOME
                
                 
Foreign currency translation adjustments
     (64,408 )     868,172  
Unrealized gain on marketable securities
     -       -  
                 
Total Other Comprehensive Income
     (64,408 )     868,172  
                 
                 
COMPREHENSIVE INCOME (LOSS)
   $ (266,060 )   $ 625,238  
                 
BASIC AND DILUTED LOSS PER SHARE
   $ (0.00 )   $ (0.00 )
                 
WEIGHTED AVERAGE NUMBER
                
  OF SHARES OUTSTANDING
     50,000,000       50,000,000  

 

 
The accompanying condensed notes are an integral part of these interim consolidated financial statements.
 
4

 
Condensed Consolidated Statements of Cash Flows
  
(Unaudited)
  
             
             
   
For the Three
  
   
Months Ended
  
   
September 30,
  
   
2008
    
2007
  
CASH FLOWS FROM OPERATING ACTIVITIES
            
Net loss
   $ (201,652 )   $ (242,934 )
Adjustments to reconcile net loss to net cash
                
  used by operating activities:
                
Depreciation and amortization
     1,405       1,214  
Common stock issued for services
     -       -  
Changes in operating assets and liabilities
                
Decrease in accounts receivable
     821       11,957  
Decrease (Increase) in inventories
     (22,341 )     (5,984 )
(Increase) decrease in prepaid expenses and other assets
     12,025       5,215  
(increase) decrease in other assets
     19,208       9,705  
Increase (decrease) in accounts payable
                
  and accrued expenses
     (20,093 )     (18,541 )
                 
Net Cash Used by Operating Activities
     (210,627 )     (239,368 )
                 
                 
CASH FLOWS FROM INVESTING ACTIVITIES
     221       (2,752 )
                 
                 
CASH FLOWS FROM FINANCING ACTIVITIES
                
                 
Cash received on shareholder loans receivable
     110,554       -  
Cash received on promissory notes
     -       1,265,465  
Payment of notes payable
     -       (134,742 )
                 
Net Cash Provided by Financing Activities
     110,554       1,130,723  
                 
                 
EFFECT OF EXCHANGE RATE CHANGES
     (64,408 )     (868,172 )
                 
NET INCREASE (DECREASE) IN CASH
     (164,260 )     20,431  
                 
CASH AT BEGINNING OF PERIOD
     229,717       24,548  
                 
CASH AT END OF PERIOD
   $ 65,457     $ 44,979  
                 
SUPPLIMENTAL DISCLOSURES OF
                
CASH FLOW INFORMATION
                
                 
CASH PAID FOR:
                
                 
Interest
   $ -     $ -  
Income Taxes
   $ -     $ -  
                 
 NON CASH FINANCING ACTIVITIES:
                
Common stock issued for debt
   $ -     $ -  
 
 
 
 
  The accompanying condensed notes are an integral part of these interim consolidated financial statements. 
 
5
 
 
Notes to the Condensed Consolidated Financial Statements
 
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. 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, 2008. 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-month period ended September 30, 2008 are not necessarily indicative of the results that may be expected for the full fiscal year ending June 30, 2009.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Sangui Biotech International, Inc., incorporated in Colorado in 1995, and its wholly owned subsidiaries, Sangui Biotech, Inc., SanguiBioTech AG, GlukoMediTech AG, and Sangui BioTech PTE Ltd., (collectively, the "Company") have been engaged in the research, development, manufacture, and sales of medical and cosmetic products.

On June 30, 2003, GlukoMediTech AG ("Gluko AG") was merged into Sangui BioTech AG ("Sangui AG"). Effective November 4, 2003, Sangui AG was converted into Sangui BioTech 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 hemoglobin, blood substitutes and blood additives) as well as in the development of glucose implant sensors.

The operations of Sangui BioTech, Inc. and Sangui BioTech PTE Ltd Singapore, two former wholly-owned subsidiaries, were discontinued and dissolved during 2002.

     The operations of Sangui BioTech, Inc. ("Sangui USA") were discontinued during 2002 upon the sale of its in vitro immunodiagnostics business and the subsequent merger of Sangui USA with and into the parent company, Sangui BioTech International, Inc., effective December 31, 2002. Sangui BioTech PTE Ltd ("Sangui Singapore") was a regional office for the Company that carried out research and development projects in conjunction with Sangui GmbH and Sangui Singapore. The Company discontinued the operations of Sangui Singapore in August 2002. The Singapore office was closed effective December 31, 2002.

Consolidation

The consolidated financial statements include the accounts of Sangui BioTech International, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
 

  6
 
 
SANGUI BIOTECH INTERNATIONAL, INC.
Notes to the Condensed Consolidated Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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.

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 no 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.

Going Concern

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 $23,542,247 as of September 30, 2008 and has been significantly reducing its working capital since June 30, 2004. The Company incurred a net loss applicable to common stockholders of $201,652 during the three months ended September 30, 2008 and used cash in operating activities of $210,627 for the three months ended September 30, 2008. 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.

Cash and Cash Equivalents

The Company maintains its cash in bank accounts in Germany. Cash and cash equivalents include time deposits for which the Company has no requirements for compensating balances. The Company has not experienced any losses in its uninsured bank accounts.  At September 30, 2008 the Company had no cash equivalents.
 

7 
 
 
SANGUI BIOTECH INTERNATIONAL, INC.
Notes to the Condensed Consolidated Financial Statements
 
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue Recognition

Revenue is recognized when the sales amount is determined, shipment of goods to the customer has occurred and collection is reasonably assured. Product is shipped FOB origination.

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 gives 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 September 30, 2008, 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 - COMMITMENTS AND CONTINGENCIES

Litigation

The Company may, from time to time, be involved in various legal disputes 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.
 

  8
 
 
SANGUI BIOTECH INTERNATIONAL, INC.
Notes to the Condensed Consolidated Financial Statements

NOTE 3 – PROMISSORY NOTES

As of September 30, 2008, the Company had $1,952,841 in outstanding promissory notes payable.  These notes are convertible into common stock at conversion rates of 0.09 to 0.13 and bear interest at a rate of 5.0 percent per annum.


 



9
 
 
 
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
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
 
     The Company's mission is the development of novel and proprietary pharmaceutical, medical and cosmetic products.  The Company develops its products through its wholly owned German subsidiary Sangui GmbH.  The Company is seeking to market and sell some or all of their products through partnerships with industry partners.
 
    The focus of Sangui GmbH has been the development of oxygen carriers capable of providing oxygen transport in humans in the event of acute and/or chronic lack of oxygen due to arterial occlusion, anaemia or blood loss whether due to surgery, trauma, or other causes.  Sangui GmbH has thus far focused its development and commercialization efforts of such artificial oxygen carriers by reproducing and synthesizing polymers out of native hemoglobin of defined molecular sizes.  Sangui GmbH, has in addition developed external applications of oxygen transporters in the medical and cosmetic fields in the form of gels and emulsions for the regeneration of the skin
 
    Sangui GmbH holds the exclusive distribution rights for Chitoskin wound pads in the European Union and various other countries.  Sangui GmbH has filed a patent cooperation treatment applications (“PCT”) for the production and use of improved Chitoskin wound pads using gelatine instead of collagen as the carrier substance.
 
Artificial Oxygen Carriers
    
    Sangui GmbH develops several products based on polymers of purified natural porcine hemoglobin with oxygen carrying abilities that are similar to native hemoglobin.  These are (1) oxygen carrying blood additives and (2) oxygen carrying blood volume substitutes.
 
    In December 1997, Sangui GmbH decided that porcine hemoglobin should be used as the basic material for its artificial oxygen carriers.  In March 1999, Sangui GmbH decided which hemoglobin hyperpolymer would go into preclinical investigation and that glutaraldehyde would be utilized as a cross linker, and further that the polymer hemoglobin be chemically masked to prevent protein interaction in blood plasma.  The fine adjustment of the molecular formula of the artificial oxygen carriers - optimized for laboratory scale production - was finalized in the summer of 2000.
 
    The experiments completed in Sangui GmbH’s laboratories demonstrated that it is possible to polymerize hemoglobins isolated from porcine blood resulting in huge soluble molecules, so-called hyperpolymers.  In August 2000, Sangui GmbH finalized its work on the pharmaceutical formulation of the oxygen carrier for laboratory scale.  In February 2001 a pilot production in a laboratory scale was carried out in SGBI's clean room.  The resulting product was applied in single volunteers in pilot self-experiments.
 
    The blood additives and blood substitute projects were halted in 2003 due to the lack of financing for the pre-clinical test phase of the blood additives.  In October 2006, a contract was entered into between Sangui GmbH and ERC Nano Med S.A. de C.V. of Monterrey, Mexico (“ERC”), which provides that ERC will establish a production facility in Mexico to produce sufficient quantities of the blood additive.  In cooperation with the medical faculty of Monterrey University and the Mexican National Health Organizations, ERC will initiate all necessary steps to begin the pre-clinical test phase for the products as soon as possible.  It is anticipated that this will lead to the FDA authorization process in due course.
 
    According to regulatory requirements, all drugs must complete preclinical and clinical trials before approval (e.g. Federal Drug Administration approval) and market launch.  The Company’s management believes that the European and FDA approval process will take at a minimum several years to complete.
 
 
10
Nano Formulations for the Regeneration of the Skin
 
    Healthy skin is supplied with oxygen both from the inside as well as through diffusion from the outside.  A lack of oxygen will cause degenerative alterations, ranging from premature aging, to surface damage, and even as extensive as causing open wounds.  The cause for the lack of oxygen may be a part of the normal aging process, but it may also be caused by burns, radiation, trauma, or a medical condition.  Impairment of the blood flow, for example caused by diabetes mellitus or by chronic venous insufficiency, can also lead to insufficient oxygen supply and the resulting skin damage.
 
    The nano-emulsion-based preparations now being sold by Sangui GmbH have been designed to supporting the regeneration of the skin by improving its oxygen supply.  The products Sangui GmbH are currently focussing on are an anti-aging formulation and treatment and an anti-cellulite formulation for the cosmetics market.  The products were thoroughly tested by an independent research institute and received top marks for skin moisturization, and enhanced skin elasticity, respectively.
 
    Sangui’s cosmetic business model is reliant upon cooperation with its manufacturing and distribution partners.  Sangui has its various formulations produced by a contract manufacturer and sells quantities of the products either in bulk or in customized private label packaging, as requested.  In addition, Sangui started to sell its cosmetic products under its own brand “Pure MO2isture” via an internet shop as of mid September 2006 which generates consistant sales, albeit at a low level.
    
    As of October 12, 2008, subsequent to the period covered by this report, SanguiBioTech GmbH and Fanales GmbH, Recklinghausen, Germany, entered into a cooperation with regard to marketing and sales of the Pure Moisture cosmetics.  The agreement comprises an initial test phase of six months.  Under the terms of the mutually non-exclusive agreement, Fanales will sell Sangui’s Pure Moisture cosmetics in a specialized shop in Dusseldorf and strive to establish additional distribution channels.
 
Chitoskin Wound Pads
 
    In October, 2008, subsequent to the period covered in this report, management and the medical staff of SanguiBioTech GmbH held a series of presentations at leading medical institutions in the Kingdom of Jordan.  The series of presentations had been organized by Abu-Jabir Industrial and Marketing Consulting.  This company is currently establishing a sales network for Sangui products in the Arab countries.  Their distribution partner in Jordan will be the pharmaceuticals trading house Nobles Medical Supplies.
 
FINANCIAL POSITION
 
    The Company's current assets decreased $265,319, or 29%, from June 30, 2008 to $658,214 at September 30, 2008.  The decrease is primarily attributable to a $164,260 decrease in cash and a $110,554 decrease in shareholder loans receivable.
 
    The Company's net property and equipment decreased $1,626, or 23% from June 30, 2008 to $5,395 at September 30, 2008.  The decrease is primarily attributable to current period depreciation, partially offset by minor purchases of fixed assets.
 
    The Company funded its operations primarily through its existing cash reserves and cash received from the issuance of promissory notes payable.  During the three months ended September 30, 2008, the Company's stockholders' deficit increased $266,060.  This increase is due primarily to the Company's current period net loss of $201,652, and to other comprehensive income related to fluctuations in foreign currency exchange rates.
 
 
11
RESULTS OF OPERATIONS

Three months ended September 30, 2008 and 2007:
 
    RESEARCH AND DEVELOPMENT.  Research and development expenses decreased significantly to $30,694 in 2008 from $89,502 in 2007.  The decrease is mainly attributed to the Company’s attempting to further develop markets for its existing product base.  The Company is seeking additional sources to provide financing for additional research and development.
 
    GENERAL AND ADMINISTRATIVE.  General and administrative expenses increased 11% to $157,344 in 2008 from $139,391 in 2007.  This increase is mainly attributed to the Company’s emphasis on becoming current with its audit process and its filings with the Securities and Exchange Commission, in addition to its attempt to solidify the Company’s standing in new and existing markets.
 
    DEPRECIATION AND AMORTIZATION.  Depreciation increased 14% to $1,405 in 2008 from $1,214 in 2007.  This increase is mainly attributed to the small purchases of additional fixed assets.
 
    NET LOSS.  As a result of the above and other factors, the Company's consolidated net loss was $201,652, or $0.00 per common share, for the three months ended September 30, 2008, compared to $242,934, or $0.01 per common share, during the comparable period in 2007.

LIQUIDITY AND CAPITAL RESOURCES
 
    For the three months ended September 30, 2008, net cash used in operating activities decreased to $210,627 from $239,368 in the corresponding period in 2007, primarily related to the Company’s decreased net loss for the period.
 
    The Company had a working capital deficit of $1,591,912 at September 30, 2008, an increase of $245,226 from June 30, 2008.  At September 30, 2008, the Company had cash of $65,457.  The Company will need substantial additional funding to fulfill 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.
 
 
12

 
 
    We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.


Evaluation of Disclosure Controls and Procedures
 
    We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that information is accumulated and communicated to our management, including our principal executive and principal financial officer (whom we refer to in this periodic report as our Certifying Officers), as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our Certifying Officers, the effectiveness of our disclosure controls and procedures as of September 30, 2008, pursuant to Rule 13a-15(b) under the Securities Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of September 30, 2008, our disclosure controls and procedures were effective.
 
Changes in Internal Controls
 
    There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION
 
ITEM 1 - LEGAL PROCEEDINGS
 
    On February 14, 2007, Dr. Rainer Felfe, filed a claim (4 Ca 431/07) against the Company and its subsidiary, SanguiBioTech GmbH, with the Industrial Relations Court in Bochum, Germany (Arbeitsgericht Bochum). Dr. Felfe's claim states that he is entitled to receive outstanding wages and salaries owed to Prof. Dr. Dr. Wolfgang Barnikol by the Company, or its subsidiary, in the amount of approximately 370,000 euros (approximately US $503,200) as partial relief of a judgment rendered in a civil case against Dr. Barnikol (Oberlandesgericht Düsseldorf I 6 U 96/06). Dr. Barnikol has never made a claim against the Company, or its subsidiary, for outstanding wages with any governmental agency and acknowledges there are no outstanding wages due to him by either the Company or its subsidiary. The claim by Dr. Felfe has been declared pending by the Industrial Relations Court until a final judgment is rendered by the Federal Supreme Court in the appeal to the above civil case. The Company believes the claim lacks merit and plans to vigorously defend this claim.
 
    The Company is not aware of pending claims or assessments, other than as described above, which may have a material adverse impact on the Company’s financial position or results of operations.
 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
 
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
    None.
    
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
 
    None.
 
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
 
    None.
 
ITEM 5 - OTHER INFORMATION
 
Resignation of Director
 
    On September 30, 2008, Prof. Dr. Dr. Wolfgang Barnikol submitted his resignation as a Director of the Board of Directors of the Registrant, effective as of September 30, 2008. There were no disagreements between the Registrant and Dr. Barnikol that led to his resignation.

13
ITEM 6 - EXHIBITS
 
2.1
 Exchange Agreement between MRC Legal Services LLC and SanguiBioTech International, Inc., dated of March 31, 2000 (1)
3.1  Articles of Incorporation of the Company (1)
3.2 Bylaws of the Company (1)
4.1 Stock Option Agreement between Professor Wolfgang Barnikol and Sangui Biotech International, Inc. dated November 3, 1999 (2)
10.1
Office Lease between Brookhollow Office Park and Sangui Biotech International, Inc. dated September 4, 1996 and as amended 2000 (2)
10.2 Fee Agreement between GlukoMeditech AG and Dr. Sieglinde Borchert dated June 15, 1998 (2)
10.3 Fee Agreement between SanguiBiotech AG and Dr. Sieglinde Borchert dated June 15, 1998 (2)
10.4 Service Contract between GlukoMeditech AG and Dr. Wolfgang Barnikol dated June 30, 1998 (2)
10.5 Service Contract between SanguiBiotech AG and Dr. Wolfgang Barnikol dated June 30, 1998 (2)
10.6 Service Agreement between Axel Kleinkorres Promotionsagentur and Sangui Biotech International, Inc. dated April 26, 1999 (2)
10.7 Amendment to Service Agreement between Axel Kleinkorres Promotionsagentur and Sangui Biotech International, Inc. dated August 18, 2000 (2)
10.8 Appropriation Notice from North-Rhine-Westphalia to GlukoMediTech AG dated November 30, 1998 (2)
10.9 Appropriation Notice from North-Rhine-Westphalia SanguiBiotech AG dated November 30, 1998 (2)
10.10 Lease Contract for Business Rooms between Research and Development Centre, Witten, Germany and GlukoMeditech AG dated June 6, 2000 (2)
10.11 Additional Agreement to Lease Contract between Research and Development Centre, Witten, Germany and GlukoMeditech AG dated June 7, 2000 (2)
10.12 Additional Agreement to Lease Contract between Research and Development Centre, Witten, Germany and SanguiBiotech AG dated June 7, 2000 (2)
10.13 Assignment of Patents and Royalty Agreement with Dr. Wolfgang Barnikol (3)
10.14 Prolongation Letter for SanguiBiotech AG Grants (4)
16.1  Auditor Letter from HJ & Associates, LLC (5)
21.1 Subsidiaries of the Company (6)
31.01 Certification of CEO Pursuant to Rule 13a-14(a) and 15d-14(a), filed herewith
31.02 Certification of CFO Pursuant to Rule 13a-14(a) and 15d-14(a), filed herewith
32.01  Certification Pursuant to Section 1350 of Title 18 of the United States Code, filed herewith
99.01 Press Release Dated October 21, 2008, filed herewith
99.02 Press Release Dated October 22, 2008, filed herewith
99.03 Press Release Dated October 29,2008, filed herewith
     _____________________________________________________________________________________________________________________
        (1) Filed as an exhibit to the report on Form 8-K, filed on or about April 4, 2000     
        (2) Filed as an exhibit to the report on Form 10-KSB for period ended June 30, 2000, filed on October 13, 2000
        (3) Filed as an exhibit to the amended report on Form 10-KSB/A for the period ended June 30, 2000, filed on November 20, 2000
        (4) Filed as an exhibit to the report on Form 10-KSB for the period ended June 30, 2001, filed on September 28, 2001
        (5) Filed as an exhibit to the report on Form 8-K/A filed on October 9, 2007
        (6) Filed as an exhibit to the report on Form 10-QSB for the period ended September 30, 2006, filed on June 10, 2008
 
 
    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.
 
 
 
 
Dated: November 19, 2008     /s/ Thomas Striepe       
                    __________________________________________
                    By: Thomas Striepe
                    Chief Executive Officer
 
 
 
 
Dated: November 19, 2008     /s/ Joachim Fleing     
                    __________________________________________
                    By: Joachim Fleing
                    Chief Financial Officer
 
 
14