form10qsb.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
_______________________
FORM
10-QSB
(Mark
One)
[ X ] QUARTERLY
REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For
Quarterly period Ended: March
31, 2007; 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 o No
x
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
The number of shares
outstanding of the issuer's common stock, no par value, as of May 28, 2008, was
50,000,000
Transitional Small
Business Disclosure Format. Yes o No
x
SANGUI
BIOTECH INTERNATIONAL, INC.
Report on
Form 10-QSB
For the
Quarter Ended March 31, 2007
INDEX
----------
ii
ITEM 1 – CONSOLIDATED
FINANCIAL STATEMENTS
The
accompanying unaudited consolidated 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 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 March 31, 2007 and our unaudited
consolidated statements of operations for the three month periods ended March
31, 2007 and 2006, and the unaudited consolidated statements of cash flows for
the three month periods ended March 31, 2007 and 2006, are attached hereto
and incorporated herein by this reference.
1
|
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
|
June
30,
|
|
|
2007
|
|
|
2006
|
|
CURRENT
ASSETS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$ |
30,331 |
|
|
$ |
24,548 |
|
Accounts
receivable
|
|
|
25,874 |
|
|
|
16,601 |
|
Inventory
|
|
|
21,742 |
|
|
|
14,720 |
|
Prepaid
expenses and other assets
|
|
|
10,006 |
|
|
|
15,060 |
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
87,953 |
|
|
|
70,929 |
|
|
|
|
|
|
|
|
|
|
FIXED
ASSETS, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and
equipment
|
|
|
4,773 |
|
|
|
11,708 |
|
|
|
|
|
|
|
|
|
|
Total
Fixed Assets
|
|
|
4,773 |
|
|
|
11,708 |
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents
and licenses, net
|
|
|
6,736 |
|
|
|
23,460 |
|
Other
miscellaneous assets
|
|
|
73,100 |
|
|
|
17,809 |
|
|
|
|
|
|
|
|
|
|
Total
Other Assets
|
|
|
79,836 |
|
|
|
41,269 |
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$ |
172,562 |
|
|
$ |
123,906 |
|
The
accompanying condensed notes are an integral part of these interim consolidated
financial statements.
2
SANGUI
BIOTECH INTERNATIONAL, INC.
|
|
Consolidated
Balance Sheets (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31,
|
|
|
June
30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(Unaudited)
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
386,006 |
|
|
$ |
335,488 |
|
Notes
payable
|
|
|
113,134 |
|
|
|
172,122 |
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
499,140 |
|
|
|
507,610 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
499,140 |
|
|
|
507,610 |
|
|
|
|
|
|
|
|
|
|
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 and 47,503,749 shares
|
|
|
|
|
|
|
|
|
issued
and outstanding, respectively
|
|
|
18,969,358 |
|
|
|
18,969,358 |
|
Additional
paid-in capital
|
|
|
1,958,376 |
|
|
|
1,958,376 |
|
Accumulated
other comprehensive income
|
|
|
996,691 |
|
|
|
453,434 |
|
Accumulated
deficit
|
|
|
(22,251,003 |
) |
|
|
(21,764,872 |
) |
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity (Deficit)
|
|
|
(326,578 |
) |
|
|
(383,704 |
) |
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS'
|
|
|
|
|
|
|
|
|
EQUITY
(DEFICIT)
|
|
$ |
172,562 |
|
|
$ |
123,906 |
|
The
accompanying condensed notes are an integral part of these interim consolidated
financial statements.
3
|
|
Consolidated
Statements of Operations
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Three
|
|
|
For
the Nine
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
|
March
31,
|
|
|
March
31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$ |
211,438 |
|
|
$ |
41,672 |
|
|
$ |
347,755 |
|
|
$ |
95,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF SALES
|
|
|
135,031 |
|
|
|
17,019 |
|
|
|
254,900 |
|
|
|
32,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
76,407 |
|
|
|
24,653 |
|
|
|
92,855 |
|
|
|
62,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
41,100 |
|
|
|
32,960 |
|
|
|
93,245 |
|
|
|
82,870 |
|
Depreciation
and amortization
|
|
|
6,333 |
|
|
|
6,482 |
|
|
|
20,340 |
|
|
|
28,351 |
|
General
and administrative
|
|
|
162,954 |
|
|
|
129,468 |
|
|
|
478,442 |
|
|
|
375,772 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
210,387 |
|
|
|
168,910 |
|
|
|
592,027 |
|
|
|
486,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
LOSS
|
|
|
(133,980 |
) |
|
|
(144,257 |
) |
|
|
(499,172 |
) |
|
|
(424,090 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
- |
|
|
|
94 |
|
|
|
90 |
|
|
|
94 |
|
Interest
expense
|
|
|
(5,953 |
) |
|
|
(3,029 |
) |
|
|
(16,094 |
) |
|
|
(8,352 |
) |
Other
income (loss)
|
|
|
140 |
|
|
|
802 |
|
|
|
29,045 |
|
|
|
9,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Income (Expense)
|
|
|
(5,813 |
) |
|
|
(2,133 |
) |
|
|
13,041 |
|
|
|
1,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
|
(139,793 |
) |
|
|
(146,390 |
) |
|
|
(486,131 |
) |
|
|
(423,031 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustments
|
|
|
120,969 |
|
|
|
(7,236 |
) |
|
|
543,257 |
|
|
|
5,651 |
|
Unrealized
gain on marketable securities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Comprehensive Income
|
|
|
120,969 |
|
|
|
(7,236 |
) |
|
|
543,257 |
|
|
|
5,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
INCOME (LOSS)
|
|
$ |
(18,824 |
) |
|
$ |
(153,626 |
) |
|
$ |
57,126 |
|
|
$ |
(417,380 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER
SHARE
|
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OF
SHARES OUTSTANDING
|
|
|
50,000,000 |
|
|
|
48,503,749 |
|
|
|
50,000,000 |
|
|
|
48,332,216 |
|
The
accompanying condensed notes are an integral part of these interim consolidated
financial statements.
4
|
|
Statements
of Cash Flows
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
For
the Nine
|
|
|
|
Months
Ended
|
|
|
|
March
31,
|
|
|
|
2007
|
|
|
2006
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(486,131 |
) |
|
$ |
(423,031 |
) |
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
used
by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
|
28,351 |
|
|
|
28,351 |
|
Common
stock issued for services
|
|
|
- |
|
|
|
10,837 |
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Decrease
(Increase) in accounts receivable
|
|
|
(9,273 |
) |
|
|
(2,948 |
) |
Decrease
(Increase) in inventory
|
|
|
(7,022 |
) |
|
|
(5,151 |
) |
Decrease
(Increase) in prepaid expenses and other assets
|
|
|
(33,513 |
) |
|
|
51,488 |
|
Increase
(Decrease) in accounts payable and accrued expenses
|
|
|
50,518 |
|
|
|
97,999 |
|
|
|
|
|
|
|
|
|
|
Net
Cash Used by Operating Activities
|
|
|
(457,070 |
) |
|
|
(242,455 |
) |
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(21,416 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net
Cash Used by Investing Activities
|
|
|
(21,416 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from notes payable
|
|
|
(58,988 |
) |
|
|
57,218 |
|
Sale
of common stock for cash
|
|
|
- |
|
|
|
175,502 |
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
(58,988 |
) |
|
|
232,720 |
|
|
|
|
|
|
|
|
|
|
EFFECT
OF EXCHANGE RATE CHANGES
|
|
|
543,257 |
|
|
|
5,651 |
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
|
5,783 |
|
|
|
(4,084 |
) |
|
|
|
|
|
|
|
|
|
CASH
AT BEGINNING OF PERIOD
|
|
|
24,548 |
|
|
|
9,497 |
|
|
|
|
|
|
|
|
|
|
CASH
AT END OF PERIOD
|
|
$ |
30,331 |
|
|
$ |
5,413 |
|
|
|
|
|
|
|
|
|
|
SUPPLIMENTAL
DISCLOSURES OF
|
|
|
|
|
|
|
|
|
CASH
FLOW INFORMATION
|
|
|
|
|
|
|
|
|
CASH
PAID FOR:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
- |
|
|
$ |
- |
|
Income
Taxes
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
NON
CASH FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Common
stock issued for debt
|
|
$ |
- |
|
|
$ |
24,132 |
|
The
accompanying condensed notes are an integral part of these interim consolidated
financial statements.
5
Notes to
the 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, 2006. 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 March 31, 2007 are not necessarily indicative of the
results that may be expected for the full fiscal year ending June 30,
2007.
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") were 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.
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, has been engaged in the
research, development, manufacture, and sales of medical and cosmetic
products.
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 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.
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
$22,251,003 as of March 31, 2007 and has been significantly reducing
its working capital since June 30, 2004. The Company incurred a net loss
applicable to common stockholders of $486,131 during the nine months ended March
31, 2007 and used cash in operating activities of $457,070 for the nine months
ended March 31, 2007. 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 December 31, 2006 the Company had no cash
equivalents.
7
SANGUI BIOTECH INTERNATIONAL,
INC.
Notes to
the 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 December 31,
2006 and 2005, 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.
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 dueto 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, subsequent to the period covered by this
report, 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.
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 focusing 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
consitent sales, albeit at a low level.
Sales
of the anti-cellulite products started in August 2005 via two German TV shop
programs. Sales of the anti-cellulite products via the two German TV
shop programs have been flat thus far this fiscal year. Additionally,
distribution partners in Argentina and Mexico have purchased launch quantities
in November 2005, and July 2006, respectively.
Chitoskin
Wound Pads
In
March 2005, SanguiBioTech GmbH was awarded the CE mark for their Chitoskin
Wound Pad product. The CE mark authorizes the company to
distribute and sell this medical product in the member countries of the European
Union. At the same time Sangui GmbH successfully passed the ISO
9001:2000 (General Quality Management System) and ISO 13485:2003 (Quality
Management System Medical Products) audits, and obtained the respective
certifications. The “Chitoskin” trademark was granted to the company
for the European countries effective November 1, 2004.
Karl
Beese GmbH, a leading German vendor and distributor of hospital supplies began
marketing and distributing the wound pad product in August 2005, and has placed
several subsequent orders with the company. In addition, Karl Beese
delivered large quantities of the wound pad product to a Czech distribution
partner through summer 2006.
FINANCIAL
POSITION
The Company's
current assets increased approximately $17,024, or 24%, from June 30, 2006 to
approximately $87,953 at March 31, 2007. The increase is primarily
attributable to small increase in accounts receivable and
inventory.
The Company's
net property and equipment decreased approximately $6,935, or 59% from June 30,
2006 to approximately $4,773 at March 31, 2007. The decrease is primarily
attributable to current period depreciation.
The Company
funded its operations primarily through its existing cash reserves and cash
received from the sale of common stock. The Company's stockholders'
deficit decreased approximately $57,126. The primary decrease is caused by
an increase in the Company's current assets and other assets.
RESULTS
OF OPERATIONS
Three
months ended March 31, 2007 and 2006:
REVENUES - The
Company’s revenues increased 407% to $211,438 during the three months ended
March 31, 2007, as compared to the comparable period in 2006. Cost of
sales increased 693% to $135,031 as compared to the comparable period in
2006. These increases were primarily the result of new sales markets
being pursued and increased marketing efforts.
RESEARCH AND
DEVELOPMENT - Research and development expenses increased $8,140 to
approximately $41,100 in 2007 from approximately $32,960 in 2006. The increase
is mainly attributed to the Company seeking to expand its product base to meet
the demands of new and emerging markets. The Company is seeking
additional sources to provide financing for additional research and
development.
GENERAL AND
ADMINISTRATIVE - General and administrative expenses increased 26% to
approximately $162,954 in 2007 from approximately $129,468 in 2006. This
increase is mainly attributed to the ongoing refocusing program, and an
expansion into new emerging sales markets.
DEPRECIATION
AND AMORTIZATION - Depreciation decreased $149 to approximately $6,333 in 2007
from approximately $6,482 in 2006. This decrease is mainly attributed to
the ongoing restructuring of Sangui GmbH.
NET
LOSS. As a result of the above factors, the Company's consolidated net
loss was approximately $139,793, or approximately $(0.00) per common share, for
the three months ended March 31, 2007, compared to approximately $146,390, or
$0.00 per common share, during the comparable period in 2006.
Nine
months ended March 31, 2007 and 2006:
REVENUES - The
Company’s revenues increased 264% to $347,755 during the nine months ended March
31, 2007, as compared to the comparable period in 2006. Cost of sales
increased 678% to $254,900 as compared to the comparable period in
2006. These increases were primarily the result of new sales markets
being pursued and increased marketing efforts.
RESEARCH AND
DEVELOPMENT - Research and development expenses increased $10,275 to
approximately $93,245 in 2007 from approximately $82,870 in 2006. The
increase is mainly attributed to the Company seeking to expand its product base
to meet the demands of new and emerging markets. The Company is seeking
additional sources to provide financing for additional research and
development.
GENERAL AND
ADMINISTRATIVE - General and administrative expenses increased 27% to
approximately $478,442 in 2007 from approximately $375,772 in 2006. This
increase is mainly attributed to the ongoing refocusing program, and an
expansion into new emerging sales markets.
DEPRECIATION
AND AMORTIZATION - Depreciation decreased $8,011 to approximately $20,340 in
2007 from approximately $28,351 in 2006. This decrease is mainly
attributed to the ongoing restructuring of Sangui GmbH.
NET LOSS.
As a result of the above factors, the Company's consolidated net loss was
approximately $486,131, or approximately $0.01 per common share, for the nine
months ended March 31, 2007, compared to approximately $423,031, or $0.01 per
common share, during the comparable period in 2006.
.
LIQUIDITY
AND CAPITAL RESOURCES
For the nine
months ended March 31, 2007, net cash used in operating activities increased to
approximately $457,070, from approximately $242,455 in the corresponding period
in 2006, primarily related to an increase in the Company's consolidated net loss
as a result of the ongoing refocusing program.
The Company
had a working capital deficit of approximately $411,187 at March 31, 2007, an
decrease of approximately $25,494 from June 30, 2006 due primarily to the
Company's net loss for the nine-month period, as well as a significant increase
in prepaid expenses and other assets. At March 31, 2007, the Company
had cash of approximately $30,331. 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.
11
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 date 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 were not
efficient enough 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 periods specified in applicable SEC
rules and forms. Our principal executive officer and principal
financial officer are currently working to streamline our disclosure controls
and procedures, so as to adequately comply with such 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.
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
None.
ITEM
3 -
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4 -
SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
Resignation
of Dr. Wolfgang Barnikol from positions of Chief Executive Officer and Chief
Financial Officer
Subsequent
to the period covered by this report, on March 30, 2008, Dr. Wolfgang
Barnikol amicably resigned as the Company’s Chief Executive Officer and Chief
Financial Officer effective April 3, 2008. Dr. Barnikol's resignation was
not due to any disagreement with the Company. Dr. Barnikol remains a
Director.
Appointment
of Thomas Striepe as Chief Executive Officer
Subsequent
to the period covered by this report, on April 8, 2008, the Board of
Directors appointed Thomas Striepe to serve as Chief Executive Officer of the
Company. He is a current Director of the Company. Mr.
Striepe is the Vice President of Accounting and Controlling at Feedback AG,
Hamburg, Germany, a financial services company. Prior to joining in 2004, he
held management positions in the accounting departments of several German and
international corporations. He holds an MBA from Hamburg University.
Mr. Striepe does not
have an employment agreement with the Company nor have the terms of a severance
agreement with the Company been finalized.
Mr.
Striepe has no family relationships with any other director or executive officer
of the Company or any person nominated to become a director or executive officer
of the Company. There are no arrangements or understandings between any of
the directors or executive officers, or any other person or person pursuant to
which they were selected as directors and/or
officers.
Appointment
of Joachim Fleing as Chief Financial Officer
Subsequent
to the period covered by this report, on April 8, 2008, the Board of
Directors appointed Joachim Fleing to serve as Chief Financial Officer of the
Company. He is a current Director of the Company. Mr. Fleing is a
communications specialist. His professional experience includes the
position of a communications officer and the position as an account director at
an international PR agency. Mr. Fleing holds a PhD from Wuppertal
University. Mr. Fleing does
not have an employment agreement with the Company, nor have the terms of any
severance agreement with the Company been finalized
and are thus not yet available.
Mr.
Fleing has no family relationships with any other director or executive officer
of the Company or any person nominated to become a director or executive officer
of the Company. There are no arrangements or understandings between any of
the directors or executive officers, or any other person or person pursuant to
which they were selected as directors and/or officers.
Entry
into Letter of Intent with HemCon
Subsequent
to the period covered by this report, on April 15, 2008 the Company signed
a letter of intent with HemCon Medical Techolologies, Inc. to develop technology
relating to Chitosan wound care products. The Company will license
exclusive worldwide sales and marketing rights in exchange for HemCon managing
the submission of the Chitosan wound care products to the United States Food and
Drug Administration.
12
Sale
of Capital Securities in Wholly Owned Subsidiary
Subsequent
to the period covered by this report, on April 25, 2008 the Company entered into
letters of intent with various European investors to sell 10% of the capital
securities of its wholly owned subsidiary, Sangui BioTech GmbH, for
approximately 722,000 Euros. Payments for the purchase were received in
their entirety by the Company by May 16, 2008. The closing of this
transaction is subject to German Law and is anticipated to be complete
within eight weeks of filing with the German Register of Commercial
Companies scheduled for June 11, 2008 in Witten Germany.
One
of the investors in this transaction is the current Managing Director of the
wholly owned subsidiary; he is receiving his ownership interest in
consideration of past services rendered for the Company in the amount
of 50,000 Euros.
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 |
_____________________________________________________________________________________________________________________
(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:
June 12, 2008 /s/ Thomas
Striepe
__________________________________________
By: Thomas
Striepe
Chief Executive
Officer
Dated:
June 12, 2008 /s/ Joachim
Fleing
__________________________________________
By: Joachim
Fleing
Chief Financial
Officer
13