form10qsba.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
_______________________
FORM
10-QSB/A
(Mark
One)
[ X ] QUARTERLY
REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For
Quarterly period Ended: December 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 x
No o
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
October 14, 2008, was 50,000,000
Transitional
Small Business Disclosure Format. Yes o
No x
SANGUI
BIOTECH INTERNATIONAL, INC.
Report on
Form 10-QSB/A
For the
Quarter Ended December 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 December 31, 2007 and our unaudited
consolidated statements of operations for the three month periods ended December
31, 2007 and 2006, and the unaudited consolidated statements of cash flows for
the three month periods ended December 31, 2007 and 2006, are attached
hereto and incorporated herein by this reference.
1
|
|
|
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
June
30,
|
|
|
|
2007
|
|
|
2007
|
|
|
CURRENT
ASSETS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$ |
92,210 |
|
|
$ |
18,497 |
|
|
Accounts
receivable
|
|
|
28,566 |
|
|
|
36,387 |
|
|
Inventory
|
|
|
95,093 |
|
|
|
88,353 |
|
|
Prepaid
expenses and other assets
|
|
|
8,652 |
|
|
|
16,890 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
224,521 |
|
|
|
160,127 |
|
|
|
|
|
|
|
|
|
|
|
|
FIXED
ASSETS, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment
|
|
|
5,345 |
|
|
|
4,530 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
Fixed Assets
|
|
|
5,345 |
|
|
|
4,530 |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
refunds receivable
|
|
|
22,157 |
|
|
|
6,218 |
|
|
Other
miscellaneous assets
|
|
|
65,824 |
|
|
|
93,871 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Assets
|
|
|
87,981 |
|
|
|
100,089 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$ |
317,847 |
|
|
$ |
264,746 |
|
The
accompanying condensed notes are an integral part of these interim consolidated
financial statements.
2
|
SANGUI
BIOTECH INTERNATIONAL, INC.
|
|
|
Condensed
Consolidated Balance Sheets (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31,
|
|
|
June
30,
|
|
|
|
|
2007
|
|
|
2007
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$ |
418,572 |
|
|
$ |
427,688 |
|
|
Notes payable
|
|
|
1,675,236 |
|
|
|
113,134 |
|
|
Notes
payable - related
|
|
|
- |
|
|
|
134,742 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
2,093,808 |
|
|
|
675,564 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
2,093,808 |
|
|
|
675,564 |
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
1,958,376 |
|
|
|
1,958,376 |
|
|
Treasury
stock
|
|
|
- |
|
|
|
- |
|
|
Accumulated
other comprehensive income
|
|
|
241,335 |
|
|
|
1,147,882 |
|
|
Accumulated
deficit
|
|
|
(22,945,030 |
) |
|
|
(22,486,434 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity (Deficit)
|
|
|
(1,775,961 |
) |
|
|
(410,818 |
) |
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS'
|
|
|
|
|
|
|
|
|
|
EQUITY
(DEFICIT)
|
|
$ |
317,847 |
|
|
$ |
264,746 |
|
The
accompanying condensed notes are an integral part of these interim consolidated
financial statements.
3
|
|
|
|
Condensed
Consolidated Statements of Operations
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Three
|
|
|
For
the Six
|
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
|
|
December
31,
|
|
|
December
31,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES
|
|
$ |
7,806 |
|
|
$ |
16,842 |
|
|
$ |
7,806 |
|
|
$ |
136,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST
OF SALES
|
|
|
2,345 |
|
|
|
42,713 |
|
|
|
2,345 |
|
|
|
119,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
5,461 |
|
|
|
(25,871 |
) |
|
|
5,461 |
|
|
|
16,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development
|
|
|
45,366 |
|
|
|
29,756 |
|
|
|
134,868 |
|
|
|
52,145 |
|
|
Depreciation
and amortization
|
|
|
892 |
|
|
|
6,820 |
|
|
|
2,106 |
|
|
|
14,007 |
|
|
General
and administrative
|
|
|
160,062 |
|
|
|
158,833 |
|
|
|
299,453 |
|
|
|
315,488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
206,320 |
|
|
|
195,409 |
|
|
|
436,427 |
|
|
|
381,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
LOSS
|
|
|
(200,859 |
) |
|
|
(221,280 |
) |
|
|
(430,966 |
) |
|
|
(365,192 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
- |
|
|
|
80 |
|
|
|
- |
|
|
|
90 |
|
|
Interest
expense
|
|
|
(14,803 |
) |
|
|
(5,367 |
) |
|
|
(27,630 |
) |
|
|
(10,141 |
) |
|
Other
income (loss)
|
|
|
- |
|
|
|
28,886 |
|
|
|
- |
|
|
|
28,905 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Income (Expense)
|
|
|
(14,803 |
) |
|
|
23,599 |
|
|
|
(27,630 |
) |
|
|
18,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
|
(215,662 |
) |
|
|
(197,681 |
) |
|
|
(458,596 |
) |
|
|
(346,338 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustments
|
|
|
65,375 |
|
|
|
175,126 |
|
|
|
933,547 |
|
|
|
422,288 |
|
|
Unrealized
gain on marketable securities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Comprehensive Income
|
|
|
65,375 |
|
|
|
175,126 |
|
|
|
933,547 |
|
|
|
422,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
INCOME (LOSS)
|
|
$ |
(150,287 |
) |
|
$ |
(22,555 |
) |
|
$ |
474,951 |
|
|
$ |
75,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
AND DILUTED LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER
SHARE
|
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OF
SHARES OUTSTANDING
|
|
|
50,000,000 |
|
|
|
50,000,000 |
|
|
|
50,000,000 |
|
|
|
50,000,000 |
|
The
accompanying condensed notes are an integral part of these interim consolidated
financial statements.
4
|
|
|
|
Condensed
Statements of Cash Flows
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Six
|
|
|
|
|
Months
Ended
|
|
|
|
|
December
31,
|
|
|
|
|
2007
|
|
|
2006
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(458,596 |
) |
|
$ |
(346,338 |
) |
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
|
used
by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
|
2,106 |
|
|
|
14,007 |
|
|
Changes
in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
Decrease
in accounts receivable
|
|
|
7,821 |
|
|
|
11,970 |
|
|
Decrease
(Increase) in inventories
|
|
|
(6,740 |
) |
|
|
(124,828 |
) |
|
(Increase)
decrease in prepaid expenses and other assets
|
|
|
8,238 |
|
|
|
(74,136 |
) |
|
(Increase)
decrease in other assets
|
|
|
12,108 |
|
|
|
- |
|
|
Increase
in accounts payable and accrued expenses
|
|
|
(9,116 |
) |
|
|
226,272 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Used by Operating Activities
|
|
|
(444,179 |
) |
|
|
(293,053 |
) |
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of fixed assets
|
|
|
(2,921 |
) |
|
|
(12,905 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Used by Investing Activities
|
|
|
(2,921 |
) |
|
|
(12,905 |
) |
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments
on notes payable
|
|
|
- |
|
|
|
(58,988 |
) |
|
Cash
received on promissory notes
|
|
|
1,562,102 |
|
|
|
- |
|
|
Cash
paid on notes receivable - related
|
|
|
(134,742 |
) |
|
|
- |
|
|
Sale
of common stock for cash
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
1,427,360 |
|
|
|
(58,988 |
) |
|
|
|
|
|
|
|
|
|
|
|
EFFECT
OF EXCHANGE RATE CHANGES
|
|
|
(906,547 |
) |
|
|
422,288 |
|
|
|
|
|
|
|
|
|
|
|
|
NET
DECREASE IN CASH
|
|
|
73,713 |
|
|
|
57,342 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AT BEGINNING OF PERIOD
|
|
|
18,497 |
|
|
|
24,548 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AT END OF PERIOD
|
|
$ |
92,210 |
|
|
$ |
81,890 |
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLIMENTAL
DISCLOSURES OF
|
|
|
|
|
|
|
|
|
|
CASH
FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
PAID FOR:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
- |
|
|
$ |
5,322 |
|
|
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 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, 2007. 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 December 31, 2007 are not
necessarily indicative of the results that may be expected for the full fiscal
year ending June 30, 2008.
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 $22,945,030 as of
December 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 $458,596 during the six months ended December 31, 2007 and used cash in
operating activities of $444,179 for the six months ended December 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, 2007 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 December 31, 2007, 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.
NOTE 3 –
PROMISSORY NOTES
As of
December 31, 2007, the Company had $1,525,946 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.
8
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 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 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.
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
Pad
In March
2005, SanguiBioTech GmbH was awarded the CE mark for their Chitoskin
wound care 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 $64,394, or 236%, from June 30, 2006 to
approximately $224,521 at December 31, 2007. The increase is primarily
attributable to a $73,713 increase in cash. This increase was partially
offset by slight decreases in accounts receivable and prepaid expenses during
the period.
The Company's
net property and equipment increased approximately $815, or 18% from June 30,
2007 to approximately $5,345 at December 31, 2007. The increase is primarily
attributable to the purchase of a small amount of basic office assets, offset in
part by current period depreciation.
The Company
funded its operations primarily through its existing cash reserves and cash
received from the issuance of promissory notes payable. The Company's
stockholders' deficit increased approximately $1,365,143. The increase resulted
primarily from the Company's increase in promissory notes, and the net loss
recognized for the period.
RESULTS OF
OPERATIONS
Three months ended December
31, 2007 and 2006:
RESEARCH AND
DEVELOPMENT. Research and development expenses increased $15,610 to
approximately $45,366 in 2007 from approximately $29,756 in 2006. The increase
is mainly attributed to the Company focusing on the development and production
of its existing product line. The Company is seeking additional sources to
provide financing for additional research and development.
GENERAL AND
ADMINISTRATIVE. General and administrative expenses increased 1% to
approximately $160,062 in 2007 from approximately $158,833 in 2006. This
insignificant increase is mainly attributed to the Company maintaining its
ongoing refocusing program, and expansion of the Company’s product lines into
new markets.
DEPRECIATION
AND AMORTIZATION. Depreciation decreased $5,928 to approximately $892 in 2007
from approximately $6,820 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 $215,662, or approximately $0.00 per common share, for the three
months ended December 31, 2007, compared to approximately $197,681, or $0.00 per
common share, during the comparable period in 2006.
Six months ended December
31, 2007 and 2006:
RESEARCH AND
DEVELOPMENT. Research and development expenses increased $82,723 to
approximately $134,868 in 2007 from approximately $52,145 in 2006. The increase
is mainly attributed to the Company seeking to expand its product base into new
markets. The Company is seeking additional sources to provide
financing for additional research and development.
GENERAL AND
ADMINISTRATIVE. General and administrative expenses decreased 5% to
approximately $299,453 in 2007 from approximately $315,488 in 2006. This
decrease is mainly attributed to the ongoing refocusing program, and the
Company’s expansion into new sales markets.
DEPRECIATION
AND AMORTIZATION. Depreciation and amortization decreased $11,901 to
approximately $2,106 in 2007 from approximately $14,007 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 $458,596, or approximately $(0.01) per common share, for the six
months ended December 31, 2007, compared to approximately $346,338, or $0.01 per
common share, during the comparable period in 2006.
LIQUIDITY AND CAPITAL
RESOURCES
For the six
months ended December 31, 2007, net cash used in operating activities increased
to approximately $444,179, from approximately $293,053 in the corresponding
period in 2006, primarily related to a increase in the Company's consolidated
net loss and increased inventory holdings.
The Company
had a working capital deficit of approximately $1,869,287 at December 31, 2007,
an increase of approximately $515,437 from June 30, 2006 due primarily to the
Company's issuance of promissory notes and its net losses. At
December 31, 2007, the Company had cash of approximately $92,210. 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.
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 are 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.
Except as
stated above, 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.
Civil
Lawsuit Involving Prof. Dr. Dr. Wolfgang Barnikol
On September
13, 2007, the District Appeal Court of Dusseldorf, Germany (Oberlandesgericht
Düsseldorf I 6 U 96/06) found Prof. Dr. Dr. Wolfgang Barnikol jointly and
severally liable in a civil suit to Dr. Rainer Felfe, a shareholder of the
Company, in the amount of approximately 700,000 euros (approximately US
$952,000, which amount includes interest and costs) for supporting the unethical
selling of the Company's shares. This judgment is enforceable, but has not yet
become final and absolute as Dr. Barnikol has submitted a petition of appeal to
the Federal Supreme Court of Germany (Bundesgerichtshof). The Company was not
and is not a party to these proceedings.
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.
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.
2nd
Civil Lawsuit Involving Prof. Dr. Dr. Wolfgang Barnikol
Subsequent to
the period covered by this report, on September 2, 2008, the District Court of
Dusseldorf (Landgericht Düsseldorf 7 O 299/04) found Prof. Dr. Dr. Wolfgang
Barnikol jointly and severally liable in a civil suit to a shareholder of the
Company in the amount of approximately 150,000 euros (approximately US $204,000,
which amount includes interest and costs) for supporting the unethical selling
of the Company's shares. This judgment is enforceable, but has not yet become
final and absolute. The Company was not and is not a party to these
proceedings.
Resignation
of Director
Subsequent to
the period covered by this report, on September 30, 2008, Prof. Dr. Dr. Wolfgang
Barnikol submitted his resignation as a Director, effective as of September 30,
2008. There were no disagreements between the Company and Dr. Barnikol that led
to his resignation.
|
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:
October 15, 2008 /s/ Thomas
Striepe
__________________________________________
By: Thomas
Striepe
Chief Executive
Officer
Dated:
October 15, 2008 /s/ Joachim
Fleing
__________________________________________
By: Joachim
Fleing
Chief Financial
Officer
13