SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-21271
SANGUI BIOTECH INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in its Charter)
COLORADO 84-1330732
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Alfred-Herrhausen-Str. 44
58455 Witten
Germany
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: 011-49-2302-915-204
___________
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date:
Title of each class of Common Stock Outstanding at October 31, 2003
----------------------------------------- -------------------------------
Common Stock, no par value 40,655,363
Transitional Small Business Disclosure Format
(Check one);
Yes [ ] No [X]
INDEX
SANGUI BIOTECH INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at September 30, 2003 (Unaudited)........3
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited) Three Months Ended September 30, 2003 and 2002..........4
Consolidated Statements of Cash Flows(Unaudited)
Three Months Ended September 30, 2003 and 2002......................5
Notes to Consolidated Financial Statements (Unaudited)..............6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..........................................10
Item 3. Controls and Procedures............................................11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................12
Item 2. Change in Securities and Use of Proceeds...........................12
Item 3. Defaults Upon Senior Securities....................................12
Item 4. Submission of Matters to a Vote of Securities Holders..............12
Item 5. Other Information..................................................12
Item 6. Exhibits and Reports on Form 8-K...................................12
2
SANGUI BIOTECH INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
SEPTEMBER 30,
2003
(UNAUDITED)
-------------
Current assets
Cash and cash equivalents $ 581,734
Available for sale securities 811,177
Taxes receivable 179,525
Prepaid expenses and other assets 79,486
----------
Total current assets 1,651,922
Property and equipment-net 134,580
Patents and licenses-net 17,383
----------
Total assets $1,803,885
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 122,552
------------
Commitments and contingencies
Stockholders' equity
Preferred stock, no par value; 5,000,000 shares
authorized, no shares issued and outstanding --
Common stock, no par value, 50,000,000 shares
authorized, 40,655,363 shares issued and outstanding 18,345,491
Additional paid-in capital 2,000,000
Accumulated other comprehensive income 504,154
Accumulated deficit (19,168,312)
------------
Total stockholders' equity 1,681,333
------------
Total liabilities and stockholders' equity $ 1,803,885
============
The accompanying notes are an integral part of these financial statements.
3
SANGUI BIOTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE
THREE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED)
--------------------------------------
2003 2002
------------ ------------
Revenues $ -- $ --
Operating expenses:
Research and development 184,107 229,706
General and administrative 211,218 274,602
Depreciation and amortization 30,970 45,595
------------ ------------
Total operating expenses 426,295 549,903
Other income:
Interest income 7,916 15,141
Other income 4,324 47,112
------------ ------------
Total other income 12,240 62,253
Loss from continuing operations (414,055) (487,650)
Loss from discontinued operations -- (47,059)
------------ ------------
Net loss (414,055) (534,709)
Other comprehensive income (loss):
Foreign currency translation adjustments (661) (209,224)
Unrealized gain (loss)on marketable securities 12,109 (61,646)
------------ ------------
Comprehensive loss $ (402,607) $ (805,579)
============ ============
Loss available to common
stockholders per common share - basic and diluted:
Loss from continuing operations $ (0.01) $ (0.01)
============ ============
Loss from discontinued operations $ -- $ --
============ ============
Net loss $ (0.01) $ (0.01)
============ ============
Basic and diluted weighted average
number of common shares outstanding 40,655,363 40,655,363
============ ============
The accompanying notes are an integral part of these financial statements.
4
SANGUI BIOTECH INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE
THREE MONTHS ENDED
SEPTEMBER 30,
(UNAUDITED)
--------------------------------
2003 2002
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (414,055) $ (534,709)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 30,970 45,595
Realized gains on sale of marketable securities -- (34,263)
Realized gain on sale of assets of discontinued operations -- (16,980)
Loss on impairment of assets -- 106,927
Changes in operating assets and liabilities:
Accounts receivable -- 52,301
Inventories -- 16,362
Grant receivable -- 68,935
Taxes receivable 3,295 --
Prepaid expenses and other assets 11,930 95,678
Accounts payable and accrued expenses (3,264) (224,052)
----------- -----------
Net cash used in operating activities (371,124) (424,206)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in marketable securities -- (682,607)
Maturities of marketable securities -- 1,117,898
Purchase of property and equipment (1,830) (21,150)
----------- -----------
Net cash provided by (used in) investing activities (1,830) 414,141
----------- -----------
Effect of exchange rate changes (1,843) (209,224)
----------- -----------
Net decrease in cash and cash equivalents (374,797) (219,289)
Cash and cash equivalents, beginning of period 956,531 832,130
----------- -----------
Cash and cash equivalents, ending of period $ 581,734 $ 612,841
=========== ===========
Supplemental disclosures:
Cash paid during the period for:
Interest $ -- $ --
=========== ===========
Income taxes $ -- $ --
=========== ===========
During the quarter ended September 30, 2002, the Company recorded a note
receivable for $60,000 from the sale of inventory and equipment related to its
discontinued operations, which is recorded in prepaid expenses and other assets.
The accompanying notes are an integral part of these financial statements.
5
SANGUI BIOTECH INTERNATIONAL, INC.
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 - BASIS OF PRESENTATION
------------------------------
The accompanying consolidated financial statements have been prepared without
audit in accordance with accounting principles generally accepted in the United
States of America for interim financial information and with the instructions
to Form 10-QSB and Item 301 of Regulation S-B. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States
of America have been condensed or omitted pursuant to such rules and
regulations. The unaudited consolidated financial statements and notes should,
therefore, be read in conjunction with the consolidated financial statements
and notes thereto in the Company's Form 10-KSB for the year ended June 30,
2003. 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, 2003 are not indicative of the results that may be expected for the full
fiscal year ending June 30, 2004.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------
Nature of Business
------------------
Sangui BioTech International, Inc., incorporated in Colorado in 1995, and its
subsidiaries (collectively, the ("Company") have been engaged in the research,
development, manufacture, and sales of medical products.
SanguiBioTech AG ("Sangui AG"), the Company's German subsidiary, is engaged in
the development of artificial oxygen carriers (external applications of
hemoglobin, blood substitute and blood additives) as well as in the development
of glucose implant sensors. On June 30, 2003, GlukoMediTech AG, the Company's
German subsidiary, was merged into Sangui AG.
The operations of Sangui BioTech, Inc. ("Sangui USA"), a wholly owned subsidiary
of the Company, were discontinued during 2002.
The operations of Sangui Singapore, incorporated in Singapore in 1999 as a
regional office for the Company, were discontinued during 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.
Certain amounts in the three months ended September 30, 2002 have been
reclassified to conform to the three months ended September 30, 2003
presentation. These reclassifications have no effect on the previously reported
net loss.
Use of Estimates
----------------
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the respective reporting period. Actual results could differ from those
estimates. Significant estimates made by management are, among others, the
realization of receivables, long-lived assets, and valuation allowance on
deferred tax assets.
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 AG, 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.
6
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 $19,168,312 as of
September 30, 2003 and has been significantly reducing its working capital since
June 30, 2003. The Company's management believes, based on its current operating
plan, that its current cash and highly liquid marketable securities totaling
approximately $1.4 million at September 30, 2003, are sufficient to fund the
Company's operations and working capital requirements at least through September
30, 2004. There are no assurances, however, that the Company will generate
sufficient cash flows from operations or complete any sales or financing
transactions or, even if such transactions are completed, have sufficient funds
to execute its intended business plan over an extended period of time. The
accompanying financial statements do not include any adjustments that might be
necessary should the Company be unable to continue as a going concern.
Foreign Currency Translation
----------------------------
Assets and liabilities of the Company's foreign operations are translated into
U.S. dollars at period-end exchange rates. Net exchange gains or losses
resulting from such translation are excluded from net loss but are included in
comprehensive income (loss) and accumulated in a separate component of
stockholders' equity. Income and expenses are translated at weighted average
exchange rates for the period.
Cash and Cash Equivalents
-------------------------
The Company maintains its cash in bank accounts in Germany. 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.
Marketable Securities
---------------------
Marketable securities are classified as available-for-sale. Unrealized gains and
losses are excluded from net loss and are reported as a separate component of
accumulated other comprehensive income in stockholders' equity. Realized gains
and losses are included in other income and are determined based on the specific
identification of the securities bought and sold (see Note 3).
Revenue Recognition
-------------------
Revenues from product sales are recognized at the time of shipment.
Research and Development
------------------------
Research and development costs are charged to operations as they are incurred.
Legal fees and other direct costs incurred in obtaining and protecting patents
are expensed as incurred.
Basic and Diluted Loss Per Common Share
---------------------------------------
Basic loss per common share is computed by dividing loss available to common
stockholders by the weighted average number of common shares outstanding during
the period of computation. Diluted loss per share gives effect to all potential
dilutive common shares outstanding during the period of compensation. The
computation of diluted 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, 2003 and 2002, the Company had no potentially
dilutive securities that would effect the loss per share if they were to be
dilutive.
7
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.
Segments of an Enterprise and Related Information
-------------------------------------------------
The Company applies Statement of Financial Accounting Standards ("SFAS") No.
131, "Disclosures about Segments of an Enterprise and Related Information". SFAS
No. 131 establishes standards for the way public companies report information
about segments of their business in their annual financial statements and
requires them to report selected segment information in their quarterly reports
issued to shareholders. It also requires entity-wide disclosures about the
products and services an entity provides, the material countries in which it
holds assets and reports revenues and its major customers (see Note 6).
New Accounting Pronouncements
-----------------------------
In May 2003, the Financial Accounting Standards Board ("FASB") issued SFAS No.
150, "Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity". SFAS No. 150 establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). SFAS No. 150 is effective for financial instruments entered into
or modified after May 31, 2003, and otherwise is effective at the beginning of
the first interim period beginning after June 15, 2003. It is to be implemented
by reporting the cumulative effect of a change in an accounting principle for
financial instruments created before the issuance date of SFAS No. 150 and still
existing at the beginning of the interim period of adoption. Restatement is not
permitted. The adoption of SFAS No. 150 did not have a material effect on the
Company's consolidated financial statements.
NOTE 3 - AVAILABLE FOR SALE SECURITIES
--------------------------------------
Available for sale securities consist of the following at September 30, 2003:
Cost Fair market value Unrealized Gain
Corporate bonds due within one year $680,612 $811,177 $130,565
======== ======== ========
NOTE 4 - DISCONTINUED OPERATIONS
---------------------------------
Sangui USA manufactured in vitro immunodiagnostic blood test kits that were
primarily sold in the United States and Europe. The Company decided to
discontinue the in vitro immunodiagnostics business in August 2002, sold Sangui
USA's inventory and property and equipment to an unrelated party for $60,000,
and closed the facility. The sale resulted in a gain of $16,980 which is
included as part of loss from discontinued operations in the accompanying
statements of operations for the three months ended September 30, 2002. In July
2002, the Company received $100,000 as part of an agreement to cease
manufacturing and selling certain blood test kits which is included in loss from
discontinued operations in the accompanying statements of operations for the
three months ended September 30, 2002. The Company decided to discontinue the
operations of Sangui Singapore in August 2002, recorded an impairment loss on
property and equipment of $106,927, and closed the facility effective December
31, 2002.
Components of amounts reflected in the accompanying consolidated statements of
operations and comprehensive loss for the three months ended September 30, 2002
are presented below:
2002
------
Sangui Sangui
USA Singapore Total
--------- ---------- ---------
Sales $ 138,542 $ -- $ 138,542
Cost of sales 94,747 -- 94,747
Operating expenses 76,060 24,487 100,907
--------- ---------- ---------
Loss from continuing
operations (32,265) (24,487) (57,112)
Other income 116,980 -- 116,980
Impairment
of assets -- (106,927) (106,927)
--------- --------- ---------
Income(loss) from discontinued
operations
$ 84,715 $(131,774) $ (47,059)
========= ========= =========
8
NOTE 5 - COMMITMENTS AND CONTINGENCIES
--------------------------------------
Litigation
----------
The Company may, from time to time, be involved in various litigation resulting
from the ordinary course of operating its business. Management is currently not
able to predict the outcome of any such cases. However, management believes
that the amount of ultimate liability, if any, with respect to such actions
will not have a material effect on the Company's financial position or results
of operations.
Indemnities and Guarantees
--------------------------
During the normal course of business, the Company has made certain indemnities
and guarantees under which it may be required to make payments in relation to
certain transactions. These indemnities include certain agreements with the
Company's officers, under which the Company may be required to indemnify such
person for liabilities arising out of their employment relationship. The
duration of these indemnities and guarantees varies and, in certain cases, is
indefinite. The majority of these indemnities and guarantees do not provide
for any limitation of the maximum potential future payments the Company could
be obligated to make. Historically, the Company has not been obligated to make
significant payments for these obligations and no liabilities have been
recorded for these indemnities and guarantees in the accompanying consolidated
balance sheet.
NOTE 6 - BUSINESS SEGMENTS
--------------------------
The Company reports it business segments based on geographic regions, which are
as follows as of September 30, 2003 and for the three months ended September
30, 2003 and 2002:
2003 2002
----------- -----------
NET SALES
Sangui AG $ -- $ --
Sangui BioTech International, Inc. -- --
Sangui USA (included in discontinued operations) -- 138,542
Sangui Singapore -- --
----------- -----------
$ -- $ 138,542
=========== ===========
NET INCOME (LOSS)
Sangui AG $ (364,173) $ (398,328)
Sangui BioTech International, Inc. (49,882) (89,322)
Sangui USA -- 84,715
Sangui Singapore -- (131,774)
----------- -----------
$ (414,055) $ (534,709)
=========== ===========
DEPRECIATION AND AMORTIZATION
Sangui AG $ 30,970 $ 45,595
Sangui BioTech International, Inc. -- --
Sangui USA -- --
Sangui Singapore -- --
----------- -----------
$ 30,970 $ 45,595
=========== ===========
IDENTIFIABLE ASSETS
Sangui AG $ 1,653,117
Sangui BioTech International, Inc. 150,768
Sangui USA --
Sangui Singapore --
-----------
$ 1,803,885
===========
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 is primarily involved in the development of artificial oxygen
carriers and glucose sensors.
The Company's clinical development projects are primarily in the preliminary
stages. The Company is diligently developing several applications for its
clinical development projects, but does not anticipate beginning any government
protocols or clinical trials in the near term. In the course of the ongoing cost
containment efforts, these projects were halted during the last fiscal year,
after having achieved the planned milestones. The Company decided to reduce
further expenditures in the blood substitute, blood additive and glucose sensor
projects to the amount necessary to find financing, industrial or distribution
partners for further development and marketing of the resulting products.
The Company's development projects related to cosmetic applications of its
oxygen carrier are nearing completion. The Company has established contact with
a German cosmetics vendor and is planning and preparing to jointly introduce
this application as a cosmetic anti-aging product in the German market in the
course of the current fiscal year.
Cost Savings
------------
In total, management has been able to reduce the Company's operating expenses by
23% to approximately $426,000 in the first three months of fiscal 2004, compared
to approximately $550,000 in the respective period of last fiscal year. Research
and development expenses and general and administrative expenses have been
reduced by 20% and 23%, respectively, in the first three months of fiscal 2004
as compared to the respective period of last fiscal year. This effort is also
reflected in the net cash used in operating activities which decreased 13% to
approximately $371,000 compared to approximately $424,000 net cash used in
operating activities in the respective period of last fiscal year. Management
assumes that the current planning is realistic and that the Company's funds and
liquidity are sufficient to finance its activities at least through the period
ending September 30, 2004.
FINANCIAL POSITION
------------------
The Company's current assets decreased approximately $378,000, or 19%, from
June 30, 2003 to approximately $1.7 million at September 30, 2003. The decrease
is primarily attributable to a decrease in cash and cash equivalents of
approximately $375,000. The decrease in cash and cash equivalents results
primarily from funding the current year's operations of the Company with no
revenues in the three month period ended September 30, 2003.
The Company's net property and equipment decreased approximately $25,000, or 16%
from June 30, 2003 to approximately $135,000 at September 30, 2003. The decrease
is primarily attributable to current year depreciation of approximately $31,000.
The Company funded its operations primarily through its existing cash reserves.
The Company's stockholders' equity decreased approximately $403,000. The
primary decrease is caused by the Company's current period net loss of
approximately $414,000, and an increase in accumulated other comprehensive
income of approximately $12,000 due to foreign currency translation adjustments
and unrealized gains on marketable securities.
10
RESULTS OF OPERATIONS
---------------------
Three months ended September 30, 2003 and 2002:
Sangui AG
---------
RESEARCH AND DEVELOPMENT. Research and development expenses decreased 19% to
approximately $184,000 in 2003 from approximately $230,000 in 2002. The decrease
is due to the refocusing of research and development activities.
GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased 11% to
approximately $161,000 in 2003 from approximately $182,000 in 2002. This
decrease is mainly attributed to decreased legal fees.
DEPRECIATION. Depreciation decreased 32% to approximately $31,000 in 2003 from
approximately $46,000 in 2002. This decrease is mainly attributed to the ongoing
restructuring of the German subsidiary.
Sangui BioTech International, Inc.
----------------------------------
GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased 46% to
approximately $50,000 in 2003 from to approximately $93,000 in 2002. The
decrease is due to decreased consulting and legal fees.
Consolidated
------------
NET LOSS. As a result of the above factors and the loss from discontinued
operations (see Note 4), the Company's consolidated net loss was approximately
$414,000, or $0.01 per common share, in 2003, compared to approximately
$535,000, or $0.01 per common share, in 2002.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
For the three months ended September 30, 2003, net cash used in operating
activities decreased to approximately $371,000 from approximately $424,000 in
the corresponding period in 2002, primarily related to a decrease in the
Company's consolidated net loss as a result of the ongoing refocusing program.
For the three months ended September 30, 2003, net cash used in investing
activities was approximately $2,000 compared to approximately $414,000 net cash
provided by investing activities in the corresponding period in 2002. The
principal decrease is due to the maturity of marketable securities and purchases
of marketable securities in 2002. There was no maturity or purchase of
marketable securities in 2003.
Working capital was approximately $1.5 million at September 30, 2003, a decrease
of approximately $400,000 million from June 30, 2003 due primarily to the
Company's net loss for the three month period. A substantial portion of the
Company's total assets consists of cash and highly liquid marketable securities
classified as available for sale securities. The highly liquid nature of these
assets provides the Company with flexibility in financing and managing its
business. For the three months ended September 30, 2003, there were no realized
gains on the Company's marketable securities and unrealized gains were
approximately $131,000.
At September 30, 2003, the Company had cash and liquid marketable securities of
approximately $1.4 million. The Company believes that its available cash will be
sufficient to satisfy its requirements at least through the period ending
September 30, 2004. However, the Company will need substantial additional
funding to fulfil its business plan and the Company intends to explore financing
sources for its future development activities. No assurance can be given that
these efforts will be successful.
ITEM 3 - CONTROLS AND PROCEDURES
--------------------------------
As of September 30, 2003, an evaluation was performed under the supervision and
with the participation of the Company's management, including the CEO/CFO, of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based on that evaluation, the Company's management,
including CEO/CFO, concluded that the Company's disclosure controls and
procedures were effective as of September 30, 2003. There have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect internal controls subsequent to September 30, 2003.
11
ITEM 4 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------------------------------------------------------------------
The Company has no derivative financial instruments. Exposure to foreign
currency exchange rates is limited, as the Company has no operating business or
staff outside Germany since December 31, 2002.
PART II - OTHER INFORMATION
---------------------------
ITEM 1 - LEGAL PROCEEDINGS
--------------------------
On July 26, 2001, the Company filed a lawsuit in the United States District
Court for the District of Colorado against Helmut Kappes, a director of the
Company. In the lawsuit, the Company alleged that Mr. Kappes is engaged in
conduct related to the Company's affairs that is fraudulent, dishonest and a
gross abuse of his authority or discretion as a director and that his removal
from the Company's Board of Directors would be in the best interest of the
Company. In October 2002, the Court granted the motion of counsel to Mr. Kappes
to withdraw from representation of Mr. Kappes. Upon consideration by the Board
of Directors of the legal costs to prosecute the claims against Mr. Kappes and
the likelihood of being able to collect on any obtained judgment, the Company
has requested its attorneys to take the steps necessary to dismiss the liability
claim. On November 5, 2003, the Court has issued an order to dismiss the lawsuit
without prejudice.
ITEM 2 - CHANGE IN SECURITIES AND USE OF PROCEEDS
-------------------------------------------------
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
----------------------------------------
Not applicable
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
--------------------------------------------------------------
Not applicable
ITEM 5 - OTHER INFORMATION
--------------------------
As of July 9, 2003, Dr. Christoph Ludz and Dr. Markus Volpers were elected
Directors of Sangui BioTech International, Inc.
As of September 15, 2003, Dora Malek has resigned from her position as a
Director of Sangui BioTech International, Inc. as well as from all other
positions she held within the Company and its subsidiaries.
As of July 30, 2003, it was resolved to convert the Company's German subsidiary
to a public limited company under German law (GmbH). The pertinent documents
have been filed with the Registry Court in Witten, Germany. The conversion was
registered effective November 4, 2003.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
31.1 Certification Pursuant to Rule 13a-14(a) and 15d-14(a), filed herewith.
32. Certification Pursuant to Section 1350 of Title 18 of the United States
Code, filed herewith.
12
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SANGUI BIOTECH INTERNATIONAL, INC.
----------------------------------
By: /s/ Wolfgang Barnikol
-----------------------------------------
Wolfgang Barnikol
President, Chief Executive Officer and
Chief Financial Officer
Date: November 13, 2003
13