SANGUI BIOTECH INTERNATIONAL INC - Quarter Report: 2008 December (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
_______________________
FORM
10-Q
(Mark
One)
[ X ] QUARTERLY
REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For
Quarterly period Ended: December 31, 2008;
or
[
] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE
ACT OF 1934
For
the transition period __________ to __________
Commission
File Number: 0-21271
_________________________
SANGUI
BIOTECH INTERNATIONAL, INC.
________________________________________________
(Exact
name of Small Business Issuer as specified in its charter)
| Colorado | 84-1330732 |
| (State or other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
Alfred-Herrhausen-Str.
44, 58455 Witten, Germany
_____________________________
(Address
of principal executive offices)
011-49-2302-915-204
___________________________________
(Issuer's
telephone number, including area code)
Check whether the issuer:
(1) filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 12 months (or for such shorter period that a
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
o
Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting
company. See definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
|
Large
Accelerated Filer o
|
Accelerated
Filer o
|
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Non-Accelerated
Filer o
|
Smaller Reporting Company
x
|
Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).
|
Yes £ No T
|
Indicate the
number of shares outstanding of each of the issuer’s classes of common stock, as
of the latest practicable date. As of February 23, 2009,
there were 68,163,500 shares of the issuer's Common Stock, no par value, issued
and outstanding.
SANGUI
BIOTECH INTERNATIONAL, INC.
Report on
Form 10-Q
For the
Quarter Ended December 31, 2008
INDEX
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ii
ITEM 1 – CONSOLIDATED
FINANCIAL STATEMENTS
The
accompanying unaudited consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q pursuant to the rules and
regulations of the Securities and Exchange Commission and, therefore, do not
include all information and footnotes necessary for a complete presentation of
our financial position, results of operations, cash flows, and stockholders'
deficit in conformity with generally accepted accounting principles in the
United States of America. In the opinion of management, all adjustments
considered necessary for a fair presentation of the consolidated results of
operations and financial position have been included and all such adjustments
are of a normal recurring nature.
Our
unaudited consolidated balance sheet as of December 31, 2008 and our unaudited
consolidated statements of operations for the three month periods ended December
31, 2008 and 2007, and the unaudited consolidated statements of cash flows for
the six month periods ended December 31, 2008 and 2007, are attached hereto
and incorporated herein by this reference.
1
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SANGUI
BIOTECH INTERNATIONAL, INC.
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Condensed
Consolidated Balance Sheets
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||||||||
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ASSETS
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||||||||
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December
31,
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June
30,
|
|||||||
|
2008
|
2008
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|||||||
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CURRENT
ASSETS
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(Unaudited)
|
|||||||
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Cash
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$ | 42,021 | $ | 229,717 | ||||
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Accounts
receivable
|
9,368 | 5,021 | ||||||
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Inventory
|
134,229 | 127,109 | ||||||
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Shareholder
loans receivable
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117,776 | 533,059 | ||||||
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repaid
expenses and other assets
|
13,592 | 28,627 | ||||||
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Total
Current Assets
|
316,986 | 923,533 | ||||||
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FIXED
ASSETS, Net
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||||||||
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Property and
equipment
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4,491 | 7,021 | ||||||
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Total
Fixed Assets
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4,491 | 7,021 | ||||||
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OTHER
ASSETS
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||||||||
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Tax
refunds receivable
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27,232 | 40,166 | ||||||
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Other
non-current assets
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213,746 | 221,208 | ||||||
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Total
Other Assets
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240,978 | 261,374 | ||||||
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TOTAL
ASSETS
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$ | 562,455 | $ | 1,191,928 | ||||
The accompanying condensed
notes are an integral part of these interim consolidated financial
statements.
2
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SANGUI
BIOTECH INTERNATIONAL, INC.
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Condensed
Consolidated Balance Sheets (Continued)
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LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
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||||||||
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December
31,
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June
30,
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|||||||
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2008
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2008
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|||||||
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(Unaudited)
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||||||||
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CURRENT
LIABILITIES
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||||||||
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Accounts
payable and accrued expenses
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$ | 295,505 | $ | 317,378 | ||||
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Notes
payable
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140,499 | 1,952,841 | ||||||
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Total
Current Liabilities
|
436,004 | 2,270,219 | ||||||
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TOTAL
LIABILITIES
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436,004 | 2,270,219 | ||||||
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STOCKHOLDERS'
EQUITY (DEFICIT)
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||||||||
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Preferred
stock, no par value; 10,000,000 shares
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||||||||
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authorized,
-0- shares issued and outstanding
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- | - | ||||||
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Common
stock, no par value; 250,000,000 shares
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||||||||
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authorized,
68,048,600 and 50,000,000 shares
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||||||||
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issued
and outstanding, respectively
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21,156,591 | 18,969,358 | ||||||
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Additional
paid-in capital
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3,138,674 | 3,138,674 | ||||||
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Accumulated
other comprehensive income
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(331,301 | ) | 154,272 | |||||
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Accumulated
deficit
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(23,837,513 | ) | (23,340,595 | ) | ||||
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Total
Stockholders' Equity (Deficit)
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126,451 | (1,078,291 | ) | |||||
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TOTAL
LIABILITIES AND STOCKHOLDERS'
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||||||||
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EQUITY
(DEFICIT)
|
$ | 562,455 | $ | 1,191,928 | ||||
The
accompanying condensed notes are an integral part of these interim consolidated
financial statements.
3
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SANGUI
BIOTECH INTERNATIONAL, INC.
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Condensed
Consolidated Statements of Operations
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(Unaudited)
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||||||||||||||||
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For
the Three
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For
the Six
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|||||||||||||||
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Months
Ended
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Months
Ended
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|||||||||||||||
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December
31,
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December
31,
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|||||||||||||||
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2008
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2007
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2008
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2007
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REVENUES
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$ | 8,858 | $ | 7,806 | $ | 11,117 | $ | 7,806 | ||||||||
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COST
OF SALES
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12,239 | 2,345 | 12,239 | 2,345 | ||||||||||||
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GROSS
PROFIT
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(3,381 | ) | 5,461 | (1,122 | ) | 5,461 | ||||||||||
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OPERATING
EXPENSES
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||||||||||||||||
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Research
and development
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84,610 | 45,366 | 115,304 | 134,868 | ||||||||||||
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Depreciation
and amortization
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801 | 892 | 2,206 | 2,106 | ||||||||||||
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General
and administrative
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190,000 | 160,062 | 347,344 | 299,453 | ||||||||||||
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Total
Operating Expenses
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275,411 | 206,320 | 464,854 | 436,427 | ||||||||||||
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OPERATING
LOSS
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(278,792 | ) | (200,859 | ) | (465,976 | ) | (430,966 | ) | ||||||||
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OTHER
INCOME (EXPENSE)
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Interest
income
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4,387 | - | 11,951 | - | ||||||||||||
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Interest
expense
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(21,541 | ) | (14,803 | ) | (43,573 | ) | (27,630 | ) | ||||||||
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Other
income (loss)
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680 | - | 680 | - | ||||||||||||
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Total
Other Income (Expense)
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(16,474 | ) | (14,803 | ) | (30,942 | ) | (27,630 | ) | ||||||||
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LOSS
BEFORE INCOME TAXES
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(295,266 | ) | (215,662 | ) | (496,918 | ) | (458,596 | ) | ||||||||
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PROVISION
FOR INCOME TAXES
|
- | - | - | - | ||||||||||||
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NET
LOSS
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$ | (295,266 | ) | $ | (215,662 | ) | $ | (496,918 | ) | $ | (458,596 | ) | ||||
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OTHER
COMPREHENSIVE INCOME
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||||||||||||||||
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Foreign
currency translation adjustments
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(421,165 | ) | 65,375 | (485,573 | ) | 933,547 | ||||||||||
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Total
Other Comprehensive Income
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(421,165 | ) | 65,375 | (485,573 | ) | 933,547 | ||||||||||
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COMPREHENSIVE
INCOME (LOSS)
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$ | (716,431 | ) | $ | (150,287 | ) | $ | (982,491 | ) | $ | 474,951 | |||||
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BASIC
AND DILUTED LOSS
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||||||||||||||||
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PER
SHARE
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$ | (0.01 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
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WEIGHTED
AVERAGE NUMBER
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||||||||||||||||
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OF
SHARES OUTSTANDING
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59,024,300 | 50,000,000 | 54,512,150 | 50,000,000 | ||||||||||||
The accompanying condensed
notes are an integral part of these interim consolidated financial statements.
4
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SANGUI
BIOTECH INTERNATIONAL, INC.
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Condensed
Consolidated Statements of Cash Flows
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||||||||
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(Unaudited)
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||||||||
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For
the Six
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||||||||
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Months
Ended
|
||||||||
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December
31,
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||||||||
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2008
|
2007
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CASH
FLOWS FROM OPERATING ACTIVITIES
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||||||||
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Net
loss
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$ | (496,918 | ) | $ | (458,596 | ) | ||
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Adjustments
to reconcile net loss to net cash
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||||||||
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used
by operating activities:
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||||||||
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Depreciation,
depletion and amortization
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2,206 | 2,106 | ||||||
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Changes
in operating assets and liabilities
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||||||||
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(Increase)
Decrease in accounts receivable
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(4,347 | ) | 7,821 | |||||
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(Increase) decrease
in inventories
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(7,120 | ) | (6,740 | ) | ||||
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(Increase)
decrease in prepaid expenses and other assets
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15,035 | 8,238 | ||||||
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(Increase)
decrease in other assets
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20,396 | 12,108 | ||||||
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Increase
(decrease) in accounts payable and accrued expenses
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(21,873 | ) | (9,116 | ) | ||||
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Net
Cash Used in Operating Activities
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(492,621 | ) | (444,179 | ) | ||||
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CASH
FLOWS FROM INVESTING ACTIVITIES
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||||||||
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Purchase
of fixed assets
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(2,921 | ) | (2,921 | ) | ||||
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Disposal
of fixed assets
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3,245 | - | ||||||
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Net
Cash Used in Investing Activities
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324 | (2,921 | ) | |||||
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CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
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Cash
received on promissory notes
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374,891 | 1,562,102 | ||||||
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Cash
paid on notes receivable - related
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- | (134,742 | ) | |||||
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Cash
received on notes receivable
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415,283 | - | ||||||
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Net
Cash Provided by Financing Activities
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790,174 | 1,427,360 | ||||||
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EFFECT
OF EXCHANGE RATE CHANGES
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(485,573 | ) | (906,547 | ) | ||||
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NET
DECREASE IN CASH
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(187,696 | ) | 73,713 | |||||
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CASH
AT BEGINNING OF PERIOD
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229,717 | 18,497 | ||||||
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CASH
AT END OF PERIOD
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$ | 42,021 | $ | 92,210 | ||||
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SUPPLEMENTAL
DISCLOSURES OF
|
||||||||
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CASH
FLOW INFORMATION
|
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CASH
PAID FOR:
|
||||||||
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Interest
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$ | - | $ | - | ||||
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Income
Taxes
|
$ | - | $ | - | ||||
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NON
CASH FINANCING ACTIVITIES:
|
||||||||
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Common
stock issued for debt
|
$ | 2,187,233 | $ | - | ||||
The
accompanying condensed notes are an integral part of these interim consolidated
financial statements.
5
Notes to
the Condensed Consolidated Financial Statements
NOTE 1 -
BASIS OF PRESENTATION
The
accompanying consolidated financial statements have been prepared without audit
in accordance with accounting principles generally accepted in the United States
of America for interim financial information. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to such rules and regulations. The
unaudited consolidated financial statements and notes should, therefore, be read
in conjunction with the consolidated financial statements and notes thereto in
the Company's Form 10-KSB for the year ended June 30, 2008. In the opinion of
management, all adjustments (consisting of normal and recurring adjustments)
considered necessary for a fair presentation, have been included. The results of
operations for the three-month period ended December 31, 2008 are not
necessarily indicative of the results that may be expected for the full fiscal
year ending June 30, 2009.
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of
Business
Sangui
Biotech International, Inc., incorporated in Colorado in 1995, and its wholly
owned subsidiaries, Sangui Biotech, Inc., SanguiBioTech AG, GlukoMediTech AG,
and Sangui BioTech PTE Ltd., (collectively, the "Company") have been engaged in
the research, development, manufacture, and sales of medical and cosmetic
products.
On June
30, 2003, GlukoMediTech AG ("Gluko AG") was merged into Sangui BioTech AG
("Sangui AG"). Effective November 4, 2003, Sangui AG was converted into Sangui
BioTech GmbH (Sangui GmbH). After completion of the restructuring, Sangui GmbH,
which is headquartered in Witten, Germany, is engaged in the development of
artificial oxygen carriers (external applications of hemoglobin, blood
substitutes and blood additives) as well as in the development, marketing and
sales of cosmetics and wound management 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 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 medical products (wound dressings and other
wound management products)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, under development in Germany, will be
subject to more stringent regulatory requirements, because they are in vivo
products for humans. The Company and its subsidiaries have no experience in
obtaining regulatory clearance on these types of products. Therefore, the
Company will be subject to the risks of delays in obtaining or failing to obtain
regulatory clearance.
Going
Concern
The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern, which contemplates, among other
things, the realization of assets and satisfaction of liabilities in the normal
course of business. The Company has accumulated deficit of $23,837,513 as of
December 31, 2008 and has been significantly reducing its working capital since
June 30, 2004. The Company incurred a net loss applicable to common stockholders
of $496,918 during the six months ended December 31, 2008 and used cash in
operating activities of $492,621 for the six months ended December 31, 2008.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern. The Company expects to continue to incur significant capital
expenses in pursuing its business plan to market its products and expand its
product line, while obtaining additional financing through stock offerings or
other feasible financing alternatives. In order for the Company to continue its
operations at its existing levels, the Company will require significant
additional funds over the next twelve months. Therefore, the Company is
dependent on funds raised through equity or debt offerings. Additional financing
may not be available on terms favorable to the Company, or at all. If these
funds are not available the Company may not be able to execute its business plan
or take advantage of business opportunities. The ability of the Company to
obtain such additional financing and to achieve its operating goals is
uncertain. In the event that the Company does not obtain additional capital or
is not able to increase cash flow through the increase of sales, there is a
substantial doubt of its being able to continue as a going concern. The
accompanying condensed consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Cash and Cash
Equivalents
The
Company maintains its cash in bank accounts in Germany. Cash and cash
equivalents include time deposits for which the Company has no requirements for
compensating balances. The Company has not experienced any losses in its
uninsured bank accounts. At December 31, 2008 the Company had no cash
equivalents.
7
SANGUI
BIOTECH INTERNATIONAL, INC.
Notes to
the Condensed Consolidated Financial
Statements
NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue
Recognition
Revenue
is recognized when the sales amount is determined, shipment of goods to the
customer has occurred and collection is reasonably assured. Product is shipped
FOB origination.
Research and
Development
Research
and development costs are charged to operations as they are
incurred. Legal fees and other direct costs incurred in obtaining and
protecting patents are expensed as incurred.
Basic and Diluted Earnings
(Loss) Per Common Share
Basic
earnings (loss) per common share is computed by dividing income (loss) available
to common stockholders by the weighted average number of common shares
outstanding during the period of computation. Diluted earnings (loss) per share
gives effect to all potential dilutive common shares outstanding during the
period of compensation. The computation of diluted earnings (loss) per share
does not assume conversion, exercise or contingent exercise of securities that
would have an antidilutive effect on earnings. As of December 31, 2008, the
Company had no potentially dilutive securities that would affect the loss per
share if they were to be dilutive.
Comprehensive Income
(Loss)
Total
comprehensive income (loss) represents the net change in stockholders' equity
during a period from sources other than transactions with stockholders and as
such, includes net earnings (loss). For the Company, the components of other
comprehensive income (loss) are the changes in the cumulative foreign currency
translation adjustments and unrealized gains (losses) on marketable securities
and are recorded as components of stockholders' equity.
Inventory
Inventory
consists of various raw materials, supplies, and semi-processed and fully
processed cosmetics products. The Company
values its inventory at the lower of cost or market. The cost is
determined by specific identification method. Cost includes purchase
price, freight, insurance, duties and other incidental expenses incurred in
bringing inventories to their present location and condition. The Company
records a reserve if the fair value of inventory is determined to be less than
the cost. At December 31, 2008, no reserve for impaired inventory has
been recorded.
8
SANGUI
BIOTECH INTERNATIONAL, INC.
Notes to
the Condensed Consolidated Financial Statements
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 4 –
SIGNIFICANT EVENTS
During
the quarter ended December 31, 2008, the Company increased its authorized common
shares from 50 million to 250 million shares.
During
the quarter ended December 31, 2008, the Company’s Board of Directors resolved
to convert $2,187,233 in promissory notes into 18,163,500 shares of common
stock, at conversion rates of $0.09 to $0.13 per
share.
9
Forward-looking
Statements
The following
discussion of our financial condition and results of operations should be read
in conjunction with the consolidated financial statements and the related notes
thereto included elsewhere in this quarterly report. Some of the
information in this quarterly report contains forward-looking statements,
including statements related to anticipated operating results, margins, growth,
financial resources, capital requirements, adequacy of the Company's financial
resources, trends in spending on research and development, the development of
new markets, the development, regulatory approval, manufacture, distribution,
and commercial acceptance of new products, and future product development
efforts. Investors are cautioned that forward-looking statements involve
risks and uncertainties, which may affect our business and prospects, including
but not limited to, the Company's expected need for additional funding and the
uncertainty of receiving the additional funding, changes in economic and market
conditions, acceptance of our products by the health care and reimbursement
communities, new development of competitive products and treatments,
administrative and regulatory approval and related considerations, health care
legislation and regulation, and other factors discussed in our filings with the
Securities and Exchange Commission.
GENERAL
The Company's
mission is the development of novel and proprietary pharmaceutical, medical and
cosmetic products. The Company develops its products through its
wholly owned German subsidiary Sangui GmbH. The Company is seeking to
market and sell some or all of their products through partnerships with industry
partners.
The focus of
Sangui GmbH has been the development of oxygen carriers capable of providing
oxygen transport in humans in the event of acute and/or chronic lack of oxygen
due to arterial occlusion, anaemia or blood loss whether due to surgery, trauma,
or other causes. Sangui GmbH has thus far focused its development and
commercialization efforts of such artificial oxygen carriers by reproducing and
synthesizing polymers out of native hemoglobin of defined molecular
sizes. Sangui GmbH, has in addition developed external applications
of oxygen transporters in the medical and cosmetic fields in the form of gels
and emulsions for the regeneration of the skin
Sangui GmbH
holds the exclusive distribution rights for Chitoskin wound pads in the European
Union and various other countries. Sangui GmbH has filed a patent
cooperation treatment applications (“PCT”) for the production and use of
improved Chitoskin wound pads using gelatine instead of collagen as the carrier
substance.
Artificial Oxygen
Carriers
Sangui GmbH
develops several products based on polymers of purified natural porcine
hemoglobin with oxygen carrying abilities that are similar to native
hemoglobin. These are (1) oxygen carrying blood additives and (2)
oxygen carrying blood volume substitutes.
In December
1997, Sangui GmbH decided that porcine hemoglobin should be used as the basic
material for its artificial oxygen carriers. In March 1999, Sangui
GmbH decided which hemoglobin hyperpolymer would go into preclinical
investigation and that glutaraldehyde would be utilized as a cross linker, and
further that the polymer hemoglobin be chemically masked to prevent protein
interaction in blood plasma. The fine adjustment of the molecular
formula of the artificial oxygen carriers - optimized for laboratory scale
production - was finalized in the summer of 2000.
The
experiments completed in Sangui GmbH’s laboratories demonstrated that it is
possible to polymerize hemoglobins isolated from porcine blood resulting in huge
soluble molecules, so-called hyperpolymers. In August 2000, Sangui
GmbH finalized its work on the pharmaceutical formulation of the oxygen carrier
for laboratory scale. In February 2001 a pilot production in a
laboratory scale was carried out in SGBI's clean room. The resulting
product was applied in single volunteers in pilot self-experiments.
The blood
additives and blood substitute projects were halted in 2003 due to the lack of
financing for the pre-clinical test phase of the blood additives. In
October 2006, a contract was entered into between Sangui GmbH and ERC Nano
Med S.A. de C.V. of Monterrey, Mexico (“ERC”), which provides that ERC will
establish a production facility in Mexico to produce sufficient quantities of
the blood additive. In cooperation with the medical faculty of
Monterrey University and the Mexican National Health Organizations, ERC will
initiate all necessary steps to begin the pre-clinical test phase for the
products as soon as possible. It is anticipated that this will lead
to the FDA authorization process in due course.
According to
regulatory requirements, all drugs must complete preclinical and clinical trials
before approval (e.g. Federal Drug Administration approval) and market
launch. The Company’s management believes that the European and FDA
approval process will take at a minimum several years to complete.
10
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.
On October
12, 2008, SanguiBioTech GmbH and Fanales GmbH, Recklinghausen, Germany, entered
into a cooperation with regard to marketing and sales of the Pure Moisture
cosmetics. The agreement comprises an initial test phase of six months.
Under the terms of the mutually non-exclusive agreement, Fanales will sell
Sangui’s Pure Moisture cosmetics in a specialized shop in Dusseldorf and strive
to establish additional distribution channels.
Chitoskin Wound
Pads
In October,
2008, management and the medical staff of SanguiBioTech GmbH held a series of
presentations at leading medical institutions in the Kingdom of Jordan.
The series of presentations had been organized by Abu-Jabir Industrial and
Marketing Consulting. This company is currently establishing a sales
network for Sangui products in the Arab countries. Their distribution
partner in Jordan will be the pharmaceuticals trading house Nobles Medical
Supplies.
FINANCIAL
POSITION
The Company's
current assets decreased $606,547, or 66%, from June 30, 2008 to $316,986 at
December 31, 2008. The decrease is primarily attributable to a $189,696
decrease in cash and a $415,283 decrease in shareholder loans
receivable.
The Company's
net property and equipment decreased $2,530, or 36% from June 30, 2008 to $4,491
at December 31, 2008. The decrease is primarily attributable to current
period depreciation, partially offset by minor purchases of fixed
assets.
The Company
funded its operations primarily through its existing cash reserves and cash
received from the issuance of promissory notes payable. During the six
months ended December 31, 2008, the Company's stockholders' deficit decreased
$1,204,742. This decrease is due primarily to the Company's issuing common
stock for debt, partially offset by the current period net loss of
$496,918, and to other comprehensive income related to fluctuations in foreign
currency exchange rates.
11
Three
months ended December 31, 2008 and 2007:
RESEARCH AND
DEVELOPMENT. Research and development expenses increased significantly to
$84,610 in 2008 from $45,366 in 2007. The increase is mainly attributed to
the Company’s attempting to further develop its products and add complimentary
products to existing product lines. The Company is seeking additional
sources to provide financing for additional research and
development.
GENERAL AND
ADMINISTRATIVE. General and administrative expenses increased to $190,000
in 2008 from $160,062 in 2007. This increase is mainly attributed to the
Company’s emphasis on becoming current with its audit process and its filings
with the Securities and Exchange Commission, in addition to its attempt to
solidify the Company’s standing in new and existing markets.
DEPRECIATION
AND AMORTIZATION. Depreciation decreased slightly to $801 in 2008 from
$892 in 2007. This decrease is mainly attributed to certain assets
becoming fully depreciated.
NET
LOSS. As a result of the above and other factors, the Company's
consolidated net loss was $295,266, or $0.00 per common share, for the three
months ended December 31, 2008, compared to $215,662, or $0.01 per common share,
during the comparable period in 2007.
Six
months ended December 31, 2008 and 2007:
RESEARCH AND
DEVELOPMENT. Research and development expenses decreased slightly to
$115,304 in 2008 from $134,868 in 2007. The decrease is mainly attributed
to the Company’s attempting to maximize sales through existing product
lines. The Company is seeking additional sources to provide financing
for additional research and development.
GENERAL AND
ADMINISTRATIVE. General and administrative expenses increased to $347,344
in 2008 from $299,453 in 2007. This increase is mainly attributed to the
Company’s emphasis on becoming current with its audit process and its filings
with the Securities and Exchange Commission, in addition to its attempt to
solidify the Company’s standing in new and existing markets.
DEPRECIATION
AND AMORTIZATION. Depreciation increased slightly to $2,206 in 2008 from
$2,106 in 2007. This increase is mainly attributed to the purchases of
certain small fixed assets.
NET
LOSS. As a result of the above and other factors, the Company's
consolidated net loss was $496,918, or $0.01 per common share, for the six
months ended December 31, 2008, compared to $458,596, or $0.01 per common share,
during the comparable period in 2007.
LIQUIDITY AND CAPITAL
RESOURCES
For the six
months ended December 31, 2008, net cash used in operating activities increased
to $492,621 from $444,179 in the corresponding period in 2007, primarily related
to the Company’s decreased net loss for the period.
The Company
had a working capital deficit of $119,018 at December 31, 2008, a decrease of
$1,227,668 from June 30, 2008. At December 31, 2008, the Company had
cash of $42,021. The Company will need substantial additional funding to
fulfill its business plan and the Company intends to explore financing sources
for its future development activities. No assurance can be given that
these efforts will be successful.
12
We
are a smaller reporting company as defined by Rule 12b-2 of the Securities
Exchange Act of 1934 and are not required to provide the information under this
item.
Evaluation
of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed by us in the reports that we file or submit
to the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized and reported within the
time periods specified by the Securities and Exchange Commission’s rules and
forms, and that information is accumulated and communicated to our management,
including our principal executive and principal financial officer (whom we refer
to in this periodic report as our Certifying Officers), as appropriate to allow
timely decisions regarding required disclosure. Our management evaluated, with
the participation of our Certifying Officers, the effectiveness of our
disclosure controls and procedures as of December 31, 2008, pursuant to Rule
13a-15(b) under the Securities Exchange Act. Based upon that evaluation, our
Certifying Officers concluded that, as of December 31, 2008, our disclosure
controls and procedures were effective.
Changes
in Internal Controls
There
were no changes in our internal control over financial reporting that occurred
during the quarter ended December 31, 2008 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
PART II - OTHER INFORMATION
ITEM
1 -
LEGAL PROCEEDINGS
On
February 14, 2007, Dr. Rainer Felfe, filed a claim (4 Ca 431/07) against the
Company and its subsidiary, SanguiBioTech GmbH, with the Industrial Relations
Court in Bochum, Germany (Arbeitsgericht Bochum). Dr. Felfe's claim states that
he is entitled to receive outstanding wages and salaries owed to Prof. Dr. Dr.
Wolfgang Barnikol by the Company, or its subsidiary, in the amount of
approximately 370,000 euros (approximately US $503,200) as partial relief of a
judgment rendered in a civil case against Dr. Barnikol (Oberlandesgericht
Düsseldorf I 6 U 96/06). Dr. Barnikol has never made a claim against the
Company, or its subsidiary, for outstanding wages with any governmental agency
and acknowledges there are no outstanding wages due to him by either the Company
or its subsidiary. The claim by Dr. Felfe has been declared pending by the
Industrial Relations Court until a final judgment is rendered by the Federal
Supreme Court in the appeal to the above civil case. The Company believes the
claim lacks merit and plans to vigorously defend this
claim.
The
Company is not aware of pending claims or assessments, other than as described
above, which may have a material adverse impact on the Company’s financial
position or results of operations.
We
are a smaller reporting company as defined by Rule 12b-2 of the Securities
Exchange Act of 1934 and are not required to provide the information under this
item.
ITEM
2 -
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
On
December 19, 2008, the Company filed Amended and Restated Articles of
Incorporation with the Colorado Secretary of State thereby increasing the
authorized number of shares of common stock available for issuance from
50,000,000 to 250,000,000 shares. The
Company then sought out holders of promissory notes it issued who were
willing to convert this debt into common stock of the Company in order to
decrease the Company’s outstanding
debt.
On
December 29, 2008, the Company's board of directors authorized the issuance of a
total of 18,163,500 shares of common stock, at conversion rates of $0.09 to
$0.13 per share to satisfy
$2,187,233
in outstanding promissory notes. The securities were issued
pursuant to an exemption from registration provided under Section 4(2) of the
Securities Act of
1933.
13
ITEM
3 -
DEFAULTS UPON SENIOR
SECURITIES
None.
ITEM
4 -
SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
The Company’s Annual Meeting of Stockholders was held on November 18, 2008 at the Company’s principal executive offices in Witten, Germany. There were five proposals to be considered at the meeting. Of the 50,000,000 shares of the Company’s common stock outstanding as of September 22, 2008 (the record date), 21,333,529 shares, or 42.66%, were present or represented by proxy at the meeting. Since enough shares were not present at the meeting to represent a quorum for voting purposes, the meeting was adjourned until December 17, 2008 in order to permit additional shareholders to submit their votes.
At
the reconvened Annual Meeting of Stockholders on December 17, 2008, of the
50,000,000 shares of the Company's common stock as of the record date,
25,326,973
shares, or 50.65%, were present or represented by proxy, a quorum was present
and the results of the voting are as follows:
Proposal
One
The
stockholders elected the Company’s three nominees to its Board of Directors to
each serve for a one-year term, each until his successor is duly elected.
The table below presents the results of the election.
|
Name
|
For
|
Withheld
|
||
|
Thomas
Striepe
|
25,098,473
|
228,500
|
||
|
Joachim
Fleing
|
25,103,473
|
223,500
|
||
|
Hubertus
Schmelz
|
25,104,473
|
222,500
|
Proposal
Two
The
stockholders ratified the appointment of Moore
& Associates, Chartered as the Company's independent accountants for the
fiscal years ending June 30, 2008 and 2009. The ratification
of the independent accountants was approved by 97.2% of the vote; this proposal
received 24,617,402 votes for, 339,211 votes against, and 370,360
abstentions.
Proposal
Three
Approval
of the Amended and Restated Articles of the Company, which increased the
aggregate number of shares which the Company is authorized to issue to
260,000,000 shares, of which 250,000,000 shares are to be common stock, without
par value, and 10,000,000 shares are to be preferred stock, without par value,
was approved by 71.4% of the vote; this proposal received 18,075,911 votes for,
870,252 votes against, and 458,860 abstentions.
Proposal
Four
The
Amended and Restated Bylaws of the Company were approved by 73.3% of the votes;
this proposal received 18,568,163 votes for, 246,000 votes against, and 590,860
abstentions.
Proposal
Five
The
ratification of the Amended and Restated Sangui Biotech International Inc.
Long-Term Incentive Plan, and to reserve an additional 10,000,000 shares of
common stock for issuance hereunder, was approved by 73.2% of the votes; this
proposal received 18,549,888 votes for, 346,275 votes against, and 508,860
abstentions.
ITEM
5 -
OTHER INFORMATION
Amended
and Restated Articles of Incorporation
On
December 19, 2008, the Company filed Amended and Restated Articles of
Incorporation with the Colorado Secretary of State increasing its authorized
capital from 50,000,000 shares of common stock, no par value to 250,000,000
shares of common stock, no par value. The Amended and Restated Articles of
Incorporation became effective immediately upon filing.
14
ITEM
6 -
EXHIBITS
|
2.1
|
Exchange Agreement between MRC Legal Services LLC and SanguiBioTech International, Inc., dated of March 31, 2000 (1) |
| 3.1 | Articles of Incorporation of the Company (1) |
| 3.2 | Bylaws of the Company (1) |
| 3.3 | Amended and Restated Article of Incorporation, filed herewith |
| 3.4 | Amended and Restated Bylaws, filed herewith |
| 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) |
| 10.15 | Amended and Restated Long-Term Incentive Plan, filed herewith |
| 16.1 | Auditor Letter from HJ & Associates, LLC (5) |
| 21.1 | Subsidiaries of the Company (6) |
| 31.01 | Certification of CEO Pursuant to Rule 13a-14(a) and 15d-14(a), filed herewith |
| 31.02 | Certification of CFO Pursuant to Rule 13a-14(a) and 15d-14(a), filed herewith |
| 32.01 | Certification Pursuant to Section 1350 of Title 18 of the United States Code, filed herewith |
| 99.01 | Press Release Dated December 11, 2008, filed herewith |
| 99.02 | Press Release Dated December 19, 2008, filed herewith |
| 99.03 | Press Release Dated February 9, 2009, 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:
February 23, 2009 /s/
Thomas Striepe
__________________________________________
By:
Thomas Striepe
Chief
Executive Officer
Dated:
February 23, 2009 /s/
Joachim Fleing
__________________________________________
By:
Joachim Fleing
Chief
Financial Officer
15