NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 deemedCompany accounts for the transactions denominated in foreign currencies in the Parent Company’s books 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 developmenttransaction gains (losses) recognized 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.Other Income.
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 $ 37,091,180$37,845,291 as of DecemberMarch 31, 2017.2021. The Company incurred a net loss before non-controlling interest of $118,839 during$151,923 for the six monthsnine-months ended DecemberMarch 31, 20172021 and used cash in operating activities of$133,096during $104,178 during the six monthssame nine-months ended DecemberMarch 31, 2017.2021. These conditions raise substantial doubt about the Company's ability to continue as a going concern.concern for a period of one year from issuance of the financial statements. 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, is not able to collect its outstanding receivables, 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.
6
SANGUI BIOTECH INTERNATIONAL, INC.
Notes to the Condensed Consolidated Financial Statements
December 31, 2017 and June 30, 2017
(Unaudited)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
Revenue Recognition
Product salesIn May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognizedrecognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The Company recognizes revenue based on the five criteria for revenue recognition established under Topic 606: 1) identify the contract, 2) identify separate performance obligations, 3) determine the transaction price, 4) allocate the transaction price among the performance obligations, and 5) recognize revenue as the performance obligations are satisfied.
SANGUI BIOTECH INTERNATIONAL, INC.
Notes to the Condensed Consolidated Financial Statements
March 31, 2021 and June 30, 2020
(Unaudited)
Type of Revenue
The Company derives revenue primarily from licensing fees on sales of its wound spray product.
The Company recognizes revenue based on the five criteria for revenue recognition established under Topic ASC 606 set forth below.
The Company’s licenses provide a right to use and create performance obligations satisfied at a point in time. The Company recognizes revenue from the license when the sales amountperformance obligation is determined, shipmentsatisfied through the transfer of goods to the customer has occurred and collection is reasonably assured. Product is shipped FOB origination. Productlicense. The Company will recognize royalty revenue is recognizeda) when the licensee makes the subsequent sales or use that trigger the royalty, or (b) the performance obligation to which some or all of the sales-based or usage-based royalties has reported the product sales to the Company. Product royalty revenue is calculated based upon the contractual percentage of reported sales.been allocated has been satisfied.
Basic and Diluted Earnings (Loss) Per Common Share
Basic earnings (loss) per common share are 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 give 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 DecemberMarch 31, 2017,2021, the Company had no potentially dilutive securities that would affect the loss per share if they were to be dilutive.
Comprehensive Income (Loss)Loss
Total comprehensive income (loss)loss represents the net change in stockholders' equity (deficit) 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)loss are limited to the changes in the cumulative foreign currency translation adjustments, and unrealized gains (losses) on marketable securities and arewhich is recorded as components of stockholders' equity.equity (deficit).
ReclassificationsRecent Accounting Pronouncements
Certain amountsIn February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), ("ASC 842"). The objective of the guidance in ASC 842 is to increase transparency and comparability among organizations by recognizing lease assets and liabilities in the priorbalance sheet and disclosing key information. ASC 842 amends previous lease guidance to require a lessee to recognize a lease liability and a right-of-use asset on the entity’s balance sheet for all leases with terms that exceed one year. ASC 842 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. ASC 842 provides that lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statementsstatements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. The Company elected a policy of not recording leases on its condensed balance sheets when the leases have been reclassifiedterm of 12 months or less and the Company is not reasonably certain to conformelect an option to purchase the current period presentation. These reclassifications had no effectleased asset. The Company recognizes payments on reported losses.
Recent Accounting Pronouncementsthese leases within selling, administrative and other expenses on a straight-line basis over the lease term. The standard did not materially impact consolidated net income or liquidity.
Management does not believe that any recently issued, but not yet effective, accounting standardstandards if currently adopted would have a material effect on the accompanying consolidated financial statements.
SANGUI BIOTECH INTERNATIONAL, INC.
Notes to the Condensed Consolidated Financial Statements
March 31, 2021 and June 30, 2020
(Unaudited)
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.
At the time of reporting, no litigation is pending.
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SANGUI BIOTECH INTERNATIONAL, INC.
Notes to the Condensed Consolidated Financial Statements
December 31, 2017 and June 30, 2017
(Unaudited)
NOTE 3 - COMMITMENTS AND CONTINGENCIES (Continued)
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.
Leases
The Company leases office facilities from an unrelated third party at 1,110 Euros per month, which amount includes 177 Euros for sales tax. The office lease contract began in January 2020 and expires June 2026.The Company also leases an automobile under an operating lease. The lease provides for a lease payment of 538 Euros per month that began June 2018 expired May 2020. The company has extended the expired contract until May 2021. The monthly leasing rate is 670 Euros for the period from June 2020 to May 2021.The following table reconciles future minimum operating lease payments to the discounted lease liability as of March 31, 2021:
On July 27, 2020, September 07, 2020, September 21, 2020, October 09,2020, December 12, 201703,2020, January 05, 2021, February 11, 2021 and on March 17, 2021 a Company Director advanced an amount of 25,000amounts totaling 85,000 Euros ($29,951101,515 as of DecemberMarch 31, 2017)2021) to the Company. The loan isloans are due on demand, accruesaccrue interest annually at 2% and isare unsecured.
As of DecemberMarch 31, 2017,2021, all notes issued have total interest accrued of $57,343.
Interest expense for the note has an accrued interest balance of $31.nine-month period ended March 31, 2021 and 2020 was $13,273 and $10,357, respectively.
SANGUI BIOTECH INTERNATIONAL, INC.
Notes to the Condensed Consolidated Financial Statements
Notes payableMarch 31, 2021 and June 30, 2020
(Unaudited)
On June 15, 2015 the Company entered into an unsecured note for 32,963 Euros and accrues interest annually at 4%. The note was originally entered into with a related-party. As of December 31, 2017, due to a change in nature of relationship with the note holder, the Company has discontinued recording it as a related party obligation. As of December 31, 2017, the balance of the note is $39,551. The Company made an interest payment of $1,553 and as of period end; the outstanding accrued interest owed on the note was $777. The combined principal and interest at December 31, 2017 is $40,342.
NOTE 5 – CAPITAL STOCK STOCKHOLDERS’ DEFICT
Preferred Stock
– The Company is authorized to issue 10,000,000 shares of preferred stock. No preferred stock has been issued so far.to date. The authorized preferred shares are non-voting and the Board of Directors has not designated any liquidation value or dividend rates.
Common Stock
– The Company is authorized to issue 250,000,000 shares of no - par value common stock. The holders of the Company's common stock are entitled to one vote for each share held of record on all matters to be voted on by those stockholders. As of DecemberMarch 31, 20172021, and June 30, 2017,2020, the Company had 188,451,503 shares203,355,598 and 184,935,259203,355,598 shares of common stock issued and 188,397,747and 184,881,503203,301,842 and 203,301,842 shares outstanding, respectively.
8
SANGUI BIOTECH INTERNATIONAL, INC.
Notes to the Condensed Consolidated Financial Statements
December 31, 2017 and June 30, 2017
(Unaudited)
NOTE 5 – CAPITAL STOCK (CONTINUED)
On May 11, 2015, theTreasury Stock - The Company entered into an equity purchase agreement (the “EPA”) with an unrelated investor (“the Investor”). The EPA is a put option contract wherein, at the Company’s sole discretion, up to $5,000,000holds 53,756 of its common stock may be sold to the Investor for a periodas treasury stock, which is valued at cost of 3 years ending May 2018. Under the terms of the EPA, prior to 2016, the Company issued 208,333 shares pursuant to a put notice for $10,000. The put notice yielded $1,500 in cash against 37,037 of the 208,333 shares. In addition to these 37,037 shares, the investor converted $2,973 in accrued interest related to a prior convertible note payable into 165,144 shares, leaving 6,152 shares held by the investor that are receivable by the Company$19,387 as of DecemberMarch 31, 2017.2021.
During the six months ended December 31, 2017, the Company sold 3,570,000 shares of common stock to a Company Director for $88,927 ($0.025 per share).
NOTE 6 – SUBSEQUENT EVENTS
Subsequent to March 31, 2021, the Company sold 3,600,000 shares of its common stock for approximately $58,737 in cash proceeds to one individual at price of approximately $0.0163 per share.
In accordance with ASC 855-10, the Company’sCompany’s management has reviewed all material events and there are no additional material subsequent events to report.
Item 2 - Management's Discussion Andand Analysis Ofof Financial Condition Andand Results Ofof 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
Our mission is the development of novel and proprietary pharmaceutical, medical and cosmetic products. We develop our products through our German subsidiary, Sangui GmbH. Currently, we are seeking to market and sell our products through partnerships with industry partners worldwide.
Our focus 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, anemia or blood loss whether due to surgery, trauma, or other causes, as well as in the case of chronic wounds. We have thus far focused our development and commercialization efforts on such artificial oxygen carriers by reproducing and synthesizing polymers out of native hemoglobin of defined molecular sizes. In addition, we have developed external applications of oxygen transporters in the medical and cosmetic fields in the form of sprays for the healing of chronic wounds and of gels and emulsions for the regeneration of the skin. A wound dressing that shows outstanding properties in the support of wound healing, is being distributed by SastoMed GmbH (Sastomed), a former joint venture company in which we had held a share of 25%, as global licensee under the Granulox brand name. Effective as of the end of the second quarter of our fiscal year 2016 we sold this stake to SanderStrohmann GmbH.
SanguiBioTechSangui GmbH holds distribution rights for our Chitoskin wound pads for the European Union and various other countries. AAdditionally, a European patent has been granted for the production and use of improved Chitoskin wound pads.
Our current key business focuses are: (a) selling our existing cosmetics and wound management products by way of licensing through distribution partners, or by way of direct sale, to end users; (b) identifying additional industrial and distribution partners for our patents, production techniques, and products; and (c) obtaining the additional certifications on our products in development.
Artificial Oxygen Carriers
SanguiBioTech
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.
During the first quarter of our 2013 financial year the European Patent Office granted a patent based on Sangui’s application (01 945 245) “Mammalian hemoglobin compatible with blood plasma, cross-linked and conjugated with polyalkylene oxides as artificial medical oxygen carriers, production and use thereof.”
During the third quarter of our 2013 financial year the company had a feasibility study prepared by external experts inquiring into market potentials and further preclinical and clinical development requirements. The study came to the conclusion that an approval of Sangui's hemoglobin hyperpolymers as a blood additive appears possible, expedient and promising.
During the fourth quarter of our 2014 financial year the company filed a patent application aimed at significantly expanding the protection of our hemoglobin formulations. It will encompass a greater array of ischemic conditions of the human body, for instance in the case of severe dysfunctions of the lung.
During the first quarter of our 2015 financial year, we began together with Excellence Cluster Cardio-Pulmonary System (“ECCPS”) and TransMIT Gesellschaft für Technologietransfer mbH (“TransMIT”) to investigate therapeutic approaches to treating septic shock and acute respiratory distress syndrome (“ARDS”). The approach adopted here by Sangui, ECCPS and TransMIT presupposes that self-perpetuating septic shock, that has so far been highly resistant to treatment, can be interrupted by Sangui's artificial hemoglobin-based oxygen carrier, which would ultimately lower mortality rates. The preclinical trials commenced at ECCPS investigate the effect of various hemoglobin preparations on the oxygen supply of a number of organs in septic shock models and ARDS.
Also during the first quarter of our financial year 2015 we were notified that the period for objection against European Patent EP 2550973,(“Wound Spray“) had elapsed without any objection being raised. The patent, therefore, has become effective and legally binding.
During the second quarter of our 2015 financial year the first phase of preclinical trials was concluded successfully. It could be demonstrated that applying an oxygen-carrying liquid (the hemoglobin hyperpolymer formulation SBT102) in the abdomen did significantly improve the oxygen supply to the intestines. The restoration of intestinal oxygenation will have an impact on tissue integrity and ultimately on patient survival.
During the third quarter of our 2015 financial year the preclinical trials were concluded successfully, the final results did fully confirm the interim results obtained in the second quarter.
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’sCompany’s management believes that the European and FDA approval process will take at a minimum several years to complete.
Our most promising potential product in the area of artificial oxygen carriers, the blood additive, is still in an early development stage. In the pursuit of these projects, we will need to obtain substantial additional capital to
continue their development. As the Company has limited financial resources, we have suspended this project temporarily in order to focus our attention on our chronic wound research and the products developed in conjunction with their treatment.
The blood additives project was halted in the second quarter of our financial year 2016 due to the lack of financing the further authorization.
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.
SalesIn response, we developed nano-emulsion based cosmetic preparations that in their design are able to help support regeneration of the skin by improving its oxygen supply. Our line of cosmetic products was thoroughly tested by an independent research institute and received top marks for skin moisturizing, and enhanced skin elasticity, respectively. However, sales of this series have remained at a low level. Duringlevels and during the first quarter of the 2016 financial year we decided to decrease our operations in this particular segment and to abandon the patent protection for this range of products.
Chitoskin Wound Pads
Usually, normal (“primary”(“primary”) wounds tend to heal over a couple of days without leaving scars following a certain sequence of phases. Burns and certain diseases impede the normal wound healing process, resulting in large, hardly healing (“secondary”(“secondary”) wounds which only close by growing new tissue from the bottom. Wound dressings serve to safeguard the wound with its highly sensitive new granulation tissue from mechanical damage as well as from infection. Using the natural polymer chitosan, Sangui’sSangui’s Chitoskin wound dressings show outstanding properties in supporting wound healing.
It Sangui GmbH holds various distribution rights for our Chitoskin wound pads, and it is the strategy of the company to find industry partners ready to acquire or license this product range as a whole.
Hemospray Wound Spray
SanguiBioTechSangui GmbH has developed a novel medical technology supporting the healing of chronic wounds. Lack of oxygen supply to the cells in the wound ground is the main reason why those wounds lose their genuine healing power. Based on its concept of artificial oxygen carriers, ourthe wound spray product we developed bridges the watery wound surface and permits an enhanced afflux of oxygen to the wound ground.
In December 2010, SanguiBioTech GmbH established SastoMed GmbH, a joint venture company with SanderStrothmann GmbH of Georgsmarienhütte, Germany. SanguiBioTechSangui GmbH has granted SastoMed GmbH global distribution rights. SastoMed GmbH startedrights to distribute the product in Germany after having obtained the CE mark authorizing the distributionthis product. Distribution of the wound spray began in the countries of the European Union in April 2012.
As licensor SanguiBioTech GmbH is awarded a fixed licensing fee as a percentage of all the external revenues received by SastoMed from sales of the Granulox product (based on SastoMed selling prices). The licensing percentage ranges in the uppermost zone of what is usually granted in the pharmaceutical and medical products industries and thus well above the average licensing rate of 7.5% of sales revenues as calculated by market analysts. In addition and complementing this basic agreement the percentage will be permanently increased by one fourth of the current rate as soon as cumulated sales revenues at SastoMed will have exceeded the total of €50,000,000.
In September 2011, the Mexican Health Authorities registered the entire current range of Sangui developed wound management products and thus granted the authorization to apply and sell these products on a nationwide level.
On April 5, 2012 SastoMed GmbH notified SanguiBioTech GmbH that the wound spray product was granted a certification as class III medical product. The CE mark according to sections 6 and 7 of the German Medical Devices Act authorizes production, distribution and sales of the product in all member countries of the European Union. According to SastoMed GmbH, sales of the product under the brand name “Granulox“Granulox.” started in Germany on April 16, 2012, other markets will be addressed in due course.
In August 2012, Sangui BioTech GmbH and SastoMed GmbH adjusted the existing sales strategy. In consideration of corresponding contributions the existing licensing contract was partially complemented resulting in the following conditions: As licensor SanguiBioTech GmbH is awarded a fixed licensing fee as a percentage of each and every external revenues received by SastoMed from sales of the Granulox product (based on SastoMed selling prices). The percentage ranges in the uppermost zone of what is usually granted in the pharmaceutical and medical products industries. In addition and complementing this basic agreement the percentage will be permanently increased by one fourth of the current rate as soon as cumulated sales revenues at SastoMed will have exceeded the total of €50,000,000.
In December 2012, actualproduct distribution of the product was initiated in Mexico under the management of SastoMed GmbHby Sastomed and their local distribution partner Bio-Mac Pharma. International distribution has been expanded since then through cooperation agreements with local distribution partners in the Benelux countries and South Eastern Europe.
In May 2013, the Company declared in the course of the filing of its third quarter report on form 10-QSB that according to information provided by SastoMed GmbH it now expects the Granulox market entry phase to last longer than initially expected. No assurance can be given that based on royalty revenues the Company may reach break-even in the course of its current financial year.
Since December 2013, international distribution outside Germany was initiated in collaboration with local partners has occurred in more than 40 countries in Europe and Latin American.
Effective December 31, 2015 Sangui BioTech GmbH sold its stake in Sastomed GmbH of 25% to SanderStrohmann GmbH. Also effective December 31, 2015 SanderStrohmann GmbH increased the nominal capital of Sastomed GmbH for an amount of Euro 500,000 to strengthen the capital base of Sastomed GmbH.
It has to be noted, however, that Granulox sales by our distribution partner SastoMed GmbH have become more volatile and declining from time to time. We remain confident, however, that SastoMed will be able to considerably increase its sales along with more international markets entering actual distribution of the product.
On November 13,2017the 2017, the Company announced thatInfirstthat Infirst Healthcare Ltd has announced that the United States (US) Food and Drug Administration (FDA)hadgranted Fast Track designation toGranulox 10% hemoglobin spray (porcine hemoglobin)to Granulox for the treatment of diabetic foot ulcers (DFUs).ulcers. It is the first and only hemoglobin spray to receive Fast Trackthe Fast-Track designation - a process designed by the FDA to facilitate the development, and expedite the review of, new therapies to treat serious conditions and fill an unmet medical need.
Despite the positive reviews of our product, Granulox sales have become more volatile. We remain confident, however, that SastoMed will be able to considerably increase its sales in conjunction with increased distribution of the product into more international markets.
ThroughIn December 2010, Sangui GmbH established a sub -license agreement withSastomedjoint venture company with SanderStrothmann GmbH of Georgsmarienhuette, Germany, under the name of SastoMed GmbH. This enterprise was in charge of obtaining the CE mark certification authorizing the distribution of one of SGBI’s products in the member states of the European Union. Effective December 31, 2015, Sangui GmbH sold its stake in Sastomed GmbH to whichSanguiBioTechSanderStrohmann GmbH.
On or about June 18, 2018, Sangui GmbH hastogether with Sastomed GmbH founded Sangui Know-How- und Patentverwertungsgesellschaft mbH & Co. KG (“Sangui KG”). Sangui KG is a limited partnership. On June 22, 2018, Sangui KG acquired all the rights in the license agreement made on December 17, 2010, between Sastomed GmbH and Sangui GmbH.
Pursuant to the contracts dated May 2, 2018 and November 11, 2018 between Sangui GmbH and Sangui KG, respectively, and a former contractor Sangui KG grants that contractor a license fee on the license income received by Sangui for his previous services as a co-inventor. The license fee is 10% analogously to the remuneration regulation of the German Law on Employee Inventions (ArbnErfG).
Given the Company’s business strength is primarily in research and product development, we have decided to partner with established distribution entities who license our marketable products, or those products that are close to market entry, for sale to end users. In pursuit of this strategy, we have licensed the worldwidemost promising product, a hemoglobin based wound spray technology to Sastomed GmbH, a former joint venture of SGBI, for distribution in several European, Latin American and Asian countries. In addition, we are entering the preclinical testing of hemoglobin based artificial oxygen carriers aiming at the remediation of ischemic conditions in human patients.
Effective July 27, 2020, Sastomed GmbH was merged with its parent company Mölnlycke Health Care GmbH, Düsseldorf. As a result of the merger, the license agreement between Sastomed GmbH and Sangui Know-How und Patentverwertungsgesellschaft mbH & Co. KG is transferred with all rights forGranulox.Infirst Healthcare Ltd has exclusive US commercialization rights forand obligations to the patented hemoglobin spray, which is approved as a class III medical device in the European Union and marketed for the treatment of diabetic foot ulcers, venous leg ulcers and pressure ulcers.receiving Mölnlycke Health Care GmbH.
FINANCIAL POSITION
During the six monthsnine-months ended DecemberMarch 31, 2017,2021, our total assets decreased $37,142increased $996 from $93,773 at$125,328 on June 30, 20172020 to $56,631 at December$126,324 on March 31, 2017. A2021. An increase of accounts receivable of $15,294 partially offset by a decrease in theof operating lease right-of-use assets of $ 4,361 and a decrease of cash on handof $ 3,662 from June 30, 20172020 to DecemberMarch 31, 2017, of $38,609 was2021 were primarily responsible for the decreaseincrease in the total assets.
We funded our operations primarily through our existing cash reserves and cash received from the issuance of shares of common stock.notes payables from related parties. Our stockholders’ equity (deficit)stockholders’ deficit increased by $58,787$153,376 from ($260,523) at 729,878) on June 30, 20172020 to ($319,310) at December883,254) on March 31, 2017.2021. The primary factor behind this was duenet loss attributable to the issuancecommon stockholders of stock for cash in the amount of $88,927, off-set by an increase to accumulated deficit of $112,882 as well as an decrease in accumulated other comprehensive income due to movements in the foreign exchange rate.$148,866.
RESULTS OF OPERATIONS
For the three-month and six monthnine-month period ended DecemberMarch 31, 20172021 and 2016:2020:
REVENUES – Revenues reported were $ 38,44621,182 and $25,797$ 9,211 for the three monthsthree-months ended DecemberMarch 31, 20172021 and 20162020 respectively. For the six monthsnine-months ended DecemberMarch 31, 20172021 and 20162020 revenues were $55,082$51,754 and $35,508. Revenues increased by $12,649 for the three months ended December 31, 2017 and increased by $19,574 for the six months ended December 31, 2017.$21,176. The increase of $12,649$11,971 and the increase of $19,574 from the revenues in the comparable period of our 2017 financial year$30,578 can be traced back to a increasethe development in royalties from the licensing agreement with SastoMedMölnlycke Heath Care GmbH. Cost of sales were $44 and $658 for the six months ended December 31, 2017 and 2016 respectively.
RESEARCH AND DEVELOPMENT –DEVELOPMENT– Research and development expenses decreasedincreased by $732$ 525 to $3,176$ 2,060 from $3,908$1,535 for the three-month periods ending DecemberMarch 31, 20172021 and 2016.2020. Research and development expenses decreased $523
increased $61 to approximately $7,805$6,482 in the first half-yearnine months of our 2018 financial2021financial year from approximately $8,328$6,421 in the comparable period of the previous year. This decrease isincrease mainly attributed to lowerhigher fees for patents.
GENERAL AND ADMINISTRATIVE and PROFESSIONAL FEES – For the three months ended December 31, 2017 and 2016 the The combined accumulated general and administrative expenses and professional fees decreasedincreased $3,130 to $47,241 during the three-months ended March 31, 2021, from $44,111 in the respective period of the previous year mainly due to higher of costs for cars and license expenses offset by $83,669 from $170,235 to $86,566.lower costs for legal advice. Accumulated general and administrative expenses and professional fees decreased $88,779increased $12,080 to approximately $156,358$155,701 in the half-yearnine months ended DecemberMarch 31, 2017,2021, from approximately $245,137$143,621 in the respective period of the previous yearmainly due tolowercoststo higher of costs for legal advice.tax advice, cars, rent and license expenses.
DEPRECIATION AND AMORTIZATION - Depreciation and amortization were $206 and $1,020 for the three-months and $610 and $1,020 for the nine-months ended March 31, 2021 and 2020 respectively.
GAIN/LOSS ON FOREIGN EXCHANGE – The three-month period ended March 31, 2021 shows gains on foreign exchange of $ 32,167 compared to gains of $12,838 during the respective period of the previous year, hence a change of $19,329. The nine-month period ended March 31, 2021 shows losses on foreign exchange of $27,611 compared to gains of $19,547 during the respective period of the previous year, hence a change of $47,158. The change is mainly due to the revaluation of notes payables denominated in Euros at the end of each period.
INTEREST EXPENSE - interestInterest expenses for the three-month period ended DecemberMarch 31, 20172021 and 2016 were $1,908 and $1,053, an increase of $855.2020 increased by $913 to $4,580 from $3,667. For the six monthsnine-months ended December 31,2017March 31, 2021 and 2016,2020, interest expenseincreasedby $941$2,916 to $3,776$13,273 from $2,835.$10,357. The increase relates to effectsthe increase of exchange rates.interest - bearing debt financing.
NET LOSS - As a result of the above factors, the net loss attributed to common shareholders decreased to a loss of $52,537$90 compared to a loss of $141,217$ 26,696 for the three monthsthree-months ended DecemberMarch 31, 20172021 and 2016 respectively2020 and a loss of $112,882increased $25,438 to $148,866 compared to a loss of $209,117$123,428 for the six monthnine-months ended DecemberMarch 31, 20172021 and 2016 respectively2020 respectively. The loss per share for both periods was $(0.00).
Our consolidated net loss before non-controlling interest was $54,688,$738 or $(0.00) per common share, for the three monthsthree-months ended DecemberMarch 31, 2017,2021, compared to $149,775$28,284 or $(0.00) per common share, during the comparable period in our 20172020 financial year. Our consolidated net loss before non-controlling interest was $118,839$151,923 or $(0.00) per common share, for the six monthsnine-months ended DecemberMarch 31, 2017,2021, compared to $221,450$127,410 or $(0.00) per common share, during the comparable period in our 20172020 financial year.
LIQUIDITY AND CAPITAL RESOURCES
For the six monthsnine-months ended DecemberMarch 31, 2017,2021, net cash used in operating activities increased $53,116$23,975 to $(133,096)($104,178), compared to $(186,212)($128,153) in the corresponding period of the previous yearyear. This is mainly due to an increase accounts payables and accrued expenses of $ 15,604 and related party payables of $11,852.
The Company funded its business in the decrease of the operating loss of approximately $102,611 from a loss of $(221,450) in 2017 to a loss of $(118,839) in 2018.first nine-months ended March 31, 2021 by issuing note payables totaling Euros 85,000 ($101,515).
We had a working capital deficit of approximately $319,310 at December$897,618 on March 31, 2017, a2021an increase of approximately $58,787$154,829 from June 30, 2017.
2020.
At December
On March 31, 20172021 compared to June 30, 2017,2020, we had cash of $18,381$11,620 compared to $56,990,$15,282, prepaid expenses of $27,722$14,995 compared to $26,662$13,361 and accounts receivable of $977$25,152 compared $468.$9,858. We will need substantial additional funding to fulfill our business plan and we intend to explore financing sources for our future development activities. No assurance can be given that these efforts will be successful.
Item 3 - Quantitative and Qualitative Disclosures about Market Risk
We are a smaller reporting company as defined by § 229.10(f)§229.10(f)(1) and are not required to provide the information under this item.
Item 4 - Controls and Procedures
Disclosure Controls and Procedures
As of the date of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as required by Exchange Act Rule 13a-15. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’sSEC’s rules and forms.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’sSEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
The term “internal“internal control over financial reporting”reporting” is defined as a process designed by, or under the supervision of, the registrant’sregistrant’s principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant’sregistrant’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
(a)
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the registrant;
(b)
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the registrant are being made only in accordance with authorizations of management and directors of the registrant; and
(c)
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the registrant’sregistrant’s assets that could have a material effect on the financial statements.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
The Company is not aware of pending claims or assessments, which may have a material adverse impact on the Company’sCompany’s financial position or results of operations.
Item 1a - Risk Factors
We are a smaller reporting company as defined by §229,10(f)(1) and are not required to provide the information under this item.
Item 2 - Unregistered Sales of Equity Securities and Use Of Proceeds
DuringSubsequent to the six months ended December 31, 2017,period covered by this report, the Company sold 3,570,0003,600,000 shares of its common stock for approximately $58,737 to one individual, for $88,927 ($0.0249at price of approximately $0.0163 per share).
share. No underwriters were used. The securities were sold pursuant to an exemption from registration provided by Regulation S and Section 4(2) of the Securities Act of 1933. The certificate representing the shares contained a restricted legend.
Item 3 - Defaults Upon Senior Securities
None.
Item 5 - Other Information
On November 13, the Company announced thatInfirst Healthcare Ltd has announced that the United States (US) Food and Drug Administration (FDA) has granted Fast Track designation toGranulox 10%hemoglobin spray (porcinehemoglobin) for the treatment of diabetic foot ulcers (DFUs). It is the first and onlyhemoglobin spray to receive Fast Track designation - a process designed by the FDA to facilitate the development, and expedite the review of, new therapies to treat serious conditions and fill an unmet medical need.None.
Through a sub - license agreement withSastomed GmbH, to whichSanguiBioTech GmbH has licensed the worldwide distribution rights forGranulox,Infirst Healthcare Ltd has exclusive UScommercialization rights for the patentedhemoglobin spray, which is approved as a class III medical device in the European Union and marketed for the treatment of diabetic foot ulcers, venous leg ulcers and pressure ulcers.Item 6 – Exhibits
Item 6 – Exhibits
1. Financial Statements. The unaudited condensed consolidated Balance Sheet of Sangui Biotech International, Inc. as of DecemberMarch 31, 20172021 and the audited balance sheet as of June 30, 2016,2020, the unaudited condensed consolidated Statements of Operations for the three and sixnine - month periods ended DecemberMarch 31, 20172021 and 2016,2020, the unaudited condensed consolidated Statements of Stockholder’s Deficit as of March 31, 2021 and 2020, and the unaudited condensed consolidated Statements of Cash Flows for the six monthnine-month period ended DecemberMarch 31, 20172021 and 2016,2020, together with the notes thereto, are included in this Quarterly Report on Form 10-Q.
2. Exhibits. The following exhibits are either filed as a part hereof or are incorporated by reference. Exhibit numbers correspond to the numbering system in Item 601 of Regulation S-K.
Exhibit
Number Description of Exhibit
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.
Dated: February 13, 2018
May 7, 2021/s/ Thomas Striepe
By: Thomas Striepe
Chief Executive Officer and Principal Financial Officer
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