Sangui Biotech International (SGBI) 10-Q 2009 Q2 Quarterly report

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
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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PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements.................................................................................................................................................................	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations .....................................	10
Item 3.	Quantitative and Qualitative Disclosure About Market Risk ...........................................................................................	13
Item 4.	Controls and Procedures ........................................................................................................................................................	13
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings ....................................................................................................................................................................	13
Item 1A.	Risk Factors ..............................................................................................................................................................................	13
Item 2.	Changes in Securities and Use of Proceeds ........................................................................................................................	13
Item 3.	Default Upon Senior Securities ..............................................................................................................................................	14
Item 4.	Submission of matters to a Vote of Security Holders .........................................................................................................	14
Item 5.	Other Information .....................................................................................................................................................................	14
Item 6.	Exhibits .......................................................................................................................................................................................	15

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PART I - FINANCIAL INFORMATION

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

SANGUI BIOTECH INTERNATIONAL, INC.
Condensed Consolidated Balance Sheets
ASSETS
	December 31,		June 30,
	2008		2008
CURRENT ASSETS	(Unaudited)
Cash	$	42,021	$	229,717
Accounts receivable		9,368		5,021
Inventory		134,229		127,109
Shareholder loans receivable		117,776		533,059
repaid expenses and other assets		13,592		28,627
Total Current Assets		316,986		923,533
FIXED ASSETS, Net
Property and equipment		4,491		7,021
Total Fixed Assets		4,491		7,021
OTHER ASSETS
Tax refunds receivable		27,232		40,166
Other non-current assets		213,746		221,208
Total Other Assets		240,978		261,374
TOTAL ASSETS	$	562,455	$	1,191,928

The accompanying condensed notes are an integral part of these interim consolidated financial statements.

2

SANGUI BIOTECH INTERNATIONAL, INC.
Condensed Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
	December 31,			June 30,
	2008			2008
	(Unaudited)
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	295,505		$	317,378
Notes payable		140,499			1,952,841
Total Current Liabilities		436,004			2,270,219
TOTAL LIABILITIES		436,004			2,270,219
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, no par value; 10,000,000 shares
authorized, -0- shares issued and outstanding		-			-
Common stock, no par value; 250,000,000 shares
authorized, 68,048,600 and 50,000,000 shares
issued and outstanding, respectively		21,156,591			18,969,358
Additional paid-in capital		3,138,674			3,138,674
Accumulated other comprehensive income		(331,301	)		154,272
Accumulated deficit		(23,837,513	)		(23,340,595	)
Total Stockholders' Equity (Deficit)		126,451			(1,078,291	)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)	$	562,455		$	1,191,928

The accompanying condensed notes are an integral part of these interim consolidated financial statements. 

  3

SANGUI BIOTECH INTERNATIONAL, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
	For the Three						For the Six
	Months Ended						Months Ended
	December 31,						December 31,
	2008			2007			2008			2007
REVENUES	$	8,858		$	7,806		$	11,117		$	7,806
COST OF SALES		12,239			2,345			12,239			2,345
GROSS PROFIT		(3,381	)		5,461			(1,122	)		5,461
OPERATING EXPENSES
Research and development		84,610			45,366			115,304			134,868
Depreciation and amortization		801			892			2,206			2,106
General and administrative		190,000			160,062			347,344			299,453
Total Operating Expenses		275,411			206,320			464,854			436,427
OPERATING LOSS		(278,792	)		(200,859	)		(465,976	)		(430,966	)
OTHER INCOME (EXPENSE)
Interest income		4,387			-			11,951			-
Interest expense		(21,541	)		(14,803	)		(43,573	)		(27,630	)
Other income (loss)		680			-			680			-
Total Other Income (Expense)		(16,474	)		(14,803	)		(30,942	)		(27,630	)
LOSS BEFORE INCOME TAXES		(295,266	)		(215,662	)		(496,918	)		(458,596	)
PROVISION FOR INCOME TAXES		-			-			-			-
NET LOSS	$	(295,266	)	$	(215,662	)	$	(496,918	)	$	(458,596	)
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustments		(421,165	)		65,375			(485,573	)		933,547
Total Other Comprehensive Income		(421,165	)		65,375			(485,573	)		933,547
COMPREHENSIVE INCOME (LOSS)	$	(716,431	)	$	(150,287	)	$	(982,491	)	$	474,951
BASIC AND DILUTED LOSS
PER SHARE	$	(0.01	)	$	(0.00	)	$	(0.01	)	$	(0.01	)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING		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

SANGUI BIOTECH INTERNATIONAL, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
	For the Six
	Months Ended
	December 31,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(496,918	)	$	(458,596	)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation, depletion and amortization		2,206			2,106
Changes in operating assets and liabilities
(Increase) Decrease in accounts receivable		(4,347	)		7,821
(Increase)  decrease in inventories		(7,120	)		(6,740	)
(Increase) decrease in prepaid expenses and other assets		15,035			8,238
(Increase) decrease in other assets		20,396			12,108
Increase (decrease) in accounts payable and accrued expenses		(21,873	)		(9,116	)
Net Cash Used in Operating Activities		(492,621	)		(444,179	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets		(2,921	)		(2,921	)
Disposal of fixed assets		3,245			-
Net Cash Used in Investing Activities		324			(2,921	)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash received on promissory notes		374,891			1,562,102
Cash paid on notes receivable - related		-			(134,742	)
Cash received on notes receivable		415,283			-
Net Cash Provided by Financing Activities		790,174			1,427,360
EFFECT OF EXCHANGE RATE CHANGES		(485,573	)		(906,547	)
NET DECREASE IN CASH		(187,696	)		73,713
CASH AT BEGINNING OF PERIOD		229,717			18,497
CASH AT END OF PERIOD	$	42,021		$	92,210
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
CASH PAID FOR:
Interest	$	-		$	-
Income Taxes	$	-		$	-
NON CASH FINANCING ACTIVITIES:
Common stock issued for debt	$	2,187,233		$	-

 The accompanying condensed notes are an integral part of these interim consolidated financial statements.

5

SANGUI BIOTECH INTERNATIONAL, INC.

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

ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking Statements

 The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes thereto included elsewhere in this quarterly report.  Some of the information in this quarterly report contains forward-looking statements, including statements related to anticipated operating results, margins, growth, financial resources, capital requirements, adequacy of the Company's financial resources, trends in spending on research and development, the development of new markets, the development, regulatory approval, manufacture, distribution, and commercial acceptance of new products, and future product development efforts.  Investors are cautioned that forward-looking statements involve risks and uncertainties, which may affect our business and prospects, including but not limited to, the Company's expected need for additional funding and the uncertainty of receiving the additional funding, changes in economic and market conditions, acceptance of our products by the health care and reimbursement communities, new development of competitive products and treatments, administrative and regulatory approval and related considerations, health care legislation and regulation, and other factors discussed in our filings with the Securities and Exchange Commission.

GENERAL

 The Company's mission is the development of novel and proprietary pharmaceutical, medical and cosmetic products.  The Company develops its products through its wholly owned German subsidiary Sangui GmbH.  The Company is seeking to market and sell some or all of their products through partnerships with industry partners.

 The focus of Sangui GmbH has been the development of oxygen carriers capable of providing oxygen transport in humans in the event of acute and/or chronic lack of oxygen 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

Nano Formulations for the Regeneration of the Skin

 Healthy skin is supplied with oxygen both from the inside as well as through diffusion from the outside.  A lack of oxygen will cause degenerative alterations, ranging from premature aging, to surface damage, and even as extensive as causing open wounds.  The cause for the lack of oxygen may be a part of the normal aging process, but it may also be caused by burns, radiation, trauma, or a medical condition.  Impairment of the blood flow, for example caused by diabetes mellitus or by chronic venous insufficiency, can also lead to insufficient oxygen supply and the resulting skin damage.

 The nano-emulsion-based preparations now being sold by Sangui GmbH have been designed to supporting the regeneration of the skin by improving its oxygen supply.  The products Sangui GmbH are currently focussing on are an anti-aging formulation and treatment and an anti-cellulite formulation for the cosmetics market.  The products were thoroughly tested by an independent research institute and received top marks for skin moisturization, and enhanced skin elasticity, respectively.

 Sangui’s cosmetic business model is reliant upon cooperation with its manufacturing and distribution partners.  Sangui has its various formulations produced by a contract manufacturer and sells quantities of the products either in bulk or in customized private label packaging, as requested.  In addition, Sangui started to sell its cosmetic products under its own brand “Pure MO2isture” via an internet shop as of mid September 2006 which generates consistant sales, albeit at a low level.

 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

RESULTS OF OPERATIONS

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

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 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 4. CONTROLS AND PROCEDURES

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.

ITEM 1A - RISK FACTORS

 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.

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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.

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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

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 23, 2009     /s/ Thomas Striepe    

 _______________________________ ___________

 By: Thomas Striepe

 Chief Executive Officer

Dated: February 23, 2009     /s/ Joachim Fleing  

  _______________________________ ___________

 By: Joachim Fleing

  Chief Financial Officer

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