10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: June 30, 2013

Commission File Number: 0-21271

_______________________

SANGUI BIOTECH INTERNATIONAL, INC.

(Exact Name of Registrant as Specified in Its Charter)

Colorado	84-1330732
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

Alfred Herrhausen Street 44, Witten Germany	58455
(Address of Principal Executive Offices)	(Zip Code)

49 (2302) 915-200

(Registrant’s Telephone Number, including Area Code)

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, no par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes. No  X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes . No  X

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  X . No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  X . No 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   .

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	.	Accelerated filer	.
Non-accelerated filer	.	Smaller reporting company	X .

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes . No X .

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter was $42,774,957.

The number of shares of the Registrant's common stock issued and outstanding on September 28, 2013 was 135,249,457

Table of Contents

PART I		Page
ITEM 1	Business	5
ITEM 1A	Risk Factors	11
ITEM 2	Properties	21
ITEM 3	Legal Proceedings	21
PART II
ITEM 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
ITEM 6	Selected Financial Data	25
ITEM 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
ITEM 7A	Quantitative and Qualitative Disclosures About Market Risk	28
ITEM 8	Financial Statements and Supplementary Data	29
	Report of Independent Registered Public Accounting Firm
	Consolidated Balance Sheet
	Consolidated Statements of Operations
	Consolidated Statements of Stockholders’ Equity
	Consolidated Statements of Cash Flows
	Notes to Consolidated Financial Statements
ITEM 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	34
ITEM 9A	Controls and Procedures	34
ITEM 9B	Other Information	36
PART III
ITEM 10	Directors, Executive Officers, and Corporate Governance	36
ITEM 11	Executive Compensation	40
ITEM 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	41
ITEM 13	Certain Relationships and Related Transactions, and Director Independence	43
ITEM 14	Principal Accountant Fees and Services	43
PART IV
ITEM 15	Exhibits	44

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CAUTIONARY STATEMENT

Some of the statements contained in this Form 10-K for Sangui Biotech International, Inc. (the “Company” or “SGBI”) discuss future expectations, contain projections of results of operation or financial condition or state other “forward-looking” information. These statements are subject to known and unknown risks, uncertainties, and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and is derived using numerous assumptions. Important factors that may cause actual results to differ from projections include, for example:

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the success or failure of management's efforts to implement their business strategy;

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the ability of the Company to raise sufficient capital to meet operating requirements;

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the uncertainty of consumer demand for our products;

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the ability of the Company to protect its intellectual property rights;

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the ability of the Company to compete with major established companies;

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the effect of changing economic conditions;

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the ability of the Company to attract and retain quality employees; and

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other risks which may be described in future filings with the SEC.

Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results and outcomes may differ materially from what is expressed or forecasted in any such forward-looking statements. Such risks and uncertainties include those set forth herein under “Risk Factors” as well as those noted in the documents incorporated herein by reference. Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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PART I

ITEM 1.

BUSINESS

General Development of Business

Sangui BioTech, Inc. (“SBT”) was incorporated in Delaware on August 2, 1996, and began operations in October 1996. Shortly after the formation of SBT, the shareholders of SanguiBioTech AG (“Sangui GmbH”) and GlukoMediTech AG (“Gluko AG”) agreed to a share swap in which all of the outstanding shares held by the shareholders would be exchanged for shares of SBT, thereby making Sangui GmbH and Gluko AG wholly owned subsidiaries of SBT. In August 1997, a publicly held company, Citadel Investment System, Inc., a Colorado corporation (“Citadel”), acquired one hundred percent (100%) of the outstanding common shares of Sangui BioTech, Inc., and as a result, Sangui BioTech, Inc. became a wholly owned subsidiary of Citadel. Thereafter, Citadel changed its name to Sangui BioTech International, Inc. (the “Company” or “SGBI”).

Until the end of its fiscal year 2003, SGBI's business operations were conducted through wholly owned subsidiaries. During the first quarter of the 2003 fiscal year, SBT sold its assets, and commenced a wind-down of its U.S. business operations. SBT was merged with and into SGBI effective December 31, 2002. Gluko AG was merged with Sangui GmbH effective June 30, 2003.

Sangui GmbH, the only remaining subsidiary of SGBI, develops hemoglobin-based artificial oxygen carriers for use as blood additives, blood volume substitutes and variant products thereof. Sangui GmbH has also developed an anti-aging cosmetic and a number of related products aimed at improving oxygen supply to the skin. Enhanced oxygen supply is the key to improved wound healing; therefore the Company has extended its product portfolio to contain wound pads and other wound management products. The facilities of Sangui GmbH are located on the premises of the Forschungs- und Entwicklungszentrum of the University of Witten/Herdecke, Witten, Germany.

To date, neither SGBI nor its subsidiary has had profitable operations. The Company has never been profitable, and through June 30, 2013, SGBI's accumulated deficit has exceeded $34.0million. The Company may continue to incur substantial losses over the next several years as it pursues its development, marketing and market entry efforts, testing activities and other growth operations.

The Company has adopted the strategy to license its marketable products or such products that are close to market entry to industry partners. In the pursuit of this strategy it has established a joint venture company currently distributing the most promising product, a hemoglobin based wound spray technology, in several European countries and Mexico. In addition, the company is preparing to enter the preclinical testing of hemoglobin based artificial oxygen carriers aiming at the remediation of ischemic conditions in human patients.

No assurance can be given that SGBI’s program will be successful.

Business of the Company

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

The Company’s 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 chronic

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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.

SanguiBioTech GmbH holds distribution rights for Chitoskin wound pads for the European Union and various other countries. A European patent has been granted for the production and use of improved Chitoskin wound pads.

The Company’s current key focus is (a) on selling its existing cosmetics and wound management products through distribution partners or to individual customers, (b) on identifying additional industrial and distribution partners for its patents and products, and (c) on obtaining the additional financial resources necessary to finalize the still pending certification processes of its development products.

SanguiBioTech GmbH is certified according to standards ISO 9001:2000 (General Quality Management System) and ISO 13485:2003 (Quality Management System Medical Products) and is subject to audits on a regular basis.

Products of the Company

Artificial Oxygen Carriers

We develop products based on polymers of purified natural porcine hemoglobin with oxygen carrying abilities that are similar to those of native hemoglobin. These are (1) oxygen carrying blood additives, and (2) oxygen carrying blood volume substitutes.

In December 1997, it was decided that porcine hemoglobin should be used as the basic material for artificial oxygen carriers. In March 1999, we decided which hemoglobin hyperpolymer would go into preclinical investigation, 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 our laboratories demonstrated that it is possible to polymerize hemoglobins isolated from porcine blood resulting in huge soluble molecules, so-called hyperpolymers. In August 2000, we finalized our 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 our clean room. The resulting product was successfully applied in animal tests, moreover, single volunteers underwent 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.

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.

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Based on this study, the company currently is in the course of planning and preparing to enter the preclinical test phase in cooperation with professional partners specializing in the authorization of pharmaceuticals.

According to regulatory requirements, all drugs must complete preclinical and clinical trials before approval (Government Regulation; No Assurance of Product Approval, see Certain Business Risks below) and market launch. The Company’s management believes that the European and United States FDA approval process will take at a minimum several years to complete.

SGBI's most promising potential product in the area of artificial oxygen carriers, the blood additive, however, is still in an early development stage. As such the Company will need to obtain substantial additional capital to continue its development.

Nano Formulations for the Regeneration of the Skin

Healthy skin is supplied with oxygen both from the inside, by way of the blood circulation, 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.

Our nano-emulsion-based preparations have been designed to support the regeneration of the skin by improving its oxygen supply. The products were thoroughly tested by an independent research institute and received top marks for skin moisturization, and enhanced skin elasticity, respectively.

Sales of this series have remained at a low level throughout the 2013 fiscal year. It is the strategy of the company to find industry partners ready to acquire or license this product range as a whole.

Chitoskin Wound Pads

Usually, normal (“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”) 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’s Chitoskin wound dressings show outstanding properties in supporting wound healing.

It is the strategy of the company to find industry partners ready to acquire or license this product range as a whole.

Hemoglobin Based Wound Spray Technology

SanguiBioTech GmbH has developed a novel medical product aimed at the healing of chronic wounds. Chronic wounds are a medical problem of increasing importance as they originate from widespread risk factors such as diabetes, obesity, smoking etc. 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, our Hemospray wound spray product bridges the watery wound surface and permits an enhanced afflux of oxygen to the wound ground.

In December 2010, SanguiBioTech GmbH established a joint venture company with SanderStrothmann GmbH of Georgsmarienhuette, Germany. Under the name of SastoMed GmbH this

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enterprise is in charge of obtaining the CE mark certification authorizing the distribution of the Hemospray wound spray in the member states of the European Union. SanguiBioTech GmbH has granted SastoMed GmbH global distribution rights. The basic terms of the pertinent licensing contract agreement are as follows:

As licensor SanguiBioTech GmbH is awarded a fixed licensing fee as a percentage of each and every external revenues incurred 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 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.

As a shareholder SanguiBioTech GmbH will benefit additionally from all future dividends to be paid by the subsidiary according to the percentage of its stake in SastoMed, which is currently 25%. Should eventually all the shares of SastoMed GmbH be sold in total to a third party, the existing licensing contract with SanguiBioTech GmbH will persist unchanged.

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” started in Germany on April 16, 2012, other markets will be addressed in due course.

On August 13, 2012, SastoMed GmbH publicized a statement indicating that it expects to reach break-even and pay back points in the course of the 2014 calendar year. The expectations were based on the response from wound management experts and patients.

In August, 2012, Sangui BioTech GmbH and SastoMed GmbH cordially 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 incurred 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, actual distribution of the product was initiated in Mexico under the management of SastoMed GmbH 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 nine month 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.

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Patents and Proprietary Rights

The Company seeks patent protection for all of its research and development, and all modifi­ca­tions and improvements thereto. As of June 30, 2013 SanguiBioTech GmbH had been gran­ted 8 patents. Fur­thermore, it has applied for several additional patents, most of which have been filed in the United States of America (US), and as an international patent application with the European Pa­tent Office (EP). Validation of EP patents includes Germany, France, Great Britain, Ita­ly, and Spain. Below are listed the most important of the rights held by the Company.

1. Hemoglobin-Hyperpolymers

US 5,985,332	“Hemoglobins provided with ligands protecting the oxygen binding sites for use as artificial oxygen carriers for direct application in medicine and biolgy, and method for the preparation thereof” (patent granted, end of duration 2017)
US 6,956,025 EP 1 299 457	“Mammalion hemoglobin compatible with blood plasma, cross-linked and conju­gated with polyalkylene oxides as artificial medical oxygen carriers, production and use thereof” (patents granted, end of duration 2020)
EP 1 249 385	“Method for the production of artificial oxygen carriers from covalently cross linking hemoglobin with improved functional properties of hemoglobin by cross-linking in the presence of chemically non-reacting effectors of the oxygen affinity of the hemoglobin” (patent granted, end of duration 2020)
US 7,005,414 EP 1 294 386	“Synthetic oxygen transport made from cross-linked modified human or porcine hemoglobin with improved properties, method for a preparation thereof from purified material and use thereof” (patents granted, end of duration 2020)
US 7,598,220	“Use of hyperpolymer hemoglobin for treating a pulmonary oedema” (patent granted, end of duration 2021)

2. Wound Management

EP 1 485 120	“Use of one or more natural or modified oxygen carriers, devoid of plasma and cellular membrane constituents, for externally treating open, in particular chronic wounds” (patent granted, end of duration 2022)
EP 1 696 971	“Therapeutically active wound dressings, production thereof, and use of the same” (patent granted, end of duration 2024)

3. Cosmetics

EP 1 513 492 “Microemulsions having a binary phase differentiability and active substance differentiability, the production thereof and their use, particularly for the topical supply of oxygen” (patent granted, end of duration 2022)

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Manufacturing, Marketing and Distribution

Manufacturing, marketing and distribution are not core competencies of the company. It is our strategy, therefore to outsource such business processes to external partners. In selecting and mandating them special attention is being paid to their experience, reputation and standing including the required quality management systems and certifications.

Research and Development

Research and development are charged to operations as they are incurred. Legal fees and other direct costs incurred in obtaining and protecting patents are expensed as incurred. Research and development costs totaled $65,010 and $104,413 during the fiscal years ended June 30, 2013 and 2012, respectively.

Government Regulation

Sangui BioTech International, Inc. and its former United States subsidiaries are and were subject to governmental regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances Control Act, and other similar laws of general application, as to all of which we believe we and our subsidiaries were in material compliance.

Although it is believed that we and our former United States subsidiaries have been in material compliance with all applicable governmental and environmental laws, rules, regulations and policies, and although no government concerns were put forward during the operation of or after the closing of the US operations, there can be no assurance that the business, financial condition, and our results of operations of and those of our subsidiaries will not be materially adversely affected by future government claims with regard to unlikely, but not impossible, infringements on these or other laws resulting from our former United States operations.

Additionally, the clinical testing, manufacture, promotion and sale of a significant majority of the products and technologies, if those products and technologies are to be offered and sold in the United States, are subject to extensive regulation by numerous governmental authorities in the United States, principally the Federal Drug Administration (FDA), and corresponding state regulatory agencies. To the extent those products and technologies are to be offered and sold in markets other than the United States, the clinical testing, manufacture, promotion and sale of those products and technologies will be subject to similar regulation by corresponding foreign regulatory agencies. In general, the regulatory framework for biological health care products is more rigorous than for non-biological health care products. Generally, biological health care products must be shown to be safe, pure, potent and effective. There are numerous state and federal, foreign and international statutes and regulations that govern or influence the testing, manufacture, safety, effectiveness, labeling, storage, record keeping, approval, advertising, distribution and promotion of biological health care products. Non-compliance with applicable requirements can result in, among other things, fines, injunctions, seizures of products, total or partial suspension of product marketing, and failure of the government to grant pre-market approval, withdrawal of marketing approvals, product recall and criminal prosecution.

Competition

The market for our products and technologies is highly competitive, and we expect competition to increase. Experiments and clinical testing in the field of artificial oxygen carriers are being carried out by Alliance Pharmaceutical Corp. of San Diego, California. In the fields of anti-aging and anti-cellulite cosmetics, all major cosmetic vendors are actively marketing proprietary formulations. Leading wound management product providers include Johnson & Johnson, Bristol-Myers Squibb, Coloplast A/S of Denmark as well as BSNmedical, a former part of Beiersdorf AG.

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Dependence on Major Customers

As of June 30, 2012 the Company had no significant concentrations of sales to or receivables from specific customers. As of June 30, 2013, the majority of revenues and trade receivables were generated and due by SastoMed GmbH, as licensee of the global distribution rights of the Sangui developed wound spray technology.

Human Resources

We consider our relations with our employees to be favorable. As of June 30, 2013 the Company, and our subsidiary, had one fulltime employee, who was not involved in research and development. For management, research and development purposes, the Company has consulting arrangements with five individuals and one related entity.

Dividends

We anticipate that we will use any funds available to finance our growth and that we will not pay cash dividends to stockholders in the foreseeable future.

Reports to Security Holders

Copies of our reports, as filed with the Securities and Exchange Commission, are available and may be viewed as filed at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington D.C. 20549 or by calling 1-800-SEC-0330. Additionally they can be accessed and downloaded via the internet at http://www.sec.gov/cgi-bin/srch-edgar by simply typing in “Sangui Biotech International” or via the web links at the corporate website http://www.sanguibiotech.com.

ITEM 1A.

RISK FACTORS

The risks and uncertainties described below are not the only ones facing the company, and there may be additional risks that are not presently known or are currently deemed immaterial. All of these risks may impair business operations.

The Company's present and proposed business operations will be highly speculative and subject to the same types of risks inherent in any new or unproven venture, as well as risk factors particular to the industries in which it will operate, as well as other significant risks not normally associated with investing in equity securities of United States companies, among other things, those types of risk factors outlined below.

Risk that SGBI's Common Stock may be deemed a “Penny Stock”

The Company's common stock may be deemed to be a “penny stock” as that term is defined in Rule 3a51-1 of the Exchange Act of 1934. Penny stocks are stocks (i) with a price of less than five dollars per share; (ii) that are not traded on a “recognized” national exchange; (iii) whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ-listed stocks must still meet requirement (i) above); or (iv) of an issuer with net tangible assets of less than US$2,000,000 or US$5,000,000 (if in continuous operation for less than three years), or with average annual revenues of less than US$6,000,000 for the last three years.

A principal exclusion from the definition of a penny stock is an equity security that has a price of five dollars ($5.00) or more, excluding any broker or dealer commissions, markups or markdowns. As of the date of this report SGBI's common stock has a price less than $5.00.

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If SGBI's Common Stock is at any time deemed a penny stock, section 15(g) and Rule 3a51-1 of the Exchange Act of 1934 would require broker-dealers dealing in SGBI's Common Stock to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor's account. Potential investors in SGBI's common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be “penny stock.”

Moreover, Rule 15g-9 of the Exchange Act of 1934 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for investors in SGBI's common stock to resell their shares to third parties or to otherwise dispose of them.

Moreover, market prices of penny stocks tend to show a higher volatility than others. Market activities by even a small number of individuals may cause unexpected, but significant changes of share price.

Conflicts of Interest; Related Party Transactions

The possibility exists that the Company may acquire or merge with a business or company in which the Company's executive officers, directors, beneficial owners or their affiliates may have an ownership interest. Although there is no formal bylaw, stockholder resolution or agreement authorizing any such transaction, corporate policy does not forbid it and such a transaction may occur if management deems it to be in the best interests of the Company and its stockholders, after consideration of all factors. A transaction of this nature would present a conflict of interest to those parties with a managerial position and/or an ownership interest in both the Company and the acquired entity, and may compromise management's fiduciary duties to the Company's stockholders. An independent appraisal of the acquired company may or may not be obtained in the event a related party transaction is contemplated. Furthermore, because management and/or beneficial owners of the Company's common stock may be eligible for finder's fees or other compensation related to potential acquisitions by the Company, such compensation may become a factor in negotiations regarding such potential acquisitions. It is the Company's intention that all future transactions be entered into on such terms as if negotiated at arm’s length, unless the Company is able to receive more favorable terms from a related party.

Limited Operating History of the Company; Losses Are Expected To Continue

There can be no assurance that unanticipated technical or other problems will not occur which would result in material delays in product commercialization or that the efforts of SGBI will result in successful product commercialization. SGBI has been operating at a loss and expects its costs to increase as soon as its development efforts and testing activities accelerate. It is currently unknown when profitable operations might be achieved.

Substantial Doubt that the Company Can 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

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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.

Future Capital Needs and Uncertainty of Additional Funding

Management believes that SGBI's cash position is insufficient to cover its financing requirements for the current fiscal year, and anticipates that substantial funds will be required in order to enact SGBI's development plans. The Company will require additional cash for: (i) payment of increased operating expenses; (ii) payment of development expenses; and (iii) further implementation of its business strategies. Such additional capital may be raised by additional public or private financing, as well as borrowings and other resources. To the extent that additional capital is received by SGBI by the sale of equity or equity-related securities, the issuance of such securities will result in dilution to SGBI's shareholders. There can be no assurance that additional funding will be available on favorable terms, if at all. SGBI may also seek arrangements with collaborative partners in order to gain additional funding, marketing assistance or other contributions. However, such arrangements may require SGBI to relinquish rights or reduce its interests in certain of its technologies or product candidates. The inability of SGBI to access the capital markets or obtain acceptable financing could have a material adverse effect on the results of operations and financial condition of SGBI. Moreover, if funds are not available from any sources, SGBI may not be able to continue to operate. During the year ended June 30, 2009 the Company increased its authorized common shares from 50 million to 250 million. This increase has given the Company increased flexibility to raise funds and/or satisfy debt obligations via equity issuances.

Dependence on Key Personnel

The future success of SGBI will depend on the service of its key scientific personnel and, additionally, its ability to identify, hire and retain additional qualified personnel. There is intense competition for qualified personnel in this industry and there can be no assurance that SGBI will be able to attract and retain personnel necessary for the development of the business of SGBI. Because of the intense competition, there can be no assurance that SGBI will be successful in adding technical personnel if needed to satisfy its staffing requirements. Failure to attract and retain key personnel could have a material adverse effect on SGBI.

SGBI and its subsidiary are dependent on the efforts and abilities of their senior management. The loss of various members from management could have a material adverse effect on the business and prospects of SGBI. There can be no assurance that upon the departure of key personnel from the service of SGBI or its subsidiary suitable replacements will be available.

Licenses and Consents

The utilization or other exploitation of the products and services developed by SGBI or its subsidiary may require SGBI or its subsidiary to obtain licenses or consents from the producers or other holders of patents, trademarks, copyrights or other similar rights (Intellectual Property) relating to the products and technologies of SGBI or its subsidiary. In the event SGBI or its subsidiary are unable, if so required, to obtain any necessary license or consent on terms which the management of SGBI or its subsidiary consider to be reasonable, SGBI or its subsidiary may be required to cease developing, utilizing, or exploiting products or technologies affected by those Intellectual Property rights. In the event SGBI or its subsidiary are challenged by the holders of such Intellectual Property

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rights, there can be no assurance that SGBI or its subsidiary will have the financial or other resources to defend any resulting legal action, which could be significant.

Technological Factors

The market for the products and technology developed by SGBI is characterized by rapidly changing technology, which could result in product obsolescence or short product life cycles. Similarly, the industry is characterized by continuous development and introduction of new products and technology to replace outdated products and technology. Accordingly, the ability of SGBI to compete will be dependent upon the ability of SGBI to provide new and innovative products and technology. There can be no assurance that competitors will not develop technologies or products that render the proposed products and technology of SGBI obsolete or less marketable. SGBI will be required to adapt to technological changes in the industry and develop products and technology to satisfy evolving industry or customer requirements, any of which could require the expenditure of significant funds and resources, and SGBI does not have a source or commitment for any such funds and resources. Development efforts relating to the technological aspects of the various products and technologies to be developed by SGBI are not substantially completed. Accordingly, SGBI will continue to refine and improve those products and technologies. Continued refinement and improvement efforts remain subject to the risks inherent in new product development, including unanticipated technical or other problems, which could result in material delays in product commercialization or significantly increased costs. In addition, there can be no assurance that those products and technologies will prove to be sufficiently reliable or durable in wide spread commercial application. The products or technologies sought to be developed by SGBI will be the result of significant efforts, which may result in errors that become apparent subsequent to widespread commercial utilization. In such event, SGBI would be required to modify such products or technologies and continue with additional research and development, which could delay the plans of SGBI and cause SGBI to incur additional cost.

Early Stage of Product Development; Lack of Commercial Products; No Assurance of Successful Product Development

The Company's primary efforts are devoted to the development of proprietary products involving artificial oxygen carriers.

The potential products of SGBI will require additional pre-clinical and clinical development, regulatory approval and additional investment prior to commercialization, either by SGBI independently or by others through collaborative arrangements. Potential products that appear to be promising at early stages of development may be ineffective or be shown to cause harmful side effects during pre-clinical testing or clinical trials, fail to receive necessary regulatory approvals, be difficult to manufacture, be uneconomical to produce, fail to achieve market acceptance or be precluded from commercialization by proprietary rights of others. There can be no assurance that any potential products will be successfully developed, prove to be safe and efficacious in clinical trials, satisfy applicable regulatory standards, be capable of being produced in commercial quantities at acceptable costs or achieve commercial acceptance.

All products and technologies under development by SGBI will require significant commitment of personnel and financial resources. Several products will require extensive evaluation and pre-marketing clearance by the Federal Drug Administration and comparable agencies in other countries prior to commercial sale. SGBI regularly re-evaluates its product development efforts. On the basis of these re-evaluations, SGBI may abandon development efforts for particular products. No assurance can be given that any product or technology under development will result in the successful introduction of any new product. The failure to introduce new products into the market on a timely basis could have a material adverse effect on the business, financial conditions or results of operation of SGBI.

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There can be no assurance that human testing of potential products based on such technologies will be permitted by regulatory authorities or, even if human testing is permitted, that products based on such technologies will be shown to be safe and efficacious. Potential products based on the technologies of SGBI are at an early stage of testing and there can be no assurance that such products will be shown to be safe or effective.

Market Acceptance

There can be no assurance that the products and technologies of SGBI will achieve a significant degree of market acceptance, and that acceptance, if achieved, will be sustained for any significant period or that product life cycles will be sufficient (or substitute products developed) to permit SGBI to achieve or sustain market acceptance which could have a material adverse effect on the business, financial condition, and results of operations of SGBI.

Government Regulation; No Assurance of Product Approval

The clinical testing, manufacture, promotion, and sale of biotechnology and pharmaceutical products are subject to extensive regulation by numerous governmental authorities in the United States, principally the Federal Drug Administration (FDA), and corresponding state and foreign regulatory agencies prior to the introduction of those products. Management of SGBI believes that many of the potential products of SGBI will be regulated by the FDA, subject to the then current regulations of the FDA. Other federal and state statutes and regulations may govern or influence the testing, manufacture, safety, effectiveness, labeling, storage, record-keeping, approval, advertising, distribution and promotion of certain products developed by SGBI. Non-compliance with applicable requirements can result in, among other things, fines, injunctions, seizure of products, suspensions of regulatory approvals, product recalls, operating restrictions, re-labeling costs, delays in sales, cessation of manufacture of products, the imposition of civil or criminal sanctions, total or partial suspension of product marketing, failure of the government to grant pre-market approval, withdrawal of marketing approvals and criminal prosecution.

The FDA's requirements include lengthy and detailed laboratory and clinical testing procedures, sampling activities and other costly and time-consuming procedures. In particular, human therapeutic products are subject to rigorous pre-clinical and clinical testing and other approval requirements by the FDA, and corresponding agencies in other countries. Although the time required for completing such testing and obtaining such approvals is uncertain, satisfaction of these requirements typically takes a number of years and varies substantially based on the type, complexity and novelty of each product. Neither SGBI nor its subsidiary can accurately predict when product applications or submissions for FDA or other regulatory review may be submitted. Management of SGBI has no experience in obtaining regulatory clearance on these types of products. The lengthy process of obtaining regulatory approval and ensuring compliance with applicable law requires the expenditure of substantial resources. Any delays or failure by SGBI or its subsidiary to obtain regulatory approval and ensure compliance with appropriate standards could adversely affect the commercialization of such products, the ability of SGBI to earn product or royalty revenue, and its results of operations, liquidity and capital resources.

Pre-clinical testing is generally conducted in laboratory animals to evaluate the potential safety and effectiveness of a drug. The results of these studies are submitted to the FDA, which must be approved before clinical trials can begin. Typically, clinical evaluation involves a time consuming and costly three-phase process. In Phase I, clinical trials are conducted with a small number of subjects to determine the early safety profile, the pattern of drug distribution and metabolism. In Phase II, clinical trials are conducted with groups of patients afflicted with a specific disease in order to determine preliminary efficacy, optimal dosages and expanded evidence of safety. In Phase III, large-scale, multi-center, comparative trials are conducted with patients afflicted with a target disease in order to provide enough data to demonstrate the efficacy and safety required by the FDA. The FDA closely monitors the progress of each of the three phases of clinical trials and may, at its discretion,

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re-evaluate, alter, suspend or terminate the testing based upon the data which have been accumulated to that point and its assessment of the risk/benefit ratio to the patient.

Clinical trials and the marketing and manufacturing of products are subject to the rigorous testing and approval processes of the FDA and foreign regulatory authorities. The process of obtaining FDA and other required regulatory approvals is lengthy and expensive. There can be no assurance that SGBI will be able to obtain the necessary approvals to conduct clinical trials for the manufacturing and marketing of products, that all necessary clearances will be granted to SGBI or their licensors for future products on a timely basis, or at all, or that FDA review or other actions will not involve delays adversely affecting the marketing and sale of the products or SGBI. In addition, the testing and approval process with respect to certain new products which SGBI may seek to introduce is likely to take a substantial number of years and involve the expenditure of substantial resources. There can be no assurance that pharmaceutical products currently in development will be cleared for marketing by the FDA. Failure to obtain any necessary approvals or failure to comply with applicable regulatory requirements could have a material adverse effect on the business, financial condition or results of operations of SGBI. Further, future government regulation could prevent or delay regulatory approval of the products of SGBI.

There can be no assurance as to the length of the clinical trial period or the number of patients the FDA will require to be enrolled in the clinical trials in order to establish the safety and effectiveness of the products of SGBI. SGBI may encounter significant delays or excessive costs in their efforts to secure necessary approvals, and regulatory requirements are evolving and uncertain. Future United States or foreign legislative or administrative acts could also prevent or delay regulatory approval of the products of SGBI. If commercial regulatory approvals are obtained, they may include significant limitations on the indicated uses for which a product may be marketed. In addition, a marketed product is subject to continual FDA review. Later discovery of previously unknown problems or the failure to comply with the applicable regulatory requirements may result in restrictions on the marketing of a product, or even the removal of the product from the market, as well as possible civil or criminal sanctions. Failure of SGBI to obtain marketing approval for any of their products under development on a timely basis, or FDA withdrawal of marketing approval once obtained, could have a material adverse effect on the business, financial condition and results of operations of SGBI.

Any party that manufactures therapeutic or pharmaceutical products is required to adhere to applicable standards for manufacturing practices and to engage in extensive record keeping and reporting. Any of the manufacturing facilities of SGBI are subject to periodic inspection by state and federal agencies, including the FDA and comparable agencies in foreign countries.

The effect of governmental regulation may be to delay the marketing of new products for a considerable period of time, to impose costly requirements on the activities of SGBI or to provide a competitive advantage to other companies that compete with SGBI. There can be no assurance that FDA or other regulatory approval for any products developed by SGBI will be granted on a timely basis, if at all or, if granted, that compliance with regulatory standards will be maintained. Adverse clinical results by SGBI could have a negative impact on the regulatory process and timing. A delay in obtaining, or failure to obtain, regulatory approvals could preclude or adversely affect the marketing of products and the liquidity and capital resources of SGBI. The extent of potentially adverse governmental regulation that might result from future legislation or administrative action cannot be predicted.

Additionally, SGBI will be subject to regulatory authorities in Germany and other countries governing clinical trials and product sales. Even if FDA approval is obtained, approval of a product by the comparable regulatory authorities of other countries must be obtained prior to the commencement of marketing the product in those countries. The approval process varies from country to country and the time required may be longer or shorter than that required for FDA approval. The foreign regulatory approval process includes all of the risks associated with obtaining FDA approval

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set forth above, and approval by the FDA does not ensure approval by the health authorities of any other country. There can be no assurance that any foreign regulatory agency will approve any product submitted for review by SGBI.

SGBI is subject to various federal, state and local laws, regulations and recommendations relating to safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents, used in connection with its research work. The extent and character of governmental regulation that might result from future legislation or administrative action cannot be accurately predicted.

Intense Competition

Competition in the biotechnology, pharmaceutical and cosmetic industries is intense and is expected to increase. In the field of its medical and cosmetic products SGBI and its subsidiary compete directly with the research departments of biotechnology and pharmaceutical companies, chemical companies and, possibly, joint collaborations between chemical companies and research and academic institutions. Management of SGBI is aware that other companies and businesses have developed and are in the process of developing technologies and products, which may be competitive with the products and technologies developed and offered by SGBI. Eventually, this might include the field of blood additives where there is no known direct competition at present. The biotechnology and pharmaceutical industries continue to undergo rapid change. There can be no assurance that competitors have not or will not succeed in developing technologies and products that are more effective than any which have been or are being developed by SGBI or which would render the technology and products of SGBI obsolete. Many of the competitors of SGBI have substantially greater experience, financial and technical resources and production, marketing and development capabilities than SGBI. Accordingly, certain of those competitors may succeed in obtaining regulatory approval for products more rapidly or effectively than SGBI.

Uncertainties Associated With Patents and Proprietary Rights

The success of SGBI and its subsidiary may depend in part on their ability to obtain patents for their technologies and products, if any, resulting from the application of such technologies, to defend patents once obtained and to maintain trade secrets, both in the United States and in foreign countries.

The success of SGBI will also depend on avoiding the infringement of patents issued to competitors. There can be no assurance that SGBI will be able to obtain patent protection for products based upon the technology of SGBI. Moreover, there can be no assurance that any patents issued to SGBI or its subsidiary will not be challenged, invalidated or circumvented or that the rights granted there under will provide competitive advantages to SGBI. Litigation, which could result in substantial cost to SGBI, may be necessary to enforce the patent and license rights of SGBI or to determine the scope and validity of its and others' proprietary rights.

Due to the length of time and expense associated with bringing new products through development and the length of time required for the governmental approval process, the biotechnology and pharmaceutical industries have traditionally placed considerable importance on obtaining and maintaining patent and trade secret protection for significant new technologies, products and processes. The enforceability of patents issued to biotechnology and pharmaceutical firms can be highly uncertain. U.S. Federal court decisions establishing legal standards for determining the validity and scope of patents in the field are in transition. In addition, there can be no assurance that patents will be issued or, if issued, any such patents will afford SGBI protection from infringing patents granted to others.

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A number of biotechnology and pharmaceutical companies, and research and academic institutions, have developed technologies, filed patent applications or received patents on various technologies that may be related to the business of SGBI and its subsidiary. Some of these technologies, applications or patents may conflict with the technologies of SGBI. Such conflicts could also limit the scope of the patents, if any, that SGBI or its subsidiary may be able to obtain or result in the denial of the patent applications of SGBI.

Many of the competitors of SGBI are, have, or are affiliated with companies having, substantially greater resources than SGBI, and such competitors may be able to sustain the costs of complex patent litigation to a greater degree and for longer periods of time than SGBI. Uncertainties resulting from the initiation and continuation of any patent or related litigation could have a material adverse effect on the ability of SGBI to compete in the marketplace pending resolution of the disputed matters. Moreover, an adverse outcome could subject SGBI to significant liabilities to third parties and require SGBI to license disputed rights from third parties or cease using the technology. In the event that third parties have or obtain rights to intellectual property or technology used or needed by SGBI, there can be no assurance that any licenses would be available to SGBI or would be available on terms reasonably acceptable to SGBI.

SGBI may rely on certain proprietary technologies, trade secrets, and know-how that are not patentable. Although SGBI has taken steps to protect their unpatented trade secrets and technology, in part through the use of confidentiality agreements with their employees, consultants and certain of its contractors, there can be no assurance that: (i) these agreements will not be breached; (ii) SGBI would have adequate remedies for any breach; or (iii) the proprietary trade secrets and know-how of SGBI will not otherwise become known or be independently developed or discovered by competitors.

Risk of Product Liability; Potential Unavailability of Insurance

The business of SGBI will expose it to potential product liability risks that are inherent in the testing, manufacturing and marketing of human pharmaceutical and therapeutic products. SGBI does not currently have product liability insurance, and there can be no assurance that SGBI will be able to obtain or maintain such insurance on acceptable terms or, if obtained, that such insurance will be adequate to cover potential product liability claims or that a loss of insurance coverage or the assertion of a product liability claim or claims would not materially adversely affect the business, financial condition and results of operations of SGBI. SGBI faces an inherent business risk of exposure to product liability and other claims in the event that the development or use of its technology or products is alleged to have resulted in adverse effects. Such risk exists even with respect to those products that are manufactured in licensed and regulated facilities or that otherwise possess regulatory approval for commercial sale. There can be no assurance that SGBI will avoid significant product liability exposure.

While SGBI has taken, and will continue to take, what it believes are appropriate precautions, there can be no assurance that it will avoid significant liability exposure. An inability to obtain product liability insurance at acceptable cost or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of products developed by SGBI. A product liability claim could have a material adverse effect on the business, financial condition and results of operations of SGBI.

Uncertainties Relating to Pricing and Third-Party Reimbursement

The operating results of SGBI may depend in part on the availability of adequate reimbursement for the products of SGBI from third-party payers, such as government entities, private health insurers and managed care organizations. Third-party payers are increasingly seeking to negotiate the pricing of medical services and products. In some cases, third-party payers will pay or reimburse a user or supplier of a product for only a portion of the purchase price of the product. In the case of the products of SGBI, payment or reimbursement by third-party payers of only a portion of the

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cost of such products could make such products less attractive, from a cost perspective, to users, suppliers and physicians. There can be no assurance that reimbursement, if available, will be adequate. Moreover, certain of the products of SGBI may not be of the type generally eligible for third-party reimbursement. If adequate reimbursement levels are not provided by government entities or other third-party payers for the products of SGBI, the business, financial condition and results of operations of SGBI would be materially adversely affected. A number of legislative and regulatory proposals aimed at changing the United States’ health care system have been proposed in recent years. While SGBI cannot predict whether any such proposals will be adopted, or the effect that any such proposal may have on its business, such proposals, if enacted, could have a material adverse effect on the business, financial condition or results of operations of SGBI.

Risk of Product Recall; Product Returns

Product recalls may be issued at the discretion of SGBI, the FDA or other government agencies having regulatory authority for product sales and may occur due to disputed labeling claims, manufacturing issues, quality defects or other reasons. No assurance can be given that product recalls will not occur in the future. Any product recall could materially adversely affect the business, financial condition or results of operations of SGBI. There can be no assurance that future recalls or returns would not have a material adverse effect upon the business, financial condition and results of operations of SGBI.

Risks of International Sales and Operations

SGBI's results of operations are subject to fluctuations in the value of the Euro against the U.S. Dollar due to SGBI's German subsidiary. Although management of SGBI will monitor exposure to currency fluctuations, there can be no assurance that exchange rate fluctuations will not have a material adverse effect on the results of operations or financial condition of SGBI. In the future, SGBI could be required to sell its products in other currencies, which would make the management of currency fluctuations more difficult and expose SGBI to greater risks in this regard.

The products of SGBI will be subject to numerous foreign government standards and regulations that are continually being amended. Although SGBI will endeavor to satisfy foreign technical and regulatory standards, there can be no assurance that the products of SGBI will comply with foreign government standards and regulations, or changes thereto, or that it will be cost effective for SGBI to redesign its products to comply with such standards or regulations. The inability of SGBI to design or redesign products to comply with foreign standards could have a material adverse effect on SGBI's business, financial condition and results of operations.

Lack of Commercial Manufacturing and Marketing Experience

SGBI has not yet manufactured its products in commercial quantities. The Company and its manufacturing contractors and partners will be engaged in manufacturing pharmaceutical products which will be subject to stringent regulatory requirements. No assurance can be given that the Company, on a timely basis, will be able to make the transition from manufacturing clinical trial quantities to commercial production quantities successfully or be able to arrange for contract manufacturing. SGBI and its subsidiary have no experience in the sales, marketing and distribution of products. There can be no assurance that SGBI will be able to establish sales, marketing and distribution capabilities or make arrangements with collaborators, licensees or others to perform such activities or that such effort will be successful.

The manufacture of the products of SGBI involves a number of steps and requires compliance with stringent quality control specifications imposed by SGBI and by the FDA or similar regulatory bodies under the law of the respective countries. Moreover, SGBI's products can only be manufactured in a facility that has undergone a satisfactory inspection by the FDA. For these reasons, SGBI would not be able to quickly replace its manufacturing capacity if one of its manufacturing

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contractors or partners were unable to use their manufacturing facilities as a result of a fire, natural disaster, equipment failure or other difficulty, or if such facilities are deemed not in compliance with the FDA's Good Manufacturing Practice (GMP) requirements and the non-compliance could not be rapidly rectified. The inability or reduced capacity of SGBI to manufacture their products would have a material adverse effect on SGBI's business and results of operations.

SGBI has entered and may enter into arrangements with contract manufacturing companies to expand its production capacities in order to satisfy requirements for its products, or to attempt to improve manufacturing efficiency. If SGBI chooses to contract for manufacturing services and encounters delays or difficulties in establishing relationships with manufacturers to produce, package and distribute its finished products, clinical trials, market introduction and subsequent sales of such products would be adversely affected. Further, contract manufacturers must also operate in compliance with the FDA's GMP requirements; failure to do so could result in, among other things, the disruption of product supplies.

Currently, SGBI has its products manufactured by contract manufacturers in Germany and anticipates future production in Mexico. No assurance can be given, that these vendors will be willing or able to produce the products in the required quality or quantities or at prices which will enable SGBI to sell the end products as requested by its customers.

Risks resulting from investing and financing activities

SGBI may from time to time in the ordinary course of business carry out certain investing or financing transactions including extending loans to non-related third parties or the purchase of treasury stocks. Such transactions are subject to certain risks including but not limited to the inability of borrowers to redeem interest and principal of such loans, the inability of the company to capitalize on collaterals provided by the borrowers if any, or the devaluation of the treasury stock. In the event that one or more of these risks actually occur, the company may be confronted with the situation that it in turn may not be able to refinance its ongoing operations.

Hazardous Materials and Environmental Matters

The research and development processes of SGBI involve the controlled storage, use and disposal of hazardous materials. SGBI is subject to federal, state and local laws and regulations governing the use, generation, manufacturing, storage, handling, and disposal of such materials and certain waste products. Although SGBI does not currently manufacture commercial quantities of its product candidates, it produces limited quantities of such products for its clinical trials or comparable testing and SGBI may eventually intend to manufacture commercial quantities of its products. Although SGBI has passed the ISO 9001:2000 (General Quality Management System) and ISO 13485:2003 (Quality Management System Medical Products) audits, and obtained the respective certifications, and although it believes that its safety procedures for handling and disposing of such materials comply with the standards prescribed by such laws and regulations, the risk of accidental contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, SGBI could be held liable for any damages that result, and any such liability could exceed the resources of SGBI. There can be no assurance that SGBI will not be required to incur significant costs to comply with current or future environmental laws and regulations nor that the operations, business or assets of SGBI will not be materially or adversely affected by current or future environmental laws or regulations.

Fluctuations in Foreign Currency Exchange Rates could have an Adverse Impact.

Because a portion of our total income is derived from international operations that are conducted in foreign currencies, changes in value of these foreign currencies relative to the US dollar may affect our results of operation and financial position. If for any reason exchange or price controls

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or other restriction on the conversion of foreign currencies were imposed, our business could be adversely affected.

ITEM 2. 

PROPERTIES

The Company leases its office and laboratory facilities and is housed in approximately 8,600 square feet based in the Forschungs-und Entwicklungszentrum of the University Witten/Herdecke, Germany. Rent expense was approximately $63,836 and $83,213 during the years ended June 30, 2013 and 2012, respectively.

ITEM 3. 

LEGAL PROCEEDINGS

We are not a party to any pending legal proceeding. No federal, state or local governmental agency is presently contemplating any proceeding against the Company. No director, executive officer or affiliate of the Company or owner of record or beneficially of more than five percent of the Company's common stock is a party adverse to the Company or has a material interest adverse to the Company in any proceeding.

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PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

As of June 30, 2013, our common stock was traded on the OTCQB Venture Marketplace under the symbol SGBI as well as on the OTC markets of the Berlin and Hamburg-Hanover stock exchanges in Germany.

The following table sets forth the high and low closing prices for shares of SGBI common stock for the fiscal periods noted, as reported by OTCQB. Quotations reflect inter-dealer prices, without retail mark-up, markdown or commissions and may not represent actual transactions.

	Common Stock Closing Prices (US$)
	High		Low
2013
Quarter ended September 2012	$	0.55	$	0.30
Quarter ended December 2012	0.45		0.28
Quarter ended March 2013	0.65		0.21
Quarter ended June 2013	0.98		0.05
2012
Quarter ended September 2011	$	0.22	$	0.03
Quarter ended December 2011	0.42		0.02
Quarter ended March 2012	0.74		0.18
Quarter ended June 2012	0.89		0.31

In addition to freely tradable shares, SGBI has numerous shares of common stock outstanding that could be sold pursuant to Rule 144. In general, under Rule 144, subject to the satisfaction of certain other conditions, a person, including one of our affiliates, who has beneficially owned restricted shares of common stock for at least one year is entitled to sell, in certain brokerage transactions, within any three-month period, a number of shares that does not exceed the greater of 1% of the total number of outstanding shares of the same class, or the average weekly trading volume during the four calendar weeks immediately preceding the sale. A person who presently is not and who has not been an affiliate for at least three months immediately preceding the sale and who has beneficially owned the shares of common stock for at least six months is entitled to sell such shares under Rule 144 without regard to any of the volume limitations described above.

Holders

 At June 30, 2013, the number of record holders of the Company's common stock was approximately 896.

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Dividends

The company did not pay any cash dividends during the past two fiscal years and does not contemplate paying dividends in the foreseeable future.

Securities Authorized For Issuance Under Equity Compensation Plans

The following table sets forth information as of June 30, 2013, with respect to our equity compensation plans previously approved by stockholders and equity compensation plans not previously approved by stockholders.

	Equity Compensation Plan Information
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity compensation plans approved by stockholders	0[1]	$	0.00	0
Equity compensation plans not approved by stockholders	0		0.00	0
Total	0	$	0.00	0

^[1] On October 22, 2008 the Company adopted the 2008 Amended and Restated Long-Term Equity Incentive Plan, whereby the Board was authorized to issue up to 10,000,000 shares of common stock (including incentive stock options) to certain eligible employees, directors, and consultants of the Company or its subsidiaries.

During its 2012 financial year the Company issued an aggregate of 2,700,000 shares to nine (9) individuals pursuant to this Plan.

During its 2013 financial year the Company issued an aggregate of 750,000 shares to one (1) individual pursuant to this Plan.

Issuer Purchases of Equity Securities

During the fiscal year ended June 30, 2012, the Company repurchased 53,756 shares of its common stock for cash. The treasury stock is valued using the Treasury Stock Method at $19,387.  

During the fiscal year ended June 30, 2013, the Company reacquired 1,000,000 shares of its common stock  as a partial redemption of a loan to a non-related party. The treasury stock is valued using the Treasury Stock Method at $320,000.

Recent Sales of Unregistered Securities

In October 2012, the Company issued 300,000 shares of its common stock for services to an unrelated party at $0.31 per share. Additionally the Company sold 140,800 shares of its common stock for cash to three (3) individuals at an average price of $0.37 per share. No underwriters were

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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.

In November 2012, the Company issued 750,000 shares of its common stock to one (1) individual pursuant to its long-term incentive plan at $0.32 per share. Additionally, the Company sold 194,300 shares of its common stock for cash to three (3) individuals at an average price of $0.30 per 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.

In December 2012, the Company sold 2,022,500 shares of its common stock for cash to one (1) entity and five (5) individuals at an average stock price of $0.33 per share. Additionally, the Company issued 69,100 shares of its common stock for services to an unrelated party at a stock price of $0.37 per 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.

In January 2013, the Company sold 362,000 shares of its common stock for cash to one (1) entity and six (6) individuals at an average stock price of $0.36 per 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.

In February 2013, the Company sold 102,200 shares of its common stock for cash to five (5) individuals at an average stock price of $0.34 per share and 1,800,000 shares of its common stock for cash to one (1) entity at an average stock price of $0.26 per share. The Company also received 1,000,000 shares of its common stock in partial satisfaction of a note receivable. 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.

In April 2013 the Company issued 630,000 shares of its common stock for cash to three (3) individuals at an average stock price of approximately $0.13 per 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.

In May 2013 the Company issued 140,000 shares of its common stock for cash to three (3) individuals at an average stock price of approximately $0.13 per 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.

Sales of Unregistered Securities Subsequent to the Period Covered by this Report

In August 2013 the company issued 1,060,000 shares of its common stock for cash to five (5) individuals at a stock price of approximately $0.10. In addition the company issued 200,000 shares of its common stock to one (1) individual for services at a stock price of approximately $0.13 per 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.

In September 2013 the company issued 1,172,600 shares of its common stock for cash to six (6) individuals at a stock price of approximately $0.10. In addition, the company issued 700,000

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shares of its common stock for cash to one (1) entity at a stock price of approximately $0.10. 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 6.

SELECTED FINANCIAL DATA

As a “smaller reporting company” (as defined by §229.10(f)(1)), we are not required to provide the information required by this Item.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Actual results may differ from these estimates under different assumptions or conditions.

CRITICAL ACCOUNTING POLICIES: Our significant accounting policies are described in Note 1 to the consolidated financial statements for the year ended June 30, 2013. The following are our critical accounting policies:

Revenue Recognition

The Company derives revenue primarily from licensing fees on sales of its wound spray product as well as from the sale of its cosmetics products.

The wound spray technology is licensed to an entity in which the Company holds a 25 percent equity interest. The Company is presently entitled to royalties on net sales of the wound spray product. The licensing fees are invoiced on a quarterly basis and are recognized as revenues as per the quarter for which the sales were reported by the licensee.

The majority of the Company’s sales are generated via online orders, with credit card payment. The Company recognizes revenues when: (i) persuasive evidence of a sales arrangement exists, (ii) the sales terms are fixed and determinable, (iii) title and risk of loss have transferred, and (iv) collectability is reasonably assured — generally when products are shipped to the customer, except in situations in which title passes upon receipt of the products by the customer. In this case, revenues are recognized upon notification that customer receipt has occurred. The Company does not have customer acceptance provisions, but it does provide its customers a limited right of return. As warranted the Company accrues an estimated amount for sales returns and allowances at the time of sale based on its ability to estimate sales returns and allowances using historical information. Shipping and handling fees are included as part of net sales. The related freight costs and supplies associated with shipping products to customers are included as a component of cost of goods sold.

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. Research and

24

development costs totaled $65,010 and $104,413 during the fiscal years ended June 30, 2013 and 2012, respectively.

Foreign Currency Translation

The functional currency of the Company’s Sangui GmbH subsidiary is the local currency, the Euro. Accordingly, assets and liabilities of the subsidiary are translated into U.S. dollars at period-end exchange rates. Sales and expenses are translated at the average exchange rates in effect for the period. The resulting translation gains or losses are recorded as a component of accumulated other comprehensive income in the consolidated statement of stockholders’ equity (deficit). There were no gains or losses resulting from foreign currency transactions as of June 30, 2013 and 2012.

The exchange rates used to calculate values and results for the years ended June 30, 2013 and 2012 were as follows (USD):

	Year-end Rates	Average Period Rates
June 30, 2013	0.7688	0.7732
June 30, 2012	0.7951	0.7474

FINANCIAL POSITION

The Company’s current assets decreased by $603,926, or 53.6%, from June 30, 2012 to $522,529 at June 30, 2013. The decrease is primarily attributable to an impairment of related party receivables in the amount of $1,040,583 as of June 30, 2013 resulting in a corresponding increase in other expense. We impaired the receivables in accordance with Generally Accepted Accounting Principles of the United States. However we believe that the foreseeable increase in market penetration of the wound spray product and the subsequent break even of the joint venture company will ultimately result in the recovery of our investment.

Receivables	Balance				Balance
(in US$)	June 30, 2012	Additions	Reductions	Impairment	June 30, 2013
Notes (related parties)	130,073	910,510	-	(1,040,583)	-
Loans (non-related parties)	715,878	3,556	(344,823)	-	374,610
Accrued Interest	1,228	21,946	(4,906)	(18,267)	-
Trade Receivables	37,491	116,381	(115,334)	-	38,538
Other	20,153	117,236	(97,830)	-	39,559
Total Receivables	904,823	1,169,629	(562,894)	(1,058,850)	452,707
Exchange Rate Adjustment	(52,115)				(39,560)
Total Receivables	852,708				413,147

The Company's net property and equipment decreased $821 or 65%, from June 30, 2012 to $449 at June 30, 2013. The decrease is attributable to depreciation expense on information technology equipment.

The Company funded its operations primarily through sales of unregistered securities. The Company’s stockholders’ equity decreased from $959,374 at June 30, 2012 to $296,342 as of June 30, 2013. The primary reason for the decrease was the Company's issuance of common stock totaling approximately $1.4 million offset by the net loss and non controlling interests of approximately $2.3 million.

REVENUES. Revenues increased 606% to $105,487 during the year ended June 30, 2013 from $14,949 during 2012. This increase is due primarily to the income from royalties due from sales of the wound spray product. Revenues in the third and fourth quarters came in lower than initially

25

expected at the beginning of the reporting year. The Company incurred Cost of Sales totaling $10,692 during the 2013 fiscal year, a 220% increase from the prior year.

RESEARCH AND DEVELOPMENT. Research and development expenses decreased by 38% to $65,010 during the year ended June 30, 2013 from $104,413 during the 2012 fiscal year. This decrease is due to the fact that the Company reduced its R&D activities after the respective product authorizations were obtained in Mexico and Europe.

OPERATING EXPENSES. Operating expenses (including depreciation, amortization and professional fees) decreased 65% to $1,338,743 in 2013 from $3,722,256 in 2012. Included in Professional fees is the value of shares issued to consultants, employees and business partners of the Company under the Long Term Incentive Plan.

OTHER INCOME (EXPENSE). Other expense increased by $1,185,286 from income of $165,774. The increased loss was primarily attributable to the impairment of receivables from our joint venture in the amount of $1,040,583 as of June 30, 2013.

NET LOSS. As a result of the above and other factors, the Company's consolidated net loss attributable to common stockholders was $2,095,494 or $0.02 per common share in 2013, as compared to $3,491,904 or $0.03 per common share in 2012.

LIQUIDITY AND CAPITAL RESOURCES

For the year ended June 30, 2013, net cash used in operating activities increased to $841,606 from $723,155 for the year ended June 30, 2012, primarily related to a decrease in shares issued for services.

For the year ended June 30, 2013, net cash used for investing activities amounted to

$880,463 compared to $691,737 in 2012. This is primarily due to the extending of loans to related and unrelated third parties.

For the year ended June 30, 2013, net cash provided by financing activities decreased to an inflow of $1,366,442 from an inflow of $1,555,687 for the year ended June 30, 2012.  The decrease came about due to a reduction of shares issued for cash in 2013.

We had working capital of $295,893 at June 30, 2013, compared to a working capital of $958,104 at June 30, 2012; the decrease is due to our issuing less common stock for cash during the year as well as to the impairment of receivables due from related parties.

The Company incurred a net loss applicable to common stockholders of $2,095,494 and used cash in operating activities of $841,606 for the year ended June 30, 2013. These and other 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 consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

26

While sales of our cosmetics products continued on a low level throughout our 2012 financial year, it is the core strategy of the company to out license its technologies to industry partners. The current state of the sales efforts in particular with regard to the Granulox product distributed by our 25% joint venture SastoMed GmbH has induced management to believe that income from these agreements may be obtainable in the course of the 2014 fiscal year. However, 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.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” (as defined by §229.10(f)(1)), we are not required to provide the information required by this item.

27

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

SANGUI BIOTECH INTERNATIONAL, INC.

AUDIT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

AND

CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013 and 2012

28

SANGUI BIOTECH INTERNATIONAL, INC.

 Table of Contents

Page

Audit Report of Independent Accountants                                                                                         F-1

Consolidated Balance Sheets – June 30, 2013 and 2012                                                                     F-2

Consolidated Statements of Operations for the years ended June 30, 2013 and 2012                            F-3

Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended

June 30, 2013 and 2012                                                                                                                    F-4

Consolidated Statements of Cash Flows for the years ended June 30, 2013 and 2012                           F-5

Notes to Consolidated Financial Statements                                                                                      F-6

_______________________________________

29

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Sangui Biotech International, Inc.

We have audited the accompanying consolidated balance sheets of Sangui Biotech International, Inc. (“the Company”) as of June 30, 2013 and 2012 and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended.  These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sangui Biotech International, Inc. as of June 30, 2013 and 2012, and the results of their operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has not yet established an ongoing source of revenue sufficient to cover its operating costs which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Sadler, Gibb & Associates, LLC

Salt Lake City, UT

September 27, 2013   

 

F-1

SANGUI BIOTECH INTERNATIONAL, INC.

Consolidated Balance Sheets

ASSETS
			June 30,		June 30,
			2013		2012
CURRENT ASSETS
	Cash		$	47,764	$	238,639
	Prepaid expenses and other assets			43,046		15,621
	Tax refunds receivable			18,572		19,487
	Related party receivables			38,537		160,509
	Note receivable, related party			39,022		63,347
	Notes receivable			335,588		628,852
		Total Current Assets		522,529		1,126,455
PROPERTY AND EQUIPMENT, Net				449		1,270
		TOTAL ASSETS	$	522,978	$	1,127,725
LIABILITIES AND STOCKHOLDERS' EQUITY
			June 30,			June 30,
			2013			2012
CURRENT LIABILITIES
	Accounts payable and accrued expenses		$	171,728	$	135,445
	Related party payables			35,397		14,041
	Note payable - related party			19,511		18,865
		TOTAL CURRENT LIABILITIES		226,636		168,351
STOCKHOLDERS' EQUITY
	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, 132,116,857 and 125,605,957 shares issued and
	130,932,115 and 125,552,201 shares outstanding, respectively			30,315,527		28,589,773
	Additional paid-in capital			4,621,430		4,621,430
	Treasury stock			(339,387)		(19,387)
	Accumulated other comprehensive income (loss)			92,846		(102,053)
	Accumulated deficit			(34,027,179)		(31,931,685)
	Non-controlling interest			(366,895)		(198,704)
		Total Stockholders' Equity		296,342		959,374
		TOTAL LIABILITIES AND STOCKHOLDERS'
		EQUITY	$	522,978	$		1,127,725

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

F-2

SANGUI BIOTECH INTERNATIONAL, INC.

Consolidated Statements of Operations

			For the Years Ended
			June 30,
			2013		2012
REVENUES			$	105,487	$	14,949
COST OF SALES				10,692		3,337
GROSS MARGIN				94,795		11,612
OPERATING EXPENSES
	Research and development			65,010		104,413
	Depreciation and amortization			865		692
	Professional fees			304,201		3,159,015
	General and administrative			968,667		458,136
		Total Operating Expenses		1,338,743		3,722,256
		OPERATING LOSS		(1,243,948)		(3,710,644)
OTHER INCOME (EXPENSE)
	Patent licensing income			-		138,577
	Gain on settlement of debt			-		27,422
	Interest expense			(4,573)		(225)
	Interest income			25,419		(225)
	Impairment of related party receivable			(1,040,583)		-
		Total Other Income (Expense)		(1,019,737)		165,549
		Loss before income taxes and non-controlling interest		(2,263,685)		(3,545,095)
		Provision for income taxes		-		-
NET LOSS				(2,263,685)		(3,545,095)
	Less: Net loss attributable to non-controlling interest			(168,191)		(53,191)
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS			$	(2,095,494)	$	(3,491,904)
OTHER COMPREHENSIVE INCOME (LOSS)
	Foreign currency translation adjustments			194,899		(17,580)
		Total Other Comprehensive Income (Loss)		194,899		(17,580)
		COMPREHENSIVE  (LOSS)	$	(2,068,786)	$	(3,562,675)
		BASIC AND DILUTED LOSS PER SHARE	$	(0.02)	$	(0.03)
		BASIC AND DILUTED WEIGHTED AVERAGE
		NUMBER OF SHARES OUTSTANDING		128,549,355		116,691,252

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

F-3

SANGUI BIOTECH INTERNATIONAL, INC.

Consolidated Statements of Stockholders’ Equity

								Accumulated
				Additional				Other		Non-
	Common Stock			Paid-In		Treasury		Comprehensive		controlling		Accumulated
	Shares	Amount		Capital		Stock		Income (Loss)		Interest		Deficit			Total
Balance, June 30, 2011	109,804,855	$	24,007,655	$	4,621,430	$	-	$	(84,473)	$	(145,513)	$	(28,440,006)	$	(40,907)
Common shares issued for cash
at $0.17 per share	9,126,300		1,555,044		-		-		-		-		-		1,555,044
Common shares issued for services
at $0.45 per share	6,674,802		3,027,074		-		-		-		-		-		3,027,074
Treasury stock purchased	-		-		-		(19,387)		-		-		-		(19,387)
Currency translation adjustment	-		-		-		-		(17,580)		-		-		(17,580)
Net loss for the year
ended June 30, 2012	-		-		-		-		-		(53,191)		(3,491,679)		(3,544,870)
Balance, June 30, 2012	125,605,957		28,589,773		4,621,430		(19,387)		(102,053)		(198,704)		(31,931,685)		959,374
Common shares issued for
cash at $0.25 per share	5,391,800		1,366,887		-		-		-		-		-		1,366,887
Common shares issued for
services at $0.32 per share	819,100		265,567		-		-		-		-		-		265,567
Common shares issued for debt
settlement at $0.31 per share	300,000		93,300		-		-		-		-		-		93,300
Treasury stock issued for
extinguishment of notes receivable	-		-		-		(320,000)		-		-		-		(320,000)
Currency translation adjustment	-		-		-		-		194,899		-		-		194,899
Net loss for the year
ended June 30, 2013	-		-		-		-		-		(168,191)		(2,095,494)		(2,263,685)
Balance, June 30, 2013	132,116,857	$	30,315,527	$	4,621,430	$	(339,387)	$	92,846	$	(366,895)	$	(34,027,179)	$	296,342

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

F-4

SANGUI BIOTECH INTERNATIONAL, INC.

Consolidated Statements of Cash Flows

				For the Years Ended
				June 30,
				2013		2012
CASH FLOWS FROM OPERATING ACTIVITIES
	Net loss			$	(2,263,685)	$	(3,545,095)
	Adjustments to reconcile net loss to net cash
	used by operating activities:
		Depreciation			865		692
		Common stock issued for services			265,565		3,027,074
		Common stock issued for settlement of debt			93,300		-
		Impairment of related party receivable			1,040,583		-
	Changes in operating assets and liabilities
		Trade accounts receivable			(1,003)		427
		Royalties receivable			(27,548)		-
		Inventory			-		2,637
		Prepaid expenses and other current assets			(29,220)		21,331
		Tax refunds receivable			26,296		-
		Related party receivables			-		(169,490)
		Accounts payable and accrued expenses			24,747		(67,633)
		Related parties accounts payable			28,494		6,902
			Net Cash Used in Operating Activities		(841,606)		(723,155)
CASH FLOWS FROM INVESTING ACTIVITIES
		Collection of notes receivable, related parties			30,047		-
		Issuance of notes receivable, related parties			-		(62,885)
		Issuance of notes receivable			(910,510)		(628,852)
			Net Cash Used in Investing Activities		(880,463)		(691,737)
CASH FLOWS FROM FINANCING ACTIVITIES
		Proceeds from notes payable-  related party			-		18,865
		Common stock issued for cash			1,366,442		1,555,046
		Purchase of treasury stock			-		(18,224)
			Net Cash Provided by Financing Activities		1,366,442		1,555,687
EFFECTS OF EXCHANGE RATES					164,310		(25,000)
	NET INCREASE (DECREASE) IN CASH				(190,875)		115,795
	CASH AT BEGINNING OF YEAR				238,639		122,619
	CASH AT END OF YEAR			$	47,764	$	238,414
SUPPLEMENTAL DISCLOSURES OF
	CASH FLOW INFORMATION
	CASH PAID FOR:
		Interest		$	-	$	-
		Income Taxes		$	-	$	-
	NON CASH INVESTING AND FINANCING ACTIVITIES
		Treasury stock received for note receivable		$	320,000	$	-

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

F-5

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Sangui Biotech International, Inc. (“the Company”) was incorporated in Colorado in 1995. Since 2003 when a comprehensive restructuring of the group was completed, all operations have been carried out by Sangui BioTech GmbH, its ninety percent owned subsidiary which is headquartered in Witten, Germany, while Sangui Biotech International, Inc., the parent company acts as a holding company whose purpose it is to secure financing and access to the capital markets.

SanguiBioTech GmbH is engaged in the development of technologies aimed at improved supply of oxygen to the human body such as wound management products in particular a wound spray based on natural hemoglobin, wound dressings based on Chitosan (a natural polymer), artificial oxygen carriers (external applications of hemoglobin, blood substitutes and blood additives) and cosmetics. The cosmetics products are currently being sold via the Company’s internet shop, yielding small revenues. Otherwise, the Company does not produce nor market its products. It has adopted the strategy to license its technologies to industry partners in exchange for royalties. In the pursuit of this strategy, the Company established a joint venture company in December 2010 for the purposes of marketing and selling the wound spray product in Germany and of preparing and managing its market entry in several other countries. As consideration for the license, the Company is paid royalties on all sales of this product and is entitled to a 25 percent share of all future profits of the joint venture.

Going Concern

The Company incurred a net loss applicable to common stockholders of $2,095,494 and used cash in operating activities of $841,606 for the year ended June 30, 2013. These and other 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; however, obtaining additional financing through stock offerings or other feasible financing alternatives may be difficult or even impossible. In order for the Company to continue operating at its existing levels, it 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 Company’s ability 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 consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Principles of Consolidation

The consolidated financial statements include the accounts of Sangui BioTech International, Inc. and its ninety percent owned foreign subsidiary, Sangui BioTech GmbH. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the respective reporting period. As future events and their effects cannot be determined with precision, actual results could differ from those estimates. Significant estimates made by management are, among others, the realization of receivables, inventories, long-lived assets, and valuation allowance on deferred tax assets.

F-6

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Risks and Uncertainties

The Company's line of future pharmaceutical and cosmetic products (artificial oxygen carriers or blood substitute and additives) as well as other medical products being developed by Sangui BitTech 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 products will be subject to stringent regulatory requirements because they are in vivo products for humans. The Company and its subsidiaries have limited experience in obtaining regulatory clearance on these types of products. Therefore, the Company could be subject to risks of delays in obtaining or failing to obtain regulatory clearance.

Financial Instruments

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, accounts and notes receivable, accounts payable and accrued liabilities and amounts due to related parties.  Pursuant to ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

Foreign Currency Translation

The functional currency of the Company’s Sangui GmbH subsidiary is the local currency, the Euro. Accordingly, assets and liabilities of the subsidiary are translated into U.S. dollars at period-end exchange rates. Revenues and expenses are translated at the average exchange rates in effect for the period. The resulting translation gains or losses are recorded as a component of accumulated other comprehensive income in the consolidated statement of stockholders’ equity. For the years ended June 30, 2013 and 2012, the Company recognized a loss on translation adjustment in the amount of $17,580 and a gain on translation adjustment of $194,899, respectively. There were no gains or losses resulting from foreign currency transactions as of June 30, 2013 and 2012.

F-7

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Foreign Currency Translation (Continued)

The exchange rates used to calculate values and results of operations for the years ended June 30, 2013 and 2012, were as follows:

	Year-end Rates	Average Period Rates
June 30, 2013	0.7688	0.7732
June 30, 2012	0.7951	0.7474

Cash and Cash Equivalents

The Company considers highly liquid investments with insignificant interest rate risk and original maturities to the Company of three months or less to be cash equivalents. The Company maintains its cash in uninsured 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. The Company had no cash equivalents outstanding as of June 30, 2013 and 2012.

Property and Equipment

Property and equipment are recorded at cost and are depreciated or amortized using the straight-line method over the expected useful lives, which range from three to five years. Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful lives of the assets or the related lease terms. Depreciation expense for the years ended June 30, 2013 and 2012 was $865 and $692, respectively. Expenditures for normal maintenance and routine repairs are charged to expense, and significant improvements are capitalized. The cost and related accumulated depreciation of assets are removed from the accounts upon retirement or other disposition; any resulting gain or loss is reflected in the statement of operations.

Impairment of Long-Lived Assets

Long-lived assets, including property and equipment and certain identifiable intangibles to be held and used are reviewed by the management of the Company for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. On a regular basis and at least annually, the Company evaluates whether events and circumstances have occurred that indicate possible impairment and relies on a number of factors, including business plans, economic projections, and anticipated future cash flows. Measurement of the amount of impairment, if any, is based upon the difference between the asset’s carrying value and estimated fair value. As of June 30, 2013 and 2012, management of the Company believes that no impairment has been indicated. There can be no assurance, however, that market conditions will not change or demand for the Company's products will continue which could result in impairment of long-lived assets in the future.

Revenue Recognition

The Company derives revenue primarily from licensing fees on sales of its wound spray product as well as from the sale of its cosmetics products.

The wound spray technology is licensed to an entity in which the Company holds a 25 percent equity interest. The Company is presently entitled to royalties on net sales of the wound spray product. The licensing fees are invoiced on a quarterly basis and are recognized as revenues as per the quarter for which the sales were reported by the licensee.

F-8

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition (Continued)

The majority of the Company’s product sales are generated via online orders, with credit card payment. The Company recognizes revenues when: (i) persuasive evidence of a sales arrangement exists, (ii) the sales terms are fixed and determinable, (iii) title and risk of loss have transferred, and (iv) collectability is reasonably assured — generally when products are shipped to the customer, except in situations in which title passes upon receipt of the products by the customer. In this case, revenues are recognized upon notification that customer receipt has occurred. The Company does not have customer acceptance provisions, but it does provide its customers a limited right of return. As warranted the Company accrues an estimated amount for sales returns and allowances at the time of sale based on its ability to estimate sales returns and allowances using historical information. Shipping and handling fees are included as part of net sales. The related freight costs and supplies associated with shipping products to customers are included as a component of cost of goods sold.

Trade Accounts Receivable

Accounts receivable are reflected at estimated net realizable value, do not bear interest nor do they generally require collateral. The Company maintains an allowance for doubtful accounts based upon a variety of factors. The Company reviews all open accounts and provides specific reserves for customer collection issues when it believes the loss is probable, considering such factors as the length of time receivables are past due, the financial condition of the customer, and historical experience. The Company also records a reserve for all customers, excluding those that have been specifically reserved for, based upon evaluation of historical losses, which exceeded the specific reserves the Company had established. For the years ended June 30, 2013 and 2012, the Company recognized bad debt expense in the amounts of $-0- and $203, respectively.

Loans Receivable

Loans receivable pertain primarily to the Company’s activities wherein funds have been loaned and interest is charged to certain related and unrelated third parties and are carried at principal amount, less an estimate made for doubtful receivables based on a review of all outstanding amounts on a quarterly basis. These loans receivable are deemed simple interest loans with interest being computed on the outstanding principal balance. The terms of the Company’s financing activities include annual interest of between zero and six percent, and amended maturity dates from between notes that are due on demand notes that are due February 25, 2014.  No origination fees are charged on these loans. Loans receivable are considered to be past due if any portion of the receivable balance has not been received by the contractual maturity date.  

Specific reserves or impairment of loans are estimated by management based on certain assumptions and variables, including the creditor’s financial condition, age of the creditor’s loans outstanding, and changes in payment histories. Loans receivable are written off against reserves and impairments when deemed uncollectible or taken immediately to bad debt expense if reserves during a year are exhausted.  Recoveries of loans receivable previously written off are recorded when received. The Company has recorded an allowance for doubtful accounts of $928,777 and $-0- as of June 30, 2013 and 2012, respectively.

The outstanding net loans receivable balance consists of principle and accrued interest balances. Loans are written off against the Company’s estimated allowances and impairments when collection of payment is determined to be improbable.

The below table shows the original principle balance and accrued interest comprising the ending balance of the Company’s installment loans receivable.

	June 30,		June 30,
	2013		2012
Principal	$	1,285,120	$	691,737
Accrued interest		18,267		-
Impairment of loans receivable		(928,777)		-
Net loans receivable	$	374,610	$	691,737

F-9

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Inventory

Inventory is stated at the lower of cost (computed on a first-in, first-out basis) or market value. Provisions to value the inventory at the lower of the actual cost to purchase or manufacture the inventory, or the current estimated market value of the inventory, are based upon assumptions about future demand and market conditions. The Company also performs evaluations of inventory and records a provision or impairment for estimated excess and obsolete items based upon demand, and any other known factors at the time.  As of June 30, 2013 and 2012, all inventory balances had been reserved against in full.

Sales Tax Collected from Customers

As a part of the Company’s normal course of business, sales taxes are collected from customers. Sales taxes collected are remitted, in a timely manner, to the appropriate governmental tax authority on behalf of the customer. The Company’s policy is to present revenue and costs net of sales taxes.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax assets are reviewed for recoverability and the Company records a valuation allowance to reduce deferred income tax assets when it is more likely than not that such deferred tax assets will not be realized.

The Company has a foreign subsidiary formed or acquired to conduct or support its business outside the United States. The Company provides for income taxes, net of applicable foreign tax credits, on temporary differences in its investment in foreign subsidiaries which are not considered to be permanently invested outside of the United States.

The Company adopted ASC 740 which defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. A tax position that meets the “more-likely-than-not” criterion shall be measured at the largest amount of benefit that is more than 50 percent likely of being realized upon ultimate settlement. ASC 740 also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. ASC 740 applies to all tax positions accounted for under ASC 740. Estimated interest and penalties related to the underpayment of income taxes are recorded as a component of provision for income taxes in the consolidated statements of operations. For the years ended June 30, 2013 and 2012, the Company did not recognize any such interest or penalties, nor were any interest fees or penalties accrued as of June 30, 2013 and 2012.

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 also expensed as incurred, due to the uncertainty with respect to future cash flows resulting from the patents. Research and development costs totaled $65,010 and $104,413 during the fiscal years ended June 30, 2013 and 2012, respectively.

F-10

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Basic and Diluted Loss per Common Share

Basic loss per common share excludes dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding during the period of computation. Diluted loss per share gives effect to all potential dilutive common shares outstanding during the period of compensation. The computation of diluted loss per share does not assume conversion, exercise or contingent exercise of securities that would have an antidilutive effect on earnings. As of June 30, 2013 and 2012, the Company had no potentially dilutive securities that would affect the loss per share if they were to be included in the loss per share.

Comprehensive Loss

Total comprehensive loss represents the net change in stockholders' equity during a period from sources other than transactions with stockholders and as such, includes net loss. For the Company, the components of other comprehensive loss are the changes in the cumulative foreign currency translation adjustments.

Segments of an Enterprise and Related Information

The Company adopted ASC 280, "Disclosures about Segments of an Enterprise and Related Information." ASC 280 establishes standards for the way public companies report information about segments of their business in their annual financial statements and requires them to report selected segment information in their quarterly reports issued to stockholders. It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenues and its major customers, if any. As of June 30, 2013 and 2012, the Company has one business segment, which is the manufacturing and sales of its wound treatment and cosmetics products.

Non-controlling Interests

On June 11, 2008, the Company’s wholly-owned German subsidiary, Sangui Biotech GmbH (“GmbH”) issued 11,400 shares of its previously unissued common stock for cash proceeds of $1,140,759. These shares amount to 10 percent of the GmbH’s total outstanding common stock, which totaled 113,800 shares of as June 30, 2013 and 2012, respectively. The Company accounts for these non-controlling interests pursuant to ASC 810 whereby gains or losses in a subsidiary with a non-controlling interest are allocated to the non-controlling interest based on the ownership percentage of the non-controlling interest, even if that allocation results in a deficit non-controlling interest balance.

Recent Accounting Pronouncements

The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position, or statements.

Financial Statement Reclassifications

The Company has reclassified certain prior-year account balances in order to comply with current-period classifications and increase comparability.

F-11

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

NOTE 2 – INVESTMENT IN JOINT VENTURE

During December 2010, the Company’s subsidiary Sangui BioTech GmbH established a joint venture company with SanderStrothmann GmbH, under the name of SastoMed GmbH. The Company owns 25 percent of the joint venture and accounts for its interest in the joint venture using the cost method of accounting. The Company invested $8,508 in the joint venture during the year ended June 30, 2011.

During the year ended June 30, 2013 the Company loaned the joint venture $910,500 of cash at 4 percent interest.  Also during the year ended June 30, 2013 and separate from the aforementioned loans receivable, the Company was due to receive a joint venture milestone payout of $130,037.  The Company has adopted ASC 310 which requires that the Company assess the collectability of such receivables based on factors such as the financial condition of the creditor.

The joint venture has realized significant losses since inception and as a result all such receivables from the joint venture have been impaired as of June 30, 2013. As such, the Company recorded loan impairments of $928,777 and for milestone payments of $130,037 for the year ended June 30, 2013.

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment consists of the following at June 30, 2013 and 2012:

	June 30,
	2013		2012
Technical and laboratory equipment	$	641,326	$	641,326
Leasehold improvements		285,189		285,189
Office equipment and furniture		311,371		311,371
Total property and equipment		1,237,886		1,237,886
Less accumulated depreciation		(1,237,437)		(1,236,616)
Total property and equipment, net	$	449	$	1,270

NOTE 4 – NOTES RECEIVABLE

During the years ended June 30, 2013 and 2012, the Company invested $910,510 and $691,737, respectively into a various notes receivable. The notes receivable are unsecured and accrue interest at between zero and 6 percent per annum.

The components of notes receivable are summarized in the table below:

	June 30,		June 30,
	2013		2012
Note receivable, principal and interest, due from a joint venture related party, bearing interest at 4%, unsecured, due on December 31, 2013	$	464,389	$	-
Note receivable, principal and interest, due from a joint venture related party, bearing interest at 4%, unsecured, due on February 25, 2014		464,389		-
Note receivable, principal and interest, due from a shareholder, bearing interest at 6%, secured by 138,899 shares of the Company’s common stock, due on demand		39,022		62,885
Note receivable principal due from an unrelated third party, bearing interest at 0%, personally secured by a shareholder of the borrower, due on demand		335,588		625,852
Total	$	1,303,387	$	691,737

F-12

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

NOTE 5 – RELATED PARTY TRANSACTIONS

The Company has an agreement with the Company's former President and CEO, pursuant to which he is entitled to three percent royalties of gross revenues earned with any product based on his inventions. No royalties were outstanding, paid or earned in fiscal years 2013 and 2012.

Related Party Loans Payable

As of June 30, 2013 and 2012, the Company had a note payable to an officer of the Company of $19,511 and $18,865, respectively. The due date for the note payable was extended in April 2013. The note payable is unsecured, accrues interest at 5 percent per annum and is payable at the Company’s option any time before but no later than April 7, 2014.

As of June 30, 2013 and 2012, the Company had a note payable to an officer of the Company of $-0- and $7,110, respectively. The note payable was unsecured, accrued interest at 6 percent per annum and was redeemed in full during the course of the year ended June 30, 2013.

The components of related party notes payable are summarized in the table below:

	June 30,		June 30,
	2013		2012
Note payable, principal and interest, from a Company officer, bearing interest at 6%, unsecured, due on demand	$	-	$	7,110
Note payable, principal and interest, from a Company officer, bearing interest at 5%, unsecured, April 7, 2014		19,511		18,865
Total	$	19,511	$	25,975

Note Receivable – Related Parties

On May 15, 2012, the Company entered into a note receivable with a shareholder for $63,658. The note receivable accrues interest at 6 percent per annum, was due on August 31, 2012 and is secured by 138,899 shares of the Company’s common stock. The note receivable has been extended without a fixed due date. The note receivable is due one month from notice by the Company to the shareholder on intent to collect. Interest and principle have been received in several installments so that at June 30, 2013 the outstanding note receivable amounted to $39,022 of principal and interest.

Joint Venture

The Company has entered into an agreement wherein the Company will pay its joint venture partner, SastoMed GmbH, $7,760 per month through December 31, 2013 for research and development consulting with regard to the blood additive project.

NOTE 6 – STOCKHOLDERS' EQUITY

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock. The authorized preferred shares are non-voting and the Board of Directors has not designated any liquidation value or dividend rates. During the financial years ended June 30, 2012 and 2013 no shares of preferred stock were issued or outstanding.

Common Stock

The Company is authorized to issue 250,000,000 shares of common stock with no par value. 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.

F-13

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

NOTE 6 – STOCKHOLDERS' EQUITY (CONTINUED)

Common Stock Issuances

During the year ended June 30, 2012, the Company issued 3,674,802 shares of common stock for services at an average of $0.48 per share for a total cost of $1,767,074.  In addition, the Company issued 9,126,300 shares of common stock for cash at an average of $0.17 per share, yielding total cash proceeds of $1,555,044 for the year. The Company also issued 3,000,000 shares of common stock in exchange for services related to its wound spray technology.  The shares issued for services were valued at the trading price of the stock on the date the shares were issued.

During the year ended June 30, 2013 the Company issued 819,100 shares of common stock for services at an average of $0.32 per share for a total cost of $265,567. In addition, the Company issued 5,391,800 shares of common stock for cash at an average of $0.25 per share, yielding total cash proceeds of $1,336,887. The shares issued for services were valued at the trading price of the common stock on the date the shares were issued.

Treasury Stock

During the year ended June 30, 2012, the Company repurchased 53,756 shares of its common stock for cash. During the year ended June 30, 2013, the Company received 1,000,000 shares of its common stock as a partial redemption of a loan to a non-related third party. The treasury stock was valued using the Treasury Method at $339,387.  This value was based on the trading price of the Company’s common stock on the date of acquisition.

Stock Options

From time to time, the Company may issue stock options pursuant to various agreements and other contemporary agreements. At June 30, 2013 and 2012, and during the years ended June 30, 2013 and 2012, no options were issued or outstanding.

NOTE 7 - INCOME TAX PROVISION

The Company’s provision for income taxes was $-0- and $-0- for the years ended June 30, 2013 and 2012 respectively, since the Company incurred net operating losses through June 30, 2013.

Income tax expense for the years ended June 30, 2013 and 2012 differed from the amounts computed by applying the U.S. federal income tax rate of 34 percent as follows:

	June 30,		June 30,
	2013		2012
Income tax benefit at U.S. federal statutory rates	$	(712,468)	$	(1,205,256)
Effect of:
Common stock issued for services		90,292		1,029,205
Impairment of related party receivables		353,798		-
Increase (decrease) in valuation allowance		268,378		176,051
Provision for income taxes	$	-	$	-

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets at June 30, 2013 and 2012 are presented below:

	June 30,		June 30,
	2013		2012
Deferred tax assets
Net operating losses	$	11,125,151	$	6,885,870
Less: valuation allowance		(11,125,151)		(6,885,870)
Net deferred tax assets		-		-
Deferred tax liabilities		-		-
Net deferred taxes	$	-	$	-

F-14

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

NOTE 7 - INCOME TAX PROVISION (CONTINUED)

As of June 30, 2013, the Company had net operating loss carryforwards of approximately $11.6 million which is available to offset future taxable federal, state and foreign income. The federal and state carryforward amounts expire in varying amounts between 2013 and 2032. The foreign net operating loss carryforwards do not have an expiration period.  

The Company has evaluated its uncertain tax positions and determined that any required adjustments for unrecognized tax benefits would not have a material impact on the Company’s balance sheet, income statement, or statement of cash flows.

The Company’s tax filings for 2009 through 2013 remain subject to examination by tax authorities for federal income tax purposes and by other major taxing jurisdictions to which we are subject. The Company has identified potential penalties for the late filing of reports to taxing authorities. The Company believes that it is more likely than not the penalties will be waived and accordingly has not accrued the penalties in the financial statements.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

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. The Company has recorded a reserve for indemnities and guarantees of $-0- as of June 30, 2013 and 2012.

Leases

The Company leases office facilities from an unrelated third party at $6,518 per month. The office lease contract is maintained on a month-to-month basis.

The Company also leases an automobile under an operating lease. The lease provides for a lease payment of $1,599 per month beginning June 2012 expiring June 2015.  

Future minimum lease payments under the terms of the operating leases are as follows:

2014	$	19,182
2015		19,182
2016		-
Thereafter		-
Total	$	38,364

NOTE 9 – STOCK-BASED COMPENSATION

The Company has applied the disclosure provisions of ASC 718 for the years ended June 30, 2013 and 2012. There were no common shares or stock options outstanding, issued or granted to employees during these reporting periods.

F-15

Notes to Consolidated Financial Statements

June 30, 2013 and 2012

On April 28, 2004, the Company adopted the 2004 Employee Stock Incentive Plan (“the Plan”). Under the terms of this plan the Board was authorized to issue up to 1,000,000 shares of common stock to certain eligible employees of the Company or its subsidiaries. All of these shares were issued pursuant to the plan prior to June 30, 2007. On September 22, 2008 the Company adopted the 2008 Amended and Restated Long-Term Equity Incentive Plan, whereby the Board was authorized to issue up to 10,000,000 shares of common stock (including incentive stock options) to certain eligible employees, directors, and/or consultants of the Company or its subsidiaries. During the years ended June 30, 2013 and 2012, respectively, the Company issued 750,000 and 6,300,000 shares pursuant to this Plan. All shares available under the 2008 Long-Term Equity Incentive Plan had been issued on June 30, 2013.

NOTE 10 – FOREIGN CURRENCY TRANSLATION

During the years ended June 30, 2013 and 2012, the Company has transacted the majority of its business activities in Germany, and the transactions have been primarily consummated in the Euro currency.  Due to the fact that the Company’s functional currency is the Euro and its reporting currency is the U.S. dollar, the Company must recognize the effects of variations in foreign currency exchange rates as gains and losses as a component of other comprehensive income (loss), pursuant to ASC 830 “Foreign Currency Translation.” To calculate this other comprehensive income and loss, the Company utilizes the “current method,” whereby assets and liabilities of the German subsidiary are translated from Euro into U.S. dollars at the exchange rate at the balance sheet date.  

All equity items, other than retained earnings, are specifically identified where possible and exchange rates on transaction dates are implemented.  Profit and loss accounts are translated using an average rate for the period.  During the years ended June 30, 2013 and 2012, the Company recognized other comprehensive gains of $195,545 and other comprehensive losses of and $17,580, respectively.  Such other comprehensive income and losses had no effect on liquidity.

NOTE 11 – SUBSEQUENT EVENTS

Subsequent to the year ended June 30, 2013 the Company issued 200,000 shares of common stock for services at an average of $0.13 per share for a total cost of $26,400. In addition, the Company issued 2,932,600 shares of common stock for cash at an average of $0.10 per share, yielding total cash proceeds of $285,581. The shares issued for services were valued at the trading price of the common stock on the date the shares were issued.

F-16

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On January 11, 2011 the Board of Directors of the Company approved the engagement of the accounting firm of Sadler, Gibb & Associates, LLC (“Sadler Gibb”) as its independent registered public accounting firm effective immediately and mandated Sadler Gibb to audit the financial statements of the company for its financial year ended June 30, 2010, as well as to review the quarterly reports for the quarters of this financial year. The engagement was renewed to audit the financial statements of the company for its financial years ended June 30, 2012 and 2013, as well as to review the quarterly reports for the quarters of the immediately subsequent financial years.

During the two most recent fiscal years and the subsequent interim periods the Company did not consult with Sadler Gibb with regard to: (i) the application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on the Company's financial statements; and further, Sadler Gibb has not provided written or oral advice to the Company that was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement or a reportable event (as described in Item 304(a)(1)(iv) of Regulation S-B).

ITEM 9A. 

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’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’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.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Exchange Act Rule 13a-15(f).  Management conducted an evaluation of the effectiveness of the internal control over financial reporting as of June 30, 2012, using the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.  Based on the evaluation of the effectiveness of the internal controls over financial reporting as of June 30, 2013, management has concluded that our

34

internal controls over financial reporting were not effective as of the end of the period covered by this report.

As a result of management’s assessment, management has determined that there is a material weakness due to the lack of segregation of duties.  In order to address and resolve this weakness we will endeavor to locate and appoint additional qualified personnel to the board of directors and pertinent officer positions as our financial means allow.  To date, our limited financial resources have not allowed us to hire the additional personnel necessary to address this material weakness.

Additionally, as a result of management’s assessment, management has determined that there is a significant deficiency with regard to the lack of a backup process for electronic financial information.  There is no stored backup offsite or in a media safe, and as such, there are no regularly run test restorations of said financial information.  In order to address and resolve this deficiency we are currently researching the options available given our financial means to have a regularly scheduled and dependable offsite backup of our Company records.

Lastly, the Company has not instituted specific anti-fraud controls.  While management found no evidence of fraudulent activity, the chief accounting officer has access to both accounting records and corporate assets, principally the operating bank account.  Management believes this exposure to potential fraudulent activity is not significant either to the operations of the company or to the financial reporting; however, management is in the process of instituting controls specifically designed to address this material weakness, so as to prevent and detect—on a timely basis—any potential loss due to fraudulent activity.

This Annual Report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.

 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 (our fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, the registrant’s principal executive and principal financial officers, or persons performing similar functions, and effected by the registrant’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’s assets that could have a material effect on the financial statements.

35

ITEM 9B.

OTHER INFORMATION

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Identity of directors and executive officers

The following table sets forth the names and ages of the current directors and executive officers of Sangui BioTech International, Inc., their principal offices and positions and the date each such person became a director or executive officer. Our executive officers are elected annually by the Board of Directors. Our directors serve one-year terms or until their successors are elected. The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors. There are no family relationships between any of the directors and executive officers. In addition, there was no arrangement or understanding between any executive officer and any other person pursuant to which any person was selected as an executive officer.

The directors as of June 30, 2013 were as follows:

Name	Age	Position with the Company	Director Since
Hubertus Schmelz	58	Non-Executive Director	Dec 18, 2008
Joachim Fleing, Ph.D.	60	CFO	Dec 13, 2003
Thomas Striepe	49	CEO	Feb 7, 2005

None of the Directors are related to one another. None of the independent Directors has a business or professional relationship with SGBI and/or the other Directors and substantial shareholders of SGBI, except as follows:

Since July, 2002, the Company had an agreement with Joachim Fleing under which the latter serves as a communications specialist on an hourly basis. This agreement was cancelled effective February 24, 2012, and replaced by a remuneration agreement under which his services as an executive of the company will be remunerated on an hourly basis.

Since January, 2004, the subsidiary of the Company has an agreement with Hubertus Schmelz under which the latter serves as a Managing Director on an hourly basis.

The day-to-day operations of SGBI are entrusted to the Executive Directors of SGBI.

The business and working experience of the Directors and key Executive Officers of SGBI as of June 30, 2013, are set out below:

THOMAS STRIEPE, is Vice President Accounting and Controlling at Dr. Ludz GmbH, Hamburg, Germany, a financial services company. Prior to joining Dr. Ludz GmbH in 2004, he held management positions in the accounting departments of several German and international corporations. He holds an MBA of Hamburg University.

JOACHIM FLEING, PhD, is a communications specialist. His professional experience includes the position of a communications officer and the position as an account director at an international PR agency. Joachim Fleing holds a PhD of Wuppertal University as well as an Executive MBA in Accounting and Controlling of Muenster University.

36

HUBERTUS SCHMELZ, is the General Manager of SanguiBioTech GmbH. He was appointed to this position effective December 16, 2003. Prior to joining Sangui he acted as a legal and business consultant. During the last decade prior to 2000 he was entrusted with numerous business development projects by the German Treuhandanstalt in restructuring the economy of Eastern Germany. After having studied law he acted as legal counsel in several positions.

There are no arrangements or understandings between any of the directors or executive officers, or any other person or person pursuant to which they were selected as directors and/or officers.

Significant Employees

All but one individuals serving as scientific or administrative staff have been engaged on the basis of consulting agreements. They include non-disclosure and exclusivity sections and secure the ongoing cooperation. Key personnel the expertise and abilities of which would be difficult to replace includes Dr. Harald Poetzschke.

Directorships

No Director of the Company or person nominated or chosen to become a Director holds any other directorship in any company with a class of securities registered pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any other company registered as an investment company under the Investment Company Act of 1940.

Family Relationships

There are no family relationships between any of the directors, officers or employees of the Company.

Involvement in Certain Legal Proceedings

During the past ten years, no present director, executive officer or person nominated to become a director or an executive officer of the Company has been or filed:

1.

A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

2.

Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

3.

Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

i.

Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

ii.

Engaging in any type of business practice; or

37

iii.

Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

4.

Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;

5.

Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

6.

Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

7.

Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

i.

Any Federal or State securities or commodities law or regulation; or

ii.

Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

iii.

Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

8.

Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Promoters and Control Persons

None.

Audit Committee and Audit Committee Financial Expert

The Company has no separately designated standing audit committee or another committee performing similar functions. The Board of Directors acts as the audit committee. None of the directors qualifies as an Audit Committee Financial Expert.

Material Changes to the Method by Which the Shareholders May Recommend Nominees to the Board of Directors

None.

38

Section 16 (a) Beneficial Ownership Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's executive officers, directors and persons who own more than ten percent of the Company's Common Stock, to file initial reports of beneficial ownership on Form 3, changes in beneficial ownership on Form 4 and an annual statement of beneficial ownership on Form 5, with the SEC. Such executive officers, directors and greater than ten percent shareholders are required by SEC rules to furnish the Company with copies of all such forms that they have filed.

Based solely upon a review of copies of the reports filed, we believe that during the year ended June 30, 2013, all executive officers, directors and persons who own more than ten percent of the Company's Common Stock are in compliance with such regulations.

Code of Ethics

As of the date of this report the Company has not adopted a code of ethics.

Audit Committee and Audit Committee Financial Expert

Our board of directors is comprised of three directors, none of which is an outside independent director, and as of the date hereof we have not established an audit committee.  Accordingly, our board of directors presently performs the functions that would customarily be undertaken by an audit committee.

39

ITEM 11.

EXECUTIVE COMPENSATION AND OTHER INFORMATION

Summary Compensation Table

The table below summarizes all compensation awarded to, earned by, or paid to our Officers for all services rendered in all capacities to us for the fiscal periods indicated.

		Salary		Stock	Option	Total
Name and Principal Position	Year	($) (1)	Bonus ($)	Awards ($)	Awards ($)	($)
Dr. Joachim Fleing (2) Chief Financial Officer	2013 2012	40,313 40,821	- -	- -	- -	40,313 40,821
Thomas Striepe Chief Executive Officer	2013 2012	0 0	- -	- -	- -	0 0

Hubertus Schmelz⁽³⁾ 2013 2012 155,199 160,557 - - - - - - 155,199 160,557

⁽¹⁾ All figures are expressed in United States Dollars (“USD”); for the German management personnel, the EURO or DM was converted to USD using the average exchange rate of the period July 1 through June 30 for each year.

⁽²⁾ Compensation resulting from the communications service agreement, and the remuneration agreement, respectively. See Item 13, below.

⁽³⁾ Hubertus Schmelz serves as the Chief Executive Officer of the Company’s wholly owned subsidiary.

Narrative Disclosure to Summary Compensation Table

There are no other employment contracts, compensatory plans or arrangements, including payments to be received from the Company with respect to any executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of employment with the Company, or its subsidiary, any change in control, or a change in the person’s responsibilities following a change in control of the Company.

There are no agreements or understandings for any executive officer to resign at the request of another person. None of our executive officers acts or will act on behalf of or at the direction of any other person.

Outstanding Equity Awards at Fiscal Year-End Table and Narrative

The Company had no outstanding equity awards at fiscal year-end.

40

Compensation of Directors

The table below summarizes all compensation awarded to, earned by, or paid to our Directors for all services rendered in all capacities to us for the fiscal periods indicated.

		Fees Earned
		or Paid		Stock		Option
Name		in Cash ($)		Awards ($)		Awards ($)		Total ($)
Thomas Striepe	$	-	$	-	$	-	$	-
Hubertus Schmelz	$	155,199	$	-	$	-	$	155,199
Joachim Fleing	$	40,313	$	-	$	-	$	40,313

Narrative to Director Compensation Table

Directors serve in this position without compensation and there are no standard or other arrangements for their compensation. There are no employment contracts, compensatory plans or arrangements, including payments to be received from the Company with respect to any Director that would result in payments to such person because of his or her resignation with the Company, or its subsidiary, in the event of any change in control of the Company. There are no agreements or understandings for any Director to resign at the request of another person. None of our Directors or executive officers acts or will act on behalf of or at the direction of any other person.

Other Contracts

None.

ITEM 12. 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Securities Authorized for Issuance under Equity Compensation Plans

No securities have been authorized for issuance as part of any Equity Compensation Plan.

2004 Stock Incentive Plan

On April 28, 2004, the Company adopted the 2004 Employee Stock Incentive Plan. Under the terms of this plan the Board was authorized to issue up to 1,000,000 shares of common stock to certain eligible employees of the company or its subsidiary. All 1,000,000 shares of common stock were issued under the plan in Sangui’s 2005 and 2006 financial years.

2008 Amended and Restated Long-Term Equity Incentive Plan

On October 22, 2008 the Company adopted the 2008 Amended and Restated Long-Term Equity Incentive Plan, whereby the Board was authorized to issue up to 10,000,000 shares of common stock (including incentive stock options) to certain eligible employees, directors, and consultants of the Company or its subsidiaries. In its 2013 financial year the company issued an aggregate of 750,000 shares to one (1) individual pursuant to this plan. All shares available under the 2008 Long-Term Equity Incentive Plan had been issued by June 30, 2013.

41

Security Ownership of Certain Beneficial Owners

The following table sets forth, as of June 30, 2013, certain information concerning ownership of shares of Common Stock by any person who is the beneficial owner of more than 5% of the issued and outstanding Common Stock of the Company.

Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Owner(1)	Percent of Class
Common Stock	Feedback AG Neuer Wall 54 20354 Hamburg Germany	6,788,802	5.1%
Common Stock	Hubertus Schmelz Alfred Herrhausen Street 44 58455 Witten Germany	10,702,601	8.1%
Common Stock	SanderStrothmann GmbH Brüsseler Straße 2 49124  Georgsmarienhütte Germany	10,575,808	8.0%

Security Ownership of Management

The following table sets forth, as of June 30, 2013, certain information concerning ownership of shares of Common Stock by each director of the Company and by all executive officers and directors of the Company as a group:

Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Owner(1)	Percent of Class
Common Stock	Thomas Striepe Alfred Herrhausen Street 44 58455 Witten Germany	1,350,000	1.0%
Common Stock	Hubertus Schmelz Alfred Herrhausen Street 44 58455 Witten Germany	10,702,601	8.1%
Common Stock	Dr. Joachim Fleing Am Vogelherd 43 35043 Marburg Germany	1,744,193	1.3%
Common Stock	All Officers and Directors as a Group (3 persons)	13,035,294	10.4%

Percentages are calculated on the basis of 132,116,857 shares issued on June 30, 2013.

42

Changes in Control

To the best of the Company’s knowledge there are no present arrangements or pledges of the Company's securities, which may result in a change in control of the Company.

ITEM 13. 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions with related persons

Except as otherwise disclosed below, no Director, substantial shareholder or Executive Officer of SGBI was or is an interested party in any transaction undertaken by SGBI or its subsidiary within the last two years.

Consulting Contract with Joachim Fleing, PhD.

The Company signed a consulting contract with Joachim Fleing, PhD, covering certain investor relations services on July 17, 2002. When the latter was appointed a director of the company effective December 16, 2003, the Board of Directors unanimously agreed that this contract should persist. This agreement was cancelled effective February 24, 2012, and replaced by a remuneration agreement under which his services as an executive of the company will be remunerated on an hourly basis.

Parents

Not applicable.

Promoters and Control Persons

Not applicable.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

Independent Registered Public Accountants

The Company’s independent accountants for the fiscal year ended June 30, 2012 and 2013 were Sadler, Gibb & Associates, LLC.

(a)

Audit Fees. For the fiscal year ended 2012, the aggregate fees billed by Sadler, Gibb & Associates for services rendered for the audits of the annual financial statements and the review of the financial statements included in the quarterly reports on Form 10-QSB or services provided in connection with the statutory and regulatory filings or engagements for those fiscal years were $19,000.

(b)

For the fiscal year ended 2013, the aggregate fees billed by Sadler, Gibb & Associates for services rendered for the audits of the annual financial statements and the review of the financial statements included in the quarterly reports on Form 10-Q or services provided in connection with the statutory and regulatory filings or engagements for those fiscal years were $19,000

(c)

Audit-Related Fees. For the fiscal year ended 2013 fees billed by Sadler, Gibb & Associates were an aggregate $0 for any audit-related services other than as set forth in paragraph (a) above.

(d)

Tax Fees. For the fiscal years ended 2012 and 2013 Sadler, Gibb & Associates did not bill any fees for tax compliance services. The auditors did not provide tax-planning advice for the fiscal years ended 2012 and 2013.

(e)

All Other Fees. None.

43

PART IV

ITEM 15.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

Index to Exhibits

3.1	Articles of Incorporation of the Company (1)
3.2	Bylaws of the Company (1)
3.3	Amended and Restated Articles of Incorporation of the Company(2)
3.4
Amended and Restated Bylaws of the Company(2)
21.1	Subsidiaries of the Company (2)
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

Notes:

⁽¹⁾ Previously filed as an exhibit to the report on Form 8-K, filed on or about April 4, 2000, and incorporated herein by reference

⁽²⁾ Previously filed as an exhibit to the report on Form 10-Q, filed on February 25, 2009, and incorporated herein by reference

⁽³⁾ Previously filed as an exhibit to the report on Form 10-QSB for the period ended September 30, 2006, filed on June 10, 2008, and incorporated herein by reference

44

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

/s/ Thomas Striepe               Thomas Striepe Chief Executive Officer Principal Executive Officer	September 27, 2013
/s/ Joachim Fleing               Joachim Fleing, Ph.D Chief Financial Officer Principal Financial Officer	September 27, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signatures	Title	Date
/s/ Thomas Striepe              Thomas Striepe	Director	September 27, 2013
/s/ Joachim Fleing              Joachim Fleing, Ph.D	Director	September 27, 2013
/s/ Hubertus Schmelz          Hubertus Schmelz	Director	September 27, 2013

45

EX-31

Exhibit 31.01

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14

I, Thomas Striepe, certify that:

1.

I have reviewed this annual report on Form 10-K of Sangui Biotech International, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have, for the small business issuer and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c)

Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5.

I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date:  September 27, 2013

/s/ Thomas Striepe

By: Thomas Striepe

Its: Chief Executive Officer

      Principal Executive Officer 

EX-31

Exhibit 31

EX-32

Exhibit 32.01

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Sangui Biotech International, Inc. (the “Company”) on Form 10-K for the period ending June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas Striepe, Chief Executive Officer and, I, Joachim Fleing, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of our knowledge and belief:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Thomas Striepe

By: Thomas Striepe

Chief Executive Officer

Principal Executive Officer

Dated: September 27, 2013

/s/ Joachim Fleing

By: Joachim Fleing

Chief Financial Officer

Principal Financial Officer

Dated: September 27, 2013

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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Organization and Summary of Significant Accounting Policies: Nature of Business (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Nature of Business

Nature of Business

Sangui Biotech International, Inc. (“the Company”) was incorporated in Colorado in 1995. Since 2003 when a comprehensive restructuring of the group was completed, all operations have been carried out by Sangui BioTech GmbH, its ninety percent owned subsidiary which is headquartered in Witten, Germany, while Sangui Biotech International, Inc., the parent company acts as a holding company whose purpose it is to secure financing and access to the capital markets.

SanguiBioTech GmbH is engaged in the development of technologies aimed at improved supply of oxygen to the human body such as wound management products in particular a wound spray based on natural hemoglobin, wound dressings based on Chitosan (a natural polymer), artificial oxygen carriers (external applications of hemoglobin, blood substitutes and blood additives) and cosmetics. The cosmetics products are currently being sold via the Company’s internet shop, yielding small revenues. Otherwise, the Company does not produce nor market its products. It has adopted the strategy to license its technologies to industry partners in exchange for royalties. In the pursuit of this strategy, the Company established a joint venture company in December 2010 for the purposes of marketing and selling the wound spray product in Germany and of preparing and managing its market entry in several other countries. As consideration for the license, the Company is paid royalties on all sales of this product and is entitled to a 25 percent share of all future profits of the joint venture.

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Statements of Stockholders Equity (USD $)	Common stock	Additional Paid In Capital	Treasury Stock	Stock Subscription (Receivable) Payable	Accumulated Other Comprehensive Income (Loss)	Noncontrolling Interest	Accumulated Deficit	Total
Purchase of treasury stock at Jun. 30, 2010
Common stock issued for cash, value	$ 909,951							$ 909,951
Common stock issued for cash, shares	17,433,167							17,433,167
Currency translation adjustment					131,198			131,198
Common stock issued for services, value	704,827							704,827
Common stock issued for services, shares	12,714,540							12,714,540
Common stock issued for stock subscriptions payable, value	13,457			(13,457)
Common stock issued for stock subscriptions payable, shares	300,000							300,000
Stockholders' Equity, ending balance at Jun. 30, 2011	24,007,655	4,621,430			(84,473)	(145,513)	(28,440,006)	(40,907)
NET LOSS FOR THE YEAR at Jun. 30, 2011						(77,205)	(1,527,418)	(1,604,623)
Balance common shares, ending balance at Jun. 30, 2011	109,804,855							109,763,948
Purchase of treasury stock at Jun. 30, 2011
Common stock issued for cash, value	1,555,044							1,555,044
Common stock issued for cash, shares	9,126,300							9,126,300
Currency translation adjustment					(17,580)			(17,580)
Common stock issued for services, value	3,027,074							3,027,074
Common stock issued for services, shares	6,674,802							6,674,802
Stockholders' Equity, ending balance at Jun. 30, 2012	28,589,773	4,621,430	(19,387)		(102,053)	(198,704)	(31,931,685)	959,374
NET LOSS FOR THE YEAR at Jun. 30, 2012						(53,191)	(3,491,679)	(3,544,870)
Purchase of treasury stock at Jun. 30, 2012			(19,387)					(19,387)
Balance common shares, ending balance at Jun. 30, 2012	125,605,957							125,605,957
Common stock issued for cash, value	1,366,887							1,366,887
Common stock issued for cash, shares	5,391,800							5,391,800
Common stock issued for settlement of debt, value	93,300							93,300
Common stock issued for settlement of debt, shares	300,000							300,000
Currency translation adjustment					194,899
Common stock issued for services, value	265,567							265,567
Common stock issued for services, shares	819,100							819,100
Stockholders' Equity, ending balance at Jun. 30, 2013	30,315,527	4,621,430	(339,387)		92,846	(366,895)	(34,027,179)	296,342
NET LOSS FOR THE YEAR at Jun. 30, 2013						(168,191)	(2,095,494)	(2,263,685)
Purchase of treasury stock at Jun. 30, 2013			$ (320,000)
Balance common shares, ending balance at Jun. 30, 2013	132,116,857

XML

Related Party Transactions

12 Months Ended

Jun. 30, 2013

Notes

Related Party Transactions

NOTE 5 – RELATED PARTY TRANSACTIONS

The Company has an agreement with the Company's former President and CEO, pursuant to which he is entitled to three percent royalties of gross revenues earned with any product based on his inventions. No royalties were outstanding, paid or earned in fiscal years 2013 and 2012.

Related Party Loans Payable

As of June 30, 2013 and 2012, the Company had a note payable to an officer of the Company of $19,511 and $18,865, respectively. The due date for the note payable was extended in April 2013. The note payable is unsecured, accrues interest at 5 percent per annum and is payable at the Company’s option any time before but no later than April 7, 2014.

As of June 30, 2013 and 2012, the Company had a note payable to an officer of the Company of $-0- and $7,110, respectively. The note payable was unsecured, accrued interest at 6 percent per annum and was redeemed in full during the course of the year ended June 30, 2013.

The components of related party notes payable are summarized in the table below:

	June 30,		June 30,
	2013		2012
Note payable, principal and interest, from a Company officer, bearing interest at 6%, unsecured, due on demand	$	-	$	7,110
Note payable, principal and interest, from a Company officer, bearing interest at 5%, unsecured, April 7, 2014		19,511		18,865
Total	$	19,511	$	25,975

Note Receivable – Related Parties

On May 15, 2012, the Company entered into a note receivable with a shareholder for $63,658. The note receivable accrues interest at 6 percent per annum, was due on August 31, 2012 and is secured by 138,899 shares of the Company’s common stock. The note receivable has been extended without a fixed due date. The note receivable is due one month from notice by the Company to the shareholder on intent to collect. Interest and principle have been received in several installments so that at June 30, 2013 the outstanding note receivable amounted to $39,022 of principal and interest.

Joint Venture

The Company has entered into an agreement wherein the Company will pay its joint venture partner, SastoMed GmbH, $7,760 per month through December 31, 2013 for research and development consulting with regard to the blood additive project.

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Organization and Summary of Significant Accounting Policies: Cash and Cash Equivalents (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers highly liquid investments with insignificant interest rate risk and original maturities to the Company of three months or less to be cash equivalents. The Company maintains its cash in uninsured 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. The Company had no cash equivalents outstanding as of June 30, 2013 and 2012.

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Organization and Summary of Significant Accounting Policies: Going Concern (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Going Concern

Going Concern

The Company incurred a net loss applicable to common stockholders of $2,095,494 and used cash in operating activities of $841,606 for the year ended June 30, 2013. These and other 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; however, obtaining additional financing through stock offerings or other feasible financing alternatives may be difficult or even impossible. In order for the Company to continue operating at its existing levels, it 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 Company’s ability 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 consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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Organization and Summary of Significant Accounting Policies: Recent Accounting Pronouncements (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Recent Accounting Pronouncements

Recent Accounting Pronouncements

The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position, or statements.

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Organization and Summary of Significant Accounting Policies: Revenue Recognition (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Revenue Recognition

Revenue Recognition

The Company derives revenue primarily from licensing fees on sales of its wound spray product as well as from the sale of its cosmetics products.

The wound spray technology is licensed to an entity in which the Company holds a 25 percent equity interest. The Company is presently entitled to royalties on net sales of the wound spray product. The licensing fees are invoiced on a quarterly basis and are recognized as revenues as per the quarter for which the sales were reported by the licensee.

The majority of the Company’s product sales are generated via online orders, with credit card payment. The Company recognizes revenues when: (i) persuasive evidence of a sales arrangement exists, (ii) the sales terms are fixed and determinable, (iii) title and risk of loss have transferred, and (iv) collectability is reasonably assured — generally when products are shipped to the customer, except in situations in which title passes upon receipt of the products by the customer. In this case, revenues are recognized upon notification that customer receipt has occurred. The Company does not have customer acceptance provisions, but it does provide its customers a limited right of return. As warranted the Company accrues an estimated amount for sales returns and allowances at the time of sale based on its ability to estimate sales returns and allowances using historical information. Shipping and handling fees are included as part of net sales. The related freight costs and supplies associated with shipping products to customers are included as a component of cost of goods sold.

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Organization and Summary of Significant Accounting Policies: Impairment of Long-lived Assets (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Impairment of Long-lived Assets

Impairment of Long-Lived Assets

Long-lived assets, including property and equipment and certain identifiable intangibles to be held and used are reviewed by the management of the Company for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. On a regular basis and at least annually, the Company evaluates whether events and circumstances have occurred that indicate possible impairment and relies on a number of factors, including business plans, economic projections, and anticipated future cash flows. Measurement of the amount of impairment, if any, is based upon the difference between the asset’s carrying value and estimated fair value. As of June 30, 2013 and 2012, management of the Company believes that no impairment has been indicated. There can be no assurance, however, that market conditions will not change or demand for the Company's products will continue which could result in impairment of long-lived assets in the future.

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Commitments and Contingencies: Leases (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Leases

Leases

The Company leases office facilities from an unrelated third party at $6,518 per month. The office lease contract is maintained on a month-to-month basis.

The Company also leases an automobile under an operating lease. The lease provides for a lease payment of $1,599 per month beginning June 2012 expiring June 2015.  

Future minimum lease payments under the terms of the operating leases are as follows:

2014	$	19,182
2015		19,182
2016		-
Thereafter		-
Total	$	38,364

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Organization and Summary of Significant Accounting Policies: Basic and Diluted Loss Per Common Share (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Basic and Diluted Loss Per Common Share

Basic and Diluted Loss per Common Share

Basic loss per common share excludes dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding during the period of computation. Diluted loss per share gives effect to all potential dilutive common shares outstanding during the period of compensation. The computation of diluted loss per share does not assume conversion, exercise or contingent exercise of securities that would have an antidilutive effect on earnings. As of June 30, 2013 and 2012, the Company had no potentially dilutive securities that would affect the loss per share if they were to be included in the loss per share.

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Related Party Transactions: Joint Venture (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Joint Venture

Joint Venture

The Company has entered into an agreement wherein the Company will pay its joint venture partner, SastoMed GmbH, $7,760 per month through December 31, 2013 for research and development consulting with regard to the blood additive project.

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Organization and Summary of Significant Accounting Policies: Sales Tax Collected From Customers (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Sales Tax Collected From Customers

Sales Tax Collected from Customers

As a part of the Company’s normal course of business, sales taxes are collected from customers. Sales taxes collected are remitted, in a timely manner, to the appropriate governmental tax authority on behalf of the customer. The Company’s policy is to present revenue and costs net of sales taxes.

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Stockholders' Equity: Treasury Stock (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Treasury Stock

Treasury Stock

During the year ended June 30, 2012, the Company repurchased 53,756 shares of its common stock for cash. During the year ended June 30, 2013, the Company received 1,000,000 shares of its common stock as a partial redemption of a loan to a non-related third party. The treasury stock was valued using the Treasury Method at $339,387.  This value was based on the trading price of the Company’s common stock on the date of acquisition.

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Organization and Summary of Significant Accounting Policies: Property and Equipment (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Property and Equipment

Property and Equipment

Property and equipment are recorded at cost and are depreciated or amortized using the straight-line method over the expected useful lives, which range from three to five years. Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful lives of the assets or the related lease terms. Depreciation expense for the years ended June 30, 2013 and 2012 was $865 and $692, respectively. Expenditures for normal maintenance and routine repairs are charged to expense, and significant improvements are capitalized. The cost and related accumulated depreciation of assets are removed from the accounts upon retirement or other disposition; any resulting gain or loss is reflected in the statement of operations.

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Organization and Summary of Significant Accounting Policies

12 Months Ended

Jun. 30, 2013

Notes

Organization and Summary of Significant Accounting Policies

NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Sangui Biotech International, Inc. (“the Company”) was incorporated in Colorado in 1995. Since 2003 when a comprehensive restructuring of the group was completed, all operations have been carried out by Sangui BioTech GmbH, its ninety percent owned subsidiary which is headquartered in Witten, Germany, while Sangui Biotech International, Inc., the parent company acts as a holding company whose purpose it is to secure financing and access to the capital markets.

SanguiBioTech GmbH is engaged in the development of technologies aimed at improved supply of oxygen to the human body such as wound management products in particular a wound spray based on natural hemoglobin, wound dressings based on Chitosan (a natural polymer), artificial oxygen carriers (external applications of hemoglobin, blood substitutes and blood additives) and cosmetics. The cosmetics products are currently being sold via the Company’s internet shop, yielding small revenues. Otherwise, the Company does not produce nor market its products. It has adopted the strategy to license its technologies to industry partners in exchange for royalties. In the pursuit of this strategy, the Company established a joint venture company in December 2010 for the purposes of marketing and selling the wound spray product in Germany and of preparing and managing its market entry in several other countries. As consideration for the license, the Company is paid royalties on all sales of this product and is entitled to a 25 percent share of all future profits of the joint venture.

Going Concern

The Company incurred a net loss applicable to common stockholders of $2,095,494 and used cash in operating activities of $841,606 for the year ended June 30, 2013. These and other 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; however, obtaining additional financing through stock offerings or other feasible financing alternatives may be difficult or even impossible. In order for the Company to continue operating at its existing levels, it 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 Company’s ability 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 consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Principles of Consolidation

The consolidated financial statements include the accounts of Sangui BioTech International, Inc. and its ninety percent owned foreign subsidiary, Sangui BioTech GmbH. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the respective reporting period. As future events and their effects cannot be determined with precision, actual results could differ from those estimates. Significant estimates made by management are, among others, the realization of receivables, inventories, long-lived assets, and valuation allowance on deferred tax assets.

Risks and Uncertainties

The Company's line of future pharmaceutical and cosmetic products (artificial oxygen carriers or blood substitute and additives) as well as other medical products being developed by Sangui BitTech 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 products will be subject to stringent regulatory requirements because they are in vivo products for humans. The Company and its subsidiaries have limited experience in obtaining regulatory clearance on these types of products. Therefore, the Company could be subject to risks of delays in obtaining or failing to obtain regulatory clearance.

Financial Instruments

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, accounts and notes receivable, accounts payable and accrued liabilities and amounts due to related parties.  Pursuant to ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

Foreign Currency Translation

The functional currency of the Company’s Sangui GmbH subsidiary is the local currency, the Euro. Accordingly, assets and liabilities of the subsidiary are translated into U.S. dollars at period-end exchange rates. Revenues and expenses are translated at the average exchange rates in effect for the period. The resulting translation gains or losses are recorded as a component of accumulated other comprehensive income in the consolidated statement of stockholders’ equity. For the years ended June 30, 2013 and 2012, the Company recognized a loss on translation adjustment in the amount of $17,580 and a gain on translation adjustment of $194,899, respectively. There were no gains or losses resulting from foreign currency transactions as of June 30, 2013 and 2012.

The exchange rates used to calculate values and results of operations for the years ended June 30, 2013 and 2012, were as follows:

	Year-end Rates	Average Period Rates
June 30, 2013	0.7688	0.7732
June 30, 2012	0.7951	0.7474

Cash and Cash Equivalents

The Company considers highly liquid investments with insignificant interest rate risk and original maturities to the Company of three months or less to be cash equivalents. The Company maintains its cash in uninsured 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. The Company had no cash equivalents outstanding as of June 30, 2013 and 2012.

Property and Equipment

Property and equipment are recorded at cost and are depreciated or amortized using the straight-line method over the expected useful lives, which range from three to five years. Leasehold improvements are amortized using the straight-line method over the lesser of the estimated useful lives of the assets or the related lease terms. Depreciation expense for the years ended June 30, 2013 and 2012 was $865 and $692, respectively. Expenditures for normal maintenance and routine repairs are charged to expense, and significant improvements are capitalized. The cost and related accumulated depreciation of assets are removed from the accounts upon retirement or other disposition; any resulting gain or loss is reflected in the statement of operations.

Impairment of Long-Lived Assets

Long-lived assets, including property and equipment and certain identifiable intangibles to be held and used are reviewed by the management of the Company for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. On a regular basis and at least annually, the Company evaluates whether events and circumstances have occurred that indicate possible impairment and relies on a number of factors, including business plans, economic projections, and anticipated future cash flows. Measurement of the amount of impairment, if any, is based upon the difference between the asset’s carrying value and estimated fair value. As of June 30, 2013 and 2012, management of the Company believes that no impairment has been indicated. There can be no assurance, however, that market conditions will not change or demand for the Company's products will continue which could result in impairment of long-lived assets in the future.

Revenue Recognition

The Company derives revenue primarily from licensing fees on sales of its wound spray product as well as from the sale of its cosmetics products.

The wound spray technology is licensed to an entity in which the Company holds a 25 percent equity interest. The Company is presently entitled to royalties on net sales of the wound spray product. The licensing fees are invoiced on a quarterly basis and are recognized as revenues as per the quarter for which the sales were reported by the licensee.

The majority of the Company’s product sales are generated via online orders, with credit card payment. The Company recognizes revenues when: (i) persuasive evidence of a sales arrangement exists, (ii) the sales terms are fixed and determinable, (iii) title and risk of loss have transferred, and (iv) collectability is reasonably assured — generally when products are shipped to the customer, except in situations in which title passes upon receipt of the products by the customer. In this case, revenues are recognized upon notification that customer receipt has occurred. The Company does not have customer acceptance provisions, but it does provide its customers a limited right of return. As warranted the Company accrues an estimated amount for sales returns and allowances at the time of sale based on its ability to estimate sales returns and allowances using historical information. Shipping and handling fees are included as part of net sales. The related freight costs and supplies associated with shipping products to customers are included as a component of cost of goods sold.

Trade Accounts Receivable

Accounts receivable are reflected at estimated net realizable value, do not bear interest nor do they generally require collateral. The Company maintains an allowance for doubtful accounts based upon a variety of factors. The Company reviews all open accounts and provides specific reserves for customer collection issues when it believes the loss is probable, considering such factors as the length of time receivables are past due, the financial condition of the customer, and historical experience. The Company also records a reserve for all customers, excluding those that have been specifically reserved for, based upon evaluation of historical losses, which exceeded the specific reserves the Company had established. For the years ended June 30, 2013 and 2012, the Company recognized bad debt expense in the amounts of $-0- and $203, respectively.

Loans Receivable

Loans receivable pertain primarily to the Company’s activities wherein funds have been loaned and interest is charged to certain related and unrelated third parties and are carried at principal amount, less an estimate made for doubtful receivables based on a review of all outstanding amounts on a quarterly basis. These loans receivable are deemed simple interest loans with interest being computed on the outstanding principal balance. The terms of the Company’s financing activities include annual interest of between zero and six percent, and amended maturity dates from between notes that are due on demand notes that are due February 25, 2014.  No origination fees are charged on these loans. Loans receivable are considered to be past due if any portion of the receivable balance has not been received by the contractual maturity date.  

Specific reserves or impairment of loans are estimated by management based on certain assumptions and variables, including the creditor’s financial condition, age of the creditor’s loans outstanding, and changes in payment histories. Loans receivable are written off against reserves and impairments when deemed uncollectible or taken immediately to bad debt expense if reserves during a year are exhausted.  Recoveries of loans receivable previously written off are recorded when received. The Company has recorded an allowance for doubtful accounts of $928,777 and $-0- as of June 30, 2013 and 2012, respectively.

The outstanding net loans receivable balance consists of principle and accrued interest balances. Loans are written off against the Company’s estimated allowances and impairments when collection of payment is determined to be improbable.

The below table shows the original principle balance and accrued interest comprising the ending balance of the Company’s installment loans receivable.

	June 30,		June 30,
	2013		2012
Principal	$	1,285,120	$	691,737
Accrued interest		18,267		-
Impairment of loans receivable		(928,777)		-
Net loans receivable	$	374,610	$	691,737

Inventory

Inventory is stated at the lower of cost (computed on a first-in, first-out basis) or market value. Provisions to value the inventory at the lower of the actual cost to purchase or manufacture the inventory, or the current estimated market value of the inventory, are based upon assumptions about future demand and market conditions. The Company also performs evaluations of inventory and records a provision or impairment for estimated excess and obsolete items based upon demand, and any other known factors at the time.  As of June 30, 2013 and 2012, all inventory balances had been reserved against in full.

Sales Tax Collected from Customers

As a part of the Company’s normal course of business, sales taxes are collected from customers. Sales taxes collected are remitted, in a timely manner, to the appropriate governmental tax authority on behalf of the customer. The Company’s policy is to present revenue and costs net of sales taxes.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax assets are reviewed for recoverability and the Company records a valuation allowance to reduce deferred income tax assets when it is more likely than not that such deferred tax assets will not be realized.

The Company has a foreign subsidiary formed or acquired to conduct or support its business outside the United States. The Company provides for income taxes, net of applicable foreign tax credits, on temporary differences in its investment in foreign subsidiaries which are not considered to be permanently invested outside of the United States.

The Company adopted ASC 740 which defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. A tax position that meets the “more-likely-than-not” criterion shall be measured at the largest amount of benefit that is more than 50 percent likely of being realized upon ultimate settlement. ASC 740 also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. ASC 740 applies to all tax positions accounted for under ASC 740. Estimated interest and penalties related to the underpayment of income taxes are recorded as a component of provision for income taxes in the consolidated statements of operations. For the years ended June 30, 2013 and 2012, the Company did not recognize any such interest or penalties, nor were any interest fees or penalties accrued as of June 30, 2013 and 2012.

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 also expensed as incurred, due to the uncertainty with respect to future cash flows resulting from the patents. Research and development costs totaled $65,010 and $104,413 during the fiscal years ended June 30, 2013 and 2012, respectively.

Basic and Diluted Loss per Common Share

Basic loss per common share excludes dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding during the period of computation. Diluted loss per share gives effect to all potential dilutive common shares outstanding during the period of compensation. The computation of diluted loss per share does not assume conversion, exercise or contingent exercise of securities that would have an antidilutive effect on earnings. As of June 30, 2013 and 2012, the Company had no potentially dilutive securities that would affect the loss per share if they were to be included in the loss per share.

Comprehensive Loss

Total comprehensive loss represents the net change in stockholders' equity during a period from sources other than transactions with stockholders and as such, includes net loss. For the Company, the components of other comprehensive loss are the changes in the cumulative foreign currency translation adjustments.

Segments of an Enterprise and Related Information

The Company adopted ASC 280, "Disclosures about Segments of an Enterprise and Related Information." ASC 280 establishes standards for the way public companies report information about segments of their business in their annual financial statements and requires them to report selected segment information in their quarterly reports issued to stockholders. It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenues and its major customers, if any. As of June 30, 2013 and 2012, the Company has one business segment, which is the manufacturing and sales of its wound treatment and cosmetics products.

Non-controlling Interests

On June 11, 2008, the Company’s wholly-owned German subsidiary, Sangui Biotech GmbH (“GmbH”) issued 11,400 shares of its previously unissued common stock for cash proceeds of $1,140,759. These shares amount to 10 percent of the GmbH’s total outstanding common stock, which totaled 113,800 shares of as June 30, 2013 and 2012, respectively. The Company accounts for these non-controlling interests pursuant to ASC 810 whereby gains or losses in a subsidiary with a non-controlling interest are allocated to the non-controlling interest based on the ownership percentage of the non-controlling interest, even if that allocation results in a deficit non-controlling interest balance.

Recent Accounting Pronouncements

The Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on the Company’s financial position, or statements.

Financial Statement Reclassifications

The Company has reclassified certain prior-year account balances in order to comply with current-period classifications and increase comparability.

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Property and Equipment

12 Months Ended

Jun. 30, 2013

Notes

Property and Equipment

NOTE 3 – PROPERTY AND EQUIPMENT

Property and equipment consists of the following at June 30, 2013 and 2012:

	June 30,
	2013		2012
Technical and laboratory equipment	$	641,326	$	641,326
Leasehold improvements		285,189		285,189
Office equipment and furniture		311,371		311,371
Total property and equipment		1,237,886		1,237,886
Less accumulated depreciation		(1,237,437)		(1,236,616)
Total property and equipment, net	$	449	$	1,270

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Stockholders' Equity

12 Months Ended

Jun. 30, 2013

Notes

Stockholders' Equity

NOTE 6 – STOCKHOLDERS' EQUITY

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock. The authorized preferred shares are non-voting and the Board of Directors has not designated any liquidation value or dividend rates. During the financial years ended June 30, 2012 and 2013 no shares of preferred stock were issued or outstanding.

Common Stock

The Company is authorized to issue 250,000,000 shares of common stock with no par value. 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.

Common Stock Issuances

During the year ended June 30, 2012, the Company issued 3,674,802 shares of common stock for services at an average of $0.48 per share for a total cost of $1,767,074.  In addition, the Company issued 9,126,300 shares of common stock for cash at an average of $0.17 per share, yielding total cash proceeds of $1,555,044 for the year. The Company also issued 3,000,000 shares of common stock in exchange for services related to its wound spray technology.  The shares issued for services were valued at the trading price of the stock on the date the shares were issued.

During the year ended June 30, 2013 the Company issued 819,100 shares of common stock for services at an average of $0.32 per share for a total cost of $265,567. In addition, the Company issued 5,391,800 shares of common stock for cash at an average of $0.25 per share, yielding total cash proceeds of $1,336,887. The shares issued for services were valued at the trading price of the common stock on the date the shares were issued.

Treasury Stock

During the year ended June 30, 2012, the Company repurchased 53,756 shares of its common stock for cash. During the year ended June 30, 2013, the Company received 1,000,000 shares of its common stock as a partial redemption of a loan to a non-related third party. The treasury stock was valued using the Treasury Method at $339,387.  This value was based on the trading price of the Company’s common stock on the date of acquisition.

Stock Options

From time to time, the Company may issue stock options pursuant to various agreements and other contemporary agreements. At June 30, 2013 and 2012, and during the years ended June 30, 2013 and 2012, no options were issued or outstanding.

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Notes Receivable

12 Months Ended

Jun. 30, 2013

Notes

Notes Receivable

NOTE 4 – NOTES RECEIVABLE

During the years ended June 30, 2013 and 2012, the Company invested $910,510 and $691,737, respectively into a various notes receivable. The notes receivable are unsecured and accrue interest at between zero and 6 percent per annum.

The components of notes receivable are summarized in the table below:

	June 30,		June 30,
	2013		2012
Note receivable, principal and interest, due from a joint venture related party, bearing interest at 4%, unsecured, due on December 31, 2013	$	464,389	$	-
Note receivable, principal and interest, due from a joint venture related party, bearing interest at 4%, unsecured, due on February 25, 2014		464,389		-
Note receivable, principal and interest, due from a shareholder, bearing interest at 6%, secured by 138,899 shares of the Company’s common stock, due on demand		39,022		62,885
Note receivable principal due from an unrelated third party, bearing interest at 0%, personally secured by a shareholder of the borrower, due on demand		335,588		625,852
Total	$	1,303,387	$	691,737

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Stockholders' Equity: Preferred Stock (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Preferred Stock

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock. The authorized preferred shares are non-voting and the Board of Directors has not designated any liquidation value or dividend rates. During the financial years ended June 30, 2012 and 2013 no shares of preferred stock were issued or outstanding.

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Organization and Summary of Significant Accounting Policies: Trade Accounts Receivable (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Trade Accounts Receivable

Trade Accounts Receivable

Accounts receivable are reflected at estimated net realizable value, do not bear interest nor do they generally require collateral. The Company maintains an allowance for doubtful accounts based upon a variety of factors. The Company reviews all open accounts and provides specific reserves for customer collection issues when it believes the loss is probable, considering such factors as the length of time receivables are past due, the financial condition of the customer, and historical experience. The Company also records a reserve for all customers, excluding those that have been specifically reserved for, based upon evaluation of historical losses, which exceeded the specific reserves the Company had established. For the years ended June 30, 2013 and 2012, the Company recognized bad debt expense in the amounts of $-0- and $203, respectively.

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Organization and Summary of Significant Accounting Policies: Income Taxes (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Income Taxes

Income Taxes

The Company accounts for income taxes in accordance with ASC 740. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be realized or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax assets are reviewed for recoverability and the Company records a valuation allowance to reduce deferred income tax assets when it is more likely than not that such deferred tax assets will not be realized.

The Company has a foreign subsidiary formed or acquired to conduct or support its business outside the United States. The Company provides for income taxes, net of applicable foreign tax credits, on temporary differences in its investment in foreign subsidiaries which are not considered to be permanently invested outside of the United States.

The Company adopted ASC 740 which defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. A tax position that meets the “more-likely-than-not” criterion shall be measured at the largest amount of benefit that is more than 50 percent likely of being realized upon ultimate settlement. ASC 740 also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. ASC 740 applies to all tax positions accounted for under ASC 740. Estimated interest and penalties related to the underpayment of income taxes are recorded as a component of provision for income taxes in the consolidated statements of operations. For the years ended June 30, 2013 and 2012, the Company did not recognize any such interest or penalties, nor were any interest fees or penalties accrued as of June 30, 2013 and 2012.

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Organization and Summary of Significant Accounting Policies: Non-controlling Interests (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Non-controlling Interests

Non-controlling Interests

On June 11, 2008, the Company’s wholly-owned German subsidiary, Sangui Biotech GmbH (“GmbH”) issued 11,400 shares of its previously unissued common stock for cash proceeds of $1,140,759. These shares amount to 10 percent of the GmbH’s total outstanding common stock, which totaled 113,800 shares of as June 30, 2013 and 2012, respectively. The Company accounts for these non-controlling interests pursuant to ASC 810 whereby gains or losses in a subsidiary with a non-controlling interest are allocated to the non-controlling interest based on the ownership percentage of the non-controlling interest, even if that allocation results in a deficit non-controlling interest balance.

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Commitments and Contingencies: Indemnities and Guarantees (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Indemnities and Guarantees

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. The Company has recorded a reserve for indemnities and guarantees of $-0- as of June 30, 2013 and 2012.

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Consolidated Statements of Operations (USD $)	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
REVENUES
REVENUES	$ 105,487	$ 14,949
COST OF SALES	10,692	3,337
GROSS MARGIN	94,795	11,612
Research and development	65,010	104,413
Depreciation and amortization	865	692
Professional fees	304,201	3,159,015
General and administrative	968,667	458,136
Total Operating Expenses	1,338,743	3,722,256
OPERATING LOSS	(1,243,948)	(3,710,644)
Patent licensing income		138,577
Gain on settlement of debt		27,422
Interest expense	(4,573)	(225)
Interest income	25,419	(225)
Impairment of related party receivable	(1,040,583)
Total Other Income (Expense)	(1,019,737)	165,549
Loss before income taxes and non-controlling interest	(2,263,685)	(3,545,095)
NET INCOME (LOSS)	(2,263,685)	(3,545,095)
Less: Net loss attributable to non-controlling interest	(168,191)	(53,191)
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS	(2,095,494)	(3,491,904)
Foreign currency translation adjustments	194,899	(17,580)
Total Other Comprehensive Income (Loss)	194,899	(17,580)
COMPREHENSIVE (LOSS)	$ (2,068,786)	$ (3,562,675)
BASIC AND DILUTED LOSS PER SHARE	$ (0.02)	$ (0.03)
BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING	128,549,355	116,691,252

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Stock-based Compensation

12 Months Ended

Jun. 30, 2013

Notes

Stock-based Compensation

NOTE 9 – STOCK-BASED COMPENSATION

The Company has applied the disclosure provisions of ASC 718 for the years ended June 30, 2013 and 2012. There were no common shares or stock options outstanding, issued or granted to employees during these reporting periods.

On April 28, 2004, the Company adopted the 2004 Employee Stock Incentive Plan (“the Plan”). Under the terms of this plan the Board was authorized to issue up to 1,000,000 shares of common stock to certain eligible employees of the Company or its subsidiaries. All of these shares were issued pursuant to the plan prior to June 30, 2007. On September 22, 2008 the Company adopted the 2008 Amended and Restated Long-Term Equity Incentive Plan, whereby the Board was authorized to issue up to 10,000,000 shares of common stock (including incentive stock options) to certain eligible employees, directors, and/or consultants of the Company or its subsidiaries. During the years ended June 30, 2013 and 2012, respectively, the Company issued 750,000 and 6,300,000 shares pursuant to this Plan. All shares available under the 2008 Long-Term Equity Incentive Plan had been issued on June 30, 2013.

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Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (2,263,685)	$ (3,545,095)
Depreciation	865	692
Common stock issued for services	265,565	3,027,074
Common stock issued for settlement of debt	93,300
Change in impairment of related party receivable	1,040,583
Trade accounts receivable	(1,003)	427
Royalties receivable	(27,548)
Inventory		2,637
Prepaid expenses and other current assets	(29,220)	21,331
Change in tax refunds receivable	26,296
Change in related party receivables		(169,490)
Change in accounts payable and accrued expenses	24,747	(67,633)
Related parties accounts payable	28,494	6,902
Net Cash Used in Operating Activities	(841,606)	(723,155)
Collection of notes receivable, related parties	30,047
Issuance of notes receivable, related parties		(62,885)
Issuance of notes receivable	(910,510)	(628,852)
Net Cash Used in Investing Activities	(880,463)	(691,737)
Proceeds from notes payable- related party		18,865
Common stock issued for cash	1,366,442	1,555,046
Change in treasury stock		(18,224)
Net Cash Provided by Financing Activities	1,366,442	1,555,687
EFFECTS OF EXCHANGE RATES	164,310	(25,000)
NET INCREASE (DECREASE) IN CASH	(190,875)	115,795
CASH AT BEGINNING OF YEAR	238,414	122,619
CASH AT END OF YEAR	$ 47,764	$ 238,414
Treasury stock received for note receivable	320,000

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Consolidated Balance Sheets (USD $)	Jun. 30, 2013	Jun. 30, 2012
ASSETS
Cash	$ 47,764	$ 238,639
Prepaid expenses and other assets	43,046	15,621
Tax refunds receivable	18,572	19,487
Related party receivables	38,537	160,509
Note receivable, related party	39,022	63,347
Notes receivable	335,588	628,852
Total Current Assets	522,529	1,126,455
PROPERTY AND EQUIPMENT, Net	449	1,270
TOTAL ASSETS	522,978	1,127,725
Accounts payable and accrued expenses	171,728	135,445
Related party payables	35,397	14,041
Note payable - related party	19,511	18,865
TOTAL CURRENT LIABILITIES	226,636	168,351
Common stock, no par value; 250,000,000 shares authorized, 132,116,857 and 125,605,957 shares issued and 130,932,115 and 125,552,201 shares outstanding, respectively	30,315,527	28,589,773
Additional paid-in capital	4,621,430	4,621,430
Treasury stock	(339,387)	(19,387)
Accumulated other comprehensive income (loss)	92,846	(102,053)
Accumulated deficit	(34,027,179)	(31,931,685)
Non-controlling interest	(366,895)	(198,704)
Total Stockholders' Equity	296,342	959,374
TOTAL LIABILITIES AND STOCKHOLDERS'EQUITY	$ 522,978	$ 1,127,725

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Organization and Summary of Significant Accounting Policies: Loans Receivable (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Loans Receivable

Loans Receivable

Loans receivable pertain primarily to the Company’s activities wherein funds have been loaned and interest is charged to certain related and unrelated third parties and are carried at principal amount, less an estimate made for doubtful receivables based on a review of all outstanding amounts on a quarterly basis. These loans receivable are deemed simple interest loans with interest being computed on the outstanding principal balance. The terms of the Company’s financing activities include annual interest of between zero and six percent, and amended maturity dates from between notes that are due on demand notes that are due February 25, 2014.  No origination fees are charged on these loans. Loans receivable are considered to be past due if any portion of the receivable balance has not been received by the contractual maturity date.  

Specific reserves or impairment of loans are estimated by management based on certain assumptions and variables, including the creditor’s financial condition, age of the creditor’s loans outstanding, and changes in payment histories. Loans receivable are written off against reserves and impairments when deemed uncollectible or taken immediately to bad debt expense if reserves during a year are exhausted.  Recoveries of loans receivable previously written off are recorded when received. The Company has recorded an allowance for doubtful accounts of $928,777 and $-0- as of June 30, 2013 and 2012, respectively.

The outstanding net loans receivable balance consists of principle and accrued interest balances. Loans are written off against the Company’s estimated allowances and impairments when collection of payment is determined to be improbable.

The below table shows the original principle balance and accrued interest comprising the ending balance of the Company’s installment loans receivable.

	June 30,		June 30,
	2013		2012
Principal	$	1,285,120	$	691,737
Accrued interest		18,267		-
Impairment of loans receivable		(928,777)		-
Net loans receivable	$	374,610	$	691,737

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Organization and Summary of Significant Accounting Policies: Foreign Currency Translation (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Foreign Currency Translation

Foreign Currency Translation

The functional currency of the Company’s Sangui GmbH subsidiary is the local currency, the Euro. Accordingly, assets and liabilities of the subsidiary are translated into U.S. dollars at period-end exchange rates. Revenues and expenses are translated at the average exchange rates in effect for the period. The resulting translation gains or losses are recorded as a component of accumulated other comprehensive income in the consolidated statement of stockholders’ equity. For the years ended June 30, 2013 and 2012, the Company recognized a loss on translation adjustment in the amount of $17,580 and a gain on translation adjustment of $194,899, respectively. There were no gains or losses resulting from foreign currency transactions as of June 30, 2013 and 2012.

The exchange rates used to calculate values and results of operations for the years ended June 30, 2013 and 2012, were as follows:

	Year-end Rates	Average Period Rates
June 30, 2013	0.7688	0.7732
June 30, 2012	0.7951	0.7474

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Stockholders' Equity: Stock Options (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Stock Options

Stock Options

From time to time, the Company may issue stock options pursuant to various agreements and other contemporary agreements. At June 30, 2013 and 2012, and during the years ended June 30, 2013 and 2012, no options were issued or outstanding.

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Organization and Summary of Significant Accounting Policies: Financial Statement Reclassifications (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Financial Statement Reclassifications

Financial Statement Reclassifications

The Company has reclassified certain prior-year account balances in order to comply with current-period classifications and increase comparability.

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Organization and Summary of Significant Accounting Policies: Comprehensive Loss (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Comprehensive Loss

Comprehensive Loss

Total comprehensive loss represents the net change in stockholders' equity during a period from sources other than transactions with stockholders and as such, includes net loss. For the Company, the components of other comprehensive loss are the changes in the cumulative foreign currency translation adjustments.

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Organization and Summary of Significant Accounting Policies: Segments of An Enterprise and Related Information (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Segments of An Enterprise and Related Information

Segments of an Enterprise and Related Information

The Company adopted ASC 280, "Disclosures about Segments of an Enterprise and Related Information." ASC 280 establishes standards for the way public companies report information about segments of their business in their annual financial statements and requires them to report selected segment information in their quarterly reports issued to stockholders. It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenues and its major customers, if any. As of June 30, 2013 and 2012, the Company has one business segment, which is the manufacturing and sales of its wound treatment and cosmetics products.

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Commitments and Contingencies

12 Months Ended

Jun. 30, 2013

Notes

Commitments and Contingencies

NOTE 8 – COMMITMENTS AND CONTINGENCIES

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. The Company has recorded a reserve for indemnities and guarantees of $-0- as of June 30, 2013 and 2012.

Leases

The Company leases office facilities from an unrelated third party at $6,518 per month. The office lease contract is maintained on a month-to-month basis.

The Company also leases an automobile under an operating lease. The lease provides for a lease payment of $1,599 per month beginning June 2012 expiring June 2015.  

Future minimum lease payments under the terms of the operating leases are as follows:

2014	$	19,182
2015		19,182
2016		-
Thereafter		-
Total	$	38,364

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Organization and Summary of Significant Accounting Policies: Inventory (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Inventory

Inventory

Inventory is stated at the lower of cost (computed on a first-in, first-out basis) or market value. Provisions to value the inventory at the lower of the actual cost to purchase or manufacture the inventory, or the current estimated market value of the inventory, are based upon assumptions about future demand and market conditions. The Company also performs evaluations of inventory and records a provision or impairment for estimated excess and obsolete items based upon demand, and any other known factors at the time.  As of June 30, 2013 and 2012, all inventory balances had been reserved against in full.

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Stockholders' Equity: Common Stock (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Common Stock

Common Stock

The Company is authorized to issue 250,000,000 shares of common stock with no par value. 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.

Common Stock Issuances

During the year ended June 30, 2012, the Company issued 3,674,802 shares of common stock for services at an average of $0.48 per share for a total cost of $1,767,074.  In addition, the Company issued 9,126,300 shares of common stock for cash at an average of $0.17 per share, yielding total cash proceeds of $1,555,044 for the year. The Company also issued 3,000,000 shares of common stock in exchange for services related to its wound spray technology.  The shares issued for services were valued at the trading price of the stock on the date the shares were issued.

During the year ended June 30, 2013 the Company issued 819,100 shares of common stock for services at an average of $0.32 per share for a total cost of $265,567. In addition, the Company issued 5,391,800 shares of common stock for cash at an average of $0.25 per share, yielding total cash proceeds of $1,336,887. The shares issued for services were valued at the trading price of the common stock on the date the shares were issued.

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Subsequent Events

12 Months Ended

Jun. 30, 2013

Notes

Subsequent Events

NOTE 11 – SUBSEQUENT EVENTS

Subsequent to the year ended June 30, 2013 the Company issued 200,000 shares of common stock for services at an average of $0.13 per share for a total cost of $26,400. In addition, the Company issued 2,932,600 shares of common stock for cash at an average of $0.10 per share, yielding total cash proceeds of $285,581. The shares issued for services were valued at the trading price of the common stock on the date the shares were issued.

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Income Tax Provision

12 Months Ended

Jun. 30, 2013

Notes

Income Tax Provision

NOTE 7 - INCOME TAX PROVISION

The Company’s provision for income taxes was $-0- and $-0- for the years ended June 30, 2013 and 2012 respectively, since the Company incurred net operating losses through June 30, 2013.

Income tax expense for the years ended June 30, 2013 and 2012 differed from the amounts computed by applying the U.S. federal income tax rate of 34 percent as follows:

	June 30,		June 30,
	2013		2012
Income tax benefit at U.S. federal statutory rates	$	(712,468)	$	(1,205,256)
Effect of:
Common stock issued for services		90,292		1,029,205
Impairment of related party receivables		353,798		-
Increase (decrease) in valuation allowance		268,378		176,051
Provision for income taxes	$	-	$	-

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets at June 30, 2013 and 2012 are presented below:

	June 30,		June 30,
	2013		2012
Deferred tax assets
Net operating losses	$	11,125,151	$	6,885,870
Less: valuation allowance		(11,125,151)		(6,885,870)
Net deferred tax assets		-		-
Deferred tax liabilities		-		-
Net deferred taxes	$	-	$	-

As of June 30, 2013, the Company had net operating loss carryforwards of approximately $11.6 million which is available to offset future taxable federal, state and foreign income. The federal and state carryforward amounts expire in varying amounts between 2013 and 2032. The foreign net operating loss carryforwards do not have an expiration period. 

The Company has evaluated its uncertain tax positions and determined that any required adjustments for unrecognized tax benefits would not have a material impact on the Company’s balance sheet, income statement, or statement of cash flows.

The Company’s tax filings for 2009 through 2013 remain subject to examination by tax authorities for federal income tax purposes and by other major taxing jurisdictions to which we are subject. The Company has identified potential penalties for the late filing of reports to taxing authorities. The Company believes that it is more likely than not the penalties will be waived and accordingly has not accrued the penalties in the financial statements.

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Investment in Joint Venture

12 Months Ended

Jun. 30, 2013

Notes

Investment in Joint Venture

NOTE 2 – INVESTMENT IN JOINT VENTURE

During December 2010, the Company’s subsidiary Sangui BioTech GmbH established a joint venture company with SanderStrothmann GmbH, under the name of SastoMed GmbH. The Company owns 25 percent of the joint venture and accounts for its interest in the joint venture using the cost method of accounting. The Company invested $8,508 in the joint venture during the year ended June 30, 2011.

During the year ended June 30, 2013 the Company loaned the joint venture $910,500 of cash at 4 percent interest.  Also during the year ended June 30, 2013 and separate from the aforementioned loans receivable, the Company was due to receive a joint venture milestone payout of $130,037.  The Company has adopted ASC 310 which requires that the Company assess the collectability of such receivables based on factors such as the financial condition of the creditor.

The joint venture has realized significant losses since inception and as a result all such receivables from the joint venture have been impaired as of June 30, 2013. As such, the Company recorded loan impairments of $928,777 and for milestone payments of $130,037 for the year ended June 30, 2013.

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Organization and Summary of Significant Accounting Policies: Research and Development (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Research and Development

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 also expensed as incurred, due to the uncertainty with respect to future cash flows resulting from the patents. Research and development costs totaled $65,010 and $104,413 during the fiscal years ended June 30, 2013 and 2012, respectively.

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Organization and Summary of Significant Accounting Policies: Principles of Consolidation (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of Sangui BioTech International, Inc. and its ninety percent owned foreign subsidiary, Sangui BioTech GmbH. All intercompany accounts and transactions have been eliminated in consolidation.

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Foreign Currency Translation

12 Months Ended

Jun. 30, 2013

Notes

Foreign Currency Translation

NOTE 10 – FOREIGN CURRENCY TRANSLATION

During the years ended June 30, 2013 and 2012, the Company has transacted the majority of its business activities in Germany, and the transactions have been primarily consummated in the Euro currency.  Due to the fact that the Company’s functional currency is the Euro and its reporting currency is the U.S. dollar, the Company must recognize the effects of variations in foreign currency exchange rates as gains and losses as a component of other comprehensive income (loss), pursuant to ASC 830 “Foreign Currency Translation.” To calculate this other comprehensive income and loss, the Company utilizes the “current method,” whereby assets and liabilities of the German subsidiary are translated from Euro into U.S. dollars at the exchange rate at the balance sheet date. 

All equity items, other than retained earnings, are specifically identified where possible and exchange rates on transaction dates are implemented.  Profit and loss accounts are translated using an average rate for the period.  During the years ended June 30, 2013 and 2012, the Company recognized other comprehensive gains of $195,545 and other comprehensive losses of and $17,580, respectively.  Such other comprehensive income and losses had no effect on liquidity.

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Organization and Summary of Significant Accounting Policies: Financial Instruments (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Financial Instruments

Financial Instruments

Pursuant to ASC 820, Fair Value Measurements and Disclosures, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

Level 1

Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2

Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3

Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company’s financial instruments consist principally of cash, accounts and notes receivable, accounts payable and accrued liabilities and amounts due to related parties.  Pursuant to ASC 820, the fair value of our cash is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.

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Organization and Summary of Significant Accounting Policies: Use of Estimates (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the respective reporting period. As future events and their effects cannot be determined with precision, actual results could differ from those estimates. Significant estimates made by management are, among others, the realization of receivables, inventories, long-lived assets, and valuation allowance on deferred tax assets.

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Document and Entity Information (USD $)	12 Months Ended
	Jun. 30, 2013
Document and Entity Information:
Entity Registrant Name	SANGUI BIOTECH INTERNATIONAL INC
Document Type	10-K
Document Period End Date	Jun. 30, 2013
Amendment Flag	false
Entity Central Index Key	0001104280
Current Fiscal Year End Date	--06-30
Entity Common Stock, Shares Outstanding	135,249,457
Entity Public Float	$ 135,249,457
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	Yes
Entity Well-known Seasoned Issuer	Yes
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY

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Organization and Summary of Significant Accounting Policies: Risks and Uncertainties (Policies)

12 Months Ended

Jun. 30, 2013

Policies

Risks and Uncertainties

Risks and Uncertainties

The Company's line of future pharmaceutical and cosmetic products (artificial oxygen carriers or blood substitute and additives) as well as other medical products being developed by Sangui BitTech 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 products will be subject to stringent regulatory requirements because they are in vivo products for humans. The Company and its subsidiaries have limited experience in obtaining regulatory clearance on these types of products. Therefore, the Company could be subject to risks of delays in obtaining or failing to obtain regulatory clearance.